What The Actual Phase One Deal Means for Markets

What’s in Today’s Report:

  • What The Actual Phase One Deal Means for Markets
  • January Economic Breaker Panel
  • EIA Analysis and Oil Update

Futures are modestly higher following a quiet night of news as markets continued to digest that the actual text of the phase one trade deal largely meet expectations.

Economic data was sparse as the only report was German CPI and it met estimates at 1.5% yoy.

Today focus will be on economic data and earnings, as there are several important economic reports including (in order of importance):  Retail Sales (E: 0.3%), Philly Fed (E: 3.4), Jobless Claims (E: 214K), and Housing Market Index (E: 75). There is also one Fed speaker, Bowman (10:00 a.m. ET), but he shouldn’t move markets.

On the earnings front, results have been mixed so far this week, and focus will turn more towards earnings now that phase one is a done deal. Some important reports we’ll be watching today include: MS ($0.98), SCHW ($0.64), BK ($0.99), TSM ($0.72), CSX ($0.97), PPG ($1.35).

What Phase One Means for Markets (Three Takeaways)

What’s in Today’s Report:

  • What the Actual Phase One Deal Means for Markets
  • Weekly Market Preview (All About Economic Data)
  • Weekly Economic Cheat Sheet

Futures are modestly higher on the U.S./China phase one deal momentum while economic data was mixed.

There were no new details released on phase one trade deal over the weekend, but sentiment towards the agreement remained generally positive.

Economic data was mixed as Chinese economic data beat estimates (Retail Sales, FAI, Industrial Production), while EU flash manufacturing PMI missed 45.9 vs. (E) 47.3.

Today (and going forward) focus will turn back towards economic data, so today’s Flash Manufacturing PMI (E: 52.4) is the key number to watch, while Empire Manufacturing Index (E: 4.0) and the Housing Market Index (E: 70) are also notable.  Going forward, the better the economic data, the better for stocks.

Tom Essaye Quoted in on November 25, 2019

“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 Interviewed with TD Ameritrade Network on October 10, 2019

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

What’s Next for U.S.-China Trade?

What’s in Today’s Report:

  • What’s Next in U.S.-China Trade

Futures have recovered from overnight losses that were spurred by a weaker than expected yuan fixing by the PBOC and are now higher with EU markets as easier than expected central bank policy overseas is helping offset trade war angst and Forex concerns.

The Reserve Banks of New Zealand and India, and the Bank of Thailand all eased policy more than expected overnight triggering dovish money flows across asset classes underscored by new highs in gold (+1% to over $1500/oz.) and a global bond rally.

Economically, German Industrial Production was -1.5% vs. (E) -0.4% which largely contradicted yesterday’s solid Manufacturers’ Orders print.

There are no economic reports to watch today but there is one Fed official scheduled to speak: Evans (9:30 a.m. ET) and there is a 10 Year Treasury Note auction at 1:00 p.m. ET which could move markets, especially considering the 10s-2s yield spread is testing the lows of the year this morning, below 10 basis points.

Aside from those events, investors will remain focused on any new developments regarding the trade war as the latest tariff announcement (last Thursday) was the main source of the recent spike in volatility.

Trade War Update (After Tariff Increases)

What’s in Today’s Report:

  • Tariff/Trade War Update

Futures are marginally weaker as the U.S. increased tariffs on Chinese imports, as expected.

Positively, the trade talks will continue today, and the consensus market outlook remains that a deal does get done, likely in the next few weeks.

Away from trade, economic data was solid.  Japanese Household Spending, British GDP and UK Industrial Production all beat estimates.

Today most of us will spend the day watching for any trade related headlines, and there are likely to be plenty.  But, barring a total breakdown in negotiations, trade shouldn’t be too big of a negative on markets today.

