Equity Market Insight from Nasdaq MID - December 13, 2017

Wednesday, December 13, 2017, 11:45 AM, EST

  • NASDAQ Composite +0.40% Dow +0.46% S&P 500 +0.2% Russell 2000 +0.75% S&P MID 400 +0.2%
  • NASDAQ Advancers: 1497 Decliners: 705
  • Today’s Volume (100 day avg) -6%

Technology stocks are bouncing back this morning, and supplying the support for the broader markets. The final Fed meeting of 2017 will conclude today with Janet Yellen on the stage this afternoon offering the committee’s state of the economy and what we may see in 2018. For the first time in 5 days, the US Dollar is lower, and likely ending the greenback’s longest winning streak since early 2016.

  • Three of the leading global Central Banks are in focus this week as all of them are in the midst of impactful policy moves. Today, the Federal Reserve will likely raise rates by 0.25% to 1.50%, which marks the 4 th hike over the past year. Tomorrow, the Bank of England and European Central Bank are expected to keep their lending rates unchanged, but investors will be looking for clarity on their monetary tighten policy and the long-term effects of Brexit.
  • Monthly CPI was out before the bell and the number (+0.4%) was in line with expectations. The latest CPI figure further confirmed weak inflation (compared to the Feds target) in the US. Consensus amongst economists believe the sluggish core inflation will continue in 2018, and stay muted as long as the wage growth remains stagnant.
  • The retail apocalypse continues to make headlines as many brick-n-mortar retailers struggle to compete with e-commerce and the “Amazon Effect.” In 2017, more than 6,800 stores shut their doors as bankruptcy and consolidation played out in the space. However, many consumer discretionary names have gone public in 2017, bucking the news cycle that retail is dead. Some of these successful launches were National Vision (Nasdaq:EYE) and Stitch Fix (Nasdaq:SFIX) who both have multi-billion dollar market caps.
  • The Russell 2000 (+0.75%) is the best performer leading index, helped by the strong gains from Finisar Corp (+26%). The upside is being fueled by the news that Apple will use Finisar’s technology for their iPhone X face recognition feature.
  • Highlighting the continuing shift in energy markets, The Energy Information Agency’s December outlook says that by middle of next year US crude oil production should reach about 9.99m barrels a day. That puts US production on par, if not slightly ahead of Saudi Arabia’s output at current levels. In the meantime OPEC says the markets are nearing balance as surplus stockpile decline to 130 mbls above the targeted 5-year average, down from about 154mbls a month ago. DOE weekly inventory data reflects a sizable drawdown in crude stocks along with an in line reduction in distillates, but gasoline levels increased more than triple expectations. Crude oil is trading flat to slightly higher with little impact from the data dump.

Technical Take:

The Federal Reserve is meeting today and markets are pricing in a 98% probability for a 25bps rate hike, its fourth hike in twelve months. The uncertainty resides in the committee’s new DotPlot which reflects the each member’s expectations for future economic data like GDP and unemployment, as well as expectations regarding the pace of future rate hikes. Since June much of the economic data has largely exceeded market expectations. This is best measured by the Citigroup Economic Surprise Index which recently reached a four year high. While this is certainly a positive signal, over the near term it is seen by some as a contrarian indicator reflecting extreme bullish sentiment.

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Nasdaq's Market Intelligence Desk (MID) Team includes:

Michael Sokoll, CFA is a Senior Managing Director 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.

Jeffrey LaRocque is a Director on the Market Intelligence Desk (MID) at Nasdaq, covering U.S. equities with over 10 years of experience having learned market structure while working on institutional trading desks and as a stock surveillance analyst. Jeff's diverse professional knowledge includes IPOs, Technical Analysis and Options Trading.

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.

Annie O'Callaghan is Director on the Market Intelligence Desk (MID) at Nasdaq. Annie has worked for NASDAQ in a variety of roles including support of Nasdaq C-level management in client retention and customer service. Annie also served as a Sales Director in Nasdaq’s Transactions Services business. Prior to joining Nasdaq, Annie worked at AX Trading, managing accounts for its Alternative Trading System and served on Credit Suisse's trading desk as an Electronic & Algorithmic Sales Trading Analyst.

Brian Joyce, CMT has 16 years of trading desk experience. Prior to joining Nasdaq Brian executed equity orders and provided trading ideas to institutional clients. He also contributed technical analysis to a fundamental research offering. Brian focuses on helping Nasdaq’s Financial, Healthcare and Airline companies among others understand the trading in their stock. Brian is a Chartered Market Technician.

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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