Cohn Resignation Sends Equity Futures Spiraling

Wednesday,March7, 2018, 11:19 AM, EST

• NASDAQ Composite -0.33% Dow -0.79% S&P 500 -0.54% Russell 2000 -0.23%
• NASDAQ Advancers: 776 Decliners: 1221
• Today's Volume (vs. yesterday) -6.1%

Gary Cohn's resignation last night as the top economic advisor to the White House sent equity futures spiraling downward. U.S. equities opened broadly lower but well off the lows with all 11 S&P 500 sectors trading in negative territory. Despite increased employment and the recent uptick in wages, markets are overshadowed by the larger specter of macro-policy and a perceived trade war. Also the solid wage numbers have investors worried about inflation, a negative for stocks. The surprise today seems to be that equities are not down even more.

• Global markets traded lower after Gary Cohn's resignation was announced last night. Both equity markets and the dollar declined as investors feared the U.S. will lean toward enacting protectionist tariffs. Secretary of the Treasury Steven Mnuchin stated today on Fox Business that, "we are definitely going to end up with these tariffs and we're going to roll this out very, very quickly … again we are moving forward with these tariffs and that's the plan."
• The ADP National Employment Report (private payroll data) came in well above expectations, with an increase of 235,000 workers in February vs expectations of 200,000. January data was revised higher to 244,000 jobs vs 234,000. February is the fourth month in a row where job gains were 200,000 or higher. U.S. jobless claims are due out Thursday morning. Economist surveyed by Bloomberg are expecting initial jobless claims at 220,000 for the week and continuing claims at 1.919 million. The U.S. Department of Labor will release non-farm payroll numbers Friday morning with expectations of 200,000 new hires for February and an uptick in wages of 0.2% month-over-month and +2.8% year-over-year.
• The U.S. Commerce Department reported the trade deficit increased 5% in January, widening for the 5 th straight month and hitting near 10 year high. The U.S. trade deficit rose to 56.6 billion in January from $53.9 billion in December, Economists polled by Bloomberg forecast a $55 billion gap. December was revised higher as well to $53.9 billion from $53.1 billion.
• The weeklyMBA Mortgage Applications Index rose 0.3% to follow last week's increase of 2.7%. Mortgage Bankers Association Vice President of Commercial Real Estate Research , Jamie Woodwell , stated in a press release that "Commercial and multifamily mortgages ended 2017 continuing to perform extraordinarily well … the market tailwinds of strong fundamentals, increasing property values and ready access to mortgage and other credit all put downward pressure on delinquency rates."

Technical Take :

Equity futures saw a meaningful decline in the overnight session following the resignation by White House chief economic advisor Gary Cohn. Cohn's departure is seen as a confirmation of Trump's plan to apply large tariffs on imported steel and aluminum. Equities are concerned the tariffs will trigger a trade war that will be a "lose lose" for all parties and the global economy. On that note January's US trade deficit widened more than expected which only bolsters figures the administration points to as evidence of unfair trade. The deficit increased 5% to $56.6B vs. the median estimate of $55B, and is now at its widest level since October 2008.

Nasdaq's Market Intelligence Desk (MID) Team includes:

Michael Sokoll, CFA is a Senior Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over 25 years of equity market experience. In this role, he manages a team of professionals responsible for providing NASDAQ-listed companies with real-time trading analysis and objective market information.

Jeffrey LaRocque is a Director on the Market Intelligence Desk (MID) at Nasdaq, covering U.S. equities with over 10 years of experience having learned market structure while working on institutional trading desks and as a stock surveillance analyst. Jeff's diverse professional knowledge includes IPOs, Technical Analysis and Options Trading.

Steven Brown is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over twenty years of experience in equities. With a focus on client retention he currently covers the Financial, Energy and Media sectors.

Christopher Dearborn is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq. Chris has over two decades of equity market experience including floor and screen based trading, corporate access, IPOs and asset allocation. Chris is responsible for providing timely, accurate and objective market and trading-related information to Nasdaq-listed companies.

Annie O'Callaghan is Director on the Market Intelligence Desk (MID) at Nasdaq. Annie has worked for NASDAQ in a variety of roles including support of Nasdaq C-level management in client retention and customer service. Annie also served as a Sales Director in Nasdaq's Transactions Services business. Prior to joining Nasdaq, Annie worked at AX Trading, managing accounts for its Alternative Trading System and served on Credit Suisse's trading desk as an Electronic & Algorithmic Sales Trading Analyst.

Brian Joyce, CMT is a Director on the Market Intelligence Desk (MID) at Nasdaq. Before joining Nasdaq Brian spent 16 years as an institutional trader executing equity and options orders for both the buy side and sell side. He also provided trading ideas and wrote technical analysis commentary for an institutional research offering. Brian focuses on helping Nasdaq's Financial, Healthcare and Transportation companies, among others, understand the trading in their stock. Brian is a Chartered Market Technician (CMT).

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.