Daily Morning Report

Wednesday, June 10–Jim Wyckoff’s Morning Markets Report

Global stock markets were mostly weaker in overnight trading. U.S. stock indexes are pointed toward narrowly mixed openings when the New York day session begins. The Nasdaq index overnight hit another record high, while the S&P 500 stock index on Monday hit a three-month high. Risk appetite remains generally upbeat at mid-week as businesses in major economies continue to open back up after the Covid-19 lockdown and social distancing guidelines are relaxed.

Today concludes the two-day meeting of the Federal Reserve’s Open Market Committee (FOMC) that will see an afternoon statement, along with a press conference from Fed Chairman Jay Powell. No change in interest rates is expected. However, the Fed’s economic projections and Powell’s remarks will be closely scrutinized and will probably move markets to some degree.

In overnight news, the OECD think tank forecast global economic growth will fall 6% this year, if a second wave of Covid-19 can be avoided. The OECD also said the world economy “is on a tightrope” and a second wave of the pandemic would be a terrible blow to the world economy.

China got some dour economic news at mid-week as it reported its industrial prices in May fell by 3.7%, year-on-year. Consumer inflation fell to a 2.4% growth rate. Both figures undershot market expectations.

The important outside markets see the U.S. dollar index slightly lower and hitting a three-month low overnight. The greenback is in a serious swoon. Meantime, Nymex crude oil prices are lower on a corrective pullback after hitting a three-month high above $40.00 Monday, and is trading around $38.00 a barrel. The yield on the benchmark U.S. Treasury 10-year note is currently around the 0.79% level.

U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the consumer price index, real earnings and the weekly DOE liquid energy stocks report.

–Jim
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“The trend is your friend” is the tried and true market adage that so many professional traders espouse. The U.S. stock indexes are trending solidly up and there are no early clues to suggest that market tops are in place. Any early, bearish chart clues that do arise you will hear from me first, via my daily markets update report.–Stay tuned! Jim

Tuesday, June 9–Jim Wyckoff’s Morning Markets Report

Global stock markets were mixed but mostly weaker in overnight trading. U.S. stock indexes are pointed toward lower openings when the New York day session begins, on normal corrective pullbacks from recent strong gains. The Nasdaq index overnight hit a record high, while the S&P 500 stock index hit a three-month high Monday. Trader and investor risk sentiment remains upbeat. The just-released NFIB small business optimism index rose to 94.4 in May from 90.9 in April. The U.S. government reported the American economy officially entered recession in February, while also on Monday the Federal Reserve expanded its lending program to U.S. businesses.

In overnight news, the Euro zone economy in the first quarter contracted by 3.6% from the fourth quarter of last year. Forecasters expect the second-quarter GDP reading to be worse.

The World Bank has forecast global GDP to see a 5.2% contraction this year. Advanced economies will contract 7%, led by a 9.1% decline in the Euro zone. Other GDP projections see the U.S. at -6.1%, China at up 1.0% and India -3.2%. “This is the first recession since 1870 triggered solely by a pandemic, and it continues to manifest itself… Given this uncertainty, further downgrades to the outlook are very likely,” the World Bank said. Global economic growth is due for a rebound in 2021, growing 4.2%, said the World Bank.

Today begins the two-day meeting of the Federal Reserve’s Open Market Committee (FOMC) that ends Wednesday afternoon with a statement and press conference from Fed Chairman Jay Powell.

The important outside markets see the U.S. dollar index slightly higher early today on a corrective bounce from its recent 11-week low. Meantime, Nymex crude oil prices are lower on a corrective pullback after hitting a three-month high Monday, and trading around $37.25 a barrel. The yield on the benchmark U.S. Treasury 10-year note is currently around the 0.82% level.

U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, the NFIB small business index, the IBD/TIPP economic optimism index, and monthly wholesale trade.

