Overnight Markets and News
March S&P 500 E-minis are up +0.5% this morning after Sunday's news that Treasury Secretary Mnuchin called CEOs of the six largest U.S. banks and received reassurances that there is plenty of liquidity to deal with the recent market volatility. Mr. Mnuchin also tried to reassure the markets that President Trump would not try to fire Fed Chief Powell after Bloomberg late Friday reported that Mr. Trump has repeatedly expressed a desire to aides to fire Mr. Powell. Mr. Mnuchin today is scheduled to convene a call with the President's Working Group on financial markets with representatives from the Fed, SEC and CFTC.
The markets have so far taken in stride the partial U.S. government shutdown that began last Friday at midnight. The earliest that a shutdown could be end is when the Senate is due to reconvene on Thursday. However, White House Budget Director Mulvaney on Sunday said that, "It's very possible that the shutdown will go beyond the 28th and into the new Congress," which begins on Jan 3.
The Euro Stoxx 50 index is down -0.66% this morning, playing catch-up with last Friday's -2.06% sell-off in the S&P 500 index. Asian stocks today closed mostly lower with the Japan Nikkei index closing down -1.11% and Hong Kong Hang Seng closing down -0.40%. However, China's Shanghai Composite closed up +0.43% after Chinese government economic planning officials at their meeting last week said the government plans to cut taxes and fees in 2019 as a support measure.
China announced a new batch of import tariff cuts on 700 import items and export tariff cuts on 94 export items effective Jan 1. The move is the third round of tariff cuts this year and are designed to meet Chinese President Xi's goal of opening China's economy. The tariff move did not involve the retaliatory tariffs that China slapped on imports from the U.S.
U.S. Stock Preview
Key U.S. news today includes: (1) Nov Chicago Fed national activity index (expected -0.04 to 0.20, Oct +0.10 to 0.24), (2) Treasury auctions $40 billion of 2-year T-notes.
Notable Russell 1000 earnings reports today include: none.
U.S. IPO's scheduled to price today: none.
Equity conferences during the remainder of this week: none.
Mar S&P 500 E-minis this morning are up +0.5%. Friday's closes: S&P 500 -2.06%, Dow Jones -1.81%, Nasdaq 100 -3.15%. The S&P 500 on Friday dropped to a new 1-1/4 year low and closed sharply lower. Stocks were undercut by continued worries about Fed rate hikes in 2019 and by the threat of a government shutdown on Friday night. Stocks found some underlying support from reduced interest rate concerns after New York Fed President Williams said the Fed is "listening" to markets and that forward guidance from the FOMC for further gradual interest rate increases isn't a commitment or a promise.
Mar 10-year T-notes this morning are up 3 ticks. Friday's closes: TYH9 -1.0, FVH9 +2.00. Mar 10-year T-notes on Friday closed slightly lower on the slightly stronger-than-expected U.S. Nov personal spending of +0.3% versus expectations of +0.2% and the unexpected +0.8 point increase to 98.3 in the University of Michigan U.S. Dec consumer sentiment index report. T-note prices were underpinned by safe-haven demand with the continued plunge in stocks.
The dollar index is mildly lower by -0.20% this morning, with EUR/USD up +0.0024 (+0.21%) and USD/JPY down -0.13 (-0.12%). Friday's closes: Dollar Index +0.680 (+0.71%), EUR/USD -0.0074 (-0.65%), USD/JPY -0.06 (-0.05%). The dollar index on Friday settled higher on the stronger-than-expected U.S. Nov personal spending report of +0.4% and the slightly higher 10-year T-note yield, which improved the dollar's interest rate differentials.
Metals prices this morning are mixed with Feb gold up 5.6 (+0.45%), Mar silver ,up +0.053 (+0.36%), and Mar copper down -0.013 (-0.47%). Friday's closes: Feb Comex gold (GCG19) on Friday closed down -9.8 (-0.77%), and Mar Comex silver (SIH19) closed down -0.167 (-1.12%). A stronger dollar Friday prompted long liquidation in metals. Silver prices were also weighed down on weaker-than-expected U.S. economic data that implies reduced industrial metals consumption after Q3 GDP was revised slightly lower to 3.4% (q/q annualized) from 3.5%, and after Nov durable goods orders rose +0.8%, weaker than expectations of +1.6%. Feb gold on Thursday rallied to a 5-1/2 month high and Mar silver climbed to a 1-1/2 month high after a slump in the S&P 500 to a 1-1/4 year low boosted safe-haven demand for precious metals. The turmoil in global equity markets has boosted demand for gold as a store of wealth after long gold positions in ETFs rose to a 5-1/2 month high Thursday. Technical buying is another supportive factor for gold after prices remained above the 200-day average. Fund selling of silver continues as long silver positions in ETFs fell for a sixth consecutive session to a 10-1/4 month low on Wednesday.
Feb crude oil prices are mildly lower by -0.09 (-0.20%) this morning despite weekend comments from several OPEC oil ministers saying that OPEC will extend its production cuts to the last six months of 2019 and will consider deeper cuts if necessary to soak up excess oil supplies in 2019. Feb gasoline this morning is down -0.0083 (-0.64). Friday's closes: Feb WTI crude oil (CLF19) on Friday closed down by -$0.29 per barrel (-0.63%) and Feb Brent crude (CBG19) closed down -$0.53 (-0.98%). Feb RBOB gasoline (RBF19) closed down by -0.18 cents per gallon (-0.14%). The energy complex on Friday sold off for a second day on fund selling with Feb WTI crude at a 17-month low, Feb Brent crude at a 1-1/4 year low, and Feb RBOB gasoline at a 2-year low. Weakness in global equity markets Friday undercut confidence in the economic outlook and weighed on energy demand prospects. Strength in the dollar Friday was another negative for energy prices. Weaker-than-expected economic data pressured crude prices further after U.S. Q3 GDP was revised slightly lower to 3.4% (q/q annualized) from 3.5%, which signals reduced energy consumption. Gasoline prices retreated as well after the crack spread fell to a 1-week low, which curbs incentive for refiners to purchase crude to refine into gasoline. Weekly data from Baker Hughes was bearish as it showed active U.S. oil rigs in the week ended Dec 21 rose sharply by +10 rigs to 883 rigs, which was just 5 rigs below the 3-3/4 year high of 888 rigs posted the week of Nov 16.
Overnight U.S. Stock Movers
Cigna (CI +0.83%) was rated a new 'Buy' at Edward Jones
Under Armour (UAA -4.13%) may initially open higher this morning after Adage Capital reported a 5.88% passive stake in the company.
Raytheon (RTN -4.07%) was awarded a $693 million contract to produce Sweden's Patriot Integrated Air and Missile Defense System, including spare parts, support and training.
Lockheed Martin (LMT -3.29%) was awarded a $3.38 billion contract from the U.S. Army to produce Phased Array Tracking Radar to Intercept on Target Advanced Capability-3 missiles with associated ground support equipment and initial spares.