Seven Macro Catalysts

What’s in Today’s Report:

  • Seven “If’s” That Will Move This Market

Money flows are decidedly risk-on this morning thanks to renewed optimism about U.S.–China trade negotiations after an otherwise very quiet weekend.

Late yesterday, President Trump officially delayed the March 1st tariff deadline sending US stock futures up 10-15 points at the electronic open and shares in mainland China up over 5%.

There were no notable economic reports or other market moving catalysts overnight.

Looking into today’s Wall Street session, there are two economic reports due out this morning: Chicago Fed National Activity Index (E: 0.13) and Dallas Fed Manufacturing Survey (E: 3.0). These two releases are not usually watched closely by investors but they were especially bad in late 2019 and contributed to the heavy selling in December, so if they “whiff” again, we could see stocks come for sale.

There are no Fed officials scheduled to speak today which will leave the market primarily focused on any new developments or details regarding trade negotiations with China. Note that the March 1st deadline was delayed indefinitely and there were no other material developments regarding trade over the weekend so investors will be looking for any further indication on the next steps towards a deal.

A New Prognosis from Dr. Copper?

What’s in Today’s Report:

  • Is  Dr. Copper’s Prognosis for the Markets Just Change?
  • Economic Data (Yesterday Was Not a Good Day)
  • Energy Update

Futures are recouping yesterday’s losses not because of what happened overnight (which was nothing) but instead of what might happen today.

Trump & Chinese Vice Premier He will meet at 2:30 ET and markets hope more progress on a deal is signaled.

Additionally, markets hope Fed officials (specifically Williams and Clarida) give more clarity on the end of QT at a Fed conference later this afternoon.

As mentioned, there are no economic reports or notable earnings today so focus will be on the Trump/He meeting and the various Fed speakers making comments today:  Williams (10:15 a.m. ET), Bullard (1:30 p.m. ET), Clarida (1:30 p.m. ET), Harker (1:30 p.m. ET).  For those events to power stocks meaningfully higher, we’ll need to see hints that a U.S./China deal would reduce current tariffs, and a clear indication that QT will end in 2019.

Technical Tipping Point

What’s in Today’s Report:

  • Technical Update – We’ve Reached the Tipping Point
  • Why Copper Really Rallied Yesterday

Futures are slightly lower and international markets were mixed overnight as investor focus is shifting to today’s release of the January FOMC Meeting Minutes.

Japanese Exports in January were worse than feared (-8.4% vs. E: -6.1%) while the British CBI Industrial Trends Survey was 6 vs. (E) -5 but neither release moved markets o/n.

There are no economic reports in the U.S. today however the European Commission releases Flash Consumer Confidence data for February (10:00 a.m. ET) and given the recent string of underwhelming EU data points, another bad number could weigh on EU (and to a lesser extend U.S.) stocks into the European close.

The big event today will be the release of the January FOMC Meeting Minutes at 2:00 p.m. ET. Investors will be looking for any further clues as to the Fed’s plans for the balance sheet as a dovish adjustment is one of the few potentially bullish catalysts left for this stock rally right now.

Other than the Fed, U.S.-China trade negotiations continue in Washington however a deal is largely priced in and the talks are now a risk to the market as any “bad news” regarding the trade war would likely hit stocks hard.

Is a Fed “Pause” Actually Good for Stocks?

What’s in Today’s Report:

  • Is a Fed “Pause” Actually Good for Stocks?

Futures are decidedly higher after Congress reached a deal to avert another government shutdown late yesterday and investors remain optimistic about trade talks between the US and China as negotiations in Beijing continue this week.

The NFIB Small Business Optimism Index fell to 101.2 vs. (E) 103 in January underscoring business owners’ uncertain outlook on the economy.

Today, there is one economic report: December JOLTS (E: 6.950M) and several Fed speakers to watch: Powell (12:45 p.m. ET), George (5:30 p.m. ET), and Mester (6:30 p.m. ET).

As long as Powell does not change his recent narrative when he speaks over the lunch hour, investors will likely remain focused on additional updates regarding the new funding deal lawmakers agreed to late Monday and more importantly, the ongoing trade talks in Beijing.

