Stocks Rebound as China Stabilizes Currency
- NASDAQ Composite +0.62% Dow +0.39% S&P 500 +0.37% Russell 2000 +0.14%
- NASDAQ Advancers: 1231 / Decliners: 1133
- Today's Volume (vs. Monday) -8.25%
- Crude $54.60 -$0.09, Gold $1470.00 +$5.40, VIX 22.01 -2.59
Market Movers
- Economic advisor Larry Kudlow said the President is flexible on China tariffs, depending on how trade talks go…
- China took overnight measures to dampen recent yuan weakness
- U.S. June JOLTS: Job Openings 7.348 million vs consensus of 7.326 million
- May revised higher to 7.384 million from 7.323 million previously reported
- June CoreLogic Home Price Index +3.4% Y/Y & +0.4% M/M
- German Factory orders stronger +2.5% M/M vs +0.3% consensus
- Barneys New York files for bankruptcy
- Reaction to earnings: PODD +21%, ITRI +14%, TTWO +10%, KLAC +7%, ZTA +6.5%, DF -23%, ENT -11%, IFF -10%, MOS -8.5%
Chris’ Commentary
Following the worst trading day of the year, stocks are moving higher. Selling yesterday was consistent across all sectors with Tech faring the worst down over 4% and Utilities the best, down only 1.5%. While the macro and day traders continue to push the markets around, there has been no clear sign of capitulation, like we saw last December, yet. I could say today is a dead-cat bounce. However the elevated trading volumes indicate that investors have their shopping lists, looking for those names that are on sale. Let’s see if the buying is real and the markets can hold onto today’s gains. It all depends on the headline risk from the China-U.S. trade dispute.
Currently, 8 of the 11 S&P 500 sectors are trading higher with Tech and Communications the clear leaders. Utilities and Material are both down nearly 1% today. Crude oil is flat following yesterday’s 1.75% move lower. Gold is slightly higher after 2 days of solid gains. The dollar is flat to higher. The yield on the 10-yr is a meager 1.75%.
China – U.S. tensions continue to dominate the headlines. In a mostly symbolic gesture, the U.S. Treasury designated China as a currency manipulator after Monday’s close. Following which, China took actions to stem the recent pullback in the yuan, setting the daily fix at a stronger than expected level (6.9693 yuan per dollar) and announcing the sale of yuan-denominated bonds in Hong Kong to help tighten liquidity. Yi Gang, the Governor of the People’s Bank of China said China won’t use the yuan as a tool to deal with trade disputes saying he is “fully confident that the yuan will remain a strong currency in spite of recent fluctuations amid external uncertainties.”
Four former Federal Reserve chairs wrote an Op-Ed in today’s WSJ titled “America Needs an Independent Fed.” The article signed by Paul Volcker, Alan Greenspan, Ben Bernanke and Janet Yellen emphasizes the importance of a Fed chair who's "permitted to act independently and in the best interests of the economy, free of short-term political pressures and, in particular, without the threat of removal or demotion." The note stated that even the perception that monetary-policy decisions are politically motivated "can undermine public confidence that the central bank is acting in the best interest of the economy… this can lead to worse economic performance in the long run, including higher inflation and slower growth."
Barneys, the upper-crust New York retailer and iconic Christmas window spectacle, has filed for bankruptcy protection. The company has raised $75M to support the sale process that will see the company close 15 of its 22 locations. According to Seeking Alpha’s Wall Street Breakfast note, “It's just one of many department stores that's struggling as shoppers buy online or from brands directly. Nordstrom (JWN) is trading nearly $20 a share lower than a $50/share buyout offer it rejected two years ago as too low, Saks-owner Hudson's Bay (HBAYF) is considering going private after its stock fell nearly 50% in the year through June, while shares of Macy's (M) are down 34% YTD.”
Sector Recap
Brian’s Technical Take
Brian is out this week enjoying some well-deserved R&R with the family.
Bitcoin had an outsized move yesterday while the rest of the market crumbled. The cryptocurrency has had an outsized run for 2019, posting returns of over 200%. What is interesting is that the Bitcoin has for some, become a safe haven for traders as the China-U.S. trade war lingers. Bloomberg noted that, “Investors piled into safer securities such as sovereign bonds on Monday after China struck back in its trade dispute with the U.S. and let its currency weaken through a milestone level. Major cryptocurrencies, increasingly seen as a refuge during distressed times, also rose, with Bitcoin gaining more than 14% and smaller peers including XRP and Litecoin each rising more than 5%.” Brad Bechtel, head of foreign exchange at Jefferies was quoted in the article that “It definitely appears to be acting somewhat like a safe haven,” continuing “when markets are calm and rallying, then Bitcoin sort of falls by the wayside, but every time we see turbulence in the market and it starts to sell off, you see Bitcoin.”
To that effect, today’s chart features the relationship between the S&P 500 and Bitcoin. Note yesterday’s cross over emphasizing the above statement.
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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).
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