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Wednesday, April 19, 2017

Market Alert - Pre-Market

Futures vs FV: SP +7.21; DJ +20.72; NASDAQ +24.16

Nice rebound in the futures, and DJ30 would be higher but for IBM acting as a 60 point Dow-drag. IBM missed revenues and of course the bald headed guy on CNBC is saying all is well because it was just a matter of not getting the deals signed by the earnings cutoff date. IBM was firing people as close as two weeks ahead of earnings we have learned from many former IBM employees who were sworn to silence ahead of earnings. Entire units were laid off. THAT does not sound as if it was just a matter of timing on the signing of new contracts.

Taxes: The LATEST word of the day on taxes is that there is a push for a corporate tax reduction versus tax reform as that is 'doable' this year. Reform would be put off until next year (read forever). Here is the deal: they are talking a tax reduction or holiday for those funds overseas then a nominal reduction in the corporate tax. To me, nominal is anything down to 20% or above. To really make a difference the corporate tax rate needs to be 15% or lower, and 15% is high. IF YOU BUY THAT A CORPORATE TAX REDUCTION IS NEEDED AT ALL, YOU SHOULD WANT A 0% CORPORATE TAX. Corporate taxes are passed directly to the consumer, and the consumer pays higher prices as a result. Remove the corporate tax fiction and give CONSUMER, the taxpayers, a tax cut that matters.

More Tax Facts: 44% of Americans won't pay ANY income tax for 2016. It must be nice to have no skin in the game while the middle class, what is left of it, pays a higher percentage of their disposable income as tax than of course those who pay no taxes and those who have a higher tax rate.

The Dollar: FT quotes Treasury Secretary Mnuchin as saying Trump is "absolutely not" trying to talk the dollar lower.

Earnings Beats: MS, YHOO, ISRG

Misses: IBM (TL); BLK (TL); TXT (TL). Well, what do you know? Revenue misses have returned in force after a one-quarter hiatus.

Fed: Fed Funds Futures contract has shifted the higher probability (66.1%) to a September rate hike versus a June rate hike. Hence the troubles for the financials.

Minimum Wage: New Harvard Study says that for every $1 increase in the minimum wage, there is a 4% to 10% increase in restaurant failures. Second study in the past year that takes real life effects/facts of minimum wage hikes and concludes that an increased minimum wage does in fact reduce business activity, particularly in those areas relying heavily on labor. Guess what? Restaurants will robotize, there will only be the larger chains that can afford to do so, and thus the small, local, and mom & pop restaurants will be forced out. Way to go do-gooder law makers.

Bonds: 2.20% 10 year. Yields rebounding some from the Tuesday dump.

EUR/USD: 1.0726 vs 1.07307

USD/JPY: 108.928 vs 109.525

Oil: 52.44, +0.03

Gold: 1286.30, -7.80

Futures are off the morning highs but are holding gains into the open in quite a snapback from the Tuesday weakness. Oil, Chips will be very important as they attempt a rebound. Remember, SP500, DJ30 are in good patterns testing the 50 day MA. NASDAQ is decent, trying to hang on. RUTX, SP400, SOX have something to prove on this bounce -- if it can hold.

Jon Johnson, Chief Market Strategist
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