Tom Essaye Quoted in Barrons on January 23, 2019

Tom Essaye Quoted in Barrons on January 23, 2019. His take on this unpredictable market. Click here to read the full article.

Positive News on the U.S. Consumer (Good for Stocks)

What’s in Today’s Report:

  • Positive Commentary on the U.S. Consumer (From Someone Who Should Know)
  • EIA and Weekly Oil Analysis

Futures are moderately higher thanks to a dovish Fed article in the WSJ and more solid earnings (SBUX).

The WSJ reported that Fed officials are considering ending their balance sheet reduction earlier than expected, and that’s helped lift futures.

Economic data underwhelmed again as the German IFO Business Expectations Survey declined to 94.2 vs. (E) 97.0.

Today there are no economic reports (Durable Goods & New Home Sales won’t be produced because of the shutdown) and the earnings calendar is relatively quiet (ABBV ($1.92) and CL ($0.73) are two names we’re watching), so focus will likely remain on political headlines as there finally appears to be hints of progress at resolving this government shutdown (although the solution may only last three weeks).  If we get any positive news on the shutdown, that’ll likely add to the early rally.

A Sector With Relative Clarity (and Opportunity)

What’s in Today’s Report:

  • A Sector With Relative Clarity (and Opportunity)

Futures are slightly higher as momentum from yesterday’s positive earnings offset more disappointing economic data.

January flash PMIs in Japan and the EU were disappointing.  The Japanese manufacturing PMI fell to 50.0 vs. (E) 52.4 while the EU Composite PMI dropped to 50.7 vs. (E) 51.4.  But, markets haven’t traded off Japanese data in over a year, and the “Yellow Vest” disruptions are weighing on French PMIs, which dragged the composite EU PMI lower, so these disappointing numbers aren’t weighing on markets as much as they normally would.

Today the big number is the U.S. Flash Composite PMI (E: 54.2), as markets are looking for more signs of economic stabilization following the loss of momentum in December.  Anything that implies stabilization will be stock positive.

We also have an ECB Rate Decision (E: No Change to Rates) and the ECB Press Conference (8:30 a.m. ET) and the key will be whether ECB President Draghi is very dovish given more disappointing economic data (he’s not expected to be materially dovish).

Finally, earnings continue and generally the season, so far, has been better than expected.  Some results we’re watching today include: INTC ($1.22), NSC ($2.30), SBUX ($0.65), WDC ($1.50).

Time to Get More Defensive?

What’s in Today’s Report:

  • Time to Get More Defensive?

Futures are moderately higher thanks to rising U.S./China trade optimism.

Yesterday’s WSJ article that stated U.S. officials are considering reducing China tariffs spurred a global rally, despite being disputed by administration officials.

Economic data was mildly disappointing as Japanese CPI (0.7% vs. (E) 0.8%) and UK Retail Sales (-0.9% vs. (E) -0.8%) both slightly missed estimates, although neither report is moving markets.

Today there are several earnings reports but none of the companies reporting should move the market unless the results are truly horrid.

Economically, Industrial Production (E: 0.3%) is the key report as we want to see if “hard” manufacturing activity dropped as much as the manufacturing surveys in December.  We also get an update on Consumer Sentiment (E: 97.0) and one Fed speaker, Williams (9:05 a.m. ET), who could help markets rally if he talks more about flexibility on balance sheet reduction.

Market Outlook (After the Bounce)

What’s in Today’s Report:

  • Market Outlook (After the Bounce)
  • Weekly Economic Cheat Sheet (Important First Looks at January Data)
  • Weekly Market Preview (All About Earnings)

Futures are sharply lower following more disappointing global economic data.

Chinese exports badly missed expectations falling –4.4% vs. (E) 4.8%, further stoking fears of a Chinese economic slowdown.  Data in Europe wasn’t much better, as Euro Zone Industrial Production fell –1.7% vs. (E) 0.5%.

Geopolitically, it was a generally quiet weekend as markets are looking past Trump’s economic threat to Turkey.

There are no notable economic reports today so focus will be on earnings, as the Q4 season officially kicks off with C ($1.55).  The key for this report (and all reports this season) will be the guidance and management commentary – and anything that downplays a slowing global economy will be welcomed by markets.

Tom Essaye Quoted in MarketWatch on January 10, 2019

Tom Eassye was quote in MarketWatch on January 10, 2019. Read the full article here.

Earnings Season Preview (Market or Break for the Bull Market)

What’s in Today’s Report:

  • Earnings Season Preview:  Two Important Factors

Futures are slightly lower despite generally good news overnight, as markets continue to digest the recent rally.

The U.S. & China announced the next round of trade talks will occur Jan 30/31 in Washington, which is a mild positive (although it was largely expected and mostly priced in).

Economically, data was mixed Japanese Household Spending rose 1.1% vs. (E) 0.2%, while UK Industrial Production dropped –0.3% vs. (E) 0.4%.

Today is all about the CPI  report (E: -0.1% m/m, 1.9% y/y).  Both the headline and core need to stay around 2.0% yoy for this “dovish” Fed narrative to continue to grow, as a hot CPI report could undo some of the rally markets have enjoyed since last Friday.

Technical Update (Bounce or Bottom?)

What’s in Today’s Report:

  • Technical Market Update – Bounce or Bottom?
  • U.S./China Trade Update (What’s Next and What Sectors Benefit)

Futures are modestly lower as markets digest the recent rally following a quiet night of news.

Economically, Chinese inflation underwhelmed as CPI rose 1.9% vs. (E) 2.0% and PPI gained just 0.9% vs. (E) 2.7%.  However, those soft numbers give Chinese authorities more room to further stimulate their economy, so low inflation isn’t a negative.

On trade, there were no further comments from either side (a slight negative) as some were hoping for some optimistic official statement from the Chinese.

Today focus will remain on the Fed as we get multiple Fed speakers, highlighted by Fed Chair Powell (1:00 PM) and Vice Chair Clarida (5:30 PM).  We expect more dovish language from virtually all the speakers today, but at this point most of the benefit from dovish Fed speak is priced in, so don’t expect the comments to be a major positive catalyst unless there’s a surprise.

Economically, the calendar is quiet although we do get Jobless Claims (E: 224k) and we want to see those move back towards 200k and away from 250k.

Four Keys to a Market Bottom Updated

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.

Jobs Report Preview

What’s in Today’s Report:

  • Jobs Report Preview
  • Is the AAPL Decline an Opportunity for Value Stocks?

Futures are down more than 1% as AAPL sharply cut Q4 revenue guidance.

AAPL cut Q4 revenue guidance to $84 bln from the previous $89-$93 bln range, citing slowing Chinese demand as the main negative influence.

Economically UK Construction PMI and Euro Zone Money supply both slightly missed expectations.

The entire tech sector will be in focus today to see how well it can hold up in the face of the AAPL news, which wasn’t a shock as analysts and suppliers have been cutting IPhone numbers for months.  If stocks can set the lows early in the day and rally back, that would be an anecdotal sign near term selling pressure may be exhausted.

Away from AAPL, we get a lot of economic data today including (in order of importance): ISM Manufacturing Index (E: 57.9), ADP Employment Report (E: 175K), Jobless Claims (E: 217K) and Motor Vehicle Sales (E: 17.3M).  Data today could be important because if the data is firm, it should decrease the AAPL fallout.  However, if the data is weak, then it’s going to be another ugly day as the news will reinforce worries about corporate earnings and economic growth.