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Earnings Season Takeaways in the COVID Era

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What’s in Today’s Report:

  • In the Era of COVID, How Can We Use Earnings to Generate Market Insights?

Stock futures are trading modestly higher this morning as investors digest yesterday’s new record highs in the S&P after a mostly quiet night of news.

Traders remain optimistic for a stimulus deal however there were no positive developments overnight while economic data was sparse and did not move markets.

Looking into today’s session, there are no economic reports to watch and the calendar is fairly quiet in the morning.

Potential market catalysts do pick up in the afternoon as the Treasury will hold a 20-Yr Bond auction at 1:00 p.m. ET which has the potential to move rates, the yield curve and ultimately impact equity markets.

Later in the afternoon, the minutes from the most recent Fed meeting will be released at 2:00 p.m. ET before Richmond Fed President Barkin speaks at 3:00 p.m. ET.

The market’s primary focus right now however remains the stimulus package and with rising chatter about potential concessions in the front half of the week, the prospects for a deal have improved. And any additional positive news regarding a stimulus deal should help the market continue to grind to new record levels.

The Presidential Election and Markets

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What’s in Today’s Report:

  • Why Doesn’t the Market Care About the Election Yet?
  • NFIB Small Business Optimism Index Takeaways

Stock futures are higher this morning following positive vaccine news from MRNA late yesterday which is offsetting a continued rise in tensions between the U.S. and China.

All 45 patients involved in MRNA’s latest coronavirus vaccine trial reportedly showed a “robust immune response” to the treatment, pushing the trial into the next phase.

Looking into today’s session, there are a lot of potential market catalysts including several economic reports due early in the day: Empire State Manufacturing Survey (E: 8.9), Import and Export Prices (E: 1.1%, 0.8%), and Industrial Production (E: 4.3%).

There is also one Fed official scheduled to speak: Harker (12:00 p.m. ET) but he is not likely to move markets as focus shifts to earnings. Notable companies releasing their Q2 earnings reports include: UNH ($5.08), GS ($4.27), PNC ($1.14), and BK ($0.94).

Despite all of the moving pieces this morning, markets are focused on the positive MRNA vaccine developments and continued optimism for a viable vaccine/treatment should support risk-on money flows today barring any major surprises.

Market Multiple Levels: S&P Chart

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What’s in Today’s Report:

  • Market Multiple Levels: S&P 500 Chart

Stock futures are trading with tentative gains this morning as investors digest yesterday’s late session reversal in the U.S. while focus shifts to the start of Q2 earnings season.

Internationally, there was a slew of economic data overnight and on balance the reports were moderately disappointing.

In the U.S. the NFIB Small Business Optimism Index rose to 100.6 vs. (E) 96.7 in June pointing to a continuing improvement in sentiment among business owners this summer.

Today, there is one economic report: CPI (E: 0.5%) and two more Fed officials are scheduled to speak: Brainard (2:00 p.m. ET) and Bullard (2:30 p.m. ET). As we saw with Kaplan’s comments yesterday, the market remains sensitive to Fed chatter right now as the threat of less accommodation, specifically through bond purchases, is not something priced into stocks right now.

The market’s main focus today however will be on the start to Q2 earnings season as several of the big banks are due to release their quarterly results before the open: JPM ($1.34), WFC (-$0.16), and C ($0.47). Additionally, we will get a look into the state of the airline industry via earnings from DAL (-$4.06) as investors ultimately try to decipher just how bad the economic fallout from the shutdowns in the first half of the year really were.

Is There a “Second Wave” Coming?

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What’s in Today’s Report:

  • Is There a Second Wave Coming? Let’s Look At the Data

Stock futures are rising with global equity markets amid positive developments on U.S.-China trade, rising hopes for a $1T infrastructure spending package in the U.S. and dovish details regarding the Fed’s bond-buying programs.

Economically, the German ZEW Survey for the month of June was better than expected helping lift EU shares.

Today, investors will be focused on economic data early with Retail Sales (E: 7.5%), Industrial Production (E: 2.9%), Business Inventories (E: -0.5%), and the Housing Market Index (E: 44.0) all due out before the open or shortly after the bell.

From there, attention will shift to Fed Chair Powell’s semiannual testimony before Congress which will begin at 10:00 a.m. ET as investors look for further clues regarding current stimulus programs and the Fed’s outlook for the economy in the coming quarters.

ECB Preview

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What’s in Today’s Report:

  • ECB Preview
  • Have Treasury Yields Bottomed?

Stock futures are flat while most international markets rallied overnight thanks to incremental progress on trade amid a continuation of the recent rotation into cyclicals.

There were no notable economic reports overnight.

China announced tariff exemptions for multiple U.S. imports o/n which is an incremental positive as both sides have made modest concessions in recent weeks.

The rotation from momentum to cyclicals is continuing overseas, a theme that will remain in focus today. Remember that because of the heavy weighting of big tech stocks in the major indexes, this rotation could remain a headwind on the broader stock market in the near term.

Today, there is one economic report to watch: PPI (E: 0.1%) and no Fed officials are scheduled to speak.

There is a 10-Yr Treasury Note Auction at 1:00 p.m. ET and depending on the reaction from the bond market, there could be an impact on stocks however investor focus has largely shifted forward to the ECB tomorrow which will likely keep stocks largely paralyzed for the next 24 hours.