Market Alert - Pre-Market

Futures vs FV: SP +4.11; DJ +40.4; NASDAQ +3.72

Stock futures trade at pre-market highs as the Wednesday sluggishness tries to swap out with a return to more bullish bias.

The big news is Treasury Secretary Mnuchin's first interview since becoming Secretary (CNBC). Talked about 50 - 100 year US bond as a way to possibly fund infrastructure spending, but no real mention of infrastructure other than that. Said the administration wanted tax reform by August but said it was 'too early' to give details on a plan. So much for the Trump 2 -3 weeks to announce a 'phenomenal' plan. That is why Mnuchin was there--it wasn't ready to be announced so provide more of a tease. Border tax? The administration has 'some concerns' with it.

Tax cut for the 'rich' (and how do you define rich?)? He said the rate would be lower but the tax the same as it would close 'loopholes.'

Here is the problem with that: 'rich' will be defined as someone making $150K. The truly rich do not derive their money from income so a change in the income tax indeed does not change what they pay. A sleight of hand with the wording by Mnuchin. What this kind of 'no tax cut for the rich' does is squeeze the small business people who fall in this category who still depend upon a mortgage deduction and other deductions that are NOT loopholes but part of a bargained tax plan in Congress that people have built their businesses, etc. around.

Thus, the only fair way to go is a flat tax in the 11%-12% range. Then you can eliminate the 'loopholes', get everyone with skin in the game, and rocket the economy higher as it becomes much more cost effective to invest in the US than play games with tax shelters.

Oh, THAT will happen . . .


Oil: API reports a draw of 0.88M versus the +9.4M bbl last week. Oil jumps. Pavlov's dog.


Trump: meeting with big corporate CEO's today to see how to jumpstart jobs, economy, etc. You do that by lowering taxes across the board and giving incentives to start small businesses. We still are starting half the businesses we used to since 2005. It is NEW business that makes the difference, not these old moss-covered mature industries that already have a competitive advantage.


EARNINGS beats: HP, SQ, KS, TREE, W

MISSES: HRL (BL); TSLA (BL); SAFM (TL, BL); FIT; (TL, BL); JACK (TL,BL); LB (TL)


OTHER MARKETS
Bonds: 2.392% vs 2.42% 10 year. Bond rallied on Mnuchin comments

EUR/USD: 1.0581 vs 1.0557

USD/JPY: 112.76 vs 113.324. Dollar off post-Mnuchin

Oil: 54.69, +1.10. Up on API report.

Gold: 1248.70, +15.4. Jumped after Mnuchin as well.


Futures are running into the open. Looks like another pause then rally. Have to watch how gaps open are treated, but thus far in the move they have not been sold that hard.

Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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