Monday, May 13, 2019

Market Alert - Pre-Market

Futures vs FV: SP -52.10; DJ -483.37; NASD -185.03

The market is obviously not viewing the big picture with respect to trade with China. Futures started much lower at the open, then at 7:45ET China announced additional tariffs on $60B in US goods. Also discussions of stopping purchase of US ag products as well as state newspapers saying there are discussions of selling US Treasuries. Those stories triggered more downside in US futures. Asia, Europe down already, the US is ready to follow.

More on the trade deal that wasn't: the word is that the deal was 'done' and that the two parties were discussing the logistics of a signing ceremony. Then China backed out, rewriting over one-third of the agreement, of course on the most important areas.

It is clear the market will continue to sell in working through the trade issues. The indices and many stocks are going to start at the Friday intraday lows that they rebounded off. SPY is there right now as is, e.g. GOOG.

China: Auto sales -11.6% in April. Eleven straight months of declining sales. Yes, China has a strong economic hand to play in the trade negotiations.

Upgrades: Not sure if they will help, but here they are. WEN, PINS (2); ZOOM (3); WING; KBH; TYSN; MRK

Downgrades: XOM; INTC; DE

FED: Clarida says lower neutral rates for a long time. Fed faces zero bond rate. Not much Fed can do re lower interest rates.

Kaskari: Wait and see right now re trade effects

Bonds: 2.414% vs 2.473% 10 year

EUR/USD: 1.1256, +0.0023

USD/JPY: 109.10, -0.84

Oil: 62.77, +1.11

Gold: 1288.30, +0.90

Futures opened lower and held the same place until the China 'retaliation' that is at this point rather weak. The past hour since the Chinese announcement on retaliatory tariffs and that farther dip, futures have slid laterally in a tight range.

Obviously stocks have not fully absorbed the failure of the trade deal. The key for the session is whether the indices can hold the lows from Thursday and Friday and build from there. For now they are, but again, they are going to open at those levels with AAPL off 8 clicks, AMZN off 50, FB off 5, AVGO off 10.

Jon Johnson, Chief Market Strategist

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