[Chart courtesy of MarketWatch.com]
- Moving the markets
After the “mini trade” deal faded yesterday, today’s news brought into question whether anything was accomplished. Chinese officials essentially confirmed that the progress on the “phase 1” deal may have been a sham.
Beijing will make good on the $50 billion of annual agricultural purchases, but only if Washington agrees to remove all the trade war tariffs. On the other hand, Trump has made it clear that the tariffs must remain in place until a deal has been implemented with the Chinese proving that they are abiding by the rules.
While the futures markets slumped on the news, this was quickly forgotten as the computer algos jumped on the earnings bandwagon with traders cheering a bunch of ‘not really’ upbeat corporate earnings reports thereby pushing the “phase 1” trade deal on the back burner. Also throwing in a temporary assist to the bulls were news of an alleged breakthrough of the always changing Brexit negotiations.
In the meantime, the Fed’s overnight Repo operations to provide liquidity to banks surged to nearly $90 billion, which means the initial problem I posted about is anything but transitory and will eventually affect stock markets. The question in my mind is not “if” but “when.”
Despite best efforts, the S&P 500 fell short of reclaiming its psychologically important 3,000 level. It may break through it, but it will then face stiff overhead resistance at the high end of the trading range at around 3,022. If we get there, the index may very well turn around again to close its October break-away gap (blue) before possibly starting another rally attempt.
ZH summed up the rally-on-no-news like this:
China (negatively) snubbed Trump’s trade deal overnight, demanding tariffs removed before Ag buy.
China (negatively) saw CPI surge, somewhat reducing option of brad-based stimulus
Brexit (positively) was reported as being closer to becoming a deal.
Fed Repo bailout (negatively) surged to its highest since September.
Tariffs (positively) did not get implemented today (which is, of course, old news).
Earnings (negatively) signaled ugliness persists for GS and WFC.
Earnings (positively) beat (with UNH, JPM and JNJ helping support The Dow).
IMF (negatively) downgraded global growth to weakest since Lehman.(more…)