Daily Morning Report

Thursday, February 6–Jim Wyckoff’s Morning Markets Report

Asian and European shares were higher overnight as traders and investors at least for now have pushed aside the coronavirus outbreak in China. U.S. stock indexes are pointed toward higher openings when the New York day session begins and are at or near their record highs.

History proves traders and markets are fickle. The coronavirus outbreak continues to spread, with over 500 reported dead in China and around 30,000 afflicted in the country. China’s domestic commerce is being impacted, as is global commerce. The big drop in Tesla’s stock price Wednesday is blamed at least in part on the coronavirus outbreak impacting Tesla’s business in China. Many global companies doing business with China (Remember that China is the world’s second-largest economy.) have been negatively impacted. It will not be surprising to this longtime market watcher to see the coronavirus outbreak back on the front burner of the marketplace next week, or sooner. Such a scenario would be bullish for gold, U.S. Treasuries and the U.S. dollar, and bearish for global equities.

Reports overnight said China has moved to lower tariffs on $75 billion in U.S. imports, as part of its recent partial trade agreement with the U.S. Chinese officials also said the plan to cut domestic value-added taxes. The Chinese Finance Ministry said it hopes to eventually eliminate all of the increased trade tariffs on U.S. goods that were implemented during the trade war of the past two years.

The global marketplace showed little reaction to the acquittal of President Trump in his impeachment trial in the Senate. The outcome was not surprising at all.

The key outside markets today see crude oil prices higher and trading around $51.00 a barrel. Meantime, the U.S. dollar index is near steady after hitting a nearly four-month high overnight.

Traders are also awaiting the U.S. employment situation report from the Labor Department that is out Friday morning. The key non-farm payrolls figure is forecast to come in at up around 160,000. However, a strong ADP national employment report reading on Wednesday has some thinking Friday’s jobs report will be stronger than forecast.

U.S. economic data due for release Thursday includes the weekly jobless claims report, the Challenger job-cuts report, preliminary productivity and costs, and the monthly chain store sales index.

–Jim

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Global stock markets are in full rally mode at mid-week as traders and investors have pushed aside earlier concerns about the coronavirus outbreak in China significantly denting world economic growth. U.S. stock indexes are at or near their record highs. As is many times the case, an unexpected shock to the marketplace is initially deemed by traders as being close to a worst-case scenario and market prices react accordingly. Then, such turns out not to be the case, as is apparently so with the coronavirus outbreak. The U.S. stock index bulls are right back in business and the e-mini S&P bulls are looking for a fresh leg up in prices in the near term—if they can push prices above chart resistance at the present contract high. On a side note, U.S. stock market traders this week are buzzing about the stock price of Tesla, which has soared around 50% since the beginning of January. Some pessimistic stock market watchers are calling Tesla’s move a euphoria that can signal the top in a stock market rally. Stay tuned!–Jim

Wednesday, February 5–Jim Wyckoff’s Morning Markets Report

Global stock markets are in full rally mode at mid-week, as Asian and European shares pushed higher as traders and investors have pushed aside earlier concerns about the coronavirus outbreak in China significantly denting world economic growth. The marketplace is reacting to the rate of spread of the illnesses slowing down, even though total numbers of those afflicted is rising. U.S. stock indexes are pointed toward sharply higher openings when the New York day session begins and are at or near their record highs. As is many times the case, an unexpected shock to the marketplace is initially deemed by traders as being close to a worst-case scenario and market prices react accordingly. Then, such turns out not to be the case, as is apparently so with the coronavirus outbreak.

The marketplace this week sees it as especially encouraging that China’s central bank stepped in an provided significant liquidity to China’s financial system, specifically by reducing short-term lending rates with the influx of funding. The effort was in response to the coronavirus outbreak’s negative impact on China’s businesses.

U.S. stock market traders this week are buzzing about the stock price of Tesla, which has soared around 50% since the beginning of January. Some pessimistic stock market watchers are calling Tesla’s move a euphoria that can signal the top in a stock market rally.

