Bank Holiday Ahead Of Q3 Earnings, Trade Negotiations

Monday, October 14, 2019

In what has been traditionally known throughout the country as Columbus Day (and in many parts of the U.S. being reconsidered as Indigenous Peoples Day), what started out as a 19th century celebration of Italian-American heritage remains a bank holiday in most places this second Monday in October. It has been thus for nearly 50 years.

And, while public schools, post offices, et. al. are closed today, the U.S. stock markets are open for business. We may expect lower trading volume overall today, largely due to the heavy reportage of Q3 earnings beginning promptly tomorrow morning, with major companies like JPMorgan Chase (NYSE:JPM) , Goldman Sachs (NYSE:GS) , Citigroup (NYSE:C) , Johnson & Johnson (NYSE:JNJ) and UnitedHealthcare (NYSE:UNH) all posting new earnings results. There is also no government-based economic data scheduled for today, in observance of the holiday.

Where we see most of the focus in today’s pre-market is in the continuing narrative of a trade truce between the U.S. and China, which on Friday President Trump declared had amounted to a “Phase One agreement.” Since then, however, news reports paint a blurrier picture — with the actual agreement now looking to be signed next month in Santiago, Chile.

This morning on CNBC’s “Squawk Box” program, U.S. Treasury Secretary Steven Mnuchin fielded questions about the trade deal, in which he stated there was “substantial progress” made last week, “subject to documentation,” and that there was still “a lot of work to be done.” This is a clear walk-back from Trump’s earlier announcement of “the greatest and biggest deal ever made for our Great Patriot Farmers in the history of our country.”

What we know now is that tariff hikes planned for this week have been suspended — $250 of Chinese goods imported to the U.S. and $50 billion of agriculture imports from the U.S. to China. Since the trade war began a year ago, however, China has reached agriculture trade deals with countries like Brazil, and any agreement between the U.S. and China would likely not force China to roll back those trade deals.

Among other difficulties will be finding common ground on Intellectual Property (IP) rights, financial services (including currency and foreign exchange considerations) and structural changed in agriculture — all of which Mnuchin said this morning the administration expects to resolve over the next month. On the flip side, an alignment with the needs of state-owned Chinese companies, along with restrictions on free speech regarding China’s ongoing difficulties with protestors in Hong Kong, look to be expected.

For sure, there is still plenty of heavy lifting yet to go in any “Phase One” trade deal. Markets are currently pricing this in, albeit moderately: the Dow is down 60 points at the hour, the Nasdaq down 20 and the S&P 500 down 7.

Mark Vickery

Senior Editor

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