Stock Market Update from Briefing.com

'Normal' stock drop breaks an uncommon market calm

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'Normal' stock drop breaks an uncommon market calm

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4:10 pm:

[BRIEFING.COM] The stock market snapped its two-day skid on Wednesday with the Nasdaq Composite leading the advance. The tech-heavy index climbed 2.5% while the Dow (+1.8%) and S&P 500 (+1.8%) registered slimmer gains.

Although the market ended the midweek session on a higher note, the advance did not feature the characteristics of a sharp bounce. Instead, stocks traded in sideways fashion before spiking to new highs during the final 30 minutes of the day. Despite today's higher close, the S&P 500 remains lower by 2.0% for the week with all ten sectors showing week-to-date losses.

Today, however, nine sectors posted gains while the utilities space (UNCH) underperformed amid higher Treasury yields. To that point, the 10-yr note slumped in the morning, briefly retraced its loss during the session, and fell back to lows into the close. As a result, the 10-yr yield increased three basis points to 2.19%.

On the upside, the top-weighted technology sector (+2.6%) outperformed throughout the session, which kept the market afloat during the morning pullback that saw the S&P 500 trade within five points of its flat line. Large cap tech names like Apple (AAPL 112.34, +4.62), Facebook (FB 89.89, +2.66), Google (GOOGL 644.91, +15.35), and Microsoft (MSFT 43.36, +1.54) gained between 2.4% and 4.3% while high-beta chipmakers also fared better than the market with the PHLX Semiconductor Index climbing 2.3%.

Elsewhere among influential sectors, health care settled in-line with the market while biotechnology outperformed, contributing to the relative strength in the Nasdaq as iShares Nasdaq Biotechnology ETF (IBB 346.23, +12.89) spiked 3.9%.

Also of note, the heavily-weighted financial sector (+1.5%) began the day among the leaders, but the group slipped behind the broader market during intraday action after finishing yesterday's session well behind the market.

With the exception of the final 30 minutes of the day, the Wednesday action in equities was fairly subdued, but the same could not be said for crude oil as the energy component remained volatile, ending the pit session higher by 1.9% at $46.25/bbl after testing the $43.22/bbl area. WTI crude slumped to lows after the latest inventory report showed a larger than expected build while news that Senate has enough votes to back the Iran nuclear deal also contributed to the brief weakness in oil.

Today's trading volume was well above average, staying true to recent trends. With that in mind, more than a billion shares changed hands at the NYSE floor.

Economic data included, ADP Employment Change, Q2 Productivity/Unit Labor Cost data, Factory Orders, and MBA Mortgage Index:

  • The ADP National Employment Report revealed that employment in the nonfarm private business sector rose by 190K in Augus while the Briefing.com consensus expected an increase of 201K
    • The July reading was revised down to 177,000 from 185,000
  • Productivity data for the second quarter showed an increase of 3.3% (Briefing.com consensus 2.8%), which was better than the 1.3% increase that had been reported in the preliminary reading
    • Unit labor costs for the second quarter were revised lower to reflect a decrease of 1.4% (Briefing.com consensus -0.9%) after they had reportedly increased 0.5% in the preliminary reading
  • Factory orders increased 0.4% in July after increasing an upwardly revised 2.2% (from 1.8%) in June while the Briefing.com consensus expected an increase of 0.9%
    • The relative softness in the factory orders data was the result of declining oil prices weighing down sales at petroleum refineries as refinery orders fell 7.9% in July after increasing 0.8% in June
  • The weekly MBA Mortgage Index spiked 11.3% to follow last week's 0.2% uptick

Tomorrow, the Challenger Job Cuts report for August will be released at 7:30 ET while weekly Initial Claims (Briefing.com consensus 273,000) and July Trade Balance (consensus -$42.70 billion) will both be released at 8:30 ET. The day's data will be topped off with the 10:00 ET release of the ISM Services Index for August (consensus 58.4).

