Monday, March 11, 2019, 12:31 PM, EST
- NASDAQ Composite +1.48% Dow +0.39% S&P 500 +1.08% Russell 2000 +0.96%
- NASDAQ Advancers: 1699 / Decliners: 590
- Today's Volume (vs. Friday)-1.26%
- Crude+1.05%, Gold-0.48%
- Nvidia announced it will buy Mellanox for $6.9 billion
- The Dow remains under pressure primarily due to Boeing after an Ethiopian Airlines 737 Max 8 crashed over the weekend killing everyone on board
- January US Retail Sales +0.2% vs. consensus 0.0%; January ex-Autos +0.9% vs. consensus +0.2%. December Retail Sales revised to (1.6%) from (1.2%). December ex-Autos revised to (2.1%) from (1.8%)
- December US Business Inventories +0.6% vs. consensus +0.6%. November revised to 0.0% from (0.1%)
- Chinese shares outperformed pairing some of Friday's losses with stocks in Japan and Hong Kong also higher
This past Saturday marked the official 10 year anniversary of the bull market, but will this milestone also mark its end? The major stock indexes posted their fifth straight decline on Friday, leaving the S&P 500 down 2.2% for the week. The Dow Jones Industrial Average suffered a weekly fall of 2.2%, while the Nasdaq Composite lost 2.5%. It was the worst week of 2019 for all three gauges. The week was littered by all sorts of market pot holes ranging from dismal economic data out of China to the European Central Bank staging a dovish reversal to a US jobs reports that in the famous lyrics of Twisted Sister was "worthless and weak." It's easy to lose perspective after enduring a 5 day beat down, however, stocks are still sporting strong gains for the year to date, with the S&P 500 and Dow up more than 9% and Nasdaq up 11.7%, marking a strong rebound from a sharp end-of-year sell off. Could it be that we just got way ahead of ourselves riding this wave of optimism over U.S-China détente, hitting the panic button when negotiations stalled? Global growth is a concern but who's to say the recently enacted measures by the ECB will not stabilize and jump start the region.
Do we not think China will introduce some sort of fiscal stimulus to combat it's over 20% decline in exports. And what about the U.S.? Yes the top line of the jobs number was bad on Friday but the devil is in the details. Unemployment continues to fall and wage growth is picking up. Finally, the U.S. and China both have a lot to gain through some sort of trade deal so expect progress on that front in the weeks to come. Both are extremely prideful nations and both need to save face. Ok enough of my glass half full perspective. Let's turn to today and this week. A portion of this morning's market is being heavily influenced by human tragedy. Over the weekend a Boeing 737 Max 8 airliner operated by Ethiopian Airlines crashed shortly after takeoff killing all 157 people on board. This was the second deadly crash of this airliner in less than a year prompting some carriers to ground the popular selling aircraft. The 737 Max is Boeing's best-selling narrow body with dozens of customers worldwide. It had an early adverse effect on the Dow while the S&P 500 and Nasdaq trade in positive territory.
Remember the Dow is a price weighted index and Boeing is its highest priced component so the pressure on the shares was having an outsized influence on the index early this morning. The index has since rebounded and is trading in positive territory. Of positive note this morning was a 60 minutes interview with Federal Reserve Chairman Jerome Powell who was quoted as saying the economy is still strong and that the Fed will remain patient with its approach to monetary policy. He did acknowledge that perceived economic weakness around the world would eventually start to be felt in the U.S. In addition, M&A is alive an well as Nvidia Corp has agreed to buy Mellanox technologies for $6.9 billion. Nvidia will pay $125 a share in cash in its biggest ever acquisition to date as the company pursues the strategy of convincing data centers that Nvidia's graphic chips are the best solution for processing large amounts of information needed for artificial intelligence. On the economic front, investors were somewhat relieved this morning when retail sales for January came in better than anticipated after a plunge the prior month.
The Commerce Departmen t report ed that retail sales for January rose 0.2% after a decrease of 1.6% the prior month, which was the largest drop in nine years. Sales in the control group (excluding food services, car dealers, building material stores and gas stations), widely seen as a purer view of consumer demand rose 1.1%, higher than analyst estimates after a 2.3% plunge the prior month. Eight of the 13 major retail categories showed improvements with building materials outlets, food and beverage stores and sporting goods and hobby stores rising the most. This stronger than expected report should ease concerns about consumer strength after a surprisingly Weak December that was probably influenced by the government shutdown.
Business inventories in the U.S. rose 0.6% in December according to the Commerce Department while sales fell 1%. The ration of inventories to sales (months it would take to sell all the inventory on hand) climbed to 1.38 from 1.36. An increase in inventories adds to gross domestic product reflecting an expanding economy. In the commodity pits, crude is rising today boosted by comments made by the Saudi Oil Minister Khalid al-Falih who said that an end to OPEC led supply cuts was unlikely before June and before a report showing fall U.S. drilling activity. Gold is slipping today after failing to break above resistance of $1,300 last week as equities regain some ground today. Technology and Communications sectors are getting a boost this morning thanks to Apple and Facebook's performance after getting Buy upgrades from Bank of America and Nomura / Instinet respectively. In fact all 11 sectors are trading in positive territory with Industrials the worst performer influenced heavily by Boeing.
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Brian's Technical Take
Investors will often look at the performance of the transportation industry as one of many indicators to gauge the pulse of the economy. And during this recent pullback the Dow Jones Transportation Index (TRAN) has not fared well with an eleven consecutive days in the red ending Friday, March 8th. The TRAN Index has not seen that many days in the red in nearly 47 years (May 1972) which may sound dire, however one off historical stats are sometimes nothing more than just that.
In 1972 the Dow Jones Industrials and S&P 500 indices gained 14.6% and 15.6%. And taking a broader perspective this time around seems to provide context for which to be more optimistic. Over the recent string of losses the TRAN gave back just 6.4% which is relatively modest after rebounding more than 23% off its December lows. As of Friday's close it stood +17% from the December lows and +10.3% YTD. The 2019 pullback began with overbought technical readings as measured by its 75 daily RSI. Despite being down for the eleventh session in a row on Friday, the TRAN rebounded off of a cluster of minor support representing the 50-day moving average as well as a minor pivot from early February.
Friday's pattern formed a bullish candlestick pattern (hammer) and today's 1% gain is thus far confirming the reversal. While its plausible the markets may have to go through a longer period of corrective price action, the recent correction is not yet negating the positive start to the year.
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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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.