Daily Morning Report

The U.S. stock indexes are in near-term price uptrends at present, to suggest more sideways-to-higher price action in the coming days or longer. There are no early technical clues to suggest prices are near a top. If any significant bearish chart clue arises, you’ll hear it first from me, in my daily markets report.–Stay tuned! Jim

Thursday, May 7–Jim Wyckoff’s Morning Markets Report

Global stock markets were mixed to firmer in overnight trading. U.S. stock indexes are pointed toward higher openings when the New York day session begins. Traders and investors are more upbeat this week amid a strong recovery in Nymex crude oil futures prices and as U.S. and European economies begin to reopen. Still, the Covid-19 cases and deaths in the U.S. continue to rise outside of the earlier hotspots like New York City.

Focus today is on the weekly U.S. jobless claims report, which is expected to show less claims filed than the enormous figures seen in recent weeks, but still very large at over 3 million in new claims expected. Thursday’s weekly jobless report comes just ahead of Friday morning’s monthly employment situation report from the U.S. Labor Department, which is expected to show a loss of over 20 million jobs in April and an unemployment rate north of 15%, after a jobless rate of just 4.4% reported in March.

Another positive for traders and investors today is reports that U.S. and China trade officials will meet next week. The meeting comes after the recent rise in tensions between the world’s two largest economies, as the U.S. has accused China of hiding the Covid-19 outbreak, and even creating it in a laboratory.

China also got some upbeat economic data Thursday, as its exports unexpectedly rose in April by 3.5%, year-on-year, after declining 6.6% in March. Exports in April were forecast at down over 18%. Meantime, China’s imports fell 14.2% in April after declining only 0.9% in March.

The Bank of England today left its monetary policy unchanged, as most had expected. However, the BOE said U.K. economic growth for much of 2020 could be down 30%.

At least one market advisory firm is now calling for a “commodity super-cycle” to begin to occur in the coming months. The firm believes the combination of major global economies coming back to life in rapid fashion, after the Covid-19-induced demand shock, and the recent huge monetary stimulus measures from the big central banks of the world will produce huge demand for raw commodities that will drive their prices sharply higher. The naysayers to this postulation say the 2008 financial crisis that saw similar—although not nearly as extreme—conditions did not produce problematic price inflation at all, and in fact the world’s major economies struggled with inflation that was too low for many years. This longtime market watcher’s perspective on the matter: I lean on the side of problematic price inflation, thinking of the old saying, “no good deed (central bank stimulus) goes unpunished.”

The important outside markets Thursday see Nymex crude oil prices higher and trading around $26.00 a barrel in June futures. Prices have more than tripled from the recent low. The U.S. dollar index is slightly higher today as the greenback bulls are having a very good week.

Other U.S. economic reports out Thursday include the Challenger job-cuts report, preliminary productivity and costs, consumer credit and monthly chain store sales.

–Jim
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Wednesday, May 6–Jim Wyckoff’s Morning Markets Report

Global stock markets were mixed to firmer in overnight trading. U.S. stock indexes are pointed toward higher openings when the New York day session begins. Traders and investors are showing a bit more risk appetite at mid-week, as Nymex crude oil futures prices have rebounded sharply from single-digit levels seen in late April. Also, U.S.-China tensions have ratcheted down just a bit as both sides have toned down their harsh rhetoric—at least for the moment. Still, the Covid-19 pandemic lingers to keep the marketplace generally uneasy. While parts of North America and Europe reopen for business, the numbers of Covid-19 cases and deaths in the U.S. continue to rise at an alarming rate.

In overnight news, the Euro zone retail sales in March were reported down 11.2% from February and down 9.2%, year-on-year. Those numbers were records for declines. Also, the Euro zone services purchasing managers index (PMI) was reported at 12.0 for April. A reading below 50.0 suggests contraction in the sector.

In the U.S., today’s ADP national employment report is out and will be a precursor to Friday morning’s more important employment situation report from the U.S. Labor Department. The forecast for the ADP number is down 22 million jobs in April versus down 27,000 in March.

The important outside markets see Nymex crude oil prices higher and trading around $25.50 a barrel in June futures. Prices have more than doubled from the recent low. The U.S. dollar index is higher again today and the greenback bulls are having a good week. The Euro currency is pressured this week as the European Central Bank’s authority to stimulate the Euro zone economy has been called into question by Germany.

