Schwab takes out the competition

  • Schwab takes out the competition – leaving E-Trade at the alter
  • Xi – makes rare comments on the state of trade – attempting to appear calm
  • US issues bill to support Hong Kong human rights
  • Global markets in rally mode after a week of pressure.
  • GTry the Sausage stuffing for your Turkey.

By KENNY POLCARI

So it’s done. Charlie forces commissions to zero, forcing the others to match.

It causes margins to compress, discount broker stocks to sell off, and then sneaks in and takes out TD Ameritrade for more than it was trading at prior to the commission change, all as the industry continues to consolidate. SCHW and AMTD both surged on the news while E-Trade sold off because no one wants them. Or maybe not, GS suddenly rumored to be considering a purchase in the space. Hmmmmm? Not so sure I believe that.

So stocks treaded water all day, not sure which way to go as investors/traders/algos continued to try and decipher the headlines over trade: we’re on, then we’re off. This has caused the latest round of confusion. China reaches out and invites the US trade negotiators back to Beijing, but DC has not responded yet, attempting to create a standoff-ish tone.

And while the market is a bit confused right now, we continue to churn closer to the highs than not. It should not surprise anyone that while the headlines remain benign, there has to be some consolidation in the latest surge higher. By the end of the day, the Dow gave up 54 points, the S&P lost 5 points, the Nasdaq gave up 20 points, and the Russell shed 8 points.

Oil. The energy markets tore higher yesterday on news that OPEC and Russia will most likely extend their current levels of production (or rather their current level of production CUTS) through March 2020 when they meet in 2 weeks. Additionally, oil found support when it was believed that the US and China were closer to a deal than not, suggesting increasing demand. The move has taken US WTI (crude) back up and through all three levels of trend line resistance, leaving the 200-day moving average as support now vs. resistance. At $58.67, oil is up 6% just this week suggesting that the oil markets think we are closer to a deal than not.

This caused the XLE (Energy ETF) to surge as well taking that sleeping giant up and through two levels of trend line resistance, leaving this ETF up 7% since the start of the fourth quarter. If the tone of the talks feel like we are onto something, we could see XLE move to challenge its long term resistance trend line at $62.14. If trade talks fail or at least drag on, then oil and the energy complex will once again back off a bit.

The tone around the world this morning is a bit more bullish.

Most Asian markets ended the week higher after four days of pressure. While there isn’t any news on trade, the advance overnight was more of a technical bounce. Xi Xi was quoted as telling the world that China wants to move towards a Phase One trade deal with the US, but one that is built upon “mutual respect and equality” saying:

“We didn’t initiate this trade war and it isn’t something we want.  When necessary, we will fight back, but we have been working actively to try not to have a trade war.”

In addition, China is voicing their displeasure with the latest move out of DC, after we passed a human rights bill aimed right at China and Hong Kong. As far as China is concerned, we need to stay out of “internal issues” for that country and this as well as Xi’s latest comments put pressure on the CSI 300 (China Index).

Japan +0.43%, Hong Kong +0.48%, China lost 1% while ASX advanced 0.55%

Stocks in Europe are in rally mode this morning as well.

German GDP rose by 0.1% (that’s good) and we are waiting for PMI numbers to be released for France, Germany, and the Eurozone. While they were expected to be in line, the rumor is that there might be a small miss. In the UK, the Labour party launched their “manifesto” or their platform as they prepare for the upcoming election. They “promise” to raise corporate taxes… Hmmmm, ok. That works, I guess.

FTSE + 1%, CAC 40 +0.25%, DAX +0.21%, EUROSTOXX +0.28%, SPAIN  +0.51%, and ITALY +0.16%.

US futures are trending higher this morning after four days of losses.

Dow futures are up 46 points, S&Ps are +6, the Nasdaq is up 26 points, and the Russell is ahead by 6 points. Do not expect the markets to do much as investors try to sort all of the trade news out. Economic data today includes Markit US Services PMI – exp of 51 and Markit US Manufacturing PMI – exp of 51.4 – if true – then both remain in the “expansionary” mode (bullish).

S&P closed at 3103, or down 0.8% from last week’s highs. We have tested below 3100 but it feels like investors are trying to end the week on the north of 3100. This is all about optics. My gut says we will remain in the 3100/3125 range.

Take good care. Have a great weekend.

Kp

Send your feedback here: AskKenny@sevenfigurepublishing.com

Follow me on Twitter: @KennyPolcari

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