Stocks Rise, Led by Tech, After Fed Rate Cut
- NASDAQ Composite +0.25% Dow +0.21% S&P 500 +0.26% Russell 2000 +0.52%
- NASDAQ Advancers: 1442 Decliners: 953
- Today’s Volume (vs yesterday) +8.5%
- Crude $58.67 +$0.56, Gold $1498.30 -$10.10, VIX 13.91 -0.04
Market Movers
- U.S. Initial Weekly Jobless Claims reported at 208,000 vs. consensus 213,000
- U.S. Continuing Jobless Claims reported at 1.661 million vs consensus of 1.672 million
- September Philadelphia Fed Index better at +12.0 vs. consensus +10.5
- Reaction to earnings: MLHR +5%, DRI -5%
Chris’ Commentary
Major indexes finished mixed to flat yesterday after the Federal Reserve cut its benchmark interest rate citing concerns of slowing global economic growth and continued uncertainty over international trade. This was the second cut of the year by the FOMC and widely anticipated by investors. The market initially sold off on the news, but rallied back following Chairman Powell’s press conference. The S&P 500 finished slightly higher Wednesday to close at 3,006.73, less than 0.7% away from the July’s all-time high of 3,025.86.
Today, we are higher out of the gate, building on yesterday’s late afternoon rally. Yesterday’s Fed announcement and Chairman Powell’s comments following it were dovish enough to give the markets the boost they needed. Also today, U.S. and Chinese deputy trade negotiators are set to resume face-to-face talks for the first time in nearly two months, aiming to lay the groundwork for high-level discussions in early October. All of this lays the groundwork for some positive momentum which could help give traders a shot to retest the old highs.
Currently, 8 of the 11 of the S&P 500 sectors are trading higher with Tech, Communications and Healthcare leading. Crude oil is slightly higher. Gold trades lower but is still trading north of the $1500 level. The dollar is slightly lower while the yield on the 10-yr stands at 1.78%.
A divided Federal Reserve voted 7-3 to lower rates by 25 basis points. Eric Rosengren and Ester George voted to maintain the fed fund target rate range at 2 to 2-1/4 and James Bullard voted for a 50 basis point cut. The FOMC statement highlighted some concerns, “household spending has been rising at a strong pace, (however) business fixed investment and exports have weakened.” Chairman Jerome Powell highlighted in press conference later that "if the economy does turn down, then a more extensive sequence of rate cuts could be appropriate." This statements got traders attention and helped markets rally into the close.
Unemployment numbers released by the U.S. Department of Labor continue to show demand in the U.S. and a continued bright spot for the economy. Reported Initial Jobless Claims were a little better than expectations at 208,000. Reported Continuing Claims were also a little better than expected at 1.661 million claims vs estimates of 1.672 million. Continuing and initial claims were both revised slightly higher.
Sector Recap
Brian’s Technical Take
The rotation from growth to value has been a popular headline in September. So far, we have been reluctant to give up on growth as the longer term trend of outperformance, the ratio of growth/value (RLG/RLV), is still holding above technical support levels. That said, we highlighted select value plays like industrials which appear to be setting up technically in a very constructive manner.
Another rotation to watch for is large cap into small cap. The ratio of the S&P 500 to the Russell 2000 bottomed int eh first week of September at lows not seen since January 2008 which then marked a major picot low. The bounce off of this support reflects the 2.5% outperformance by the Russell 2000, a relatively small figure in the longer term trend. However, the absolute chart of the Russell 2000 suggests the small cap index could be on the cusp of a breakout and potentially continue its recent outperformance.
The weekly period chart of the Russell 2000 peaked in August 2018 and has since been in consolidation mode. While it remains more than 10% from its 2018 highs, it appears to be on the cusp of a bullish breakout. Resistance is just above at the 1,586, - 1,614 range in place since November 2018. The consolidation pattern is somewhat similar to what is forming in industrials, materials, and transports.
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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