Thursday, January 3, 2019

Today's Action

A lot to unpack in today's session. I pretty much cover the long and the short of it in the following bullet points:

  • Apple's projected revenue miss hit the market hard today. No doubt partly because it's Apple, but the bigger issue is where the weakness came from; China! U.S. multinational companies that do business in China (name me one that doesn't) by and large got hammered today. Apple CEO Tim Cook cited the trade war as a contributor to China's slowdown.
  • The Institute for Supply Management December manufacturing survey came in way below expectations; posting it's worst monthly decline since 2008. The 54.1 score remains nicely in expansion mode, but the distance from last month's 59.7 is too far for comfort. Of course tariffs were cited as the central concerning issue!
  • I listened to an interview with Dallas Fed President -- and FOMC voting member -- Robert Kaplan this morning. He said he's voting for a halt to any interest rate moves till well into next year. And he stated that the balance sheet should be an option if necessary (which is contrary to Fed Chair Powell's latest commentary). If Powell and the rest of the Fed adopt Kaplan's view, which they should at this juncture, that's good news for the market.
  • ADP/Moody's private sector payrolls for December came in 100k better than expected. That supports our view that, on balance, the economy remains in decent shape.
  • The record streak of sub-300k weekly jobless claim remains intact. Ditto the previous bullet point.
  • Weekly mortgage purchase apps were down 8% year-over-year. While that's a noisy statistic, that's not good news.

Tomorrow, all eyes will be on the government's jobs report, the services sector Purchasing Managers Index, and an interview with Fed Chairman Powell. The latter being the event of the day.

Clearly, there was too much potential for a mishap overnight and tomorrow morning for traders to keep the bullish end of day theme that I wrote about this morning alive. Yesterday's late-day bulls got stung bad by Apple's after-hours news.

As I type this evening, Japan is following the U.S.'s lead lower. However, copper and the Aussie dollar are up (the latter significantly), and Chinese and Hong Kong stocks are rallying big time. U.S. equity futures are in the green as well, but not nearly as much as China and HK. The only news highlight at this point supporting the copper, the Aussie, and the China/HK rallies is an article confirming that the U.S. and China will hold face-to-face talks on trade next week. I suspect that the China/HK rally could also be a delayed reaction to last night's news regarding a new round of stimulus coming from China. 

We'll keep you posted...

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