Fed Chairman Jerome Powell readied the sleigh for a Santa rally in the markets with his dovish comments Wednesday. But a trade deal out of Friday’s dinner meeting between President Trump and Chinese President Xi Jingping is needed to keep up the momentum.
Unfortunately, some investors don’t see an agreement on the menu at that Buenos Aires meeting.
“We remain unconvinced that one bilateral meeting between the two leaders will result in a grand bargain that puts the U.S.-China relationship back on track,” said Nomura in a note to clients.
On to our call of the day, from Northman Trader’s Sven Henrich, who tells MarketWatch that investors need to sit up and pay attention right now as “markets are in a critical phase.”
And the Fed chief has been a big part of that. The trader says he expected some dovish talk out of Powell, but not until December’s Fed meeting. In any case, those comments triggered a rally and the first phase of a bear trap for stocks, which occurs when investors who sell near the bottom of a cycle get caught out as the market reverses. The opposite holds true for a bull trap.
Read: Did Fed’s Powell ‘light the fuse’ for a year-end stock rally?
Bears expected the SP 500 to break below 2,600 last week, but instead the market headed up on Monday, Henrich noted. Powell did his part to help the rally, and if Trump gets a deal with China, that would complete that bear trap, pushing gains possibly into the first quarter of next year, he said,
Henrich points out that hedge funds and lots investors who are underwater would very much like to see a year-end rally to help them recoup losses and exit the market at higher prices. But that could come at a price, turning the bear trap into an even bigger bull trap into next year, he says.
You can read more about his bear-trap warning that popped up last week, here.
Reading past the market optimism about Powell’s dovishness, the Fed may have also signaled something for investors to worry about, says Henrich.
“What does it say when a 10% market decline to flat on the year is enough to halt the Fed when rates are only at 2.25%? Clearly not bullish as the market would have us believe,” tweeted Michael Lebowitz, co-founder of 720 global.
In one month Powell went from FF’s being far away from neutral to near neutral. Why do you think it happened?
— Michael Lebowitz, CFA (@michaellebowitz) November 28, 2018
are off to a weaker start.
is steady, the dollar
Check out the Market Snapshot column for the latest action.
is largely in the green, while it was a mixed day in Asia, where China stocks
slipped over 1%.
Is oil building up for another round of big losses? Our chart of the day shows West Texas Intermediate crude futures
dipping below $50 early Thursday. Providing that chart in this tweet, Robeco portfolio manager Jeroen Blokland notes it’s the first time in more than a year that oil has dropped below that key level:
Oil is picking up where it left off Wednesday, with losses stemming from worries that OPEC may not deliver a production cut next month, and data that showed rising U.S. inventories.
POTUS is due to touch down in Argentina late Thursday evening as the G-20 kicks off. Ahead of that some have been rattled by comments from U.S. Trade Rep. Robert Lighthizer who said he was looking at all means of upping duties to 40% on Chinese autos.
U.S.-listed shares of Deutsche Bank
are down, tracking losses in Europe after a raid on the bank’s German headquarters amid suspicions of money laundering.
is soaring on forecast-beating results, while Express
is off over a downbeat outlook. A miss is also hitting shares of Dollar Tree
. Dell Technologies
are still to come.
Outdoor and recreation products maker Yeti
is up after its first set of results as a public company beat forecasts.
is taking a hit after cutting 2018 targets.
It could have been the end of Pabst Blue Ribbon, had MillerCoors, a unit of MolsonCoors Brewing
and Pabst not settled a potentially catastrophic lawsuit.
dropped plans for a test tunnel in west Los Angeles after community groups put up resistance.
POTUS’s SpaceForce planstriggered some mockery a few months ago, are being walked back.
Reports of alleged sexual assault and attempted coverup by ex-CBS
CEO Les Moonvies could cost him a $120 million severance deal.
cut a sweetheart deal by flipping on Bear Stearns executives.
Jobless claims surged to a six-month high, consumer income and spending income also rose. Pending-home sales and Fed minutes are still ahead. Cleveland and Chicago Fed Presidents Loretta Mester and Charles Evans will speak as well.
U.S. life expectancy dropped again, in a trend not seen since the early 1900s.
Overparenting is creating a generation of American snowflakes
A couple of YouTubers had a go at a real job (skip to minute 26:03 unless you want to get super annoyed)
NYC got in the spirit last night
Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. Be sure to check the Need to Know item. The emailed version will be sent out at about 7:30 a.m. Eastern.
Providing critical information for the U.S. trading day. Subscribe to MarketWatch’s free Need to Know newsletter. Sign up here.
Barbara Kollmeyer is an editor for MarketWatch in Madrid. Follow her on Twitter @bkollmeyer.
We Want to
Hear from You
Join the conversation