Market Intelligence

Equity Market Insights: January 5, 2018

Thursday, January 5, 2018, 11:15 AM, EST

  • NASDAQ Composite +0.56% Dow +0.27% S&P 500 +0.22% Russell 2000 +0.06% S&P MID 400 +0.14%
  • NASDAQ Advancers: 1286 Decliners: 910
  • Today’s Volume (100 day avg) +15%

US stocks are poised to continue the 2018 winning streak, as investors continue to favor the technology, and material. Employment data from December was a headline miss, while the read doesn’t seem to be a bearish signal. Crude Oil (-0.66%) is seeing its largest pullback since 12/13, retreating from the highest closing price in 3 years.

  • The economic calendar was full of data this morning, led by a December Nonfarm Payroll that fell short of the consensus (+190) but maintained confidence behind the healthy jobs market. The payroll read was a positive takeaway, as the hourly earnings was up 0.3% this past month and up 2.5% from the same month last year. Separately, US trade deficit widened to $50.5billon, which was marginally higher than expected and the largest gap since early 2012. Lastly, ISM Non-Manufacturing (55.9 vs 57.9 est.) Factor Orders (+1.3% vs +1.1% est), and Durable Goods (+1.3% vs 1.3% prior) didn’t send shockwaves to the markets.
  • Philadelphia Fed President, Patrick Harker, mentioned this morning that 2 rate hikes in 2018 might be appropriate in this soft inflation environment. Harker doesn’t vote on policy changes but believes it might be time to reevaluate the targets and “the way we conduct policy.” The consensus amongst US economist is for 3 to 4 hikes this year while the Fed stays on its gradual path to further tightening.
  • Crude Oil is coming off its best 3 day rally in over a year, declining this morning as investors believe that production might increase now that the price has reached a level where profits are achievable. OPEC’s efforts over the past year to cut into the global surplus might hit a major hurdle if the prices continue to climb.
  • The Dow Jones Industrials average now has crossed over seven 1,000 point milestones since the presidential election in November, 2016. Known as Main Street’s Index, the Dow now stands above 25,000 and is poised to go higher. Of all 30 members of the Dow, a price weighted index, can you name the top performer of the index contributing the most points to the index’s rise? If you guessed Boeing (BA) then you are correct adding nearly 1,000 points to this historic run. Other top performers include Caterpillar (CAT) adding 460 points and United Healthcare (UNH) adding 425 points.

Technical take: Big Test for Biotechs

Following the bursting of the Housing Bubble, one of the top performing industries for years had been biotechs. After peaking in mid-2015 the Nasdaq Biotech Index (NBI) declined 40% to its lows in Q2’16. In 2016 the NBI declined (21.7%) its first year in the red since 2008. Last year it bounced back with a gain of 21.1%, however in September the biotech index stalled at the ~3,570 resistance line, in place since Q4’15, and has spent the ensuing four months to date consolidating. Over this time the NBI has repeatedly tested the clearly defined rising trendline whose importance was already well established with the extensive number of successful tests from Q4’16 through mid-17. The rising support is now converging closely towards the ~3,570 resistance which indicates a breakout, up or down, is likely to occur in the not too distant future. The corrective pattern since Q4’15 has formed a large, bullish cup and handle continuation pattern, with the handle being represented by the last four months of corrective price action. The size and duration of the pattern suggests a breakout above the ~3,570 neckline could be accompanied by strong upside momentum with a “textbook” measured move to 4,624, +33% from last sale. In this constructive scenario, the prior all-time, 4,195, is the true test in confirming a resumption of the prior long term, multi-year uptrend.

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 is a 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).

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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