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Why Can’t the S&P 500 Get Through 3000?

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What’s in Today’s Report:

  • Why Can’t the S&P 500 Get Through 3000?
  • Brexit Resolution Today?
  • Weekly Market Preview (There’s a big speech coming on Thursday)
  • Weekly Economic Cheat Sheet

Futures are slightly higher on continued hopes of Brexit resolution and improvement in U.S./China trade relations.

The vote on the new Brexit deal was delayed in Parliament on Saturday, but it’s likely to happen today or tomorrow and passage of the deal is (narrowly) expected.

On U.S./China trade, Chinese Vice Premier Liu He made positive comments on U.S./China trade negotiations although he didn’t say anything new.

Today there are no economic reports and just one Fed speaker, Bowman (11;40 a.m. ET).  So, the focus will be on Brexit headlines as a final vote on the Brexit deal in Parliament could happen later today.  If the Brexit deal passes Parliament, we could see a short term rally, although again I don’t think Brexit resolution is enough, by itself, to send stocks sustainably higher from here.

Is Brexit Clarity a Bullish Gamechanger?

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What’s in Today’s Report:

  • Is Brexit Clarity a Bullish Gamechanger?

Futures are little changed following mixed Chinese economic data.

Chinese GDP missed estimates at 6.0% vs. (E) 6.1%, while Retail Sales met expectations at 7.8% and Industrial Production beat (5.8% vs. (E) 4.9%).  In sum, the data is slightly underwhelming but isn’t changing expectations for global growth.

Looking forward to today, there are no economic reports but there are a lot of Fed speakers including (in order of importance):  Clarida (11:30 a.m. ET), George (10:00 a.m. ET), Kaplan (9:00 & 11 a.m. ET), Kashkari (10:30 a.m. ET).  But, none of them should say anything too surprising and they shouldn’t move markets.

So, markets will stay focused on earnings and Brexit headlines.  Regarding Brexit, a vote on the new Brexit deal will happen Saturday in Parliament, and at this point passage looks to be a 50/50 chance.  So, there’s more drama yet in the three plus year Brexit saga.

Tom Essaye Quoted in Benzinga on October 16, 2019

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Tom Essaye, founder of Sevens Report Research, said this week there are three reasons why the S&P 500 won’t be breaking out above its summer highs in the 3,027 range unless investors see better trade news:

The Phase I deal provided no relief from current trade war tariffs and it contained no provisions that would boost global growth from current levels. The December tariff increases are still in play, so the Phase I deal didn’t even eliminate market uncertainty over whether things could get worse from here.

Earnings Season Technical Preview

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What’s in Today’s Report:

  • Earnings Season Technical Preview
  • Empire State Manufacturing Survey Takeaways (Released a Day Early)

Stock futures have pulled back from overnight highs after China requested the U.S. reconsider $50B in tariffs just as investor focus had shifted from the trade war to earnings.

Economically, the Business Expectations component of the German ZEW Survey was not as bad as feared (-22.8 vs. E: -29.4) which is bolstering EU shares this morning.

There are no economic reports today however there are two Fed speakers to watch: Bostic (9:00 a.m. ET) and Daly (3:30 p.m. ET), while there are a slew of companies due to report quarterly results today as earnings season gets underway.

Notable corporations reporting earnings today include: JPM ($2.44), C ($1.96), GS ($5.03), WFC ($1.15), UNH ($3.75), and JNJ ($2.00) ahead of the open and UAL ($3.93) and JBHT ($1.44) after the bell.

What the U.S./China Trade Deal Means for Markets

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What’s in Today’s Report:

  • What the U.S./China Trade Deal Means for Markets
  • Weekly Market Preview (All About Earnings)
  • Weekly Economic Cheat Sheet (Important Growth Data This Week)

Futures are modestly lower following reports that China wants “more talks” before signing phase one of Friday’s “deal.”

More broadly, there is some disappointment with Friday’s announcement as it does not provide material tariff relief or trade clarity (more on that in the issue).

Economically, Chinese exports missed estimates falling –3.2% vs. (E) -3.0% and that’s also weighing on sentiment as markets still need global growth to stabilize.

Today is the Columbus Day holiday so there are no economic reports or Fed speakers while banks and the bond markets are closed.  Given that, we can expect any U.S./China trade related headlines to again drive markets until the focus shifts to earnings tomorrow.

