Daily Morning Report

Thursday, March 5–Jim Wyckoff’s Morning Markets Report

Global stock markets were mostly firmer overnight, following the big gains in the U.S. stock market on Wednesday. However, U.S. stock indexes are pointed toward sharply lower openings when the New York day session begins. Look for another active day in U.S. markets.

The U.S. stock market euphoria over Democratic U.S. presidential candidate Joe Biden’s solid performance at the “Super Tuesday” primaries has quickly faded Thursday as focus again turns to the uncertainty regarding the Covid-19, or coronavirus, outbreak that continues to spread worldwide and especially outside of China. This week, major corporations have suspended air travel for their employees and cancelled some conventions and conferences. There are reports of some U.S. stores running out of basic consumer goods. On the economic front several major central banks this week have eased their monetary policies to combat the negative economic consequences of the Covid-19 outbreak. More central banks are likely to take action soon, including the European Central Bank.

Recent history shows that some days traders and investors are less concerned about the coronavirus outbreak, and then the next day they are more concerned. Look for continued vacillating markets as the Covid-19 situation plays out. It’s now looking more likely that the event will not be a short-term situation, but instead one that will play out over several months, or longer.

The benchmark U.S. 10-year Treasury note yield earlier this week fell below 1.0% to a record low, and remains below that level. This has prompted keen concern among long-term market watchers that a U.S. and /or global economic recession looms, including the prospect of debilitating consumer and commercial price deflation.

All of the above are bearish for stocks and most commodities, and bullish for safe-haven assets like gold, the U.S. dollar and U.S. Treasuries. An examination of a chart of the Goldman Sachs Commodity index paints a dour picture for the prospects for the raw commodity sector.

The key outside markets today see Nymex crude oil prices firmer and trading around $47.00 a barrel in early trading. Reports said the OPEC oil cartel is close to agreement on a collective oil-production cut to try to stem the slide in oil prices. The U.S. dollar index is trading down today.

U.S. economic data due for release Thursday includes the weekly jobless claims report, the Challenger job-cuts report, revised productivity and costs, manufacturers’ shipments and inventories, and monthly retail chain store sales.

–Jim

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Wednesday, March 4–Jim Wyckoff’s Morning Markets Report

Global stock markets were mixed to firmer overnight, following the big sell off in the U.S. stock market Tuesday. U.S. stock indexes are pointed toward solidly higher openings when the New York day session begins. Look for another very active day in U.S. markets.

The global marketplace on Wednesday is still digesting the surprise 0.5% interest rate cut delivered by the U.S. Federal Reserve on Tuesday morning. That move, at least initially, roiled the U.S. stock market and, importantly, sent the yield on the benchmark 10-year U.S. Treasury note plummeting to a record low, below 1.0%. Wednesday morning the yield on the 10-year note was around 9.85%. Veteran market watchers are taking a very dim view of the drop in U.S. Treasury yields, as it is a signal of impending U.S. and/or global economic recession. It’s also suggestive of potential consumer and commercial price deflation. Deflation is the archenemy of many markets, including raw commodities.

Part of the rebound in the U.S. stock market overnight is likely due to former U.S. Vice President Joe Biden’s strong performance in the “Super Tuesday” Democratic presidential primaries. Biden’s solid showing dented socialist-leaning candidate Senator Bernie Sanders’ momentum. Most agree the U.S. stock market would not like a Sanders presidency.

Meantime, the Covid-19, or coronavirus, outbreak continues to spread worldwide and especially outside of China. There are anecdotal reports of consumer hoarding of basic goods in the U.S. The outbreak is being perceived by analysts and economists as seriously denting world economic growth, at least for a short period of time, or maybe not so short. More central banks are expected to soon announce they are easing their monetary policies to help thwart the negative economic impacts of the outbreak, following the U.S. and Australian moves earlier this week.

In overnight news, China’s private Caixin purchasing managers index (PMI) February showed a manufacturing reading of 40.3 versus 51.1 in January and 46.0 forecast. The Caixin services PMI was 26.5 versus 51.8 in January and 48.0 forecast. The Caixin composite PMI was 27.5 compared to 51.9 in January. Hong Kong’s Markit PMI came in at 33.1 in February, down from 46.8 in January and marked the steepest drop since at least 1998, when the survey began. The Euro zone February composite PMI was reported at a better-than-expected 52.6 versus 51.3 in January. A reading below 50.0 suggests contraction in the sector.

The key outside markets today see Nymex crude oil prices higher and trading around $47.75 a barrel in early trading. The U.S. dollar index is trading up today following recent strong selling pressure.

U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the ADP national employment report, the U.S. services PMI, the ISM non-manufacturing report on business, the global services PMI and the weekly DOE liquid energy stocks report.

