"Let us not seek the Republican answer or the Democratic answer, but the right answer. Let us not seek to fix the blame for the past. Let us accept our own responsibility for the future." -- President John F. Kennedy
The Politics of It All
Generally, I do not like discussing politics. I like writing about politics even less. I am a numbers guy. There are, however, times like today, when the marketplace will likely be impacted by what transpires elsewhere. I have written extensively on the keeping of the pro-growth, pro-business narrative on track in order to keep the rally in equities on track.
Confidence in all business surveys, be they consumer-based, manufacturing-based, small business-centric, or homebuilder-based, is at stake as well. Group confidence is as important as anything else. That sudden confidence in coming policy shifts could quickly be seen as skating on thin ice should the current narrative change.
There are multiple events scheduled for today that would, in my opinion, present headline risk to the marketplace. First and foremost would be President-Elect Trump's first press conference in five months. The president-elect will address the media at 11am ET and certainly have to face unsubstantiated claims that Russia has, or has tried to gain what would be embarrassing information regarding personal conduct. Regardless of whether allegations such as this are true, or partially true, or even completely false, it is imperative that Trump handles himself well today.
Secondly, the continued Senate confirmation hearings for the "Trump Team" remain central to the reflation story. As far as supporting a pro-business agenda, this is a proposed team of hitters. Alabama Sen Jeff Sessions (nominee for Attorney General) will have to return to those hearings today as things have moved along slowly.
Former Exxon (XOM) CEO Rex Tillerson (nominee for Secretary of State) should at least get started, as well. Tillerson is well known for having a working relationship within Russia (for decades), and could be considered controversial. He will have to sound tough and display his experience as advantageous, especially now that tensions between the U.S. and Russia are only intensifying.
Aggressive here? Not so much. The S&P 500 closed unchanged yesterday. Unchanged, gang. In the electronic age. Incredible. The rally in U.S. equities has broadened out a bit this week. The Nasdaq Composite hits a new high seemingly every day. Technology shares and consumer discretionary names have taken the lead, along with healthcare. The recent moves in the healthcare sector could be at least partially due to the JPMorgan conference in San Francisco. But, as a group, this sector remains a political football, and is subject possibly to even more headline risk than the market in general.
I will tell you this, as far as my trading behavior is concerned. I have traded less over the last few days than I consider normal and I have spent more on downside protection. I have not, however taken any profits prematurely. That said, my targets are set, as are my panic points. I will act on both when reached. Earnings are on the way. I promise.
10:30 - Oil Inventories (Weekly): Expecting +1.0 million, Last Week -7.1 million barrels.
10:30 - Gasoline Stocks (Weekly): Expecting +1.8 million, Last Week +8.3 million barrels. Today, the Energy Information Administration (EIA) will be coming off of a week that saw a massive headline draw for crude supplies coupled with a massive build for gasoline. The weekly Tuesday evening data released by the American Petroleum Institute (API) was much more in line with professional consensus this week than it has very often been of late.
The API reported a build of 1.5 million barrels for oil and a build of 1.7 million barrels for gasoline. Neither number, if confirmed today, would be considered very surprising and would likely not impact market prices for commodity, nor for the energy sector all that much. WTI did initially sell off last night in response to that data, but has rallied to levels well above those lows throughout the overnight session.
13:00 - 10-Year Note Auction: the U.S. Treasury will auction off $20 billion worth of 10-year paper. Last month's auction, also of $20 billion, went off at an awarded yield of 2.485%, with a bid to cover of 2.39. Indirect bidders (foreign institutions such as central banks) took down 57.5% of the issue. Bid to cover, though well below what is considered normal, was an improvement over November. The yield awarded was the highest since September 2014.
13:20 - Fed Speaker: New York Fed Pres. William Dudley will speak on banking and regulation from New York City. As regional district bank president, Dudley has a voting position within the FOMC as long as he holds his current position. Dudley has been quite dovish in the past, but has towed the "company line" as the committee had become more hawkish toward year's end. Dudley has been particularly good at telegraphing policy direction to the marketplace.
Sarge's Trading Levels
These are my levels to watch today for where I think that the S&P 500 and the Russell 2000 might either pause or turn.
SPX: 2293, 2281, 1172, 2264, 2255, 2245
RUT: 1383, 1376, 1371, 1365, 1357, 1349
Wednesday's Earnings Highlights
Before the Open: (SVU) ($0.14)
After the Close: (KBH) ($0.45)