Day Traders Diary

5/3/18

U.S. equities are on course for a lower open, as the S&P 500 futures are trading 12 points, or 0.5%, below fair value. The S&P 500 has declined in two of this week's three sessions -- most recently on Wednesday, when the benchmark index dropped 0.7%. Week to date, the S&P 500 is down 1.3%.

Investors are already looking ahead to tomorrow's release of the Employment Situation report for April, but they'll have several reports to digest in the meantime; namely, the preliminary readings for first quarter Productivity (Briefing.com consensus +0.8%) and Unit Labor Costs (Briefing.com consensus +3.0%), the March Trade Balance report (Briefing.com consensus -$49.8 billion), weekly Initial Claims (Briefing.com consensus 220K), March Factory Orders (Briefing.com consensus +1.2%), and the ISM Services Index for April (Briefing.com consensus 58.3).

The productivity, unit labor costs, trade balance, and initial claims readings will be released at 8:30 AM ET, while factory orders and the ISM Services Index will be released at 10:00 AM ET.

Two days of trade talks between the U.S. and China are set to begin today in Beijing. U.S. Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He will lead their respective teams in the negotiations, but the meeting is not expected to produce any immediate headlines. 

U.S. Treasuries are up this morning, pushing yields lower across the curve; the benchmark 10-yr yield is down two basis points at 2.94%. Meanwhile, the U.S. Dollar Index is down 0.2% at 92.39, retreating from its 2018 high, and WTI crude futures are down 0.1% at $67.87 per barrel. 

In U.S. corporate news:

• DowDuPont (DWDP 63.85, +0.36): +0.6% after beating earnings estimates for the first quarter.
• Kraft Heinz (KHC 55.71, +1.51): +2.8% after reporting above-consensus earnings for Q1.
• Tesla (TSLA 282.58, -18.57): -6.2% after CEO Elon Musk bizarrely dismissed analysts' questions during the company's earnings call.

Reviewing overnight developments:

• Equity indices in the Asia-Pacific region ended Thursday on a mixed note while Japan's Nikkei was closed for Constitution Day. Hong Kong's Hang Seng -1.3%, China's Shanghai Composite +0.6%, India's Sensex -0.2%.
  • In economic data:
    • Australia's March trade surplus AUD1.53 billion (expected AUD650 million; last AUD1.35 billion). March Building Approvals +2.6% month-over-month (expected 1.0%; last -4.2%) March Imports +1.0% month-over-month (expected 0.0%) and March Exports +1.0% month-over-month (last 0.0%). March Private Housing Approvals +1.1% (last 3.1%). April AIG Service Index 55.2 (last 56.9)
    • Hong Kong's March Retail Services +11.4% year-over-year (last 29.8%)
  • In news:
    • U.S. trade negotiators were expected to begin talks with their Chinese counterparts today, but the meeting is not expected to produce immediate headlines.
    • The Reserve Bank of Australia will release its quarterly policy statement and accompanying economic projections on Friday, but no major changes are expected.

• Major European indices trade in the red with Italy's MIB (-0.4%) trailing its peers. UK's FTSE -0.1%, France's CAC -0.3%, Germany's DAX -0.3%.
  • In economic data:
    • Eurozone April CPI +1.2% year-over-year (expected 1.3%; last 1.3%) and Core CPI +0.7% year-over-year (expected 0.9%; last 1.0%). March PPI +0.1% month-over-month, as expected (last 0.1%); +2.1% year-over-year, as expected (last 1.6%)
    • UK's April Services PMI 52.8 (expected 53.5; last 51.7)
    • Spain's Consumer Confidence 99.9 (last 98.6)
  • In news:
    • The Bank of England will release its latest policy statement next week, but expectations for a rate hike have fallen considerably since the conclusion of the March meeting.
    • Bundesbank President Jens Weidmann, who could become the next ECB President, noted that the ECB should not delay the withdrawal of stimulus. Mr. Weidmann added that the central bank has not corrected or committed to the market's expectations for the first rate hike around mid-2019, describing the expectations as "not unrealistic."