Earlier this week, Caterpillar reported earnings, and as we expected, the result was somewhat bearish - CAT took a plunge, taking the stock market along with it. However, yesterday, Apple jumped in earnings, perhaps offering a sigh of relief to the overall tech sector. Today’s earnings calendar features several notable names, including Alibaba, Boeing, AT&T, McDonald's, SiriusXM Radio, General Dynamics and Hess.
Overnight in Asia, equity markets were split with 6 of 12 primary markets closing lower including the Nikkei and Shanghai markets. In Europe, 10 of 13 primary stock markets are currently higher including the FTSE and CAC, but the DAX is lower. At the time of this writing, BABA earnings have been released, showing mixed results. In addition, this morning the MBA Mortgage Applications numbers released were lower than expected, suggesting that the Fed raising interest rates has at least a modest effect on housing.
Speaking of the Fed, today marks the conclusion of the two-day January meeting. The CME’s Fed Fund Rate Futures report strongly suggests that the Fed will not raise rates today and expresses doubts that rates will be raised at all this year.
What to watch for today:
According to Morgan Stanley, “Here, the balance sheet will be of utmost importance. The Wall Street Journal reported that Fed officials may be discussing an earlier-than-expected end to the balance sheet normalization, which we ultimately expect to occur. This could take place as early as this week's FOMC meeting. Markets are unprepared for this change and it could have significant FX implications, in our view.”
In addition, based on analysis from Bank of America/Merryl Lynch, the May and September Fed Fund Rate Futures will be worth watching today for clues in response to the Powell press conference at 2:30 EST.
Lastly, Moody’s rating agency released a report yesterday with a bearish tone regarding the Chinese economy. This followed China experiencing its lowest GDP growth since 1990. Moody’s also gave a stern warning regarding another potential U.S. government shutdown which could occur in mid-February, saying, “If another shutdown occurs, there could be a more severe impact on the U.S. economy than during the recently ended shutdown.”
While the U.S. stock markets seem quiet now, negotiations that are still underway with China add to the potential of a volatile market along with the looming possibility of the second government shutdown. Tomorrow, we will update our technical view of the S&P 500 heading into the close of January.
Today’s Economic Calendar:
- MBA Mortgage Applications 7:00 AM ET
- ADP Employment Report 8:15 AM ET
- GDP 8:30 AM ET
- 3-Yr Note Announcement 8:30 AM ET
- 10-Yr Note Announcement 8:30 AM ET
- 30-Yr Bond Announcement 8:30 AM ET
- Treasury Refunding Announcement 8:30 AM ET
- Pending Home Sales Index 10:00 AM ET
- State Street Investor Confidence Index 10:00 AM ET
- EIA Petroleum Status Report 10:30 AM ET
- FOMC Meeting Announcement 2:00 PM ET
- Fed Chair Press Conference 2:30 PM ET