The U.S. Dollar Index declined 0.2% to 96.37. WTI crude increased 0.1% to $59.34/bbl. U.S. Treasuries closed on a lower note, pushing yields slightly higher. The 2-yr yield and the 10-yr yield increased one basis point each to 2.46% and 2.61%, respectively.

Bloomberg reports that U.S. officials are concerned China will walk back its trade offers. A follow-up report from The Wall Street Journal offered a more positive perspective: the two sides are expected to hold meetings in Beijing and Washington over the next two weeks in hopes for a deal by the end of April.

The main event this week will be the Fed’s policy meeting, which concludes on Thurs morning. No action is anticipated, so market attention will fall on the new economic forecasts, Powell’s press conference, and the updated ‘dot plot’. Fed officials adopted a much more cautious tone in early 2019, indicating they’ll put their rate-hike plans on hold for the time being while they monitor the risks surrounding the economy. In the context of markets now seeing greater odds for rate cuts moving forward, a dot plot pointing to even one hike in 2019 could come as a ‘hawkish surprise’.

The S&P 500 advanced as much as 0.7% on Tuesday, bolstered by dovish expectations ahead of the Federal Reserve’s policy decision on Wednesday. Conflicting U.S-China trade headlines, however, induced some profit-taking interest after a recent stretch of gains, as did a late-day slide in oil prices, which hit their highs for the year earlier in the session. The S&P 500 was down as much as 0.3% but managed to close near its flat line.

S&P 500 utilities (-1.2%), financials (-0.8%), and industrial (-0.4%) sectors underperformed the broader market. Conversely, the health care (+0.8%), consumer discretionary (+0.5%), and information technology (+0.2%) sectors were the lone groups to finish with gains.

Notable chipmaker Advanced Micro Devices (AMD 26.00, +2.75) rose 11.8% as Google confirmed a partnership with the company for its new gaming streaming service. On the other hand, transport heavyweight Union Pacific (UNP 160.75, -5.49, -3.3%) dragged on the transportation average after it was downgraded to ‘Hold’ from ‘Buy’ at Loop Capital. Trucking stocks were also weak following a first quarter earnings warning from Covenant Transportation (CVTI 19.61, -1.79, -8.4%).

• The U.S. Dollar Index declined 0.1% to 96.49. It was a quiet session for most of the G7 currencies on Monday, with no notable data prints.
• U.S. Treasuries closed near their unchanged marks. The 2-yr yield and the 10-yr yield increased one basis point each to 2.45% and 2.60%, respectively. WTI crude rose 1.4% to $59.30/bbl, supported by news that OPEC canceled its April meeting and will let its current production cuts run until at least June.
• Theresa May’s Brexit strategy was dealt a major blow by House of Commons Speaker John Bercow when he effectively banned her from bringing her deal back to Parliament for a third time, unless it changes significantly. In his statement, Bercow invoked the rule  dating back to 1604, that the same motion cannot be put to a vote repeatedly. “It is a necessary rule to ensure the sensible use of the House’s time and the proper respect for the decisions which it takes. Decisions of the House matter,” he said. With the UK scheduled to leave the European Union on March 29th, time is running out and May needs to officially request for an extension of Article 50 from the EU. As this would need to be approved by all 27 remaining states, their next opportunity to get an extension is Thursday’s EU Council meeting.

• S&P 500 gained 0.4% on Monday in a session led by the cyclical sectors. Some follow-through buying interest amid a lack of “new” catalysts helped the market advance in front of the Fed’s policy meeting this week. The S&P 500 energy (+1.4%), consumer discretionary (+1.1%), financials (+1.0%), and industrial (+0.9%) sectors outperformed the broader market. Conversely, the communication services (-0.8%), real estate (-0.5%), and utilities (-0.4%) sectors underperformed.
• From a macro perspective, the market appeared uninterested by the latest developments pertaining to U.S.-China trade, Brexit, or slowing growth. Monday’s session also featured a burst of M&A activity and speculation. Notable deals included Fidelity National Information Services (FIS 108.12, -0.76, -0.7%) acquiring Worldpay (WP 108.51, +9.83, +10.0%) in a $43 billion cash-and-stock deal and Deutsche Bank (DB 9.26, +0.38, +4.3%) confirming it is in merger talks with Commerzbank (CRZBY 8.67, +0.58, +7.2%).

