Morning Call: Stocks move higher and T-note yields fall ahead of the conclusion of today's FOMC meeting; Mar E-mini S&Ps up +0.83%.
Related Stocks
 ESH19 - S&P 500 E-Mini
SymLastChgPct
ESH192,811.89s+4.64+0.17%
DXY0096.651s+0.156+0.16%
ZNH19122-220s+0-060+0.15%
GCG191,325.1s-0.8-0.06%
SIH1915.345s-0.027-0.18%
HGH192.8360s-0.0640-2.21%
CLF1947.20s+0.96+2.08%
RBF191.3237s-0.0025-0.19%
DRI117.44+1.33+1.15%
LLY128.30-0.01-0.01%
ULTA330.52-4.61-1.38%
SLG89.72-1.22-1.34%
XYL77.06-2.19-2.76%
UAA20.72-0.98-4.52%
FDX173.99-5.00-2.79%
MU41.62-2.37-5.39%
JBL26.87-0.70-2.54%
ALKS33.96-0.98-2.80%

Overnight Markets and News

Mar E-mini S&Ps (ESH19 +0.87%) this morning are up +0.83% on optimism a resolution to the China-U.S. trade rift can be found after China's Ministry of Commerce said both sides have held several rounds of talks in recent weeks and that they plan to hold a formal, face-to-face meeting in Jan. U.S. Treasury Secretary Mnuchin said both sides are focused on trying "to document an agreement" by a Mar 1 deadline for their current tariffs truce to run out. The FOMC is expected to raise the funds rate target by 25 bp at the conclusion of today's policy meeting, although the 10-year T-note yield slid to a 6-1/2 month low of 2.798% today on expectations the FOMC will signal a slower pace or even a pause in interest rate hikes next year. European stocks are up +0.66% as Italian bank stocks rallied after the European Commission decided against launching a disciplinary procedure against Italy over its budget and said that concessions by Italy on its budget meant the country didn't warrant triggering the excessive deficit procedure. Asian stocks settled mostly lower: Japan -0.60%, Hong Kong +0.20%, China -1.05%, Taiwan +0.66%, Australia -0.16%, Singapore +0.43%, South Korea +0.60%, India +0.38%. Asian markets followed the slide in the S&P 500 Tuesday to a fresh 14-1/2 month low as the Shanghai Composite fell to a 1-1/2 month low and the Nikkei Stock Index dropped to an 8-1/2 month low.

The dollar index (DXY00 -0.28%) is down -0.31%. EUR/USD (^EURUSD +0.33%) is up +0.35% at a 1-week high. USD/JPY (^USDJPY -0.15%) is down -0.16% at a 1-1/2 month low.

Mar 10-year T-note prices (ZNH19 +0-010) are up +2 ticks at a new contract high.

The Japan Nov trade balance was in deficit by -737.3 billion yen, wider than consensus of -630.0 billion yen and the largest deficit in 10 months. Nov exports rose +0.1% y/y, weaker than expectations of +1.2% y/y. Nov imports rose +12.5% y/y, stronger than expectations of +11.8% y/y.

German Nov PPI of +0.1% m/m and +3.3% y/y was stronger than expectations of -0.1% m/m and +3.1% y/y.

UK Nov CPI rose +0.2% m/m and +2.3% y/y, right on expectations. Nov core CPI rose +1.8% y/y, right on expectations.

UK Dec CBI trends total orders fell -2 to 8, stronger than expectations of -4 to 6.Dec CBI trends selling prices unexpectedly rose +5 to 14, stronger than expectations of -1 to 8.

U.S. Stock Preview

Key U.S. news today includes: (1) weekly MBA mortgage applications (previous +1.6% to 346.0 with purchase sub-index +2.5% to 256.1 and refi sub-index +1.8% to 851.6), (2) Q3 current account deficit (expected -$125.0 billion, Q2 -$101.5 billion), (3) Nov existing home sales (expected -0.4% to 5.20 million, Oct +1.4% to 5.22 million), (4) EIA weekly Petroleum Status Report, (5) FOMC announces interest rate decision (+25 bp increase in fed funds target range expected to 2.25% to 2.50% from current 2.00% to 2.25%) and Fed Chair Jerome Powell will hold a press conference following FOMC meeting.

Notable Russell 1000 earnings reports today include: General Mills (consensus $0.81), Paychex (0.63).

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 +0.87%) this morning are up +21.00 points (+0.83%). Tuesday's closes: S&P 500 +0.01%, Dow Jones +0.35%, Nasdaq 100 +0.67%. The S&P 500 on Tuesday closed little changed. Stocks were supported by the +3.2% increase in U.S. Nov housing starts to 1.256 million (vs expectations of unch at 1.228 mln), and by the unexpected +5.0% increase in Nov building permits to a 7-month high of 1.328 mln. There was also support from strength in technology stocks led by a rally in semiconductor chip makers. Energy stocks were a drag on the overall market as Jan WTI crude oil prices plunged -7.30% to a 1-1/4 year low.

