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Can Central Banks Stop the Rise in Yields?

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What’s in Today’s Report:

  • Can Central Banks Stop the Rise in Yields

Stock futures are in the red this morning, led by a 1.5% drop in Nasdaq futures as weakness in big tech names is dragging equity markets lower for a sixth consecutive day despite stabilizing bond yields.

Economically, the Eurozone HICP report met expectations at 0.2% in January, easing some recent inflation concerns.

Looking into today’s session, there are a few economic reports due to be released early in the day: Case-Shiller Home Price Index (E: 0.9%), FHFA House Price Index (E: 0.8%), and Consumer Confidence (E: 89.7) before focus will shift to Fed Chair Powell’s Congressional testimony which begins at 10:00 a.m. ET.

Specifically, investors will be looking for Powell to reiterate the Fed’s very accommodative stance on policy for the foreseeable future as well as his responses to any questions regarding the recent, sharp rise in interest rates.

In the afternoon, there is a 2-Yr Treasury Note auction at 1:00 p.m. ET which should not move markets unless very soft demand, and subsequently higher yields suggests the market is becoming more hawkish on Fed policy given recent “hot” inflation data.

Economic Breaker Panel: February Update

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What’s in Today’s Report:

  • Economic Breaker Panel: February Update
  • Empire State Manufacturing Index

Stock futures are slightly lower this morning following a mostly quiet night of news as investors continue to cautiously eye this week’s sharp rise in bond yields.

The 10-Yr Note yield notably topped 1.33% overnight, pressuring S&P futures to session lows but yields have pulled back and stock futures have stabilized in pre-market trading.

Looking into today’s session, there are multiple economic reports to watch this morning including: Retail Sales (E: 1.0%), Industrial Production (E: 0.5%), PPI (E: 0.4%), and the Housing Market Index (E: 83).

As we move into the afternoon, focus will be on the 20-Yr Treasury Bond Auction at 1:00 p.m. ET as the results could move yields and in turn impact equity markets.

Then, the FOMC Meeting Minutes will be released at 2:00 p.m. ET, and finally Robert Kaplan is scheduled to speak at 6:05 p.m. ET.

With the slew of potential catalysts on the calendar today, bond yields will be the key factor to watch as if we see another sharp rise in the 10-year it will act as an increasing headwind for stocks.

FOMC Preview

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What’s in Today’s Report:

  • What the GameStop Drama Means for Markets
  • FOMC Preview

Stock futures are modestly lower this morning as yesterday’s volatile start to the week is digested while investors look ahead to the Fed meeting and a busy earnings week.

Volatility remained elevated overnight as the PBOC unexpectedly withdrew liquidity from the Chinese financial system while the U.K. unemployment rate hit a 5 year high.

Looking into today’s session, there are two measures of the health of the real estate market due out before the market opens: Case-Shiller Home Price Index (E: 0.8%) and FHFA House Price Index (E: 0.8%), and then Consumer Confidence (E: 88.5) will print shortly after the opening bell.

On the earnings front, the Q4 reporting season picks up today with several notable companies reporting quarterly results pre-market including: JNJ ($1.81), MMM ($2.19), GE ($0.08), VZ ($1.16), and AXP ($1.26), while MSFT ($1.64), AMD ($0.47), and COF ($2.85) will report after the close.

With the FOMC meeting beginning today and more mega-cap tech earnings due later in the week, it is likely we see some sense of “Fed paralysis” in the market as traders reposition into the middle of the week.

The Case for Banks

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What’s in Today’s Report:

  • The Case for Banks

Stock futures have pulled back from overnight highs as yesterday’s run to fresh record levels is digested amid concerning coronavirus trends and fading vaccine optimism.

COVID-19 related hospitalizations reportedly hit a new high for the 15th consecutive day yesterday while deaths spiked to the highest level since May, rekindling concerns that more lockdowns may be implemented.

Today’s economic calendar is very busy with several notable and potentially market moving reports due to be released including: Durable Goods Orders (E: 0.9%), Q3 GDP (33.1%), Jobless Claims (E: 730K), New Home Sales (E: 970K), Consumer Sentiment (E: 77.7), and the Core PCE Price Index (E: 1.4%).

Beyond the morning data dump, there are no Fed speakers but the most recent FOMC Meeting Minutes will print at 2:00 p.m. ET and any hawkish hints in the release could weigh on this seemingly tentative run to new records, especially given thin volumes and low attendance this week.

Finally, additional negative news regarding the second wave of the coronavirus outbreak, including new or extended lockdown measures, could trigger more profit taking into the Thanksgiving holiday.

New Market Catalysts

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What’s in Today’s Report:

  • New Market Catalysts (Election/Vaccine Are Priced In)

Stock futures are trading moderately lower this morning as yesterday’s rally to fresh record highs is digested while coronavirus cases continue to rise in the U.S.

There were over 160K new COVID-19 cases reported in the U.S. alone yesterday, the second highest daily increase on record which is tempering some of the vaccine optimism that drove yesterday’s gains.

The economic calendar picks up today as there are several notable economic reports due to be released: Retail Sales (E: 0.4%), Industrial Production (E: 0.9%), and Housing Market Index (E: 85). The market will want to see those data points continue to meet or beat expectations to confirm the recovery remains robust and any disappointment in the numbers could weigh further on stocks.

There is also a slew of Fed officials scheduled to speak today: Powell (1:00 p.m. ET), Bostic (1:00 p.m. ET), Daly (1:25 p.m. ET), Williams (2:00 p.m. ET), Rosengren (2:35 p.m. ET), and Barkin (3:00 p.m. ET). Markets will be most interested in Powell’s remarks but more broadly investors expect the Fed to remain very dovish for the foreseeable future so any signs of the contrary could trigger further profit taking in stocks.