Away from trade, we also get the most important economic data point of the week:  CPI (E: 0.4%).  PPI was more firm than it seemed, and if CPI is also firm then that will reduce the possibility of a preventative Fed rate cut, which will be another headwind on stocks.  Finally, there are multiple Fed speakers today: Brainard (8:30 a.m. ET), Bostic (9:05 a.m. ET), Williams (10:00 a.m. ET) but none should move markets.

Inflation Update (It’s More Important Than Trade)

What’s in Today’s Report:

  • Inflation Update (This Is More Important Than the Trade Drama)
  • EIA Analysis and Oil Update

Futures are decidedly weaker this morning following more hawkish trade rhetoric from President Trump overnight.

At a rally in Florida Trump said China “broke” the deal and reiterated his tariff threats.  Importantly though, nothing changed as far as actual negotiations and the Chinese trade delegation still arrives today.

Economically Chinese CPI generally met expectations at 2.5% yoy vs. (E) 2.6%.

Today the market will be held hostage again by trade headlines, but beyond the trade headlines there are two notable economic reports.

First, Jobless Claims (E: 215K) have risen lately and we’ll want to see that roll back over soon, otherwise it could be a negative signal on the jobs market.  Second, PPI (E: 0.3%), while not as important as tomorrow’s CPI, could still move markets given inflation’s new-found importance. Finally, there are three Fed speakers, Powell (8:30 a.m. ET), Bostic (10:45 a.m. ET) and Evans (1:15 p.m. ET), but none of them (including Powell) are expected to move markets.

What New Tariff Threats Mean for Markets

What’s in Today’s Report:

  • What Trump’s Tariff Threats Mean for Markets
  • Updated Market Outlook (Beyond Tariffs/Trade)
  • Weekly Market Preview
  • Weekly Economic Cheat Sheet (All About Inflation)

Futures are sharply lower after President Trump renewed tariff threats against China, putting the expectation for a U.S./China trade deal in doubt.

President Trump threatened to increase tariffs on Chinese imports to 25% on 200 billion this Friday if a trade deal is not complete.

Outside of trade, economic data was mixed.  Chinese composite PMI declined (52.7 vs. (E) 52.9) while Euro Zone composite PMI and retail sales slightly best estimates.

Today there is one Fed Speaker: Harker (9:30 a.m. ET) but obviously the focus of markets will be on any trade updates.  As of this writing, the Chinese trade delegation is still coming to the U.S. for more negotiations this week.  If that is cancelled, look for stocks to take another leg lower.  Conversely, if it’s announced Chinese Vice-Premier Liu He is attending the talks, that will be a positive.

From a technical standpoint, 2890 in the S&P 500 is notable support and if that’s broken, selling could accelerate.

Earnings Season Takeaway (Mild Positive)

What’s in Today’s Report:

  • Earnings Season Early Takeaway (Mildly Positive)
  • Sector Winners From a U.S./China Trade Deal Announcement (It’s Coming Any Day Now)
  • EIA and Oil Market Update

Futures are little changed following a generally quiet night as earnings remain in focus.  Economic data was sparse overnight and isn’t moving markets.

Results after hours Wednesday were good as FB and MSFT both beat estimates, although that’s being offset partially by ugly MMM results this morning.

Today there are two notable economic reports, Durable Goods (E: 0.8%) and Jobless Claims (E: 209K) and it’ll be important to see some sort of stabilization in business spending via Durable Goods.

But, the real focus today will remain on earnings, as we get several important reports.  If numbers are good in aggregate, this rally can continue.  Some earnings we’re watching include – Pre-Open: UPS ($1.42), MMM ($2.50), MO ($0.92).  After the Close: AMZN ($4.72), INTC ($0.87), SBUX ($0.56).

Tom Essaye Appeared on The Ticker on Yahoo Finance on March 1, 2019

7 Macro ‘Ifs’ That Could Boost Markets

Tom interviewed with The Ticker’s Jackie DeAngelis on Yahoo Finance to discuss the 7 ‘ifs’ that would have to happen for markets to…Click here to watch the entire clip or click on the video below.