Other U.S. economic reports out Wednesday include the weekly MBA mortgage applications survey, the weekly DOE liquid energy stocks report, and the global services PMI.

–Jim
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The Nymex crude oil futures market has moved well off the recent low of $6.50 a barrel, to suggest a market low is in place. Make no mistake, the bulls have some heavy lifting to do to suggest a price uptrend can be sustained. See that downtrend lines are still in place on the daily bar chart. More likely is choppy and sideways trading in the coming weeks, including bouts of higher volatility.–Stay tuned! Jim

Tuesday, May 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 when the New York day session begins. Traders and investors early Tuesday are focused on the positives regarding local economies beginning to open back up in some major countries in Europe and North America. However, rallies in equities in the near term are likely to be tempered by eroding U.S.-China trade relations. The Trump administration has called out China’s leadership for mishandling and even concealing the Covid-19 outbreak that started in Wuhan, China. Reports this week are saying the global perception of China is now at a 30-year low. Many market watchers are wondering how China will react as it gets pushed farther into a corner by the U.S. This matter has the potential to eventually make the U.S.-China trade dispute of the past couple years look minor, and could even launch the world’s two largest economies into a “cold war” that rivals the one waged between the U.S. and Soviet Union for over four decades.

In overnight news, the March Euro zone producer price index was reported down 1.5% from February and down 2.8%, year-on-year.

The German high court on Tuesday has challenged the European Central Bank’s bond-buying authority, saying the ECB exceeded its powers. This is big news, as Germany is the workhorse of the European Union collective economy. The Euro currency fell on the news, as it once again raises questions about the long-term sustainability of the European Union during this time of “de-globalization” leanings by some countries that include the U.S. and U.K. It could be that the hard-working Germans are finally getting fed up with other EU nations and their economic woes.

The important outside markets see Nymex crude oil prices sharply higher and trading around $22.50 a barrel in June futures. The U.S. dollar index is higher today after the greenback bulls faded last week.

U.S. economic reports out Tuesday include the weekly Goldman Sachs and Johnson Redbook retail sales reports, the international trade report, the U.S. services PMI, the ISM non-manufacturing report on business, and the IBD/TIPP economic optimism index.

–Jim
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Monday, May 4–Jim Wyckoff’s Morning Markets Report

Global stock markets were mostly down in overnight trading. U.S. stock indexes are pointed toward lower openings when the New York day session begins. On the front burner of the market place this week remains the Covid-19 pandemic and its destructive impact on the global economy. Purchasing managers’ surveys from around the world, released Friday and Monday, show unprecedented contraction in that important sector of economies during the month of April.

Said one market analyst in a morning email dispatch Monday: “The next two to three weeks are going to be extremely critical on two fronts: health and the economy. No one knows with a high degree of certainty how the Covid-19 curve will play out. While we all hope it slopes downward. There is no guarantee it will, especially with lockdown periods coming to an end. If cases begin to grow and the curve steepens, the chances are high of returning to another phase of complete shutdown. That would put economies on freeze again and the only direction for stocks to head then is down. The other risk factor is a new trade war between the U.S. and China, which is the last thing investors want to hear at this stage.”

The U.S. is ratcheting up its rhetoric blaming China for delaying reporting of the coronavirus outbreak in its early stages, and even implying the virus could have come from a Wuhan laboratory. This escalation in U.S.-China tensions could thwart the partial trade agreement the world’s two largest economies reached in January. President Trump has threatened new trade tariffs and other sanctions could be levied against China. Gold prices are rallying Monday, likely on concerns about future U.S.-China relations.

The European Central Bank on Monday forecast sharply lower economic growth and inflation for the bloc in 2020. The ECB sees Euro zone GDP down 5.5% and inflation at 0.4% in 2020. The ECB in January forecast inflation at 1.2% in 2020.

The important outside markets see Nymex crude oil prices lower lower and trading around $18.35 a barrel in June futures. The U.S. dollar index is higher today after the greenback bulls faded badly last week. The 10-year U.S. Treasury note yield is trading around 0.6% this morning.

U.S. economic reports out Monday include the ISM New York report on business, manufacturers’ shipments and inventories and the global manufacturing PMI.

–Jim
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