Posts

The Four Phases of Fiscal Stimulus Explained

/in /by

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.

What Does The Fed Decision Mean for the Rally?

/in /by

What’s in Today’s Report:

  • What Does the Fed Decision Mean for the Rally?
  • The Key Takeaway from Yesterday’s Fed Decision (It Wasn’t Positive)
  • EIA Analysis and Oil Update

Futures are sharply lower on follow through from the modest declines following yesterday’s FOMC decision.

If there’s a “reason” for the pullback it’s two-fold:  First, digestion of Powell’s depressing outlook on future growth and second, a potential rebound in coronavirus cases.

Regarding coronavirus, the number of new cases is not spiking, but it is accelerating, as it’s done for over a week.  Point being, there hasn’t been a recent spike in new cases over the past few days, the rise in cases has been occurring for over a week.  But, the news cycle is turning again and renewed media focus on the virus is weighing on sentiment.

Looking forward to today, the key number is Jobless Claims (E: 1.500M) and again we need to see this number 1) Continue to decline and 2) Beat expectations, especially in light of Powell’s caution on the economy.  Also, Continuing Claims needs to decline.  If jobless claims disappoint markets, the selling today will likely intensify.

Market Multiple Levels: S&P 500

/in /by

What’s in Today’s Report:

  • Market Multiple Levels: S&P 500 Chart
  • What Do Protests Mean for Markets

S&P futures are once again up by double digits today as more stimulus chatter by global central banks and good economic data offset intensifying civil unrest in the U.S.

Economically, global Composite PMI data for May was mostly upbeat with Chinese and EU figures coming in ahead of expectations while the EU Unemployment Rate in April was not as bad as feared at 7.3% vs. (E) 8.2%.

Looking into the U.S. session, focus will be on economic data early with three notable reports due to be released: ADP Employment Report (E: -8.663M), Factory Orders (E: -14.0%), and ISM Non-Manufacturing Index (E: 44.0).

There are no Fed officials scheduled to speak today so investor focus will likely turn back to the protests across much of the country as well as the simmering geopolitical tensions between the U.S. and China after this morning’s economic data.

Bottom line, if economic data in the U.S. largely confirms the upbeat data from overseas, the rally could extend higher towards 3,100 in the S&P 500 however the market is becoming near-term overextended and due for a breather.

China Press Conference Preview (A New Headwind?)

/in /by

What’s in Today’s Report:

  • China Press Conference Preview (A New Market Headwind?)
  • EIA and Oil Market Update

Futures are modestly lower as markets digest the week’s gains ahead of the China press conference and Powell speech.

Economic data was mixed overnight as German Retail Sales beat estimates (-5.3% vs. (E) -11%), while Japanese IP and Retail Sales both missed expectations.

U.S./China tensions continue to tick higher as China said it would retaliate to any sanctions over the Hong Kong law.

Today the big event is the Trump/China press conference, and the key is this:  As long as there’s no reason for the markets to think the “trade truce” is in jeopardy, any market fallout from more sanctions on China should be relatively modest.

Away from China, we get two notable economic reports today, Core PCE Price Index (E: -0.3%) and Consumer Sentiment (E: 73.9) and a speech by Fed Chair Powell (11:00 a.m. ET).  But, that’s unlikely to move markets unless there’s a surprise revealed (and that’s not likely as Fed policy is pretty well known at this point).

Bullish Developments on Equity Index Charts

/in /by

What’s in Today’s Report:

  • Bullish Developments on the Equity Index Charts
  • Is There A Finally a Rival to Treasuries?  If So, What Are the Short and Long Term Implications?

Futures are little changed following a generally quiet night of news.

China’s legislature approved new security legislation for Hong Kong, further escalating tensions with the U.S. But, for now, markets are ignoring it.

Economically, the only notable number was EU Economic Sentiment which missed expectations (67.5 vs. (E) 70.5).

Today focus will be on economic data as we get multiple important reports including, in order of importance: Jobless Claims (E: 2.050M), Durable Goods Orders (E: -18.5%), Revised Q2 GDP (E: -4.8%), and Pending Home Sales Index (E: -15.5%).   We also get one Fed speaker: Williams (11:00 a.m. ET).

Finally, the administration keeps teasing a “response” to China passing the Hong Kong security legislation, and while markets have been able to ignore the uptick in U.S./China tension, that won’t last forever if tensions continue to rise.

Are There New Tailwinds for Stocks?

/in /by

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.

The Yield Curve and Recessions

/in /by

What’s in Today’s Report:

  • Yield Curve Update: Historically Speaking

U.S. equity futures are up more than 1% this morning, recovering the bulk of yesterday’s late afternoon declines amid continued hopes for a looming economic recovery.

Economically, Japanese Machine Orders for March declined -0.4% after rising 2.3% in February while inflation statistics in Europe were on the soft side, but none of the data materially moved markets overnight.

There are no notable economic reports today however the Treasury will hold a 20-Year Bond Auction at 1:00 p.m. ET, and as we have seen so far this year, any resulting move in yields (specifically the curve) could influence equity market trading.

There are also a few potential Fed catalysts today with two speakers on the schedule: Bostic (10:00 a.m. ET) and Bullard (12:00 p.m. ET), and the release of the FOMC meeting minutes at 2:00 p.m. ET.

The market remains primarily focused on the still very fluid coronavirus outbreak situation and economic reopening process, as well as any further developments about vaccines or treatments. Any positive headlines, specifically regarding the latter, could help power stocks to fresh multi-week highs today, while contrarily, negative news could see a repeat of yesterday’s late day selloff.

Tom Essaye Quoted in Benzinga on May 15, 2020

/in /by

While that phrase may sound pretty scary to investors, Sevens Report’s Tom Essaye said Thursday stock prices may hold up much better in 2020 than during the previous two extended U.S. recessions.

“That’s $2.6 billion in two months, compared to $3.5 trillion in six years! And, the Fed isn’t done, either, as the balance sheet will certainly eclipse $7 trillion soon. Point being, this is very, very…” Essaye said. Click here to read the full article.

Benzinga_5.18.20

Technical Update: Headwinds Building?

/in /by

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?”

/in /by

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.