The key outside markets today see crude oil prices higher and trading around $50.75 a barrel. Meantime, the U.S. dollar index is firmer.

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

–Jim

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Tuesday, February 4–Jim Wyckoff’s Morning Markets Report

Asian stock markets rebounded overnight after Monday’s sell-off. European stock markets were also higher and U.S. stock indexes are pointed toward sharply higher openings when the New York day session begins. So far this week trader and investor risk appetites are keener and the marketplace appears to be moving beyond the coronavirus outbreak that continues to spread. Latest counts show over 20,000 Chinese citizens afflicted with over 425 dead, with air travel to China being significantly curtailed and global and domestic business there disrupted.

China’s central bank this week has injected large amounts of money into its financial system to help out domestic businesses that are being hurt by the coronavirus outbreak. This move has helped to assuage Asian investors.

In other overnight news, the Euro zone producer price index in December was reported unchanged from November and down 0.7%, year-on-year. Those numbers were in line with market expectations.

The markets took in stride the highly anticipated Iowa presidential caucuses that have yet to declare a Democratic winner, due to technological issues with the vote count.

The key outside markets today see crude oil prices firmer and trading around $50.75 a barrel. Meantime, the U.S. dollar index is slightly higher on some follow-through strength after good gains posted Monday.

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 manufacturers’ shipments and inventories.

–Jim

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The crude oil market has been pounded lower by the coronavirus outbreak. Has the outbreak nearly run its course, from an overall markets-impact perspective? While it’s too early to tell for sure, it appears the oil market has, or is close to, bottoming out. See on the daily bar chart for March Nymex crude oil futures the steep price downdraft that is now overdone on the downside. The Relative Strength Index at the bottom of the chart shows the lowest (oversold) reading since last summer, at which time oil prices also put in a near-term low. And if oil prices have indeed bottomed out, other raw commodity markets that have been hit by the coronavirus outbreak may also be doing the same. Stay tuned!–Jim

Monday, February 3–Jim Wyckoff’s Morning Markets Report

Asian stock markets were lower overnight, led by sharp losses in mainland China stocks as those markets reopened for the first time in over a week, due to the Lunar New Year holiday last week. The Shanghai stock index lost nearly 8% on the day—the biggest drop in 4.5 years. European stock markets were mostly up and U.S. stock indexes are pointed toward higher openings when the New York day session begins.

The coronavirus outbreak in China that has spread to other parts of the world remains in focus early this week. Latest counts show 17,500 Chinese citizens afflicted and over 350 dead, with air travel to China being significantly curtailed and global and domestic business there disrupted. It’s been an up-and-down daily trading affair for markets the past two weeks, regarding the coronavirus outbreak. Judging from the European and U.S. stock markets’ gains Monday, at least on this day the present situation appears to be factored into market prices.

In other Asian news, Hong Kong’s economy contracted by 1.2% in 2019, the first negative growth rate in over 10 years. Civil unrest and a global trade slowdown hurt that city’s economy.

In the Euro zone, the January manufacturing purchasing managers’ index (PMI) came in at 47.9, which was slightly better than expectations, but still a reading below 50.0 that suggests a contraction in the sector.

The U.K. has officially exited from the European Union as of last Friday. The British pound saw some pressure as the U.K. and Euro zone officials begin transition talks.

The key outside markets today see crude oil prices modestly up and trading around $51.80 a barrel. Reports overnight said Saudi Arabia is mulling a “drastic” temporary oil-production cut due to the coronavirus outbreak. OPEC ministerial officials may meet this week to discuss the matter. Meantime, the U.S. dollar index is higher on a corrective bounce from solid losses seen last Friday.

U.S. economic data due for release Monday includes the U.S. manufacturing purchasing managers’ index (PMI), the ISM manufacturing report on business, construction spending, domestic auto industry sales and the global manufacturing PMI.

–Jim

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