–Jim
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Monday, June 8–Jim Wyckoff’s Morning Markets Report

Global stock markets were mixed in overnight trading. U.S. stock indexes are pointed toward modestly higher openings when the New York day session begins. The Nasdaq hit a record high overnight, while the S&P 500 stock index hit a three-month high. Businesses in major global economies continue to reopen and that’s lifting trader and investor spirits. However, the more social interaction the past couple weeks has caused an increase in Covid-19 infections in some U.S. states. Still, that could be just because more testing for infections is being done than in weeks past. Also, the civil unrest in the U.S. has turned much less violent and by far mostly peaceful.

The marketplace is mostly shrugging off some stated reporting errors in Friday’s shockingly upbeat U.S. employment report from the Labor Department. Those reporting errors made the report look more rosy than it would have been otherwise, but the errors were not major. Friday’s report suggested the U.S. economy will see a “V-shaped” recovery from the Covid-19 damage. “We are likely to see the shortest (U.S.) recession on record,” said one market analyst. Friday’s huge miss by analysts/economists on the jobs data in May raises questions on the accuracy of assumptions made by central banks, including the Federal Reserve, the past few months. Important questions include: What if the central banks greatly misjudged the overall damage to their economies and their recovery rates? Did the central banks severely over-react on monetary stimulus packages, which could create bigger problems (inflation) down the road?

In overnight news, economic data out of China was downbeat. China’s imports in May were down 16.7%, year-on-year. Exports were down 3.3% in the same period.

The important outside markets see the U.S. dollar index slightly lower early today and not far above last Friday’s 11-week low. Meantime, Nymex crude oil prices are higher and trading around $39.75 a barrel. The yield on the benchmark U.S. Treasury 10-year note is currently around the 0.91% level. Bond yields have risen significantly the past few sessions.

U.S. economic data due for release Monday is light and includes the employment trends index.

–Jim
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One feature in the marketplace recently has been the slumping greenback and the resurgence of the so-called “commodity currencies” like the Canadian and Australian dollars. It could be that many of the big speculative “fund” traders are moving into commodities (including the grains) and commodity currencies, reckoning many commodity markets are now longer-term value-buying opportunities and that inflation will flare up in the coming months. Economics 101 classes teach that pumping large sums of money into financial systems creates price inflation. See on the chart for July soybeans that prices have seen a bullish upside “breakout” from the recent trading range and that a gentle price uptrend is in place. The soybean market technicals look the most bullish they have looked in months.–Stay tuned! Jim

Friday, June 5–Jim Wyckoff’s Morning Markets Report

Global stock markets were mostly higher in overnight trading. U.S. stock indexes are pointed toward higher openings and at or near three-month highs when the New York day session begins. Continued central bank stimulus programs keep pushing the growing heaps of cash into the stock markets. The latest influx comes from the European Central Bank, which announced Thursday another 600 billion Euro infusion into the Euro zone economy. Also, there is the perception among global traders and investors that the Covid-19 pandemic has peaked, at least from an economic impact perspective if not also from a human toll perspective. That’s allowing risk appetite to uptick in the markets.

The U.S. economic data point of the week is Friday morning’s Labor Department employment situation report for May, expected to show non-farm payrolls down 8.3 million. In the April jobs report, there was a 20.5 million drop in non-farm payrolls.

The important outside markets see the U.S. dollar index modestly higher early today on a corrective bounce after hitting an 11-week low overnight. One feature in the marketplace this week has been the slumping greenback and the resurgence of the so-called “commodity currencies” like the Canadian and Australian dollars. Part of the reason has been civil unrest in the U.S. However, it could also be that many of the big speculative “fund” traders are moving into commodities and commodity currencies, reckoning many commodity markets are now longer-term value-buying opportunities and that inflation will flare up in the coming months. Economics 101 classes teach that pumping large sums of money into financial systems creates price inflation.

Meantime, Nymex crude oil prices are higher and trading around $38.30 a barrel. The OPEC cartel and its allies have reached a deal to extend the crude oil production cuts by one month, through July. Since late April the price of Nymex crude has doubled.

The yield on the benchmark U.S. Treasury 10-year note is currently around 0.75%. Bond yields have risen significantly this week, suggesting less risk aversion in the market place, but maybe also some creeping concerns about rising inflation.

Other U.S. economic data due for release Friday includes the consumer credit report.

–Jim
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