Morning Minutes 1/10/2019

Morning Minutes

World Markets Pause for a Rest, Macy’s Warning, Central Bank Comments

January 10, 2019
8:45 am EST

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Market Commentary By:
Colin Cieszynski, CFA, CMT
Chief Market Strategist
ccieszynski@siawm.com
+1 (647) 282-4428

Crude oil and stock markets have started off 2019 very strong with investors who had fled the scene back in December scrambling to get back on the bandwagon. Nothing goes straight up or straight down forever, however, so it’s not a surprise to see markets pause to digest their recent gains.  Overseas, the Hang Seng rose 0.2%, the Nikkei fell 1.2% while the Dax and FTSE are pretty much flat. In the US, Dow futures are down about 50 points but had been down about 100 points earlier in the morning after the Dow gained 91 points yesterday. Crude oil is down 0.5%, with WTI trading well above $50.00/bbl near $52.00.

China reported inflation numbers overnight which were below expectations as consumer prices rose by 1.9% below the 2.1% street estimate and producer prices rose 0.9%, well short of the 1.6% street estimate (likely due to lower energy prices). A soft Chinese economy and the US partial government shutdown aren’t really new news. What is new this morning is that Macy’s reported same store sales growth for November/December of 0.7%, and cut its sales growth guidance for the fiscal year to flat from 0.3%-0.7%, which could influence trading in retailer stocks today.

Boosted by the oil price breakout, the S&P/TSX gained 199 points or 1.3% outpacing the S&P 500’s 0.4% gain to the upside. The Bank of Canada held interest rates steady yesterday. In the statement and press conference, Governor Poloz tried to walk a fine line between weakness in the oil sector and strength in other parts of the Canadian economy. Based mainly on weaker energy prices, the Bank cut its 2019 Canadian GDP growth forecast to 1.7% from 2.1%. While the impact of lower energy prices on GDP and inflation means that rate hikes look unlikely in the near term, Governor Poloz didn’t hit the panic button suggesting that additional rate hikes remain possible in the longer term.

US investor sentiment today could be influenced by a number of speeches scheduled for today from FOMC members including Chair Powell and Vice -Chair Clarida. Speculation on how many interest rate increases to expect from the Fed has had a significant impact on US stock prices in recent weeks, plunging in December on hawkish Powell comments and rallying in January when Powell shifted the tone back to neutral.

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