–Jim

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Tuesday, March 3–Jim Wyckoff’s Morning Markets Report

Global stock markets were mixed to firmer overnight, following the strong rebound in the U.S. stock market Monday. While the Covid-19, or coronavirus, outbreak appears to have slowed its rate of spread in China, the illness rate is growing outside of China, including South Korea, Italy and other countries. The marketplace is becoming more focused on what the major economies of the world are doing to prevent economic damage. Australia’s central bank cut its main interest rate overnight, while the Group of Seven finance ministers are holding a conference call today to discuss what to do about the outbreak’s impact on world economies. A statement from the G-7 will likely come following the phone call. President Trump again brow-beat the Federal Reserve in a tweet overnight, urging the U.S. central bank to lower interest rates. Many analysts are now saying the outbreak’s impact on global economies will be serious but the duration of the impact will be short. U.S. stock indexes are pointed toward firmer openings when the New York day session begins.

Many are wondering if Monday’s big gains in the U.S. stock indexes point to market bottoms being in place. Maybe. A more solid clue that near-term market bottoms are in place in the stock indexes (or any other market that has been beaten down the past few weeks) would be two very strong up-days in a row, or a bullish weekly high close on a Friday. Also, it’s very likely that higher market volatility will resurface, and probably soon. The Covid-19 outbreak has moved on and off the front burner of the marketplace many times over the past couple months, and such will likely continue for the near term.

The yield on the benchmark U.S. Treasury 10-year note rose to 1.150% Tuesday after hitting a record low of 1.031% Monday. Gold and silver prices are higher early Tuesday, following good gains Monday.

The key outside markets today see Nymex crude oil prices higher and trading around $48.35 a barrel in early trading. The U.S. dollar index is trading up today following recent strong selling pressure.

U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, the ISM New York report on business, the IBD/TIPP economic optimism index, and domestic auto sales.

–Jim

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Many are wondering if Monday’s big gains in the U.S. stock indexes point to market bottoms being in place. Maybe. A more solid clue that near-term market bottoms are in place in the stock indexes (or any other market that has been beaten down the past few weeks) would be two very strong up-days in a row, or a bullish weekly high close on a Friday. Also, it’s very likely that higher market volatility will resurface, and probably soon. The Covid-19 outbreak has moved on and off the front burner of the marketplace many times over the past couple months, and such will likely continue for the near term.

There is an old saying in trading markets that when times get really dire and anxiety is high, you don’t sell what you want, you sell what you can. Such is likely part of the reason safe-haven gold has seen some downside price pressure this week amid the meltdown in global stock markets. Also, remember that gold’s price is driven by consumer demand. China is a leading gold consumer, and the coronavirus outbreak’s negative impact on the Chinese economy is most certainly going to crimp Chinese citizens’ purchases of gold. Still, the gold bulls remain in firm near-term technical control amid a price uptrend in place on the daily bar chart and prices are not that far below the recent seven-year high.–Jim

Friday, February 28–Jim Wyckoff’s Morning Markets Report

Global stock markets were solidly lower again Friday, the last trading day of the month, as the coronavirus outbreak continues to grip the global marketplace and is causing keen trader and investor anxiety. Here are just a few of the economic ramifications of the coronavirus outbreak, according to reports: China ports are seeing container ship calls down 30% from last year. Oil shipments to China from the Middle East are down 88% from last year’s February deliveries. The International Energy Agency forecasts oil demand to fall by 435,000 barrels a day in the first quarter–the first contraction in 10 years. U.S. stock indexes are pointed toward sharply lower openings and at multi-month lows when the New York day session begins.

Do not be surprised if, as soon as today, the major central banks of the world issue a joint statement declaring they stand ready to stimulate economies by easing their monetary policies, if the coronavirus scare continues to roil the markets. How the marketplace would interpret such a declaration is unclear. It could make market participants even more panicky.

The yield on the benchmark U.S. Treasury 10-year note has dropped to a record low of
1.17%. The 10-year German bond (bund) yield hit a five-month low of -0.616%. What the U.S. Treasury market is telling traders and investors this week is that serious economic damage will be inflicted by the coronavirus—both at home and abroad, including the possibility of a U.S. recession on the horizon. Europe’s economy stands to be hurt even worse by the outbreak.

Nymex crude oil prices solidly lower, at a 14-month low, and trading around $45.50 a barrel in early trading Friday. The U.S. dollar index is trading solidly down again today, as currency traders focus on the coronavirus prompting the Federal Reserve to lower interest rates as soon as March. President Donald Trump also bashed the Fed again this week and implied he wants a weaker greenback. The U.S. dollar, like, gold is a safe-haven asset, but both assets are feeling pressure late this week on the concerns associated with slowing economic growth. There’s an old saying that during an extremely anxious marketplace, traders don’t’ sell what they want, they sell what they can. Such is likely the case for gold this week.

U.S. economic data due for release Friday includes the advance economic indicators report, personal income and outlays, the Chicago ISM business survey, and the University of Michigan consumer sentiment survey.

–Jim

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