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January Economic Breaker Panel Update

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What’s in Today’s Report:

  • Some Improvement in the Economic Breaker Panel: Three Breakers Tripped, January Update

Futures are cautiously higher this morning mostly thanks to optimism about the US-China trade situation as “mid-level” meetings concluded in Beijing overnight.

President Trump’s address to the nation last night regarding border security and the government shutdown did not have a material effect on markets.

Economically, the Eurozone Unemployment Rate fell to 7.9% vs. (E) 8.1% in November but relative to the first half of 2018, the labor market in the EU continues to show signs of losing momentum.

Oil is up over 2% in the wake of the bullish API print late Tuesday that showed a significant draw in oil stockpiles ahead of today’s official weekly EIA report.

There are no economic reports in the U.S. today but several Fed events to watch including speakers: Bostic (8:20 a.m. ET), Evans (9:00 a.m. ET), and Rosengren (11:30 a.m. ET) before the December FOMC Meeting Minutes are released midafternoon (2:00 p.m. ET).

Stocks continue to have positive momentum right now as the trade war backdrop improves and monetary policy outlook has become less hawkish over the last week but the market is becoming moderately overbought at current levels, on a near term basis, and a profit taking pullback should not come as a surprise.

Encouraging Signs from Credit

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What’s in Today’s Report:

  • Some Encouraging Signs From Credit

Futures are higher with international shares despite more soft data in the EU and a disappointing earnings report by Samsung as investors focus on U.S.-China trade progress.

China’s Vice Premier, Liu He, unexpectedly attended mid-level trade talks in Beijing overnight which was seen as a potential catalyst for legitimate progress towards a deal.

Economically, German Industrial Production fell –1.9% vs. (E) 0.3% but the NFIB Small Business Optimism Index in the U.S. was not as bad as feared with a headline of 104.4 vs. (E) 104.0.

Today, there is one economic report to watch: International Trade (E: -$53.9B) which has been more closely watched since U.S.-China trade tensions first escalated while there are no Fed officials scheduled to speak.

Momentum remains positive in risk assets including stocks right now and that could continue especially if there are more positive developments regarding the trade talks in Beijing today.

Four Keys to a Market Bottom Updated

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What’s in Today’s Report:

  • Four Keys to a Market Bottom – More Progress But Not There Yet
  • Weekly Market Preview
  • Weekly Economic Cheat Sheet

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

Economic data was mixed overnight as Japanese Composite PMI and German Manufacturers’ Orders missed estimates.  However, German Retail Sales (1.4% vs. (E) 0.4%) and EU Retail Sales (0.6% vs. (E) 0.2%) beat expectations.   So, the data reflects a still generally muddled global economic outlook.

Regarding trade, the next round of U.S./China trade talks began in Beijing but there were no notable headlines, although none were expected this early so the silence isn’t a negative at this point.

Today focus will be on economic data as we get the ISM Non-Manufacturing PMI (E: 58.4).  Despite Friday’s strong jobs report there are growing worries about the U.S. economy so a good ISM Non-Manufacturing (or service sector) PMI should help stocks keep most of Friday’s gains.  Finally, we also have one Fed speaker today, Bostic at 12:40 p.m. ET, but he shouldn’t move markets.

How Bad Can It Get? Valuation Worst Case Scenario

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What’s in Today’s Report:

  • How Bad Can It Get?  Valuation Worst Case Scenario

Futures are sharply higher after China took further steps to support the economy while economic data was mixed.

China announced a 1% cut to bank reserve requirements and pledged to do more to support the economy.  This announcement is the main reason stocks are bouncing back this morning.

Global composite PMIs were mixed as China beat estimates (52.2 vs. (E) 51.9) while the Euro Zone Composite PMI missed expectations (51.1 vs. (E) 51.3).

Today focus will be on two big events.  First, the jobs report.  Expectations are for 180K jobs adds, a 3.7% unemployment rate and a 3.0% annual wage increase.  The best case number is a mild miss on all three metrics, so around 150kish jobs, 3.8% unemployment (or higher) and under 3.0% wages.  The worst case scenario (a stagflation number) is a miss on jobs but firm unemployment and wages.  If that happens, it’ll likely be another ugly day.

The other major event today is the  Powell speech at 10:15 a.m. ET (he’ll be joined by Yellen and Bernanke).  The key here is Powell changing his rhetoric to look more flexible on 1) rate increases and 2) balance sheet reduction.  If he does that, especially with regards to the balance sheet, then stocks can extend this early rally.

More Growth Fears

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What’s in Today’s Report:

  • The Aussie-Yen Points to Further Growth Fears

S&P futures are tracking international shares lower to start the year this morning as another set of soft economic data stoked fears of slowing global growth.

The Chinese Caixin Manufacturing PMI Index fell 0.5% to 49.7 in December suggesting the world’s second largest economy is slipping into contraction.

Meanwhile, the Eurozone PMI Manufacturing Index met expectations but dipped to a near two year low of 51.4.

In the U.S. today, there is one economic report to watch: PMI Manufacturing Index (E: 53.9) and there are no Fed officials scheduled to speak.

2019 Market Outlook

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What’s in Today’s Report:

  • 2019 Market Outlook
  • Weekly Market Preview
  • Weekly Economic Cheat Sheet (There are a lot of big reports this week)

Futures are higher on the final trading day of 2018 as a positive tweet on U.S./China trade is offsetting more weak Chinese economic data.

President Trump tweeted over the weekend that U.S./China trade talks were making “big progress,” raising expectations for a deal in early 2019.

Chinese economic data missed estimates as the December Manufacturing PMI dropped to 49.4 vs. (E) 50.0, signaling outright contraction. It was the lowest reading since 2016.

There are no notable economic reports or Fed speakers today so I’d expect end of year positioning to dominate trading.

Valuation Update

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What’s in Today’s Report:

  • Valuation Update and a New “Fair Value” Trading Range

Futures are extending the late Thursday gains and are modestly higher thanks to momentum.

Economically, Japanese data disappointed as the Unemployment Rate (2.5% vs. (E ) 2.4%) and Retail Sales (1.4% vs. (E) 2.2%) missed expectations.

Today investors will see if the year-end bounce can continue.  There are a few economic reports including International Trade in Goods (E: -$75.7B), Chicago PMI (E: 62.4) and Pending Home Sales Index (E: 1.5%) but none of those should move markets materially.

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.