Morning Call: Trade tensions between the U.S. and China weighs on stocks; Dec E-mini S&Ps down -0.13%; Dec 10-year T-notes down -3 ticks to a 1-1/2 month low.
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 ESZ18 - S&P 500 E-Mini
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ESZ182,552.50+16.75+0.66%
DXY0096.907-0.197-0.20%
ZNZ18121-005+0-020+0.05%
GCZ181,249.2s+1.8+0.14%
SIZ1814.585s-0.054-0.37%
HGZ182.6860+0.0150+0.56%
CLV1870.80s-0.32-0.45%
RBV182.1012s+0.0188+0.90%
ST43.06+1.08+2.57%
HRL43.26+0.09+0.21%
WFC46.52-0.09-0.19%
AVGO249.67-4.46-1.76%
LULU119.20+0.33+0.28%
MBUU34.94-1.64-4.48%
AXP101.02-0.16-0.16%
TMO230.30+1.43+0.62%
ARMK30.45-0.71-2.28%
UNH252.97-5.10-1.98%
BVX5.55-0.42-7.04%

Overnight Markets and News

Dec E-mini S&Ps (ESZ18 -0.11%) this morning are down -0.13% and European stocks are down -0.01% as U.S./China trade concerns linger. The WSJ reported that China may turn down a U.S. offer of trade talks if the U.S. imposes tariffs on an extra $200 billion of Chinese goods. President Trump tweeted early this morning that "if countries will not make fair deals with us, they will be tariffied." Higher interest rates added to negative sentiment for equities as the German 10-year bund yield climbed to a 1-1/2 month high of 0.468% on hawkish comments from ECB Governing Council member Vasiliauskas who said there’s no reason to extend ECB stimulus. Losses in European stocks were limited after the Bundesbank said in its monthly economic report that "the upswing in Germany should fundamentally remain intact, not least because of the persistently good domestic economy." Asian stocks settled mostly lower: Japan closed for holiday, Hong Kong -1.30%, China -1.11%, Taiwan -0.36%, Australia +0.32%, Singapore -0.63%, South Korea -0.69%, India -1.33%. Markets in Hong Kong and China closed lower on U.S./China trade tensions along with concern about damages from Typhoon Mangkhut which hit Hong Kong and southern China over the weekend.

The dollar index (DXY00 -0.24%) is down -0.21. EUR/USD (^EURUSD +0.35%) is up +0.29% on hawkish comments from ECB Governing Council member Vasiliauskas who said, "there's no ground to talk about extension of stimulus at this point in time given the domestic euro area growth." USD/JPY (^USDJPY unch) is up +0.02%.

Dec 10-year T-note prices (ZNZ18 -0-030) are down -3 ticks at a 1-1/2 month low.

ECB Governing Council member Vasiliauskas said "international trade is raising questions, but there's no ground to talk about extension of stimulus at this point in time given the domestic euro area growth."

The Bundesbank in its monthly economic report said, "The upswing in Germany should fundamentally remain intact, not least because of the persistently good domestic economy." The overall pace of economic expansion in Germany should "improve markedly" after the auto industry overcomes "conversion problems" to new emission-test procedures.

China Aug new home prices rose in 68 of 70 cities the index tracks, the most in a year.

U.S. Stock Preview

Key U.S. news today includes: (1) Sep Empire manufacturing survey general business conditions index (expected -2.6 to 23.0, Aug +3.0 to 25.6).

Notable Russell 2000 earnings reports today include: FedEx (consensus $3.82), Oracle (0.68).

U.S. IPO's scheduled to price today: none.

Equity conferences during the remainder of this week: AFA Air & Space Conference on Mon, Global Product Data Interoperability Summit on Mon, Buckingham Research Group Insurance/Reinsurance Conference on Mon, J.P. Morgan U.S All Stars Conference on Mon-Tue, AI Hardware Summit on Tue, Janney Montgomery Scott Healthcare Conference on Tue, RBC Capital Markets Aircraft Leasing Investor Day on Tue, Moody's Real Estate Conference on Tue, Gastech Conference - T1.7 on Tue-Wed, Autonomous Research Future of Commerce Symposium on Thu, BMO Capital Markets Real Estate Conference on Thu, Buckingham Industrials Conference on Thu, D.A Davidson Diversified Industrials & Services Conference on Thu, IAA Commercial Vehicles Trade Show on Thu, Keefe, Bruyette, & Woods Insurance Conference on Thu.


