Thursday, December 6–Jim Wyckoff’s Morning Markets Report
Risk aversion is back in full force in the world marketplace Thursday. World stock markets were lower overnight, with U.S. stock indexes set to open sharply lower on strong follow-through selling from big losses Tuesday. U.S. stock and financial markets were closed Wednesday for a national day of mourning the death of former President George H.W. Bush.
There are several bearish factors at work spooking world stock markets. Chinese tech giant Huawei’s chief financial officer was arrested in Canada, on behalf of the U.S., and will be extradited to the U.S. Her company may be shipping high tech products to Iran, which would violate U.S. sanctions against Iran. This sparked fears the U.S.-China trade tensions could rise further, despite last weekend’s trade truce between the world’s two largest economies. Chinese government officials said Thursday they are still planning to work with U.S. trade officials over the next 90 days to come to agreement.
A big drop in crude oil prices Thursday is also weighing on trader and investor sentiment. Nymex crude oil prices are sharply lower and trading just above $51.00 a barrel. The OPEC oil cartel is meeting in Vienna, Austria on Thursday. Reports said OPEC heavyweight Saudi Arabia has not yet agreed to a production cut, but that it may before the meeting ends on Friday. This has many crude oil market watchers wondering about any collective production cut being extended, after most reckoned such would be the case before the meeting began.
Trader are also anxiously awaiting another speech from Federal Reserve Chairman Jerome Powell today, wondering if he will elaborate on U.S. monetary policy direction.
Another feature in the marketplace recently that also has the stock market wobbly is falling U.S. Treasury yields (rising prices). The five-year T-Note yield this week dropped below the lower maturities. A fully inverted yield curve has been historically bearish for the U.S. economy and stock market. Right now the 10-year Treasury note yield remains above the 2-year, so the yield curve is not fully inverted.
The other key outside markets today find the U.S. dollar index modestly higher.
And it’s a very busy day of U.S. economic data due for release Thursday, which includes the weekly jobless claims report, the Challenger job-cuts report, the ADP national employment report, the U.S. international trade report, the U.S. and global services PMIs, manufacturers’ shipments and inventories, the ISM non-manufacturing report on business, monthly chain store sales, and the weekly DOE liquid energy stocks report. Several Fed officials also speak today, including Chairman Powell.