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Four Pillars of the Rally Remain Intact

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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

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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.
Barrons_06_02_21

What Caused Stocks to Drop (And Recover?)

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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).

No Trade Deal?

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What’s in Today’s Report:

  • What Happens If There Isn’t a Trade Deal

Futures are rebounding modestly this morning mostly thanks to a positive trade article by Bloomberg overnight.

The article said Trump’s comments about having no deadline for a China trade deal yesterday, which sent stocks tumbling, were “off the cuff” and that a deal is still likely.

Meanwhile, Service PMI data in China and Europe beat expectations and U.S. legal sanctions against Chinese nationals for human rights violations are not expected to affect trade negotiations.

Looking into today’s session, there are two key economic reports to watch: the ADP Employment Report (E: 156K) and the ISM Non-Manufacturing Index (E: 54.5). And based on the market’s negative response to the soft ISM report on Monday, the has the potential to move stocks.

There is also one Fed official speaking today: Quarles (10:00 a.m. ET), but Fed policy is largely on the back burner right now as no changes in interest rates are expected anytime soon which will leave the market primarily focused on any new developments in the trade war.

S&P 500 At 3000? (Not So Fast)

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What’s in Today’s Report:

  • One of Two S&P 500 3000 Conditions Met
  • Why the Dollar and Bond Yields Have Decoupled

Futures are little changed following a night of no new trade news and slightly underwhelming economic data.

Global markets all rallied on momentum from the Thursday gains in the U.S., but nothing new occurred on trade overnight.

Economic data was slightly disappointing as EU Composite PMI (54.2 vs. (E) 54.3) slightly missed estimates while EU Manufacturing PMI (53.3 vs. (E) 54.2) badly missed.

Today focus will be on the U.S. September PMI Composite Flash (E: 55.1), and as always we’ll be looking for stability in the economic data to imply this strong economy isn’t losing momentum.  Additionally,  today is quadruple witching options expiration, so don’t be surprised by big volumes and an uptick in volatility into the close.

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