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Why Surging Coronavirus Cases Aren’t Causing a Selloff

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What’s in Today’s Report:

  • Why Surging Coronavirus Cases Aren’t Causing a Selloff
  • Technical Take: S&P 500

Stock futures are trading higher with international shares as conflicting trade war headlines continue to be digested while economic data was mostly encouraging overnight.

White House trade advisor, Peter Navarro, said late Monday that the U.S.-China trade deal was “over,” but his comments were contradicted by a Trump tweet saying the deal was “intact,” which saw risk-off money flows reverse o/n.

Global Composite Flash PMIs largely topped expectations overnight, bolstering hopes that a swift economic recovery is underway.

Today, investor focus will be on economic data early as the U.S. Composite PMI Flash (E: 45.0) and New Home Sales (E: 630K) are both due out shortly after the opening bell.

There are no Fed officials scheduled to speak today but there is a 2-Year Treasury Note auction at 1:00 p.m. ET that could impact the yield curve and ultimately move the equity markets in the afternoon.

Aside from those potential catalysts, any further developments regarding the trade war or coronavirus infection rates will be closely watched as the market continues to look for direction with the S&P being tightly rangebound for the last week.

Tom Essaye Intereviewed with Yahoo Finance on June 18, 2020

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“I’m getting concerned that the market is under-appreciating the risk that Trump loses,” said veteran trader and founder of Sevens Report Research Tom Essaye on Yahoo Finance’s The First Trade. Click here to watch the full interview.

Yahoo Finance Interview with Tom

New S&P 500 Measured Move Targets

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What’s in Today’s Report:

  • New S&P 500 Measured Move Targets

Futures are solidly higher following a generally quiet night as markets again try to extend this week’s rally.

Economically, British Retail Sales were much stronger than expected, rising 12% vs (E) 6.5% and adding to the better than expected data this week.

New daily coronavirus cases continued to increase in the U.S., but markets for now continue to look past the recent uptick.

Today there are no notable economic reports, although there are multiple Fed speakers including: Powell (1:00 p.m. ET), Rosengren (10:15 a.m. ET), Quarles (12:00 p.m. ET), Mester (1:00 p.m. ET).  But, given Powell’s testimony earlier this week, it’s unlikely any of the Fed officials say anything to materially move markets.

Finally, today is a “quad witch” quarterly options expiration, so we should expect big volumes and an uptick in volatility into the close.

The Four Phases of Fiscal Stimulus Explained

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What’s in Today’s Report:

  • The Four Phases of Fiscal Stimulus Explained
  • Weekly EIA Data Analysis and Oil Update

Stock futures are slightly lower this morning following a risk-off night of trade thanks to ongoing concerns about rising COVID-19 infections in the U.S., Europe, and China.

There were no market moving economic reports overnight however the 7-day moving average of daily new cases of coronavirus in the U.S. reached a one-month high yesterday which is pressuring risk assets this morning.

It is lining up to be a busy morning as the BOE Meeting Announcement will hit at the top of the 7 o’clock hour (ET), before U.S. economic data kicks off at 8:30 a.m. ET with: Jobless Claims (E: 1.220M) and the Philadelphia Fed Business Outlook Survey (E: -22.7), and then after the bell, Leading Indicators (E: 1.7%) will be released.

There are also three Fed officials scheduled to speak today: Kashkari (E: 11:00 p.m. ET), Mester (12:15 p.m. ET), and Daly (7:00 p.m. ET) but investors have been largely focused on coronavirus headlines over the last 12-18 hours so any fresh developments on testing, new case trends, or treatments will likely move markets.

Are There New Tailwinds for Stocks?

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What’s in Today’s Report:

  • Are There New Tailwinds for Stocks?
  • Weekly Economic Cheat Sheet

U.S. equity futures are trading higher with global markets today amid investor optimism for reopenings and reports of further progress on COVID-19 treatments/vaccines.

Novavax was the latest company to begin human testing for its coronavirus vaccine over the weekend which is helping drive risk-on money flows this morning.

Today, there are several economic reports due to be released: S&P Corelogic Case-Shiller HPI (E: 0.3%), FHFA House Price Index (E: 0.6%), Consumer Confidence (E: 88.3), and New Home Sales (E: 495K).

Additionally, there is one Fed official scheduled to speak: Kashkari (1:00 p.m. ET) and the Treasury will hold a 2-Yr T-Note auction at 1:00 p.m. ET.

