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Valuation Update

What’s in Today’s Report:

  • Valuation Update and a New “Fair Value” Trading Range

Futures are extending the late Thursday gains and are modestly higher thanks to momentum.

Economically, Japanese data disappointed as the Unemployment Rate (2.5% vs. (E ) 2.4%) and Retail Sales (1.4% vs. (E) 2.2%) missed expectations.

Today investors will see if the year-end bounce can continue.  There are a few economic reports including International Trade in Goods (E: -$75.7B), Chicago PMI (E: 62.4) and Pending Home Sales Index (E: 1.5%) but none of those should move markets materially.

Dow Theory Just Turned Bearish

What’s in Today’s Report:

  • Dow Theory: First Bearish Signal Since July 2015

Futures are enjoying a bounce this morning after top economic officials from the US and China held a conference call o/n regarding the next stages of trade negotiations.

Economically, the German ZEW Survey was mixed as the Current Conditions reading badly missed at 45.3 vs. (E) 55.0 but Business Expectations were not as bad as feared: -17.5 vs. (E) -26.0.

The NFIB Small Business Optimism Index was a disappointment this morning with the headline coming in at 104.8 vs. (E) 107.0, the lowest headline since May.

Looking at the calendar today, the catalyst list is fairly thin as there is only one economic report: PPI (E: 0.0%) however inflation has been an important topic recently and a material “miss” or “beat” could move markets. Meanwhile there are no Fed officials scheduled to speak.

That will leave the primary focus of the market on U.S.-China trade relations including any further developments or details from last night’s “trade call” as well as the Huawei CFO’s bail hearing in Canada.

Bottom line, as long as we see more positive trade headlines, sentiment should improve and trade optimism will likely continue to act as a near term tailwind for markets.

Trade War Indicator

What’s in Today’s Report:

  • A Realtime Trade-War Indicator to Watch

Futures are slightly lower with EU markets this morning on renewed political tensions despite upbeat economic data o/n while US focus turns ahead to the mid-terms.

Italian shares are down nearly 1% as the revised budget due on 11/13 is not expected to have the improvements investors previously hoped which could lead to further tensions with the EU.

Economically, the EU Composite PMI came in better than expected (53.1 vs. E: 52.7) which is a longer term positive as we need to see overseas data “catch up” to US growth metrics to help fuel continued gains in stocks broadly.

Today, trader focus is going to primarily be on the mid-term elections although results will not come in until after the close.

On the economic front, there is just one report to watch: September JOLTS (E: 7.110M) while there are no Fed officials schedules to speak ahead of the two-day Fed meeting that begins tomorrow.

Lastly, markets will remain sensitive to any trade war developments while technicals are still playing a major role in intraday price swings so if momentum is generated back towards 2700, the odds of another ugly break to the mid $2600’s would rise significantly.

Yield Curve Update (Positive)

What’s in Today’s Report:

  • Bank Update – Positive Catalyst Looming?
  • 10’s-2’s Curve Update (Positive)
  • Weekly EIA and Oil Outlook

Futures are very slightly higher following a quiet night of news.

There was no trade news overnight so cautiously optimistic sentiment towards trade remained in place – and all eyes remain on next week’s U.S./China summit which, for now, is still on.

British Retail Sales was the only notable economic report, and it beat estimates at 0.3% vs. (E) 0.1%, continuing a recent run of good British data.

Today focus will be, of course, on any trade headlines, especially pertaining to next week’s U.S./China trade summit.  Beyond that, we get some notable economic data, starting with Philadelphia Fed Business Outlook Survey (E: 19.2).  We also get Jobless Claims (E: 210K) and Existing Home Sales (E: 5.360M) although neither should move markets.

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Tariff Update (It Was an Important Weekend)

What’s in Today’s Report:

  • Tariff Update (Bottom Line from the Headlines This Weekend)
  • Weekly Market Preview
  • Weekly Economic Cheat Sheet

Futures are modestly lower following mixed trade headlines over the weekend.

The WSJ had two important trade articles over the weekend.  The first stated the Trump administration will implement 10% (vs. (E) 25%) tariffs on Chinese exports, while the second said if that happened, China would cancel the next round of trade talks.  Asian markets dropped 1% on the combined stories, but European and U.S. markets are taking a “wait and see” approach and are down only marginally.

