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Economic Breaker Panel December Update

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What’s in Today’s Report:

  • Economic Breaker Panel December Update (More Signs of Weakness)
  • EIA Analysis – Can the Bounce in Oil Hold?

Futures are slightly higher following a very quiet night of news, as markets digest recent volatility.

There was no change in U.S./China trade overnight but that’s a net positive as there has been legitimate and concrete progress on U.S./China trade over the past week.

Economic data was sparse as German CPI was the only notable number and it met expectations (2.3% yoy).

Today the highlight event is the ECB Meeting (E: No Change to Rates) but other than a potentially dovish tone from Draghi at the press conference, this shouldn’t impact markets too much.  Outside of the ECB, we get Jobless Claims (E: 228K) and Import & Export Prices (E: -1.0%, 0.1%).

Bottom line, geo-political headlines remain key but as long as nothing implies a reversal of U.S./China trade progress, then stocks can extend this rally, led by tech and other China sensitive sectors (industrials, materials, consumer discretionary).

Finally, at a subscribers suggestion (thank you Maria!) we are now including the 10’s-2’s Treasury yield spread in the currencies and bonds table.  Given how close the curve is to inversion, we’ll update that spread daily going forward so you’ll have a consistent place to check and see the latest levels.  We hope you find it useful.

Sector Value and Performance

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What’s in Today’s Report:

  • Sector Valuations and Performance Since the Breakdown

Stock futures are trading higher again this morning thanks to ongoing improvement in US-China trade war sentiment as Brexit drama and the threat of a potential US government shutdown continue to be largely shrugged off.

Huawei’s CFO was released on bail in Canada which was a market positive and Trump also told Reuters he may intervene in the case if it would help with a trade deal.

Economic data overnight was mixed but did not move markets as focus remained on trade.

Looking into today’s Wall Street session, focus will be on U.S. inflation data early with CPI due out ahead of the bell (E: 0.0%).

Beyond that release, the list of scheduled catalysts is thin as there are no Fed officials speaking or other economic reports which will leave traders focused on any further trade war developments.

Dow Theory Just Turned Bearish

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What’s in Today’s Report:

  • Dow Theory: First Bearish Signal Since July 2015

Futures are enjoying a bounce this morning after top economic officials from the US and China held a conference call o/n regarding the next stages of trade negotiations.

Economically, the German ZEW Survey was mixed as the Current Conditions reading badly missed at 45.3 vs. (E) 55.0 but Business Expectations were not as bad as feared: -17.5 vs. (E) -26.0.

The NFIB Small Business Optimism Index was a disappointment this morning with the headline coming in at 104.8 vs. (E) 107.0, the lowest headline since May.

Looking at the calendar today, the catalyst list is fairly thin as there is only one economic report: PPI (E: 0.0%) however inflation has been an important topic recently and a material “miss” or “beat” could move markets. Meanwhile there are no Fed officials scheduled to speak.

That will leave the primary focus of the market on U.S.-China trade relations including any further developments or details from last night’s “trade call” as well as the Huawei CFO’s bail hearing in Canada.

Bottom line, as long as we see more positive trade headlines, sentiment should improve and trade optimism will likely continue to act as a near term tailwind for markets.

Why Markets Dropped and How We Find Stability

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What’s in Today’s Report:

  • Why Stocks Dropped (New Reason) and How Markets Stabilize
  • Weekly Market Preview
  • Weekly Economic Cheat Sheet (CPI Wed. and lots of data Friday)

Futures and global markets are modestly lower due to momentum from Friday’s sell off.

News over the weekend was actually net positive as U.S./Chinese officials implied the Huawei CFO arrest was separate from trade, while China signaled it will begin buying U.S. soybeans and energy again.

Economically, Chinese exports missed estimates (5.4% vs. (E) 10.0%), although that number is very “noisy” and it’s not moving markets this morning (the Chinese economic data this Friday is more important than the trade balance).

There’s only one economic report today,  JOLTS (E: 7.0M), and no Fed speakers so focus will remain on geo-political headlines (trade) and we should continue to expect more volatility.  That said, the market is now deeply oversold in the short term, and if tech can stabilize and rally early, markets can bounce.

Why Markets Are Dropping Again

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What’s in Today’s Report:

  • Why Markets Are Dropping Again (And Why We Don’t Think It’s a Bearish Gamechanger)
  • What Needs to Happen in the Short Term for Markets to Stabilize
  • Jobs Report Preview
  • Bond Market Analysis (Yield Curve)

Futures are sharply lower as the arrest of the Huawei CFO in Canada has added to uncertainty on U.S./China trade, while oil is down sharply due to OPEC disappointment.

Huawei (Huawei is a giant Chinese telecom company) CFO Meng Wanzhou was arrested in Canada overnight and that is perceived as potentially complicating U.S./China trade.

Further adding to the downward pressure in markets is a 3% drop in oil, as Saudi Arabia proposed a 1 million barrel production cut, less than the 1.3 million barrel expectation.

Focus today will be on geo-political headlines, specifically any further reaction to the Huawei CFO arrest and anything that minimizes the situation will help stocks.

