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Wednesday, June 13, 2018

Market Alert - Pre-Market

Futures vs FV: SP +1.00; DJ +18.27; NASDAQ +6.04

Futures peaked for the premarket just over an hour ago though they still hold modest gains the day after a judge approved the T/TWX merger with no conditions. Media stocks and telecom stocks are higher as a result, but the decision has not set off any wide buying spree.

FOMC: It is Fed day and this afternoon there should be a 0.25BP rate hike. Then there is the endless analysis of the 'dots', i.e. where the various FOMC members stand on future rate hikes. The concern is they will all be more hawkish given the economic strength and the 'need' to be tougher on inflation.

PPI: Speaking of inflation, the PPI was up, following Tuesday's CPI
PPI OVERALL: 0.5 vs 0.3 expected vs 0.1 prior . YR/YR 3.1% vs 2.6% April. 6.5 year high

Core: 0.3 vs 0.2 vs 0.2 prior. 2.6% year/year

There is inflation. The Fed has wanted it. Watch what you ask for, right? Every time the Fed fosters inflation it gets more than it wanted. Some things never change.

Mortgages: -15% for the week. Higher rates kill home buying.

Trade: Trump back on China, saying he will implement tariffs Friday as talks with China stall.

Oil: Trump is again saying prices are too high, that OPEC 'is at it again.' It ahs been somewhat effective, and with oil at a resistance point it will be interesting to see how prices react, i.e. what kind of jawboning power the President has.

Taxes: Seattle city council repeals the 'Homeless Housing Tax' 1 month after it passed the tax. No, it was not a tax on the homeless (which would be logical if you believe what you tax you reduce) but on large corporations such as AMZN, SBUX to fund housing for homeless. Maybe they should hire the homeless? Maybe the homeless should seek a job from them? Just thinking out loud . . .

California: Proposal to break the state into three states has made it on the ballot. I know that a lot of people from the north of the state as well as the non-coastal regions cannot stand the politics of the large cities on the coast.

Bonds: 2.959% vs 2.963%

EUR/USD: 1.1776 vs 1.1745

USD/JPY: 110.45 vs 110.381

Oil: 65.95, -0.41

Gold: 1300.30, +0.90

Futures so-so ahead of the FOMC decision. Powell wants a press conference every month, ostensibly to give the Fed more flexibility for announcements regarding rates versus having to wait for meetings. Looking forward to hear how 'tough' Powell is today.

Of course as you know there continue to be many stocks in good patterns. Stocks tend to drift modestly upside pre-FOMC, but then we have to go through the post-FOMC digestion period. Thus, buying stocks on this day can see morning turn to lower turn to back upside.

For us, if it is a good pattern that formed regardless of all that is going on, then it is a good pattern, and if it makes the move and looks solid, then we can at least pick up a partial position.

Jon Johnson, Chief Market Strategist
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