Wednesday, January 30, 2019

This Morning's Log Entry

Private payrolls came in at +213k, vs +174k consensus estimate, while pending home sales came in at -2.2%, vs +0.3% estimate. Mortgage purchase apps fell 2.0%, however the reading (along with the previous two) remains above the post-crisis low in 2010.

Asia data overnight were mixed with a slightly positive skew, Europe data were mixed. Global growth is clearly slowing, however the internals simply do not scream recession looming.

Boeing reported a huge earnings and revenue beat this morning and a bullish 2019 outlook. Apple came in just above lowered expectations last night. The market is rewarding both handsomely this morning.

The finish to this week holds huge potential for equity volatility with bellwether earnings reports from Facebook, Microsoft and Amazon, the Fed announcement this morning and trade talks in Washington today and tomorrow.

The key for the Fed is going to be for Chair J. Powell to simply state that the balance sheet is in play; I'm assuming the obvious with regard to the fed funds rate – no move this meeting and guidance that they’ll remain patient and data dependent.

The trade talks are huge! Lighthizer is itching to play hardball and would love nothing more than to leave the meetings with nothing but cautionary/negative commentary. That would virtually guarantee a selloff in stocks. Unfortunately Navarro gets to attend, although I suspect he’s been effectively muted, as I haven’t heard a peep since his last market rattling comments. Mnuchin and Kudlow, and I strongly suspect Trump, and I absolutely know the stock market, are itching for a deal as soon as possible.

The government jobs report Friday is likely to come in strong, which is fine as long as the Fed issues a dovish statement this morning.

Event risk skews in favor of the upside for stocks in the near-term. The technicals signal an upside bias as well. Although a misstep by the Fed or the trade negotiators will have markets falling apart in a hurry...

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