Stocks Pare Gains After Weak Consumer Confidence Data
- NASDAQ Composite -0.69% Dow +0.05% S&P 500 -0.12% Russell 2000 -0.50%
- NASDAQ Advancers: 701 Decliners: 1608
- Today’s Volume (vs. Monday) +26.45%
- Crude -1.77%, Gold -0.10%
Market Movers
- US Case-Shiller Home Price Index (20-city, year/year) +2.0% vs. consensus +2.10%. June reading was +2.16%
- July US FHFA House Price Index +0.4% vs. consensus +0.2%
- September Richmond Fed Manufacturing Index came in at -9 vs consensus 1
- September US Consumer Confidence 125.1 vs. consensus 133.3
- President Trump addresses The UN General Assembly
- Germany’s IFO Business Climate Index came in better than expected at 94.6 for September
- The UK Supreme Court ruled that Prime Minister Boris Johnson broke the law by suspending Parliament for five weeks
Charlie’s Commentary
Global growth concerns remained an overhang over the market for much of the afternoon yesterday while domestic PMI data gave investors hope that the US economy remained strong albeit showing slight weakness. Conviction was tepid at best as volume was 28% less that the 30 day average. The S&P 500 was down just 0.3% at its session low and crossed into positive territory as soon as European markets closed for trading. It finished the day down less than a point however and that was the second straight drop for the broad based index. The Dow gained just 14.92 points, or 0.1% to 26,949 while Nasdaq dipped by 0.1% to finish at 8,112. Retailers, semis, apparel, tobacco, restaurants, auto retailers were among the groups higher. Lagging was managed care, hospitals, pharma, food products, airlines. The U.S. Treasury market reflected some growth concerns as increased demand pushed yields lower. The 2-yr yield declined three basis points to 1.67%, and the 10-yr yield declined six basis points to 1.71%.
This morning stocks came out of the gate in positive territory on some encouraging trade progress. Bloomberg reported earlier today that the Chinese government has given waivers to several state and private companies to buy US soybeans without regulatory tariffs. This goodwill gesture is a result of negotiations between working level officials who met last week before top officials meet next month to try to settle the ongoing trade dispute. The companies have been given waivers on two to three million tons of soybeans with some companies already buying 1.2 million tons from the US on Monday. This reinforces both President Trump’s and Treasury Secretary Mnuchin’s comments that China is currently buying agriculture. The trade war has been dragging on for the better part of a year now and this is some concrete evidence that progress is being made. Clarity was also given to troubling reports last week when a Chinese delegation canceled a planned visit to farms in Montana. Secretary Mnuchin provided clarity to the situation informing the press that the visit was cancelled at the request of the US to avoid further confusion regarding the negotiations. Finally the Treasury Secretary also confirmed that he and US Trade Representative Lighthizer have a meeting in Washington with Chinese Vice Premiere Liu He in two weeks
Early triple digit gains were pared significantly, however, when a consumer confidence reading came in lower than forecast. The Conference Board’s Index of consumer confidence decreased to a 3 month low of 125.1 vs. consensus of 133. This seemed to indicate that America’s view on the economy and job market has deteriorated. The risk to the economy is that this less than encouraging view could have a detrimental effect on household spending, a key component to economic growth. Turning to other items on the we have a less than rosy report on the housing market. According to the S&P CoreLogic Case-Shiller Index in 20 US cities, home prices decelerated during July for a sixteenth straight month. Property values increased in July by a paltry 2% vs a year earlier which was the slowest increase since August of 2012. This modest increase is despite solid wage gains for Americans and cheaper borrowing costs to finance their purchases. Finally a September reading of the Richmond Fed’s Manufacturing Activity came in at -9, significantly lower than the 1 forecast. New order volume fell to -14 after rising 2 the prior month. Shipments fell -14 after rising 5 the prior month
Oil is under pressure this morning amid reports that Saudi oil output could be back to normal by late next week or early the following. While raw production will get up to speed faster than anticipated, refinement of the product remains a challenge. In addition the troubling overhang of weak manufacturing data out of the Eurozone has investors speculating that demand will weaken. Gold prices are trading range bound today bolstered as of late by a combination of weak global growth, declining policy rates and increased global tensions. It’s progress is being held in check by the encouraging trade news that has given a boost to riskier assets such as equities. The yield on the ten year has fallen three basis points to 1.70%. The yield on the two year declined one basis point to 1.67%
Sector strength today is being led by Utilities (+1.33%), Consumer Staples (+0.92%) and Healthcare (+0.40%). Lagging the market is Energy (-1.25%), Basic Materials (+0.02%) and Consumer Discretionary (+0.04%).
Sector Recap
Brian’s Technical Take
In August the 10YR UST yield registered its 2nd largest monthly decline since the peak of the financial crisis in December 2008. At months end the weekly RSI then measured an extreme oversold 17 reading, its lowest level since the Asian Currency Crisis/LTCM in the fall of 1998.
The long yield bottomed on the first session in September at 1.43% and then rebounded a sharp 48bps to a high of 1.91% on September 13th. It is now pulling back with declines in six of seven sessions to yesterday’s low of 1.66%, an exact 50% retracement of the prior two week uptrend.
The long yield finished yesterday’s session at the midpoint of the daily range and thus formed a short term bottoming candlestick pattern (doji). However in today’s activity. the long yield is now retesting yesterday’s lows and thus not confirming yesterday’s bullish reversal pattern. From a short term perspective the 1.66% level is key support.
The major moving averages (50, 100, and 20-day) are all in clearly defined downtrends which favors a continued move lower over the intermediate term. The next support level below is 1.61% and 1.54% which represent the 61.8% and 76.4% retracements. Below there and a retest of the September low, 1.43%, is likely in order.
The 30YR UST yield made a new all-time low in August but the 10YR did not. With plenty of event risk on the calendar (central banks, US China trade, Brexit, etc), the next six weeks should be telling.
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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