Tom Essaye, president of the Sevens Report, said, “To be sure, there are arguments that industrials could keep up their current pace of growth, at least in the short term. Investor optimism toward a U.S.-China trade deal, as well as the belief that global growth will…” Read the full article here.
What’s in Today’s Report:
Money flows are decidedly risk-on this morning thanks to renewed optimism about U.S.–China trade negotiations after an otherwise very quiet weekend.
Late yesterday, President Trump officially delayed the March 1st tariff deadline sending US stock futures up 10-15 points at the electronic open and shares in mainland China up over 5%.
There were no notable economic reports or other market moving catalysts overnight.
Looking into today’s Wall Street session, there are two economic reports due out this morning: Chicago Fed National Activity Index (E: 0.13) and Dallas Fed Manufacturing Survey (E: 3.0). These two releases are not usually watched closely by investors but they were especially bad in late 2019 and contributed to the heavy selling in December, so if they “whiff” again, we could see stocks come for sale.
There are no Fed officials scheduled to speak today which will leave the market primarily focused on any new developments or details regarding trade negotiations with China. Note that the March 1st deadline was delayed indefinitely and there were no other material developments regarding trade over the weekend so investors will be looking for any further indication on the next steps towards a deal.
What’s in Today’s Report:
Futures are flat as more reports of an impending U.S./China trade deal offset disappointing economic data.
Japanese & EU flash manufacturing PMIs both fell below 50 in February. The Japanese PMI dropped to 48.5 while the EU reading fell to 49.2 (vs. (E) 50.4).
Multiple media outlets reported a U.S./China trade deal is almost done, but we don’t know if tariffs will be reduced.
Today focus will be on economic data as we get several potentially important reports. They are, in order of importance: Flash Composite PMI (E: 54.4), Philly Fed Mfg Index (E: 14.0), Durable Goods (E: 1.0%), Jobless Claims (E: 225k), Existing Home Sales (E: 5.04M).
If the data is good, that will fuel a further rally towards 2800 in the S&P 500, although I don’t think good data today will be enough to get us through that level (it’ll take more dovish Fed commentary on the balance sheet to do that in the near term).
What’s in Today’s Report:
Futures are modestly lower this morning as last week’s gains are digested following a quiet holiday weekend.
There were no US-China trade developments since Friday however negotiations are set to resume in Washington this week.
Economically, the British Labour Market Report largely met expectations while the headline to the German ZEW Survey for February fell to a more than 4-year low, underscoring analysts concerns about German growth expectations.
Looking ahead to the U.S. session today, there is one Fed speaker ahead of the open: Mester (8:50 a.m. ET) and one economic report due out in the first hour of trade: Housing Market Index (E: 59.0).
The market’s main focus will continue to be U.S. – China trade negotiations as a successful deal or at the very least extension to the next tariff deadline (March 1st) has largely been priced into stocks at current levels, so any renewed tensions could hit stocks, potentially hard, in the coming sessions.
A lot of the good news out there is already priced into stocks at these levels,” wrote Tom Essaye, president of the Sevens Report, in a Monday note to clients. “At 2,700 or higher, the S&P 500 isn’t priced for perfection, but…” Read the full article here.
What’s in Today’s Report:
Futures are slightly lower as disappointing economic data offset U.S./China trade optimism.
Worries about global growth persist as the Caixin Chinese Manufacturing PMI fell to 48.3 vs. (E) 49.7 while European data wasn’t much better. The British Manufacturing PMI fell to 52.8 vs. (E) 53.5 while the EU reading was 50.5.
Today focus will be on the jobs report but the ultra-dovish Fed has taken some of the impact away from this report, because it’ll have to be incredibly strong to make the Fed skew more hawkish. Expectations are: Jobs Adds of 158K, Unemployment of 3.9%, M/M Wage gains of 0.3%.
In some ways, the ISM Manufacturing Index (E: 54.0) is the more important number today because if that’s a soft number, it’ll fan fears the Fed is reacting to a U.S. economy that’s losing momentum, so that’s the number I’m watching closely today.
What’s in Today’s Report:
Futures are modestly lower as markets digest the recent rally following a quiet night of news.
Economically, Chinese inflation underwhelmed as CPI rose 1.9% vs. (E) 2.0% and PPI gained just 0.9% vs. (E) 2.7%. However, those soft numbers give Chinese authorities more room to further stimulate their economy, so low inflation isn’t a negative.
On trade, there were no further comments from either side (a slight negative) as some were hoping for some optimistic official statement from the Chinese.
Today focus will remain on the Fed as we get multiple Fed speakers, highlighted by Fed Chair Powell (1:00 PM) and Vice Chair Clarida (5:30 PM). We expect more dovish language from virtually all the speakers today, but at this point most of the benefit from dovish Fed speak is priced in, so don’t expect the comments to be a major positive catalyst unless there’s a surprise.
Economically, the calendar is quiet although we do get Jobless Claims (E: 224k) and we want to see those move back towards 200k and away from 250k.
What’s in Today’s Report:
Futures and global markets are surging (up more than 1%) as Trump and Xi agreed to U.S./China trade war truce.
As was generally expected, the U.S. will not raise tariffs on China to start 2019 and both sides have agreed to a three month negotiation period.
Economic data was good as EU and UK Manufacturing PMIs both beat estimates
Today there is one important economic report, the November ISM Manufacturing PMI (E: 57.2) and it needs to be a “Goldilocks” reading to help fuel this early rally. We also get three Fed speakers (Williams (9;15 a.m. ET), Brainard (10:30 a.m. ET), Kaplan (1:00 p.m. ET)) but none of them should move markets.
Bottom line, tech and industrials are the key sectors to watch today, and outperformance from both will be needed for stocks to hold these big, early gains.