Beyond those potential catalysts, investor focus will remain on the economic reopening process around the globe and any additional information regarding potential COVID-19 vaccines or treatments.

Technical Update: Headwinds Building?

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What’s in Today’s Report:

  • Technical Update:  Headwinds Building?

Futures are modestly lower following mixed Chinese economic data as markets digest Thursday’s rebound.

Chinese economic data was mixed but not worse than feared, as Industrial Production beat estimates (3.9% vs. (E) 1.5%) while Retail Sales and Fixed Asset Investment both declined sharply (-7.5% and –3.8% respectively) but no worse than expected.  In sum the data was “good enough” to keep hope alive that the U.S. economy can see a substantial economic rebound in the coming months, assuming no “second wave” of virus infections.

Today will be an important day for economic data, and the reports we’re watching today (in order of importance) are: Empire State Manufacturing Survey (E: -65.0), Retail Sales (E: -11.2%), Consumer Sentiment (E: 66.0), Industrial Production (E: -11.5%), and JOLTS (E: 5.900MM).

Empire Manufacturing Report and Consumer Sentiment are May reports, so markets will want to see hints of improvement to confirm the economic “worst” will soon be behind us.  If that happens, stocks can hold Thursday’s gains.

What Happens to Markets If There’s a “Prolonged Recession?”

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What’s in Today’s Report:

  • What Happens to Markets If There’s A “Prolonged Recession?”
  • EIA & Oil Update – Can the Bounce Continue?

Futures are little changed as markets digest Wednesday’s uptick in concern about future economic growth and the subsequent market selloff.

Positively, corporate news was solid overnight as CSCO earnings were fine and Mastercard said it’s starting to see the beginning of a recovery in certain sectors.

Economic data was sparse overnight as the only notable number was German CPI, which rose 0.4% vs. (E) 0.3%.

Today, the key will again be the Jobless Claims data (E: -2.500MM).  First and foremost, claims need to continue to decline from the previous week, and if the number beats estimates that will help offset some of the concerns about future growth.  There are also two Fed speakers today, Kashkari (1:00 p.m. ET) and Kaplan (6:00 p.m. ET), but neither should move markets given we heard from Powell yesterday.

Current Market Catalysts (They Changed Last Week)

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What’s in Today’s Report:

  • Current Market Catalysts:  From Reopening and Remdesivir to Normalization and Nationalism
  • Weekly Market Preview
  • Weekly Economic Cheat Sheet (Jobs Report This Friday)

Futures are moderately lower as U.S./China tensions rise while markets begin to shift their focus towards when the economy will return to normal.

U.S./China tension over the origin of the coronavirus rose over the weekend as Secretary of State Pompeo said there was “enormous” evidence that suggests the virus was created in a lab.

Economically, the EU manufacturing PMI slightly missed expectations, coming in at 33.4 vs. (E) 33.6.

Today there are no notable economic reports nor any Fed speakers, so markets will trade off any U.S./China coronavirus tension headlines, along with any hints of when the economy might return to some semblance of “normal” as those two issues have now become the main drivers of stocks in the near term.

Tom Essaye Quoted in Yahoo Finance on April 27, 2020

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“All the data is horrific. But it’s getting less bad than it was say a couple weeks ago and that’s especially true with…” said Sevens Report Research founder Tom Essaye on Yahoo Finance’s The First Trade. Click here to read the full article.

Fed Meeting Preview

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What’s in Today’s Report:

  • FOMC Preview

S&P futures are up 1% this morning, tracking European shares higher as economies around the globe begin to reopen while investor focus shifts ahead to the slew of earnings releases in the coming days as well as multiple central bank meetings this week.

Coronavirus headlines were mostly positive overnight as there were reports of expanded testing capabilities in the U.S., the growth rate of new cases continues to slow in the U.S., and states across the country are beginning the process of lifting COVID-19 containment policies.

The FOMC meeting begins today (concluding tomorrow) while there are a few notable economic reports to watch this morning: International Trade in Goods (E: -%51.5B), S&P CoreLogic Case-Shiller HPI (E: 0.4%), and Consumer Confidence (E: 95.0).

Investors will be increasingly focused on earnings this week as we approach the peak of the Q1 reporting season.

There are several major corporations, from manufacturing to tech sectors, releasing results today including: MMM ($2.02), PEP ($ 1.02), PFE ($0.71), UPS ($1.23), CAT ($1.77), MRK ($1.39), LUV (-$0.48), BP ($0.28),  AMD ($0.18), GOOGL ($10.97), F (-$0.10), CHRW ($0.71).