Mar 10-year T-notes (ZNH19 +0-010) this morning are up +2 ticks at a new contract high. Tuesday's closes: TYH9 +6.5, FVH9 +5.25. Mar 10-year T-notes on Tuesday climbed to a 1-week high and closed higher on the plunge in crude oil prices to a 1-1/4 year low, which reduced inflation expectations. T-note prices were also supported by continued safe-haven demand with the global stock market turmoil. T-note prices were undercut by the stronger-than-expected U.S. Nov housing starts and building permits reports.

The dollar index (DXY00 -0.28%) this morning is down -0.299 (-0.31%), EUR/USD (^EURUSD +0.33%) is up +0.0040 (+0.35%) at a 1-week high, and USD/JPY (^USDJPY -0.15%) is down -0.18 (-0.16%) at a 1-1/2 month low. Tuesday's closes: Dollar Index +0.004 (+0.00%), EUR/USD +0.0013 (+0.11%), USD/JPY -0.31 (-0.27%). The dollar index on Tuesday fell to a 1-week low but recovered and closed the day little changed. The dollar was undercut by the decline in the 10-year T-note yield to a 3-1/2 month low, which hurt the dollar's interest rate differentials. USD/JPY dropped to a 1-week low as the global stock market turmoil boosted the safe-haven demand for the yen.

Metals prices this morning are mixed with Feb gold (GCG19 -0.13%) -1.5 (-0.12%), Mar silver (SIH19 +0.20%) +0.019 (+0.13%), and Mar copper (HGH19 +0.47%) +0.013 (+0.49%). Tuesday's closes: Feb Comex gold (GCG19) on Tuesday closed up +1.8 (+0.14%), and Mar Comex silver (SIH19) closed down -0.058 (-0.39%). A slide in the dollar index to a 1-week low Tuesday gave gold prices a boost. Also, recent stock market turmoil that pushed the S&P 500 to a 14-1/2 month low Monday has been a bullish factor for gold on increased demand for gold as a store of wealth after long gold positions in ETFs rose to a 4-3/4 month high Monday. Silver prices were weighed down by industrial metals demand concerns after a keynote speech by Chinese President Xi Jinping failed to offer any new initiatives to spur growth in China's economy. Losses in silver were limited on Tuesday's stronger-than-expected U.S. Nov housing starts report of +3.2% to 1.256 million units (vs expectations of -0.2 to 1.226 million), which was positive for industrial metals demand.

Jan WTI crude oil (CLF19 +0.82%) prices this morning are up +14 cents (+0.30%) and Jan gasoline (RBF19 +0.77%) is +0.61 (+0.45%). Tuesday's closes: Jan WTI crude oil (CLF19) on Tuesday closed down by -$3.64 per barrel (-7.30%) and Feb Brent crude (CBG19) closed down -$3.62 (-6.07%). Jan RBOB gasoline (RBF19) closed down by -0.0599 cents per gallon (-4.25%). The energy complex sold off sharply Tuesday with Jan WTI crude oil at a 1-1/4 year low, Feb Brent crude at a 14-month low, and Jan RBOB gasoline at a 2-year low. Concern about higher global supply spurred fund selling in the energy complex Tuesday after the EIA forecast that U.S. Jan shale-oil crude production will climb to 8.166 million bpd, up +136,000 bpd (+1.7% m/m) from 8.030 million bpd forecast for Dec. Also, crude prices fell back on expectations that Wednesday's weekly EIA data will show crude supplies at Cushing, the delivery point for WTI futures, will climb +1.3 million bbl. Finally, data from the Joint Organizations Data Initiative showed that Saudi Arabian Oct crude production rose to a record 10.64 million bpd and that Saudi Oct crude exports rose to a 22-month high of 7.7 million bpd. A slide in the dollar index to a 1-week low Tuesday was a supportive factor for crude along with expectations that Wednesday's weekly EIA U.S. crude inventories will decline by -3.25 million bbl.

Overnight U.S. Stock Movers

Darden Restaurants (DRI +5.02%) was upgraded to 'Buy' from 'Neutral' at BTIG LLC with a price target of $119.

Eli Lilly (LLY -1.72%) may open higher initially this morning after it forecast 2019 adjusted EPS of $5.90 to $6.00, stronger than consensus of $5.82

Ulta Beauty (ULTA -0.43%) was rated a new 'Buy' at Citigroup with a price target of $315.

SL Green Realty (SLG -0.62%) was downgraded o 'Underweight' from 'Neutral' at JPMorgan Chase.

Xylem (XYL +0.14%) was upgraded to 'Buy' from 'Hold' at Stifel with a price target of $75.

Under Armour (UAA +2.23%) was downgraded to 'Underweight' from 'Neutral' with a price target of $14.

FedEx (FDX +1.55%) fell -5% in after-hours trading after the company reported that the weak European economy is negatively affecting its earnings and outlook.

Micron Technology (MU +0.68%) fell -6% in after-hours trading on a weak Q2 sales outlook.

Jabil (JBL +3.01%) rallied sharply by +11% in after-hours trading after the company's Q2 core EPS forecast beat estimates.

Alkermes (ALKS -3.43%) fell 5% in after-hours trading after Goldman downgraded its rating and cut its target on the company.