- Missiles fired by Iran at American / coalition airbases in Iraq with no apparent casualties
- MBA Mortgage applications for the period ending 1/3 rose by 13.5%
- December US ADP Employment +202K vs. consensus +165K
- DOE reports crude oil inventories +1.16M barrels vs consensus (3.2M) barrels
- A Ukrainian Boeing 737 airliner crashed near Tehran, killing 176 people
U.S.-Iran tensions continued to dominate the narrative yesterday despite a midday rally that saw the indexes pull even or positive before succumbing to uncertainty in the afternoon. The Dow fell -0.42% while the S&P 500 slipped -0.28% and Nasdaq declined -0.03% after being up for much of the day. Technology (specifically semiconductors) and Communications were the best performers while REIT’s, Consumer Staples and Financials lagged. The dollar advanced with oil continued its retreat from multi month highs.
Several hours after the close yesterday, we learned that Iran launched more than a dozen ballistic missiles at two Iraqi airbases that housed American and coalition troops. While the Dow futures plunged over 400 points at the time and the S&P fell 1.6%, the markets recovered pre-market and are trading in positive / flat territory this morning as investors determined that the attacked were much less invasive than feared and appeared that Iran intended to avoid US casualties. In addition, there was relief that oil infrastructure was not targeted and Iran’s Foreign Minister issued a statement that it was not seeking war. The bases that were hit were already on high alert and received prior warning of the assault from Iran. As President Trump tweeted last night, “All is well.” This morning’s action seems to be a combination of a relief rally and short covering on speculation that tensions won’t immediately escalate further. This was essentially affirmed by the President at his news conference earlier where he said that Iran seems to be standing down and there were no US or Iraqi casualties. He went on to say that Iran will never have nuclear capabilities and that the US would like to strike a peaceful deal that allows Iran to thrive and prosper.
There were two economic releases today. Mortgage applications for the period ending January 3rd rose a robust 13.5% after falling 13.2% the prior week. Purchases were up 3% after rising 2.2% the prior week. Refinances increased 24.6% after falling by 26% the prior week. December ADP employment rose to 202,000 vs. the 150,000 / 160,000 estimate, the most in eight months and a clear sign of a healthy labor market to end the year. In addition the November number was revised up by 67,000 to 124,000. Job gains for the month were spread across sectors, with construction adding 37,000, the best monthly gain since April and a reversal of the initially reported 5,600 loss in November. Goods producing jobs increased by 29,000 while service provider employment rose by 173,000 led by trade and transportation. The ADP release has long been a proxy for the Labor Departments Non-Farm payroll number to be released on Friday. Economists expect the Labor Department’s tally to show a gain of 160,000.
Turning to the commodity space, oil is reversing from an overnight knee jerk spike to trade lower as it was determined that Iran’s initial response was not targeted against energy infrastructure. In addition, the United Arab Emirates Energy Minister Suhail al-Mazrouei told Reuters that he saw no imminent risk to oil passing through the critical Strait of Hormuz. Finally, The Department of Energy reported a substantial build in inventories vs an expected draw. Gold, which recently surpassed the $1,600 level for the first time in seven years, has pared gains as investors judged the Iranian response as much less aggressive than previously expected.
Seven of the eleven sectors are trading in positive territory led by financials (+0.49%), Consumer Staples (+0.20%) and Technology (+0.19%). Lagging the market are Energy (-0.98%), Materials (-0.14%) and Utilities (-0.03%).
Brian’s Technical Take
Bitcoin is starting to percolate and it is not going unnoticed by the day and swing traders of the world. One week ago, bitcoin tested the 6,426 – 6,867 price range which we have previously identified as a key support zone (see 11/22 and 11/25 MIDDAY Updates) given it represents a large price gap made initially back in May of 2019. Gaps are notorious for acting as future support/resistance levels. This was the third test of this clearly defined support in as many months and over the ensuing four sessions bitcoin has been higher for a total gain of more than 21%.
Bitcoin’s strong rebound has “broken out” above the declining trend line from the June 2019 highs, but quickly another test presents itself. Today’s high, 8,462.10, has come within 1% of its 200-day moving average (yellow line), now 8,542, a measure which bitcoin has proven to be sensitive to in the past.
The easy fruit has been picked and the key test from here is whether or not bitcoin can continue higher though expected resistance and overbought momentum readings. Already the daily RSI has gone from the high 30’s to high 60’s, typically a sign buyer exhaustion could soon set in, however, bitcoin has proven in can enter and hold high into overbought territory far longer than most instruments.
The risk levels are clearly defined. Adult swim only.
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.