The month of February ends with no lunch and no deal in Hanoi for POTUS and his North Korean counterpart, but plenty of green for investors.

Investors are waking up to news that talks between POTUS and North Korea’s leader fell apart in the wee hours of Thursday as the two couldn’t agree over sanctions. While geopolitics tend to have a temporary effect on stocks, it could erode some confidence in riskier assets like stocks as big GDP data looms for due later.

“The combination of the lack of progress with North Korea and China will drag on equities and we might have to wait for a new catalyst to renew the bullish start to the year,” said Neil Wilson, chief market analyst at Markets.com.

Bullish start indeed. February is set to deliver gains of 3% or more for new indexes, with some pointing out it’s the best two-month start to any year of the year since 1987.

But our call of the day, from Doug Kass, president of Seabreeze Partners Management, warns that we’ve swung from a market opportunity in December to “market vulnerability” as the month winds down, with risk of “an abrupt change in market complexion and momentum” on the rise.

He explains his view in a recent email to clients: “A weakening global economic recovery, a faltering corporate profit picture, untenable debt loads, political turmoil (and the risk of an increasingly untethered President) provide an unsound foundation to markets that have had such a spirited rally.”

With that, Kass, laid out a top 10 list of events that could cause U.S. stocks to drop by at least 5% in a single session. Here we go:

1) Further bad news on U.S. growth, a stumble for China’s economy and a deeper recession for Europe. (Factory orders out of China Thursday were not great at all).

2) No U.S.-China deal on trade, and no “big deliverables” over IP theft and or technology exchange. No deal out of Hanoi could also be a trigger.

3) POTUS “lashes out in a series of policy mistakes” rattling market confidence as he faces failures in getting China, North Korea agreements. For example, hitting Europe with auto tariffs.

4) A move under 2.5% in the 10-year U.S. Treasury yield

TMUBMUSD10Y, -0.64%

  — as the asset continues to fail to validate improvement in U.S. growth.

5) Machines and computer based trading, whose strategies are “all on the same side of the boat” push the sell button as big upside momentum we’ve seen in January and February makes a sudden U-turn.

6) More warnings over first-quarter results, adding to fears of a negative year for S&P 500 earnings.

7) Domestic pressures heat up for POTUS, such as damaging testimony by former lawyer Michael Cohen or a Mueller report.

8) A hard, problematic Brexit.

9) Crude-oil supplies spike and prices collapse.

10) A dovish ECB President Mario Draghi gets replaced by a hawk.

Note that Kass has been a bear on stocks for a while, as he turned negative in January 2018.

Check out: The U.S. stock market has now split into the ‘haves’ and the ‘have nots’

Read: How Donald Trump and the Fed could ignite a ‘shock and awe market rally

The quote

“Sometimes you have to walk.” — That was U.S. President POTUS at a presser in Hanoi, Vietnam where he said talks ended early with North Korean counterpart Kim Jong Un because the latter wanted more sanctions lifted.

In other highlights, he said Kim “felt very badly” about the death of U.S. student Otto Warmbier and bashed Democrats for the timing of testimony of former lawyer Michael Cohen during a “very important summit.” Says Cohen’s a liar.”

The market

Dow

YMH9, -0.09%

 , S&P 500

ESH9, -0.19%

 and Nasdaq

NQH9, -0.37%

 futures are lower , on the heels of Wednesday’s lackluster session that produced modest losses for the Dow

DJIA, -0.28%

 and S&P 500

SPX, -0.05%

 , and a tiny gain for the Nasdaq

COMP, +0.07%

The dollar

DXY, -0.26%

and gold

GCJ9, +0.44%

 are pretty flat, while crude

CLJ9, -0.28%

  is handing back some of those big gains from Wednesday.

South Korea Kospi

SEU, -1.76%

 led losses for Asia on that POTUS – Kim summit collapse. Chinese stocks

SHCOMP, -0.44%

 fell on data showing weak factory-activity data. Europe stocks

SXXP, -0.32%

 are under pressure.

The chart

Amid all the geopolitical noise, our chart of the day highlights a big piece of economic news that dropped out of China Thursday. Factory activity fell to the lowest level in three years, to 49.2 in February from 49.5 in January. The index has been in contraction territory — a reading below 50 — for three months in a row. There were a few tiny silver linings, such as the new orders subindex, which inched up.

Our chart from The Daily Shot shows export orders slowing at the fastest pace since the Great Recession:


The buzz

A string of tech companies reported disappointing earnings late Wednesday and shares are feeling the strain — Box

BOX, +2.26%

HP

HPQ, -0.21%

Fitbit

FIT, +3.93%

Square

SQ, +1.76%

 and Booking

BKNG, -0.51%

 . Victoria’s Secret parent L Brands

LB, -0.29%

 is also down on mixed results.

Opinion: HP is still being disrupted by the internet in 2019

Thursday’s earnings list includes Hormel

HRL, +1.75%

 and Domino’s

DPZ, -0.12%

 early, then Kraft Heinz

KHC, -2.78%

 , Hewlett Packard Enterprises

HPE, -0.60%

 Roku

ROKU, +3.52%

Wendy’s

WEN, +1.52%

Dropbox

DBX, -0.41%

 and BJ’s

BJ, -0.16%

 

Opinion: Whatever happened to that earnings recession?

Move over again Tesla

TSLA, +5.67%

 , big European auto makers BMW

BMW, +0.12%

 and Daimler

DAI, -0.53%

 are expected to announce plans to team up on self-driving technology.

Ending an order drought for one of its new planes, Boeing

BA, +2.03%

 landed a big order for its 777-9 jetliner from British Airways.

The economy

GDP is the big data point to watch with first and second estimates for the fourth quarter coming at 8:30 a.m. Eastern, along with weekly jobless claims, followed by Chicago’s purchasing managers index and housing vacancies.

Economic preview: GDP could show U.S. economy slipping below 2% growth at end 2018

A bunch of Fed speakers are also coming our way, with Chairman Jerome Powell speaking Thursday evening in New York. Philly, Dallas, Cleveland and Atlanta Fed Presidents Patrick Harker, Robert Kaplan, Loretta Mester and Raphael Bostic. Also Fed Vice Chairman Richard Clarida.

Random reads

Egypt’s transport minister steps down after horrific train crash that triggered an explosion at Cairo’s main station, leaving 20 dead, dozens injured

Tangled up in tensions with Russia, Ukraine pulls out of Eurovision song contest

Video of Chinese kids singing the praises of Huawei phones goes viral

Who benefits from a minimum wage hike? You’d be surprised

Just as your kid’s Fortnite addiction starts to wane, here comes Season 8.

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2019-02-28