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Sitting on Rebound Effort, Waiting for Fed News

Briefing.com

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Chief Market Analyst

The equity market continues in rebound mode this morning. The S&P 500 futures are up 15 points and are trading 0.6% above fair value, the Nasdaq 100 futures are up 23 points and are trading 0.4% above fair value, and the Dow Jones Industrial Average futures are up 107 points and are trading 0.5% above fair value.

FedEx (FDX) and Adobe (ADBE) rightfully deserve some credit for the positive tone. Both companies blew past their respective earnings estimates and did so with double-digit revenue growth. The latter is noteworthy, as it points to the fact that the earnings surprises here were not just a cost-cutting story.

FDX is indicated to open 9% higher and ADBE is trading 2% higher. 

Other luminaries on the move include Microsoft (MSFT), which is up 1.0% after raising its dividend, General Motors (GM), which is up 3.5% on reports its is aiming to manufacture a family of electric car drive systems and motors, Eli Lilly (LLY), which is up 1.4% after sharing positive data on its COVID antibody treatment, and Southwest Airlines (LUV), which is up 0.6% after highlighting improved leisure travel demand trends.

This is all well and good for the broader market, but it’s not a stretch to think that the positive bias in the futures market is also wrapped up in the understanding that the FOMC decision today, along with updated projections, will serve as a reminder that the policy rate isn’t going to be raised anytime soon.

That reminder will come at 2:00 p.m. ET and will be followed by Fed Chair Powell’s press conference at 2:30 p.m. ET to explain the committee’s thinking.

While the Fed has made it known that it stands ready to do more if necessary, we would expect the Fed chair to posit that additional fiscal stimulus is the greater need at this juncture. 

The stock market knows the Fed is on its side, so there will be some intrigue around the reaction to the Fed’s “expected” pathway today. Does it feed the rebound beast or does it get met with a yawn (and maybe even some selling) by a spoiled stock market?

The spoils are expected to persist at the opening bell, even though there are some news blemishes in the mix.

Facebook (FB) is down 1.5% on news that a gaggle of celebrities are recommending a one-day boycott and reports that the company could possibly see the FTC hit it with an antitrust suit. Boeing (BA) is down 0.9% following a scathing House Transportation Committee report on the company’s 737 MAX dealings. And NVIDIA (NVDA) is down 0.4% as China’s Global Times has highlighted concerns about letting a U.S. company buy Arm Holdings.

On top of this, the Retail Sales report for August was weaker than expected. Total sales were up 0.6% m/m (Briefing.com consensus 1.0%) following a downwardly revised 0.9% increase (from 1.2%) in July. Excluding autos, sales were up 0.7% (Briefing.com consensus 1.0%) following a downwardly revised 1.3% increase (from 1.9%) in July.

The key takeaway from the report is that it points to some slowing in retail spending activity following the expiration of enhanced unemployment benefits, but, importantly, it didn’t reveal a spending contraction as increases were seen in many categories.

The futures market showed little reaction to the data.

Originally Posted on September 16, 2020 – Sitting on Rebound Effort, Waiting for Fed News

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