CapMarketComment: Wednesday March 1 Daily Market Primer

Stocks drop
Trump talks
March hike probability spikes
China and Europe PMIs solid, UK disappoints
Personal spending and inflation up

Happy March. Stocks dropped yesterday, with the Dow down just .1% and the S&P down .2%, but the NASDAQ and the R2000 got hit harder. Treasuries fell on Fed president speeches, and the US 10 year has crept back up to about 2.4%. President Trump gave his highly anticipated speech to congress last night, and it seems to be getting fairly good reviews as Mr. Trump struck a conciliatory tone and stayed on message. However, the speech was short on policy details market analysts were looking for http://bit.ly/TrumpTalks, http://bit.ly/TrumpTalksWSJ. The Japanese stock market had a good day, up 1.4%, and stocks in the rest of Asia and Europe are also up, oil is on the moving again, as are S&P futures, at +.5%.

	LAST	CHANGE	% CHANGE
DJIA	20,812.24	-25.20	-0.12%
Nasdaq	5,825.44	-36.46	-0.62%
S&P 500	2,363.64	-6.11	-0.26%
Russell 2000	1,386.68	-21.29	-1.51%
Global Dow	2,665.63	4.39	0.16%
Stoxx Europe 600	371.39	1.19	0.32%
Nikkei 225	19,393.54	274.55	1.44%
UK: FTSE 100	7,348.47	85.03	1.17%
CBOE Volatility	12.06	-0.03	-0.25%
Australia: S&P/ASX 200	5,704.80	-7.40	-0.13%
China: Shanghai Composite	3,246.93	5.20	0.16%
Hong Kong: Hang Seng	23,776.49	35.76	0.15%
Europe Dow	1,606.36	16.77	0.84%
India: S&P BSE Sensex	28,984.49	241.17	1.05%
France: CAC 40	4,941.68	83.10	1.71%
Germany: DAX	12,004.16	169.75	1.43%
Italy: FTSE MIB	19,321.18	407.90	2.16%
Spain: IBEX 35	9,725.80	170.30	1.78%
U.S. 3 Month	0.627	0/32
U.S. 2 Year	1.308	-3/32
U.S. 5 Year	1.979	-7/32
U.S. 10 Year	2.429	-10/32
U.S. 30 Year	3.023	-17/32
Germany 2 Year	-0.862	-2/32
Germany 10 Year	0.266	-18/32
Crude Oil	54.16	0.15	0.28%
Brent Crude	56.71	0.2	0.35%
Natural Gas	2.789	0.015	0.54%
S&P GSCI	403.95	1.73	0.43%
E-mini S&P 500	2376.25	13.5	0.57%

Another Greek bailout is underway, but unlike the dark days of “Grexit” its barely making the news, much less moving markets. The market implied probability of a March rate hike hit 80% this morning after Fed presidents Williams and Dudley expressed confidence in the Fed’s ability and willingness to raise rates , and Williams said it us up for “serious consideration” in speeches yesterday. Chinese, Eurozone, and UK PMI’s all came in, with China and Europe indicating strong manufacturing growth, but the UK below expectations.

US consumer spending grew .2% in January, less than the expected .3%. This follows a 5% increase in December. Incomes were up 4%, though inflation adjusted incomes dropped, as inflation was up .4% from December and 1.9% year over year. The core PCE number, which excludes the more volatile food and fuel components, rose .3% month over month and 1.7% year over year. The Atlanta Fed’s GDP Now real time forecast is showing 2.5% this morning (yes there’s an app for that).

Here’s the news:

Trump's speech

In his first address to Congress, President Donald Trump struck a conciliatory tone, urging Americans to set aside conflict. The speech, however, was short on the policy details that some investors were hoping for, with the president opting for broad promises —"I am going to bring back millions of jobs" — rather than specifics. While U.S. stock futures pared their gains slightly while Trump was on his feet, markets were generally unmoved by the rhetoric.

March hike

Market bets of a rate increase this month jumped after speeches from Federal Reserve officials signaled a greater willingness to tighten monetary policy. San Francisco Fed President John Williams said he expects an interest-rate increase to receive “serious consideration” at the March 14-15 FOMC meeting. Evercore ISI have switched their call for the next rate increase to March, from May, citing comments from New York Fed President William Dudley as the reason for the change. The dollar is rallying on the increasing March speculation.

