Stocks Trading at Record Highs on Positive Trade Developments
- NASDAQ Composite +0.76% Dow +0.86% S&P 500 +0.57% Russell 2000 +0.77%
- NASDAQ Advancers: 1528 Decliners: 805
- WTI Crude +2.2%, Gold -2.0%, 10yr Treasury 1.926%
- Market Volume (First Hour): -2.4%
Market Movers
- Potential movement with US-China Trade
- Weekly jobless claims fall to 211k and continuing claims fall to 1.689k
- Bloomberg Consumer Comfort Index fell from 61.0 to 59.1 last week
Steve’s Commentary
The market lacked momentum yesterday and the major indices closed flat to lower, but momentum returned today on word that the US and China have reached an agreement to begin removing tariffs. China’s Ministry of Commerce said overnight that the two sides have agreed to end tariffs in phases as the sides work toward a deal. The US confirmed within the past hour and if such an agreement pans out it very well could lead to reduced tensions and remove a big cloud that has been hanging over the world economy.
In the meantime, there has been a good bit of back & forth over when and where to hold a public signing event for a phase-one deal. The market swooned shortly before noon yesterday on word that the signing event might get pushed to December, but that was short lived. Given the upcoming Thanksgiving Holiday in the US, a November signing would have to happen within the next two weeks and it doesn’t sound like the two sides are that far along just yet.
No matter, at midday, the Nasdaq Composite, S&P and Dow are each trading at record highs, and though the Russell 2000 is still about 8% away from its record, it is trading in line with the other indices. Market volumes have been strong for the past five consecutive sessions, something not seen since early August and that suggests money is moving into the markets. Bloomberg News notes that sector-based ETFs are starting to see inflows again after several weeks of outflows.
Markets in Asia were mostly higher overnight and Europe closed higher across the board. The ECB’s Economic Bulletin confirms ongoing sluggish growth but also highlighted strength in the employment markets and rising wages, and the Bank of England kept rates steady but noted weaker growth due to the global economy and ongoing Brexit uncertainty. Neither statement offered anything new.
In the US, the is light today and tomorrow. Weekly unemployment claims fell from 219k to 211k this week and continuing claims dipped to 1.689k. Both measures are consistent with results over recent months and offer no hint of a softening labor market. Tomorrow comes consumer sentiment and next week we get a look at both CPI and PPI inflation stats.
Most sectors are positive at midday with the only exceptions being REITs, Utilities and Consumer Staples. REITs are off 1.5% today and 4.0% over the past five days while Utilities fall 1.7% today and over 3.6% over the past five sessions. However, both remain among the top three best performing sectors over the past twelve months. Consumer Staples are off 0.3% and have consistently underperformed since the beginning of the quarter. On the upside, are Communications with a 1.3% surge with earnings from Discovery and Fox driving the gain. Energy is 1.3% higher, recouping some of yesterday’s decline, and Technology gains 1.2% with strong results from QUALCOMM and Fiserv leading the way higher.
Treasuries under pressure due to improving sentiment but yields are at a seven week high. Crude oil is trading over 2% higher, its fourth gain in the past five session and it is trade optimism driving the move higher. Despite the move higher, WTI has been unable to remain above its 200-day moving average at $57.23, and Brent is holding just above its 50-day MVA. Gold falls 1.5% today and is down over 5% from the September 4th high, the dollar index gains 0.2% and Treasuries under pressure due to improving sentiment.
Sector Recap
Brian’s Technical Take
SPX futures spiked to new highs in the overnight session on <Control V> “optimism regarding the US-China trade war.” Accordingly, the safe haven greenback immediately traded lower, however, it has quickly rebounded to the top of the recent two week range.
The US dollar Index (DXY) declined 2% in October for its largest monthly decline since January 2018 (-3.25%). At this time, US equity benchmarks were entering what some call a “blow-off top” by registering their best monthly gains (NDX +8.7%, SPX +5.6%) following the 2016 U.S presidential elections.
With animal spirits alive and kicking and many US sectors/industries breaking out to new 52-week highs in November, it is noteworthy that the typically inversely correlated DXY (chart 1 below) is diverging. The DXY made its low back on October 18th which it retested two later on November 1st. Now back to the top of this two week range, the DXY is on the verge of “breaking out” above the 98 resistance level (minor) which would trigger a small “double bottom” reversal pattern carrying a minimum price projection to 98.87.
The short term perspective on long rates is arguably constructive. The 10YR UST yield (chart 2 below) registering a series of higher lows since the bottom in August at 1.43%, and the 20-day and 50-day moving averages have reversed and sloping to the upside. However, the long yield has yet to make a higher high and that is now being put to the test with key resistance just a few ticks above at the 1.90 – 2% range. In addition, the longer term 100-day, 150-day, and 200-day moving averages remain in a downtrend suggesting it may be too soon for an upside breakout.
As noted yesterday the intermediate to long term outlook remains constructive, but prior breakout levels are often retested and late comers to the risk-on party are at risk of a shakeout.
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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