Posts

Bounce Coming?

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What’s in Today’s Report:

  • Why We Could Be Close to a Bounce

Futures are modestly lower following the surprise resignation of Defense Secretary Mattis.

Mattis was seen as a stabilizing force in the administration, so his resignation is an incremental negative on general sentiment and that’s pressuring stocks this morning.

Economically, Q3 British GDP met expectations at 0.6%.

Today there is a lot of important economic data including (in order of importance):  Durable Goods (E: 1.4%), Core PCE Price Index (E: 0.2%), Final Q3 GDP (E: 3.5%) and Consumer Sentiment (E: 97.5).  The key numbers will be the Core PCE Price Index (it needs to stay around 2.00%) and Durable Goods (they need to be stable) as they can give us a stock positive “Goldilocks” outcome.

Additionally, Fed Governor Williams will by on CNBC at 10:00 a.m., and if he’s dovish that might help stocks rally.

Finally, today is quadruple witching options expiration.

FOMC Takeaways (Not Good)

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What’s in Today’s Report:

  • FOMC Decision Takeaways – Not Good.

Futures are slightly higher as markets bounce following Wednesday’s post Fed selloff.

It was a quiet night of news as there were no new headlines on trade, and most commentary focused on the takeaways of the Fed decision.

Economically, UK data was mixed as Nov. Retail Sales were strong (1.4% vs. (E) 0.3%) while Dec. Distributive Trades were weak (-13 vs. (E) 15).

Today focus will remain on the economic data, which becomes even more important in the face of the not dovish enough Fed.  We get to notable reports today, Jobless Claims (E: 220K) and Philadelphia Fed Business Outlook Survey (E: 16.5) and if the later misses expectations, look for more selling.

FOMC Preview

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What’s in Today’s Report:

  • FOMC Preview

US stock futures are enjoying a pre-Fed bounce this morning due to positioning and short-covering as stocks remain oversold after the steep losses Friday and Monday.

Despite the bounce in futures, news flows were actually bearish since yesterday’s close as both FDX and MU made cautious comments about slowing global growth in their respective earnings calls and both cut guidance for 2019.

In the US today, there is one economic report due to be released: Existing Home Sales (E: 5.190M) and a “beat” would be well received after the string of soft housing data points of recent, but frankly all eyes will be on the Fed and the report will not materially move markets.

The New York session is likely to be slow in the morning with traders positioning into the Fed. The FOMC Meeting Announcement and Forecasts will hit at 2:00 p.m. ET and then Fed Chair Powell’s press conference is scheduled for 2:30 p.m. ET.

A New Headwind on Stocks

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What’s in Today’s Report:

  • A New Headwind on Stocks (It’s Potentially a Big One)
  • It’s Not All Bad – A Legitimate Positive Scenario for Q1 ‘19
  • Weekly Market Preview
  • Weekly Economic Cheat Sheet

Futures are slightly lower as markets digest Friday’s selloff following a quiet weekend.

There was no notable geo-political (i.e. U.S./China trade) or economic (global growth) news over the weekend, and investors/markets are looking ahead to Wednesday’s FOMC Decision.

Economic data was sparse but EU Core HICP (their CPI) met expectations at 1.0% yoy.

We get two economic numbers this morning via the  Empire State Manufacturing Survey (E: 21.0) and Housing Market Index (E: 61.0) but neither should move markets.  Investors will be looking ahead to Wednesday’s big FOMC Decision and that should lead to generally quiet trading, barring any surprise headlines or tweets.  More broadly, for stocks to bounce in the near term, we need to see leadership from the tech sector, and participation from financials and energy (both of which are very, very oversold).

Political Risks to this Market

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What’s in Today’s Report:

  • Political Risks to This Market

Futures are sharply lower (about 1%) as bad economic data is furthering worries about a slowdown in global growth.

Chinese Retail Sales (8.1% vs. (E) 9.0%) and Industrial Production (5.4% vs. (E) 5.9%) both badly missed estimates.

In Europe, the flash composite PMIs also missed expectations at 51.3 vs. (E) 52.5.

Geopolitically it was a quiet night although Chinese officials confirmed the reduction of auto tariffs to 15% from 40% (this was already pledged but it is good to see it will be enacted on Jan 1.).

Today it’s all about economic data.  The numbers from China and the EU this morning were not good and fears of a global economic slowdown are rising, and we need Retail Sales (E: 0.1%) and Industrial Production (E: 0.3%) to push back on that narrative, otherwise today could be another ugly day.

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).