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Market Multiple Levels: S&P 500 Chart

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What’s in Today’s Report:

  • Market Multiple Levels: S&P 500 Chart

U.S. equity futures fell with global stocks overnight amid ongoing stagflation fears but optimism that the House will pass the debt ceiling bill today has helped stocks stabilize.

Economically, the German ZEW Survey slightly missed estimates while the NFIB Small Business Optimism Index was 99.1 vs. (E) 99.5 but neither report is materially moving markets this morning.

Looking into today’s session, there is just one economic report to watch: August JOLTS (E: 11.013M) but it would take a meaningful surprise in the release to impact markets as it is a very dated report.

Meanwhile, there are no Fed officials scheduled to speak but there are two notable Treasury auctions to watch: 3-Yr Note (11:30 a.m. ET) and 10-Yr Note (1:00 p.m. ET).

Outside any potential surprises from Congress regarding the bill to raise the debt limit, if we see rates continue to accelerate higher on inflation worries today, then stocks could remain volatile and potentially test last week’s lows.

Economic Breaker Panel: August Update

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What’s in Today’s Report:

  • Sevens Report Economic Breaker Panel – August Update
  • Consumer Confidence Data Points to Stagflation – Chart

Futures are trading near record highs this morning after mostly disappointing economic data helped reinforce dovish expectations for global central bank policy overnight.

Economically, a private Manufacturing PMI in China showed factory activity fell into contraction last month while European PMI data underwhelmed versus estimates and German Retail sales fell 5.1% vs. (E) -0.9% in July.

Looking into the U.S. session, focus will be one economic data early with the ADP Employment Report (E: 500K) due out ahead of the bell and then the ISM Manufacturing Index (E: 59.0) and Construction Spending (E: 0.3%) reports due shortly after the open.

There are no Fed speakers or Treasury auctions today so the biggest driver of markets will likely be the reaction to the economic data and what it means for Fed policy expectations. The biggest risk to the rally into the end of the week is data that is “too hot” and causes a hawkish shift to a currently very accommodative Fed policy outlook.

This Is What Stagflation Looks Like

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What’s in Today’s Report:

  • This is What Stagflation Looks Like
  • Yield Curve Chart: The Steepening Trend Is Stalling

U.S. futures are lower this morning amid new regulatory threats for Chinese tech companies, while Delta variant concerns linger and traders look ahead to fresh U.S. data.

Chinese regulators proposed a new set of rules for internet and technology companies overnight which once again triggered a wave of selling in Chinese markets, specifically in big cap tech names.

Economically, the Eurozone GDP flash met estimates while U.K. wage growth hit a new record in July the latest evidence that stagflation may be an emerging economic trend (more on that in today’s edition of the Report).

Looking into today’s session, there are two notable economic reports due out in the U.S. this morning: Retail Sales (E: -0.2%), and Industrial Production (E: 0.5%).

As has been the case recently, investors will be looking for data that is good enough to suggest we are not falling deeper towards a stagflationary environment but not so strong that it pulls forward expectations for tapering QE (the key to reading the data will be to monitor the reaction in the yield curve; we want to see steepening).

Finally, Fed Chair Powell will speak as part of a virtual town hall event at 1:30 p.m. ET this afternoon and the markets will be looking for any new clues as to the Committee’s taper plans/views of the economic recovery. For now, a continued, slightly dovish stance remains the best case scenario for stocks as another hawkish “tilt” would likely spark a run higher in yields, potentially weighing on broader equity markets.

Yield Curve Update (Reflation vs. Stagflation)

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What’s in Today’s Report:

  • Yield Curve Update (Reflation vs. Stagflation)
  • EIA and Oil Market Update

Futures are little changed following a generally quiet night of news.

Economic data was slightly underwhelming as UK Industrial Production (-0.7% vs. (E) 0.3%) and Euro Zone IP (-0.3% vs. (E) -0.2%) both missed estimates, although neither is weighing materially on markets.

Covid headlines remained largely unchanged, although Hawaii is reimposing restrictions on social gatherings.  But, that headline isn’t enough to weigh on markets broadly, as the broad response to rising cases remains mask mandates and increased vaccinations (which aren’t material headwinds on the recovery yet).

Today focus will be on Jobless Claims (E: 378K) and markets will want to see the number continue to gradually decline (but not drop so fast that it makes the Fed taper more quickly).  We also get Final PPI (E: 0.6% m/m, 7.3% y/y) but given yesterday’s CPI wasn’t hotter than expected, PPI shouldn’t move markets.

Is Stagflation Possible? Yes.

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What’s in Today’s Report:

  • Is Stagflation Possible?  Yes.

Futures are little changed ahead of this morning’s jobs report.

Economic data underwhelmed overnight with Japanese Household Spending falling –3.2% while German Industrial Production missed estimates (-1.3% vs. (E) 0.5%).

On COVID, headlines remain net negative as cases continue to rise and analysts look for any signs of a loss of economic momentum (so far there’s nothing concrete).

Today the focus is on the jobs report and expectations are as follows:  Job Adds:  900K, UE Rate:  5.7% and Wages: 0.3% m/m and 3.8% y/y.  Again, the biggest risk to markets is for a “Too Hot” jobs number that shifts the tapering timeline, and if that occurs we should brace for volatility.

Updated Market Outlook (Volatility isn’t Automatically Bearish)

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What’s in Today’s Report:

  • Updated Market Outlook – Increased Volatility Isn’t Automatically Bearish
  • Weekly Market Preview:  Do We Get More Hints of Stagflation?
  • Weekly Economic Cheat Sheet:  Friday’s Flash PMIs are Key.

Futures are modestly lower following disappointing Chinese economic data.

Chinese economic data joined recent U.S. data in hinting at a possible plateauing recovery and building inflation pressures.  Industrial Production rose 9.8% vs. (E) 10.0% while Retail Sales gained 17.7% vs. (E) 25%.  Housing Prices, meanwhile, rose 0.48% vs. (E) 0.41%.

Today the Empire Manufacturing Survey (E: 25) is the key report and markets will want to see solid data and stable prices indices.  We also get the Housing Market Index (E: 83) but that shouldn’t move markets.

From a Fed standpoint, Clarida (10:05 am ET) is the headliner today while Bostic (10:00 a.m. ET) will also provide comments.

The Real State of the Jobs Market

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What’s in Today’s Report:

  • What Is the Real State of the Jobs Market and Why Do We Care?
  • What Is Going On With the Colonial Pipeline?

Futures are down sharply with global shares this morning as positive vaccine headlines were offset by rising stagflation concerns which are weighing heavily on tech names.

PFE was awarded emergency use authorization for its vaccine in 12-15 year-olds, bolstering “re-opening” optimism but also stagflation concerns in the wake of Friday’s weak jobs report.

There were no market-moving economic reports overnight.

Today, there are a lot of moving pieces and potential catalysts. First, there is one economic report: JOLTS (E: 7.455M) as well as a 3-Yr Treasury Note auction at 1:00 p.m. ET. If the labor data shows further signs of weakness and/or the auction is weak, sending yields higher, expect more equity market weakness led by tech.

Additionally, there are multiple Fed speakers: Williams (10:30 a.m. ET), Brainard (12:00 p.m. ET), Daly (1:00 p.m. ET), Bostic (1:15 p.m. ET), and Harker (2:00 p.m. ET). They should not veer too far from the dovish narrative however if any of them do hint at “talking about tapering” or mention inflation becoming a concern, expect more volatility.