Saturday, December 22, 2018

Fed Chair Spooks Already Fragile Markets Fearing a Slowdown

TradeTheNews.com Weekly Market Update: Fed Chair Spooks Already Fragile Markets Fearing a Slowdown
Fri, 21 Dec 2018 16:06 PM EST

The quarter and year drew mercifully towards a close in what was another bruising week for investors. Concerns surrounding global growth heading into 2019 lingered amid heightened speculation on just how much the US Fed would incorporate those worries into their rate policy statement on Wednesday. Another string of weak economic readings, particularly in core Europe and China, along with some deceleration evident in the US economy only exacerbated that trepidation and manifested itself in downward moves for global equities and commodities, most notably continued pressure on crude oil prices.

Wednesday’s FOMC statement failed to meet mounting dovish expectations and Chairman Powell’s press conference delivery further underwhelmed those same investors. The Chairman emphasized the Fed would remain data dependent into 2019 and at this point most FOMC members now forecast two hikes next year rather than three given the strength of the US economy. Dovish tweaks to the statement language and the press conference itself did nothing to change sentiment and investors resumed selling stocks. US indices plumbed through the February lows, the NASDAQ officially fell into bear market territory, and the Transports careened lower, further worrying Dow theorists. Dysfunction in Washington DC didn’t help either as the President and Congress veered towards a government shutdown as the two sides fought over funding for the Mexico border wall. Gold prices rose above the 200 day moving average and the VIX jumped above 30 for the first time since February. The S&P500 had its worst week since 2011, falling 7.1% and the Russell 2000 was down 8.2%. The DJIA and Nasdaq had their worst week since 2008, plunging 6.9% and 8.4%, respectively.

In corporate news this week, Nike jumped after reporting results, noting strong online growth and rising women’s sportswear apparel sales. FedEx crystalized concerns about international growth and shares came under pressure after slashing its forecast, saying its international business had weakened as global trade decelerates. Pfizer and Glaxo announced they would combine their consumer businesses, creating an over-the-counter-drug monolith. Qualcomm won a ruling against Apple in a Munich Court that would ban the sale of some iPhone models in Germany — this coming after a judge had granted preliminary injunctions against Apple in China last week. Jack in the Box announced it was exploring strategic alternatives and has spoken with potential buyers, though no timelines for a deal are known. The Malaysian government lodged criminal charges against Goldman Sachs and said it would seek $7.5B in damages from the American bank over allegedly fraudulent dealings with the state development fund 1MDB.


MONDAY 12/17
*(US) DEC EMPIRE MANUFACTURING: 10.9 V 20.0E (lowest since May 2017)
*(US) DEC NAHB HOUSING MARKET INDEX: 56 V 60E
WTI crude futures settle at $49.88/bbl, settling below $50 for the first time since Oct 2017
ORCL Reports Q2 $0.80 v $0.78e, Rev $9.56B v $9.53Be
JNJ Announces $5B share repurchase program (1% of market cap); affirms FY18 $8.13-8.18 v $8.16e, Rev $81-81.4B v $81.3Be

TUESDAY 12/18
*(DE) GERMANY DEC IFO BUSINESS CLIMATE: 101.0 V 101.7E; CURRENT ASSESSMENT: 104.7 V 105.0E
(SA) Saudi Arabia 2019 budget: Forecasts 2019 GDP growth at 2.6% vs. 2.3% this year - financial press
*(US) NOV HOUSING STARTS: 1.26M V 1.228ME; BUILDING PERMITS: 1.33M V 1.260ME
MU Reports Q1 $2.97 v $2.93e, Rev $7.91B v $8.03Be
FDX Reports Q2 $4.03 v $4.06e, Rev $17.8B v $17.7Be; initiates voluntary employee buyout program

WEDNESDAY 12/19
GSK.UK Reached agreement with Pfizer Inc to combine their consumer health businesses into a new world-leading JV (Pfizer to receive 32% equity stake of JV)
(TH) THAILAND CENTRAL BANK (BOT) RAISES BENCHMARK INTEREST RATE BY 25BPS TO 1.75%; AS EXPECTED
(SA) Saudi Oil Min Al-Falih: Current oil price not reflected in fundamentals; will achieve oil market balance in 2019
(US) DOE CRUDE: -0.5M V -3ME; GASOLINE: +1.8M V +1ME; DISTILLATE: -4.2M V +0.5ME
(US) Association of American Railroads weekly rail traffic report for week ending Dec 15th: 569K, +3.9% y/y
*(US) FOMC RAISES TARGET RANGE BY 25BPS TO 2.25-2.50%; AS EXPECTED
*(US) FOMC SUMMARY OF ECONOMIC PROJECTIONS (DEC) FOR SEPT MEETING (V. SEPT)
*(US) Fed Chair Powell: inflation has come in a touch lower than we expected, gives FOMC the ability to be patient going forward - Q&A FOMC press conf

THURSDAY 12/20
(ID) INDONESIA CENTRAL BANK (BI) LEAVES 7-DAY REVERSE REPO UNCHANGED AT 6.00%; AS EXPECTED
(SE) SWEDEN CENTRAL BANK (RIKSBANK) RAISES REPO RATE BY 25BPS TO -0.25%; NOT EXPECTED
(UK) NOV RETAIL SALES (EX AUTO/FUEL) M/M: 1.2% V 0.2%E; Y/Y: 3.8% V 2.3%E
(UK) BANK OF ENGLAND (BOE) DEC MINUTES: Voted 9-0 to leave Interest rates unchanged
QCOM Wins injunction against Apple in Munich Court; Can ban the sale of some iPhone models in Germany - press
(US) DEC PHILADELPHIA FED BUSINESS OUTLOOK: 9.4 V 15.0E
(CN) Reportedly US and over a dozen allies plan to openly accuse China about its economic espionage activities - Washington Post
(SA) Saudi Arabia reportedly to cut production more than initially expected as part of OPEC agreement; to cut 3% of collective output from 2.5% initially announced - press
Nasdaq Composite now 20% off record high set in Aug, entering a bear market
NKE Reports Q2 $0.52 v $0.45e, Rev $9.37B v $9.16Be
(US) Pres Trump in tweet announces Defense Sec Mattis will be retiring at end of Feb; replacement to be named 'shortly'

FRIDAY 12/21
(CN) China State Council guideline on implementing Central Economic Work Conference Report: Reiterates to enact a proactive fiscal policy; modifies its monetary policy stance to neutral for 2019 - financial press
(UK) Q3 FINAL GDP Q/Q: 0.6% V 0.6%E; Y/Y: 1.5% V 1.5%E
(US) US President Trump Tweets: Senator Mitch McConnell should fight for the Wall and Border Security as hard as he fought for anything. He will need Democrat votes, but as shown in the House, good things happen. If enough Dems don’t vote, it will be a Democrat Shutdown! House Republicans were great yesterday!
*(US) Q3 FINAL GDP ANNUALIZED Q/Q: 3.4% V 3.5%E; PERSONAL CONSUMPTION: 3.5% V 3.6%E
*(US) NOV PRELIMINARY DURABLE GOODS ORDERS: 0.8% V 1.6%E; DURABLES EX-TRANSPORTATION: -0.3% V +0.3%E
*(US) NOV PERSONAL INCOME: 0.2% V 0.3%E; PERSONAL SPENDING: 0.4% V 0.3%E
(US) Fed's Williams (moderate, voter): the important message is that the economy is very strong; listening to markets closely - CNBC interview
(US) Pres Trump: chances are pretty good there will be a shutdown; totally prepared for a very long shutdown