Stocks Higher on Trade Optimism
- NASDAQ Composite +0.65% Dow +0.56% S&P 500 +0.58% Russell 2000 +0.44%
- NASDAQ Advancers: 1500 Decliners: 913
- Today’s Volume (vs. Thursday) +0.13%
- Crude $57.57 +$0.80, Gold $1466.60 -$6.80, VIX 12.39 -0.66
Market Movers
- U.S. October Retail Sales +0.3% vs. consensus +0.2%
- September unrevised at -3%
- October Ex-Autos Sales +0.2% vs. +0.4%
- September revised higher to +0.2% from 0.0%
- October Ex-Autos and Gas Sales +0.1% vs. +0.3%
- September revised lower to -0.1% from flat last month
- October Core Retail Sales +3% after declining last month by -0.1%
- October Import Prices -0.5% vs. consensus -0.2% expected
- October Export Prices -0.1% vs. flat month over month consensus
- November Empire Manufacturing +2.9 vs. consensus +6% growth
- October Industrial Production -0.8% vs. -0.4% expected
- October Capacity Utilization 76.7% vs. 77.1% consensus
- Business Inventories flat M/o/M vs +0.1% expected growth
- Reaction to earnings: AMAT +8%, JOBS +5%, DLB + 4.5%, JD +2%, KLIC + 2%, ACB -10%
Chris’ Commentary
Markets are trading higher to start the day following better than expected economic data and positive China trade commentary. If this morning’s trend can continue, the S&P 500 will being looking to log its 6th straight week of gains.
Thursday, U.S. equities closed flat to slightly higher on the day. The S&P 500 had another record close, ending the day up +0.08% to 3,096.63. China trade deal complications coupled with softer China October activity data and continued protests in Hong Kong were some of the major headwinds for the day. I sound like a broken record, but equity trading volumes continue to lag, signaling a lack of participation from many traders. Trading volumes for this week are only averaging 6.39 billion shares a day, nearly 9% below the yearly average and over 23% below this same period last year.
Currently, nine of the 11 major S&P 500 sectors are trading higher. Healthcare, Industrials and Tech are the front runners while Staples and Utilities lag. Crude oil is up +0.3% while Gold trades lower. The dollar is lower while the yield on the 10-yr stands at 1.84%
October retail sales in the U.S. rebounded more than analysts’ expectations. The top-line number showed an increase of 0.3%, which beat economist expectation of +0.2% growth. Core retail sales (excluding autos and fuel) grew by 0.1% after declining 0.1% last month. The report shows continued growth in consumer discretionary spend, which is a net positive for the Q4 GDP.
White House economic adviser Larry Kudlow said late Thursday that “Phase One” of the anticipated trade agreement with China was down to the final stages with the two sides in close contact. Kudlow commented that "the mood music is pretty good." Also on Thursday, China lifted a ban on American poultry that began in 2015, after the USDA made a similar decision to allow Chinese poultry into the U.S. Another potential sign of thawing issues.
Sector Recap
Brian’s Technical Take
Here’s a new one for ya! The Solactive Social Media Index (SOCL) out of Germany is comprised of 41 leading global technology companies which are active in the social media industry. The 41 members have an aggregate market cap of $2.2T, an average market cap of $54B, and a median market cap of $6B. Without looking any deeper, I surmise it represents plenty of institutional flows which often translate into “less noisy” price charts.
While the U.S. S&P 500 technology index has returned +40% YTD measuring its best annual performance since 2009, the global SOCL Index is +20% YTD. In 2018 the SPX tech index declined a modest 1.6% while the SOCL index lost 15.5%. It’s been a relative underperformer and I suspect it has to do with its international exposure.
Like many global benchmarks, the SOCL Index peaked in January 2018. In the recent weeks and months we are finally seeing many of the global benchmarks rebounding close to or above those prior highs, however the SOCL Index remains more than 17% below its highs. A look at the long term charts suggests there are reasons to keep the faith.
The SOCL Index returned annual gains of 11%, 10% and 55% in 2015, 2016, and 2017. During that span its weekly RSI reached 84 and 85 on two separate occasions. Its 55% decline in 2018 punished any latecomers but also more than worked off those deep overbought technicals. The near two year corrective price action has formed a common continuation pattern (inverse head & shoulders) which is currently evident throughout other industries that are now breaking out to above recent resistance (see the S&P 500 industrials and materials indices).
If the SOCL Index is going to follow suit, the breakout could be quite powerful given the size of the prior two year range. “The bigger the base …. The bigger into space.“
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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