This week has gotten off to a bit of a slower start in the U.S. due to Monday’s holiday closing down financial markets. From Sunday night’s equity index open through this morning's trade, the U.S. stock indices have been trading in a quiet range. The S&P 500 Volatility Index (VIX) has now converted prior support into resistance, anticipating a continued slow down in price action.
Today’s calendar includes earnings reports from 133 corporations. The most well-known of these businesses are CVS, GoDaddy, Jack In The Box, and the Cheesecake Factory; however, none of these should be particularly noteworthy in the broader markets.
In global trading, overnight, 11 of 12 Asian stock markets closed higher including the big three (Nikkei, Hang Seng, Shanghai), and in Europe, 10 of 13 stock markets are currently trading higher including its big three (DAX, CAC, FTSE).
Today’s economic calendar in the U.S. includes a couple of nuggets of worthwhile information, although whether these will be market-moving remains to be seen. The first is mortgage applications which will be reported well before the regular trading hours open. Since housing numbers have been trickling lower, this number could come strongly into view in subsequent months.
However, the most important item on today’s calendar will be the FOMC minutes release from the Fed's January meeting. The Fed has seemed to indicate a more dovish stance in recent months; however, its exact intentions are not clear. Currently, the CME’s Fed Funds Rate Futures suggests that no further rate hikes will occur this year, and in fact, it predicts a greater likelihood of a rate decrease than increase.
According to Bank of America / Merrell Lynch, today’s FOMC minutes will be of “particular interest given the extreme dovish pivot from the Fed,” and BofA/ML believes that “the Fed will drop some hints.” The company's analysts go on to say that today's minutes should include answers to three important questions:
- Why did the Fed go from signaling additional hikes in December to no further hikes just six weeks later in the January meeting?
- What is the Fed watching to determine next steps? Is it global data? Financial markets?
- How has the Fed's thought process evolved around the balance sheet normalization process?
Ahead of today’s minutes, Barclays saya, “Look to the minutes for insights as to whether FOMC participants see the rate hike cycle as essentially complete or members still expect further rate hikes as part of the baseline outlook…...we expect the minutes to signal that the committee is prepared to release its plan for the end of the runoff of its balance sheet 'soon,' which we believe will come at the March meeting.”
In other news, U.S. and Chinese trade talks continue to make headlines with currency manipulation being the important topic this week. While the U.S. stock markets seem quiet for now, certain news from these negotiations could cause a change in market temperament.
Today’s Economic Calendar
- MBA Mortgage Applications 7:00 AM ET
- Redbook 8:55 AM ET
- E-Commerce Retail Sales 10:00 AM ET
- 2-Yr FRN Note Auction 11:30 AM ET
- FOMC Minutes 2:00 PM ET
- Farm Prices 3:00 PM ET