Economically, the only notable number was EU Core HICP, which met estimates at 1.0% year over year.

Today focus will be on whether the new tariffs are formally announced, and whether that ends up in the cancellation of next week’s U.S./China trade negotiations.  Economically, there’s only one report, Empire State Manufacturing (E: 23.0).

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Inflation Update

What’s in Today’s Report: Inflation Update

 

Futures are slightly lower as strong Chinese economic data was offset by U.S./China trade worries.

Chinese August Manufacturing PMI increased and beat estimates at 51.3 vs. (E) 51.0, which will ease some concern about the Chinese economy.

Regarding inflation. EU Core HICP slightly missed estimates (1.0% vs. (E) 1.1%) as inflation remains stubbornly low.  This is important because it’s going to be hard for the dollar to really breakdown without a good euro rally – and we need higher EU inflation to fuel that EU rally, and it’s just not happening.

There was no new trade news overnight but prospects of 200 bln in new tariffs next week is a headwind on markets.  Both Bloomberg and Reuters had separate reports saying the administration intends to go forward with the tariffs shortly after the comment period ends early next week.

Today there is only one economic report, Consumer Sentiment (E: 95.5), so focus will remain on trade headlines – but assuming the news wires are quiet on that topic, it should be a typically slow, pre-long weekend Friday in the markets.

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Tom Essaye on CNBC

“In March, we had four areas of trade uncertainty: Mexico, China, Europe and Canada. I think Canada will be resolved and Europe and Canada are already resolved,” said Tom Essaye, founder of The Sevens Report. “Basically, we’ve got three of four resolved, but China is a big one.”

Essaye also said he would be surprised if stocks keep grinding higher without a resolution to U.S.-China trade relations.

Click here to read the entire article.

Push on Trade – Tom Essaye on Bloomberg Radio

Tom Essaye, Founder, The Sevens Report, joined Bryan Curtis and David Ingles on Daybreak Asia to discuss the deal on trade with Mexico and the outlook for a resolution with China. He goes onto Fed hikes, how close they are to neutral and when the yield curve may invert.

Link to the Bloomberg site: Click Here

Are Commodities Bottoming?

What’s in Today’s Report:

  • Are Commodities Bottoming?

It was another very quiet August night in the markets as US futures are flat this morning while European shares are slightly lower and Asian indexes continued to advance modestly with trade negotiations still the major focus.

The German GfK Consumer Climate edged down 0.1 to 10.5 vs. (E) 10.6 in September. Sentiment in Europe is not quite as strong as the US, but it remains mostly upbeat and strong enough for continued equity gains in the medium term.

Oil prices are slightly higher this morning despite the API reporting a slight build (+38K bbls) in crude stocks vs. (E) -1M bbls ahead of the weekly EIA report this morning.

Today, trade will continue to dominate the headlines but there are two economic reports to watch: GDP (E: 4.0%) and Pending Home Sales (E: 0.0%). There are no Fed officials or other central bank events so from a catalyst standpoint, it will likely be another quiet session.

The dollar has been a good inverse proxy for trade sentiment recently so if we see a continued pullback, stocks can continue to flirt with new highs, however any material rebound in the dollar index today will likely pressure US shares (the greenback is slightly higher so far).

Finally, I’ll be joining Liz Claman on Fox Business’s “Countdown to the Closing Bell” this afternoon at 3:00  p.m. ET to discuss the outlook for the markets and opportunities for investors as we head into the final four months of the year.

To access the full analysis Go Here

Valuation Update (New Target)

What’s in Today’s Report:

  • Valuation Update

Futures are slightly higher this morning after a very quiet night as global shares are edging higher after yesterday’s run to new all-time highs in several major US indexes.

Trade concerns continue to ease after yesterday’s favorable developments between the US and Mexico, leading to a further pullback in the dollar which has been the most significant tailwind for stocks over the last week.

Looking ahead to today’s session, there are a few notable economic reports due out: International Trade in Goods (E: -$69.4B), S&P Case-Shiller HPI (E: 0.2%), and Consumer Confidence (E: 126.8) but there are no Fed officials scheduled to speak.

Economic data aside, progress on trade and the subsequent decline in the dollar index have been the primary bullish influences on stocks right now, so as long as the trade situation doesn’t deteriorate today, and the dollar doesn’t materially rally, stocks should be able to continue towards new highs.

To access the full analysis Go Here