Overnight Markets and News

Mar E-mini S&Ps (ESH19 +0.66%) this morning are up +0.62% as they recover from a 1-3/4 year nearest-futures low posted in overnight trade. U.S. stock indexes recovered from early losses and moved higher after President Trump expressed confidence in Treasury Secretary Mnuchin and in the U.S. economy. Stock indexes had initially extended Monday's sharp losses after President Trump said he had discussed firing Fed Chair Powell over the Fed's recent action to raise interest rates. President Trump attempted to calm markets concerns when he said Tuesday that the Fed is “raising interest rates too fast” but he has “confidence” the Fed will “get it pretty soon.” Trading activity is muted this morning with markets closed in Europe for the extended Christmas holiday and closed in the UK for Boxing Day. The upheaval in U.S. equity markets has fueled safe haven demand for T-notes and pushed the 10-year T-note yield down to an 8-1/2 month low of 2.718% and also boosted demand for gold as a store of wealth with Feb COMEX gold (GCG19 +0.25%) up +0.33% at a 6-month high. Asian stocks settled mixed: Japan +0.89%, China -0.26%, Taiwan -0.50%, Singapore -1.31%, South Korea -1.31%, India +0.51%. Hong Kong and Australia were closed for the Boxing Day holiday.

The dollar index (DXY00 +0.21%) is up +0.20%. EUR/USD (^EURUSD +0.28%) is down -0.11%. USD/JPY (^USDJPY -0.73%) is up +0.27%.

Mar 10-year T-note prices (ZNH19 +0-015) are up +1.5 ticks at a new contract high.

ECB Governing Council member Lane said, “the balance of risks is shifting to the downside” due to “the mixed signals about the momentum in the global business cycle and the extraordinary high levels of policy uncertainty, with businesses and households expressing concerns about the future of the global trading system and, more locally, Brexit.”

U.S. Stock Preview

Key U.S. news today includes: (1) weekly MBA mortgage applications (previous -5.8% to 325.9 with purchase sub-index -6.8% to 238.6 and refi sub-index -2.3% to 832.2), (2) Oct S&P CoreLogic composite-20 home price index (expected +0.3% m/m and +4.8% y/y, Sep +0.33% m/m and +5.15% y/y), (3) Dec Richmond Fed manufacturing survey (expected +1 to 15, Nov -1 to 14), (4) Treasury auctions $18 billion of 2-year floating rate notes and $41 billion of 5-year T-notes.

Notable Russell 1000 earnings reports today include: none.

U.S. IPO's scheduled to price today: none.

Equity conferences during the remainder of this week: none.

Market Comments

Mar S&P 500 E-minis (ESH19 +0.66%) this morning are up +14.50 points (+0.62%). Monday's closes: S&P 500 -2.71%, Dow Jones -2.91%, Nasdaq 100 -2.43%. The S&P 500 on Monday fell to a new 1-3/4 year low and closed sharply lower. Stocks were undercut by last Friday's Bloomberg report that President Trump has asked his aides about firing Fed Chair Powell. There were also concerns that Treasury Secretary Mnuchin might know something the markets don't know after he called the CEOs of the biggest U.S. banks over the weekend to confirm adequate liquidity in the banking system.

Mar 10-year T-notes (ZNH19 +0-015) this morning are up +1.5 ticks at a fresh contract high. Monday's closes: TYH9 +12, FVH9 +9. Mar 10-year T-notes on Monday closed higher on continued safe-haven demand as stocks plunged again and as concerns emerged about whether President Trump might try to fire Fed Chair Powell. T-note prices were undercut by supply overhang as the Treasury this week sells $131 billion of T-notes.

The dollar index (DXY00 +0.21%) this morning is up +0.19 (+0.20%). EUR/USD (^EURUSD +0.28%) is down -0.0012 (-0.11%). USD/JPY (^USDJPY -0.73%) is up +0.30 (+0.27%). Monday's closes: Dollar Index -0.403 (-0.42%), EUR/USD +0.0034 (+0.30%), USD/JPY -0.77 (-0.69%). The dollar index on Monday closed lower on foreign investor concern about whether President Trump might try to fire Fed Chair Powell and by Monday's -5 bp decline in the 10-year T-note yield to 2.74%, which hurt the dollar's interest rate differentials.

Metals prices this morning are higher. Feb gold (GCG19 +0.25%) is up +4.2 (+0.33%) at a 6-month high. Mar silver (SIH19 +0.64%) is up +0.125 (+0.84%) and Mar copper (HGH19 +1.54%) is +0.041 (+1.54%). Monday's closes: Feb Comex gold (GCG19) on Monday closed up +13.7 (+1.09%) and March silver closed up +0.118 (+0.80%). Precious metals on Monday rallied on the -0.3% sell-off in the dollar index and on safe-haven demand after the U.S. stock market fell sharply again on Monday. There was also safe-haven demand for precious metals after Bloomberg's report late Friday that President Trump has repeatedly told aides in recent days that he wants to fire Fed Chair Powell, which would damage the traditional independence of the Fed. The markets on Monday were also a bit alarmed to hear that Treasury Secretary Mnuchin called CEOs of the six largest U.S. banks over the weekend for a welfare check, although he received assurances that there is adequate liquidity to deal with the recent market volatility. The turmoil in global equity markets has boosted demand for gold as a store of wealth after long gold positions in ETFs rose to a 5-3/4 month high last Friday. Fund selling of silver continues as long silver positions in ETFs last Friday fell for a fourth consecutive session to a new 10-1/2 month low.

Feb crude oil prices (CLG19 +1.69%) this morning is up 88 cents (+2.07%) and Feb gasoline (RBG19 +1.27%) is up +2.10 (+1.70%). Monday's closes: Feb WTI crude oil (CLF19) on Monday closed sharply lower by -3.06 (-6.71%) and Feb Brent crude (CBG19) closed -3.35 (-6.22%). Feb RBOB gasoline (RBF19) on Monday closed down -6.72 cents per gallon (-5.15%). Crude oil prices on Monday extended the recent plunge as concerns continue about excess supply and weak demand. Crude oil prices on Monday also saw weakness after the U.S. stock index extended its plunge, thus undercutting confidence about the economy and energy demand. There was carry-over weakness on Monday from last Friday's bearish Baker Hughes report, which showed that the number of active U.S. oil rigs in the week ended Dec 21 rose sharply by +10 rigs to 883 rigs, which was just 5 rigs below the 3-3/4 year high of 888 rigs posted the week of Nov 16. The oil markets ignored Monday's comments by OPEC oil ministers trying to provide reassurance that OPEC+ will cut production by enough to soak up excess supply in 2019. OPEC President and UAE energy minister Suhail Al Mazrouei said that the world oil glut will be removed by Q1 and that OPEC has the option to hold an emergency meeting in 2019 to cut production further if the 1.2 million bpd cut is not enough. Iraq's oil minister said that OPEC wants the production cut to be for the whole year and that there could be a supply shortage in Q3.

Overnight U.S. Stock Movers

U.S. retailers may initially move higher this morning after Mastercard said U.S. retail sales grew 5.1% this holiday season.

Mastercard (MA -0.31%) was upgraded to 'Buy' from 'Hold' at Edward Jones.

Norwegian Cruise Line Holdings Ltd (NCLH -3.04%) may initially open lower this morning after it was removed from Wedbush's “Best Ideas” list.

Marine Products (MPX -4.17%) was upgraded to 'Neutral' from 'Sell' at B Riley FBR with a price target of $16.

NeuroMetrix (NURO -2.86%) was rated a new 'Buy' at HC Wainwright & Co LLC with a price target of $5.