Stocks have an upside bias now, in my view, thanks to improving economics globally, and the dovish interpretation of the Fed's latest policy statement. Today, however, durable goods orders data will still matter most for stocks as investors look for confirmation of U.S. economic gain one day ahead of critical GDP data. Corporate earnings reports are also critical in this hot and heavy day of reporting for equities. The overhanging GDP report could keep enthusiasm in check today, due to the importance of the data.
Equities benefited yesterday from the stock market's interpretation of a dovish Federal Reserve. The Fed's monetary policy statement was published and served equities modestly. Actually, corporate earnings seem to be fully in control of the broader indices, but there would appear to be an upside bias on a macro-perspective. I say that despite certain concerns I have for equities regarding the period from mid-August through September (more on that when appropriate).
Today, look for the important durable goods orders report to drive stocks. It gets reported before the U.S. market open at 8:30 AM EDT. Economists expect new orders rose 3.5% month-to-month in June. More importantly, excluding transportation, which can fog the bigger picture, new orders are expected to gain by 0.4%. Core capital goods orders are seen rising 0.3%. Those are not spectacular expectations, but this data has a tendency toward big hits or misses off consensus expectations. Look for such a result to impact equities either way today, as investors look ahead to the first reporting of GDP for the second quarter tomorrow.
The trade deficit is expected to narrow ever so slightly in data reported for June this morning, to $65.0 billion. Last month's data showed a deficit of $65.9 billion, with exports up 0.4% and imports down 0.4%. This data could be market moving if it shows significant increases in both exports and imports. That would provide further evidence of global economic gains, supporting stocks.
The Chicago Fed National Activity Index disappointed at last report for May, with the index level marking negative 0.26. The 3-month moving average slipped to 0.04 as a result. A reading of zero here means the economy is growing on historic trend, so readings above zero mark the kind of economic growth I am looking for in the second half. Economists expect the data to start to show that again in June, with the consensus expectation set at 0.10 for the index for June.
The earnings schedule again plays important today. Facebook (Nasdaq: FB) reported a somewhat disappointing result last night, but statements from the executive suite still served to save the stock. CEO Mark Zuckerberg said he would like to see the company's ancillary assets feeding revenues and earnings a little sooner. FB shares turned around and were up 4.2% in the premarket at 6:26 AM EDT.
Others reporting results today include Amazon (Nasdaq: AMZN), ArcelorMittal (NYSE: MT), Baidu (Nasdaq: BIDU), Celgene (Nasdaq: CELG), Comcast (Nasdaq: CMCSA), Federated Investors (NYSE: FII), First Solar (Nasdaq: FSLR), Intel (Nasdaq: INTC), MasterCard (NYSE: MA), PG&E (NYSE: PCG), Procter & Gamble (NYSE: PG), Southwest Airlines (NYSE: LUV), Starbucks (Nasdaq: SBUX), Travelzoo (Nasdaq: TZOO), Twitter (Nasdaq: TWTR), United Parcel Service (NYSE: UPS), Verizon (NYSE: VZ) and Valero Energy (NYSE: VLO).
In conclusion, I see stocks with an upside bias now on improving global economies and a perception of a relatively dovish Fed. Still, durable goods orders data has to confirm that driver today as investors look ahead to tomorrow's GDP data. Q2 GDP data is so important now that it could serve to temper investor enthusiasm until its release. Also, earnings will go a long way to determining the market's direction in this hot and heavy reporting day for stocks. For more of my regular work on the markets, readers are welcome to follow the column here at Seeking Alpha.
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