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Global Growth Concerns Continue to Plague the Market

Friday, December 14, 2018, 12:31 PM, EST

  • NASDAQ Composite-1.47%Dow-1.80%S&P 500-1.52%Russell 2000-0.27%
  • NASDAQ Advancers:764Decliners:1544
  • Today’s Volume (vs. yesterday)+2.01%
  • Crude-2.66%, Gold-9.63%

Market Movers

      • November US Retail Sales +0.2% vs. consensus +0.2%; November ex-Autos +0.2% vs. consensus +0.3% (Oct Retail Sales revised to +1.1% from +0.8% , Oct ex-Autos revised to +1.0% from +0.7%)
      • November US Industrial Production +0.6% vs. consensus +0.3%
      • November Capacity Utilization came in at 78.5% vs. consensus 78.5%
      • December US Markit PMI - Services - Flash 53.4 vs. consensus 54.8
      • December US Markit PMI - Manufacturing - Flash 53.9 vs. consensus 55.1
      • October US Business Inventories +0.6% vs. consensus +0.5%
      • China’s Ministry of Finance announced Friday that it would suspend a series of tariffs on American-made automobiles and parts for three months starting Jan. 1

Charlie’s Commentary You might be asking yourself who is in charge here lately? Is it the Bulls or is it the Bears? Do we buy the dips or sell the rallies? The simple fact is we have seen it all in the past several weeks. Five of the last nine trading sessions have seen the Dow swing 570 points intraday. Reversals have become more common. Data compiled by Dow Jones Market Data shows that the S&P 500 has closed either 1% below its intraday high or 1% above its intraday low 76 times in 2018. So far, that’s the most since 2015, when that occurred 82 times. In 2017, a year noted for its placid market behavior, the phenomenon was seen only six times. Volatility is back! One of the factors contributing to these wild swings is algorithmic trading programs that can be designed to react to practically anything ranging from sensing momentum to certain chart patterns to even specific words in news stories or press releases. More on that in later writings but it is a fact in today’s trading landscape. This morning we are nothing less than consistent, down early on less than stellar data out of China. New evidence that global trade tensions are hitting the world’s second-biggest economy emerged today, as China released data that showed both industrial output and retail sales for November missed economists’ forecasts. China’s National Bureau of Statistics data attempted to cool concerns, saying the economy “performed within the reasonable range.” That attempt to calm investors has been cast aside, further eroding earlier optimism that a trade deal was near. News was no better out of Europe the day after ECB President Mario Draghi warned that economic risks were moving to the downside as France’s PMI number hit the lowest level in more than four years. In addition European automobile manufacturer’s regional sales fell in November for the third month in a row. Traders are also apprehensive about what lays ahead with the Federal Reserve holding their final policy meeting of 2018 on Tuesday and Wednesday. In addition a partial government shutdown may begin next week if lawmakers and the President cannot resolve funding to the campaigned promised border wall. Turning to the economic calendar this morning, traders were anxiously anticipating the retail sales data for November that did not disappoint. The value of overall sales rose 0.2% after a 1.1% increase the prior month. Sales in the control group, that excludes food services, car dealers, building material stores and gasoline stations climbed 0.9% more than double the projections. This core number is used in the computation of the goods component for personal consumption expenditures in the GDP report. Sales were definitely aided by holiday shoppers who took advantage of lower fuel costs and hit the stores early and heavily during the Black Friday weekend. Nine of the eleven retail categories showed increases in November with the nonstore category (which includes online shopping) rising 2.3%, the most in a year. So far this stellar data has not helped the market. November industrial production rose 0.6%, the strongest gain in three months on strong mining and utility output. Utility output specifically was aided by the cold weather that has been sweeping across the country. Capacity utilization rose 0.4 percentage points in November to 78.5% This is below the 60% level that is likely to put pressure on costs. The U.S. flash manufacturing index for December fell to 53.9 from 55.3 in November. That was the lowest reading since November of 2017. Finally U.S. business inventories rose solidly in October advancing by 0.6% suggesting inventory investment could contribute to economic growth in the fourth quarter. In the commodity pits, oil is trading lower after the Chinese economic data suggested slower economic growth and ultimately lower fuel demand from the largest oil importer. Gold is also under some pressure this morning for the second straight day, touching a one week low as the dollar rises. Gold is down close to 1.0% for the week and almost 9% since April on track for a decline for the year, after rising the previous two. The dollar is gaining momentum today as investors express concern over the apparent slowdown in China. The firmer dollar makes gold more expensive for holders of other currencies. Currently all 11 sectors in the S&P 500 are in negative territory with Health Care, Consumer Staples and Technology under the most pressure. Real Estate Financials and Communications are the best performing sectors. The “Fear Index” or VIX remains above 20 at 21.41 while the yield on the 10 year has come down a bit to 2.8949 Friday trivia question is below. Just hit reply to this e-mail with your response. Have a great weekend everyone! Sector Recap

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Brian’s Technical Take: Brian is taking a well-deserved day off today

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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.