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What Will He Say? Trump’s Press Conference In Focus As Data, Earnings Sparse

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January 11, 2017

(Wednesday Market Open) With no major economic data on today’s schedule and key earnings still a couple days away, President-elect Donald Trump takes the spotlight this morning as market participants await his first press conference since the election last November.

Trump’s press conference is scheduled for 11 a.m. ET, and it could be interesting to hear what, if anything, he has to say about taxes, among other subjects (see below).

Aside from Trump, the market awaits a slew of key earnings reports from some of the big banks early Friday, as well as producer price index (PPI) and retail sales data, also due out that morning. Retail sales might be of particular interest because it includes the holiday season. One metric we’ve been watching on the retail side is online sales vs. brick and mortar. Are brick and mortar stores becoming showrooms?

In the markets this week, the Nasdaq is off to a blistering start, having just logged its longest streak of all-time highs since 1999. But the S&P 500 Index (SPX) barely budged yesterday, moving less than a point. Sparse economic data and a lack of key earnings reports until later this week have the SPX looking rather flat going into Wednesday as well.

Looking back at the last five trading days, health care has been the leading sector. Information technology, materials, and consumer discretionary stocks also got off to a strong start in 2017. Laggards include telecommunication services, utilities, and energy.

Speaking of energy, oil plunged again Tuesday after Monday’s sharp drop, falling below $51 a barrel by the end of the day and setting up a possible test of psychological support at $50, a level that futures last traded below in mid-December. The strong U.S. dollar, accompanied by concerns that some countries, notably Iraq, might not abide by the OPEC output deal, put a damper on crude.

Weekly supply data from the U.S. government is due later this morning, and it might be worth watching to see if gasoline inventories continue to build. A big climb in gasoline inventories contributed to pressure on the oil market last week. The energy sector was the biggest loser in the S&P 500 on Tuesday, falling nearly 1.5%.

Tomorrow features several Fed speakers, so it might be prudent to stay on the lookout for anything they have to say.

Technical resistance for the SPX is around 2272, with support around 2252.

S&P 500

FIGURE 1: OIL TANKS.

The S&P 500 Index (SPX), plotted here through Tuesday on the TD Ameritrade thinkorswim® platform,  treaded water, but crude oil (purple line on the chart) sank to nearly one-month lows under $51. The last time crude traded below $50 was on Dec. 15. Could futures test that mark today? Source: Standard & Poor’s. For illustrative purposes only. Past performance does not guarantee future results.

Trump Talk: With just nine days until he assumes office, President-elect Donald Trump is scheduled to hold a press conference at 11 a.m. ET today. What could market participants be listening for? Perhaps any discussion about Trump’s infrastructure, tax cut, and de-regulation plans. It’s also fair to assume there may be some interest in anything he has to say about trade policy, especially among those who follow trade-sensitive sectors like information technology, materials, and some consumer discretionary industries, including automobiles.

Gold On a Roll: The shiny metal, which had plummeted in price shortly after Trump’s election, is making a bit of a comeback. It reached six-week highs Tuesday above $1,190 an ounce. Some analysts credited gold’s rally in part to worries about how Britain might execute its exit from the European Union, worries that surfaced again over the weekend after remarks by Prime Minister Theresa May. Additionally, the U.S. dollar has dipped slightly from recent highs against the euro, and sometimes a weaker dollar can give gold a boost.

Earnings Watch: Not a whole lot on the calendar today from an economic data standpoint other than the aforementioned weekly crude stockpiles report. With that in mind, perhaps it’s more relevant to discuss what market participants might see in the earnings season ahead. Average S&P 500 company earnings are expected to rise 4.4% in Q4, according to research by S&P Capital IQ. That’s up from 4% in Q3 and from a nearly 7% decline in Q1 of 2016. Seven of the 11 S&P 500 sectors could see a rise in earnings, said research firm CFRA, the exceptions being energy, industrials, real estate, and telecom services. Financials could lead the way with earnings growth of over 14%, CFRA said. One thing to remember is that analysts have been under-estimating overall earnings results in recent quarters, so it could be interesting to see if that happened again this time around.

Good Trading,
JJ
@TDAJJKinahan

Economic Calendar

FIGURE 2: THIS WEEK'S ECONOMIC CALENDAR.

Source: Briefing.com

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