U.S. markets showed continued weakness throughout Wednesday with ongoing concerns over tax reforms erasing November gains. The Dow and S&P 500 closed lower for the 4th time in the past 5 sessions but are still just over 1% away from their all-time highs.
The Nasdaq fell for the second-straight session but held 6,700 and a key level of support. The Russell 2000 traded in the red for the fourth time in the past five sessions after falling below 1,460 but a level that held into the closing bell.
Financials were the only sector that showed strength after rising 0.2%. Laggards were led by Energy and Consumer Staples with the sectors stumbling 1.2% and 1.1%, respectively.
Global Economy- European markets closed in negative territory for the 5th-straight session with UK’s FTSE 100 falling 0.6% while the Belgium20 and Stoxx Europe 600 gave back 0.5%. Germany’s DAX 30 fell 0.4% and France’s CAC 40 declined 0.3%.
ECB Governing Council member Ardo Hansson said the short-term economic risks in the Eurozone are to the upside and the ECB is increasingly confident inflation will reach the levels consistent with our aim.
Asian markets showed heavy losses with Japan’s Nikkei tumbling 1.6% while holding the 22,000 level and Hong Kong’s Hang Seng Index tanking 1%. China’s Shanghai Composite declined 0.8% and Australia’s S&P/ASX 200 was lower by 0.6%. South Korea’s Kospi dipped 0.3%.
Japan Q3 GDP rose +1.4%, weaker than expectations of 1.5%. The Q3 deflator rose 0.1% year-over-year, matching expectations. Q3 private consumption fell 0.5% quarter-over-quarter, weaker than expectations for a drop of 0.4%. Q3 business spending rose 0.2% quarter-over-quarter, weaker than expectations for a rise of 0.3%.
MBA Mortgage Applications Composite Index up 3.1% for the week of November 10th. The purchase index gained 0.4% and the refinancing index climbed 6.3%. The 30-year fixed mortgage rate remained unchanged at 4.18%.
Empire State Manufacturing Survey came in at 19.4 versus expectations for a print of 26.
Consumer Price Index e consumer price index edged up 0.1% in October with the core rate up 0.2%, matching forecasts.
October Retail Sales were up 0.2% topping expectations of 0.1%.
November Atlantic Fed Business Inflation Expectations were up 2% for the year.
September Business Inventories were flat, with sales up 1.4%, matching forecasts.
Market Sentiment- Chicago Fed President Evans said that the Fed is facing below-target inflation expectations and he is concerned that persistent factors are holding down inflation, rather than idiosyncratic transitory ones.
He also added that he has an open mind when it comes toward a decision in December on interest rates.
The iShares 20+ Year Treasury Bond ETF (TLT) traded higher for the 3rd-straight session after gaining 1.1% while making a run to $126.67. Prior resistance at $126.50-$126.75 held with a close above the latter being a continued bullish development. Rising support is at $125.50-$125 and the 50-day moving average.
Market Analysis- The Spiders Dow Jones Industrial Average ETF (DIA) is back in a mini trading range between $232.50-$235 following its fifth-straight close below the latter.
These levels have been holding since mid-October with risk to $231-$230 on a move below $232.50. Today’s low reached $232.65. The recent all-time high reached $235.88 with lowered resistance at $233.50-$234.
RSI recently broke below early October support at 70 with risk towards 50 and early September support levels on continued weakness.
The Utilities Select Spider (XLU) continued its run towards a fresh 52-week and all-time high of $57.23 on today’s open before pulling back shortly afterwards.
The low has tapped $56.32 with rising support is at $56.50-$56 getting split. A close below the latter would likely lead to continued weakness and a further backtest towards $55.50.
This area represents the double-top breakout from earlier this month. Fresh resistance is at $56.50-$57. RSI cleared 75 yesterday but fell near 65 today. A move below this level would likely signal a continued pullback towards 60-50.
All the best,
Roger Scott