Nasdaq 100 E-Mini Futures Market News and Commentary
The S&P 500 Index ($SPX) on Friday closed up +32.14 (+1.09%), the Dow Jones Industrials Index ($DOWI) closed up +319.92 (+1.21%), and the Nasdaq 100 Index ($IUXX) closed up +103.51 (+1.34%). U.S. stock indexes rallied sharply Friday with the S&P 500 and the Dow Jones Industrials at 1-1/2 week highs and the Nasdaq 100 Index at a 3-week high on growing conviction the U.S. and China will negotiate a final trade deal after President Trump said both sides agreed to the outlines of a phase-one trade deal that could be signed as early as next month. U.S. stock index futures surged Friday after President Trump said the U.S. and China reached "phase one" of a trade deal where China would significantly step up purchases of U.S. agricultural commodities, agree to certain intellectual property measures and concessions related to financial services and currency. In exchange, the U.S. will delay the Oct 15 tariff increase on $250 billion of Chinese imports to 30% from 25%. A +2% jump in the Euro Stoxx 50 Friday to a 1-1/2 week high also provided support to U.S. stock indexes on optimism about a Brexit deal. No-deal Brexit concerns receded after European Council President Tusk said Friday he received "promising signals" that a Brexit deal is possible. UK Prime Minister Johnson met with Irish premier Varadkar Thursday and issued a joint statement saying that "they agreed that they could see a pathway to a possible deal." Friday's U.S. economic data was positive for stocks after the University of Michigan's Oct U.S. consumer sentiment index unexpectedly rose +2.8 to 96.0, stronger than expectations of -1.2 to 92.0.. Comments Friday from Minneapolis Fed President Kashkari were bullish for stocks when he said he's concerned that the labor market is showing signs of softening and he would probably be in favor if the Fed decided to cut interest rates at the Oct 29-30 FOMC meeting. The VIX S&P 500 Volatility Index ($VIX) tumbled to a 2-1/2 week low Friday at 15.11% and finished the day down -1.99 to 15.58%. The VIX last Wednesday rose to a 1-1/2 month high of 21.46% but continues to consolidate between the late-July 5-3/4 month low of 11.69% and the early-Aug 9-month high of 24.81%. Big Picture U.S. Stock Market Factors: Bullish factors for the U.S. stock market include (1) low U.S. interest rates, (2) expectations for an SPX earnings growth of +3% in 2019, although that is sharply lower than 2018's stellar +23% pace, and (3) general strength in earnings and buybacks from the 2018 tax cut. Bearish factors include (1) the forecast by FOMC members in the September Fed-dot plot for no more rate cuts in 2019-2020 and then a +25 bp rate hike in 2021 and a second rate hike in 2022, (2) US/Chinese trade and tech tensions, and (3) slower U.S. and global economic growth.