Trade Truce

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What’s in Today’s Report:

  • Is A Trade Truce a Bullish Gamechanger?  No.  Here’s Why.

It’s green on the screen and futures are 1% higher as optimism for a U.S./China trade truce surged after the close.

President Trump said talks went “very well” yesterday and will meet Liu He in the White House at 2:45 p.m. today and a trade “truce” with no more additional tariffs is expected.

Economically, the only notable number was German CPI, which met expectations at 1.2% yoy.

Markets will be focused on any trade headlines as that’s clearly the most important topic today.  From a timing standpoint, I’d expect some sort of announcement on the outcome of the negotiations between lunchtime and the close, as Trump is meeting with He at 2:45 p.m.  At this point, a trade truce with some elimination of pending tariff increases is fully expected and anything less would be a disappointment.

Away from trade, we get Import & Export Prices (E: -0.1%, 0.0%) as well as Consumer Sentiment (E: 92.0), but unless the later is very bad, neither number should move markets.  There are also several Fed speakers today including Kashkari (8:00 a.m. ET), Rosengren (1:15 p.m. ET) and Kaplan (3:00 p.m. ET) but none of them should move markets.

Tom Essaye Interviewed with TD Ameritrade Network on October 10, 2019

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Tom Essaye Interviewed with TD Ameritrade Network on October 10, 2019, discussing the upcoming U.S.-China trade negotiations, stock market, what will be the effects of no trade truce, sectors that will benefit with tariff reductions and more…Watch the full interview here.

Tom Essaye Interviewing with Oliver Renick

Trade Meeting Preview (Good, Bad, Ugly)

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What’s in Today’s Report:

  • U.S.-China Trade Talks: Good/Bad/Ugly (and Best)

S&P 500 futures jumped as much as 1.4% in early morning trade after Bloomberg reported that China is willing to discuss a “partial U.S. trade deal despite tech blacklist.”

The risk-on rally has faded moderately however as the article pointed out that Chinese officials are not optimistic and would only accept a partial deal if the next waves of U.S. tariffs are canceled.

Furthermore, China is willing to make non-core concessions like ramping up purchases of U.S. ag products but won’t budge on key issues like intellectual property theft, issues which the White House has said are critical to a deal.

The trade war will clearly continue to dominate the markets today as we have already seen in the sizeable pre-market moves however there are a few additional potential catalysts to keep an eye on.

Economically, the August JOLTS report will be released shortly after the Wall Street open (E: 7.181M) while Powell and George are scheduled to speak at 11:00 a.m. ET (note Powell did move markets yesterday by mentioning balance sheet expansion).

In the afternoon, there is a 10-Yr Treasury Note Auction at 1:00 p.m. ET which could move the yield curve and ultimately the stock market before the FOMC Meeting Minutes will print at 2:00 p.m. ET.

A Warren Presidency and Markets

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What’s in Today’s Report:

  • What Would a Warren Presidency Mean for Markets?

Stock futures reversed from overnight gains and are now decidedly lower with EU shares after the Trump administration expanded its “blacklist” to 20 Chinese companies and Chinese officials said to “stay tuned” for retaliatory measures.

Economically, the Chinese Composite PMI firmed to a multi-month high of 51.9 last month (although the services component was mildly underwhelming) and German Industrial Production was not as bad as feared (0.3% vs. E: -0.1%), while the NFIB Small Business Optimism Index was inline.

Today, there is one economic report to watch in the morning: PPI (E: 0.1%) and then the Treasury will hold a 3-Yr Note Auction at 1:00 p.m. ET (auctions have had an impact on the yield curve recently and as a result, moved markets).

Later in the day, there are a few notable Fed speakers: Evans (1:35 p.m. ET), Powell (1:50 p.m. ET), and Kashkari (5:00 p.m. ET), and while investors will watch Powell’s speech closely, the main influence on markets remains the trade war this week and as such, traders will continue to be most sensitive to any further developments or statements released by the White House or Beijing.

Tom Essaye Quoted in Yahoo Finance on October 3, 2019

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“Bottom line, worries about the economy spiked this week, and the last thing this market needs is a soft jobs number to reinforce the idea that any trade truce next week between the U.S. and Chins is ‘too late’ to help manufacturing sentiment. So, it’s not often the case, but the stronger this jobs report, the better, as a strong report will help calm any…” says Sevens Report Research founder Tom Essaye. Click here to read the full article.

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