The markets continue to operate under a level of uncertainty around the Trump administration tariff policies.  Strategists are not confident that tariff policies will be resolved over the next few weeks which will set the market direction through the summer.  Different tariff headlines and shifts in narratives have driven huge market swings over the last few weeks.

Markets are waiting for some good tariff news, most negotiation comments so far have been superficial with little actual negotiated substance behind them.  If good tariff news remains elusive, the markets are likely to start increasing recession odds.

Overnight, China blasted the US for weaponizing tariffs to pressure other countries to cut trade with China, calling it “unilateral bullying” disguised as reciprocity.  Beijing accused the White House of pushing a hegemonic agenda and warned that appeasement would only lead to failure.  China says they respect fair negotiations between other countries but would not accept any deal made at their expense.

Big banks and some consumer-facing companies post earnings this week which will provide insights into how corporate America are preparing for the impact of tariffs.  Tesla (TSLA) and Alphabet (GOOG, GOOGL) report this week.  Both are down sharply (TSLA -40%, GOOG -20%) this year as investors and funds shift away from tech stocks.

Bitcoin is up over 3%, the Dollar is down, and Gold continues to hit record highs over concerns of President Trump’s push to remove Fed Chair Jerome Powell and the trade war uncertainties.

The International Monetary Fund (IMF) will meet this week in Washington DC.  The meeting could facilitate a vital forum for dialog among the 20 global finance chiefs about the impacts of the Trump administration tariffs and global central bank responses.  The IMF will put new global growth projections that will include notable markdowns.  An analysis by Bloomberg says that IMF projections tend to skew optimistic and have understated global growth by 0.5% in the 4 large crisis they studied.

Corporate earnings premarket include Equity LifeStyle Properties (ELS) and W.R. Berkley (WRB).

The economic calendar is light with CB Leading Index @ 10:00am ET.  Chicago Fed President Austan Goolsbee speaks @ 8:30am ET.

Volatility continues to contract but remains high.  The ES 5-day average range has dropped to 130.75 points.

Whale bias is bearish into the US session open on elevated overnight large trader volume.

Monday, September 4, 2023 is a US federal holiday.  US stock markets are closed.  Enjoy the long weekend!

Fed Chair Jerome Powell could shake up the markets once again this afternoon.  He is set to give the opening remarks for a Fed Listens event in Washington D.C. @ 2:00pm ET.  Given the fireworks his press conference generated on Wednesday, there is potential for more this afternoon.

The Securities and Exchange Commission (SEC) has decided that zero-commission brokerages are not ripping their customers off and will allow brokerages to continue being paid for order flow (PFOF) from market makers like Citadel Securities or Virtu Americas.  Rather than an all-out PFOF ban, the SEC thinks more price transparency and requiring brokers to execute at the best possible price at the time will reduce the problem of small investors paying too much and allow commission-free brokerages like Robinhood to exist.  One study showed that the differences in prices between fee brokerages and commission-free brokerages cost investors up to $34 billion per year.

Stocks are down overnight with some global markets hitting 2-year lows as global central banks crank up the rate hikes.  German PMIs showed a deep contraction in manufacturing.

In the US, the Atlanta Fed’s GDPNow tool is forecasting third quarter growth of 0.3% and the bond market continues to give recession warnings with the 2-year rising to 4.19%.  Meanwhile, Goldman Sachs cut their full year target for the S&P 500 to 3600.

Speaking of big banks, they got Congressional pressure on Thursday to raise savings interest rates.  While Fed rates have increased significantly, big bank savings interest rates have not moved from 0.01%.  The banks are posting 10s of billions in quarterly profits, around 25% of gross revenue, catching the ire of lawmakers.  Many regional banks now paying 2% or more on savings accounts.

Costco (COST) is down over 3% premarket after beating earnings but warning of narrowing profit margins.

Corporate earnings include Carnival (CCL).

The economic calendar focus is the Flash PMIs @ 9:45am ET.

Volatility remains high.

Whale bias is short into the US session open on decent large trader volume.