Tuesday, October 16, 2018, 12:11 PM, EST
- NASDAQ Composite +1.82% Dow +1.36% S&P 500 +1.41% Russell 2000 +1.40%
- NASDAQ Advancers: 1758 Decliners: 565
- Today’s Volume (100 day avg) +9.09%
- Crude $71.34 -0.44, Gold $1231.11 +$4.05
- Industrial Production rose 0.3% vs. 0.2% est.
- Capacity Utilization rose 78.1% vs. 78.2% est.
- NAHB Housing Markets Index 68 vs. 68 est.
- JOLTS job openings a record 7.14 million vs. 6.9 million est.
The market was in a better mood this morning as we were greeted early with futures up about 160 Dow points as the S&P looked to open the day back above the key 200-day moving average of 2766 - it's above there now at 2790. Stocks were helped by earnings reports from Goldman Sachs and Morgan Stanley, both of which saw strong sales and trading revenues. United Health, the second highest weighted stock in the Dow behind BA in that price weighted index also helped the cause by beating estimates and raising guidance. UNH was the #1 contributor to the Dow's gain, adding 58 points at mid-morning. JNJ, another Dow component, also came in ahead of consensus and helped with +22 points. Blackrock and Walmart also reported but did not see much price change in the early going.
Lastly, we saw results from trucker and freight company JB Hunt, which traded higher after reporting better than expected earnings and in-line revenues. As it pertains to the larger economy, tight trucking capacity drove improved results while JBHT expects a normal peak season. Later, we’ll see results from IBM, Progressive and United Continental, which joined Nasdaq last month.
All S&P 500 sectors were in the green this morning with equities adding to pre-opening gains and "risky" groups like Technology (2.13%), Healthcare (2.0%) and Communications Services (1.6%) leading while Financials (1.0%), Staples (0.8%) and Energy (0.6%) are higher but lagging. The fact that job openings rose for a third straight month to a record 7.14 million did not hurt.
Outside of earnings, the market kept a close eye on Saudi Arabia given its importance to the oil market and what potential sanctions over missing journalist Khashoggi could mean to equities. Today, some of the tension seems to have eased, helping stocks to move higher. Europe also contributed with Italy agreeing on a budget, which buoyed stock and bond prices in that country. Something you usually don’t see in a bear market: the WSJ reported that Uber received IPO proposals from Morgan Stanley and Goldman that value the firm as high as $120 billion. We did a quick screen to learn that this valuation would place Uber amongst the top 50 U.S. public companies in terms of market cap, bigger than Honeywell and GE and on par with Nike, Eli Lilly or Amgen.
Is this bad? A record 85% of fund managers say the global economy is in late cycle, 11 percentage points more than the prior record high in December 2007. The net share of investors who think growth will slow over the next year is 38%, the worst reading since November 2008. Cash holdings are an elevated 5.1%. When you look at the dates of the prior highs you shudder a bit given what happened during that time. Then again, this remains ”the most hated bull market in history” so the readings may well be a contrarian indicator. Sentiment is hurt because fund managers know the Fed does not have their back in the current cycle.
Gold ticked higher to $1,231 and oil prices fell to $71.34 as the Saudi’s floated the idea of a “botched interrogation” for the disappearance of Khashoggi as Secretary of State Pompeo met with the Saudi King. This story line would seem to allow the Saudis to take responsibility but perhaps not force the hand of the U.S. and would potentially reduce the threat of sanctions.
Paul Allen, co-founder of Microsoft, died at age 65. Allen helped Bill Gates create an entire industry selling software to PC users and was the man who came up with the Microsoft name, before later turning to philanthropy and other business ventures later in life. At Nasdaq we salute visionaries that create companies, jobs and prosperity so we note his passing with sadness but with gratitude for all of his contributions to business and society.
Brian’s Technical Take
Tracking the intraday “gyrations” of the benchmark S&P 500 (SPX) during this October selloff shows the large cap index bottoming three sessions ago on 10/11 at the 2,710 level. Over the ensuing three sessions into the present the SPX has been oscillating around the 200-day moving average (yellow line, now 2,767) with clearly defined resistance (minor) at the 2,775 level. Today’s low bottomed exactly at the 200-day and has since been attempting to “breakout and run” above 2,775. Coming into this week we had been leaning towards one more decline making a slightly “lower low”, but after a 230 point decline this month the risk reward is certainly not favorable for short term players to remain short. Once this downtrend is complete, look to the 50% and 61.8% Fibonacci Retracement levels, now 2,825 and 2,852, as a guide to where the initial relief rally will go.
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Later we will see earnings from NFLX and the aforementioned UAL. Tomorrow we get three more large banks. Let's hope the market stays in a good mood!
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.