The First Two Important Events of the Year (Both This Week)

What’s in Today’s Report:

  • The First Two Important Events of 2020 (Both This Week)
  • Weekly Market Preview
  • Weekly Economic Cheat Sheet (Important Updates on Growth)

Futures are moderately higher following a quiet weekend and ahead of two important events this week:  Phase one signing ceremony (Wed) and the start of earnings season.  Futures are essentially recouping Friday’s losses.

U.S./China trade optimism is helping stocks rally as the U.S. and China will resume semi-annual meetings, something that was done in the Bush/Obama administrations.   This doesn’t impact trade directly, but just like in 2019, any generically positive U.S./China headline will result in at least a mild rally.

Economic data was soft as British GDP (-0.3% vs. (E) 0.0%) and manufacturing (-1.7% vs. (E) -0.3%) both missed estimates, although the soft data is only weighing on the Pound.

Today there are no notable economic reports and just two Fed speakers, Rosengren (10:00 a.m. ET) and Bostic (12:40 a.m. ET), and they won’t move markets.  So, investors will be looking for any hints as to what will be released at the U.S./China phase one signing ceremony on Wednesday, and the more specifics, the better.

Was the Jobs Report an “All Clear” on the Economy?

What’s in Today’s Report:

  • Was the Strong Jobs Report an “All Clear” on the Economy?
  • Weekly Market Preview:  What Happens on December 15th?
  • Weekly Economic Cheat Sheet:  A Busy Week or Reports (They Start on Wednesday)

Futures are slightly lower as markets digest Friday’s big rally following a generally quiet weekend.

On U.S./China trade, there was no new news, although China released a statement saying it wanted to make a deal “as soon as possible.”

Economic data was again mixed, as Chinese exports missed estimates (1.3% vs. (E) 1.9%) while German exports beat expectations (1.2% vs. (E) -0.3%.  But, neither number is moving markets.

Today there are no notable economic reports and no Fed speakers (they are in their blackout period ahead of Wednesday’s decision) so focus will again be on any updates on U.S./China trade.

The December 15th tariff increases are the last “big” event of 2019 and markets fully expect those to be delayed, so any confirmation of that should be a mild tailwind on stocks.  Conversely, any hints the tariffs might go into effect will hit markets, potentially hard.

Why Markets Are Still So Resilient

What’s in Today’s Report:

  • Why Markets Remain So Resilient
  • Weekly Market Preview (Still All About U.S./China Trade)
  • Weekly Economic Cheat Sheet (Wednesday is the Key Day This Week)

Futures are modestly higher on more positive U.S./China trade chatter.

China increased the penalties for Intellectual Property (IP) theft, addressing part of a key U.S. trade demand, while the Global Times (a state-run Chinese paper) said the sides were “very close” to a deal.

Economically, data was mixed but better than October.  German IFO Business Expectations rose to 92.1 vs. (E) 92.5, while British Distributive Trades rose to –3 vs. (E) –10.

Today there are no notable economic reports so the focus will remain on U.S./China trade.  Any incremental positive chatter will be a tailwind for stocks, although the Hong Kong democracy bill remains a wildcard.  If Trump signs it (which he’s expected to do), that could temporarily hit U.S./China trade sentiment, although it’s not a material negative.

Finally, Fed Chair Powell speaks at 7:00 p.m. ET but he’s not expected to say anything too incremental.

An Analogy To Explain This Market (Investors Loved It)

What’s in Today’s Report:

  • An Analogy to Help Explain This Market (Investors Loved It)
  • Weekly Market Preview (Trade and Data Remain the Focus)
  • Weekly Economic Cheat Sheet (Global Growth Updates This Week)

Futures are modestly higher as global markets extended Friday’s jobs report and trade-driven rally.

On trade, U.S. and Chinese officials again repeated that substantial progress has been made on Phase One, while Wilbur Ross downplayed chances of auto tariffs (something that wasn’t ever priced into the market but was a peripheral risk).

Economically, EU and British manufacturing PMIs slightly beat estimates but remained in contraction territory (45.9 and 44.2 respectively).

Today there is one economic report, Factory Orders (E: -0.5%), and normally I don’t follow it, but it’ll give us greater insight into the current state of business spending, so a better than expected reading there will be a positive.  Additionally, there is one Fed speaker, Daly (3:05 p.m. ET) but she won’t move markets as Clarida and Powell made future Fed policy very clear last week – they’re done cutting barring an economic rollover.

What the U.S./China Trade Deal Means for Markets

What’s in Today’s Report:

  • What the U.S./China Trade Deal Means for Markets
  • Weekly Market Preview (All About Earnings)
  • Weekly Economic Cheat Sheet (Important Growth Data This Week)

Futures are modestly lower following reports that China wants “more talks” before signing phase one of Friday’s “deal.”

More broadly, there is some disappointment with Friday’s announcement as it does not provide material tariff relief or trade clarity (more on that in the issue).

Economically, Chinese exports missed estimates falling –3.2% vs. (E) -3.0% and that’s also weighing on sentiment as markets still need global growth to stabilize.

Today is the Columbus Day holiday so there are no economic reports or Fed speakers while banks and the bond markets are closed.  Given that, we can expect any U.S./China trade related headlines to again drive markets until the focus shifts to earnings tomorrow.

