Can A Trade Truce Sustain New Highs?

What’s in Today’s Report:

  • Can a Trade Truce Sustain New Highs in Stocks?
  • What the Saudi Oil Attacks Mean for Oil Prices
  • Weekly Market Preview (All About the Fed)
  • Weekly Economic Cheat Sheet

Futures are modestly lower following attacks on Saudi oil infrastructure over the weekend.

Oil surged 10% overnight after half of Saudi oil production was taken offline following attacks this weekend, as higher oil prices and increased geo-political tensions (the U.S. & Saudi are blaming Iran) are pressuring futures.

Meanwhile, Chinese economic data was universally disappointing as Fixed Asset Investment, Retail Sales, and Industrial Production all missed estimates.  This is being somewhat ignored given the oil markets, but there remains little actual proof the Chinese economic has stabilized (and with the S&P 500 at 3000, that’s priced in).

Today focus will be on geo-politics and any further escalation in tensions between the U.S. and Iran will weigh on stocks.  Beyond the short term, barring a U.S./Iran conflict (which is still very unlikely) the net impact of this weekend’s news will be to strengthen the valuation “ceiling” at 17X 2020 S&P 500 EPS (so 3,026 in the S&P 500), as it’s hard to justify stocks above that level given elevated geo-political risks.

Economically, there’s only one notable number today, the September Empire Manufacturing Survey (E: 4.9), and any evidence of stabilization in manufacturing will help stabilize stocks.