 NOTABLE MOVES  

As of Sat, Mar 16, Singapore Time zone UTC+8

USDJPY, -0.22%, $111.47
EURUSD, +0.19%, $1.1329
GBPUSD, +0.31%, $1.3298
USDCAD, -0.01%, $1.3334
AUDUSD, +0.36%, $0.7090
NZDUSD, +0.32%, $0.6845

S&P500, +0.50%, 2,822.48
Nasdaq, +0.88%, 7,306.99
Nikkei Futures, +0.57%, 21,240.0

CURRENCY MARKET WRAP 

• Industrial production increased 0.1% in February (consensus +0.4%). The capacity utilization rate dipped to 78.2% (consensus 78.5%). The preliminary March reading for the University of Michigan Index of Consumer Sentiment at 97.8 (consensus 95.5). The key takeaway from the report is thatreal income expectations, which account for inflation, increased in households across lower, middle, and upper incomes. That favorable outlook is supportive for consumer spending activity.
• U.S. Treasuries closed the session on a higher note, pushing yields lower across the curve. The 2-yr yield declined one basis point to 2.44%, and the 10-yr yield declined four basis points to 2.59%. The U.S. Dollar Index declined 0.2% to 96.60. WTI crude lost 0.3% to $58.39/bbl.
• BOJ maintained a pledge to guide short-term interest rates at -0.1% and 10-year government bond yields around zero percent. The widely expected decision was made by a 7-2 vote. In a nod to increased risks, the BOJ cut its assessment on overseas economies to say they are showing signs of slowdown. It also revised down its view on exports and output. The central bank also stuck to its view Japan’s economy is expanding moderately, but added a phrase that “exports and output have been affected by slowing overseas growth.”In January, it said only that the economy was expanding moderately.

STOCK MARKET WRAP 

• The S&P 500 gained 0.5% on this quadruple-witching expiration Friday, supported by reported progress in U.S.-China trade talks and the outperformance of semiconductor stocks. Friday’s advance capped an impressive 2.9% weekly gain in the benchmark index and established a new closing high for 2019. The S&P 500 information technology sector (+1.2%) was the session’s leader, followed by the consumer discretionary sector (+0.7%). Conversely, the real estate (-0.4%), industrials (-0.3%), and energy (-0.1%) sectors were the lone groups to finish with losses.
• Stocks began the session on a higher note, helped by a Chinese report that the U.S. and China have made “concrete progress” in talks about the text of a trade agreement. Separately, talk that China is considering using monetary tools to further help the economy, and Japan explicitly saying it will keep interest rates low for an extended period, aided investor sentiment. 
• Shares of Boeing (BA 378.99, +5.69, +1.5%) found some reprieve after AFP News Agency tweeted Boeing is going to roll out a software upgrade for its 737 MAX in ten days. Boeing responded, telling Reuters that its timeline for the software update has not changed and is expected to be rolled out in the coming weeks. On the other hand, Facebook (FB 165.98, -4.19, -2.5%), Adobe Systems (ADBE 257.09, -10.60, -4.0%), and Tesla (TSLA 275.43, -14.53, -5.0%) were some notable laggards Friday..

• New home sales decreased 6.9% month-over-month in January to a seasonally adjusted annual rate of 607,000 (consensus 623,000). On a year-over-year basis, new home sales were down 4.1%.The key takeaway from the report is that new home sales activity continues to be soft despite moderating price pressures.
• Initial claims for the week ending March 9 increased by 6,000 to 229,000 (consensus 225,000) while continuing claims for the week ending March 2 increased by 18,000 to 1.776 million. The key takeaway from the report is that there were no wide swings to disrupt the view that employers are generally reluctant to cut staff due to tight labor market conditions.
• U.S. Treasuries finished on a lower note, pushing yields higher across the curve. The 2-yr yield increased one basis point to 2.45%, and the 10-yr yield increased two basis points to 2.63%. The U.S. Dollar Index rose 0.2% to 96.78. WTI crude rose 0.5% to $58.58/bbl.
• In Brexit, Theresa May wins U.K. parliament’s backing for her plan to delay Brexit. Thursday’s vote also sets up May for a difficult meeting next week with the remaining 27 EU leaders who are themselves divided over the proposed extension to Brexit. The public response from the EU was guarded after the vote. While EU diplomats do not expect any extension request to be rejected outright, there is no consensus between the 27 remaining member states over how long to delay Britain’s exit date and what conditions to apply. But Donald Tusk, the European Council president, has said he will make the case for a long extension that allows Britain to “rethink” its approach to Brexit when he consults EU leaders in the run-up to next week’s European Council meeting. Sterling pulled back yesterday because a request to delay Article 50 leaves the UK right where it started.

• The S&P 500 lost 0.09% on Thursday in a tight-ranged trading session. The S&P 500 materials (-0.8%) and communication services (-0.4%) sectors underperformed the broader market. Conversely, the heavily-weighted financials (+0.4%) and information technology (+0.2%) sectors outperformed.
• A New York Times report indicated that Facebook is under criminal investigation for some of its data deals that it arranged with tech companies. In Boeing‘s case, it continued to be weighed down by concerns surrounding the forced grounding of its 737 MAX 8 and 9 planes. Johnson & Johnson for its part was ordered to pay $29 million to a woman with cancer who used Johnson & Johnson’s talcum powder regularly.

