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The coming week could be one of the most pivotal for the Trump White House and the markets.
President Donald Trump announced via Twitter on Sunday night ET that the United States is planning to delay a slate of additional Chinese tariffs that were scheduled to begin on March 1.
The president cited "substantial progress" in bilateral talks between the two countries. Trump did not articulate a new deadline for a definitive trade deal.
The president also confirmed a possible meeting between Trump and Chinese President Xi Jinping, which sources earlier told CNBC is being discussed for late March. Strategists expect some form of eventual deal to be reached.
The week is packed with major events that could be market moving, including two days of economic testimony from Federal Reserve Chairman Jerome Powell. He appears before the Senate Banking Committee on Tuesday, and then a House committee Wednesday for the semiannual testimony.
The markets are also closely watching U.S. economic data after a string of misses on manufacturing and consumer data rattled stocks in the past couple of weeks. The lack of government data during the 35-day government shutdown has made it more difficult than usual to get a handle on the economy, and some economists now see fourth-quarter and first-quarter growth running at just 2 percent or below. Fourth-quarter GDP, delayed because of the shutdown, is finally released on Thursday.
"To me, the biggest story next week for markets is China," Tom Block, Washington policy strategist at Fundstrat, told CNBC prior to Trump's Tweets. "That's the one that has the most immediate market impact. The markets are pricing in good news on China next week."
There were some news reports that Special Counsel Robert Mueller's report on the Trump campaign and Russia would be provided to the attorney general next week, but a Justice Department official Friday afternoon said that was not true. Whether the Trump campaign was involved with Russia or not matters much less than whether the president himself was involved.
"This is of course great for American political drama but as for the $4.3 trillion foreign exchange market or what does this mean for the value of corporate America, it's not a big deal unless there's a smoking gun, and people think Trump is going to get impeached," said Marc Chandler, chief market strategist at Bannockburn Global Forex. "Why this is important is it might paralyze other policy. … The only way it is a really big factor is if it's used as fodder to pursue further investigations that paralyze the administration like Watergate did."
The uncertainty around China trade has been affecting the economic data, and business leaders have called on the White House to end the tariffs on China. The farm belt has been hurt as China retaliated against U.S. products.
Cowen analysts said the talks are nearing a "term sheet" between Chinese and U.S. trade negotiators. The memorandums are expected to touch on a half-dozen key areas, including forced technology transfers and cybertheft; intellectual property rights; opening the Chinese financial services market to U.S. companies; currency; agriculture, and nontariff barriers to trade. Those barriers include China's domestic industrial subsidies, licensing procedures and other regulations.
The talks are also expected to focus on a list of 10 goods and commodities that China will buy to help narrow the trade balance. That could include an additional $30 billion per year of U.S. farm products including soybeans, corn, and wheat, the Cowen analysts said.
Trump had already indicated that the tariff deadline could be extended.
"The road to 270 electoral votes for Trump goes through the farm states of the Midwest. There's no road map for Trump to get 270 electoral votes if he doesn't carry all those Midwestern farm states," Block said. "China is very big for lots of reasons. …Trump's people have to figure out, at a minimum, how to extend the truce. … The biggest threat to those states is continued trade war with China focused on agricultural products exported from the U.S."
Besides China and trade and the Mueller report, Trump plans to meet North Korean leader Kim Jong Un in Vietnam in the week ahead, and Trump has said it is not to be his last meeting with Kim. The U.S. and North Korea are expected to seek a common understanding of what is expected in denuclearization, and Trump is expected to push Kim to give up his nuclear ambitions.
Block said it's unclear what will come of those talks. "Trump overstates what he does, but the world is a little safer with us talking with North Korea rather than saber rattling with North Korea. That seems to be Trump's approach. Regardless of what his thought process is, the net result is better than not doing it," said Block.
Investors are also looking to Europe where the U.K. Parliament votes on a no-deal Brexit, which critics say would disrupt trade and commerce .
Prime Minister Theresa May continues to push for Britain's exit from the European Union on March 29. On Wednesday, there will be a vote on an amendment that would give the House of Commons the power to block a no-exit deal if May has not secured the approval by Parliament for a revised Brexit deal by the middle of March.
"They're trying to force her to give up the no deal exit. The EU is expecting a request for a 60-day extension," said Chandler.
As for U.S. data, reports on personal income and spending are coming on Friday and fourth-quarter GDP on Thursday. December's disappointing durable goods data showed slower business spending, so analysts are watching closely to see whether there was any improvement in consumer spending.
"The U.S. growth slowdown is seen intensifying in the first quarter too. We forecast U.S. GDP growth at a modest 1.5% annual rate in Q1. Slowing global manufacturing activity, tighter financial conditions, sluggish business equipment spending, and lackluster federal government spending (due in part to the government shutdown in January) are all contributing to the weakest quarter for U.S. growth in two years," wrote Scott Anderson, chief economist at Bank of the West.
Anderson expects fourth-quarter growth at 2.2 percent. He also said if uncertainties in the U.S. around China trade talks and the Brexit negotiations go away, there is a good chance U.S. economic growth will bounce back in the second quarter.
"I should note this is our base case forecast, as none of the parties involved in the negotiations want to see the worst case outcomes realized. If for some reason either of the negotiations go seriously off-track, however, the 2019 U.S. and global economic outlook will become considerably bleaker," he wrote.
10 a.m. Dallas Fed President Robert Kaplan and Vice Chair Richard Clarida, session with community
5 p.m. Kaplan and Clarida Q&A
Earnings: Home Depot, Eaton Vance, Discovery, Bank of Montreal, Mylan, Nabors Industries, Auto Zone, Weight Watchers, Planet Fitnexx, Axon, Macy's, Sempra Energy, EOG Resources, Red Robin Gourmet Burgers, Planet Fitness, Whiting Petroleum, Cracker Barrel, JM Smucker
8:30 a.m. Philadelphia Fed non manufacturing
9 a.m. S&P Case-Shiller home prices
9:30 a.m. FHFA home prices
10 a.m. New home sales
10 a.m. Consumer confidence 10:00 a.m.
Fed Chairman Jerome Powell testifies before Senate Committee
Earnings: TJX Cos, Lowe's, Bayer, Chesapeake Energy, Wingstop, Cushman and Wakefield, Hostess Brands, Best Buy, Royal Ahold, Rowan Cos, Booking holdings, Apache, Campbell Soup, Royal Ahold, HP, L Brands, Petrobras. Square, Box,
10 a.m. Pending home sales
Fed Chairman Powell testifies before House committee
Earnings: JC Penney, A-B InBev, Ambev, SeaWorld, Nielsen, NRG Energy, PG&E, Toronto-Dominion, Canadian Imperial Bank, AMC Networks, JD.com, Party City, Keurig Dr. Pepper, Gap, Nordstrom, Workday, VMWare, Pure Storage, Autodesk, Dell
8:30 a.m. Jobless claims
8:30 a.m. Q4 GDP 8:30 a.m. Advanced economic indicators
8:50 a.m. Atlanta Fed President Raphael Bostic
9:45 a.m. Chicago PMI
12:15 p.m. Philadelphia Fed President Patrick Harker
1 p.m. Dallas Fed President Robert Kaplan
8:30 a.m. Personal income
8:30 a.m. Core PCE
10 a.m. ISM manufacturing
10 a.m. Consumer sentiment
10 a.m. Construction spending
1:15 p.m. Atlanta Fed's Bostic