Equities Slide Into the Weekend
- NASDAQ Composite -0.89% Dow -0.69% S&P 500 -0.22% Russell 2000 -0.66%
- NASDAQ Advancers: 897 Decliners: 1453
- Today’s Volume (vs. yesterday) -4.7%
- Crude $54.01 +$0.08, Gold $1487.20 -$5.10, VIX 14.50 +0.71
Market Movers
- Chinese Q3 GDP +6.0% vs consensus of +6.1%, below +6.2% Q2 growth, worst print since 1992
- US September Leading Economic Index (LEI) -0.1% vs. consensus +0.1%
- Reaction to earnings: ETFC +4.5, ISRG +6.0%, PBCT +5%, WDFC -2.25%, AXP-1%, CFG +1%, KO +2.25%, KSU +5.5%, SLB +2.5%, STT +4.5% and SYF +0.5%
Chris’ Commentary
Markets opened flat and traded off slightly as the morning progressed. A lack of domestic economic and macro headlines to start the day are leading to another below average trading session. Even with this morning’s decline, the S&P 500 is on pace for its second week of gains.
Wednesday, stocks closed mixed to higher with small caps again the best performers. The Russell 2000 finished higher by 0.8% and is up 1.7% for the week. The S&P 500 was up 0.14% and is less than 1% away from its all-time high made in July. The Dow was off 0.19% while the Nasdaq was up 0.17%. Equity trading volumes were again light. For the week, equity trading volumes trail the yearly average by over 11%. An ominous sign of lack of conviction.
Currently 5 of 11 major S&P 500 sectors are trading higher. Consumer Staples and Real Estate lead the way higher both up over ½ of a percent while Tech continues to lag. Crude oil trades slightly higher while Gold continues to slide. The dollar trades lower for the 4th day in a row while the yield on the 10-yr stands at 1.75%.
China release Q3 GDP numbers below expectations last night. The Chinese economy grew by only +6.0% year-over-year, which was down from +6.2% last quarter and less than the +6.1% consensus number. This was the weakest print since 1992. Signs of continued slowing growth here are consistent with the over-arching theme of a slowing global economy.
Earnings season for the quarter is underway and though it is early, with 74 members of the S&P 500 having reported, we have seen an average upside beat of over 3.94% for the S&P 500 as a whole. The quarterly earnings growth rate for the index has declined by 3.08%, while the sales growth rate has increased nearly 3.23%. The Financials sector, with 24/68 members of reporting so far, have posted a noticeable negative growth rate of -1.80%.
Over 125 members of the S&P 500 are expected to report their Q3 numbers next week.We will get a heavy dose of Consumer, Tech and Industrials reports to sort through, including such market movers AMZN, BA, BIIB, CAT, CMG, F, HAL, HAS, K, LLY, LMT, MCD, MMM, MSFY, TSCO TXN & UPS.
Sector Recap
Brian’s Technical Take
Markets are relatively calm ahead of this weekend’s Brexit vote with the S&P 500 within 1% of breaking out to new all-time highs. Five sectors are modestly higher and six modestly lower with a bias favoring the safe haven defensive groups. Rates are slightly lower across the curve but for the week have been relatively flat following last week’s sharp bounce higher on the longer end.
The U.S. dollar index (DXY) is down again for the seventh time in eight sessions marking its third consecutive week in the red. Last week the DXY broke down below a four month rising trend line (i.e. minor support), and today it is testing its 200-day sma (yellow line), now $97.39. The DXY bounced off this common support line on at least six occasions in 2019 (see white arrows) which proves this is a key support level to monitor.
With the DXY at key support, it is not much of a surprise to see the inversely correlated Emerging Market ETF (ticker EEM) at key resistance. The EEM is currently up against a six-month declining trend line which now coincides its 200-day sma, $41.92. Yesterday the EEM broke out above this resistance, but today is has pulled back into the congestion zone.
The weekend vote is likely to have a meaningful impact in the FX markets and specifically the near term direction of the dollar, as well as the euro and sterling of course. This in turn should determine the direction of the EEM ETF, as well as rates for that matter. A mean reversion play would expect a pullback in EEM and rates, and bounce higher in the greenback.
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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