PMI day

China’s official factory gauge climbed to 51.6 in February. The data came ahead of this weekend's National People's Congress, which will set the administration's growth target for the year. Euro-area manufacturing accelerated for a sixth month in February, to 55.4, with signs of inflation pressures building in the economy. In the U.K., IHS Markit’s Purchasing Managers Index fell to 54.6 for the month, below economists' expectations of 55.8. In a worrying sign for the economy, U.K. consumer credit remained below average in January, according to Bank of England data published this morning. Markit are due to release U.S. manufacturing PMI at 9:45 a.m. Eastern Time.

Markets higher

Overnight, the MSCI AC Asia Pacific Index dropped 0.2 percent, while Japan's Topix Index rallied 1.2 percent as the dollar rose against the yen. In Europe, the Stoxx 600 Index had gained 1.1 percent by 5:34 a.m. as positive economic data lifted stocks. S&P 500 futures climbed 0.5 percent after stocks in the U.S. failed to extend their winning run in yesterday's session.

U.S. data due

Personal income and spending data for January is due to be published at 8:30 a.m. As well as Markit's Manufacturing PMI later, we also get ISM Manufacturing at 10:00 a.m. At 2:00 p.m the Fed releases the beige book. Throughout the session today vehicle-sales data for February will come in, with economists predicting total vehicle sales to increase to 17.7 million for the month.

Trump addresses America. Speaking before Congress, President Donald Trump laid out his "America First" vision in an hour-long speech that touched on job creation, immigration, national security, and international trade.
Fed rate-hike odds surge. The market sees an 80% chance that the Federal Reserve will raise its benchmark interest rate by 25 basis points at its March meeting. That's up from 50% on Tuesday and 34% last Thursday.
China keeps chugging along. China's manufacturing PMI, released by the National Bureau of Statistics, rose by 0.3 points to 51.6 in February, beating the slowdown to 51.1 that economists were anticipating. Nonmanufacturing PMI came in at 54.2 in February, down from the January's 54.6. Any reading above 50.0 indicates an expansion.
Snap's IPO has a lot of demand. Strong demand could put Snap's initial-public-offering price as high as $18 a share, giving the company a valuation of $25 billion, Business Insider's Rachael Levy and Portia Crowe report, citing people with knowledge of the matter. Shares are expected to begin trading on Thursday.
2 of the biggest local-TV station owners in the US are talking about a deal. Sinclair Broadcast Group has approached its rival Tribune Media about a potential combination, Reuters reports.
Hershey is eliminating 15% of its workforce. The chocolate maker says that it is embarking on a multiyear program to improve profitability and that it expects that program to incur pretax charges of $375 million to $425 million and provide $80 million to $100 million in benefits. Shares tumbled as much as 7% after Tuesday's closing bell.
Weight Watchers explodes after beating on earnings and guidance. Shares rallied by as much as 15% after the company announced earnings of $0.20 a share, swinging from a loss in the same period a year ago, and guidance that easily outpaced expectations.
Stock markets around the world are higher. Japan's Nikkei (+1.4%) led the advance in Asia, and Germany's DAX (+1.5%) is out front in Europe. The S&P 500 is on track to open up 0.6% near 2,377.
Earnings reports keep coming. American Eagle, Best Buy, and Dollar Tree are among the names reporting ahead of the opening bell, while Broadcom, Monster Beverage, and Shake Shack release their quarterly results after markets close.

US economic data is heavy. Personal income and spending and PCE prices will be released at 8:30 a.m. ET before Markit manufacturing PMI and ISM Manufacturing cross the wires at 9:45 a.m. ET and 10 a.m. ET. Then, at 2 p.m. ET, the Fed's Beige Book is due out. US auto sales data will be announced throughout the day. The US 10-year yield is up 4 basis points at 2.43%.

A Sharp Change of Tone
President Trump on Tuesday intoned a remarkably different rhetoric from the campaign trail and his early days in the White House as he delivered an impassioned plea for Congress to capitalize on a political uprising and unite behind significant overhauls of health care and tax laws. Mr. Trump opened his first congressional address with a call for unity over attacks on Indians in Kansas and the desecration of Jewish cemeteries: “We are a country that stands united in condemning hate and evil in all its forms.” He then offered guidelines for Congress to repeal and replace the Affordable Care Act, rebuild the nation’s roads and bridges, and find an elusive compromise on an overhaul of immigration laws. Mr. Trump’s ability to persuade his fellow Republicans will be the first major test of his leadership after an erratic start to his administration. Meanwhile, Mr. Trump will soon sign a revised executive order banning certain travelers from entering the U.S. Unlike the original version, it is likely to apply only to future visa applicants from targeted countries.

