- NASDAQ Composite -1.38% Dow -1.34% S&P 500 -1.25% Russell 2000 -1.52%
- NASDAQ Advancers: 417 / Decliners: 1875
- Today's Volume (100 day avg) +18.62%
- Crude -5.11%, Gold +0.89%
- US Jobless Claims for w/e 18-May 211K vs. consensus 215K; Continuing Claims for w/e 11-May 1676K vs. consensus 1670K. Prior week Jobless Claims unrevised from 212K. Prior week Continuing Claims revised to 1664K from 1660K
- The Eurozone Flash Manufacturing PMI for May declined to 47.7 from 47.9 in April. A reading below 50 connotes contraction
- Bloomberg Consumer Comfort for the period ending 5/19 came in at 60.3 vs. prior period 59.9
- May US Markit PMI - Manufacturing - Flash 50.6 vs. consensus 52.7
- May US Markit PMI - Services - Flash 50.9 vs. consensus 53.2
- April US New Home Sales 673K vs. consensus 678K
- May Kansas City Fed Manufacturing activity at 4, consensus 6
While yesterday afternoon’s Fed minutes had the potential to change the course of the markets, it was much “ado about nothing” as the transcript revealed no real new news about a potential rate cut during the balance of the year. We received a very clear hint of this earlier in the morning after St. Louis Fed President Bullard stated that the Fed may have slightly overdone it by raising rates in December. It was only reaffirmed by the minutes with wording such as “members observed that a patient approach to determining future adjustments to the target range for the federal funds rate would likely remain appropriate for some time.”
Many participants viewed the recent easing in inflation “as likely to be transitory, and participants generally anticipated that a patient approach to policy adjustments was likely to be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the committee’s symmetric 2% objective.” The minutes reinforced the message from Chairman Powell’s post-meeting press conference, at which he said the level of interest rates was appropriate for now and there wasn’t a strong case to move in either direction. So the afternoon continued to meander in negative territory but on light volume.
This morning’s negative action maintains the contentious trade war theme but has been ratcheted up a bit after the Chinese Communist’s Party’s main newspaper, The People’s Daily, published opinions about the US’ move to curb Chinese companies. Paraphrasing the articles, it essentially said that the US is starting a technology cold war. Going against international rules is a sure way to get hurt and attempting to make America great again instead will make it a laughing stock in the world.
Not backing down, US Secretary of State Mike Pompeo, who was at the MarketSite this morning commented on Squawk Box, that he believes China is a threat to national security and fully believes that more companies will cut ties with Huawei. The bottom line here is that trade tensions are not going away and it looks more likely that this could drag on for a long time without a solution. This is having a debilitating effect on equities and advancing bonds, creating a risk off atmosphere that has pushed the yield on the 10 year Treasury to as low as 2.3256, its lowest level since 2017.
The economic calendar was relatively full today kicking off the morning with initial jobless claims. For the week ending May 18th, claims decreased by 1,000 to 211,000. Continuing claims for the week ending May 11 increased by 12,000 to 1.676 million. This low level of initial claims would indicate a consistently healthy labor market that should continue to produce solid nonfarm payroll gains. Markit manufacturing and services PMI for May both disappointed coming in at 50.6 and 50.9 respectively, both below consensus estimates. Sales of new homes cooled in April from an 11 year high due to higher prices. Single family home sales fell 6.9% to 673,000 annualized rate following an upwardly revised March reading of 723,000.
Gold prices have firmed up with riskier assets such as equities being sold off. It does not appear however to be the safe haven of choice today as investors seem to be favoring the strong dollar as the take cover instrument. The dollar index currently trades at 98.119. Crude is taking it on the chin today following up from yesterday’s down session on trade unrest, weaker economic data and simmering tensions with Iran ultimately affecting perceived global demand.
Most sectors are trading in the red this morning led by weak Energy (-3.03%), Technology (-1.60%) and Industrials (-1.47%). The only green shoot so far is safe haven Utilities (+0.23%). REIT’s are next best performer (-0.01%) followed by Consumer Staples (-0.24%).
Brian’s Technical Take
Crude oil (WTI) is having its worst day in 2019 with a decline of 5.7% at the session’s low as weekly inventories came in higher than expected and trade war concerns are reducing demand expectations.
Yesterday WTI broke down below the 50-d sma which recently in April and early May acted as support. Today’s decline has knifed through the 200-d sma, now $60.45, to a low of $57.94. The next key support is just 1% below at $57.34 rep[resenting the 38.2% retracement, followed then by the 50% retracement, $54.48.
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.