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Key Levels To Watch in the Yield Curve

What’s in Today’s Report:

  • Signals from the “Smart Market” – Good, Bad, and Ugly Scenarios

Stock futures are flat to slightly higher this morning as investors continue to digest mixed earnings reports, incremental progress between the U.S. and China on trade, and yesterday’s very dovish Fed chatter.

U.S. and Chinese officials held phone conversations last night and it appears more face-to-face meetings are likely in the near term, underscored by a near 2% rally in copper this morning.

Looking into today’s session, there is one economic report to watch: Consumer Sentiment (E: 98.6) and two Fed officials are scheduled to speak: Bullard (11:05 a.m. ET) and Rosengren (4:30 p.m. ET).

Earnings will remain in focus as there are several notable companies releasing Q2 results before the bell: BLK ($6.52), KSU ($1.61), AXP ($2.05), and SYF ($0.96), but yesterday’s rally was all about dovish Fed expectations so investors will be watching for any further clues as to whether the Fed will cut by 25 or 50 basis points at the July FOMC meeting.

Tom Essaye Quoted in Televisa.news on July 16, 2019

Si miramos esta temporada de resultados, la pregunta clave es: ¿llevará la incertidumbre en materia comercial a que las empresas frenen sus inversiones y reduzcan sus gastos…” se planteó el experto Tom Essaye, fundador de Sevens Report.

Tom Essaye Quoted in Invezz on July 17, 2019

“Looking at this earnings season, the key question is: Will trade uncertainty cause businesses to pull back on spending and investment enough so that it begins to weigh on earnings?” Tom Essaye, founder of the Sevens Report, said in a note. Click here to read the full article.

The Four Key Influences on this Market

What’s in Today’s Report:

  • The Four Key Influences on this Market (and How to Easily Monitor Them)
  • EIA Analysis and Oil Update

Futures are modestly lower this morning as the market digests several disappointing earnings releases (notably CSX and NFLX) while U.S.-China trade concerns linger after multiple negative news articles were released overnight.

Economically, U.K. Retail Sales beat (1.0% vs. E: -0.3%), which is helping the pound recover from fresh 2019 lows.

News flow will remain steady today with two economic reports to watch: Jobless Claims (E: 215K) and Philadelphia Fed Business Outlook Survey (E: 4.5) while there is one Fed official scheduled to speak: Williams (2:15 p.m. ET).

Over the last 24-36 hours, earnings became a more significant driver of the broader stock market so today’s corporate results will be important to watch. Before the bell UNH ($3.46), MS ($1.13), HON ($2.08), and UNP ($2.12) all release results and MSFT ($1.21), and COF ($2.84) will report after the bell.

Tom Essaye on Yahoo Finance on July 16, 2019

“Looking at this earnings season, the key question is: Will trade uncertainty cause businesses to pullback on spending and…” said Tom Essaye, founder of the Sevens Report, in a note. Click here to read the full Yahoo Finance article.

Stock Trading Floor

Earnings Season Preview

What’s in Today’s Report:

  • Earnings Season Preview
  • Chinese Economic Data Takeaways

Futures are flat as investors await earnings releases from several big banks this morning while the dollar is rallying after economic data in the EU missed expectations.

The German ZEW Survey showed deteriorating confidence among analysts for both the current state, and the future outlook of the German economy while the British Labour Market Report saw the largest jump in jobless claims since 2009 but also a sharp spike in wage growth (+3.4%). Both the euro and the pound are declining on the news, supporting a rally in the dollar.

From a news flow standpoint, it is lining up to be a very busy day.

Beginning with economic data, Retail Sales (E: 0.1%), Import & Export Prices (E: -0.5%, -0.1%), Industrial Production (E: 0.1%), and the Housing Market Index (E: 65) are all due to be released by 10:00 a.m. ET. Retail Sales will be the most important report to watch, but all of the data has the ability to move markets today.

Turning to the Fed, there are multiple speakers today: Bowman & Bostic (8:15 a.m. ET), Kaplan (12:20 p.m. ET), Powell (1:00 p.m. ET), and Evans (3:30 p.m. ET). Focus will clearly be on Powell in the early afternoon, but any other commentary that wavers from the markets expectations for a 25 basis point rate cut at the FOMC meeting this month could trigger some volatility.

