Market Recon Wednesday

Good Morning,
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Global Equity Weakness.
                     Equities are trading lower this morning across the globe. In Europe, and throughout Asia, the blame is being placed squarely upon Republican candidate Donald Trump’s late surge in the polls after markets had largely priced in a smooth transition from President Obama to Hillary Clinton. Uncertainty is certainly to blame, but I don’t think fear of a Donald Trump victory is the sole cause of all of this fear. Perhaps, the fear is that the outcome of this election creates uncertainty regardless of who might concede next Tuesday night. On one hand, you’ll have the unpredictable Trump, and on the other hand, even if the Democratic candidate for this office should prevail, her ability to govern will be greatly diminished due to her ongoing legal problems. Then there’s Oil. The collapsing price of Oil has plenty to do with this market weakness, and incredibly the price of crude has continued to move lower, even as the DXY has weakened in the early part of this week. OPEC’s promises are not being taken very seriously at this time.
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Fed Day.
                     The CME Fed Funds futures probabilities page only gives today’s announcement an approximate 7% chance of putting an interest rate increase to the tape.  December probabilities are up around 74% (down from 78%). Though much of the headline economic data has been just barely good enough to “not be that bad”, a lot of the internal statistics are still troubling. One example would be the poor Final Sales to Domestic Purchasers in the first look at Q3 GDP. Another would be yesterday’s October ISM print that showed headline expansion, while the pace of New Orders slowed, and Backlogged Orders (as well as inventories) disappeared. All is not well, though there are clearly some brighter spots in the economy in some places. The FOMC does seem to be on a mission, and if they are to call what we are in “a tightening cycle”, then I guess a quarter point a year would be the minimum. One should note that the lower US Dollar currency exchange valuation will afford the members of the FOMC a little more of a comfort zone when putting together this statement.
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Macro
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08:15 – ADP Employment Report (October): Expecting 167K, September 154K. This item does not pack the market punch that the Non-Farm Payroll print will on Friday. However, this item is meant to be a predictor for the Private payrolls (the lion’s share) portion of that NFP. This print was very accurate in doing so for September, and when averaged out over the long-term has been spot on. Equity index futures will react to any kind of sizable miss upon this release.
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10:30 – Oil Inventories (Weekly): Expecting -700K, Last Week -553K barrels.
10:30 – Gasoline Stocks (Weekly): Expecting -1M, Last Week -2M barrels. Headline Oil Inventories were expected to sport an eighth reduction in the last nine weeks today. With Crude in something of a spiraling collapse of late, any contraction in this space, and in Gasoline stocks would be helpful. However, last night the American Petroleum Institute reported an incredible 9.3M barrel inventory build for Crude, as well as a 3.5M barrel draw for Gasoline. This added to overnight suppression of oil prices, and will need to be confirmed by today’s release.
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14:00 – FOMC Policy Decision. This month, there really is not much of a chance of a change in monetary policy. Regardless, the Fed seems intent, in this statement to make sure that market participants understand that they are serious about December. There will be no press conference, nor economic projections made by Fed officials today.
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Wednesday’s Earnings Highlights
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Before the Open: BABA (.70), BG (.79), CLX (1.42), EL (.80), NYT (.04), TWX (1.36), YELP (.18), ZTS (.47)
After the Close: AIG (1.20), NLY (.29), DVA (.93), FB (.96), FIT (.19), WFM (.24), ZNGA (.01)

One thought on “Market Recon Wednesday”

  1. I do not trust the ADP report. They report seasonally adjusted data “without knowing” the seasonal factor the BLS will be using to convert NSA data to say data.

    Last month’s private sector number was over adjusted. The ADP numbers have missed high, missed low….

    I believe that we could be in double digits this Friday. Should be under 140k based on seasonal factors.

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