Looking for Market Clues in the U. S. and Abroad

North American markets today, Monday, and viewed several hours before the 9:30 EST opening look set to open down with major indicators in the red at time of writing. While indicators can shift in the hours leading up to opening, (and sometimes shift even while I am writing a column), the red numbers are so deep that climbing into the green appears unlikely.

European markets are open at time of writing and major indicators there are also firmly in the red and shifting to the green during the trading day appears very unlikely.

Not surprisingly, the safe havens of gold and silver are firmly in the green. The British pound is up while the Euro and Canadian dollar are down.

This week, we can expect a range of clues about the economy and investments. The most important clues in the short term will come from the COVID relief bill. Today, the House Budget Committee is set to meet to weigh amendments to the bill before sending it to the full House for debate and passage. However, the version that lands on President Joe Biden’s desk will likely be different from the one the House Budget Committee will examine today. The final version  has implications for a host of economic factors. Whether it supercharges the economy, boosts inflation--- or both– remains to be seen.

Very optimistic – or very worried – investors will look for clues when bankrupt Hertz Global Holdings reports fourth quarter 2020 and full year results today. Whether and how it will climb out of bankruptcy remains to be seen. While the pandemic pushed it over the edge, the company had problems before the crisis including high debt. Shares rose on Friday, perhaps in anticipation of a hopeful outlook.

For clues about what we can expect in the near future, Federal Reserve Board Governor Michelle Bowman is expected to speak today at the Federal Reserve Bank of Dallas virtual meeting. Federal Reserve Chairman Jerome Powell is scheduled to speak at a virtual meeting of the Senate Banking Committee tomorrow and at a virtual hearing of the House Financial Services Committee on Wednesday.  Also, tomorrow the Conference Board is scheduled to release its consumer confidence index.

Federal Reserve Board Governor Lael Brainard is scheduled to give a remote lecture to a Harvard University class on Wednesday. Also, on Wednesday, Federal Reserve Vice Chair Richard Clarida outlines the U. S. Economic outlook via a remote presentation to the U. S. Chamber of Commerce

For clues about the evolution of the cybersecurity sector, Palo Alto Networks announces its second quarter results today.  In anticipation of positive news, shares   rose on Friday by $6.45 to close at $396.98

Proving again the danger of using target prices as an investment guide, Palo Alto target prices range from several estimates below Friday’s closing price on up to $500 at Evercore ISI.

Cybersecurity is very much a present and future growth area and Palo Alto can be expected to ride that particular wave.

For more clues about the wreckage caused by the pandemic, Royal Caribbean Cruises Ltd. is expected post a loss of over $5 per share in its fourth quarter results today. Still, shares rose $3.75 to close at $78.87, likely reflecting hope for post-vaccine bookings and a belief that Royal Caribbean represents a buying opportunity.

Overseas, ex-European Bank chief Daniel Draghi starts his second week as Italian Prime Minister and observers are looking for clues about his first steps. There is an implicit message in the fact that he is an economist and former bank head and not a politician. His task list includes stabilizing the government, making sense of the Italian economy and steering the country out of the crisis. And those are just the most immediate tasks.

The news is good for the country but neutral for Italian stocks according to Adam Choppin Assistant Investment manager at Xponance Asset Management and Investment in Philadelphia.

“I’d say this is good news, perhaps the best Italian political news in a long time,” he says. “(However) asset prices are already elevated and so it’s hard to see a strong investment case from this point.”

Draghi’s task list also includes serious changed needed after the crisis subsides. “I would look for some real signals that politicians are going to address longer-term structural impediments to Italian productivity and corporate profitability,” Choppin says. These include labor market reform, changes to the tax structure, childcare and other issues. “That has to come before thinking about Italy as a dedicated investment thesis,” he says.

Disclosure: I do not own shares in any company mentioned in this column.

Related: Is a Market Correction Coming?