1. Moving the markets

Bobbing and weaving best describes today’s session with the major indexes being stuck in a sideways pattern after rebounding from an early dip.

The latest news from the US-China trade debacle points to some progress in that trade negotiators are “laying the groundwork for a delay” of the new 15% import tariffs scheduled to be implemented this coming Sunday.

Meanwhile, the Fed started its 2-day policy meeting with the results being announced tomorrow. Expectations are that interest rates will be held steady. Of concern is Fed chief Powell’s intention of forging consensus towards a “broader revamp of the Fed rate-setting strategy.”

Translated, that means he is favor of letting inflation run above its annual 2% target. To my way of thinking, how can that end well? It’s not that the Fed has a magic wand to rein in inflation, should it suddenly burst out of control. Apparently, historic precedents as to the potentially devastating effects of inflation, such as we’ve seen during the Weimar Republic, are simply ignored.

Adding to this issue is the fact that we are living in a deficit-based spending environment where debt and deficits are soaring relentlessly higher. While these problems have been largely ignored, and are never addressed on any political platform, they represent a piper that eventually will need to get paid.

In the meantime, the markets went nowhere today with the major indexes hugging their respective unchanged lines and slipping slightly in the red.

In the underlying overnight lending market (repos), the troubles continue with liquidity being conspicuously absent. We’ll have to wait and see, if there will be a fallout by the end of this year that could affect equities.

1. Moving the markets

Despite several attempts, the bulls were not able to sustain Friday’s upward momentum, and the major indexes pulled back to close moderately in the red, but the dive into the close could be cause for concern.  

Trade negotiations were in focus again ahead of the looming deadline on US-China tariffs, along with a variety of updates from global central banks.

First, the Fed is set to do its 2-day meeting starting Tuesday, while the ECB, under the new leadership of Christine Lagarde, is scheduled to hold its convention on Thursday.

Of course, traders are cautious never being 100% certain as to the outlook for interest rates and what some commentary on the state of the global economy might contain. That uncertainty will continue into the weekend when on December 15, Trump will decide whether to implement $156 billion in Chinese tariffs or grant an extension.

For now, according to Bloomberg, the S&P 500 in 1919 is tracking its performance from the year 2013 with amazing accuracy, as this chart shows. We’ll find out soon if that performance will deviate in the last few weeks of 2019, or not.

1. Moving the markets

An early morning pop gave way to a drop, which gave way to a slow but steady recovery with the major indexes managing to reclaim their respective unchanged lines by a small margin.

What caused the comeback? Nothing noteworthy, other than a China trade spokesperson uttering the words that computer algos thrive on, namely that the so-called phase 1 negotiations designed to cease tariff hostilities, are “progressing.”

But the spokesman emphasized China’s desire to make existing tariff rollbacks a part of any resolution, which may not sit well with the White House. As a result, the tug-of-war to save face is bound to continue.

On deck tomorrow will be the always eagerly anticipated jobs report with the consensus forecast calling for a gain of 180k new jobs. Anything close to that number will likely give the markets a boost, unless bad trade news provides the bears with something to cheer about.