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Hedging Uncertainty with Russia/Ukraine

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What’s in Today’s Report:

  • Hedging Uncertainty with Russia/Ukraine
  • PMI Composite Flash Takeaways (Strong Report)
  • Consumer Confidence Index: Chart

Stock futures are enjoying a bounce this morning, tracking global equity markets higher as investors view the initial rounds of sanctions on Russia as less severe than feared while inflation data out of Europe was mildly encouraging.

Economically, the Eurozone’s Narrow Core HICP reading was -0.9%, down from +0.4% in December suggesting price pressures may finally be peaking in parts of the world.

Looking into today’s session, there are no notable economic reports to watch and just one Fed speaker ahead of the bell: Daly (9:00 a.m. ET).

There is a 5-Yr Treasury Note auction at 1:00 p.m. ET that could move markets but investor focus is likely to remain on any developments with the Russia/Ukraine situation.

After the close yesterday, it was reported that the scheduled meeting this week between Blinken and Lavrov was called off, which was a negative development but if we see a new meeting agreed to, or any signs of further de-escalation in the conflict today, stocks could enjoy a potentially sizeable relief rally. Conversely, further aggressive actions in Ukraine by Russia and/or more severe sanctions being announced by the West would likely drive more risk-off money flows.

What the SPR Release Means for Oil

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What’s in Today’s Report:

  • Global Flash Composite PMI Data Takeaways
  • What the SPR Release Means for Oil

Stock futures are trading lower and international markets were mixed overnight as investors look ahead to a very busy day of economic data while volumes are already thinning out given the Thanksgiving holiday tomorrow.

Today, there is a slew of economic data due out including: Durable Goods Orders (E: 0.3%), Q3 GDP (E: 2.1%), Jobless Claims (E: 264K), New Home Sales (E: 790K), Core PCE (E: 0.4%, 4.1%), and Consumer Sentiment (E: 66.9).

There are no Fed officials speaking today however the November FOMC meeting minutes will be released at 2:30 p.m. ET.

Bottom line, investors will be looking for good economic data today, but not so good that it will cause the Fed to accelerate tapering plans or pull forward the first rate hikes. That is especially true for the Core PCE print as it is the Fed’s preferred measure of inflation.

Why Treasury Yields Spiked Yesterday

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What’s in Today’s Report:

  • Why Treasury Yields Spiked Yesterday

Futures are modestly lower as markets digested the rally of the past two days, following underwhelming economic data and earnings overnight.

Nike (NKE) became the latest major company to cut guidance on margin concerns and supply chain issues and the stock dropped nearly 5% after hours.

Japanese flash manufacturing PMI missed estimates at 51.2 vs. (E) 52.0 mirroring the loss of momentum from global flash PMIs.

Today focus will remain on China headlines (although Evergrande is fading as a major market influence) and on multiple Fed speakers:  Mester (8:45 a.m. ET), Powell, Bowman, Clarida, George (10:00 a.m. ET), and Bostic  (12:00 p.m. ET).   Finally, we also get New Home Sales (E: 708K) but that shouldn’t move markets.

Jobs Day (Slight Shift in Expectations)

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What’s in Today’s Report:

  • Jobs Day (Slightly Shift in Expectations)
  • Washington Update  –  Why Manchin’s Op-Ed is Important

Futures are modestly higher as markets ignored disappointing economic data ahead of today’s jobs report.

Global PMIs were disappointing as the Chinese Services PMI dropped to 46.7 vs. (E) 52.3 while the EU (59.0 vs. (E) 59.5) and UK (54.8 vs. (E) 55.0) Composite PMIs both slightly missed estimates

Japanese stocks surged 2% after PM Suga resigned, igniting speculation the government will unleash more stimulus.

Today the Employment Situation report is the key event, and the expectations are as follows: Job Adds: 740K, UE Rate: 5.2%, Wages: 3.9% yoy.  Because of the soft ADP report, the “whisper number” is slightly underwhelming vs. expectations (say around 500k), so the market may be a bit more sensitive if the actual jobs report is slightly stronger than expectations (it may cause a mild decline in stocks, but nothing major).

We also get the ISM Services PMI (E: 62.0) and markets will want to see stability in that PMI.

Why Did Cyclicals Outperform?

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What’s in Today’s Report:

  • Why Did Cyclicals Outperform?

Stock futures are little changed this morning after a quiet night of news as markets look ahead to key economic data in the U.S. and the latest commentary from Fed leadership.

Economically, Composite PMI data overseas largely met estimates and therefore did not materially impact markets.

Looking into today’s session, focus will be on the ADP Employment Report (E: 715K) which is due out at 8:15 a.m. ET as investors look for the latest insights to U.S. labor market trends (important for Fed policy) and then the ISM Services Index (E: 60.4) which will hit shortly after the open (important regarding the health of the broader economic recovery).

Attention will then turn to Fed Vice Chair Clarida’s speech at 10:00 a.m. ET in which the market will be looking for further reiteration that the labor market has a ways to go before any policy changes will occur (so basically just repeating Powell’s recent comments). Any hawkish surprises could result in a spike in yields and pullback in stocks as policy expectations are very dovish right now.

Finally, earnings season continues with: CVS ($2.07), GM ($1.89), RCL (-$4.26), and KHC ($6.54) reporting before the bell while ROKU ($0.13), UBER (-$0.53), and EA ($1.28) will release Q2 results after the close.

