Futures vs FV: SP -28.95; DJ -230.48; NASD -95.09
Futures started lower last night when the Lighthizer comments hit after the close. They have remained lower ever since, but then ramped up the downside slide at 9:00ET. This is turning into an ugly morning when it was just so-so bad at 8:30ET with Do futures off about 125 points.
Trade: Of course this remains the focus, pushing earnings right out the door without even a 'thanks.' China is going to show up Friday, but the talk on some financial stations is that the US and China are not even talking right now. The US has the 3.2% GDP and 1969 level unemployment while China had a lot of negative blow back from its officials after its Belt and Road tour. Both sides look dug in and tariffs will go into effect Friday. Indeed, some are saying tariffs would ALWAYS be in effect as that was the only way to get things even.
Wow, who would have thought no deal would be struck? Who would have thought that the difference in an open society and economy versus a communist society and economy would preclude a serious, meaningful trade deal? I wonder . . .
That is neither here nor there. The issue is the market, and the market is upset, pricing down. The rebound Monday looked as if sane people realized the truth and believed the US is in a superior position. Today, not so much. Apparently we are worried about not being to buy cheaply made Chinese crap at a price not low enough for the poor quality of the crap. Harsh words but true.
EU: Growth forecast cut again: 1.2% vs 1.3%
Germany: 0.5% from 1.1%
Upgrades: ROKU; BYND; LULU; DIS
Downside: APC; BA
Earnings beats: AGN; RACE; HTZ; AIG; GLUU (TL); MOS
Misses: REGN (TL, BL); ARAMARK (BL)
Rates: Bonds are declining. Some are saying Trump tweeted not only to pressure China on its reneging once it got back from 'belt and alley' from what it agreed to, but also to pressure the Fed. Interesting theory.
Speaking of theories, Mohammad Al Arian says that the Fed Funds Futures Contract showing 54% chance of a rate cut in December and 90+% in January is way off. MAA is saying he is smarter than the market. Looking at what is happening in the stock market and bond market, looking at what Trump wants the Fed to do, could this be a big plan to accomplish hammering China and pushing rates lower. Every time I underestimate that guy strange things happen . . .
OTHER MARKETS
Bonds: 2.467% vs 2.50% 10 year. Bonds rally for a second day on trade turmoil.
EUR/USD: 1.1175, -0.0022
USD/JPY: 110.60, -0.16
Oil: 61.58, -0.67
Gold: 1280.80, -3.00
Futures continue to probe lower toward the open as stocks tread on soft clay this morning. Not opening as low as Monday but may end up testing those lows again.
______________________________________
Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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