Market Comments

Dec S&P 500 E-minis (ESZ18 -0.11%) this morning are down -3.75 points (-0.13%). Friday's closes: S&P 500 +0.53%, Dow Jones +0.57%, Nasdaq 100 +0.98%. The S&P 500 on Friday posted a 2-week high and closed higher on the preliminary-Sep University of Michigan U.S. consumer sentiment index report of +4.6 to a 6-month high of 100.8, stronger than expectations of +0.4 to 96.6. There was also strength in energy stocks as crude oil prices rose +0.58%. Stocks were undercut by the U.S. Aug retail sales report of +0.1% and +0.3% ex autos, weaker than expectations of +0.4% and +0.5% ex autos. There were also heightened trade tensions after reports that President Trump instructed aides to proceed with tariffs on $200 billion of Chinese products despite the resumption of trade talks with China.

Dec 10-year T-notes (ZNZ18 -0-030) this morning are down -3 ticks at a fresh 1-1/2 month low. Friday's closes: TYZ8 -8.0, FVZ8 -4.75. Dec 10-year T-notes on Friday tumbled to a 1-1/2 month low and closed lower. T-note prices were undercut by hawkish comments from Chicago Fed President Evans who said that due to continued strong U.S. economic data, he would not be surprised to see four Fed rate hikes this year. T-notes were also undercut by the larger-than-expected increase in the University of Michigan U.S. Sep consumer sentiment index to a 6-month high, which was hawkish for Fed policy.

The dollar index (DXY00 -0.24%) this morning is down -0.203 (-0.21%), EUR/USD (^EURUSD +0.35%) is +0.0034 (+0.29%), and USD/JPY (^USDJPY unch) is +002 (+0.02%). Friday's closes: Dollar Index +0.409 (+0.43%), EUR/USD -0.0065 (-0.56%), USD/JPY +0.14 (+0.13%). The dollar index on Friday closed higher on the jump in the 10-year T-note yield to a 6-week high, which boosted the dollar's interest rate differentials. The dollar was also boosted by strength in USD/JPY which climbed to a 1-3/4 month high as a rally in stocks undercut the safe-haven demand for the yen.

Metals prices this morning are mixed with Dec gold (GCZ18 +0.04%) unch, Dec silver (SIZ18 +0.48%) +0.053 (+0.37%) and Dec copper (HGZ18 -0.93%) -0.023 (-0.85%). Friday's closes: Dec gold -2.7 (-0.22%), Dec silver -0.049 (-0.34), Dec copper +0.70 (+0.26%). Metals on Friday closed lower on strength in the dollar and on hawkish comments from Chicago Fed President Evans who said he would not be surprised if the Fed hiked interest rates four time this year. Gold prices were undercut by continued fund liquidation of gold as long gold positions in ETFs fell to a 11-3/4 month low Thursday.

Oct WTI crude oil prices (CLV18 +0.67%) this morning are up +49 cents (+0.71%) and Oct gasoline (RBV18 +1.17%) is +2.37 (+1.20%). Friday's closes: Oct crude oil +0.40 (+0.58%), Oct gasoline -2.27 (-1.14%). Oct crude oil and gasoline on Friday settled mixed. Crude oil prices were undercut by a stronger dollar and by the decline in the crack spread to a 1-week low, which reduces the incentive for refiners to purchase crude oil to refine into gasoline. Crude oil prices were supported by looming full U.S. sanctions on Iran in November, which will take oil supplies off the global market and which have already cut Iranian oil exports by about a third.

Overnight U.S. Stock Movers

Sensata Technologies Holding PLC (ST +1.31%) was downgraded to 'Underweight' from 'Equal-Weight' at Morgan Stanley with a price target of $47.

Hormel Foods (HRL -0.66%) was downgraded to 'Market Perform' from 'Outperform' at BMO Capital Markets.

Wells Fargo (WFC -0.49%) was upgraded to 'Buy' from 'Hold' at Edward Jones.

Broadcom (AVGO +0.39%) was upgraded to 'Buy' from 'Neutral' at Nomura with a price target of $300.

Lululemon Athletica (LULU -0.58%) was upgraded to 'Outperform' from 'Market Perform' at Wells Fargo Securities with a price target of $200.

Malibu Boats (MBUU +1.55%) was upgraded to 'Buy' from 'Neutral' at B Riley FBR with a price target of $60.

American Express (AXP +0.83%) was upgraded to 'Overweight' from 'Equal-Weight' at Stephens

Thermo Fisher Scientific (TMO -0.83%) was downgraded to 'Neutral' from 'Buy' at Goldman Sachs.

Aramark (ARMK +0.50%) was rated a new 'Outperform' at Bernstein with a price target of $52.

UnitedHealth (UNH -0.07%) was rated a new 'Outperform' at Cowen with a price target of $308.

Bovie Medical (BVX +11.73%) rose 3% in after-hours trading as it extended Friday's 12% rally after it was rated a new 'Buy' at Dougherty & Company LLC.