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.

Why the Long-Term Bullish Case Got Stronger Last Week

What’s in Today’s Report:

  • Why the Long-Term Bull Case Got Stronger Last Week
  • Weekly Market Preview:  Will Lockdown Worries Cause a Near Term Pullback?
  • Weekly Economic Cheat Sheet:  Is the Economic Recovery Starting to Stall?

Futures are down nearly 2% this morning as concerns about a coronavirus mutation offset news of a stimulus deal being reached.

England went into lockdown again after a mutation of COVID-19 started to spread rapidly throughout the country, sparking fears of an extension of the pandemic.  Positively, scientists are confident that the vaccine will work for COVID mutations as well, but that’s not helping stocks this morning as concerns rise about wider/longer economic lockdowns.

On stimulus, Congress agreed to a $900 billion stimulus bill and a vote is expected today. However, this was already priced into stocks (that’s why it’s not causing a rally).

Today there are no economic reports and no Fed speakers, so focus will remain on stimulus and the coronavirus.

Regarding stimulus, the stimulus bill is expected to pass Congress today (so markets will expect that to happen).  Regarding coronavirus, any headlines that imply this mutated coronavirus is spreading across the globe will cause further downside in stocks (because it could lead to greater/longer economic lockdowns, which has been the focus of the market throughout the pandemic).

Are Investors Too Complacent?

What’s in Today’s Report:

  • Are Investors Too Complacent Right Now?
  • Weekly Market Preview:  Stimulus and an Important Fed Meeting
  • Weekly Economic Cheat Sheet:  Is the Recovery Slowing?

Futures are modestly higher following reports that the stimulus bill might be broken up into two parts (with the larger part passing before year-end).

Congress is going to try and pass two stimulus bills, the first a $750 billion-ish relief bill, and after that, a 200 billion-ish bill that deals with stickier issues of state funding and COVID liability.  The market is rallying on this news because it increases the chances of near-term stimulus (although even if this happens, and it’s not a done deal, it’s already priced into stocks).

Economic data was sparse as EU Industrial Production was in-line with estimates at 2.1% vs. (E) 2.0%.

Today there are no economic reports and no Fed speakers so stimulus headlines will drive trading.  The key will be Pelosi as she’s not been in favor of a two-part bill before, so her support (or not) will be critical to the chances of stimulus actually happening.  Bottom line, if she’s for it, expect a further rally.  If she’s not, expect stocks to turn negative on the news.

How Much Is Left in the Rally?

What’s in Today’s Report:

  • How Much Is Left in the Rally?
  • Weekly Market Preview:  Can Stimulus Get Done?
  • Weekly Economic Cheat-sheet:  Jobless Claims and Inflation

Futures are modestly lower as markets digest last week’s rally following more lockdown announcements.

California enacted a de-facto state-wide shutdown in response to rising coronavirus cases, and that is the main headwind on futures this morning.

Regarding stimulus, optimism continued to grow that a deal around $1 Trillion can be struck in the next few weeks, although nothing definitive occurred over the weekend.

Economic data was sparse as German Industrial Production beat estimates and rose 3.2% vs. (E) 0.7%.

Today there are no economic reports and no Fed speakers, so focus will remain on stimulus chatter.  Senate Majority Leader McConnell remains the wildcard as he hasn’t yet voiced support for the current proposed bill, but if he does, that will significantly increase the chances it gets done before year-end (and that would cause another short term pop in stocks).

A Busy and Important Week for Markets

What’s in Today’s Report:

  • There Are Still Risks to the Rally
  • Weekly Market Preview:  How Strong is the Economic Recovery?
  • Weekly Economic Cheat Sheet:  A Busy and Important Week

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

Chinese November PMIs were solid (manufacturing PMI 52.1 vs. (E) 51.5 and Services PMI 56.4 vs. (E) 56.2) implying the economic recovery is on going, which is a general positive for global growth.

Coronavirus cases and the amount/intensity of lockdowns appear to be leveling off in the near term, although at very elevated and stringent levels (and there are fears of a post-Thanksgiving spike in infections over the coming weeks).

Today there is just one economic report, Pending Home Sales (E: 2.0%) and no Fed speakers, so we can expect markets to focus on any headlines regarding the two key macro variables:  Stimulus (when and how much?) and Lockdowns (will there be more?).

Updated Market Outlook (Near Term Pain for Long Term Gain)

What’s in Today’s Report:

  • Updated Market Outlook:  Near Term Pain for Long Term Gain?
  • Weekly Market Preview:  Economic Data and More Vaccine Optimism (MRNA)
  • Weekly Economic Cheat Sheet:  November Data Key This Week (Empire/Philly/Jobless Claims)

Futures are moderately higher despite a continued surge in COVID cases and more partial lockdowns, as markets look beyond the short term and focus on vaccine optimism.

The weekend brought more partial lockdowns in Michigan and Washington, but that was countered by Dr. Fauchi saying he thought the U.S. could be back to normal by April given the current and future vaccines.  That positive vaccine outlook is insulating the market, so far, from the negatives of surging COVID cases and lack of fiscal stimulus.

Chinese economic data was solid as Industrial Production and Retail Sales both beat estimates and generally the Chinese economy continues to recover (which is positive for emerging markets specifically).

For today (and all week), markets will be on “Moderna Watch” as MRNA could release vaccine results any minute, and positive Phase 3 results will obviously be an additional tailwind on stocks.

Economically, the key number today is the Empire State Manufacturing Index (E: 13.5).  This is the first datapoint from November, so markets will want to see stability, especially in the face of growing partial lockdowns.  Finally, there are two Fed speakers, Daly (1:45 p.m. ET) and Clarida (2:00 p.m. ET), but neither should move markets.

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.