Equities Experience Measured Gains on Earnings
- NASDAQ Composite -0.12% Dow +0.17% S&P 500 +0.14% Russell 2000 -0.13%
- NASDAQ Advancers: 1030 Decliners: 1229
- Today’s Volume (vs. Monday) +2.29%
- Crude +2.16%, Gold +0.06%
Market Movers
- S&P 500 closes above the psychological 3000 level for the first time since 9/19
- September US Existing Home Sales 5.38M vs. consensus 5.45M. August revised to 5.50M from 5.49M
- Richmond Fed October manufacturing survey at 8 vs. -9 in September
- Biogen will pursue FDA approval of its Alzheimer's treatment aducanumab after upbeat trial results and third quarter profit that beat expectations
- Canadian Prime Minister Justin Trudeau won a second term in the national elections but his Liberal party lost the majority in parliament
Charlie’s Commentary
Equities finished Monday in positive territory close to the highs of the day but quite honestly, not necessarily on a solid foundation. Apart from a few positive trade comments, expected Fed accommodation, sanguine corporate earnings commentary and a stalled Brexit vote, nothing concrete hit the wires. The Dow rose +0.21% while Nasdaq climbed +0.91% and the S&P 500 grew by 0.69% as there was nothing really to disrupt the slightly positive momentum.
One item that had the potential to disrupt the market in the afternoon was a blocked Brexit vote. House of Commons Speaker John Bercow rejected the government's bid to conduct a second parliamentary vote on the Brexit deal stating that members had already voted on Johnson’s deal and nothing has changed. Prime Minister Boris Johnson reacting to the decision said he was disappointed that the speaker has yet again denied us a chance to deliver on the “will of the British people.” Johnson will now attempt to fast track his law through parliament and the Commons in three days. From there it would go to the House of Lords in attempt to pass Brexit by 10/31. According to the London Times, he is being warned that his bid to ram his Brexit deal through the Commons in three days will be voted down tonight unless he agrees to automatically extend the transition period after Brexit. He has now threatened to scrap his attempt to pass Brexit and move straight to an election if members of Parliament defeat him in a vote tonight. You just knew this was going to come down to the wire.
This morning stocks are off to a measured start as we had a mixed bag of earnings hit the tape. Industry bellwethers United Technologies and Procter & Gamble beat, but McDonald’s, Hasbro and Travelers missed. Still, earnings remain encouraging as more than 18% of the S&P 500 companies have reported with 80% beating analyst earnings expectations. Of particular note is the performance of Biogen Inc. this morning which is soaring on encouraging trial results of its Alzheimer’s treatment drug and third quarter profit that far exceeded expectations. They are planning on filing for a new drug application in early 2020 as their drug aducanumab showed a reduction in the clinical decline in patients with early Alzheimer’s disease. What great news for not only those afflicted but also those who have loved ones affected by the disease.
Volumes are up today vs. yesterday but still have been lower on average. In the past, my colleague Chris has highlighted the periodic weak volume in the market despite approaching all-time highs. Average daily trading volumes in the S&P 500 Index has dropped to a 10 year low. The concern is that the investing currently being executed in the marketplace is by non-fundamental traders such as passive funds, algorithmic investment funds, momentum and high frequency traders, and that a sudden downturn in the market could lead an absence of liquidity that could create a significant downdraft. The reality, however, is that the investing landscape, partially due to sheer unpredictability, has evolved beyond equities to derivative instruments such as ETF’s, Futures and Options and that has ultimately affected equity volume levels.
Switching to the trade front, continued encouraging words seem to be making their way into the headlines. The latest from Vice Foreign Minister Le Yucheng indicated that any problems could be resolved as long as both sides respected each other. “As long as we respect each other and seek equal cooperation, there are no disagreements that cannot be resolved between China and the United States. What China wants is to deliver a better life for the Chinese people. We don’t want to take anything from anyone else. There’s no such thing as China replacing anyone or threatening anyone,” Le said.
On the , we have a report on existing home sales. Contract closings on existing homes fell 2.2% in September from the prior month to an 5.38 million annual rate.That is the slowest pace in three months as higher prices have off set the benefits of lower mortgage rates and wage gains. The median sales price of a home rose 5.9% from a year earlier to $272,100. That is the biggest gain since January 2018. The October manufacturing reading from the Richmond Fed showed surprising resiliency from September which posted a weak -9 reading. Fifth District manufacturing activity strengthened to an 8 in October, as all three components shipments, new orders, and employment increased. Manufacturing firms also reported an increase in backlog of orders and improved local business conditions.
The continued positive trade tone emanating from Washington and Beijing is having a positive effect on crude currently up a little over 1% despite the buildup in US stockpiles. Gold is modestly higher as the contentious Brexit struggles / vote creates an appetite for the safe haven as a risk off attitude prevails in the short run in much of Europe.
Sector strength today is led not surprisingly by Healthcare (+1.11%) followed by Energy (+0.81%) and Industrials (+0.37%). Lagging today are Basic Materials (-0.46%). Consumer Discretionary (-0.25%) and Financials (-0.06%).
Sector Recap
Brian’s Technical Take
Brian is taking his show on the road today so I am attempting to fill his “technical shoes.” With trade optimism in the air and third quarter earnings season underway, the technology sector and particularly the semiconductor space is getting a boost. The Semiconductor ETF (SMH) held up better than most sectors and indices during early October weakness, especially with its bullish posture above the 50-day moving average and September support zone. Continued progress towards a trade deal and encouraging economic indicators could push the ETF above its current resistance level of 125.37, the 52 week high reached on 10/15 of this year. However on the flip side, any uncertainty as it pertains to trade negotiations and the global macroeconomic outlook could result in a risk off posture and the potential for it to fall below current support of 122.41.
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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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