Morning Minutes





Its the first day of earnings season, the Friday before a long weekend and monthly options expiry in the US today and amid a flurry of news announcements, US index futures are sliding 0.3%-0.4% this morning, adding to yesterday’s 0.1% to 0.4% declines. European markets are also in the red today with the Dax down 0.9% and the FTSE falling 0.8%.

Last night President-Elect Biden outlined his fiscal stimulus proposal for dealing with the impact of the current wave of COVID and lockdowns including a vaccination plan and a $1.9 Trillion fiscal stimulus program which includes a $1,400 payment to affected individuals (bringing the recent total up to the $2,000 some politicians had been looking for in the December negotiations, support for states and education, extending the ban on evictions, and an increase in the minimum wage to $15 per hour. It remains to be seen how much of this will pass or be negotiated away in the coming weeks even with the Democrats controlling both the White house and Congress, particularly with an economic rebuilding plan reportedly coming next month.

US earnings season has kicked off this morning with results from 3 big banks. Citigroup beat the street on EPS ($2.08 vs street $1.34) but increased its credit loss provision to $1.5B from $0.43B last quarter. JPMorgan also beat expectations on earnings ($3.79 vs street $2.62), which were propelled by a net $1.9B or $0.72 per share release of cash from credit (loan loss) reserves, and record results from trading operations. Wells Fargo exceeded street earnings expectations ($0.64 vs street $0.58).

Action in precious metals, however, suggests that today’s action is more of a common trading correction and not a bearish change in sentiment. Gold and silver are down 0.25% and 1.80% on a day when their natural adversary, the US Dollar is also down, suggesting that capital is still shying away from defensive havens. That being said, new lockdowns overseas, particularly in China, does appear to be dragging on commodity prices this morning with both Copper and WTI Crude Oil falling about 1.0%.

Confirming anecdotal reports from struggling US retailers from the last few days, US retail sales declined 0.7% in December which was worse than the flat reading the street had expected, while November retail sales were revised downward to a 1.4% drop from a 1.1% decline. The Empire State Manufacturing Index also came in below expectations (3.5 vs street 6.0 and previous 4.9). These misses, combined with the payroll declines announced last week confirm that the latest round of lockdowns has started to take its toll on the US economy.

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Colin Cieszynski, Chief Market Strategist

Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

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