Contemplation. Stocks took a day of rest closing mostly unchanged yesterday as traders contemplated their next moves. It was a mixed news day with nothing strong enough to move markets in either direction resulting in a low volume session.
WHAT YOU NEED TO KNOW:
1) The Chinese economy continues to show signs of weakness. Yesterday’s economic numbers out of China suggested more slowing in the consumer sector but business investment remains under control in response to earlier stimulus. WHILE YOU SLEPT Chinese officials confirmed a stimulus package that included tax cuts to both consumers and businesses. Stocks in Asia rallied on the news.
2) The US housing market remains shaky. Yesterday, the US Census Bureau released its New Home Sales figures which showed a month over month slowdown of -6.9%, significantly lower than last month’s growth of a revised +3.8% growth.
3) The UK Parliament voted to obtain a delay for the March 29th Brexit deadline. The vote comes after the House of Commons voted to avoid a “no deal Brexit”, which would represent a worst case scenario for businesses in both the UK and in the EU. The votes show that there still remains significant differences amongst MP’s regarding the direction of the Brexit. Theresa May will continue to attempt to get a yes vote on her twice failed proposal and a new referendum vote, though not likely at this point, is not off the table.
Stocks had very little in the way of real stimulus yesterday leaving investors little motivation to make big moves in either direction. Trade officials continue to spoon feed markets with positive sound bites regarding progress on negotiations and the market has baked in some sort of positive result at this point. Though yesterday's news of meeting between President Trump and President Xi being delayed could have been considered a negative, markets largely ignored the revelation. Boeing’s troubles continued yesterday with Canada joining the US in grounding all 737 Max 8 planes. Though the stock was off by -1.02% in yesterday’s trade, it appears to be stabilizing after the almost -11% pullback from earlier in the week. In other company news, GE lowered guidance yesterday but underlined efforts to cut debt and shore up its cash flows. Investors liked what they heard from new CEO Larry Culp and GE’s stock traded up by +2.79%. Yesterday’s low volume day included the S&P500 trading off by -0.09%, the Dow Jones Industrial Average moving up slightly by +0.03%, the Russell 2000 falling by -0.4%, and NASDAQ 100 slipping by -1.9%. Bonds slipped slightly with ten year treasury yields climbing to 2.63%. Value in bonds still remains in the front end maturities under 5 years where a AA Corporate Bond trades at a spread of around +40 basis points.
WHAT TO LOOK FOR TODAY:
This morning we will get Industrial Production from the Federal Reserve and it is expected to have grown by +0.4% month over month after receding by -0.6% last month. The JOLTS number is expected to show 7.225 million job openings down slightly from last month. Later this morning we will get the University of Michigan Sentiment index which is expected to have risen to 95.7 from 93.8. Today is also a quadruple witching day on which individual stock options, individual stock futures, stock index futures, and stock index options all expire. These day’s typically come with high trading volume and volatility, particularly late in the session. Next week brings factory orders, manufacturing PMI, some more housing numbers, and a regional Fed report. Also next week, the FOMC will meet to discuss policy. Though no changes are expected, the press release and accompanying dot plots should spark some interesting discussions. Have a great St. Patrick’s day.