U.S benchmarks are holding ground after a quiet overnight session, writes Bill Baruch President of Blue Line Futures.
E-mini S&P (ESH)
Yesterday’s close: Settled at 2731, up 9.75
Fundamentals: U.S benchmarks are holding ground after a quiet overnight session. President Trump delivered a well put together State of the Union speech last night with no surprises. He pointed to the border wall battle with the Democrats, an FBI investigation and needing to see structural reform with China to get a deal. Speaking of such, U.S Trade Representative Lighthizer and Treasury Secretary Mnuchin travel to Beijing next week with the March 1 deadline for a tariff hike in focus. The hope behind a potential trade deal has kept a bid under this market. Yesterday, we said if you take a step back, not a lot has changed other than price over the last 30 days. The S&P 500 is about 1% from its November closing level, but despite the 16% drop and nearly 18% recovery, the 10-year Treasury yield sits at 2.7% and has barely recovered from its fallout low of 2.54%. After tremendous volatility in October and through November, at that monthly close, the 10-year Treasury yield was 3.0%. Yes, the Federal Reserve has dialed down their rhetoric but for the 10-year to barely respond to such a recovery in equity prices certainly makes one understand that the problems are not fixed.
Today arguably marks the exit from the heart of earnings season. This morning, we look to a deluge of pharmaceutical earnings to accompany General Motors (GM) Chipotle (CMG), Prudential (PRU) and others are due after the bell.
Crude (CLH)
Yesterday’s close: Settled at $53.66, down 90¢
Fundamentals: Crude Oil did not move much after the API report yesterday but did extend its range lower early this morning. The official EIA data is due at 9:30 am CT and will be front and center. First, API showed builds across the board; +2.514 million barrels of crude, +1.731 million barrel of gasoline, +1.41 million barrels distillates and +0.889 million barrels at Cushing. This was largely in line with the expectations for EIA today. Two things that have stood out recently are draws at Cushing and falling imports. After inventories at Cushing drew for 15 of 16 weeks, they have decreased over the last three. However, a large build today that offsets the three-week run of -1.078 would weigh on the market. Last week, imports fell 1.1 million barrels as Saudi Arabia promised to cut exports to the United States; this number will be crucial as it feed it to the broad report.
Gold (GCJ)
Session close: Settled at $1,319.20
Fundamentals: Gold continues to consolidate in a very healthy manner. The U.S. Dollar Index ticked down, paring some overnight gains, after Q4 nonfarm productivity missed expectations and the trade balance was a little better than expected. The overall movement for the metal remains quiet, as we noted on Monday, with much of Asia on holiday. Tonight’s calendar should bring some life to the tape with Fed Governor Quarles speaking at 5:05 pm CST and a speech from Fed Chair Powell at 6:00 pm CST.
