First Call - Hedge Fund Telemetry

S&P futures down 0.17%, well off their worst levels. Asian markets mixed Wednesday. China a laggard following back-to-back 1%+ gains. European markets narrowly mixed. Treasuries firmer across the curve. Dollar lagging euro, but a bit better vs yen. Gold up 0.47%, extending its recent bounce. WTI crude nearly up over 2% following bullish inventory data. Copper back on the defensive, down 0.5% following recent 5%+ rebound after briefly entering bear market territory last week.
Trump controversy dominating the headlines again, though as has been the case throughout the bulk of his tenure, market impact has been fairly muted. Trump’s former personal lawyer, Michael Cohen, reached a plea deal yesterday related to tax fraud and campaign violations. His lawyer also said Cohen testified that Trump directed him to commit a crime. Separately, former Trump campaign manager Paul Manafort convicted on eight charges on Tuesday.
Latest sign of market resilience fits into all the discussion about record bull market and recent retest of late-January highs. Fundamental narrative remains upbeat on the back of strong corporate earnings, buybacks, late-cycle fiscal stimulus, US economic outperformance, elevated business and consumer confidence, and a Fed tightening cycle that is expected to remain gradual.
Outside of Trump, somewhat better trade headlines as US could announce a handshake agreement with Mexico on NAFTA on Thursday. However, key hurdles remain and Trump also reiterated threat to slap a 25% tariff on European autos at a campaign rally. US and China set to renew trade talks today. Quiet elsewhere on the macro front. Washington Post noted Fed Chair Powell privately stressed that the central bank will remain independent.
The likelihood of a December hike, currently 55%). 2pm Fed Minutes today, and then Chair Powell gives a speech Friday.
A record intraday for the S&P yesterday, but it couldn’t hold its gains. The index topped out at 1pm, and sold off 10 points to close near session lows.
The US yield curve continues to quietly flatten; the 2/10 Yr spread has fallen for 9 of the last 10 sessions and has made new 11 year lows once again overnight.
Big outperformance from SMID cap yesterday while both small and mid cap had DeMark upside exhaustion signals. The Russell 2k outperformed the S&P by 90 bps to make both a record intraday and closing high. And YTD the Index is +11.9% vs. the S&P +7.1%.
Target up after earnings, Lowe's down after earnings. Still seeing mixed retail earnings.

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