“People are getting too optimistic in the short-term. We keep pricing in all this really good stuff that’s going to happen, but it has not shown up yet…” said Tom Essaye, founder of The Sevens Report. Click here to read the full article.
What’s in Today’s Report:
U.S. stock futures and European shares are tracking Asian markets lower amid rising concerns about the outbreak of a newly discovered virus in China.
Chinese health officials have confirmed that the recently named “coronavirus” can be spread by human-to-human contact.
And with the Lunar New Year holiday beginning this week, fears of a SARS-like health epidemic are on the rise which saw the Shanghai Composite fall 1.41% overnight.
Looking into today’s session, there are no notable economic reports due to be released and no Fed officials are scheduled to speak.
That will leave investors largely focused on Q4 earnings season with HAL ($0.29) reporting before the bell and NFLX ($0.50), AMTD ($0.76), UAL ($2.64), and COF ($2.38) all releasing results after the close.
Tom Essaye, president of the Sevens Report, said in a Monday note to clients that the near 10% rally the S&P 500 pulled off in the fourth quarter of last year was driven by the idea that “the U.S.-China trade truce combined with global central bank easing (and specifically the Fed being very dovish) will result in a rebound in global growth…” Click here to read the full article.
What’s in Today’s Report:
Futures are modestly positive again this morning on more U.S.—China trade optimism.
President Trump said he thought talks with President Xi would be “productive” and that’s boosting futures.
Economic data largely met expectation although Japanese IP (2.3% vs. (E) 0.3%) and EU HICP (their CPI) slightly beat estimates (1.1% vs. 1.0% yoy).
Focus will clearly be on the looming Trump/Xi meeting but there’s an important economic data point to watch today: Core PCE Price Index (E: 0.1% m/m, 1.5% y/y). If that shows inflation that’s stronger than estimates, it’ll reduce the chances of a rate cut (bad for stocks), while a soft number will result in a “bad is good” reaction in markets.
Tom Essaye quoted in Seeking Alpha. Analysts are also starting to reassess the June market comeback, with some saying it doesn’t quite make sense. “This rally is not fundamentally backed. Instead what we are seeing is a…” Click here to read the full article.
“This rally is not fundamentally backed. Instead what we are seeing is a bunch of people getting swung around and now they are chasing stocks higher,” said Tom Essaye. Click here to read the full article.
7 Things Need to Happen For Stocks to Move Higher
Tom Essaye, founder of Sevens Report Research, recently compiled this list of seven things that need to happen for the market to make it back to new highs this year. Click here to read the full article.
What’s in Today’s Report:
Futures are only slightly lower despite disappointing U.S./China trade headlines over the weekend and more underwhelming global economic data.
The South China Morning Post reported that a Trump/Xi trade summit (to end the trade war) might not happen until June, later than the current April expectation, as talks on key issues continue to drag out.
Global economic data remained underwhelming as Japanese exports missed expectations, falling –1.2% vs. (E) 0.7%.
Today there is only one economic report, Housing Market Index (E: 63.0), and no Fed speakers (they’re in the blackout period ahead of Wednesday’s meeting) so unless we get a surprise U.S./China trade headline (and chatter there seems to be rising following the weekend) I’d expect digestion of last week’s big rally.
What’s in Today’s Report:
Futures are slightly lower following a quiet night as markets digest more mixed economic data following the big three day rally.
Chinese economic data was mixed as Industrial Production missed estimates (5.3% vs. (E) 5.5%) while Fixed Asset Investment slightly beat and Retail Sales met expectations.
Geo-politically it was a quiet night as there were no updates to U.S./China trade.
Today focus will be on economic data via the Jobless Claims (E: 225K), Import Export Prices (E: 0.3%, 0.2%) and New Home Sales (E: 620K), as well as testimony before Congress by Treasury Secretary Mnuchin. Finally, there’s a GE guidance update later this morning, and if that’s particularly soft, that could hit stocks.