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Economic Breaker Panel: December Update

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What’s in Today’s Report:

  • Economic Breaker Panel: December Update

Stock futures are flat and international markets were little changed overnight amid very quiet newswires while investors look ahead to today’s Fed decision.

Economically, the Japanese PPI release was the only report out overnight and the headline met expectations at 0.2% which did not move markets.

In the energy market, oil futures are down nearly 1% after the API reported an inventory build of +1.4MM bbls vs. (E) -2.8MM ahead of today’s EIA report.

Today, the focus will be on the Fed decision with the Meeting Announcement at 2:00 p.m. ET and the Fed Chair Press Conference following shortly after at 2:30 p.m. ET.

Any significant market moves before the Fed are unlikely but there is one economic report to watch: CPI (E: 0.2%), and the EIA report at 10:30 a.m. ET could trigger a reaction in the energy market which could affect sector trading.

Beyond those catalysts, the trade war remains the single biggest influence on this market right now so investors will be looking for any incremental developments regarding the Dec. 15 tariff plans or news on a phase one trade deal.

No Trade Deal?

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What’s in Today’s Report:

  • What Happens If There Isn’t a Trade Deal

Futures are rebounding modestly this morning mostly thanks to a positive trade article by Bloomberg overnight.

The article said Trump’s comments about having no deadline for a China trade deal yesterday, which sent stocks tumbling, were “off the cuff” and that a deal is still likely.

Meanwhile, Service PMI data in China and Europe beat expectations and U.S. legal sanctions against Chinese nationals for human rights violations are not expected to affect trade negotiations.

Looking into today’s session, there are two key economic reports to watch: the ADP Employment Report (E: 156K) and the ISM Non-Manufacturing Index (E: 54.5). And based on the market’s negative response to the soft ISM report on Monday, the has the potential to move stocks.

There is also one Fed official speaking today: Quarles (10:00 a.m. ET), but Fed policy is largely on the back burner right now as no changes in interest rates are expected anytime soon which will leave the market primarily focused on any new developments in the trade war.

Why Have Stocks Dipped?

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What’s in Today’s Report:

  • Bottom Line: Why Have Stocks Dipped?
  • OPEC Meeting Preview

S&P futures were tentatively higher overnight amid mostly quiet news flows until another trade war “tape bomb” triggered rapid risk-off money flows over the last hour.

Speaking in London before this week’s NATO meeting, President Trump said that he “had no deadline” for a trade deal with China and he thought it might be “better to wait until after the election” to make a deal.

The comments lower the odds that a “phase one” deal is agreed upon before the Dec. 15 tariffs are due to go into effect.

In the wake of Trump’s comments this morning, focus will remain almost exclusively on the trade war and any further comments by the U.S. or reaction by China will move markets.

As far as the calendar goes, there is one economic report to watch: Motor Vehicle Sales (E: 17.0M) and there are no Fed officials scheduled to speak today.

Are All the Bulls’ Eggs in One Basket?

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What’s in Today’s Report:

  • Are All The Bulls’ Eggs in One Basket?
  • Weekly Market Preview
  • Weekly Economic Cheatsheet

Futures are marginally higher as better than expected economic data is being offset by some confusion on trade.

Global manufacturing PMIs were better than expected as the Chinese (50.2 vs. (E) 49.5) and Euro Zone (46.9 vs. (E) 46.6) readings beat estimates and furthered the idea that the worst of the global slowdown is over.

On trade, headlines were mixed as Axios reported the Dec. 15 tariffs will be delayed (a positive) although a somewhat hawkish Trump trade tweet this morning is weighing on sentiment (Trump reinstituted steel and aluminum tariffs on Brazil and Argentina and that’s causing an uptick in general tariff anxiety in the market).

Today focus will (of course) remain on any trade tweet or headline, while the key economic report is the ISM Manufacturing PMI (E: 49.4), and the stronger the number, the better.

Will the Hong Kong Bill Hurt U.S./China Trade Talks?

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What’s in Today’s Report:

  • Will the Hong Kong Democracy Bill Hurt Trade Talks?  (No – Here’s Why)
  • What Wednesday’s Strong Economic Data Means for Markets

Futures are modestly lower following the Thanksgiving holiday due to a mild uptick in trade concerns after President Trump signed the Hong Kong democracy bill.

