A correction of 5% to 10% is essential for this stock market, warns the strategist of Jefferies

Are we on the verge of finally seeing how much juice remains on this stock market after the announcement of a trade deal?

A report that US and Chinese negotiators are working hard on "several memoranda of understanding" for a single big deal has given a boost to the equity futures on Wednesday night. But these gains disappeared from Thursday's session, raising the question of whether the market is losing patience with seemingly endless talks between Beijing and the United States.

Another relevant question is how do you know even what actions have been included in this course? Two financial bloggers, Josh Brown of Reformed Broker's and Michael Batnick of Investor Relevant Investor, spoke about this topic in a recent video chat. They concluded that investors would be well advised not to assume that a market has totally absorbed trade agreements, new business contracts, and so on.

"I think it's probably the baseline comment on what's happening on the market," says Batnick. "As if you knew the odds … you do not know. You will discover it afterwards.

We also believe that the Fed will not oppose further stock market gains. As summarized briefly in the blog Real Heiseinberg, it is more or less a "what-do-you-want-of-themselves" scenario.

The bulls have an additional asset: as defying gravity as this rebound after Christmas, the so-called AD (advancer / decliner) line is at its highest level: more actions than falling, which means that you can cast aside from the dark thoughts of a plunge into actions. For the moment.

That does not mean that it should not happen, says our call of the day Steven DeSanctis, equity strategist at Jefferies, told MarketWatch he did not see "sustainable momentum" in stocks rising for equities since the start of the year.

"Consolidation, a withdrawal is absolutely necessary," DeSanctis said during a telephone interview Wednesday. For example, he notes the Russell 2000

RUT, + 0.46%

up 16.5% since the beginning of the year, this is the third best start for data dating back to 1979.

"Every time you see a sharp rise, you usually experience failure. A correction of 5% to 10% would be welcome, and it would be justified, "said the strategist, adding that many factors could trigger this correction: a slowdown in China, Europe or the United States, profit estimates weaker, profits down, ratings falling back.

This last point is a major reason why he would like to see foam come out of the market. The S & P 500 companies are currently trading close to 19.8 times the term profits, he said. This compares with 20 times last August and 16 times at the end of 2018. Seeing this level fall to 17 times, the shares would seem much more attractive at the moment, he said.

Still according to DeSanctis, the decline at the end of last year was unjustified "because we do not expect the US economy to go into recession," adding that their "reckless" US economist has only planned modest GDP cuts for 2020 compared to 2019. Upbeat results from Walmart

WMT, -2.27%

This week, we only went further to appease his worries about the economy, he said.

This brings us to the stocks that he likes right now. "I will say that my favorite sector is consumer discretionary and retailers. The argument here is that the economy will grow on the consumer side, "he said, noting that the fact that people have jobs and earn more money is an argument against the recession being prepared.

"The overall trend has been very good for the consumer," said DeSanctis, adding that "what companies are saying in general is that the consumer is in very good shape."

Read also: A fund manager warns that a $ 3 trillion tsunami is about to flood the stock market

The market

Dow

YMH9, -0.12%

, S & P 500

ESH9, -0.15%

and Nasdaq

NQH9, -0.09%

the futures are moving forward. Wednesday's session saw modest gains for the Dow

DJIA, + 0.24%

and S & P 500

SPX, + 0.18%

, while the Nasdaq

COMP + 0.03%

has just managed his eighth consecutive victory.

The dollar

DXY, -0.06%

is in place, with crude

US: CLU8

but the gold

US: GCU8

is lower.

Asian stocks had a mixed day, with a slight increase for the Shanghai Composite

SHCOMP, -0.34%

, while Europe stores

SXXP, -0.31%

are largely

Table

"If I owned it, I would sell everything. I do not even joke. You can not just hurt Zion Williamson on national television and not live through a long and severe recession, "said David" El Presidente "Portnoy, founder of Barstool Sports, about the major headache that has erupted for Nike

NKE + 0.32%

late Wednesday.

Just about everyone has already seen the photos and videos of striker Duke Zion Williamson writhing in pain after his Nike

NKE + 0.32%

the shoe collapsed in the middle of the game, causing a knee injury to the NBA's first selection. Hoping that his recovery is not too long. As for Nike, it already looks very hard before marketing:

Lily: Small NFL Pensions for Pre-1993 Players

The buzz

view

CAR, -0.57%

gets closer after beating forecasts. Hormel

HRL, -0.39%

and Domino

DPZ, -0.27%

Kraft Heinz will present its report before the opening

KHC, + 1.03%

Hewlett Packard Enterprises

HPE, -0.25%

Roku

ROKU, + 0.79%

and Dropbox

DBX, -1.92%

come after the bell.

Watch J & J

JNJ, + 0.49%

, who says he has been summoned by the US Department of Justice and the SEC on the safety of baby powder and talc products.

Apple

AAPL, + 0.64%

and Goldman

GS -0.04%

develop a new credit card offering additional personal finance features on the iPhone Wallet app, sources said.

China sells drones to its American allies as fast as possible.

More: Read and subscribe to Barron's articles on Never Leaving MarketWatch.

L & # 39; s economy

A busy day for data, with weekly claims for UI, durable goods backdated and the Philadelphia Fed survey, all of these results before the opening Markit SMIs for the manufacturing and services, as well as existing home sales and advanced economic indicators will follow.

Lily: What is all this excitement? The economic outlook for Fed staff has barely changed in January

Random readings

The chemical warehouses are held responsible for the nine-hour fire that has left dozens dead and wounded in the Bangladeshi capital

An officer of the guard dreamed of killing "almost every person on earth"

The Fox News host, Tucker Carlson, filmed his Dutch guest a "moron" and worse

Actor "Empire" Jussie Smollett could be sentenced to jail time, police claiming that he simulated this attack

Teen is lucky to be alive after attempting the ultimate selfie

Snow falling … on Las Vegas

Need to know starts early and is updated until the opening bell, but register here to have it delivered once to your e-mail box. Make sure to check the item need to know. The version sent by email will be sent at approximately 7:30 am Eastern Time.

Follow MarketWatch on Twitter, Instagram, Facebook.

Provide essential information for the US trading day. Subscribe to the free MarketWatch Need to Know newsletter. Register here.