Market Alert - Pre-Market

Futures vs FV: SP +1.21; DJ +22.88; NASDAQ +6.91

Futures were a bit hung over after 2 days of jumping off support, and they are still sluggish, but they rebounded when Treasury Secretary Mnuchin started giving details of the tax plan to be released at 1:30ET.

Taxes: Mnuchin said the 15% corporate tax rate would also apply to pass-through entities (LLC, partnerships) as the administration recognizes that small businesses dominate those entities and that small businesses are the lifeblood of the US economy. How refreshing after getting beaten down by increased taxes, impossible healthcare costs and taxes, and being literally regulated out of business. As the former Sun Microsystems CEO said today on CNBC, quoting a Fortune 20 CEO, the 8 years of waterboarding ended with the election.

A 15% pass through rate for small businesses is HUGE. A game changer. Huge. No wonder futures bumped higher though the usual 'it will never pass Congress' chorus erupted shortly thereafter. And of course the sleaze Paul Ryan quickly sent out a note saying the plan was "80%" the same as his. The difference: the parts that REALLY MAKE A DIFFERENCE for the average American, such as the reduced pass-through rate. Also, I am not so sure about the inability to pass: this is an idea that will appeal to all of the US electorate. Reagan was clever that way and got the nation behind him. This is, and I did not think it possible from these guys, along those lines.


Earnings are also still very dominant and the beats are plenty but they are not as big as the prior ones, e.g. CAT.

Beats: UTX; TWTR (this one WAS much bigger than expected); TXN; CMG; WYNN; PG (though hacked revenue guidance)

Misses: BA (TL); X (cut revenue guidance 50%); STX (TL)

Some big names announce Thursday after the close, e.g. AMZN.


Oil: API reports a build (900K) versus the draw (1.5M) expected. Oil is down fairly solid.


OTHER MARKETS
Bonds: 2.334% vs 2.33%

EUR/USD: 1.0888 VS 1.0930

USD/JPY: 111.612 vs 111.093

Oil: 49.15, -0.41. API reports +900K build versus -1.3M bbl decline anticipated.

Gold: 1284.10, -3.10


Futures are fading modestly off the morning highs, but the highs have been low in themselves. Just sluggish after two fairly sharp upside sessions, something rather normal. We will see what kind of pullback we get today and tomorrow, see what stocks refuse to slow down. Would like to get a test to let some of these earnings gappers come back a bit and provide some good post-gap/post-earnings entry points.


Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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