Market Preview: Trade Hope Floats Markets into December

Markets moved gingerly higher on Friday in hopes that some progress toward resolving the China/U.S. trade war will emerge from this weekend’s G20 Summit. President Trump and Chinese President Xi Jinping are scheduled to share dinner Saturday evening and discuss trade matters. Trade tariff bellwether Caterpillar rose over 4% in anticipation of good news out of the meeting between the two leaders. With the Fed softening its stance on interest rates triggering a rally earlier in the week, progress toward a trade tariff solution could propel the markets straight into a Santa Claus rally in December.  But, given the contentious nature of the trade talks thus far, many analysts are taking a wait and see attitude toward the weekend’s talks. With a ramp-up in tariffs looming, many see this meeting as a last hope for resolution before the trade war moves to a new level.

Finisar (FNSR) and Smartsheet (SMAR) kick off the final month of the year when they report earnings on  Monday. Finisar rallied nicely from the October market selloff when it was announced November 9th that II-IV (IIIV) would be acquiring the fiber optic subsystem, test and monitoring company. Analysts will be looking for an update on the deal, including the expected closing date and whether the company anticipates any hurdles to the closing. Smartsheet will be reporting its third earnings numbers since the company went public in April. The cloud based work management company has taken investors on a bit of a roller coaster ride since going public, but is up nicely from its IPO. Also reporting Monday are Coupa Software (COUP) and Mesa Air (MESA).

The economic reporting week kicks off Monday with both PMI and ISM manufacturing data. Analysts will be looking for any weakness in the numbers due to tariff issues as news from the G20 Summit is first reflected in the markets on Monday. Construction spending numbers will also be released, and are expected to come in flat month-over-month. Tuesday, motor vehicle sales and Redbook retail numbers will be released. PMI services and ISM non-manufacturing data will be presented on Wednesday. Investors will also be focusing on comments from Fed Chairman Powell as he gives his first speech following this weeks apparent change in direction by the Fed. The Chairman is scheduled to speak at 10:15. Other data coming Wednesday includes the ADP employment report and mortgage application numbers. Thursday we’ll get the Challenger job cut report and jobless claims, as well as international trade numbers and factory orders. We’ll close out the first week of December with the employment situation numbers, wholesale trade, and consumer sentiment on Friday.

Notable earnings reports next week include Dollar General (DG) and Autozone (AZO) on Tuesday. Followed by Five Below (FIVE) and lululemon (LULU) on Wednesday. This combination of retailers should provide a good view of how holiday sales on both the value and high end are shaping up so far. Thursday brings a broad view of the economy as Kroger (KR), Ulta Beauty (ULTA) and Broadcom (AVGO) all report. The last two earnings reports of the week will come from Johnson Outdoors (JOUT) and Vail Resorts (MTN) on Friday.



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