Wednesday, February 6, 2019, 12:31 PM, EST
- NASDAQ Composite -0.34% Dow -0.12% S&P 500 -0.29% Russell 2000 -0.11%
- NASDAQ Advancers: 1075 / Decliners: 1190
- Today's Volume (vs. yesterday) +2.26%
- Crude $53.95 +$0.29 , Gold $1310.80 -$3.40 , VIX 15.30 -0.27
- Weekly MBA Mortgage Applications -2.5%, last week was -3%
- November Trade Balance decreased to -$49.3B vs -$54.0B, October revised to -$55.7B from -$55.5B
- Earnings reaction: DIS -0.8%, GM +1.5%, SWKS +11.3%, EA -13.3%, MCHP +8%, CPRI +11%, APC -5.3%
Markets opened flat to slightly lower following last night's State of the Union address. Earnings are a mixed bag today, but generally better. On the economic front, November trade deficit narrowed more than expected, signaling slower global growth as imports fell more than exports. The deficit with China decreased $2.8 billion to $35.4 billion in November. MBA mortgage applications decreased last week despite lower financing rates for the 1st week of February. The average interest rate on 30-year fixed rate conforming mortgages fell 7 basis points to 4.69%, the lowest rate since April 2018.
Currently 8 of the 11 S&P 500 sectors are trading lower with Communications down over 1 % while Real Estate and Consumer Discretionary are down nearly 0.8% each. Health Care and Tech are both up about 0.2%. Crude oil trades higher as US crude & fuel supplies grew less than expected. Gold trades lower again while the dollar moves higher. The yield on the 10-yr is slightly lower at 2.68%.
President Trump delivered the State of the Union address to Congress last night. The President hit all the expected topics while keeping an upbeat tone. His speech was generally well received on both sides of the aisle. The President preached bipartisanship on a number of topics. The question is, will it actually happen? Reminder that the latest spending bill funding ends on February 15th, so unless some work is done, we will have another federal government shutdown. As the President said last night, "So let's work together, compromise, and reach a deal that will truly make America safe."
The National Retail Federations (NRF) posted their economic forecast for 2019 stating that "state of the economy is sound." The NRF forecast that 2019 retail sales will increase between 3.8% and 4.4% topping $3.2 trillion despite threats from "self-inflicted wounds" such as the ongoing trade war and the effects of the government shutdown. "We are not seeing any deterioration in the financial health of the consumer," said NRF President and CEO Matthew Shay. "More people are working, they're making more money, their taxes are lower and their confidence remains high. The biggest priority is to ensure that our economy continues to grow and to avoid self-inflicted wounds. It's time for artificial problems like trade wars and shutdowns to end, and to focus on prosperity not politics."
Former Goldman Sachs CEO Lloyd Blankfein responded back to Senators Chuck Schumer and Bernie Sanders NYT Op-Ed that questioned the validity of corporate stock buybacks. The Senators think that corporate buybacks divert resources away from workers and enrich corporate executives who are shareholders. Mr. Blankfein stated on Twitter "A company used to be encourages to return money to shareholders when it couldn't reinvest in itself for a good return. The money doesn't vanish, it gets reinvested in higher growth businesses that boost the economy and jobs. Is that bad?" Corporations generally have three ways of returning cash to shareholders - corporate buybacks, dividends and re-investing in the company.
Earnings season marches on with 283 members of the S&P 500 having reported. The average upside beat is now 3.44% for the S&P 500 as a whole, while the quarterly earnings growth rate slipped to 13.79%. The sales growth rate stands at 6.46%. Still to come this week are ORLY, CMG, YUM, TMUS, WLTW, PM, EXPE, and GT.
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Brian's Technical Take
With the global recovery underway, at least from a price perspective, one of the more interesting setups out there is India's Nifty 50 Index. The NIFTY gained 1.2% today making for a "whopping" YTD return of 1.8%. While that ranks near the bottom of returns vs. its global peers so far in 2019, it is worth noting the NIFTY far outperformed most global indices in both 2017 and 2018 with gains of 28.7% and 3.2%.
Over the last three and five years the NIFTY has outperformed the S&P 500 by 159% and 25%. Today's gain stands out as the NIFTY is "breaking out" above a clearly defined two-month resistance line. The very recent trend of underperformance could be over as today's higher high could be the start of a new uptrend.
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Trump's address last night was good. He said all the right things, for the most part and hit on the topics that need to be addressed. "Self-inflicted" political items such as tariffs, border walls and shutdowns are a headwind for the markets and a major distraction for the good economic data and solid earnings reports that we are seeing. If the politics can stay out of the way, look to the markets continue to march.
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.