• The Dollar Index was lower on Wednesday. (96.48, -0.46, -0.5%). U.S. Treasury market was also quiet on Wednesday. The 2-yr yield and the 10-yr yield finished unchanged at 2.44% and 2.61%, respectively. WTI crude rose 2.3% to $58.27/bbl following some bullish inventory data out of the Energy Information Administration.
• In Brexit, politicians put forward a motion to rule out a “no-deal” Brexit on March 29, the current deadline. Sterling rallied sharply (as much as 2.3% to $1.3381) on the sign of strong parliamentary support for leaving the EU with a formal agreement with Brussels. The risk of a no-deal Brexit has worried central bankers and investors for months and with this option shelved, the UK economy is no longer at risk of a deep and fast contraction. There’s one more big hurdle for parliament to clear and that’s the timeframe for the extension of Article 50 – will it be the short 2 month extension or a longer 2 year addition. Later today, May will put forward a formal request to the European Union for an extension of Article 50.

• The S&P 500 gained 0.69% on Wednesday, although it lost some steam following Trump’s executive order to ground Boeing’s (BA 377.14, +1.73, +0.5%) 737 Max aircraft. Still, a break above the 2800 level for the S&P 500, along with a weakening dollar, helped the market steer past public scrutiny of Boeing. Trump’s executive order came after Canada decided to close its airspace to the 737 MAX earlier in the day. Canada’s decision wiped out an early 1.7% gain in shares of Boeing, while Trump’s decision sent BA down as much as 3.2%. Boeing, however, ultimately rebounded and ended the day higher by 0.5%.
• Despite the negative publicity surrounding Boeing, the ability for the S&P 500 to break above the 2800 level to begin the day encouraged follow-through buying interest. The benchmark index took out its November high (2815.15) intraday but finished just below that level.

• Total CPI was up 0.2% month-over-month in February, as expected, while core CPI, which excludes food and energy, was up only 0.1% (consensus +0.2%).The key takeaway from the report is that inflation trends for total CPI and core CPI both moved lower on a year-over-year basis. Total CPI was up 1.5%, versus 1.6% for the 12 months ending in January, whereas, core CPI was up 2.1%, versus 2.2% for the 12 months ending in January. The benign inflation will indeed keep the Fed in a patient state of mind.
• U.K. Prime Minister Theresa May’s Brexit deal was rejected once again by Parliament, throwing the country deeper into political crisis and raising the prospect that the divorce will be delayed or even reversed. May began the day with renewed hope after securing last-minute changes to her withdrawal deal with the EU. But MPs roundly defeated her proposals, 391 votes to 242, weeks after her first attempt to pass the deal met the same fate. The next step is another vote (later today) MPs will vote on a motion on whether to allow the UK to exit the EU on 29 March without a deal – “no-deal” Brexit. Leaving the EU without a deal – and therefore without the 21-month transition period provided for by the deal carries significant risks for trade, immigration, health, and etc.

• The S&P 500 gained 0.3% on Tuesday, adding to its strong start to the week. Softening inflation data, persistently low U.S. Treasury yields, and leadership from Apple (AAPL 180.91, +2.01, +1.1%) and Alphabet (GOOG 1193.20, +17.44, +1.5%), helped the market overcome continued weakness in Boeing (BA 375.41, -24.60, -6.2%). The Dow Jones Industrial Average lost 0.4% amid Boeing’s notable problems pertaining to the grounding of its 737 MAX by several countries, as well as the European Union. There were burgeoning calls from politicians in Washington to do the same here despite Boeing and the FAA both expressing confidence in the airworthiness of the 737 MAX.
• The S&P 500 health care (+0.7%), utilities (+0.6%), energy (+0.6%), and communication services (+0.6%) sectors led Tuesday’s advance. Conversely, the industrials (-0.9%) and consumer staples (unch) sectors underperformed.

• Fed Chair Powell set the tone after he reiterated the Fed’s patient stance in an interview with 60 Minutes on Sunday. Granted, this wasn’t “new” information, but his comments seemingly helped soothe a market fearful about slowing growth.
• U.S. Treasuries closed on a lower note, pushing yields higher across the curve. The 2-yr yield increased three basis points to 2.47%, and the 10-yr yield increased two basis points to 2.64%. The U.S. Dollar Index declined 0.1% to 97.18. WTI crude rose 1.2% to $56.80/bbl amid plans from Saudi Arabia to cut oil exports in April and its expectations that OPEC+ will not change its output policy at the next meeting.
• Sterling surged as the UK government said it had secured changes to its divorce deal from the European Union and planned to hold a vote in parliament. Those changes would not affect the terms of the withdrawal, but offer legal assurances to back it up. European Commission President Jean-Claude Juncker tweeted that the changes provide “meaningful clarifications and legal guarantees.” “The choice is clear,” he said. “It is this deal, or #Brexit may not happen at all. Let’s bring the UK’s withdrawal to an orderly end. We owe it to history.” The UK Parliament is scheduled to debate and vote on May’s withdrawal agreement later today.

