Futures vs FV: SP -27.31; DJ -260.31; NASDAQ -98.45
The direction post-FOMC is down. Fairly hard at the open. Futures were lower from the early morning hours, gapping down. About 45 minutes ago the losses steepened and futures are still trying to find lows for the morning.
Tariffs and trade wars are blamed. The Trump administration is to announce $50B in tariffs on China today, targeting theft of US intellectual property. China requires transfer of technologies to companies owned by Chinese citizens (read government in many cases) as part of doing business in China. China then appropriates the technology, pure and simple, then competes directly with the US companies they stole from. China is incensed it will not get R&D worth billions and billions of dollars for free. This is the kind of crapola that our companies deal with yet only 5% of the US population understands this. If everyone understood it they would have stood up long, long ago. Now it is harder to do it because it is established practice and the howls of anger and dire warnings by those benefitting from the status quo fools the uninformed and thus no resistance.
In any event, the fear of a trade war is one of the reasons today's weakness is blamed.
Spending: A $1.3T omnibus bill is apparently agreed to in Congress after 6 stop-gap spending bills since Trump submitted his budget in February -- of 2017! This is the result, a massive spend everything you can bill. We are insane in this country, not learning from history and the paths of prior civilizations. Oh well, we are smarter are we not? We won't make the same mistakes of the past, right? Sure, sure.
Bank of England: No rate hike, but this time 2 members voted for hikes. Oh no, the BOE is now 'hawkish' because it went from unanimity to a 7:2 ratio against rate hikes. Good grief.
Earnings beats: ACN; CAG; GES; FIVE
Misses: DRI (TL)
GIS: Raising the price of cereal and other foods. As it sells cereal by weight, it cannot use hidden inflation as easily. Yes, it has shrunk package size, but we notice that. So, it has to say it is raising prices as have others in the food business, e.g. HRL.
OTHER MARKETS
Bonds: 2.837% vs 2.881%
EUR/USD: 1.2321 vs 1.2345
USD/JPY: 105.33 vs 105.94
Oil: 64.69, -0.48
The CNBC anchor for its 9:00ET show was using those dramatic tones about the market opening lower with the Dow showing down 270 points. Sharp drop of course, but the drama, the Armageddon tones are a bit much.
There will be a gap lower on the open. Once again the market's resilience is met with downside. This of course does not look good for the rally resuming from this test of near support by NASDAQ, RUTX, SP400, and of course SOX.
It will be important, however, to monitor SOX and the small/midcaps/NASDAQ action to see if they can, after a lower open, hold support. SP500, DJ30 look, of course, like crud as they have basically all along.
Leaders are the key and FAANG is not leading though AMZN, NFLX are key watches. FB is down again as it has lost the trust of advertisers, much more important than the users. Interestingly, I know more and more people who put inaccurate information on FB pages for various reasons. Their friends know who they are so they have no problem communicating. they just don't want anyone knowing anything about them.
Chips, drugs/biotech, transports, retail, China are keys to watch.
If support breaks and they cannot recover, we will have to take action on those positions that cannot hold.
Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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