Is the Rally Starting to Stall?

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

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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What Market Bulls Are Assuming

What’s in Today’s Report:

  • What Market Bulls Are Assuming
  • Weekly Market Preview
  • Weekly Economic Cheat Sheet (Are Jobless Claims About to Rise Again?)

Futures are sharply higher thanks mostly to momentum from a big rally in Chinese stocks.

The Shanghai Composite surged nearly 6% on Monday, despite the lack of a discernable, positive catalyst.  Growing confidence in the economic recovery combined with a flood of retail investment fueled the stock gains.

In the U.S., coronavirus cases continued to rise over the weekend, although there was no material acceleration from the pace of the past several days.

Today the key economic report is the June ISM Non-Manufacturing PMI (E: 49.0), and if that can break above 50 that will be further confirmation that the economic recovery is happening faster than most thought possible (and it should be a tailwind on stocks).  Additionally, the White House has teased an announcement today of positive developments in treatment of the coronavirus, although the exact timing of this announcement, and what exactly it entails, is unclear.

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.

The Current Tug of War in this Market

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

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.

Was the Jobs Report an “All Clear” for Markets?

What’s in Today’s Report:

  • Was the Jobs Report An “All Clear” for Markets?
  • Is a “V” Shaped Recovery Happening?
  • Weekly Market Preview:  Fed Meeting Wednesday
  • Weekly Economic Cheat Sheet:  Jobless Claims Remain the Key Report

Futures are modestly higher thanks to momentum as markets extend Friday’s rally following a quiet weekend.

Economic data was mixed overnight as Chinese exports were better than expected (-3.3% vs. (E) -6.5%) while German Industrial Production missed estimates (-17.9% vs. (E ) -16.2%).  But, neither number was bad enough to turn the bullish momentum.

Protests continued across the U.S. and were mostly peaceful, but this remains largely a non-issue for markets.

Today there are no economic reports and no Fed speakers so re-opening headlines and virus trends will drive trading, and as long as there isn’t any materially negative news on either front, the bulls will likely remain in charge.

Is the Easy Part of the Rally Behind Us?

What’s in Today’s Report:

  • Is the “Easy” Part of the Rally Behind Us?
  • Weekly Market Preview
  • Weekly Economic Cheat Sheet:  Global PMIs Thursday will be very important.

Futures are sharply higher as economic reopening continued across the U.S. over the weekend, with more states announcing reopening and easing social restrictions.

The reopening headlines over the weekend were numerous, but there wasn’t any new news that implied the economic might return to normal sooner than expected, and beyond the short term, when the economy returns to normal remains the key unknown for this market.

Fed Chair Powell gave an interview on 60 Minutes that was cited as “positive” but he didn’t say anything new that wasn’t already communicated in his comments last week.

Economic data was sparse and isn’t moving markets.

Today there are no economic reports and no market moving Fed speakers, so headlines on economic reopening, U.S./China relations and the coronavirus should move markets.

Why Are Stocks So Resilient (And Can It Continue?)

What’s in Today’s Report:

  • Why Are Stocks So Resilient (And Can It Continue?)
  • Weekly Market Preview:  More re-openings and stimulus this week?
  • Weekly Economic Cheat Sheet:  Claims still key, but Friday’s data is also important.

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

Economic data from China continued to come in better than feared, as New Yuan Loans grew 11.5% vs. (E) 10.3% while auto sales declined just –5.5% in April compared to –40% in March.

The Chinese data continues to sew hopes for a relatively quick, “V” shaped economic recovery in the U.S., and that expectation is helping to support stocks.

Today there are no notable economic reports and just one Fed speaker, Evans (3:30 p.m. ET), so headlines on economic re-openings and a potential additional stimulus bill should drive markets (if the re-opening headlines are good and prospects for another stimulus bill continue to rise, markets should be able to continue to digest the recent rally).

Current Market Catalysts (They Changed Last Week)

What’s in Today’s Report:

  • Current Market Catalysts:  From Reopening and Remdesivir to Normalization and Nationalism
  • Weekly Market Preview
  • Weekly Economic Cheat Sheet (Jobs Report This Friday)

Futures are moderately lower as U.S./China tensions rise while markets begin to shift their focus towards when the economy will return to normal.

U.S./China tension over the origin of the coronavirus rose over the weekend as Secretary of State Pompeo said there was “enormous” evidence that suggests the virus was created in a lab.

Economically, the EU manufacturing PMI slightly missed expectations, coming in at 33.4 vs. (E) 33.6.

Today there are no notable economic reports nor any Fed speakers, so markets will trade off any U.S./China coronavirus tension headlines, along with any hints of when the economy might return to some semblance of “normal” as those two issues have now become the main drivers of stocks in the near term.