- NASDAQ Composite -0.38% Dow 0.00% S&P 500 -0.02% Russell 2000 -0.37%
- NASDAQ Advancers: 853 Decliners: 1399
- WTI Crude: -0.2% Gold +0.4% 10yr Treasury 1.835%
- Market Volume (First Hour): -4.4%
- Nonfarm Productivity falls -03% for the first decline since late 2015
- Unit Labor Costs beat estimates and rose 3.6% in Q3
- MBA Mortgage Applications fall 0.1% last week
The Nasdaq Composite and the Dow closed at new record highs yesterday by the slimmest of margins while the S&P fell a bit short. But despite the fractional movement in the indices, volumes were nearly 12% above average and the highest since early October. That suggests some rotation was a factor with Healthcare, REITs and Utilities down the most while Industrials, Financials and beaten up Energy pulled ahead. Today is relatively quiet in terms of news flow. Earnings continue to roll in and there is little new regarding U.S.-China trade. The lack of news means investors lack enthusiasm, and thus the markets are lower at midday with the Dow and S&P barely changed while the Nasdaq and Russell 2000 are modestly lower.
Looking at the economy, productivity fell in the third quarter by 0.3%, marking the first decline in nearly four years and nowhere near the +0.9% expected. The decline stems from a 2.1% increase in output measured against a 2.4% increase in hours worked, with the Labor Department noting that self-employed workers account for much of the increased hours worked. Year-over-year productivity rose 1.4%, down from 1.8% at the end of Q2. Unit labor costs rose at the highest rate since early 2014 with a 3.1% y/y gain, suggesting that the tight labor market is causing firms to spend more on wages.
Articles in both the Washington Post and Bloomberg discuss the waning recession concerns. The Post focuses mostly on the US where solid employment numbers, strong consumer spending, earnings generally better than feared and stocks at record highs all suggest a downturn is not imminent. They cite reports from Goldman, Barclays and Morgan Stanley all putting odds of a recession in the next year at less than 24%. Bloomberg cites rate cuts by various central banks, hopes for a US-China trade deal, and stabilizing economic data in the US and Europe as reasons the global economy will avert a full on recession. Separately, the Wall Street Journal notes that investors have over $3.4 trillion sitting in money market funds with balances growing by about $1 trillion in the last three years. Rising reserves again reflect the fear of a recession, but with those concerns ebbing the Journal says some of that money could find its way into the equity markets and fuel the major indices even higher.
The sector view is somewhat opposite of yesterday with REITs and Utilities among today’s leaders while Energy gives back some of yesterday’s gain and underperformed other sectors. Over in the commodity pits, WTI crude oil gave back earlier gains and trades -0.2% lower following the DOE’s report of an inventory build of nearly 8 million barrels, well ahead of expectations, and declines in both gasoline and distillate stocks. After three days of losses gold regains it glimmer with a 0.4% advance while the Dollar index weakens by 0.1%. Treasuries are firmer, sending yields lower across the spectrum.
Brian’s Technical Take
Equities have had a nice run with many sectors and industries “breaking out” from intermediate to long term ranges over the recent weeks. Sentiment has rebounded off bearish levels, but arguably the pendulum has swung too far the other way. From a short-term tactical perspective, equities may be now be entering a minor corrective period.
The flagship S&P 500 Index (SPX) gained 1% on Friday following better than expected payroll data, for its first real separation away from the 3,033 resistance line initially established in late July. On Monday, the SPX gapped modestly higher (0.4%) to fresh all-time highs due in part to weekend optimism surrounding a largely symbolic phase 1 trade deal with China. However, the SPX closed just below its opening price and thus formed a doji pattern indicating a potential change in trend. Monday’s doji was confirmed by yesterday’s “bearish engulfing” pattern, and early in today’s session the SPX is thus far seeing modest downside follow-through.
The price gap at 3,067 should be seen as a minor support level which, if it does not hold, opens the door for a “classic retest” of the more important 3,033 support, followed by the 50-day moving average, now 2,983. At Monday’s all-time high, the daily RSI reached a near overbought 68 reading to boot.
Knowing your time frame is of the upmost importance when implementing technicals and the above viewpoint is nearly as short term as it gets. Seasonality is absolutely a tailwind, and wide array of “bullish breakouts” is expected to bring longer lasting momentum over the intermediate to long term. Over the very near term however, I wonder if the SPX can continue to build on its leading eight straight years of gains for the month of November. Short-term tactical says be long, but mind the gap, 3,067.
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.