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What to Make of the Pullback

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What’s in Today’s Report:

  • What to Make of the Pullback
  • Weekly Market Preview:  Will the Fed be Dovish Enough?
  • Weekly Economic Cheat Sheet:  Fed Wednesday, but also important data Tues/Thurs

Futures are sharply higher as markets enjoy an oversold bounce following a marginally positive weekend of news.

Astra-Zenica (AZN) announced their COVID-19 vaccine trial was back on in the U.K., although it remains paused on other countries.

There was about $60 bln on pharma M&A announced, and that is also generally helping sentiment.

Economic data was sparse although EU Industrial Production slightly beat estimates (4.1% vs. (E) 4.0%.

Today there is no notable economic data nor any Fed speakers, and like both Thursday and Friday, the actual news overnight is not as positive as the rally in futures implies.  So, also like the past few days, the key will be whether stocks can hold the early gains and the Nasdaq should lead.  If it turns negative by lunchtime (as it has the past two trading days) look out for another Thursday repeat.

The Current Market Equation (How Investors Justify New All Time Highs)

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What’s in Today’s Report:

  • The Current Market Equation (How Investors Justify New All Time Highs)
  • Weekly Market Preview:  More Dovish Commitments from the Fed This Week?
  • Weekly Economic Cheat Sheet:  Important Inflation Data on Friday.

Futures are moderately higher on COVID-19 treatment optimism following the FDA’s authorization of plasma treatment for severely ill COVID patients.

President Trump announced on Sunday that the FDA has granted “Early Use Authorization” (EUA) for use of plasma from recovered COVID patients on severely ill patients.  The EUA will increase the availability of this treatment.

While the EUA for plasma is clearly a positive, from a market standpoint a vaccine remains a true “silver bullet” that could super charge a rally.  So, while positive, the plasma news is not a bullish gamechanger (although it does add to the feeling of FOMO (fear of mission out)).

Outside of the plasma news it was a quiet weekend, as there was no economic data nor any progress on stimulus.

Today will be a generally quiet day as there are no economic reports and no notable Fed speakers (the Jackson Hole conference is later in the week), so focus will remain on COVID treatment optimism.

Stimulus Update (Are the Executive Orders Positive for Stocks?)

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What’s in Today’s Report:

  • Stimulus Update – Are The Executive Orders Positive for Stocks?
  • Is It Time to Chase This Market?
  • Weekly Economic Cheat Sheet (Jobless Claims Remain the Key)
  • Weekly Market Preview (What’s Next in the Stimulus Saga)

Futures are little changed as markets look past President Trump’s executive orders on economic stimulus following an otherwise quiet weekend.

With stimulus talks again at an impasse, President Trump issued several executive orders over the weekend to provide economic stimulus, including $300/week in federal unemployment and a payroll tax deferral.

But, for a multitude of reasons (legal and otherwise) none of these actions will have any immediate economic impact, so the market still expects a stimulus bill to be passed (but now in the coming weeks, not immediately).

Today there’s one labor market number, JOLTS (E: 5.288M), but that shouldn’t move markets, and instead focus will be on stimulus.  Today, the key is that both the Democrats and Republicans signal they are going to continue negotiations on the stimulus bill.  If the rhetoric implies the talks have stalled completely, that that will likely pressure stocks.

Is the Rally Starting to Stall?

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What’s in Today’s Report:

  • Is the Rally Starting to Stall?
  • Weekly Market Preview:  Important Earnings and Stimulus Negotiations
  • Weekly Economic Cheat Sheet:  Fed Decision on Wednesday.

Futures are moderately higher as the Republican version of the stimulus bill is largely in-line with expectations.

The Republican stimulus bill will be released today with weekly unemployment checks cut to $200-$300/week, but one time stimulus checks roughly equivalent to the last time (in both the amount and scope, i.e. the number of people eligible to receive checks).  The weekly payment amount is mildly disappointing, but the scope of the stimulus checks is larger than expected so they basically offset one another.

On balance this version of the bill isn’t a disappointment, especially considering the amount of stimulus will likely increase modestly during negotiations with Democrats.

Looking forward, the negotiation process on the bill will now begin in earnest,  and since Washington always has a flair for the dramatic, so expect a few “scares” over the next two weeks that imply a deal won’t get done.  But, as we all know, it will get done, and likely in the next two weeks (and the sooner the better because weekly unemployment checks ended Friday, until there’s a new bill passed).

Today stimulus chatter will dominate the news wires, and beyond that there’s one notable economic report, June Durable Goods (E: 6.5%).  But, it shouldn’t move markets as investors know June was a solid month for data, and instead the weekly jobless claims are the key report for this week (out Thursday).

Why This Week Is More Important Than It Seems

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What’s in Today’s Report:

  • Why This Week Is More Important Than It Seems
  • Weekly Market Preview:  Still About Vaccines and Stimulus
  • Weekly Economic Cheat

Futures are marginally lower following a mostly quiet weekend, although there was mild disappointment regarding future EU stimulus.

The EU bailout fund saw the amount of direct grants reduced to 390B from 500B euros at this weekend’s EU summit, and that’s weighing marginally on stocks.

Economically, the only notable number was German PPI, which slightly missed estimates (flat vs. (E) 0.2%).

Today there are no notable economic reports and just two important earnings, HAL (-$0.11) and IBM ($2.14), but it’s unlikely either will move markets.

