Credit: Shutterstock photoFriday,December 7, 2018, 1:04 PM, EST
- NASDAQ Composite-2.06%Dow-1.66%S&P 500-1.60%Russell 2000-0.91%
- NASDAQ Advancers:848Decliners:1482
- Today's Volume (vs yesterday)-29.84%
- Crude+4.25%Gold+0.52%
Market Movers
- November US Nonfarm Payrolls +155K vs. consensus +195K; Unemployment Rate 3.7% vs. consensus 3.7%
- December US Michigan Consumer Sentiment (preliminary) 97.5 vs consensus 97.0
- October US Wholesale Inventories +0.8% vs. consensus +0.7%
- October Consumer Credit is at 3:00 pm
- Congratulations to Moderna (MRNA) who priced 26.28 million shares at $23.00
Charlie's Commentary
Is Technology close to finding a bottom after being battered over the last several weeks? Looking at the last hour and a half of trading yesterday some would guess that might be case. While all indexes pared their losses dramatically from morning lows, large cap technology companies and specifically the FAANG stocks, powered the Nasdaq Composite back into positive territory after a sustained rally from about 1:50 pm into the close.
At one point during the day Nasdaq was down -174 points. Aiding the rally across the board was a Wall Street Journal article yesterday afternoon that suggested Fed officials are considering whether to signal a new wait-and-see mentality after December as they become less sure how far they will need to go after the moves already made.
While that certainly helped matters and the market, traders continue to be wary and are focused on the day-after-Thanksgiving lows of 24,268 on the Dow and 2,631 on the S&P. We broke below both those levels yesterday hitting 24,242 on the Dow and 2621 on the S&P but was able to get a healthy bounce off of those levels.
Today's market is shaping up to be another roller coaster swinging back and forth between positive territory and negative territory. This morning's early sentiment was decidedly negative but got some early good news from the November Nonfarm Payroll report that missed analysts' forecasts.
Wait does that makes sense?? U.S. payrolls and wages rose less than forecast in November while the unemployment rate held at the lowest level in five decades indicating some cooling in a still strong labor market. Nonfarm payrolls increased by 155,000. Economists had expected a gain of 198,000. Average hourly earnings rose 0.2% from the prior month while unemployment remained at a 49 year low of 3.1%.
Ultimately it was a Goldilocks report. It was weak enough to convince investors the Fed can slow their tightening but strong enough not to get investors worried about a recession. Analysts' do not expect any deviation to the December rate hike. That is a done deal. In other economic news October Wholesale Inventories came in a little higher than estimate and the prior month at 0.8% vs 0.7%.
The University of Michigan's preliminary sentiment index was unchanged vs the November reading but 0.5% higher than estimate. Low unemployment and growing incomes have kept Americans in an upbeat mood although the outlook was tempered a bit amid concern that the labor market will soften.
The early positive sentiment has turned decidedly negative with yesterday's rally leading FAANG stocks rolling over and giving yesterday's gains right back. There just does not seem to be enough sustained good news and data out there to warrant traders to take on risk during a Friday.
In addition White House Advisor Peter Navarro commented that tariffs on Chinese goods would rise if there is no trade deal after the 90 day truce expires…..so the unsettled China narrative continues and dominates trading at the moment.
Turning to the commodity space oil is front and center once again but this time from a positive standpoint. During their meeting in Vienna, OPEC broke an impasse over production cuts ultimately agreeing on a larger than expected cut after 2 days of back and forth negotiations amongst members of the cartel. OPEC and its partners agreed to remove 1.2 million barrels a day from the market with OPEC itself shouldering 800,000 barrels of the burden.
Somehow, in all of these negotiations, Iran managed to avoid participating in the curbs, securing an exemption saying it is suffering already due to the effects of the currently imposed U.S. sanctions. Crude surged as a result of the news. Gold is also rallying this morning benefitting from the weaker than expected jobs data eased concerns that the Fed would aggressively raise rates in the future.
It is also reacting to generally a risk off environment where stocks and yields have fallen and the dollar has not been performing well. From a technical standpoint the resistance level of $1,240 is being closely watched
Checking the sector heat map, technology is leading the down draft followed by healthcare and consumer discretionary. On the positive side, energy and utilities are in the green.
Sector Recap
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Brian's Technical Take
Crude oil is having its best day in two years with an intraday gain as high as 5.3% after OPEC and friends agreed to cut production by 1.2 million barrels per day vs. the 1 million previously signaled. With all the carnage we have seen over the last two months in global asset prices, oil ranks near the top of the list as one of the biggest decliners. November's 22% decline was its worst monthly performance in ten years, 2nd worst in more than 25 years, and high to low it gave up more than 35%.
Accordingly energy is the worst performing sector in Q4 with the S&P 500 energy index down 14.3% QTD and -9.9% YTD. Just yesterday the energy sector ETF, ticker XLE, made fresh 52-week lows on an intraday basis, but then managed to reverse higher with the broader market to close above its opening price.
The price action formed a bullish hammer candlestick pattern on the daily period which today is being confirmed by the opening gap higher and current gain of 1.4%. However daily price patterns are very short term in nature and are unreliable predictors of trend over the longer intermediate term (weeks and months).
The XLE is currently down at the bottom of today's range and for the week the it is down 1.3%. The more reliable weekly pattern is not convincing with the XLE on pace to close at the mid-point of this week's 7% high-low range. With the broader market again deep in the red, energy's early morning thrust may not have much staying power.
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Today is December 7th where we remember all of those individuals who sacrificed their lives at Pearl Harbor in 1941. RIP
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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
