Futures vs FV: SP -3.51; DJ -42.46; NASDAQ -9.97
Follow the bouncing futures. Lower to start the session then running to positive as Mario Draghi discussed the European economy and the ECB's response. In a nutshell, the economy is sliding into recession and the ECB is panicked. Just too many geopolitical uncertainties says Draghi. No, just too much socialism catching up to it. Running out of other people's money as Margaret Thatcher would say.
EU GDP growth downgraded to 1.1 from 1.7%. In truth speak that means it is close to no growth.
No ECB rate hikes in 2019
Inflation downgraded to 1.2% growth from 1.6%
ECB to provide cheap bank loans and other cash.
US stock futures jumped to positive on the news, up 40 Dow points after trading down 30 Dow points. Then the 'good' news wore off and US futures dropped right back down to where they were and lower. Seems bad news is still bad news.
Productivity Q4: 1.9% vs 1.7% expected.
Unit labor costs Q4: 2.0 vs 1.5% expected
Earnings misses: KR; AEO (TL)
Upgrades: STZ; FIVE; EL
DLTR: closing roughly 390 FDO stores (Family Dollar)
Chips: Beige Book showed the largest drop in semiconductor orders since 2007/2008.
Bonds: 2.668% vs 2.643% 10 year
EUR/USD: 1.1254 vs 1.1305. Euro bombing on the ECB moves. Euro started to fall WED/THURS. Think this was not being traded?
USD/JPY: 111.72 vs 111.79
Oil: 56.79, +0.51
Gold; 1285.10, -2.50
Futures are near the post-ECB lows, but I will tell you, they are trading very strange. They are bouncing up and down at the exact same levels, hitting them same numbers again and again with complete flip flops in pricing. Something strange, so you cannot really take any guidance from them other than a very general downside bias: bias was lower before all the news created the morning volatility and there is downside bias now. Nonetheless, something is indeed broken in the futures this morning.
Stocks have been letting some air out of the rally this week. The small and midcaps are clearly getting sold near term. The large caps are holding out and we watch how chips, machinery trade as they were struggling now along with software. Then there are metals, transports and the like and they were just trying to turn but are getting sold back.
Jon Johnson, Chief Market Strategist
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