Is It Too Late for a Trade Truce?

What’s in Today’s Report:

  • Is It Too Late for a Trade Truce?
  • Weekly Market Preview (All About U.S./China trade)
  • Weekly Economic Cheat Sheet

Futures are modestly lower on digestion following Friday’s big rally, although there was also more soft economic data and a slightly negative U.S./China trade article.

German Manufacturers’ Orders missed expectations, falling -0.6% vs. (E) -0.4% and it’s yet another disappointing global manufacturing datapoint.

A Bloomberg article Sunday afternoon was a mild negative as it lowered expectations for a broad trade deal at this week’s talks, but there was no new news revealed.  To that point, we need to all brace for an avalanche of U.S./China trade headlines as we approach the Thursday start of senior-level talks, but cutting past the noise, the expectation is for a “Trade Truce” so anything that contradicts that expectation will be a negative for markets.

Today there is no notable economic data and two Fed speakers: Kashkari (10:20 a.m. ET) and Powell (1:00 p.m. ET).  Powell is clearly the more important of the two, but he’s giving opening remarks at a movie screening about the Fed (seriously) so I don’t think he’ll say anything market moving.

How Much Have Things Improved?

What’s in Today’s Report:

  • Updated Market Outlook:  How Much Have Things Improved?
  • Weekly Market Preview (ECB Thursday is the Key)
  • Weekly Economic Cheat Sheet (Retail Sales Friday)

Futures are marginally higher following a generally quiet weekend as markets continue to digest some (very) mild progress on U.S./China trade.

Economic data was mixed as Chinese exports missed expectations (-1.0% vs. (E) 2.5%) while German exports (0.7% vs. (E) -0.5%) and British Industrial Production (0.3% vs. (E) 0.1%) both beat expectations.

But, the reports aren’t moving markets as focus is on central banks this week (specifically the ECB on Thursday).

Today there are no notable economic reports nor are there any Fed speakers (they are entering the “blackout” period ahead of next Wednesday’s meeting) so we’ll be watching for any trade related headlines, and any continued improvement in the “tone” of relations will continue to support stocks.

What’s Next for Markets

What’s in Today’s Report:

  • What’s Next For Markets
  • Weekly Market Preview (Key earnings this week)
  • Weekly Economic Cheat Sheet (Important Growth Updates Wed/Thurs)

Futures are modestly lower following a quiet weekend as civil unrest in Hong Kong weighed on investor sentiment.

Protests in Hong Kong, which have been ongoing for weeks, intensified over the weekend as all flights out of Hong Kong have been canceled.  The turmoil is just adding to general geopolitical concerns and that’s pushing bond yields lower, which is why stock futures are down.  The 10 year Treasury yield broke below 1.70% this morning and is trading as of this writing at 1.68%.

Economic data was sparse over the weekend and there was no new news on U.S./China trade.  The next event in this drama is whether the September trade talks still occur (for now the answer is “yes” but that could change at any minute and if it does, stocks will drop).

Today the calendar is quiet as there are no economic reports and no Fed speakers, but any China related headlines will move markets.

The Most Important Week of the Year

What’s in Today’s Report:

  • Fed Week – Why This is the Most Important Fed Decision of the Year
  • Weekly Market Preview – Will the Fed Meet Incredibly Dovish Expectations?
  • Weekly Economic Cheat Sheet – One of the Busiest Weeks of the Year (Jobs Report, Inflation Data, Global PMIs)

Futures are little changed following a quiet weekend as all eyes now turn to the Fed decision on Wednesday.

Former Fed Chair Yellen endorsed a rate cut over the weekend, but did not advocate for sustained easing.   And, this gets right to the heart of this market.  We know the Fed will cut 25 bps this week, but we don’t know if they’ll signal the start of a sustained easing campaign (i.e. 75-100 bps of cuts by year-end) and that’s something the market has already aggressively priced in at these levels.

Economic data was sparse over the weekend although Japanese Retail Sales (0.3% vs. (E) 0.1%) beat estimates.

There was no notable U.S.-China trade news over the weekend and expectations are low for any actual progress at the talks this week.

Today there are no notable economic reports nor any important central bank speak, so focus will remain on earnings (this is the last important week of earnings) and on any U.S.-China trade headlines (although none are expected).

Fed Expectations and Earnings

What’s in Today’s Report:

  • Weekly Market Preview (Fed Expectations and Earnings)
  • Weekly Economic Cheat Sheet (July Flash PMIs this week).

Futures are slightly higher on positive U.S.-China trade headlines following an otherwise quiet weekend.

Tech firms will meet today with administration officials to discuss the Huawei tech ban, while multiple reports stated China will increase soybean purchases and a face to face meeting between Chinese & U.S. officials could occur soon.

Fed policy expectations continue to shift back to a 25 basis point rate cut next week as hope for a 50 basis point cut continues to recede.

Today there are no economic reports and no Fed speakers as we enter the “quiet period” ahead of next Wednesday’s rate decision.  So, there’s not much on the calendar today that could cause volatility, although headlines from the tech company/administration meeting today on Huawei is something to watch, as any hints at relaxing of the ban will be a mild positive for stocks.  Earnings are sparse today as well although I’ll be watching Whirlpool (WHR $3.80) results after the close for any insight into the state of the U.S. consumer.