Stocks Drop on Weaker-Than-Expected Manufacturing Data

• NASDAQ Composite -1.20% Dow -0.69% S&P 500 -0.77% Russell 2000 -0.66%
• NASDAQ Advancers: 723 Decliners: 1563
• Today’s Volume (vs Friday) +53%
• Crude $55.70 +$0.53, Gold $1465.40 -$2.20, VIX 14.90, +2.28

Market Movers

• U.S. Markit Manufacturing PMI 52.6 vs. consensus of 52.2
• November flash reading was 52.2 and October final was 51.3
• U.S. November ISM Manufacturing Index 48.1 below consensus 49.2
• New Orders 47.2 vs. 49.1 in October
• October Construction Spending -0.8% vs +0.4% consensus growth
• September revised lower to -0.3% from +0.5% previously reported
• Black Friday online sales reached $7.4 billion according to Adobe Analytics

Chris’ Commentary

Black Friday was the lightest trading day of the year. With only 3.66 billion shares changing hands on the consolidated tape, it seems like most traders stayed home and were complacent with their turkey leftovers.

So, where was everyone you might ask? Shopping off course. Expectations are for American shoppers to spend north of $29 billion over the long Thanksgiving weekend. According to Adobe analytics, online Black Friday sales rose 19.6% from 2018 to $7.4 billion, its largest revenue increase ever. Cyber Monday spending is expected to hit a record $9.4 billion, an 18.9% jump from last year.

U.S. stocks closed higher last week as the major indexes closed at records levels on Wednesday, before losing some ground on Black Friday in a holiday shortened trading session. Equity markets have been quiet as of late. Expectations for stock volatility have dropped as the VIX closed last week at its lowest levels in more than a year. The ongoing theme of a trade resolution between China and the U.S. continues to be the main driver for equities.

For month of November, the S&P 500 was up 3.09%, the Dow was up 3.18%, the Nasdaq was up 4.35% and the Russell 2000 closed higher by 2.35%.

Today, we are lower to start the day with the Nasdaq down over 1%, the Dow is off 0.6%, the S&P down 0.7% and the Russell 2000 is trading down 0.5%. Weaker than expected ISM manufacturing numbers for November are the leading reason for this morning’s slow start. Continued weakness in the U.S. manufacturing sector is the key takeaway here, demonstrated by the 4th straight decline in the New Orders Index (to 47.2% from 49.1%).

Currently, nine of the 11 of the S&P 500 sectors are trading lower with Tech, Real Estate and the Communications Sector all down Energy and Financials are trading flat to higher. Crude oil is up over 1% while Gold trades lower. The dollar is down while the yield on the 10-yr stands at 1.85%. 

Black Friday traditionally has been the day after Thanksgiving that marked the beginning of the Christmas shopping season for U.S. consumers. This shopping “holiday” can draw its roots back to 1924 when Macy’s Thanksgiving Day Parade made its debut (originally called Macy’s Christmas Day Parade). The term Black Friday was coined in the 60’s to refer to the time-period when retailers moved from “in the red” or loss to “black” meaning a profit for the year. Black Friday has grown to a bigger window over the years. Originally with early bird shopping specials on the day after Thanksgiving, to opening on Thanksgiving night, to deep discounts and highly promotional online sales over the entire weekend and culminating with “Cyber Monday.” Thus, Black Friday in no longer the one day, all-important indicator it use to be but a 5 day shopping extravaganza. Nearly 40% of all retail sales in the U.S. take place during holiday shopping season, thus Black Friday shopping weekend can make or break Q4 profits for retailers.

The National Retail Federations (NRF) expects more than 165 million people to shop over the long weekend. For those who partake, consumers are the winners no matter which day or which way they shop. American shoppers are expected to spend an average of $1,047.83 this holiday season, up 4% from the $1,007.24 spent last year. “The tradition of Thanksgiving weekend holiday shopping has become a five-day event with consumers spending money in stores, supporting local small businesses, and online with their mobile devices and computers,” NRF President and CEO Matthew Shay said. “Even as people are starting to purchase gifts earlier in the season, consumers still enjoy finding good Thanksgiving deals and passing time shopping with family and friends over the long holiday weekend.”

Sector Recap

Brian’s Technical Take

Over the prior seven sessions the UST 10YR Yield held support at its 50-day simple moving average (sma) and today is launching higher.   The long yield moved as much as 8bps to $1.86% from Friday’s close, 1.78%.  We recently noted how the 50-day sma was a clearly defined resistance level on numerous relief rallies throughout the 2019 downtrend.  Now on the rebound off the August lows, the 50-day sma has flipped roles and for the second time is proving to be a reliable support line.  Now the long yield is on watch to see if it can charge higher and breakout above the 1.90% - 2% resistance range.  With the short end locked down by the Fed, a higher 10Yr yield should further steepen the curve and likely be a reflection of the ongoing reflation trade underway since September.  That should bode well for equities.

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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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