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HA – Key Economic Events That Moved the Market in January 2019

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Following the volatility and cumulative declines of 2018, markets in January experienced a welcome relief. In addition to the government shutdown’s resolution on January 25, the US Federal Reserve also signalled its sensitivity to market response by halting further rate increases which triggered positive sentiment in the markets. The easing rhetoric between US and China may also have contributed to investors’ outlook on geopolitical risk. Nevertheless, political uncertainties remain somewhat of a headwind, while recent macroeconomic data continues to send mixed signals on the status of the global economy.

Dow Jones Industrial Average Daily Chart from January 2 to January 31, 2019

January 1

  • New Years Day

January 2

  • Indices in the US and across Asia and Europe open lower due to weak data from Asia and Europe, heightening fears of a global economic slowdown.
  • Factory in China contracted in December, its first in 19 months.
  • Factory in Europe, though not yet in contraction territory, fell for the fifth month, its lowest reading since February 2016.
  • PMI data came in at 53.8, well within economist expectations.

January 3

  • Stock indices plunged dramatically after Apple issued a revenue warning for the upcoming quarter; its first warning in over a decade.
  • Apple’s warning heightened fears of a slowdown in China’s economy and its effect on US corporate profits.
  • December ADP report came in at positive territory, up 271,000, higher than consensus expectations of 178,000, marking the highest growth rate in 2018.
  • Initial jobless claims increased by 10,000, coming in at 231,000 in the last week of December, higher than economist expectations of 220,000.
  • ISM manufacturing index came in at 54.1, well below the 57.9 expectation.

January 4

  • US indices advanced on news that China will be holding a new round of trade talks with the US on January 7-8 in Beijing.
  • Global equity markets found support on news that China’s central bank would reduce the amount of required cash reserves by one percentage point in order to counter economic headwinds.
  • The US jobs report came in at blockbuster levels adding 312,000 jobs in December when economists expected a gain of only 179,000 jobs.
  • Hourly average earnings ticked up by .4%.

January 7

  • Markets advanced on optimistic sentiment regarding the new round of US-China trade talks.
  • President Trump made a statement on China’s willingness to resolve disputes in order to avoid its economic slowdown.
  • ISM Non-Manufacturing index came in at 57.6, well within consensus expectations.

January 8

  • Indices continue to advance due to progress in the US-China trade talks.
  • Wilbur Ross, US Secretary of Commerce, said that the two nations are within range of reaching a trade deal.
  • November job openings came in lower at 6.888 M, below the 7.070 M expectation.

January 9

  • With the latest round of trade talks concluding positively, US indices continued to advance.
  • FOMC minutes stated a mix of dovish responsiveness to market data–that “policy wasn’t preset and could change to the upside or downside depending on the strength or weakness of the economy”–while agreeing that there was no need to end the unwinding of its balance sheet.
  • Following the FOMC minutes, the certainty and timing of the two rate hikes that have been scheduled to take place this year are now in question.

January 10

  • Stocks indices opened lower, most likely due to the lack of details surrounding the US-China trade talks.
  • Jobless claims in the week ending January 5 fell by 17,000 to 216,000, below expectations of 226,000.
  • The highlight of the day was Jerome Powell’s speech at the Economic Club in Washington D.C. in which he emphasized: there is no present path for interest-rate policy, incoming data shows no signs of an economic slowdown, and he doesn’t see a risk of recession in the near term.

January 11

  • US consumer price index declined by 0.1% in December, marking the slowest price growth since August 2017.
  • Headline inflation for the year rose by only 1.9%

January 14

  • Global stock markets fell on news of contraction in Chinese trade, heightening fears of a global economic slowdown.
  • China’s exports in December saw their biggest decline in two years.
  • Despite this data, the yuan and Chinese indices held up, which may be attributable to hopes that a trade agreement between the US and China could be achieved in the near term.

January 15

  • News that Beijing announced measures to help China’s economy such as tax cuts and supportive monetary policy gave global equity markets a lift.
  • US indices edged higher overnight, giving back some of the gains on news that several US banks reported weak to mixed quarterly earnings.
  • The producer price index declined by 0.1% as compared with November’s 0.3% increase. Consensus was for a 0.2% rise.
  • January’s Empire State Manufacturing Survey came in at 3.9, its lowest in over a year.

January 16

  • Each segment of the retail sales report came in within consensus expectations.
  • January Atlanta Fed business inflation data came in at 2.0%, lower than last month’s 2.3%.
  • Housing market came in within expectations at 58.

January 17

  • Initial jobless claims in the week ending January 12 came in at 213,000, which was 3,000 lower than economist expectations of 220,000.
  • Philadelphia Fed business index was at 17.0; median estimate was at 8.0.

January  18

  • Indices pushed higher fueled by an optimistic outlook on the current US-China trade talks.
  • China’s Vice Premier is scheduled to visit the US on January 30.
  • Industrial production in December increased by 0.3%, settling within consensus expectations.
  • In what may be the first indication of trouble linked to the government shutdown, consumer sentiment fell to a 90.7 reading, well below expectations of 95.5 and well below the previous reading of 98.3.

January 21

  • Martin Luther King Day – US Markets Closed

January 22

  • US indices plunge on news that the White House cancels trade planning meeting with China.
  • The IMF lowered its 2019 global economic growth forecast from 3.7% to 3.5%.
  • Crude oil drops 2.3% on fresh signs of economic global slowdown.
  • Drop on home sales in December, a 4.6% move, was unusually large; comparable moves occurred as a result of changes in governmental policy affecting the market; no such policy changes occurred in December.

January 23

  • After markets plunged yesterday due to Washington’s rejection of Beijing’s preparatory trade talks, the markets remained steady (though slightly lower) in anticipation of China’s Vice Premier visit to the US next week.
  • January Richmond Fed manufacturing index came in at -2, which was within consensus.

January 24

  • S. Commerce Secretary Wilbur Ross’ comments that the U.S. is miles and miles from a trade deal with China may have been the primary cause for indices to decline.
  • Unemployment benefit applications last week sunk to the lowest level since 1969, declining by 13,000, brining jobless claims to 199,000 (in November 1969, applications numbered at 197,000).

January 25

  • Indices are sharply higher due to a report that the Fed may be ending or halting their automated balance sheet reductions (to be discussed during the next FOMC meeting).
  • Government partial shutdown ended today.

January 28

  • Indices opened lower but rebounded.
  • With the government reopened economic data–namely, personal income and outlays and international trade data–has been delayed.
  • No further economic data of major significance reported today.

January 29

  • Indices are higher ahead of US-China trade talks.
  • Consumer confidence plunged during the government shutdown but has now recovered to 120.00, slightly lower but still well within economist expectations.
  • The main focus in the markets is Fed Chair Jerome Powell’s press conference tomorrow.

January 30

  • Stocks advanced sharply on news that the Federal Reserve states that its in no rush to continue is balance sheet reductions.
  • The Fed holds interest rates steady, signaling a dovish stance toward monetary policy possibly in response to market pressures.
  • Fed Chief Jerome Powell: “the case for raising rates has weakened somewhat.”

January 31

  • Stocks continued to advance, however slightly, after the Fed’s dovish signal yesterday.
  • US-China talks are taking place today.
  • Initial jobless claims increased by 53,000 to 253,000 in the week ending January 26.
  • Consumer sentiment came in at 91.2, well within consensus expectations.

 

Karl Montevirgen

Market Strategist | Halifax America

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