A QUIET DAY EVEN AS OIL DECLINED 2.9%

Equities were quiet with all assessing whether the six week rally is the “real thing” or just a dead cat bounce taking stocks too far too fast.  The dollar halted a five day slide while Treasuries were little changed.

Crude was quiet until late day selloff sent oil down about 2.9%, a selloff predicated upon the prevailing narrative that Saudi Arabia will not freeze production unless Iran also freezes output. Approximately 70% of global production is meeting in two weeks to discuss such actions.

The financial chaos of the oil producing countries is now becoming extremely pronounced.  Will the supply disruptions in Iraq and Nigeria—the result of geopolitical turmoil—become more pronounced because of this fiscal chaos?  Historically economic unrest ferments civil unrest, an environment that could be amplified given the 1200 year animosity between the two major Islamic sects.

There was little reaction to the data or to Fed statements regarding potential changes in monetary policy.

Next Monday is the commencement of first quarter earnings season.  To write the obvious, the interpretation of the results will offer considerable input in determining whether the current advance was a dead cat bounce or bona fide advance and transition into the value orientated issues.

What will happen today?  The ISM Non Manufacturing Index as well as the trade gap is released.

Last night the foreign markets were down.  London was down 1.38%, Paris down 2.12% and Frankfurt down 2.30%.  China was up 2.61%, Japan down 2.42%and Hang Sang down 1.57%.

The Dow should open moderately lower even as oil is flat, perhaps the result of Europe’s declines.  As stated above, earning season is now becoming the focus.  At this juncture analysts are expecting about a 9% decline but considerable emphasis will be placed on profit margins and revenue growth.  I think profits will decline but not by the magnitude as suggested as the bar is set too low.  All will scrutinize forward looking statements and the potential veracity of such.

The 10-year is up 9/32 to yield 1.74%.

kent
The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. The information contained herein has been compiled from sources believed to be reliable; however, there is no guarantee of its accuracy or completeness. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. The material provided in Daily Market Commentaries or on this website should be used for informational purposes only and in no way should be relied upon for financial advice. Please be sure to consult your own financial advisor when making decisions regarding your financial management. Members of FINRA and SIPC, Capitol Securities Management is a privately owned full-service retail brokerage and investment advisory firm headquartered in Richmond, Virginia. For nearly 30 years, we have been serving the needs of our investors. Today, more than 200 Capitol Securities Management investment professionals and support staff serve approximately 18,000 customer accounts from Southern Florida to the New England coast.