Retail Sales, Earnings

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Tuesday, July 16. The Bottom Line segment of today’s podcast starts at (4:10) for listeners who want to skip ahead. Be sure to check out the brand new ‘Stocks on the Contrarian Radar’ segment at the bottom of this page and (6:06) on the podcast.

State of Play

Stocks rallied yesterday, led by small caps again, thus continuing the trend from last week. Jerome Powell said the Federal Reserve would not need to wait for inflation to return to 2% before cutting rates, the clearest indication yet that we are getting a rate cut in September. As we look at our board of indicators for signs of direction at 0630, risk-on seems to be the story again:

• Stock index futures are quiet other than small caps, which continue to surge higher. The Russell 2000 is up 1.3%. S&P 500 and Nasdaq are unchanged;

• Commodities are retreating a bit, with WTI crude oil down 0.7% to trade around $80/barrel and copper down 0.4%;

• Cryptos are gaining a bit of ground, with Bitcoin up 1% to trade around $63,300. Remember that Bitcoin bear market? Yeah, me neither;

• Bonds are gaining, buoyed by Powell’s comments. The 2-year yield is down 4 basis points to 4.42% whilst the 10-year is down 5bps to 4.18% (yields move inversely to prices).

Today’s Known Events

We have some earnings to kick things off:

• Bank of America (BAC 0.00%↑) just beat estimates and the stock is rising, apparently shrugging off lower net-interest income and a rise in loan loss provisions;

• UnitedHealth (UNH 0.00%↑) earlier beat top- and bottom-line estimates and appears to have reaffirmed guidance. The stock isn’t moving on this;

• Morgan Stanley (MS 0.00%↑) and Charles Schwab (SCHW 0.00%↑) are also due out before the open.

Retail sales are out at 0830. This is a crucial reading on the state of the US consumer and likely the biggest economic data release of the week. Economists who were surveyed expect a drop of 0.2% month-over-month to headline retail sales versus an increase of 0.1% last month. Core retail sales, which exclude automobiles, are expected to increase 0.1% after a drop of 0.1% last month. There was unfortunately no survey of the annualized figure but last month it was 2.3% for headline retail sales.

We also get import prices at 0830. The expectation here is for an increase of 0.2% MoM . There’s obviously a lot that goes into this figure, including central bank policies, supply and demand, etc. etc.

Retail inventories are out at 1000 and are expected to have held steady in May after an increase of 0.3% the previous month.