Friday, March, 1, 2019, 12:31 PM, EST
- NASDAQ Composite +0.32% Dow +0.19% S&P 500 +0.29% Russell 2000 +0.34%
- NASDAQ Advancers: 1353 / Decliners: 930
- Crude Oil-1.7% , Dollar Index+0.2% , Gold-0.9%
- Personal Income (Dec) jumps +1.0%
- Personal Income (Jan) falls -0.1%
- Personal Spending (Dec) falls -0.5%
- Real Personal Spending (Dec) falls -0.6%
- PCE Deflator Y/Y (Dec) down 0.1% to 1.7%
- PCE Core Y/Y (Dec) steady at 1.9%
- ISM Manufacturing (Feb) falls 2.4 to 542
- Univ of Michigan Consumer Sentiment drops to 93.8
The market closed lower yesterday for a third consecutive day, the first time that has happened this year. Also market volume of 8.28 billion highest since Jan 31st, and taken together suggests some end-of-month rotation took place yesterday. Today the major averages are modestly higher but at the same time each index appears stalled at various resistance levels, and that might be a factor to consider next week. Markets in Europe and Asia are also modestly higher with China the standout with the Shanghai Composite closing up 1.8%. The strength comes from an announcement that MSCI that will increase the weighting of China A shares from 5% to 20%. The increase will occur in three tranches at the end of May, August and November. Also adding to strength in the Chinese markets was an unexpected increase in the Caixin Manufacturing PMI from 48.3 to 49.9. There is a good bit of economic data today. Starting with December personal income, income rose far more than analyst expected, 1% versus just 0.4%.
That was the biggest jump since December 2012, and that takes us to January person income, which surprised analysts with a decline of 0.1% versus an expected 0.3% gain, and that was the first decline since November 2015. December income is sometimes inflated due to special dividends, farm subsidy payments, and so on. December personal spending on the other hand fell 0.5%, more than the expected 0.3% decline, but November was revised 0.2% higher. We are still dealing with delayed data due to the government shutdown, so we don't get January Spending data today. Moving on, the Fed's preferred measure of inflation, Personal Consumption Expenditures (PCE), rose 1.7% y/y through December while core PCE held steady at 1.9%. Next up is February ISM Manufacturing, declining from 56.6 to 54.2, the lowest read is two years.
Export orders rose from a two year low and imports hit an eight-month high, and the employment component fell for a third month to 53.3, the lowest in over two years. Lastly University of Michigan Consumer Sentiment rose from 91.1 in January to 93.8 in February. The big news in the corporate world comes from the Gap, which will spin off the Old Navy division and with that Gap shares are trading with an 18% premium. Earnings continue and AMC Entertainment (+15), VMware (+4%) Foot Locker(+5.6%) trade higher while Nutanix (-33%) and Alarm (-7.9%) are among those trading lower. The sector view is mostly positive with Energy leading with a 1.3% in a reversal of yesterday, and Healthcare follows with a 1% advance. Utilities and REITs are the weakest with declines of 0.4% and 0.8% respectively. WTI crude retreats 1.7% after three days of gains while Brent crude extends yesterday's decline by another 1.7% today. Gold is down 0.6% for its fifth consecutive decline, the dollar index gains 0.1% and treasury yields are slightly firmer with the 10-yr at 2.738%, its highest in a month.
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Brian's Technical Take One of this week's top performers has been the Nasdaq Biotech Index (NBI) which is up 2.9% WTD. Given the robust V-Shape rally since the December lows across numerous industries, that gain may not seem so impressive. However this week's pop could mark the resumption of the prior uptrend. The NBI bottomed with the broader market on December 24th before rallying 24% over the following three weeks to its high on January 16th.
Here it ran into a wall of overhead supply representing the popular 200-day moving average, which coincided with the November and December highs at the psychologically important 3,500 level. Over the next five weeks the NBI consolidated along this cluster of resistance which now represents the "neckline", four months in duration, of a common bottoming pattern (IHS). This week's strong breakout is the "trigger" for the bullish reversal pattern which, based on the size of the consolidation, carries a measured move towards the 4,200 level which is up more than 17% from last sale.
In the January 7th MIDDAY UPDATE we highlighted the strong absolute and relative strength of the NBI and suggested this could be an indication the prior leader of the '09 - '15 bull market could be looking to reclaim its role. This week's breakout following five weeks of basing is a nice signal.
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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.