President Trump’s signing of the bill drew criticism from China, but multiple media outlets, including the WSJ, are reporting the law won’t de-rail trade talks.

Economic data was again underwhelming as Japanese IP and German Retail Sales both badly missed estimates, although that’s not impacting markets as focus remains almost exclusively on U.S./China trade.

Today there are no economic reports, no Fed officials are scheduled to speak and the NYSE closes at 1:00 p.m. ET.  So, barring any U.S./China trade headline surprises, it should be a typically quiet post-Thanksgiving trading session.

Tom Essaye Quoted in MarketWatch on November 26, 2019

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“Considering that recession fears are based on a slowdown in manufacturing and business spending bleeding into the labor market and, ultimately, the consumer, it’s notable that claims are rising…” according to Tom Essaye, president of the Sevens Report, in a Monday note. Click here to read the full article.

New York Skyline

Has Healthcare Finally Broken Out?

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What’s in Today’s Report:

  • Has Healthcare Finally Broken Out?

U.S. stock futures are trading higher and most overseas markets rallied overnight thanks to another wave of optimism for a “phase one” trade deal as traders look ahead to a busy morning of domestic economic releases.

This time it was President Trump who said the U.S. and China were in the “final throes of a very important deal” late yesterday, stoking more risk-on money flows overnight.

Today, attendance will noticeably thin out ahead of the Thanksgiving holiday and volumes are expected to be light.

But, there are several important economic reports due out today: Durable Goods Orders (E: -0.7%), GDP (1.9%), Jobless Claims (E: 219K), and Core PCE Price Index (E: 0.2%).

A rebounding economy is largely priced into stocks at these lofty levels so any significant disappointments out of this morning’s data could trigger some profit taking into the Thanksgiving holiday.

Aside from the economic data, there are no Fed officials scheduled to speak today which will leave investors focused on any new chatter on the trade war as it remains the single biggest influence on markets right now.

Tom Essaye Quoted in MSN.com on November 25, 2019

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“The market still expects a phase one deal that (most importantly) removes the threat of any further escalation in the trade war. But unless there is a material positive surprise, phase one is not going to include material existing tariff reductions…” said Tom Essaye, the founder of The Sevens Report, in a note.  Click here to read the full article.

New York Stock Exchange

Tom Essaye Quoted in CNBC on November 25, 2019

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“The market still expects a phase one deal that (most importantly) removes the threat of any further escalation in the trade war. But unless there is a material positive surprise, phase one is not going to include material existing tariff reductions…” said Tom Essaye, founder of The Sevens Report, in a note. Click here to read the full article.

New York Stock Exchange Traders

Yield Curve Update: Negative Trend Break

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What’s in Today’s Report:

  • Bottom Line: Did Something Good Happy Yesterday?
  • Yield Curve Update: Negative Trend Break

Stock futures are little changed this morning as investors digest new Fed chatter and more trade war jawboning.

Fed Chair Powell said he saw the “glass as much more than half full” regarding the current expansion and reiterated that rates will remain unchanged until inflation rises materially.

U.S. and Chinese trade negotiators spoke on the phone overnight to discuss “core issues” and reported that they have reached a “common understanding on resolving relevant problems” but no concrete progress was made and the status of phase-one remains unknown.

There are a few potential catalysts to watch today including economic releases: International Trade in Goods (E: -$70.0B), S&P Corelogic Case-Shiller HPI (E: 0.3%), New Home Sales (E: 707K), and Consumer Confidence (E: 126.8) as well as one Fed speaker: Brainard (1:00 p.m. ET).

Additionally, there is a 5-Year Treasury note auction today at 1:00 p.m. ET and with the yield curve coming back into focus, any wild swings in the belly of the curve could move stocks (remember we want to see the 10s-2s steepen due to a rising 10-year yield).

Aside from those scheduled events, speakers and reports, the market will clearly remain very sensitive to anything regarding the relationship between the U.S. and China as the trade war remains the single most important influence on this market right now.