FOMC Takeaways (An End to QE4?)

What’s in Today’s Report:

  • FOMC Takeaways:  Slightly Dovish, But Could Set Up For a More Volatile Q2
  • Are Repo Operations Really QE?  (And Why You Should Care)

Futures are sharply lower as concerns about the economic fallout from the Wuhan coronavirus continue to mount.

The spread of the Wuhan virus isn’t accelerating, but markets becoming more concerned about future earnings and economic growth as companies implement work stoppages to reduce the chance of the disease spreading.

Today there is a Bank of England rate decision and while the official market expectation is for no change, don’t be shocked if there’s a 25 bps rate cut.  Outside of the BOE, we also get the first look at Q1 GDP (E: 2.1%) and Jobless Claims (E: 215K).

On the earnings front, today is really the last “big” day of earnings, and the clear highlight is AMZN ($3.98) after the close, followed by: V ($1.46), KO ($0.43), UPS ($2.10), VZ ($1.15), MO ($1.01).

FOMC Takeaway: Will Three Rate Cuts Save the Bull Market?

What’s in Today’s Report:

  • Will Three Fed Rate Cuts Be Enough To Save the Bull Market?
  • Why Wednesday’s GDP Report is Important
  • Oil Market Update

Futures are modestly lower as weak global economic data offsets good earnings from AAPL and FB.

The Chinese October manufacturing PMI fell to 49.3 vs. (E) 49.8, the lowest level since January 2016.  German retail sales and EU unemployment also slightly missed estimates and the takeaway is that the hoped for stabilization in the global economy isn’t happening yet.

On U.S./China trade, a Bloomberg headline hit early this morning saying a long term U.S./China trade deal is unlikely, but that’s not news as it was never expected.  Instead, consensus expectations are for an ineffectual Phase One document to be signed, and then no further progress after that (the key to this whole drama remains whether there’s any tariff relief).

Today’s focus will remain on economic data as earnings begin to move towards the back burner.  Key reports to watch today, in order of importance, are:  Core PCE Price Index (E: 0.1%, 1.7%), Employment Cost Index (E: 0.7%) and Jobless Claims (E: 215K). From a data standpoint, with the Fed now on hold, “good” economic news is good for stocks, and “bad” economic news is bad.  So, the bulls are looking for good news for the remainder of the week.

What the Fed Rate Cut Means for Markets

What’s in Today’s Report:

  • FOMC Takeaways (Resistance at 3000 in the S&P 500 Getting Stronger)
  • Oil Market Update (Inventories and latest from Saudi Arabia)

Futures are slightly lower as markets digest a “not as dovish as wanted” Fed decision after a generally quiet night.

The market’s reaction to the Fed meeting is one of mild disappointment as the FOMC did not guarantee more rate cuts, although they signaled they will come if needed.

Economic data was sparse overnight as British Retail Sales met expectations and that number’s not moving markets.

Today there are several notable economic reports, including (in order of importance): Philly Fed (E: 11.3), Jobless Claims (E: 214K), Existing Home Sales (E: 5.375M) and Leading Indicators (E: 0.1%).  The Bank of England is also out with a rate decision this morning but no change is expected.

But, the most important event of the day is the start of the lower level U.S./China trade talks, and any positive “chatter” from these meetings should help stocks offset mild Fed disappointment.

FOMC Takeaways (Dovish Gamechanger?)

What’s in Today’s Report:

  • Fed Takeaways
  • EIA Analysis and Oil Update

Stock futures are rallying towards all-time highs and gold is up nearly 3% while the dollar and bond yields continued to decline overnight as global investors cheered the dovish Fed and rising prospects of a U.S.-China trade deal.

There were no notable economic, central bank, or trade war headlines since yesterday’s close.

Geopolitically, Iran claimed it shot down a U.S. spy drone overnight which triggered a fear bid in global oil prices. WTI is up nearly 3% on the news.

Looking into today’s session, there are two economic numbers due out ahead of the bell: Jobless Claims (E: 219K) and the Philadelphia Fed Survey (E: 11.0) but neither should materially move markets while no Fed officials are scheduled to speak.

Momentum is clearly higher for stocks right now and investor optimism surrounding this week’s dovish central bank developments and improving prospects for a U.S.-China trade deal very well may help drive the S&P to fresh all-time highs today.

FOMC Takeaways (Where’s the Positive Catalyst Now?)

What’s in Today’s Report:

  • FOMC Takeaways – No Discernable Positive Catalysts for Stocks
  • Why This Fed Isn’t Good at Communication
  • Jobs Report Preview
  • Oil Market Update

Futures are tentatively bouncing from yesterday’s late sell off as markets digest an imminent U.S./China trade deal, mixed economic data and the Fed meeting.

Multiple press reports yesterday implied a U.S./China trade deal could be completed next Friday, with the 10% tariffs on 250B in goods immediately reduced.  This meets current market expectations and is already priced in, so there was no rally on the news.

Economic data met low expectations overnight as the EU Manufacturing PMI rose slightly to 47.9 vs. (E) 47.8, but that’s not moving markets.

Today we get a few notable economic reports via Jobless Claims (E: 215K), Productivity and Costs (E: 1.9%, 1.8%) and Factory Orders (E: 1.5%), but none of those should move markets.  Instead, with no major events scheduled for today, traders will be focused on whether the S&P 500 can hold yesterday’s low (2923).  If that support is fails than look for selling to accelerate.

Contrarian Opportunity in Permian Shale Stocks?

What’s in Today’s Report:

  • FOMC and ECB Takeaways (Both Dovish As Expected, But Neither Will Help Stocks Rally)
  • An Opportunity in Permian Shale Energy Stocks?
  • Energy Market Update – Solidly Bullish

Futures are slightly lower following another quiet night as markets look ahead to Chinese exports and bank earnings coming tomorrow.

More progress was made in U.S./China trade talks according to the WSJ and a deal is imminent, but the market already assumes that so it didn’t cause a rally.

Chinese and German CPIs both met expectations.

Today there are two economic reports, Jobless Claims (E: 211K) and PPI (E: 0.4%, 0.2%) but neither should move markets.  So, focus will be on a lot of Fed speak, specifically Clarida (9:30 a.m. ET) and Williams (9:35 a.m. ET) (Bullard and Bowman also speak today but they aren’t considered Fed “leadership”).    If Clarida and Williams talk more about an “average” inflation target, that might put a mild tailwind on stocks as it hints at a more dovish Fed in the future (something we didn’t see in the Minutes yesterday).