Stocks Mixed on Weak Manufacturing Data
- NASDAQ Composite -0.49% Dow +0.04% S&P 500 -0.26% Russell 2000 -0.34%
- NASDAQ Advancers: 895 / Decliners: 1433
- Today's Volume (vs. Wednesday) +5.00%
- Crude $55.18 -$0.51, Gold $1493.80 -$10.80, VIX 17.06 +1.26
Market Movers
- U.S. Initial Weekly Jobless Claims reported at 209,000 vs. consensus 216,000
- U.S. Continuing Jobless Claims reported at 1.674 million vs. consensus of 1.707 million
- U.S. August Markit PMI - Services - Flash 50.9 vs. consensus 52.8
- U.S. August Markit PMI - Manufacturing - Flash shows contraction at 49.9 vs. consensus 50.5
- U.S. July Index of Leading Economic Indicators (LEI) +0.5% vs. +0.3%
- Reaction to earnings: BJ +15%, PSTG +14%, JWN +13%, SNPS +5%, DKS + 5%, HRL +2.5%, FLWS -11%, SPLK -10%, LB -8%
Chris’ Commentary
Wednesday’s trading action was positive as the markets closed up nearly 1%. Trading volumes were below average again on the consolidated tape, indicating lack of participation. For the week, trading volumes on the consolidated tape are averaging only 6 billion shares a day which is 15% lighter than the YTD average. To emphasize this point of lack of participation, Wednesday’s trading volumes were only 5.8 billion shares (one of the lightest full-session trading days of the year) which is 25% lighter than this month’s average! All 11 S&P 500 sectors closed higher lead by the Consumer Discretionary sector as a number of its retail members posted stronger than expected earnings results and guidance reinforcing the notion that the U.S. consumer remains in good shape.
Today, we were trading higher to start the day but have moved flat to lower by midday. Earlier, the President back-tracked a bit on his tax stimulus rhetoric saying, "I'm not looking at a tax cut now. We don't need it. We have a strong economy...” But that didn’t spook the market. What did was the contraction in the Flash Manufacturing PMI number that hit the wires before the U.S. Treasury 10/2 spread inverted. That inversion has now moved back to flat. Equity trading volumes have ticked up a bit on this bout of volatility but are still trending below the YTD average.
All 11 major S&P 500 sectors were trading higher to start the day but are now mixed. Financials, Industrials and Consumer Discretionary were the best performers but now trade flat. Currently only 3 of the 11 sectors trade higher with Materials, Healthcare and Tech all down over 0.5%. Crude oil is lower giving back this morning’s gains. Gold continues to trend lower, falling below the $1500 level. The dollar is lower while the yield on the 10-yr trades at 1.59%.
Global central bankers, economists, academics and of course the media are descending on Jackson Hole, Wyoming for this week’s three-day economic policy summit. The big event will be tomorrow when Fed Chair Powell makes his opening remarks. Fed watchers expect Powell to suggest the FOMC is ready to reduce interest rates further. The Fed Fund Future’s rate shows a 100% chance of the Fed cutting rates at least ¼ basis point at their September meeting.
The Fed released their minutes for the July meeting yesterday. The FOMC cut interest rates by ¼ basis point at that meeting, the 1st time the FOMC has cut rates since 2008. Traders looked for signs of disagreement in the minutes among policy makers and they were not disappointed. Hawks and doves alike had plenty to chew on as some argued for a ½ basis point cut while others made the point that no cut was needed. The language of the minutes left a lot of room for interpretation as usual. Yet, the overall takeaway from the conversation seems to be dovish since all but two voting members argued for a rate cut of some kind.
Sector Recap
Brian’s Technical Take
Much attention here in the U.S. is on the miss in today’s Markit PMI data which saw both servicing and manufacturing come in below expectations, and the latter dipping into contraction territory for the first time this cycle. What is also interesting is the composite PMI for Europe which came in at 51.8 vs. expectations of 51.2 and last month’s 51.5. In fact, Europe’s composite figure bottomed in January at 51 and has since been basing. Hat tip to Bloomberg’s Cameron Crise for highlighting this.
So, while PMI data in the US is missing estimates and making lower lows, Europe is beating expectations and made its lows six months ago. And Germany is reportedly taking a new stimulus approach by working on a fiscal plan to help spur economic activity. The sharp decline in bund yields reached a low of negative 73bps last week driving its daily RSI down to an extremely low reading of 15 which was not even reached during the depths of the Great Recession 12 years ago.
The spread between 10YR UST – Bund yields reached a 30+ year high in November 2018. The pattern over 12-months spanning May’18 through May’19 formed a large head & shoulders topping pattern which was triggered in May on the break below ~2.45%. The recent low at 2.22% was made earlier this month, but new lows appear likely. If the differentials continue to come in, all else equal that should bode well for the euro and a headwind for the greenback. That would be welcome news for many, not just President Trump.
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.
Other Topics
Stocks
The Market Intelligence Desk Team
Nasdaq
Nasdaq’s Market Intelligence Desk (MID) is designed to provide critical touch-points for timely trading analysis and market information.
MarketInsite
Nasdaq
Nasdaq’s Marketinsite offers actionable insights on a variety of market-moving topics. Learn from our thought leaders who are driving the capital markets of tomorrow.
Read MarketInsite's Bio