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Wednesday, March 7, 2018

Market Alert - Pre-Market

Futures vs FV: SP -22.62; DJ -260.12; NASDAQ -43.77

Futures are well off their lows but still well lower. Definitely a lower open with stocks such as NFLX down 5 points pre-market, cutting losses as well despite a Stifel downgrade. LRCX is down less than 2 points heading into the open. Recent leaders are coming off the lows, looking to lead.

Tariffs: All the talk on tariffs is overshadowing other data. Okay, tariffs it is. Cohn's departure has many worried the protectionists will have free run in the White House. Wilbur Ross says Cohn not pushed out. Cohn is leaving because he is not getting his way on tariffs and that is fine. He perhaps feels he cannot be effective if the administration goes that way. Thing is, his replacement, whether Kudlow or others, will be a free trade person. Trump likes the conflict. It burns people up to have to fight all the time, so Cohn's departure after some major accomplishments makes some sense.

You hear the same mantra where China dumping steel and aluminum helps the US because consumers get cheaper products. Really? I have discussed China's takeover of the aluminum market. It produces 55% now thanks to destroying the US market by dumping inferior aluminum on us. Now all you can get is poorer quality Chinese aluminum that will not bend in the thicker sizes without breaking. That makes the quality aluminum even more expensive due to scarcity. Does that help those using the higher quality product? No! It also leads to lower quality products. But that is what we have done with everything including education: dummy it down to the lowest common denominator. That is not what made the US the greatest economic power, yet we adopt policies allowing that to happen and it has happened.

ADP jobs: 235K vs 193K exp vs 244K prior (from 234K). Zandi says jobs market 'red hot,' threatens to overheat. Then where are the wage gains? Until then, it is illusory.

Productivity, Q4: 0.0 vs -0.1 vs -0.1

Unit labor costs: 2.5 vs 2.1 prior vs 2.0. Costs are up but not wages, at least not much at all.

Earnings beats: ROST, HRB, ADSK

Downgrades: NFLX buy Stifel

Bonds: 2.857% vs 2.863%

EUR/USD: 1.241 vs 1.2411

USD/JPY: 105.80 vs 105.75

Oil: 62.39, -0.21

Gold: 1332.20, -3.00

Futures flattened out the past 45 minutes as the morning recovery slows. Key will be leaders such as NFLX, LRCX, AMZN, MU as well as RUTX and SOX as noted last night. We will see how the action plays out and if we can get some good entries.

Jon Johnson, Chief Market Strategist
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