Instead, negotiations will begin on the new stimulus bill and that will be the major market influence today (that or any new vaccine headline).  If negotiations start poorly, expect stocks to sink moderately in response (although markets still very much expect a deal to get done, and that needs to happen as the $600/week stimulus checks end this week).

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The Current Tug of War in this Market

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What’s in Today’s Report:

  • The Current Tug Of War in this Market
  • Weekly Market Preview:  Do Rising Coronavirus Cases Matter?
  • Weekly Economic Cheat Sheet:  Tomorrow’s Global Flash PMIs Are The Key Report This Week

Futures are moderately higher despite generally negative news over the weekend (the news wasn’t terrible, but it wasn’t good either, and certainly not worth a 75 bps rally in futures).

Coronavirus cases continue to move higher, as new cases rose above 30k in the U.S. for the first time since early May.

Politically, President Trump’s Tulsa rally undershot expectations, highlighting a still challenging path to re-election (the market still views the Trump administration is more business friendly than a Biden administration, yet despite the polls, markets are not pricing in virtually any chance of a Biden win in November, and we think that’s a risk going forward).

Today the calendar is quiet as there is only one economic report, Existing Home Sales (E: 4.29M).  So, incremental coronavirus headlines will likely move markets, and if we get any more headlines about companies closing stores/businesses in Florida/Arizona/Texas/California, that should weigh on markets.

What Comes Next? Three Catalysts to Watch

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What’s in Today’s Report:

  • What Comes Next?  Three Catalysts To Watch
  • Weekly Market Preview:  Fed Speak and Important Data This Week
  • Weekly Economic Cheat Sheet:  Empire and Philly Manufacturing Surveys This Week (Both June Data)

Futures are sharply lower on rising coronavirus concerns, as cases continued to rise in the U.S. over the weekend.

Certain states (CA/TX/FL/AZ) continue to see an acceleration in new coronavirus cases, although national new cases remain around 20k (where they’ve been for weeks).

Chinese economic data was slightly disappointing as Industrial Production (4.4% vs. (E) 5%), Retail Sales (-2.8% vs. (E) -2.33%) and Fixed Asset Investment all missed expectations.

Today focus will be on that 3,002 low in the S&P 500 from Thursday.  If that’s broken, a run down towards 2900 becomes much more likely.  Economically, the June Empire Manufacturing Survey (E: 30) is the key number today because it is the first look at June data, and the market will want to see continued improvement from May.  There’s also one Fed speaker today, Kaplan (11:00 am E.T.), but he’s unlikely to move markets given Powell is speaking tomorrow.

Have Things Improved This Much?

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What’s in Today’s Report:

  • Have Things Improved This Much?
  • Weekly Market Preview:  Focus Shifts to Earnings
  • Weekly Economic Cheat Sheet:  How Bad Is The Economy? (We Get Important Updates This Week)

Futures are modestly lower following a generally quiet weekend as markets digest last week’s big rally.

OPEC+ agreed to cut global oil output by 9.7 mln barrels/day, slightly below to 10 mln barrel/day estimate.  That will improve the supply/demand imbalance, but it won’t spark a big rally in oil (it’ll take a sooner than expected reopening of the global economy to do that).  For stocks, this is a mild positive as oil probably won’t make new lows going forward.

Coronavirus trends continued to improve over the weekend as it becomes more clear virus growth has peaked, although that’s already priced into stocks at these levels.

Today there are no economic reports or Fed speak, and most of Europe is closed, so any coronavirus updates will likely drive trading.

Where Do Markets Go From Here?

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What’s in Today’s Report:

  • Where Do Markets Go From Here?
  • Weekly Market Preview:  Coronavirus news first, but it’s an important week from a data standpoint too
  • Weekly Economic Cheat Sheet:  Why Wednesday is the Most Important Day of the Week

Markets are trying to stabilize and futures are down modestly, but they have been volatile as futures have been down 1% and up 1% before trading back closer to flat.

If there’s a “reason” for the attempted rebound, it’s the surging expectation for a globally coordinated central bank response sometime later this week (possibly a 50 bps cut).

Coronavirus news remained negative in aggregate as cases increased in the U.S., although the news is no worse than what the market’s priced in last week.

Economically, the Chinese Feb. Manufacturing PMI imploded to 35.7 vs. (E) 46.0, but that wasn’t a surprise.  The data from the EU and Britain was solid.

Today the market will be driven by the latest coronavirus headlines, but there is an important economic report, the ISM Manufacturing PMI (E: 50.4), and a better than expected number would give the market a needed confidence boost.

How Far Are Investors Willing to Stretch?

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What’s in Today’s Report:

  • How Far Are Investors Willing to Stretch?
  • Weekly Market Preview:  Wuhan virus updates, Fed testimony.
  • Weekly Economic Cheat Sheet:  An Important Look at Consumer Spending This Week

Futures are slightly higher following a quiet weekend of news.

Wuhan virus related fears receded further over the weekend as the virus continued to spread, but at a slower pace than before and experts think the transmission rate of the disease has peaked.  Additionally, factories in China will gradually reopen this week, potentially limiting any economic fallout.

Economic data was sparse overnight although Chinese CPI rose 5.4% vs. (E) 4.9%, which should reduce hopes of any additional, large scale stimulus from Chinese authorities.

Today there are no economic reports and no Fed speakers, so focus will remain on any Wuhan virus headlines.  The key right now is the factory re-openings in China.  As long as there isn’t any news that implies factory re-openings will be delayed beyond this week (and in doing so put more pressure on the economy) than Wuhan virus related fears should continue to decline.