Away from geo-politics, we get several important economic reports including:  ADP Employment Report (E: 175K), Jobless Claims (E: 225K), Productivity and Costs (E: 2.3%, 1.1%) and ISM Non-Manufacturing index (E: 59.0).  But, even if the reports are all “Goldilocks” today’s price action will still be driven by geo-political headlines and, to a lesser extent, oil (it needs to stabilize).

OPEC’s Catch-22

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What’s in Today’s Report:

  • OPEC’s Catch-22 Explained
  • ISM Manufacturing PMI Analysis

Futures are modestly lower as the Trump-Xi “trade truce” continues to be digested this morning while the yield curve flattened further overnight, underscoring growth concerns.

The major underlying story this morning is the yield curve as the 2’s-10s spread compressed to new lows overnight (13bp) and the 2’s-5’s actually inverted.

Economically, EU PPI was 4.9% vs. (E) 4.5% in Oct. but the recent plunge in energy prices has investors largely shrugging off the “hot” print.

Today is likely to be a fairly quiet day ahead of tomorrow’s National Day of Mourning for President George H.W. Bush although there are two potential catalysts to watch: Motor Vehicle Sales (E: 17.2M) and New York Fed President Williams speaks shortly after the open (10:00 a.m. ET).

Is Flat the New Inverted?

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What’s in Today’s Report:

  • Is Flat the New Inverted?

Futures are trading slightly lower this morning on an uptick in trade war fears following an otherwise quiet night.

After the close yesterday, the WSJ ran an interview with Trump where he said he was ready to move forward with increasing tariff rates (from 10% to 25%) in early 2019 and delaying the hike per China’s request was “highly unlikely.”

Today, there are a few potential catalysts on the schedule. Economically, there are three reports due out: S&P CoreLogic Case-Shiller HPI (E: 0.3%), FHFA HPI (E: 0.3%) and Consumer Confidence (E: 136.5).

Meanwhile on the Fed front, Clarida speaks ahead of the open (7:45 a.m. ET) while Bostic, George, and Evans speak on a panel in NY this afternoon (2:30 p.m. ET).

With Powell’s speech later this week still a major focus of the market, the Fed chatter will be watched closely while the market will remain very sensitive to any further rhetoric on the trade front (the other big event being the G20) after Trump’s comments yesterday afternoon.

Technical Market Update

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What’s in Today’s Report:

  • Technical Market Update
  • Two Events to Decide the Year
  • Weekly Market Preview
  • Weekly Economic Cheat Sheet (All About Inflation This Week)

Futures are surging and global markets are up 1% thanks to apparent progress on the EU/Italy budget standoff.

Italian deputy PM Salvini said over the weekend that Italy wasn’t “stuck” on the 2.4% budget deficit, adding to the momentum that a compromise might be achieved.

Economic reports overnight were again disappointing.  Japanese flash manufacturing PMI missed estimates (51.8 vs. (E) 53.0), as did German IFO business expectation (98.7 vs. (E) 99.2.

There are no notable economic reports or Fed speakers today, so focus will remain on the tech sector.  Tech traded with some decent relative strength Friday, and if it can build on that today, then we could see a good bounce back rally.  Conversely, if tech fails to rally, then so too will the boarder markets.

Is the Corporate Bond Bubble Bursting?

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What’s in Today’s Report:

  • Pullback Update: Why we think the 2650-2850 trading range is still intact.
  • Is the Corporate Bond Bubble Bursting?

Futures are enjoying a modest oversold bounce following a generally quiet night.

Italy will be in focus today as the European Commission will issue a decision on the resubmitted budget and rejection is likely.  Positively, however, there were some reports Italy would be open to negotiation on the proposed budget, and that helped fuel the bounce this morning.

There were no notable economic reports overnight.

Today should be a generally quiet day as travel picks up for the Thanksgiving holiday.  But, that said, there are three notable economic reports this morning: Durable Goods (E: -2.5%), Jobless Claims (E: 215k), Existing Home Sales (E: 5.21M).  Bottom line, tech remains key in the short term.  If Nasdaq and FDN can bounce, stocks can recoup some of the week’s losses.

Everyone please have a happy and safe Thanksgiving!

Inflation Peaking?

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What’s in Today’s Report:

  • Is Inflation Peaking Already?

Futures are flat while overseas markets were mostly lower o/n after yesterday’s huge drop in oil weighed on risk sentiment, global data was mixed, and EU political tensions continued.

Chinese FAI and Industrial Production figures for October were slightly ahead of expectations but Retail Sales notably missed which pressured Asian shares overnight.

In Europe, the German GDP flash missed which only added to ongoing angst over Brexit and the Italian budget drama in broader European markets.

Today is the busiest day of the week as far as catalysts go. First we will get the latest inflation release in the U.S. ahead of the open: CPI (E: 0.3%), then Quarles speaks shortly thereafter (9:00 a.m. ET).

There is nothing major scheduled during market hours today but focus this evening will be on CSCO earnings ($0.72) after the close and then Powell and Kaplan are speaking in Texas at 5:00 p.m. ET (with Q&A) where Powell is expected to take a more dovish tone.