• The S&P 500 gained 1.47% on Monday in a buy-the-dip trade following the market’s decline from last week. Underpinning the broad-based advance was some reassurance from Fed Chair Jerome Powell, the outperformance of mega-cap and semiconductor stocks, and the market’s resilience in the face of an early 13.5% decline in shares of Boeing (BA 400.01, -22.53, -5.3%).
• An Ethiopian Airlines crash over the weekend that involved one of Boeing’s new 737 MAX-8 planes set a different tone for the Dow and its most heavily-weighted component. The initial news of the crash didn’t hinder buying interest in the broader market, though; moreover, Boeing staged a huge intraday rebound as investors flocked to pick up the stock at sharply lower prices. That rebound, which left the stock down 5.3% for the day, helped the broader market extend its reach into positive territory. On a related note, the FAA said shortly before the closing bell that it will issue a Continued Airworthiness Notification to the International Community for Boeing 737 MAX operators.
• Separately, today’s rebound drove both the S&P 500 and Nasdaq Composite back above their 200-day moving averages, which was regarded as a positive technical move.
• The semiconductor space was an area of notable strength after NVIDIA (NVDA 161.14, +10.50, +7.0%) announced a deal to acquire Mellanox Technologies (MLNX 117.89, +8.51, +7.8%) for $6.9 billion, or $125.00 per share, in cash. The Philadelphia Semiconductor Index jumped 2.4%, and many of its semiconductor components helped drive the outperformance of the information technology sector and the Nasdaq. The FAANG trade was back in play, too, with shares of Apple (AAPL 178.90, +5.99) increasing 3.5% after the stock was upgraded to ‘Buy’ from ‘Neutral’ at Bank of America/Merrill Lynch. Facebook (FB 172.07, +2.47) also received an upgrade to ‘Buy’ from ‘Neutral’ at Nomura but it underperformed the widely-held group with a gain of 1.5%.

 NOTABLE MOVES  

As of Sat, Mar 9, Singapore Time zone UTC+8

USDJPY, -0.38%, $111.17
EURUSD, +0.41%%, $1.1240
GBPUSD, -0.52%, $1.3017
USDCAD, -0.30%, $1.3415
AUDUSD, +0.44%, $0.7047
NZDUSD, +0.74%, $0.6804

S&P500, -0.21%, 2,743.07
Nasdaq, -0.16%, 7,015.69
Nikkei Futures, -2.01%, 20.025.56

CURRENCY MARKET WRAP 

• The February Employment Situation Report muddied what had been a pretty clear labor market picture. Nonfarm payrolls increased by only 20,000 in February, well below expectations (consensus 173,000) and far off recent readings running above 200,000. Average hourly earnings, meanwhile, increased 0.4% (consensus 0.3%), which left the year-over-year wage figure up 3.4%. That’s good news, as it is a positive underpinning for consumer spending. NEC Director Larry Kudlow, among many others, believed the payroll figure was an outlier. The key takeaway from the report is that the weak payrolls figure will drive thoughts of either there being a shortage of skilled labor that could drive up wages or that it is a sign of a softening job market.
• U.S. Treasuries edged higher, pushing yields lower. The 2-yr yield declined two basis points to 2.44%, and the 10-yr yield declined one basis point to 2.63%. The U.S. Dollar Index declined 0.3% to 97.36. WTI crude lost 0.8% to $56.14/bbl.

STOCK MARKET WRAP 

• The S&P 500 declined as much as 1.0% on Friday, as disappointing growth in U.S. jobs contributed to global growth concerns and profit-taking interest. However, renewed buying interest in the afternoon helped the benchmark index trim its loss to 0.21% and close at session highs.
• The S&P 500 energy (-2.0%) and consumer discretionary (-0.7%) sectors underperformed the broader market. Conversely, the utilities (+0.4%), materials (+0.2%), real estate (+0.1%), and consumer staples (+0.1%) sectors outperformed. It had been a broad-based retreat for most of the day with all 11 S&P 500 sectors trading lower following a mixed February Employment Situation Report. At the same time, weak trade data out of China, where February exports declined 20.7% year-over-year, and some pessimism about the prospects for a U.S.-China trade deal helped contribute to early-morning weakness.
• In earnings news, Costco (COST 227.82, +11.03, +5.1%) and Big Lots (BIG 36.18, +4.34, +13.6%) sported notable gains after both beat earnings estimates. National Beverage (FIZZ 58.27, -10.00), meanwhile, dropped 14.7% after it missed top and bottom-line estimates.