Which Will Come First? Dow 20K or US Debt Hitting $20 Trillion

Yep, the US national debt was over $19.97 Trillion at the end of December and will surpass $20 Trillion shortly.

Besides the monumental moments of the Dow hitting 20K and US debt surpassing $20 Trillion, investors have a busy week ahead as earnings season starts up. On the economic calendar, we have Consumer Credit, PPI, University of Michigan Sentiment and Retail Sales.

FOMC Members Speak: Three Fed members (Charles Evans, Patrick Harker and Janet Yellen) are scheduled to speak this week. Even though the Fed is taking a wait and see approach as to potential fiscal policy under Trump, investors will be listening to any hints as to timing on potential interest rate hikes and the steepening of the yield curve. However, I highly doubt that the Fed speakers would actually say Trump by name, way too much to ask.

The Elusive 20K: After coming within 0.37 points of 20K last week, the Dow will once again try to cross the elusive 20K. However, some analysts feel we will have a pull back since the S&P 500 is currently trading at 17.5 times forward 12-month earnings, well above the 10-year median of 14.7 times, according to Thomson Reuters data. In my opinion, 20K is acting as a massive technical resistance point. Whenever we approach the threshold, algos kick in and push the funds linked to the Dow lower. Once we do pass this number, and the Dow finishes the day above that level, 20K can potentially act as a support level and we will see the broader markets climb in tandem.   

Earnings: Earnings season kicks off this week highlighted by a bunch of bank stocks at the end of the week. So far, only 21 companies in the S&P 500 companies have reported. 33% reported revenue above expectations while 71% have reported earnings above expectations, according to Thomson Reuters I/B/E/S. Traders can expect to see large price swings in individual stocks if a company’s earnings fall short or outpace what the analysts expect.

Chinese Data: This week, China will be releasing CPI, Trade Balance and PPI. Investors will monitor the data and the Yuan’s reaction as weak data will put downward pressure on the currency, with the potential for markets to fall globally.

Retail Sales: Last week, poor same-store sales from the holiday shopping period sent the sector lower. On Friday (1/13), Retail Sales are released and investors will get another look at how retailers performed during the holidays. Since the sector was lower last week on disappointing numbers, investors will look to see if there was any strength in the online shopping arena.

Trump Tweets: Investors will continue to watch Donald Trump’s twitter page as his tweets continue to impact individual stocks or FX (mostly the Mexican Peso). If the President elect continues to tweet specific companies or industries, algos will start to be programmed to every tweet of his (if they aren’t already) and react accordingly. Analysts believe his tweets will likely help determine policy for his administration. However, we still do not know if this will continue once he gets sworn in as President. The irony of course will continue as the one stock that will not be affected by all the exposure to his tweets, is Twitter.   

Japan: Japan‘s banks will be closed on Monday for Coming-of-Age day. A holiday designed to congratulate and encourage all those who have reached the age of majority (20 years old) by having ceremonies. Imagine the US having a bank holiday where everybody is off to basically celebrate your Bar Mitzvah?