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US Markets

Stocks Climb to Near Records on Trade Optimism and Expected Rate Cut

A more positive tone surrounding trade talks, better economic data, and a US rate cut expected next week are the themes carrying the market higher.

  • NASDAQ Composite +0.06% Dow +0.29% S&P 500 +0.12% Russell 2000 +1.10%
  • NASDAQ Advancers: 1516 / Decliners: 861
  • Today's Volume (First Hour) +21.6% 
  • WTI Crude +2.7%, Gold -0.5%, 10yr Treasury 2.0955%

Market Movers

  • AT&T higher on activist taking a $3.2B stake
  • Trade talks reportedly making some progress
  • Positive economic data in Germany and the UK

Steve’s Commentary

The week gets underway with the S&P only about 1.6% away from its July 26th record, making August seem like a distant memory. A more positive tone surrounding trade talks, better economic data, and a US rate cut expected next week are the themes carrying the market higher. The 2yr/10yr yield curve is no longer inverted and warnings of a looming recession have softened somewhat. Today the market opened slightly in the green and at midday the gains have firmed with all four major indices higher. The Russell 2000 index leads with a near 1.1% gain, and that index usually serves as a good indicator of investor sentiment. Economic data for the week is highlighted by retail sales data due on Friday, and looks like a few dozen earnings reports are scheduled with most later in the week.   

Asian markets closed mostly higher today despite data showing that August exports fell 1% y/y, a sharp contrast to expectations of a 2.2% increase. Analysts expected shipments to the US to show an increase ahead of new tariffs going into effect on September 1st, but instead US-bound shipments fell 16%. Since the US consumer is still spending, either warehouses are already stocked full or shipments are coming from other countries (or a combination of both). No matter, it seems likely that China will undertake stimulus measures to boost the domestic economy and that explains why Asian and Chinese markets moved higher. Last Friday China announced lower bank reserve requirements that should add about $126 billion of liquidity, and the State Council indicated more stimulus is coming. European markets are modestly lower, that despite some glimmers of hope on the economic front. German exports rose 0.7% in July, much better than the -0.5% economists predicted and up from -0.1% in June. And in the beleaguered UK, July industrial production and manufacturing data came in positive in the face of expected declines, and construction spending grew by the most since February and reflected a health rebound over June.

The sectors viewed from the S&P 500 perspective are mixed with five higher and six lower and one unchanged, but from the Russell 2000 perspective all sectors are higher. Energy and Financials lead with gains of 1.8% and 1.5% respectively. In the Energy space, the Saudis replaced of their Energy Minister with a relative of the crown price, giving rise to some speculation that royal family would like higher oil prices and more enthusiasm for its Saudi Aramco’s IPO. Financials are up for a 4th session, and that despite the Financial Times writing that bank earnings estimates are likely to come down following the Barclay’s Global Financial conference later this week. The Communications sector is advancing 0.9% with AT&T the standout, gaining 3.5% after Elliott Management disclosed a $3.2 billion stake. Healthcare is the leading decliner with a 1.2% retreat, this coming as a number of analyst warn that drug-pricing caps might be a hot topic on capitol hill this fall. Yes it’s true, Congress is back in session after the August recess. REITs and Utilities are also off 1.0% and 0.7% respectively as the flight to safety trade takes a pause for now. Both of those sectors hit multiyear highs early last week. 

Looking at commodities, crude oil is higher with WTI up 2.2% and about 1.5% for Brent. Gold is off 0.6%, down for a third session after peaking last week, and Silver is up a slight 0.06% after falling about 8% in the last two weeks. The dollar index is off 0.1% and treasury yields are firmer. The 2yr/10y spread is currently a positive 0.042%.

Economic Calendar

Date Event
Monday Consumer Credit
Tuesday NFIB Small Business Optimism
Tuesday JOLTS Job Openings
Wednesday Mortgage Applications
Wednesday Producer Price Index
Wednesday Wholesale Inventories
Thursday Real Average Weekly Earnings
Thursday Consumer Price Index
Thursday Initial Jobless Claim
Thursday Bloomberg Consumer Comfort
Thursday US Monthly Budget Statement
Friday Retail Sales Advance
Friday Import & Export Prices
Friday University of Michigan Sentiment
Friday Business Inventories

Sector Recap

MID Chart 1 090919

Brian’s Technical Take

Declining rates has been an ongoing trend since their top last October, but the “blow-off” move in August have some believing that the lows may have just been made last week. Global sovereign rates had a historic month in August which included both the 10YR and 30YR UST yields registering their 2nd largest monthly decline since 2008, while the total amount of negative yielding bonds increased 21% MoM to north of $17T.    

The 10YR UST yield bottomed last week at 1.43%.  As previously mentioned the downside momentum was “explosive” with the 10YR’s weekly RSI  bottoming at 17, a  level not seen since October 1998.  With last week’s bullish breakout in the S&P 500, rates have rallied and the long yield is now at 1.62% and its weekly RSI is back above 20, a bullish signal for some investors. 

Lower yields have bene a tailwind for the bond proxy defensive sectors.  The S&P 500 utilities index gained 4.7% in August for it best monthly performance since February 2017.  It is currently +17% YTD for its best annual performance since 2014.  The utilities index gained another 2% at last week’s high, but it closed the week down at the bottom of the weekly range and thus formed a “shooting star” topping pattern as its weekly RSI touched the “overbought” 70 level.  The utilities sector may now be in the early stages of corrective, consolidating price action.

MID Chart 2 090919

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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