Attention Turns to Earnings after Today's NFP

Attention Turns to Earnings after Today's NFP

The monthly employment situation headlines today’s trade, but then the economic calendar goes quiet for several days, giving traders a break until the Q2 earnings season kicks off.

Attention Turns to Earnings after Today's NFP
Attention Turns to Earnings after Today's NFP Getty Images

The so-called “trade wars’ have been grabbing economic headlines over the last few months and more intensely in the past few weeks, and they only seem to be escalating. However, in our years of watching the S&P 500 and major equity indices, we have seen that markets will usually adjust and adapt to bad news and uncertainty.

The equity futures have been gapping lower on specific trade war headlines; however, they then run back up and fill the gaps. This leads us to think that unless something spectacularly unexpected arises on this front, the U.S. stock indices may start to shrug off some of the headline vulnerability.

Last week saw major and historic outflows from U.S. stocks by investment and mutual funds as the rebalancing took place at mid-year. We can understand this. As we have said, with the uncertainty of the midterm elections later this year, adding to trade wars and rising interest rates in the U.S., it would make sense for conservative money managers to move some capital to the sidelines.

However, we always ask the question, “Where will this money go?” Interest rates are still too low to keep funds in a money market account, and U.S. Treasuries are not paying that great of a yield. Furthermore, the dollar is still down considerably since the beginning of 2017, and commodities have been falling. It may just what we have seen before - when the money pulls out of U.S. equities, they start to rally, provoking that very same money to return in the hopes of jumping in and riding a climb to new all-time highs.

Today is non-farm payroll. This use to be the biggest event in most months; however, it has turned into a quiet trade over the last two or three years. Otherwise, the calendar is very light, and it remains light into next week’s open with nothing even close to being market-moving scheduled through Tuesday.

Earnings should start picking up late next week around on Friday with some notable bank names reporting, and we think that once the market gets past the NFP, attention will turn to the Q2 earnings that really pick up the week of the 16th.

Some have wondered why there has not been a typical summer slow down, and the few traders who wish to see such a slow down may have their wish granted next week. Let’s face it - technically speaking, summer is only two weeks old, but unofficially, it runs from Memorial Day to Labor Day. July 4th tends to mark the halfway point, and with the summer now starting to wind down and big earnings coming up, we think traders may leave early today and not return until the middle of next week, taking advantage of warm weather and a quiet economic calendar.

 

Today’s Economic Calendar:

  • Employment Situation 8:30 AM ET
  • International Trade 8:30 AM ET
  • EIA Natural Gas Report 10:30 AM ET
  • Baker-Hughes Rig Count 1:00 PM ET
  • Treasury STRIPS 3:00 PM ET
  • Neel Kashkari Speaks 9:10 AM ET

Monday:

  • 4-Week Bill Announcement 11:00 AM ET
  • 3-Month Bill Auction 11:30 AM ET
  • 6-Month Bill Auction 11:30 AM ET
  • TD Ameritrade IMX 12:30 PM ET
  • Consumer Credit 3:00 PM ET

Tuesday:

  • NFIB Small Business Optimism Index 6:00 AM ET
  • Redbook 8:55 AM ET
  • JOLTS 10:00 AM ET
  • 4-Week Bill Auction 11:30 AM ET
  • 3-Yr Note Auction 1:00 PM ET

 

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