Tuesday, March5, 2019, 12:31 PM, EST
- NASDAQ Composite +0.05% Dow -0.03% S&P 500 -0.05% Russell 2000 -0.11%
- NASDAQ Advancers: 989 / Decliners: 1233
- Today's Volume (vs. Monday)-7.25%
- Crude $56.73+$0.14, Gold $1286.00-$1.50,VIX 14.72+ 0.09
- Earnings reaction TGT +3%, KSS + 4.5%, CTRP +13.5%, CRM -2%
- China lowers 2019 GDP target to 6-6.5% vs 6.6% growth in 2018 (which was slowest pace in 29 years)
- ISM Non-Manufacturing Index reading for February 59.7 vs 57.4 consensus
- December New Home Sales rise 3.7% to 621,000 vs 600,000 consensus
- U.S. Redbook Retail Chain Stores Sales down 1.6% for Febuary-to-date vs. January
- February U.S. Markit PMI - Services 56.0 vs. consensus 56.2, Composite posts 55.5 reading
The S&P 500 was off to a strong start yesterday morning, then hit technical resistance at the ~2816 level and pulled back nearly 50 handles quickly but eventually settle down 24 at 2792. The pullback caught many by surprise with the TV pundits looking for a reason. Sometimes the reason is you need to pause. The 2815/16 level in the S&P 500 was a well telegraphed resistance level and many traders had that area circled on their charts. Today the markets opened flat and are looking for direction as the top of the near-term trading range has been set. Currently 6 of the 11 S&P 500 sectors are trading higher with Real Estate, Consumer Discretionary and Communications the best performers. Financial and Energy are both lower. Industrials is slightly lower but flirting with going positive as this is typed. Crude oil and gold are trading mixed to flat. The dollar moves higher again. The yield on the 10-yr is higher at 2.74%.
At China's National People’s Congress which will last for the next 11 days, Premier Li Keqiang said the nation must be prepared for a "tough economic battle ahead" as it faces a "grave and more complicated environment.", He then cut the country's 2019 GDP to 6.0%-6.5%, lower than last year’s economic growth rate of 6.6% which was the slowest since 1990. This was a widely expected move amid the ongoing trade / tariff dispute with the U.S. China also announce a ramp-up in infrastructure spend and significant tax cuts to help manufactures. This was positively received by investors as the Shanghai Composite closing up nearly 0.9%.
U.K. negotiators are back in Brussels today discussing Brexit. With 24 days to go until England is scheduled to leave the EU, Brexit Secretary Stephen Barclay and Attorney General Geoffrey Cox are in search of assurances over the backstop plan to avoid border checks in Ireland. If successful, Theresa May has a chance of getting her Brexit deal through Parliament next week, allowing for an orderly divorce. If not, Brexit will likely be delayed. A Bloomberg poll show that 54% of investors believe that Brexit will be delayed past the March 29th deadline.
The ISM Non-Manufacturing Index increased to 59.7 in February (vs. consensus of 57.4) from 56.7 in January. The dividing line between expansion and contraction is 50.0, so the increase in February reflects economic growth which is a positive for economy. The report featured a sizable increase in the New Orders component, which is encouraging and will help drown out any discussion of recession for the U.S. in the near term (the non-manufacturing sector accounts for a much larger percentage of economic activity than the manufacturing sector does).
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Brian’s Technical Take
Yesterday the S&P 500 gapped higher off the open and quickly ran to a fresh YTD high of 2,817. The good times did not last long as a sharp 49 point reversal took place over the ensuing three hours leading many to speculate it was the start of THE big correction. That may prove to be the case however it is just as likely the flagship large cap index is simply consolidating along clearly defined resistance before breaking out to fresh highs. The 2,800 - 2,817 range became an important price zone in Q4 as it is the scene of the crime where the index peaked on the three biggest relief rallies in October, November, and December.
It is natural to expect this range to be a battleground of activity now that price is rebounding from the bottom side as recent longs look to lock in gains and short term speculators identify clearly defined risk levels to go short. The SPX is now testing this resistance zone for the seventh consecutive session. The more time it spends chipping away at overhead supply, the more likely it is to break through instead of succumbing to the pressure and rolling over.
Short sellers that have been waiting for the bottom to fall out could be losing confidence with each passing day. And cash on the sidelines waiting for that elusive pullback may be forced to chase if covering ensues. At the end of the day a correction would likely be well received for many that missed out on the V-shape rally off the lows. However the market may take us higher before any sort of meaningful pullback occurs.
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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.