Lastly, the earnings calendar picks up today and investors will be watching the several major banks due to release their Q2 results ahead of the bell: JPM ($2.50), GS ($4.82), and WFC ($1.16) very closely after yesterday’s mixed report from C.

JNJ ($2.42) is also due to report pre-market and we will get some transportation earnings after the close this afternoon: CSX ($1.11) and UAL ($$4.06).

Bottom line, earnings are in focus but even with solid corporate results, economic data will need to remain Goldilocks and Fed chatter needs to keep a dovish tone for stocks to continue to churn to fresh all time highs.

How Much Is Too Much?

What’s in Today’s Report:

  • How Much Is Too Much?
  • Weekly Economic Outlook

S&P futures are modestly higher this morning while overseas markets were little changed overnight as mixed economic data was digested ahead of a busy week of earnings.

Chinese GDP slowing to 6.2% vs. (E) 6.3% initially caught investors’ attention but Fixed Asset Investment, Industrial Production, and Retail Sales all solidly beat expectations, helping Chinese shares recover 1.5%+ to close with a modest gain.

Looking into today’s session, there is one economic report to watch: Empire State Manufacturing Survey (E: 0.5) and one Fed official is scheduled to speak: Williams (8:50 a.m. ET).

Meanwhile, market focus is shifting to earnings as the Q2 reporting season gets underway this week. Today, there are just two notable reports with C (E: $1.78) ahead of the bell and JBHT (E: -$0.08) after the close.

Tom Essaye Quoted in MarketWatch on July 10, 2019

“Powell has a tough job ahead of him. The market is pricing in a 97% chance of a July rate cut, and a 75% chance of one in September.” says the Seven Report’s Tom Essaye. Click here to read the full MarketWatch article.

Graph

Finding Attractive Risk/Reward in This Market

What’s in Today’s Report:

  • Why Powell Was Dovish
  • Where Can We Find Attractive Risk/Reward?  Emerging Market Bonds
  • Energy Outlook (Slightly Positive)

Futures are marginally higher thanks to continued momentum from yesterday’s dovish rally.

Economic data was sparse overnight as the only notable number was German CPI, which met expectations at 1.6% yoy.

Today will be a busy day.  First, we get the 2nd half of Powell’s testimony in front of the Senate Banking Committee at 10:00 a.m. ET, but that shouldn’t yield any surprises as it’s mostly a repeat of yesterday.

The ECB Minutes will be released at 7:30 a.m. ET and if they hint at a re-start of QE (which they probably will) then we might see an extensions of this “dovish” rally.

On the data front, CPI (E: 0.0%) and Jobless Claims (E: 216K) both get released later this morning but given the flood of dovishness inundating markets right now from global central banks, it’d take a very strong CPI and very high jobless claims to hit stocks.

Finally, there are multiple Fed speakers today besides Powell, but they are all generally overshadowed by the comments yesterday so the market should largely ignore their speeches.  Today’s roster includes: Williams (11:00 a.m., 1:30 p.m. ET), Quarles (1:30 p.m. ET), Kashkari (5:00 p.m. ET).

Powell Preview

What’s in Today’s Report:

  • Powell Testimony Preview
  • “This Week’s Sign the Apocalypse is Upon Us”
  • NFIB Small Business Optimism Index Analysis

Futures are lower with most international markets as investors look ahead to Powell’s testimony while another EU company, PageGroup, issued a profit warning overnight.

Economically, Chinese June CPI was inline but PPI dropped from 0.6% to 0.0% vs. (E) 0.2% which rekindled deflationary concerns and underscored pressures on the Chinese manufacturing sector.

Today, there are no economic reports but even if there were, focus would be primarily on the Fed anyway.

Powell’s Testimony before Congress is clearly the main event as investors look for further clues on the future of monetary policy. His written comments are due out at 8:30 a.m. ET before he begins to speak at 10:00 a.m. ET.

Bullard also speaks at 1:30 p.m. ET today and the June FOMC Meeting Minutes will hit the wires at 2:00 p.m. ET.

Lastly, there is a 10 Year T-Note Auction at 1:00 p.m. ET and depending on the results (demand metrics and yields) a reactive move in the bond market could influence stock trading in the midst of all the Fed events.