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Will the Restart of Student Loan Payments Hurt the Economy?

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Will the Restart of Student Loan Payments Hurt the Economy: Strengthen your market knowledge with a free trial of The Sevens Report.

What’s in Today’s Report:

  • Will the Restart of Student Loan Payments Hurt the Economy?

Stock futures are lower with European shares after some hawkish ECB chatter and more bad EU economic data overnight.

The ECB’s Klass Knot noted overnight that a September rate hike is being “underestimated” by markets. This is weighing on risk assets modestly this morning.

Economically, German Manufacturers’ Orders collapsed by -11.7% vs. (E) -4.0% in July while Eurozone Retail Sales in July met estimates with a monthly decline of -0.2%. The data offered fresh evidence that the European economy is threatening to fall into recession despite ongoing calls for a global soft landing.

Today’s focus will be on economic data this morning with International Trade in Goods and Services (E: -$68.0B) and the ISM Services Index (E: 52.4) due to be released. The market is looking for signs of slowing demand but not a sharp downturn in growth.

The ISM will be the more important report to watch.  If we get a number that is “too hot” or “too cold” will likely see yesterday’s stock market declines extended, while a Goldilocks print will help markets stabilize.

There is also one Fed speaker today: Collins (8:30 a.m. ET). If she pushes back on the peak rate narrative or rate cuts in 2024, that will add another headwind to stocks and other risk assets today.

Economy

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Jobs Report Preview (Two Sided Risks)

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What’s in Today’s Report:

  • Jobs Report Preview:  Two Sided Risks
  • EIA Analysis and Oil Update
  • Why Yesterday’s Service PMI was a Negative for Markets

Futures are little changed following a mostly quiet night of news as markets digest this week’s underwhelming economic data ahead of the jobs report and long weekend.

Economic data overnight was better than expected as the Chinese Composite PMI beat estimates (57.8 vs. (E) 55.0) as did German Industrial Production (2.0% vs. (E) 0.0%).

Regional banks remained stable overnight following WAL’s update on deposit statistics yesterday.

Today focus will be on Jobless Claims (E: 201K) and a speech by Fed president Bullard (10:00 a.m. ET).  Investors will want to see claims move higher, above 200k, to signal some moderation in the labor market, while we can expect Bullard to be hawkish, although keep in mind he does not represent the consensus at the FOMC (and as such his comments shouldn’t move markets, unless they’re a dovish surprise).

Jobs Report Preview

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What’s in Today’s Report:

  • Jobs Report Preview:  Two Sided Risks for the Market

Futures are modestly lower following mixed economic data while the Fed announced it’s winding down one of its pandemic era support programs.

Service PMIs for May were mixed as the Chinese PMI missed estimates while the EU & British PMIs were in-line with expectations, but none of the data is altering the expectation that the global economic recovery is on going.

The Fed announced it’s going to start selling assets from the “Secondary Market Credit Facility” which was the program the Fed used to buy corporate bonds to stabilize markets during March/April of 2020.  This has nothing to do with QE, but it is a general reminder that we are seeing central banks removing market support as society returns to normal, and it’s a tangential reminder that tapering of QE is coming at some point.

Today’s focus will be on economic data as we get several notable reports today:   ISM Services PMI (E: 63.1), Jobless Claims (E: 400k), and ADP Employment (627k).  Generally speaking, markets will want to see “Goldilocks” data from all three reports – close to or better than expectations but not so good they make the Fed think more about tapering.  We also have three Fed speakers:  Bostic (12:30 p.m. ET), Harker (1:50 p.m. ET), and Quarles (E: 3:05 p.m. ET) but none of them should move markets.