THE TICKER

Investors are going to need nerves of steel to navigate the week ahead, which is packing a season finale’s worth of market-moving drama into a final stretch before the holidays.

And developments out of Washington will be driving the action. Here’s a rundown of the stories that will be captivating markets.

1. Impeachment votes and budget talks highlight Washington dysfunction. 

Wall Street has mostly shrugged off the House Democratic impeachment drive to date. This week, as the House Judiciary Committee drafts articles of impeachment against President Trump and potentially votes to approve them, though, the process could take on a different cast commanding investor attention. That’s because while the process on its own appears to mean little to the market, it could spook investors if it feeds a broader sense that Washington dysfunction is threatening to hamstring critical business, such as keeping the government funded.

Budget negotiators are aiming to forge a breakthrough agreement this week that punts talks into next year — before government funding runs out Dec. 20. The good news, per Politico’s Sarah Ferris and Heather Caygle: Lawmakers have been “slowly making headway to avert a government shutdown … Senior appropriators have agreed on how much to spend in total, but are still struggling with perennial sticking points like Trump’s border wall.” The president sounded “positive and encouraging” in a Thursday night phone call with Senate Appropriations Committee Chairman Richard Shelby (R-Ala.). But he remains a wild card.

2. The Fed meets.

After last week's surprisingly strong jobs report, there’s little doubt the Federal Reserve will hold interest rates steady when the central bank meets midweek. “Even before the Labor Department’s report Friday, Fed officials were prepared to hold rates steady at their two-day meeting next week after having lowered their short-term benchmark rate by a quarter percentage point at their previous three meetings, most recently in October to a range between 1.5% and 1.75%,” the Wall Street Journal’s Nick Timiraos writes

But Fed Chair Jerome Powell could offer some clues about monetary policymakers' outlook, especially given troubling signals from a slumping manufacturing sector, falling business investment and the ongoing threat from the trade wars.

3. The next China tariff deadline looms.

Barring an agreement to postpone them, the Trump administration is poised Dec. 15 to impose 15 percent tariffs on $160 billion of Chinese goods. This round of import levies targets consumer products, including toys, laptops and cellphones, threatening them with higher price tags just as the holiday shopping season hits full tilt. 

Focusing on the consequences for Apple, Wedbush Securities analyst Dan Ives writes, “Up till now, the average US consumer or tech company has only tangentially been impacted by the first wave of tariffs with this impending $160 billion potential gut punch remaining a lingering hurdle for tech stocks to go higher from current levels into year-end given the negative fundamental ramifications associated with this potential move… Apple continues to be in the crossfire given its flagship iPhone manufacturing footprint in China.”

Some investors continue to bank on cooler heads prevailing. “I don’t think [Trump is] going to raise them. I think they’ll find a reason,” James Pauslen, chief investment strategist at Leuthold Group, told CNBC’s Patti Domm. But he acknowledged anything could happen: “He’s the one off you’re never sure about… I think he goes out of his way to be a wild card.”

Not all of the signals are potentially bearish. House Democrats are nearing a deal with the Trump administration to pass an updated trade agreement with Mexico and Canada. And not all the developments are Washington-centric: Investors will also keep close watch on the results of the U.K. election on Thursday. If Boris Johnson's Conservative Party maintains its majority, it will move the country closer to the next phase of Brexit. 

MARKET MOVERS

Investors flee stock-focused funds. WSJ's Michael Wursthorn: "The S&P 500 is having its best run in six years, but individual investors are fleeing stock funds at the fastest pace in decades. That is potentially a good sign for the long-running bull market. Investors have pulled $135.5 billion from U.S. stock-focused mutual funds and exchange-traded funds so far this year, the biggest withdrawals on record, according to data provider Refinitiv Lipper, which tracked the data going back to 1992.

"Analysts say the trend highlights investors’ apprehension toward a stock market buffeted by the long-running U.S.-China trade war and lingering worries about a potential recession."

Some investors are hoarding cash to ensure they have enough available to lend if rates spike again at the end of the year.
WSJ

TRUMP TRACKER

TRADE FLY-AROUND:

— Trump cripples the WTO: "The United States has spent two years chipping away at the World Trade Organization, criticizing it as unfair, starving it of personnel and disregarding its authority, as [Trump] seeks to upend the global trade system," the New York Times's Ana Swanson reports.

"This week, the Trump administration is expected to go one step further and effectively cripple the organization’s system for enforcing its rules — even as [Trump’s] widening trade war has thrown global commerce into disarray and another tariff increase on Chinese goods set for next weekend could send markets reeling. Over the past two years, Washington has blocked the W.T.O. from appointing new members to a crucial panel that hears appeals in trade disputes. Only three members are left on the seven-member body, the minimum needed to hear a case, and two members’ terms expire on Tuesday. With the administration blocking any new replacements, there will be no official resolution for many international trade disputes."

USMCA deal reportedly near: “U.S. and Mexican negotiators are ‘very close” to finalizing the United States-Mexico-Canada Agreement, a Washington-based source familiar with the talks said on Saturday, after a top Mexico official said the two sides had made progress on the trade deal,” Reuters’s David Lawder reports.

“The person added that U.S. House Speaker Nancy Pelosi still needed to agree on revisions of the pact, known as USMCA. Mexico approved USMCA this year, but U.S. ratification has been held up by Democratic lawmakers, who have voiced concerns over the enforcement of labor and environmental provisions.”

IMPEACHMENT MINUTE: A speed read on the latest from the congressional impeachment inquiry.