Moment of Veritas
The new head of Harvard University’s endowment is wasting little time getting his turnaround plan into place. Just weeks after starting as head of the $36 billion endowment in December, N.P. Narvekar, who goes by “Narv,” said in late January that he would lay off half the staff. Traders have until the end of March to wind down their investment portfolios. Harvard Management Co. is preparing to close its hallmark internal hedge funds and invest nearly all its money with outside money managers. It also is overhauling how it makes its investment decisions, adopting a generalist approach instead of having staffers specialize in specific areas. The decisions represent the biggest overhaul of the world’s wealthiest endowment in decades and a repudiation of an investment framework used by countless pensions and other institutional investors.

Crash and Burn
Burnout is claiming victims at work, and companies aren’t ready to cope, say psychology and human-resources experts. An always-on work culture, combined with feelings of job insecurity and directives to do more with less—even when business is booming—has driven workers to the breaking point, they say. And the problem appears to be worsening, resulting in steep turnover and health costs. Younger workers may be especially prone to burnout, which begins when a worker feels overwhelmed for a sustained period, then apathetic and ultimately numb. Those feelings—historically more common in professions such as medical resident and litigator, jobs known for round-the-clock schedules and high pressure—are growing widespread. We offer tips for how to tell if you’re burned out.

The Urge to Splurge
A soaring U.S. stock market is propelling sales of super-luxury cars. Buyers are feeling more confident about shelling out six figures for a set of wheels as market investors have been on a tear in recent months. Sales of vehicles made by Volkswagen’s Bentley, Ferrari, Fiat’s Maserati, Porsche and BMW’s Rolls-Royce jumped an estimated 18% since the U.S. presidential election through January, compared with the same period in 2016. U.S. auto sales as a whole, meanwhile, were flat in the three months following the election. Dubbed the “wealth effect” by economists, perceived gains in portfolio values can prompt ultrahigh-net-worth buyers to splurge on hard assets such as fine art, real estate and luxury cars. Attractive financing and, in some cases sizable discounts, are also aiding sales of the most expensive vehicles on the market.

Greece's auditors reportedly draft bailout proposals

Auditors for Greece are assembling a list of policies that could be implemented to persuade European creditors to release the next round of bailout funding for Greece, people familiar with the matter said. Greek officials expect to resolve their differences with the EU and the International Monetary Fund soon but are worried that it might be difficult to persuade Greek lawmakers to back additional reforms, sources said. Bloomberg (28 Feb.),

S&P 500 could top 4,000 in eight years, and it's not because of Trump.

Top hedge funds of 2016 share their best bets for this year.

Trump was going to kill Mexico's peso. It's doing just fine.

In video, Uber CEO argues with driver over falling fares.

A delivery man just became one of the richest people in China.

Why it's so hard to build the next Silicon Valley.

For Snap, the Truth Will Be in Advertising

Target Gets a Lesson That Low Prices Matter

China’s Heavy Hand Pushes Preferred Pick for Hong Kong’s Next Leader

Sessions Says Justice Department to Ease Up on Police Probes

Trump Trade Policy Expected to Seek Smaller WTO Role in the U.S.

Facebook to telcos: Forget hardware empires — let's all share.

The hot meme among traders and strategists going into last night's Trump speech was that he needed to finally deliver some hard details on his policy plans: taxes, trade, healthcare, and fiscal stimulus. But Trump didn't really go big on details, and still markets are higher. So now the narrative shift is going to be: "Well, he didn't deliver the details we wanted, but that's fine since he showed himself to be 'presidential,' and 'statesmanlike,' and he's built himself up some badly need political capital." A poll by CNN showed that 57 percent of people who watched the speech had a "very positive" reaction. Of course at some point -- presumably -- actual laws will have to be voted on and passed. But from a markets standpoint, for the moment, the story is going to be the reset at the White House, and how there's an opportunity now to really get things done.