Stocks Climb on Tentative Brexit Deal, Solid Earnings
- NASDAQ Composite +0.31% Dow +0.11% S&P 500 +0.29% Russell 2000 +0.75%
- NASDAQ Advancers: 1540 Decliners: 323
- Today’s Volume (vs. yesterday) +5.25%
- Crude $52.99 -$0.38, Gold $1487.00 -$1.00, VIX 14.00 +0.32
Market Movers
- Brexit deal reached, but will it pass UK Parliament vote Saturday?
- FED Beige Book said US economy still expanding though modestly
- US Initial Weekly Jobless Claims reported at 214,000 vs. consensus 215,000
- US Continuing Jobless Claims reported at 1.679 million vs consensus of 1.675 million
- DOE inventory showed US crude build of 9.28 million barrels
- September Housing Starts 1.256 million vs. consensus 1.350 million
- Aug Housing Starts revised higher to 1.386 million from 1.364 million
- September Building Permits 1.387 million vs. 1.350 million consensus
- Aug Building Permits also revised higher to 1.425 million from 1.419 million
- September Industrial Production -0.4% vs consensus -0.2%
- Aug revised higher to +0.8% from + 0.6%
- September Capacity Utilization 77.5% vs. 77.7% consensus
- Philadelphia Fed's Manufacturing Index for October at 5.6 below consensus of 7.6, but still shows growth
- Philly Fed New Order readings stronger at 26.2 for October vs. 24.8 in September
- Reaction to earnings: AA +9%, CCI +3%, CCK +9%, CSX +2%, IBM -6%, KMI -1%, NFLX + 2.5%, SLG -0.5%, URI +5%, BBT -2%, DOV +6.5%, GPC +2%, HON +3%, KEY +0.5%, MS +3%, MTB -4%, PM -0.25%, PPG +1.25%, SNA -1%, STI -2%, TXT -4.5%, UNP +1%
Chris’ Commentary
A positive opening today for the markets following decent enough economic data. Earnings, trade talks and a tentative Brexit deal are also positives today helping lift equities.
Wednesday, stocks closed mixed to slightly lower with small caps outpacing their large cap brethren. The Russell 2000 finished higher by 0.12%, the S&P 500 down 0.2%, the Dow was off 0.08% or 23 points and the Nasdaq faired the worse of the major indexes down 0.30% led lower by Tech. Equity trading volumes yesterday were still below average showing a continued lack of investor conviction, which is an ongoing theme.
Currently 10 of 11 major S&P 500 sectors are trading higher. Healthcare and Industrials lead the way higher both up over ¾ of a percent while Tech continues to lag. Crude oil and Gold both trade slightly lower. The dollar also trades lower while the yield on the 10-yr stands at 1.77%.
Unemployment numbers released by the U.S. Department of Labor continue to show demand in the U.S. and a continued bright spot for the economy. Reported Initial Jobless Claims were relatively in-line with expectations at 214,000. Reported Continuing Claims were also a little worse, but still in-line with consensus at 1.679 million claims.
The Federal Reserve's Beige Book report yesterday afternoon said the U.S. economy was growing “at a slight to modest pace.” Some of those surveyed lowered their outlook for growth over the coming year citing trade issues and global growth as a hindrance. The Fed said “Household spending was solid on balance: non-auto retail sales increased modestly, while light vehicle sales were generally robust.” However business spending continued to slow with nonresidential construction growing “at a slightly slower yet still modest pace, while leasing activity advanced at a slow but steady rate. Manufacturing activity continued to edge lower.” All in all the report shows the US economy continuing to grow, but at a slower pace which is in-line with the recent economic data and on par with the theme of a global slowing economy.
The next FOMC meeting is in two weeks and the Fed Fund Futures predict an 85% chance of rate cut, consistent with yesterday morning’s numbers.
UK and EU negotiators confirmed that a preliminary deal on Brexit has been reached.However, the proposal still needs to pass a UK Parliament vote this weekend in order to be ratified. Enthusiasm is a bit muted however as the t Northern Irish Democratic Unionist Party (DUP) said earlier it cannot support this compromise.
Sector Recap
Brian’s Technical Take
Yesterday we highlighted the British pound’s strong move which made its 3rd best five-day advance in 34 years. The pound is up again today to a high of 1.299 on reports the EU and U.K. have reached a Brexit deal, but concerns of it now passing through Britain’s House of Commons has seen it fade to near flat. Given its robust move over the last week, clearly a lot of optimism has already been baked in over the very near term and it should be no surprise to see short term profit taking.
Accordingly the increasing probability of a Brexit deal has been positive for the euro and dollar bearish.This is welcome news for many market participants (large US corporates, commodities, EM), not just President Trump. The greenback has been bid all throughout 2019 due in part to its role as a safe haven, concerns surrounding global trade wars, and the high amount of negative yielding bonds across the globe. However, the U.S. dollar has a lot left to prove before we can say a longer term reversal is underway.
The EURUSD bottomed in the first week of October at 1.0879 and a weekly close at 1.0979. That week’s price action formed a bottoming candlestick pattern (harami) whereby the open-close range is engulfed by the prior week’s O-C range. The bullish reversal was confirmed with now two consecutive weekly gains, however the low-hanging fruit has largely been picked. The intermediate to long term trend still favors the downside. A key test is right here at the 1.112 – 1.1209 range, the top of which represents the 40-week sma (yellow line). Above this level and we can talk about the possibility that a longer lasting trend is at hand.
Even if a clean Brexit deal is implemented by month’s end, the world still has the overhang of the global trade wars and other outside geopolitical risks to deal with. It will be interesting to see how the greenback moves if/when a major hurdle like Brexit is finally behind.
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.
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