Looking Forward to a Big Week

Today continues the recent streak of relatively data-free trading days.  There were literally no economic releases scheduled for this morning, which was the case last Monday; and while there were few of consequence last week, there are several potential market movers in the coming days.  Stocks don’t seem particularly concerned, of course.

The parade of tariff news continued apace over the weekend, with the announcement of 30% levies on goods from Mexico and the EU effective August 1^st.  Stocks barely sold off on Friday after learning of a similar announcement regarding Canada and the threat of a 50% tariff on Brazil, and today, rather than simply shrugging off the worst of the overnight selling – which was relatively muted to begin with – stocks moved into positive territory by late morning.  It’s quite clear that when it comes to tariffs, the “half-life” of dips continues to shrink.  Might we get to a point where bad news is simply ignored or even gets greeted as good news simply to avoid a buyable dip?  On the tariff front at least, it appears that “so you’re telling me there’s a chance” remains the mantra.

It’s not quite so clear that stocks are as immune from economic data as they are about tariff threats.  After a dearth of meaningful reports, we get two key inflation measures in rapid succession tomorrow (CPI) and Wednesday (PPI).  The good news is that those two measures have been relatively tame in recent months, with Core CPI and PPI both rising at less than 2% annualized rates on three- and four-month bases.  Unfortunately, both measures are expected to rise this week, with Core CPI heading to 0.3% and Core PPI moving up to 0.2% on a monthly basis after both rose 0.1% on that basis in May.  The consensus estimate of a 2.9% year-over-year increase in Core CPI is echoed by the IBKR ForecastTrader, where 72% say “yes” to a rise more than 2.8% and 70% say “no” to a rate of more than 2.9%. 

In other economic news, we learn about the Fed’s Beige Book on Wednesday, Retail Sales on Thursday, and University of Michigan Sentiment on Friday, among other reports.  Economists will be busy.

So will industry analysts, particularly those who cover financial stocks.  The unofficial start to earnings season is tomorrow, when JPMorgan (JPM), Citigroup (C), Wells Fargo (WFC), and others report, followed by Bank of America (BAC), Goldman Sachs (GS), Morgan Stanley (MS) and more on Wednesday.  I’ve never been a fan of the fact that large banks typically kick off the festivities, since they are uniquely dependent upon the shape of the yield curve and trading results, among other idiosyncrasies. 

That said, the commentary from their managements can be quite illuminating, since they are able to shed light upon the behavior of their customers large and small.  Frankly, it provides a better guide to the results from other corporations than whether a particular bank had a good quarter in, say, commodities trading.  Other big names reporting later this week are Johnson & Johnson (JNJ) on Wednesday, and Abbott Laboratories (ABT) on Thursday.  Most of the largest tech stocks are several days away, though Netflix (NFLX) kicks off that sector after Thursday’s close.

Finally, we would be remiss if we didn’t make note of “crypto week”, the convergence of three bills making their way through Congress.  There is stablecoin regulation, a regulatory framework for cryptos, and a ban on Federal Reserve banks issuing digital currencies to individuals.  While the original enthusiasm for cryptocurrencies was based upon their relative anarchy, they now benefit when greater regulatory clarity seems nearer.  That has certainly been the case over the past week, where bitcoin had risen more than 10% over recent days.  We learned this morning that the bump was abetted by Strategy’s (MSTR) purchase of about $472 million worth of bitcoin last week, after it took an unexpected respite from purchases in the prior week.  It will be up to Congress to keep up the enthusiasm – an interesting bet for the crypto faithful.