ECB Decision Takeaways (Not Dovish Enough, Again)

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What’s in Today’s Report:

  • ECB Decision Takeaways (No Dovish Enough, Again)
  • Updated Oil Outlook

Futures are moderately higher thanks to solid economic data and better than expected earnings.

The EU flash PMI was stronger than expected at 60.6 vs. (E) 60.0, while good UK Retail Sales (0.5% vs. (E) 0.4%) helped offset the soft UK flash PMI (57.7 vs. (E) 61.9).  But, on an absolute basis the numbers were good, and importantly the economic recovery is still on going and has good momentum.

Earnings were good in aggregate overnight with strong reports from TWTR and SNAP, among others.

Today the key number will be the July Flash Composite PMI (E: 63.4) and markets will want “Goldlocks” data.  Specifically, that means strong activity that implies the rise in COVID cases isn’t hurting the recovery, while at the same time, activity that isn’t so strong it makes the Fed think about tapering sooner than expected, or more forcefully.

Earnings season also continues today, and four reports we’ll be watching include: NEE ($0.67), AXP ($1.64), SLB ($0.25), and HON ($1.94).

Four Pillars of the Rally Updated (Still Intact)

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What’s in Today’s Report:

  • Four Pillars of the Rally Updated (Still Intact)
  • Weekly Market Preview:  Does Delta Cause a Pullback?  Can Earnings Impress Investors?
  • Weekly Economic Cheatsheet:  Flash PMIs Friday are the Key Report.

Futures are moderately lower as more governments implement restrictions in reaction to the Delta COVID variant.

More cities in California reinstituted indoor mask mandates, Australia implemented more lockdowns and select countries in Europe upped restrictions as Delta COVID cases continue to rise, causing concern among investors that the economic recovery might lose momentum.

On infrastructure, the bi-partisan $1 trillion deal is in danger of collapsing as early as this week, which would increase the chances of tax hike headlines over the next month.

There’s only one notable economic report today, the Housing Market Index (E: 82.0), and just two notable earnings reports, AN ($2.65), TSCO ($2.94), so the tenor of COVID headline and infrastructure will drive markets, and if there are more restrictions announced or the bipartisan infrastructure bill dies, expect more weakness in stocks.

Second Half Outlook

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What’s in Today’s Report:

  • Second Half Outlook
  • Weekly Economic Cheat Sheet

Stock futures are little changed with investors focused on OPEC+’s failure to reach a new output policy agreement yesterday while economic data was mixed overnight.

OPEC+ called off a follow-up meeting yesterday after the UAE would not agree to extending production cuts through 2022 which drove oil to new multi-year highs in overnight trading as current cuts will remain in place by default, deepening supply deficit expectations for the second half of the year.

Economically, Final Composite PMI reports were mostly as expected while EU Retail Sales topped estimates but none of the data materially moved markets overnight.

Today, there is just one notable economic report to watch: ISM Services Index (E: 63.5), and no Fed officials are scheduled to speak. That will leave investors focused on the oil market in the wake of the OPEC+ developments as well as awaiting any news on infrastructure as the calendar is otherwise fairly quiet as we start the holiday-shortened trading week today.

Jobs Report Preview (Could It Make the Fed More Hawkish?)

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What’s in Today’s Report:

  • Jobs Report Preview – Could A “Too Hot” Report Make the Fed more Hawkish?
  • Oil Update and EIA Analysis

Futures are slightly higher following a night of mixed economic data.

Global June manufacturing PMIs were mixed as the Japanese (52.4 vs. 53.0) and UK (63.9 vs. (E) 64.2) PMIs missed estimates, while the EU manufacturing PMI beat expectations (63.4 vs. (E) 63.1.).

The net impact of the data is to show the global recovery is on going, but also that it has lost a bit of momentum.

Today’s focus will be on economic data, with the two important reports being Jobless Claims (E: 387K) and the June ISM Manufacturing Index (E: 61.1).  As has been the case, markets will want “Goldilocks” data to start the quarter, in that the numbers show solid activity, but nothing that would make the Fed taper more aggressively.  There’s also one Fed speaker, Bostic at 2:00 p.m. ET, but he shouldn’t move markets.

 

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Do Bonds Know Something Stocks Don’t?

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What’s in Today’s Report:

  • Do Bonds Know Something Stocks Don’t?
  • Existing Home Sales Data Takeaways

Stock futures are trading slightly higher this morning following mixed economic data overnight and a continued digestion of Powell’s “less-hawkish” testimony yesterday.

Economically, June Flash Composite PMI data was mixed as the Japan report disappointed (47.8 vs. E: 48.8) but the Eurozone print beat estimates (59.2 vs. E: 58.8).

Today, focus will be on economic data early with the U.S. PMI Composite Flash due to be released shortly after the bell (E: 67.9) and then a report on New Home Sales (E: 881K) will print at the top of the 10 a.m. hour.

Additionally, there are several Fed speakers to watch who could move markets today including: Bowman (9:00 a.m. ET), Bostic (11:00 a.m. ET), Rosengren (6:30 p.m. ET).

Finally, there is a 5-Yr Treasury Note auction at 1:00 p.m. ET that could impact bonds and ultimately stocks if yields move on the results.