Jobs Day (Slight Shift in Expectations)

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?

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)

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)

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

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?)

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?

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.

Four Pillars of the Rally Remain Intact

What’s in Today’s Report:

  • Bottom Line – Four Pillars of the Rally Remain Intact
  • Weekly Economic Cheat Sheet – Flash PMIs and Core PCE in Focus

Stock futures are trading cautiously higher this morning while international equities were mixed overnight as markets attempt to stabilize following last week’s volatile, Fed-induced declines.

News flow was quiet over the weekend as there were no major economic releases or central bank developments however the yield curve remains in focus as several key spreads have flattened to multi-month lows on hawkish policy expectations and a more cautious growth outlook.

There are no notable economic reports and no Fed officials are scheduled to speak today.

The lack of market catalysts will leave investors to continue to digest last week’s Fed developments and closely monitor the bond markets for further clues on expectations for both monetary policy and the state of the economic recovery.

Tom Essaye Quoted in Barron’s on June 1, 2021

Stocks End Mixed After Another Inflation Red Flag

If we get that strong [PMI] number (along with strong pricing indices) then pressure will build on the Fed to at least acknowledge a discussion about…wrote Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

What Caused Stocks to Drop (And Recover?)

What’s in Today’s Report:

  • Why Stocks Dropped and Recovered Yesterday
  • Yield Curve Update:  Why is 10’s-2’s At A Multi-Month Lows?

Apologies for the slightly delayed send, it was user error (I typed in the wrong address at 7:00 a.m. this morning).

Futures are modestly lower despite better than expected economic data, as markets digest yesterday’s decline.

Global Manufacturing PMIs were better than expected in Feb as the EU PMI rose to 49.1 vs. (E) 47.5, while the UK PMI increased to 51.9 vs. (E) 49.6 and the solid data is helping to reduce worries about COVID-19’s impact on the global economy.

COVID-19 headlines were slightly negative overnight as cases rose in China, Japan and South Korea and really the spread of the disease in Asia is the focus of the market right now.  Any headlines that imply the spread is accelerating in Asia will hit sentiment.

Today the key number is the February Flash Manufacturing PMI (E: 51.4), and if that beats expectations that will further reduce concern that COVID-19 virus will be a major headwind on U.S. economic growth (and that will be a fundamental positive for stocks).   We also get Existing Home Sales (E: 5.45M) and have four Fed speakers today:  Bostic & Brainard (10:00 a.m. ET), Clarida & Mester (1:30 p.m. ET).