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Stocks Slip as Wall Street Awaits Details on Trade Talks

U.S. Crude Inventories rose 7.07 million barrels.

Wednesday, March6, 2019, 12:31 PM, EST

  • NASDAQ Composite -0.48% Dow -0.29% S&P 500 -0.31% Russell 2000 -0.49%
  • NASDAQ Advancers: 795 / Decliners: 1433
  • Today's Volume (vs. yesterday)+10%
  • Crude $56.06-$0.50, Gold $1287.20+$2.50, VIX 15.41+0.67

Market Movers

  • Earnings reaction DLTR +3%, ANF +20%, +ROST +1.5%, URBN +1%
  • Weekly MBA Mortgage Applications down -2.5% vs prior week of +5.3%
  • February ADP Employment Report +183,000 vs consensus of +190,000
  • January ADP was revised up to +300,000 from +213,000 previously reported
  • U.S. December Trade Balance widened to -$59.8 billion vs consensus of -$57.9 billion November was revised to -$50.3 billion from -$49.3 billion
  • U.S. Crude Inventories rose 7.07 million barrels
  • Beige Book release at 2 p.m. ET

Chris’ Commentary

Yesterday stocks took pause closing flat on below average trading volumes. The major indexes have been on a tear since Christmas with the Nasdaq Composite up over 22% and the Russell 2000 up 23%. The Dow and S&P 500 have both returned over 18%. A pause here would be good as the recent move over the last 2 months consolidates. As earning season winds down, there is a fair amount of economic and geopolitical data coming in the next few days that could move the markets significantly. The current pause in market volatility is welcome and healthy. Today, market opened flat and have drifted lower in another listless session. Currently 4 of the 11 S&P 500 sectors are trading higher with Materials outperforming. Health Care and Energy are both down over 1%. Real Estate is flat on the day. Crude oil and the dollar both trade lower. Gold trades higher. The yield on the 10-yr is lower for the third day in a row at 2.69%.

The global economy will continue to weaken this year, according to The Organization for Economic Co-operation and Development (OECD). The OECD’s interim outlook report showed that the global economy is slowing and 2019 GDP growth will grow by only 3.3%, down from the 3.5% they reported in November (which was also cut previously from 3.7%). The report noted, “Economic prospects are now weaker in nearly all G20 countries than previously anticipated. Vulnerabilities stemming from China and the weakening European economy, combined with a slowdown in trade and global manufacturing, high policy uncertainty and risks in financial markets, could undermine strong and sustainable medium-term growth worldwide.” Laurence Boone, the OECD's chief economist said, “A sharper slowdown in any of the major regions could derail activity worldwide, especially if it spills over to financial markets.”

China closed higher today, up for the 4th day in a row and currently trading at 9 month highs. Investor expectations is that the Chinese government will unveil more policy support measures at the NPC. Better risk appetite reinforced by elevated volumes are proof of a risk-on environment as the Shanghai closed up 1.57%, the Shenzhen up 1.49% and the Hang Seng up 0.26%. Reuters noted factors that have propelled Chinese stocks to these levels such as optimism about policy stimulus and progress in U.S. – China trade talks. The article also noted, “Adding fuel to the rally is a pick up in the momentum in the A-share market’s internationalization process, which drew foreign money into China even as authorities vowed to further open up its financial markets and deepen reforms.” On Monday, U.S. Secretary of State Mike Pompeo said he thought the U.S. and China were “on the cusp” of a deal to end their trade war, adding to the optimism.

Oil futures are trading lower following the weekly government inventory report that showed U.S. crude stocks rose 7.07 million barrels last week as imports rose. The EIA report was in-line with last night’s API projection but still significantly more than analysts’ expectations. The report also showed gasoline and distillate inventories declined more than analysts’ estimated, despite a rise in utilization rates. Crude is up over 30% since Christmas Eve’s low of $42.53 but still down over 26% from the October high of $76.41.

Sector Recap

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Brian’s Technical Take

Ten years ago today the U.S. equity markets bottomed following the bursting of the housing market bubble. Toxic subprime assets then permeated throughout the far corners of the markets resulting in a systemic mess and full blown stock market crash. The system froze and the four horseman (Federal Reserve, Treasury, FDIC, and Congress) were forced to not only take out their bazookas, but actually use them over and over.

The overall stimulus and bailout was nothing short of massive. You may remember such programs as ZIRP, TARP, TALF, AGP, CAP, CPP, PPIF, PPIP, CBLI, SSFI, TIP, TLGP, LLP, CPFF, LLP, AMLF, MMIFF, PDCF, TSLF, and let’s not forget “cash for clunkers”, just to name a few. Remarkably just two years earlier in March 2007 Bernanke testified before Congress “Although the turmoil in the subprime mortgage market has created severe financial problems for many individuals and families, the implications of these developments for the housing market as a whole are less clear …. At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained.”

History rhymes and this time it is Chairman Powell who was forced to reverse from recent comments that rates were a long way from neutral and the QT program is on autopilot. Powell’s dovish pivot followed a 19.4% decline in the Dow Jones Industrials (DJIA), its biggest correction since the Great Recession. The Fed put has helped the DJIA recover more than 20% off the December lows, which bottomed right at the trend line connecting the lows of 2009 and 2016. The breadth of the recovery has been impressive and while a minor pullback can be expected at any time, the intermediate to long term outlook looks good, technically speaking.

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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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