"Inside Giuliani’s dual roles: Power-broker-for-hire and shadow foreign policy adviser." By The Post's Josh Dawsey, Rosalind S. Helderman, Tom Hamburger and Devlin Barrett 

"With White House Absent, Impeachment Devolves Into Partisan Brawl." By the New York Times's Michael D. Shear, Nicholas Fandos and Maggie Haberman

"House Dems refresh Nixon-era impeachment report for Trump." By Politico's Kyle Cheney and Darren Samuelsohn

Legal Issues
As challengers return to court, they point to recent revelations about the president’s businesses to bolster their cases.
Ann Marimow and Jonathan O'Connell

POCKET CHANGE

—U.S. banks reluctance might be behind repo shock: “The unwillingness of the top four U.S. banks to lend cash combined with a burst of demand from hedge funds for secured funding could explain a recent spike in U.S. money market rates, the Bank for International Settlements said,” Reuters’s Olga Cotaga reports.

“Cash available to banks for short-term funding all but dried up in late September, and interest rates deep in the plumbing of U.S. financial markets climbed into double digits.That forced the Fed to make an emergency injection of billions of dollars for the first time since the global financial crisis more than a decade ago.”

T-Mobile, Sprint merger heads to court: “An unprecedented trial challenging the merger of T-Mobile US Inc. and Sprint Corp. will test the federal government’s dominant role in deciding whether corporate rivals can join forces,” the Wall Street Journal’s Drew FitzGerald and Brent Kendall report.

“In a case slated to start Monday, a coalition of 13 states and the District of Columbia, all led by Democratic attorneys general, is suing to block the $26 billion plan to merge the country’s third- and fourth-largest carriers by cellphone subscribers into a nationwide heavyweight rivaling Verizon Communications Inc. and AT&T Inc.”

Reduce, reuse and get rich: “Big makers and users of plastic packaging are betting on a recycling technology that has failed for decades to take off, as a public backlash and new rules push them to find ways to cut waste and greenhouse-gas emissions tied to plastic,” WSJ’s Saabira Chaudhuri reports.

“Plastic makers like BP PLC and Dow Inc., and packaging users like Coca-Cola Co. , Danone SA and Unilever PLC, are testing or investing tens of millions of dollars in the technology, called chemical recycling. The process uses chemicals or heat to break down plastic so it can be turned into clean, new plastic again and again while preserving quality—a Holy Grail for the industry. That is a big improvement on existing, mechanical recycling—in which plastic is shredded, washed and melted—where quality diminishes over time. Material processed this way can only be recycled a few times, mostly into lower-quality products, before eventually going to landfills or incinerators.”

Digital health start-up crashes: “Proteus Digital Health has spent two decades trying to develop ‘smart pills’ that can be used to tell a smartphone app whether patients have taken their medications. The technology was so promising that, three years ago, investors valued the company at $1.5 billion,” CNBC’s Christina Farr reports.

“But Proteus has struggled to turn its vision into reality and is now desperate for cash after an expected $100 million funding round recently fell through, according to people familiar with the matter. To preserve enough money to stay afloat, the company furloughed the majority of its employees for about two weeks in November, said the people, who asked not to be named because the information is confidential.”

Bezos wants Amazon to do more with Pentagon: “Amazon.com Inc founder Jeff Bezos said it would support the Department of Defense as technology companies vie for more defense contracts and the Pentagon seeks to modernize itself,” Reuters’s Mike Stone reports.

“Tech companies have faced challenges when trying to work with the Pentagon. Last year a defense program, named Project Maven, set off a revolt, as some employees opposed Google technology being used in warfare. Those employees said it clashed with Google’s stated goal of doing no harm and cited risks around using a nascent artificial intelligence technology in lethal situations.” (Amazon CEO Jeff Bezos owns The Washington Post)

MONEY ON THE HILL

Warren earned nearly $2 million for corporate legal work. The Post's Annie Linskey: "Sen. Elizabeth Warren (D-Mass.) earned nearly $2 million working as a consultant for corporations and financial firms while she was a law professor at Harvard University, the University of Pennsylvania and other law schools, according to records her campaign abruptly released Sunday evening.

"Warren’s consulting work often involved companies dealing with bankruptcy, which was her specialty as an academic. Her campaign had been asked repeatedly for the information and had declined to release it multiple times.Her work for some of the companies doesn’t fit neatly with her current presidential campaign brand as a crusader against corporate interests."

Amazon supporters primed for NYC election fights: “Democrats who torpedoed Amazon’s plans to set up a second headquarters in New York City are finding their stance could come back to bite them on the 2020 ballot,” Politico New York’s Erin Durkin and Sally Goldenberg report.

“Under pressure from liberal activists, a group of New York Democrats including Rep. Alexandria Ocasio-Cortez won an unexpected victory when they drove one of the world’s wealthiest corporations, lured by the promise of $3 billion in tax breaks and subsidies, to ditch its massive investment plans in Queens.Now, in at least three 2020 races in the city, Democratic primary challengers are taking on leading Amazon opponents with an explicit appeal to voters who supported the corporation’s bid earlier this year to locate its second headquarters in Queens. In another race, an Amazon opponent is challenging a lawmaker who supported the plan.”

DAYBOOK

Today:

  • Casey's General, Stitch Fix and Chewy are among the notable companies to report their earnings, per Kiplinger

Tuesday:

  • The Fed begins its two-day meeting to determine whether or not to keep interest rates at their current level
  • The Senate Banking Committee holds a hearing on oversight of the SEC, Chairman Jay Clayton is set to testify
  • AutoZone, GameStop and Dave & Busters are among the notable companies to report their earnings, per Kiplinger

Wednesday:

  •  American Eagle, Lululemon, United Natural Foods and Vera Bradley are among the notable companies to report their earnings, per Kiplinger

Thursday:

  • Costco, Adobe and Oracle are among the notable companies to report their earnings, per Kiplinger

Friday:

  • The Commerce Department releases the latest retail sales numbers

THE FUNNIES

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