Are Cyclical Sectors Set To Rebound?

What’s in Today’s Report:

• Are Cyclical Sectors Set To Rebound?  (They Did Yesterday)

It’s green across the screen this morning but the gains are modest as more positive commentary on U.S./China trade and decent economic data  are supporting markets.

On trade, Treasury Secretary Mnuchin said talks have been “productive” but gave no further details.

Economically, German Retail Sales beat estimates rising 0.9% vs. (E) -1.0%, making it two days in a row of better than expected EU data.

In normal times, today the key data point would be the Core PCE Price Index (E: 0.2% m/m, 1.9% y/y) as that’s the Fed’s preferred measure of inflation.  And, if it ran hot or cold, it would have an impact on perceived Fed policy.  In today’s market, however, it’s take a massive (and almost impossible) move in that price index to change expected Fed policy, so this number likely won’t move markets.  Other notable events today include New Home Sales (E: 615k) and one Fed Speaker:  Kaplan (10:30 a.m.).

Bottom line, this market remains driven by Treasury yields.  They are over extended to the downside and rose slightly yesterday and that helped stocks – and if we see a further rise in yields today ahead of the Chinese PMIs on Sunday, that could boost markets into the weekend.