Tom Essaye Quoted in Barron’s

Tom Essaye Quoted in Barron’s on February 6, 2019.

“Futures are slightly lower as Trump’s SOTU was a non-event for markets…” Read the full article here.

Sectors to Buy If This is A ’15/’16 Repeat

Today’s Report is attached as a PDF.

What’s in Today’s Report:

  • What Sectors to Buy If This Is a ‘15/’16 Repeat
  • Why Are Global Central Banks Turning Dovish? (And Is It A Good Thing?)
  • What’s Next for Oil

Futures are moderately weaker as concerns about global growth rise following more weak EU economic data.

German Industrial Production badly missed estimates, falling –0.4% vs. (E) 0.8%, while the European Commission cut 2019 expected EU GDP to 1.3% from 1.9%.

The Reserve Bank of India surprisingly cut rates over night and is now the second large central bank to give markets a dovish surprise (after the RBA on Wednesday).

Today focus will remain on economic data and Fed speak, as we get Jobless Claims (E: 223K), Consumer Credit ($17.5B) and comments by dovish Fed Governor Bullard at 7:30 p.m. ET.  If the news is generally dollar bullish and we see a further rise in the dollar, that might weigh on stocks more as a weaker dollar is needed to help boost corporate earnings going forward.

FOMC Preview

What’s in Today’s Report:

  • FOMC Preview

U.S. equity futures are little changed this morning after a generally quiet night as investors focus turns to the Fed.

Late yesterday, the DOJ officially accused Huawei with financial fraud, stealing trade secrets, and sanctions violations and formally requested the extradition of the CFO from Canada which mildly pressured stock futures o/n.

Today, there are two, second tiered economic reports due to be released: S&P Case-Shiller HPI (E: 0.4%) and Consumer Confidence (E: 124.6), and the FOMC meeting begins which will likely bring a sense of “Fed paralysis” over the markets.

Earnings season remains in full swing and there are a few notable corporate releases on the calendar today: VZ ($1.09), MMM ($2.27), PFE ($0.63), AAPL ($4.17), AMD ($0.09), EBAY ($0.68).

If earnings are generally in-line (especially AAPL after the close) then the market will likely remain fairly choppy into tomorrow’s Fed Announcement and Powell’s press conference.

Technical Market Update

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.

Why Stocks Dropped (Again)

What’s in Today’s Report:

  • Why Stocks Dropped Yesterday
  • More Housing Trouble?
  • Are “Gassy” MLPs a Buy?

Futures are moderately lower on momentum as Monday’s U.S market declines spilled over globally and international weakness is now weighing on futures.

Economically it was another quiet night as German PPI met expectations at 3.3% while UK Industrial Trends were better than expected (10 vs. (E) -5).

There was no new news on the Fed or U.S./China trade although expectations are rising for a Trump/Xi “truce” at the G-20 and a more dovish tone from the Fed.

Today will be another quiet day, at least based on the calendar, as we have no Fed speakers and just one economic number: Housing Starts (E: 1.24M).   Given that, focus will remain on tech and the super cap names specifically.  FDN needs to stabilize and bounce to help arrest this short term sell off and that ETF is now at the top of my quote screen, as it’s driving the markets in the very short term.

A Disconcerting ERP Update

What’s in Today’s Report:

  • Equity Risk Premium: A Disconcerting Statistic

Futures are bouncing modestly after yesterday’s steep equity selloff as Secretary Mnuchin reportedly resumed talks with Chinese officials regarding trade but the budget drama between Italy and the EU remains a headwind.

Economically, the German ZEW Survey missed (badly): 58.2 vs. (E) 65.0 while the NFIB Small Business Optimism Index was more inline: 107.4 vs. (E) 108.0, underscoring the ongoing divergence between US and overseas data right now.

Looking ahead to today’s Wall Street session, there are no other economic reports to watch and only one of the two Fed speakers is during market hours: Kashkari (10:00 a.m. ET), Daly (5:00 p.m. ET).

Most of the more notable catalysts this week will come tomorrow (U.S. CPI, Chinese economic data, Powell speaks, earnings, etc.) but that doesn’t mean that downward momentum that began yesterday can’t continue so support in the S&P between 2705 and 2720 will be important to watch today.