MID - Equity Market Insight February 3, 2016

Wednesday, February 3, 2016, 12:36 PM, EST

US stocks opened marginally higher, but a weak ISM Non-manufacturing number at 10am pushed equities deep in the red. The S&P 500 has fought back at midday, gaining more than 1.25% from its intraday lows. Heading into today’s session, crude oil experienced its biggest 2 day decline (Monday and Tuesday) in 7 years, but we’re seeing rebound (+5.6%) this morning. Trading volume are ~30% higher than normal this morning with 5 out of the 10 sectors trading higher.

  • The EIA reported crude oil inventories rose for the 4th consecutive week with nearly 7.8m barrels added, about double expectations. Distillates declined as expected, but gasoline inventories increased more than double expectations. Initial reaction sent crude below $30, but having lost 11% on Mon/Tues crude prices rebounded on short covering and in response to a weaker dollar. WTI +6.2%; Brent +5.7%.
  • 2016 has been a very bearish year for stocks and according to Bloomberg, only 1.2% of equity funds are higher this year. Portfolio managers were caught off guard by the sell-off in Asia and the continuing declines in oil prices. Defensive and income focused funds have been faring well during this market turmoil.
  • On the earnings front, Comcast and Gilead are posting gains today, up 3.7% and 3.2%, respectively. Comcast reported positive results that beat expectations, helped by the biggest subscriber boost in 7 years. Gilead also beat across the board and announced they will be raising their dividend by 10%.

Technical Take

As of 11:00 AM EST, Nasdaq Composite:

  • Advancers: 631
  • Decliners: 1555
  • Advance Volume: 44MM shares
  • Decline Volume: 113MM shares
  • New 52 week Highs (prior close): 37
  • New 52 week Lows (prior close): 173

Stocks were extraordinarily quick to relinquish pre-market gains where the major indices, at least on an intraday basis, have broken below initial supports respectively on high volume, perhaps setting up for a new lower, low. The important non-manufacturing ISM looks to have been the culprit as upon its release stock selling kicked into high gear at 10 AM EDT. While the index still shows expansion, it was less than expected and, being the core driver of the US economy (services), this number only stoked global economic fears further.

  • On the S&P 500 Index (SPX) 1900 is still support, so if the index closes below there today we can more likely look forward to a retest of the 1/20 lows and the 1850 – 1810 support zone. It may be important to note though that despite being off 1% today, the index is faring much better than its counterparts around the world; still the best house on an awful block…
  • Like the SPX, the Nasdaq Composite Index (CCMP) has violated its initial support at 4500 intraday and could be headed for a close below, which would have negative implications of a possible move into the 4400 – 4300 area. Risk-off trades remain in full swing as the index has been unable to regain any relative strength against the SPX (lower panel), even during the last 2 weeks of ‘rally’. We believe that continued relative weakness bodes poorly for the health of the overall market given the CCMP’s leadership position last year and as a gauge for risk appetite.

The 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.

Vincent Randazzo, CMT is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over 13 years of experience in equity markets having served in equity research sales and desk analyst roles at major banks. Vincent’s specific expertise is in technical analysis and has been a Chartered Market Technician (CMT) since 2007.

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.

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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