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Tom Essaye Quoted in International Business Times on June 26, 2020

“Coronavirus cases are spiking and reopenings are being delayed, which at a minimum will impact earnings. The resurgence in coronavirus cases is raising concerns that the rebound may be short-lived as voluntary…” said Tom Essaye, founder of The Sevens Report. Click here to read the full article.

Are Rising COVID Cases A Reason to De-Risk?

What’s in Today’s Report:

  • Is the Increase in COVID Cases a Reason to De-Risk?
  • Weekly Market Preview (Can the S&P 500 Hold 3000?)
  • Weekly Economic Cheat Sheet (Jobs Report on Thursday)

Futures are slightly higher following a quiet weekend as markets attempt to bounce following Friday’s selloff.

Coronavirus cases continued to rise, with new U.S. cases topping 40k for Friday, Saturday and Sunday.  More states (including California) are pausing re-openings, although none have re-imposed economic restrictions yet.

Economic data was sparse overnight as Euro Zone Economic Sentiment slightly missed expectations (75.7 vs. (E) 80).

Today there is just one economic report, Pending Home Sales (E: 11.3%) and one Fed speaker, Williams (3:00 p.m. ET) and neither should move markets.

Instead, focus will remain on the coronavirus and specifically whether more states pause, and potentially rollback, economic re-openings. Technically, the S&P 500 is sitting on support at 3,000, and if that’s broken, we could see a uptick in selling by programs and algos.

Why Surging Coronavirus Cases Aren’t Causing a Selloff

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.

New S&P 500 Measured Move Targets

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

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?

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

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?)

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

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?

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.