U.S. markets opened lower and showed weakness throughout the session as Wall Street returned from the holiday weekend.
Tensions over trade remain in the forefront as deal talks will restart with Canada on Wednesday and big tariffs against China are still looming.
The Russell 2000 fell 0.4% after testing a low of 1,722.
Near-term support at 1,720 held with a move below this level likely leading to a retest of 1,700.
The Nasdaq declined 0.2% while trading to an intraday low of 8,042.
Support at 8,050-8,000 held with a close below the latter being a slightly bearish development.
The S&P 500 slipped 0.2% following the midday pullback to 2,885. Support at 2,880-2,875 held with a close below the latter signaling additional weakness.
The Dow was down a 3rd-straight session after giving back 0.1%. Upper support at 25,800-25,600 held with the morning low reaching 25,805.
Utilities and Financials rose 0.4% to led sector strength. Consumer Discretionary gained 0.2%.
Consumer Services tumbled 1.4% to lead sector weakness for a 2nd-straight session.
Real Estate stumbled 1% while Health Care was down 0.9%.
Global Economy – European markets were lower across the board on worries Italy’s government could announce a budget this fall that puts the country’s debt on an unsustainable course.
France’s CAC 40 tanked 1.3% while Germany’s DAX 30 sank 1.1%.
The Belgium20 and the Stoxx 600 Europe were down 0.7% while UK’s FTSE 100 gave back 0.6%.
Eurozone July PPI rose 0.4% month-over-month and 4% year-over-year, stronger than expectations of 0.3% and 3.9%, respectively.
UK August Markit/CIPS construction PMI fell 2.9 to 52.9, missing estimates for a slide of 0.9 to 54.9.
Asian markets were mixed. China’s Shanghai soared 1.1% and Hong Kong’s Hang Seng surged 0.9%. South Korea’s Kospi advanced 0.4%. Australia’s S&P/ASX 200 declined 0.3% and Japan’s Nikkei dipped 0.1%.
August PMI fell to 54.7, topping estimates for a print of 54.5.
August ISM Manufacturing Index jumped 3.2 points to 61.3 in August, above forecasts of 57.7, and a new 14-year high.
Construction spending rebounded 0.1% in July after tumbling 0.8% in June, but below expectations for a rise of 0.4%.
Market Sentiment – St. Louis Fed James Bullard said analysts are in good shape for today and about where analysts should be in terms of policy.
He said the FOMC should monitor incoming data as monetary policy in the U.S. is a global, 24-hour a day debate with all kinds of people weighing in.
He mentioned the President’s voice is just one more, suggesting Trump’s comments don’t really impact policy.
Bullard did said the President can have more influence on the debate by the people he appoints rather than through his comments.
He concluded by saying things look good for now, and added that the markets and policymakers are putting high probability on a September rate hike.
The iShares 20+ Year Treasury Bond ETF (TLT) fell for a 2nd-straight session after tapping a low of $119.75.
Fresh support at $119.75-$119.50 and the 200-day moving average held.
A move below the latter would be a continued bearish signal. Lowered resistance is at $120.50-$120.75 and the 50-day moving average.
Market Analysis – The PowerShares QQQ (QQQ) slipped for the 2nd time in 3 sessions with Tuesday’s low tapping $184.85. Fresh support is at $185-$184.50.
A close below the latter would be a slightly bearish signal with additional weakness towards the $182.50 area.
Near-term resistance is at $186.50-$187 with a move above $187.50 being a bullish development for higher all-time highs.
RSI is starting to roll over. Support is at 65-60 with risk to 50 on a close below the latter. Resistance is at 70.
The Spider S&P Retail ETF (XRT) showed strength for a 2nd-straight session while closing on the session high of $52.33.
Resistance is at $52.50-$52.75 with the recent August all-time high at $52.96.
Support is at $51.75-$51.50 with a move below the latter signaling another short-term top.
RSI has cleared lowered resistance at 60-65. A move above the latter could led to a retest of 70 and the mid-August peak.
Support is at 55 with a close below 50 being a bearish development.
All the best,
Roger Scott.