 

Market Multiple Table: October Update

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What’s in Today’s Report:

  • Market Multiple Update: October Update

Stock futures are little changed this morning after wavering between gains and losses overnight as investors eye rising COVID-19 cases, an uptick in lockdown measures in the U.S., as well as stimulus and vaccine uncertainties.

Several economic reports in the EU including the German ZEW Survey as well as the U.S. NFIB Small Business Optimism Index missed estimates which is acting as a headwind on stocks this morning.

Looking into today’s session there is one economic report to watch: September JOLTS (E: 6.508M) and two Fed officials are scheduled to speak: Rosengren (10:00 a.m. and 4:00 p.m. ET) and Brainard (5:00 p.m. ET).

Additionally, the Treasury will hold a 10-Yr Note action at 1:00 p.m. ET and with the massive steepening we saw in the yield curve yesterday, the outcome could influence a further steepening trend which will eventually become a headwind for equities.

Outside of those potential catalysts, investor focus will remain on emerging details about the COVID-19 vaccine, specifically when it will be available and how it may impact the next stimulus package from Congress.

Election Preview

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What’s in Today’s Report:

  • Thoughts on the Friday/Monday Rally
  • Election Preview

Stock futures are flat following a mostly quiet night of news as traders begin to look ahead to tonight’s debate between President Trump and former VP Biden.

The only economic release o/n was Eurozone Economic Sentiment which beat on the headline (91.1 vs. E: 89.5) but had soft details which is weighing modestly on EU shares.

House Democrats presented a $2.2T relief bill late yesterday but realistically it will not be passed before election day, and therefore is not having a significant impact on markets this morning.

Today, there are two economic reports, the latter of which will be more important to watch: Case-Shiller House Price Index (E: -0.1%) and Consumer Confidence (E: 88.8) while there is just one Fed official scheduled to speak (twice): Williams (9:15 a.m. & 1:00 p.m. ET).

With the debate looming tonight, the focus will be on politics and the latest attempt at a stimulus bill by Congress. And barring any unexpected progress on getting a stimulus deal done in the very near term, markets are lining up to have a relatively quiet session today.

Is the S&P 500 “The Market” Anymore?

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What’s in Today’s Report:

  • Is the S&P 500 “The Market” Anymore?

Stock futures are trading at record highs this morning amid renewed stimulus hopes and soft economic data overseas.

Late yesterday, Treasury Secretary Mnuchin urged Congress to pass new stimulus funding and expressed willingness to sit down with Congressional Democrats to work towards a deal.

German Retail Sales were -0.9% vs. (E) +0.5% in July bolstering the case that more stimulus is needed globally.

Today, we will get an initial look at labor market data for the month of August via the ADP Employment Report (E: 850K) which could move markets if there is a material surprise (either way) in the headline. Data on Factory Orders for July (E: 5.8%) will also be released this morning.

There are multiple Fed speakers today including: Williams (10:00 a.m. ET), Mester (12:00 p.m. ET), Kashkari (3:00 p.m. ET), and Daly (6:00 p.m. ET), from which the market will look for additional signals that the FOMC will remain very accommodative for the foreseeable future.

Finally, the next stimulus package has jumped back into the forefront of the market’s focus so any developments regarding progress towards a deal will be well-received by risk assets including stocks while concerns of an ongoing stalemate will be a headwind.

Tailwinds for the Residential Housing Sector

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What’s in Today’s Report:

  • Is Residential Housing the Big Winner In All of This?

Stock futures are flat and overseas equities were little changed overnight as investors digest the recent run to fresh record highs in the S&P amid very quiet news flow.

Internationally, Germany extended a “crisis job support program” which has helped keep millions employed since Q1 lockdowns. The extension is bolstering sentiment globally and helping EU shares modestly outperform today.

There were no notable or market-moving economic reports overnight.

Looking into today’s session, there is one economic report to watch ahead of the bell: Durable Goods Orders (E: 4.3%) and one Fed official scheduled to speak shortly after the open: Barkin (10:00 a.m. ET).

The limited number of catalysts today will likely leave stocks to trade with a sense of “Powell paralysis” ahead of the Fed Chair’s speech during the Economic Policy Symposium tomorrow morning however markets will remain sensitive to any further vaccine headlines or stimulus bill developments.

What Makes a Vaccine a Bullish Gamechanger?

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What’s in Today’s Report:

  • What Makes a Vaccine a Bullish Gamechanger?

Stock futures are rallying this morning suggesting that the S&P 500 will open at a fresh record high today while global shares rose overnight on easing geopolitical tensions.

Late yesterday, high-level officials from the U.S. and China including Secretary Mnuchin and Vice Premier Liu He held a “constructive” virtual meeting during which both sides reiterated commitment to the Phase-One trade deal.

Economic data largely met expectations overnight and did not materially affect markets with a focus on improving relations between the U.S. and China.

Looking into today’s session, the focus will remain on the apparent progress on trade between the U.S. and China however there are a few additional catalysts to watch.

Economically, we will get three reports on the housing market: Case-Shiller House Price Index (E: 0.1%), FHFA House Price Index (E: 0.3%), and New Home Sales (E: 774K) but Consumer Confidence (E: 93.0) will be the most important release to watch (it hits shortly after the bell at 10 a.m. ET).

There is also one Fed speaker late in the day: Daly (3:25 p.m. ET). Beyond that, the market will remain sensitive to any news regarding the Congressional stalemate over the stimulus bill and any new progress will be well received by markets.