- NASDAQ Composite -0.22% Dow -0.19% S&P 500 -0.25% Russell 2000 -0.36%
- NASDAQ Advancers: 695 / Decliners: 1533
- Today's Volume (vs. Tuesday) -6.65%
- Crude $61.78 -$1.35, Gold $1275.60 +$2.40, VIX 14.79 -0.16
- Earnings reaction: TGT +7%, SE + 15%, JWN -9%, PSTG -20%, LOW -10%, VFC -5%
- MBA’s Mortgage Applications +2.4% vs -0.6% previous week
- Mortgage refinances +8.3% W/o/W
- 30 year fixed mortgage rate declined 1.59% to 4.33% W/o/W
- EIA reports Crude Oil reserves rise 4.74 million barrels W/o/W
All the major indexes opened modestly lower with traders and talking heads citing continued political chatter on trade concerns. Yesterday’s rally was based again on trade rhetoric. The U.S. walked back some of the sabre rattling as the Department of Commerce granted Huawei a 90-day license to work with U.S. companies so it can service existing networks and mobile devices. Unless something decisive is reported, look for the markets to flail aimlessly into the long weekend.
Currently U.S. equity markets have rallied back to trade flat to slightly lower after we opened down about 0.5%. Communications, Utilities and Real Estate are the best performing sectors while Energy, Consumer Discretionary and Financials are lower. Currently 6 of the 11 S&P 500 sectors are trading higher. Crude oil trades lower while Gold moves higher at mid-day. The dollar moves lower as does the yield on the 10-yr which now stands at 2.39%.
Trading volumes continue to trend lower despite the continued day-to-day volatility. For the past five trading days, average daily trading volume on the consolidated tape has averaged 6.5 billion shares. That trails the yearly average of 7.2 billion shares by about 10%. What this is telling us is that the recent markets sell off lacks conviction. The trading volume just isn’t there. If you look at the market sell-off leading into Christmas, which saw the market give back about 10% over a 4 day period, trading volumes averaged over 11 billion shares and that includes a shortened trading session on Christmas Eve. So what does this mean? Traders and investors are cautiously optimistic that a U.S. / China trade deal will be successful. If they thought otherwise, you would see high trading volumes to the downside as investors pared back or sold out of positions that have exposure to that area.
Trade talks continue to dominate the headlines as the White House reportedly considering blacklisting more Chinese tech companies. Following on this, China’s U.S. ambassador said Beijing is prepared to resume trade talks, though we have not seen anything firm scheduled. Chinese ambassador Cui Tiankai told Fox News, “It is quite clear it is the U.S. side that, more than once, changed its mind overnight, and broke the tentative deal already reached.” Treasury Secretary Mnuchin said there are no plans to go to Beijing yet and that the U.S. is unlikely to implement tariff increases in the next 30-40 days. The President is expected to meet with Chinese Premier Xi in June at the G-20 meeting.
In M&A headlines today,International Speedway (ISCA) announced it will sell itself to privately held NASCARfor $42 a share in cash, valuing the deal at $2 billion. YTD, global M&A has top $2.0 trillion of announced or proposed deals which is down 20.5% from this time last year. In North America, we have seen only $1.1 trillion of deals, down 20% from this point last year while Europe has only seen $375 billion of announced or proposed deals which is down over 38% from this point last year.
Brian’s Technical Take
The impact of the U.S. – China trade war is taking its toll on copper which traditionally is viewed as a barometer of global economic activity given its widespread industrial use. Spot copper (HG1) is having its worst weekly performance since late December (-2.6%) and is on pace for its sixth consecutive weekly decline.
The long term weekly period chart shows it is fast approaching its 200-week moving average (yellow line), now $262.19, or 2% from last sale. This long term secular trend line proved its importance by acting as support during the lows of 2H’18. This expected support also coincides with the rising trend line connecting the lows of 2016, cyclical lows ending a five year down trend, as well as the more recent pullback in late 2018-early 2019.
If the cluster of support fails to hold this time around, it may be signaling the trade war is becoming an increasing headwind to global economic activity.
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.