U.S. markets showed weakness for a 2nd-straight session and on the first trading day of December as both tariff concerns and disappointing economic news weighed on sentiment.

The recent signing of the Hong Kong legislation seems to be a new sticking point with suggestions of a phase one agreement unlikely to happen by year-end at the earliest now a key concern.

President Trump also reinstated tariffs on steel and aluminum from Argentina and Brazil due to currency manipulation while Commerce Secretary Wilbur Ross said tariffs on China would be increased on December 15th if a deal with China is not reached.

The pullback held near-term support levels but the action in volatility remains a heightened concern.

The Nasdaq sank 1.1% following the 1st half fade to 8,540. Near-term and upper support at 8,550-8,500 was breached but held with a move below the former signaling risk towards 8,450-8,400.

The Russell 2000 dropped 1% after testing a late day low of 1,606.

Current and upper support at 1,600-1,585 was challenged and held with a close below the former getting 1,565-1,550 and the 50-day moving average in focus.

The Dow also declined 1% after tapping a late low of 27,782 while closing back below the 28,000 level. Prior and upper support from last week at 27,800-27,600 was tripped and also failed to hold with a close below the former getting 27,400-27,200 and the 50-day moving average back in play.

The S&P 500 gave back 0.9% on the morning pullback to 3,110.

Fresh and upper support at 3,100-3,1075 held with a move below the latter signaling further risk towards 3,050-3,025 and the 50-day moving average.

Industrials and Technology were the weakest sectors after tanking 1.3% and 1.2%, respectively.

Consumer Staples was the the only sector that showed strength after nudging up 0.1%.

Global Economy – European markets settled lower across the board following the new U.S. metal tariffs on Brazil and Argentina.

Germany’s DAX 30 got smashed for 2.1% while France’s CAC 40 crashed 2%. The Stoxx 600 plummeted 1.6% and the Belgium20 tumbled 1.1%. UK’s FTSE 100 lost 0.8%.

Asian markets showed strength on the first trading day of December as China PMI’s surprised expectations.

Japan’s Nikkei rallied 1% and Australia’s S&P/ASX 200 advanced 0.6%. Hong Kong’s Hang Seng gained 0.4% and South Korea’s Kospi added 0.2%.
China’s Shanghai edged up 0.1%.

China Caixin/Markit manufacturing PMI for October checked in at 51.8 versus forecasts of 51.4.

China PMI was at 50.2 for November, topping expectations of 49.5, and above October’s reading of 49.3.

PMI Manufacturing Index rose to 52.6 for November, versus forecasts of 52.2, and 51.3 in October. The output component improved to 53.7 from October’s 52.4 reading and is at its highest level since January, with new orders rising to their highest peak since the start of 2019, as well.

Construction Spending declined -0.8% in October versus forecasts for a rise of 0.4%, and follows September’s revised -0.3% slide. Weakness was broadbased with residential spending falling -0.9% versus a prior -1.1% drop.

Nonresidential spending fell -0.7% after the prior month’s 0.2% gain. Public spending was off -0.2% versus the 1.9% increase previously while private spending dropped -1% after a -1.1% prior decline.

ISM Manufacturing Index slipped -0.2 points to 48.1 in November, disappointing expectations for a pop to 50.5, and 4th-straight reading below the 50 level.

The employment gauge fell 1.1 points to 46.6 from 47.7. New orders dropped 1.9 ticks to 47.2 from 49.1. New export orders declined -2.5 points to 47.9 from 50.4, while the import sub-index rose 3 points to 48.3 from 45.3. Prices paid were up 1.2 points to 46.7 from 45.5.

Market Sentiment – The iShares 20+ Year Treasury Bond ETF (TLT) extended its losing streak to 3-straight sessions following the plunge to $137.95 shortly after the open.

Prior and upper support from mid-November at $138-$137.50 was breached but held on the close back below the 50-day moving average. A move below the $137.50 level would be signal continued weakness with risk towards $136.50-$136.

Fresh and lowered resistance is at $139-$139.50.

Market Analysis – The Russell 2000 ETF (IWM) was down for the 2nd-straight session after tapping an intraday low of $159.91. Prior and upper support at $160-$159.50 was breached but held.

A close below the former would be an ongoing bearish development with additional backtest potential towards $157.50-$157.

New and lowered resistance is at $160.50-$161. Continued closes above $162-$162.50 would be a renewed bullish signal for a run towards $164.50-$165 and fresh 52-week highs.

RSI is a downtrend with upper support at 55-50 and the latter holding since mid-October.

A close below the 50 level would signal additional weakness towards 45-40. Resistance is at 60.

The Utilities Select Spider (XLU) was showing signs of breaking out of a 12-day trading range before Monday’s intraday drop to $62.51. Current and upper support at $63-$62.50 was breached and failed to hold.

A close below the former and the bottom of the recent trading range would be an ongoing bearish signal with downside risk towards $61.50-$61 and November lows.

Resistance remains at $63-$63.50 and the 50-day moving average. Continued closes above the latter levels would be a bullish signal for additional strength towards $64.50-$65.

RSI is in a downtrend with support at 45-40.

A move below the latter would signal additional weakness towards 35-30 with the latter representing the November bottom.

Resistance is at 50.

All the best,
Roger Scott.