A Market in Transition

What’s in Today’s Report:

  • Updated Market Outlook:  A Market in Transition
  • Weekly Economic Cheat Sheet:  Key Reports Thursday and Friday (And They’re Important)
  • Weekly Market Preview:   Can the Rise in Yields Become Orderly?

Futures are modestly lower following a generally quiet weekend as markets reverse Friday’s late day rally amidst concern about forced selling due to a hedge fund failure.

Archegos Capital was unable to make margin calls last week which resulted in losses and Nomura and Credit Suisse, and that’s causing some mild anxiety about more potentially forced selling looming in the equity markets.

There were no notable economic reports overnight.

Today there are no notable economic reports and just one Fed speaker, Waller (11:00 a.m. ET).  So, focus will be on any perceived fallout from the Archegos Capital failure and if there’s any forced selling appearing in certain stocks (if there is, it could weigh temporarily on the entire market).

Harder to Rally?

What’s in Today’s Report:

  • Harder to Rally?
  • Weekly Market Preview:  All About Rising Yields (and Central Bank Reaction)
  • Weekly Economic Cheat Sheet:  A Busy and Important Week of Data, and Powell Q&A on Thursday

Futures are sharply higher thanks to falling bond yields combined with progress on stimulus and vaccine distribution.

The Reserve Bank of Australia surprised markets and announced it was buying $3 billion of longer-dated bonds as global central banks ramp up the response to rising yields, and that is the main reason we’re seeing global bond yields (including Treasuries) lower this morning.

On stimulus, the House passed the $1.9 trillion stimulus bill while the FDA approved JNJ’s single-dose COVID vaccine.  Both events were already priced into stocks, however, so they aren’t causing this morning’s rally (again that’s based on falling bond yields).

Today focus will be on data and Fed speak, as we get the  ISM Manufacturing PMI (E: 58.9) and two Fed speakers this morning: Williams (9:00 a.m. ET) and Brainard (9:05 a.m. ET).  As was the case last week, expect stocks to move inversely to yields, and if the data is solid (but not too good) and the Fed speakers dovish, expect yields to fall further and an extension of this morning’s rally.  

Too Much of a Good Thing?

What’s in Today’s Report:

  • Can There Be Too Much Of A Good Thing in Markets?
  • Weekly Market Preview:  Stimulus Expectations and Vaccine Optimism Remain the Two Drivers of Stocks
  • Weekly Economic Cheat Sheet:  Inflation

Futures are modestly higher following a quiet weekend of news as global markets rose on momentum from last week’s rally.

The stimulus process continued as Democrats passed procedural votes on Friday and a $1.5-$1.9 trillion stimulus bill is expected to become law sometime in the next 4-6 weeks (this expectation remains the single biggest driver of the stock rally).

Economically, the only notable report was German Industrial Production, which slightly missed estimates (but that’s not moving markets).

Today there are no economic reports and only one Fed speaker, Mester at 12:00 PM ET, so markets will continue to be driven by stimulus headlines and vaccine optimism, and as long as there aren’t any material disappointments on either front, the path of least resistance for stocks remains higher.

Can the Market Have the Best of Both Worlds?

What’s in Today’s Report:

  • Can the Market Have the Best of Both Worlds?
  • Weekly Market Preview: The Problem Isn’t the Fundamentals, It’s the Expectations
  • Weekly Economic Cheat Sheet: Flash PMI Data in Focus

U.S. futures are tracking international equity markets higher this morning as investors remain optimistic about more fiscal stimulus bolstering a continued rebound in growth.

Economically, the German ZEW Survey was slightly better than expected overnight with the Sentiment component notably improving from the previous month.

There are no economic reports today and no Fed officials are scheduled to speak however Janet Yellen will speak before the Senate Finance Committee at 10:00 a.m. ET before the committee votes to confirm her nomination as Treasury Secretary. Her remarks are expected to be very accommodative and support significant fiscal stimulus for the foreseeable future, so any disappointment on that topic could weigh on stocks.

Beyond Yellen’s commentary, Q4 earnings season continues today with several notable financials reporting ahead of the bell: BAC ($0.56), GS ($6.99), and SCHW ($0.70) while NFLX ($1.38) will release results after the close.

Bottom line, it appears Friday’s risk-off move into the long weekend is being reversed this morning as there were no notable or market moving developments over the weekend and hope for stimulus clearly remain one of the most important supporting factors for this market right now.

What Are the Next Catalysts for the Market?

What’s in Today’s Report:

  • What Are the Next Catalysts for the Market?
  • Weekly Economic Cheat Sheet:  Jobless Claims are The Key Report This Week
  • Weekly Market Preview:  With Stimulus Done, What’s the Next Positive Catalyst?

Futures are moderately higher after President Trump signed the $900 billion dollar stimulus package.

Late Sunday night Trump signed the stimulus package as-is, avoiding a government shutdown and delivering economic stimulus to U.S. citizens.  Despite threats not to sign the bill,  markets always expected Trump to ultimately sign the legislation, so while stocks are enjoying a bounce on the news, this was already mostly priced in (so don’t expect a big rally off the news).

Economically, there were no notable reports overnight and this will be a very quiet week for economic data.

