Equities were quiet with all assessing whether the six week rally is the “real thing” or just a dead cat bounce taking stocks too far too fast. The dollar halted a five day slide while Treasuries were little changed.
Crude was quiet until late day selloff sent oil down about 2.9%, a selloff predicated upon the prevailing narrative that Saudi Arabia will not freeze production unless Iran also freezes output. Approximately 70% of global production is meeting in two weeks to discuss such actions.
The financial chaos of the oil producing countries is now becoming extremely pronounced. Will the supply disruptions in Iraq and Nigeria—the result of geopolitical turmoil—become more pronounced because of this fiscal chaos? Historically economic unrest ferments civil unrest, an environment that could be amplified given the 1200 year animosity between the two major Islamic sects.
There was little reaction to the data or to Fed statements regarding potential changes in monetary policy.
Next Monday is the commencement of first quarter earnings season. To write the obvious, the interpretation of the results will offer considerable input in determining whether the current advance was a dead cat bounce or bona fide advance and transition into the value orientated issues.
What will happen today? The ISM Non Manufacturing Index as well as the trade gap is released.
Last night the foreign markets were down. London was down 1.38%, Paris down 2.12% and Frankfurt down 2.30%. China was up 2.61%, Japan down 2.42%and Hang Sang down 1.57%.
The Dow should open moderately lower even as oil is flat, perhaps the result of Europe’s declines. As stated above, earning season is now becoming the focus. At this juncture analysts are expecting about a 9% decline but considerable emphasis will be placed on profit margins and revenue growth. I think profits will decline but not by the magnitude as suggested as the bar is set too low. All will scrutinize forward looking statements and the potential veracity of such.
The 10-year is up 9/32 to yield 1.74%.