Thursday, May 16, 2019, 12:31 PM, EST
- Stocks have rallied about 600 points from yesterday's lows.
- Attention has turned to earnings and economic growth despite trade concerns.
- Housing Starts rose 5.7% and Building permits were a higher than expected 1.296 million while jobless claims remained low at 212,000 vs. 220,000 expected.
- Philadelphia Fed/s Business Outlook also had a positive reading of 16.6 vs 9.0 expected.
Stocks are higher today, up over 200 Dow points as of mid-morning, and 275 points as we write, marking a 600 point turnaround off yesterday's lows. Weaker than expected Retail Sales and Industrial Production releases from the government hurt stocks initially yesterday, but the market turned on a delay in auto tariffs and some talk of ending steel and aluminum tariffs with Canada and Mexico. So despite President Trump signing an executive order to ban American companies from using Huawei telecom equipment, stocks are back in "risk-on" mode.
Walmart's beat on earnings, which included a 37% increase in e-commerce sales and a 3.4% bounce in comp store sales helped assuage some concerns about yesterday's retail sales number. U.S. sales were strong but overall revenues were hit a bit by the strong dollar. Recall Macy's also had good results yesterday as well. Today, restaurant company Jack in the Box beat on earnings and credit card company Capital One is not seeing a spike in default rates to cherry pick a few positive data points from retail land that might be helping retailer and market sentiment. The S&P Retail ETF "XRT" consisting of 95 retail names has retraced all of yesterday's decline.
Today's economic news in April Housing starts were up 5.7%, well ahead of the March decline of 0.2% but below the 6.2% increase expected. Building Permits were 1.296 million vs the 1.289 million consensus, for a better than expected monthly increase of 0.6%. Philly Fed's Business Outlook Index rose 8.1 points to 16.6 in May.
Finally, Initial Jobless Claims fell 16,000 to 212,000 below the estimate of 220,000 while continuing claims of 1.66 million were also lower that the 1.67 million consensus indicating continued strength in the labor market.
Since futures began rising at 4am and did not react much to the economic & earnings data, today's strength seems to be the market getting used to the idea of a longer slog in the China negotiations, continued low rates, and perhaps some help on other trade fronts. Short covering and the expiration of May options tomorrow may also be contributing to the action today.
All sectors are higher this morning with "risky" Healthcare and Tech the leading performers and safety groups Utilities and Real Estate lagging. (see below).
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Brian's Technical Take
The major U.S. equity indices are up across the board despite yesterday's executive order which has escalated the trade war with China to new heights. The rally is widespread with the large cap NDX (+1.4%) and SPX (+1.3%) leading the rebound followed by the small cap Russell 2000 (+1.2%).
Rates are up on the day as well, but the bond market is not showing the same exuberance as equities. While stocks are in the green for their third consecutive session, rates are just one day removed from their YTD lows and for the long 10-year yield has not even moved back above yesterday's highs.
The 10-year yield bottomed yesterday at its 200-week sma, 2.35%, a widely followed moving average which it just recently tested in late March and thereby proved itself to be a key support level. Seven weeks later and the current retest is noteworthy as the declining trendline is converging closely towards this support indicating a resolution, up or down, is likely soon.
If this resolves to the downside, it could suggest the 3-day rebound in equities is more of a relief rally than the start of a new uptrend. While rates have been in decline for the majority of 2019's equity rebound due in large part to the Fed's "dovish pivot", a move to new lows in the long yield may suggest investors are pricing in the negative economic impacts of the ongoing trade war which has gone up a couple of notches over the last week.
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Nasdaq's Market Intelligence Desk (MID) Team includes:
Charles Brown is Associate Vice President on The Market Intelligence Desk with over 20 years of equity capital markets experience. Charlie has extensive knowledge of equity trading on both floor and screen based marketplaces. Charlie assists with the management of The Market Intelligence Desk and works with Nasdaq listed companies providing them with insightful objective trading analysis.
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.
Brian Joyce, CMT is a Managing 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).
Michael Sokoll, CFA is Associate Vice President 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.