Today, with stimulus behind us and this week traditionally devoid of any major economic reports or corporate news, markets will focus on 1) COVID-19 and economic lockdown trends (both still worsening) and 2) The pace of vaccine rollout (lagging behind expectations).  Improvement in both will help fuel a rally into the new year.

The New Market Dynamic (Lockdowns and Stimulus)

What’s in Today’s Report:

  • Navigating the New Market Dynamic (Lockdowns and Stimulus)
  • Weekly Economic Cheat Sheet:  The Key Number is Today’s Flash PMI
  • Weekly Market Preview:  Lockdowns vs. Vaccine Optimism, Round 2.

Futures are moderately higher as the Astra-Zenica vaccine accountment is helping to offset still surging COVID cases and more economic lockdowns.

Astra-Zenica (AZN) announced its COVID-19 vaccine was 70% effective against the disease, but 90% effective when given in two doses (making it essentially on par with the Pfizer and Moderna vaccines).

Economically, flash November PMIs were mixed as the EU PMI missed estimates, while the UK PMI beat expectations, but both numbers declined from the October levels, reflecting the lockdown-related headwinds on the economy.

Today the key number is the November Flash Composite PMI (E: 55.6).  Markets will want to see stability in that number, but if it’s a bad miss then markets will grow more nervous about a potential “double dip” recession in early 2021, and that will hit markets regardless of the AZN vaccine news.

A Market Supported By Great Expectations

What’s in Today’s Report:

  • A Market Supported by Great Expectations
  • Weekly Market Preview:  Earnings, Coronavirus and Polls are key this week.
  • Weekly Economic Cheat Sheet:  How Resilient is the Recovery?

Futures are down about 1% following a continued surge in coronavirus cases in the U.S. and Europe over the weekend, combined with disappointing earnings.

There were new records set in the U.S. and Europe for new daily coronavirus infections, increasing concerns about future growth-restricting lockdowns.

Tech giant SAP cut guidance and the stock is down 20%, which is weighing on the broad market.  SAP sighted coronavirus lockdowns as a reason for the guidance cut.

Today there is only one economic report, New Home Sales (E: 1.016M), and no Fed speakers.  Additionally, any hopes of a last-minute stimulus deal before the election seem to have been extinguished, although we still might get the “progress” or “positive” jawboning regarding the still on-going discussions.

A Market Blind Spot

What’s in Today’s Report:

  • A Market Blind Spot To Watch
  • Weekly Market Preview:  Earnings In Focus This Week
  • Weekly Economic Cheat Sheet:  More Evidence of a Plateau? (Global Flash PMIs Friday)

Futures are sharply higher thanks to better than expected global economic data following a generally quiet weekend.

Chinese economic data beat estimates as IP (6.9% vs. (E) 5.8%) and Retail Sales (3.3% vs. (E) 1.6%) handily beat estimates, while GDP slightly missed but was still solid at 4.9%.

The U.S. political outlook was unchanged over the weekend, with the market assuming a Biden Presidency and Blue Wave on Nov 3rd (and subsequent stimulus not just in 2020 but also 2021).

Today there is one notable economic report, Housing Market Index (E: 83) and two important Fed speakers, Powell (8:00 a.m. ET) and Clarida (11:45 a.m. ET) but at this point expected monetary policy is well known so I don’t expect their comments will move markets.

So, we expect stimulus headlines to again drive the market in the very short term.  There is not an expectation of stimulus before the election, so if there’s any positive movement on that in the next few days, that will help stocks extend the rally.

Has the Market Reached “Fair” Value Yet?

What’s in Today’s Report:

  • Pullback Update:  Have We Reached “Fair Value” Yet?
  • Weekly Economic Cheat Sheet:  Jobs Friday, PMI’s Thursday (It’s an Important Week)
  • Weekly Market Preview:  Coronavirus and stimulus hopes are the near term divers of stocks.

Futures are sharply higher thanks mostly to momentum from Friday’s rally, although there were incrementally positive headlines on stimulus and coronavirus over the weekend that are also helping stocks rally this morning

Speaker Pelosi made optimistic comments on a pre-election stimulus deal, but nothing specific was mentioned.

On the coronavirus front, cases keep rising, but news that Florida was fully reopening and European countries were planning more surgical shutdowns both helped sentiment.

Today there are no notable economic reports and no Fed speakers, so markets will be focused on whether the S&P 500 can hold Friday and this mornings’ gains.  From an influence standpoint, in the near term coronavirus cases and stimulus hopes are driving markets, and any incrementally negative headlines on either topic will risk seeing Friday’s gains given back.

Why the Pullback Isn’t Over

What’s in Today’s Report:

  • Why the Pullback Isn’t Over
  • Weekly Economic Cheat Sheet:  Flash PMIs the key report this week
  • Weekly Market Preview:  New Coronavirus Headwinds?

Futures are sharply lower as concerns mount that surging coronavirus cases in Europe will cause another economic lockdown.

Coronavirus cases in multiple European countries, including the UK, France, and Spain, are back near March highs, and concerns are rising those governments will re-implement economically crippling lockdown measures.

Politically, the death of Ruth Bader Ginsburg will make the election even more heated, but it should not have any direct impact on the markets.

Today there are no notable economic reports or market-moving Fed speakers, so focus will turn towards Europe as weakness in those markets drove U.S. futures lower.  If Europe can bounce into their close (11:30 a.m.) than U.S. stocks could as well.