Hiking fed funds to 4%, 5% or higher won’t make semiconductor factories in Asia run more consistently, nor will it deter the Chinese from future lockdowns. Tom Essaye, a trader and founder of financial research firm Sevens Report Research, wrote. Click here to read the full article.
What’s in Today’s Report:
Futures are flat ahead of today’s jobs report and following a generally quiet night of news.
The only notable economic report was German Industrial Production and it beat estimates rising 0.4% vs. (E) -0.4%.
Geo-politically, China suspended military, climate, and drug enforcement communications with the U.S in retaliation for the Pelosi visit to Taiwan. But, unless retaliation from China impacts U.S./China trade or commodities prices, markets will largely ignore it.
Today the focus will be on the jobs report and the key for markets is that it shows easing wage pressures and moderation in the labor market. So, a mildly underwhelming reports vs expectations (E: 250K job adds, 3.6% UE Rate, 5.0% y/y wage growth) is the best outcome for stocks.
There’s also one Fed speaker today, Barkin at 8:00 a.m. ET, but he shouldn’t move markets.
What’s in Today’s Report:
Futures are slightly higher on momentum from Wednesday’s rally and as the market again ignored soft economic data.
Economic data from Europe was again disappointing as German Manufacturers’ Orders slightly missed estimates (-9.0% vs. (E) -8.9%) as did the UK Construction PMI (48.9 vs. (E) 52.0).
Geo-politically, China began massive military drills around Taiwan, although they were previously announced.
Today focus will be on the Bank of England rate decision (E: 50 bps hike) and on weekly Jobless Claims (E: 260K). Specifically, markets will want to see if the BOE implies more 50 bps hikes are ahead (if so that’s a mild negative for the region). On jobless claims, will they continue to move methodically towards 300k? (That would be a mild positive as it implies slowing in the labor market, which the Fed needs to get to peak hawkishness).
From a Fed speak standpoint, Mester speaks at 12:00 p.m. ET.
What’s in Today’s Report:
Stock futures are lower and the 10-year yield fell to a 4-month low overnight amid heightened tensions between the U.S. and China over Speaker Pelosi’s trip to Taiwan.
Speaker Pelosi is scheduled to land in Taiwan later this morning despite repeated and stern warnings from China about a potential military response to the visit and the elevated tensions are resulting in equity market weakness and rising demand for safe havens assets such as Treasuries.
Looking beyond geopolitics, there are a few other potential catalysts to watch today including two economic reports: Motor Vehicle Sales (E: 13.5M) and JOLTS (11.0M), as well as two Fed officials scheduled to speak: Evans (9:00 a.m. ET) and Bullard (6:45 p.m. ET).
Earnings season also continues today with results from CAT ($3.00), JBLU (-$0.11), MAR ($1.59), TSEM ($0.52), AMD ($1.03), PYPL ($0.85), and SBUX ($0.77).
Bottom line, markets are trading with a risk-off tone due to the U.S.-China tensions surrounding Taiwan however a meaningful escalation including military action between the U.S. and China remains very unlikely, and as such the pressure on equities is not expected to deepen or last very long and market focus is likely to turn back to Fed policy later in the week as the July jobs report is due out on Friday.
What’s in Today’s Report:
Futures are slightly lower as markets digest last week’s big rally and following generally disappointing European economic data.
Data from Europe underwhelmed as German Retail Sales plunged –9.8% vs. (E) 7.5%, the biggest annual drop in 40 years.
The July EU and UK manufacturing PMIs were in-line with low expectations (Euro Zone manufacturing PMI 49.8 vs. (E) 49.6 and UK manufacturing PMI 52.1 vs. (E) 52.2.)
Today focus will be on the ISM Manufacturing PMI (E: 52.2) and markets will want to see a moderation in the data – a decline to show economic momentum is cooling, but no sudden drop. Practically speaking, if the ISM PMI drops to or below 50, that might scare markets that the economy is slowing too quickly.
By making borrowing more expensive and thereby tempering demand, rate increases are critical in combating inflation, but “growing fears” that the hikes will spur a recession by undercutting economic growth are the “driving forces” behind recent market weakness, says analyst Tom Essaye of the Sevens Report. Click here to read the full article.
What’s in Today’s Report:
Futures are moderately higher following a solid night of earnings.
AAPL (up 2%) and AMZN (up 12%) both beat estimates and that’s helping to extend this week’s rally.
Eurozone inflation came in slightly hotter than expected, as EU HICP rose 8.9% yoy vs. (E ) 8.8% yoy, but stronger than expected earnings are helping the market look past the slightly hot number.
Today the focus will be on inflation as we get three notable inflation readings: Core PCE Price Index (E: 0.5% m/m, 4.7% y/y), Employment Cost Index (E: 1.1%), and the University of Michigan Five Year Inflation Expectations (E: 2.8%). Markets have aggressively priced in a near term peak in inflation, and the data needs to start to confirm that, starting today. If these inflation stats run hot, don’t be surprised to see stocks decline.
On the earnings front, the season is starting to wind down but there are still a few more days of notable results. Some reports we’re watching today include: XOM ($3.80), CVX ($5.02), PG ($1.23) and CL ($0.71).
What’s in Today’s Report:
Futures are modestly lower on disappointing earnings and the increased probability of higher corporate taxes.
Earnings from META, QCOM, and others disappointed and that’s reversing some of Wednesday’s tech-driven gains.
Senate Democrats agreed on a smaller Build Back Better bill that includes some corporate tax increases, although it’s still not clear when this becomes law.
Today will be a busy day from a data and earnings standpoint. Economically, Jobless Claims (E: 249K) is the key report and if it moves considerably above 250k that will signal further deterioration in the labor market. We also get Preliminary Q2 GDP (E: 0.5%) and as we said yesterday, don’t be shocked if it’s negative and you hear a lot of recession commentary.
On the earnings front, today is an important day and the key reports will be: PFE ($1.72), MA ($2.36), AAPL ($1.14), AMZN ($0.15), INTC ($0.69).
What’s in Today’s Report:
Stock futures are modestly lower on soft retailer earnings from yesterday as focus turns to the July FOMC meeting.
WMT is down 9% in pre-market trading after the retail giant slashed its profit outlook, citing inflation pressures on consumers which is driving risk-off money flows in pre-market trade amid a resurgence in recession fears.
Today, investors will begin to look ahead to tomorrow’s Fed announcement as the FOMC meeting begins this morning however there are also several important economic reports including: Case-Shiller House Price Index (E: 1.6%), Consumer Confidence (E: 96.8), New Home Sales (E: 664K), and the Richmond Fed Manufacturing Index (E: -10).
Earnings season also continues to pick up today with UPS ($3.14), KO ($0.67), GM ($1.40), GE ($0.38), and MCD ($2.46) reporting ahead of the bell while MSFT ($2.28), GOOGL ($1.28), and V ($1.74) will release results after the close.
The market looks at that, and basically, the logic is, ‘oh crap, if they’re doing this then what about the ones aren’t as strong?’ And what are they seeing coming that everyone else isn’t…said Tom Essaye, president of Sevens Report Research. Click here to read the full article.
