Daily Morning Report

Thursday, January 30–Jim Wyckoff’s Morning Markets Report

Asian and European stock markets were mostly lower overnight. Mainland China markets remain closed for the Lunar New Year holiday. U.S. stock indexes are pointed toward solidly lower openings when the New York day session begins.

After Tuesday and Wednesday shrugging off the coronavirus outbreak that is still not at all contained and apparently escalating, the marketplace on Thursday is on edge and risk averse regarding the matter. The latest reports say over 7,700 Chinese are afflicted and over 170 have died. Global businesses located in China are closing their doors there and worldwide flights to China are being cancelled. The coronavirus outbreak is now being deemed more expansive than the SARS outbreak that occurred in Asia over 15 years ago.

U.S. traders are wondering if the seriousness of the coronavirus situation in China will give China a legal “out” on its recent signed trade-deal pledge to buy significantly more U.S. agricultural products in the next couple years.

At his press conference after the FOMC meeting conclusion Wednesday afternoon, Fed Chairman Jerome Powell said the coronavirus outbreak could have consequences for global economic growth and said the Fed is monitoring the situation closely. That comment along with other less upbeat remarks on the U.S. economy from Powell, including saying U.S. business investment and U.S. exports are weak, boosted the gold and Treasury markets and pushed U.S. stock indexes off their daily highs. Crude oil prices also sunk at the same time. There is now talk in the marketplace that the Fed will be forced to lower U.S. interest rates later this year.

The FOMC at this week’s meeting held U.S. interest rates steady during its first policy meeting of the year and of the new decade, as expected. The benchmark federal funds rate remains in a range between 1.5% to 1.75%, where it has been for the past few months. The FOMC statement said the U.S. economy and labor market are growing moderately amid inflation that is non-problematic. Annual U.S. inflation remains below the 2% level that the Fed would like to see.

The key outside markets today see crude oil prices lower and trading around $52.25 a barrel. Meantime, the U.S. dollar index is slightly higher and is near this week’s two-month high.

U.S. economic data due for release Thursday includes the weekly jobless claims report, the advance estimate of fourth-quarter GDP, which is expected to come in at up 2.1% on an annual basis.

–Jim

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Wednesday, January 29–Jim Wyckoff’s Morning Markets Report

Asian and European stock markets were mostly firmer overnight. Mainland China markets remain closed for the Lunar New Year holiday. Hong Kong’s stock market did open today, following the holiday, and closed lower. U.S. stock indexes are pointed toward firmer openings when the New York day session begins, following solid gains Tuesday.

While the coronavirus outbreak is still not at all contained, the marketplace at this point is deeming the event as fully factored into market prices. That perception could change. Traders and investors are turning their attention to other matters.

This week’s meeting of the Federal Reserve’s Open Market Committee (FOMC) that began Tuesday morning and ends Wednesday afternoon with a statement is expected to see no change in U.S. monetary policy. Fed watchers will be interested to see if the FOMC statement or Fed Chairman Powell at his press conference will address very short-term credit funding for banks. That rate in past months became unstable, causing overnight lending rates to briefly spike.

The key outside markets today see crude oil prices higher and trading around $54.00 a barrel. Meantime, the U.S. dollar index is slightly higher and is near this week’s two-month high.

Other U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, advance economic indicators, pending home sales, and the weekly DOE liquid energy stocks report.

–Jim

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Global stock markets have been hit hard by the coronavirus outbreak. Has the outbreak nearly run its course, from a markets-impact perspective? It’s too early to tell. However, see the support and resistance lines on the daily chart for the S&P e-mini futures. A push above the resistance line (the top of Monday’s downside price gap) would suggest markets have factored in the outbreak’s global economic impact. A drop below Monday’s low would suggest the outbreak is accelerating and that the global economic impact remains in question. Stay tuned!–Jim

Tuesday, January 28–Jim Wyckoff’s Morning Markets Report

Asian and European stock markets were mixed to weaker overnight. U.S. stock indexes are pointed toward firmer openings when the New York day session begins, following solid losses Monday. There is still some risk aversion in the global marketplace as the coronavirus outbreak continues to spread in China, with over 100 dead and over 4,500 infected in that country, according to the latest reports. Other countries are also seeing its citizens contract the virus.

Veteran traders know that shock market events like the coronavirus outbreak tend to see the markets factor in worst-case scenarios in the early stages of the affair. Price action in several markets the past few days suggests this event will be factored into most market prices sooner rather than later—and may be already factored in altogether. Reason: Most shock events to markets do not have the worst-case scenario play out. Once traders realize the shock event is not as bad (for markets) as they first thought, the markets’ prices begin to move back toward where they were before the shock occurred. Of course, right now it’s still too early to tell if the markets have fully factored in the coronavirus and its impact on the global economy. By the end of this week, traders and investors should have a better idea whether the outbreak has mostly run its course, from a markets-impact perspective.

The coronavirus outbreak has overshadowed the meeting of the Federal Reserve’s Open Market Committee (FOMC) that begins Tuesday morning and ends Wednesday afternoon with a statement. No change in U.S. monetary policy is expected at this week’s meeting.

The key outside markets today see crude oil prices lower and trading around $52.75 a barrel. Meantime, the U.S. dollar index is slightly higher and hit a two-month high overnight.

U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, durable goods orders, the S&P/Core-Logic home price indexes, the Richmond Fed business survey, and the consumer confidence index.

–Jim

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Monday, January 27–Jim Wyckoff’s Morning Markets Report

Asian and European stock markets were solidly down overnight. U.S. stock indexes are pointed toward sharply lower openings when the New York day session begins. Over the weekend the coronavirus illness that apparently originated in China has rapidly spread, killing at least 80 of its citizens, with nearly 8,500 cases now reported in China. Several Chinese cities are under quarantine. Several cases are now reported in the U.S. as doctors are now saying the illness is more easily contractable. There are increasing worries the outbreak could hurt world economic growth. Raw commodity prices, including crude oil, are slumping. Safe-haven gold prices are higher Monday. This week is the Chinese Lunar New Year holiday—the most important holiday in China. Chinese authorities have extended the week-long holiday by two days due to the coronavirus outbreak.

Reports of a Boeing jetliner crashing in Afghanistan are further unsettling the marketplace. Details on the purported crash are sketchy with Boeing officials currently denying one of their planes has crashed.

The key outside markets today see crude oil prices sharply lower, at a 3.5-month low, and trading around $52.35 a barrel. Meantime, the U.S. dollar index is slightly higher and hit a seven-week high overnight, as the USDX is trending up.

U.S. economic data due for release Monday include new residential sales and the Texas manufacturing outlook survey.

–Jim

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The Nymex crude oil futures market has seen prices careen lower the past couple weeks, losing around $10 a barrel from the January spike high. Do not be surprised if the early-January high of $65.40 is the high for the year in crude oil. And don’t be surprised to see crude oil trade the rest of the year in a choppy range between $50.00 and $60.00. Stay tuned!–Jim