The Market Today

TODAY’S CALENDAR

Chicago Fed Index Points to Weaker Inflation Pressure: The Chicago Fed Bank’s report on national activity disappointed expectations, falling from -0.45 to -0.71.  The index was expected to improve. The CFNAI is an aggregation of 85 different economic indicators including reports on 1) production and income, 2) the labor market, 3) personal consumption, 4) housing, and 5) sales and inventories. For context, when the CFNAI’s three-month average is above +0.70 following an expansion (or a one-month reading above 1.00), a period of more rapid inflation is expected to occur.  The 3-month average is now down to -0.31.

Dallas Fed Regional Manufacturing Index: The Dallas Fed report on regional manufacturing activity, released at 9:30 a.m. CT, is expected to remain negative but improve slightly from October’s reading. The index has been negative in five of the ten reported months this year.

Powell Speaks: Fed Chair Powell is scheduled to speak at a Providence, Rhode Island Chamber of Commerce dinner tonight at 6:00 p.m. CT.  It is unexpected that he makes any headlines given that the outlooks for inflation and trade are unchanged from his most recent comments.

 

OVERNIGHT TRADING

China Issues Statement on Intellectual Property Protections: Weekend reports indicated that odds of a second phase of a trade deal are dwindling, even if the two sides are able to reach the so far elusive first phase of an agreement. However, market sentiment has strengthened Monday following a couple of headlines out of China that gave investors hope a deal may still be possible. The Chinese government issued an official document titled “Opinions on Strengthening the Protection of Intellectual Property Rights” over the weekend in which it laid out possible proposals for appeasing one of the major points of tensions with the U.S. in the trade talks. Later, a state run paper said the two sides were “very close” to a trade deal.

Market Sentiment Firms on IP Olive Branch: Global stocks have strengthened to push the Asia Pacific index up 0.6% Monday while Europe’s Stoxx 600 has moved up 0.7%. The response by global bond yields has been less emphatic, with mixed responses across various regions. Germany’s 10-year yield was 0.6 bps higher around 7 a.m. CT while a U.K. note with the same maturity was down 1.0 bp. A top survey of German business confidence continued its stabilizing trend in November. After weakening in seven of the first eight months of the year, the Ifo business climate survey has held steady or improved in the last three reports. Heading into the U.S. session, the Treasury curve was between 1 and 2 bps higher and futures on the S&P 500 were 0.2% stronger.

NOTEWORTHY NEWS

ICYMI – November 22, 2019 Weekly Market Recap: Several housing reports were released last week and, despite mixed monthly results, the general trends show lower rates this year have been a boost for housing activity. On Friday, The University of Michigan revised up its consumer confidence index for November to a four-month high and Markit’s U.S. PMIs were firmer than expected. Notably, the manufacturing index rose to a seven-month high. The Fed’s Minutes signaled officials still sense that risks remained tilted to the downside, but most are fine waiting after the three rate cuts. However, the story was an exhausting week of conflicting trade headlines that left investors confused and concerned about the status of negotiations. Among the many, CNBC reported that Beijing was “pessimistic” about a deal but China’s top negotiator said he was “cautiously optimistic.” President Xi said later that he was “working actively to try not to have a trade war.” Earlier in the week, before Reuters said a deal may not get done in 2019, President Trump said he’ll “raise the tariffs even higher” if there no deal is reached. Yet, on Friday, he said a deal with China is “potentially very close,” adding, “The bottom line is, we have a very good chance to make a deal.” All said, stocks posted modestly weekly losses and longer yields dipped. Click here to view the full recap.