Why Are Stocks So Resilient (And Can It Last?)

What’s in Today’s Report:

  • Why Are Stocks So Resilient (And Can It Last?)
  • Last Week’s Key Event (It Wasn’t Mexican Tariffs)
  • Weekly Market Preview (Four Big Events This Week, Not Just the Fed)
  • Weekly Economic Cheat Sheet (All About the Fed)

Futures are fractionally higher following a weekend full of  articles on trade and the Fed but none of them shifted the current market outlook.

There were multiple stories on U.S./China trade and they were mixed (some positive, some negative).  The bottom line remains that the best hope for the G-20 summit is a resumption of negotiations and promises of no new tariffs.

There was no notable economic data over the weekend.

The Fed meeting is just over 48 hours away so barring any major surprises on U.S./China trade, markets should be relatively calm into that meeting.

But, that said, there is an important economic report today, Empire Manufacturing (E: 10.0), which will give us the first look at economic activity in June and this report could confirm or deny the U.S. economy is again losing positive momentum, although it’ll take a big miss or beat vs. expectation to materially move stocks.

Tom Essaye Quoted in MarketWatch on June 13, 2019

Tom Essaye, founder of the Sevens Report Research, partly credited expectations for further economic supportive measures from China for the market’s gains. “Chinese Vice Premier Hu called for more stimulus…” Click here to read the full article.

Tom Essaye Quoted in Seeking Alpha on June 12, 2019

Tom Essaye quoted in Seeking Alpha. Analysts are also starting to reassess the June market comeback, with some saying it doesn’t quite make sense. “This rally is not fundamentally backed. Instead what we are seeing is a…” Click here to read the full article.

Tom Essaye Headshot

Dr. Copper Update

What’s in Today’s Report:

  • Dr. Copper Update
  • CPI – The Case for a July Rate Cut Got A Bit Stronger Yesterday
  • China & Treasuries: No Signs of a Buyers Strike (Yet)
  • Oil Outlook – Supplies Keep Rising.

Futures are marginally higher following a busy night of news, but none of it shifted the current market outlook.

If there is a “reason” for the gains this morning it’s hopes for more Chinese stimulus as Chinese Vice Premier Hu called for more stimulus to help the economy, although no specifics were given and China’s already been aggressively stimulating the economy for months – so this isn’t exactly incremental news.

Geo-politically, Brent crude oil surged 3% after two tankers were attacked via a torpedo and mine strike overnight in the Gulf of Oman (near the mouth of the Strait of Hormuz).  It’s unclear who is responsible at this point but that’s obviously increasing tensions in an already unstable part of the globe.

The remaining big event for the week comes tonight via the Chinese economic data, so today will be spent watching the headlines for any trade updates, while on the economic front we get Jobless Claims (E: 216K) and Import & Export Prices (E: -0.3%, 0.1%), but neither should move markets materially.  Finally, there is a 30 Yr. T-Bond Auction at 1:00 p.m. ET and we’ll be watching to see if there are any signs of a Chinese “buyers strike” for Treasuries (so far, it’s not happening).

Is the “Fed Put” Back?

What’s in Today’s Report:

  • Is the “Fed Put” Back?

Futures are higher as Tuesday’s “squeezy” rally carried over into international markets overnight thanks to the dovish Fed rhetoric over the last 24 hours and a handful of incremental positive macro developments.

Mnuchin will meet with Chinese officials this weekend and there is growing support by Republican Senators to block Mexican tariffs, both of which are trade war positives.

Economic data overnight was mixed but “goldilocks” as EU composite PMIs were largely better than feared, Eurozone Retail Sales were in line with expectations, while inflation statistics came in light.

Today, focus will be on economic data early with the ADP Employment Report (E: 175K) due out ahead of the bell while the ISM Non-Manufacturing Index (E: 55.8) will print shortly after the open.

There is also one Fed speaker: Bostic (9:45 a.m. ET) and if the general tone remains dovish, this week’s short-squeeze in stocks can continue with the S&P approaching the 2850 area.

However, because the macro backdrop has not materially improved so far this week (again the developments have just been “less bad”), it is unlikely at this point that the move is the beginning of a sustainable, longer term rally.

Tom Essaye Quoted in Barron’s on May 31, 2019

Tom Essaye Quoted in Barron’s on May 31, 2019.

Investors have to consider what  Tom Essaye calls the “worst case scenario.” In this case, the governments of Mexico and China decide to wait until the next election…click here to read the full article.

Tom Essaye Interviewed with Yahoo Finance on May 31, 2019

Tom Essaye Interviewed with Yahoo Finance on May 31, 2019. A lot of important topics to talk about lately. Watch the full video here.

Why Downside Risks Are Building in Stocks

What’s in Today’s Report:

  • Why Downside Risks Are Building in Stocks
  • Weekly Market Preview
  • Weekly Economic Cheat Sheet (Friday is an important day)

Futures are modestly lower following a generally quiet three day weekend, as investors digest last week’s deterioration in economic data and U.S.-China trade relations.

Economic data was sparse overnight and the only notable report was German GfK Consumer Climate, which slightly missed expectations (10.1 vs. (E ) 10.4).  There was no material economic data out Monday.

On trade, Trump’s trip to Japan was a general non-event and there were no new developments (positive or negative) on U.S.-China trade.

Today we have a few housing numbers including Cash-Shiller HPI (E: 2.5% y/y) and FHFA HPI (E: 0.3% m/m) as well as Consumer Confidence (E: 129.8), but none of those should move markets materially.

Instead, focus will be on the news wires for any updates on U.S. – China trade and on support in the S&P 500 at 2800, which is becoming an increasingly important level.

Tom Essaye Quoted in Markets Insider on May 15, 2019

Tom Essaye was quoted in Markets Insider on May 15, 2019. The red metal has been the “single-best leading indicator for stocks over the past 18 months,” and is flashing a warning sign for…” Click here to read the full article.

Another VIX-Driven Air Pocket?

What’s in Today’s Report:

  • The Latest in the Trade Drama
  • Is this the Start of Another VIX-Driven Air Pocket?

U.S. stock futures are decidedly in the red again this morning tracking Chinese shares lower as trade tensions continue to dominate global markets.

There were however, no notable trade developments overnight.

Economically, Chinese Imports rose 4.0% vs. (E) -0.4% while German Industrial Production rose 0.5% vs. (E) -0.5%, both of which were incremental, macro positives.

Today, there are no economic reports due to be released but the Fed’s Brainard speaks at 8:30 a.m. ET, and the EIA will release weekly inventory data at 10:30 a.m. ET which could move energy markets and, in turn, influence stocks.

Additionally, there is a 10 Yr. T-Note auction at 1:00 p.m. ET and if high demand pressures yields to new lows for the week, expect that to become another headwind on stocks.