  • Nasdaq Composite +0.3% YTD
  • S&P 500 -5.3% YTD
  • Russell 2000 -4.8% YTD
  • Dow Jones Industrial Average -8.3% YTD

3:30 pm: [BRIEFING.COM]

  • Oil was volatile once again. WTI crude oil fell as much as 5% off of its morning highs, falling to today's low of $43.21/barrel.
  • However, following that low, crude began to climb and rallied as much as 8.2% to $46.77/barrel, which was hit five minutes after floor trading closed.
  • At the end of today's pity trading session, Oct crude finished +2% at $46.30/barrel.
  • In other energy, Sept natural gas dropped 2% today to end at $2.65/MMBtu, as the market remains in oversupply mode.
  • Copper posted some gains today, rising +1.3% (or $0.03) to $2.33/lb.
  • Meanwhile, precious metals ended mixed with Dec gold -0.6% to $1133.10/oz and Dec silver +0.3% to $14.66/oz.

3:00 pm:

[BRIEFING.COM] The S&P 500 trades higher by 1.1% with one hour remaining in the session. The benchmark index enters the home stretch near its opening level after recovering off its intraday low.

Despite today's gain, the S&P 500 remains lower by 2.7% for the week with all ten sectors showing week-to-date losses between 1.9% (telecom services) and 3.5% (financials and health care).

On a separate note, crude oil has completed another roller-coaster session that saw the energy component test the $43.22/bbl level before surging off its low to end the pit session higher by 1.9% at $46.25/bbl.

2:25 pm:

[BRIEFING.COM] Afternoon action continues with the S&P 500 (+1.3%) trading just below its recently-established session high.

The Federal Reserve has released its September Beige Book, which was met with a muted reaction. The S&P 500 remains higher by 1.2% while the Nasdaq Composite (+1.5%) continues trading ahead.

Overall, the Beige Book was pretty similar to the August version, indicating modest/moderate growth in 11 of 12 Federal Reserve Districts while Cleveland reported "slight growth." Meanwhile, reports on the manufacturing sector were a mixed bag as New York and Kansas City reported declining activity.

With regard to employment, the Beige Book acknowledged a modest tightening in labor markets with some businesses in Minneapolis, North Dakota, Montana, and Wisconsin struggling to find workers. Furthermore, a few Districts reported increasing wage pressures resulting from tighter labor market conditions.

Finally, the Beige Book showed little concern about inflation, describing input and output prices as, "stable."

1:55 pm:

[BRIEFING.COM] Equity indices continue trading near their best levels of the day.

Blame low oil prices on slow factory orders growth in July.

Factory orders increased 0.4% in July after increasing an upwardly revised 2.2% (from 1.8%) in June. The Briefing.com Consensus expected factory orders to increase 0.9%.

The relative softness in the factory orders data was the result of declining oil prices weighing down sales at petroleum refineries. Refinery orders fell 7.9% in July after increasing 0.8% in June. That decline caused nondurable goods orders to decline 1.3% in July after increasing 0.4% in June.

Durable goods orders growth was revised up to 2.2% in July from 2.0% in the advance release. Orders are still down from a 4.1% increase in June. Excluding transportation, durable goods orders were revised down to 0.4% from a previously reported 0.6% gain.

1:30 pm:

[BRIEFING.COM] The major U.S. indices extend their afternoon rally, pushing stocks to new session highs on the heels of strength in crude oil, which has rallied almost $2 in the last hour.

A look inside the Dow Jones Industrial Average shows that Apple (AAPL 110.98, +3.26), Microsoft (MSFT 42.99, +1.17), and McDonald's (MCD 96.00, +2.53) are outperforming. Apple and Microsoft are higher alongside its peers in the IT sector, the best performing sector today, while McDonald's is seeing some interest after announcing its all-day breakfast campaign will launch October 6.

Conversely, Chevron (CVX 78.10, -0.09) is the worst-performing Dow component, on the heels of weakness in the energy sector following crude oil's early decline. Worth noting, Crude oil futures have rallied back from being down over 4% to now showing small gains on the day.

Despite today's recovery in stocks, the DJIA is still down 2.2% this week, and 8.7% this year.

1:00 pm:

[BRIEFING.COM] Equity indices trade in the green at midday with the Dow Jones Industrial Average (+1.3%) and Nasdaq Composite (+1.4%) holding posture ahead of the S&P 500 (+1.1%).

The market began the trading day on an upbeat note, taking the lead from overnight strength in the futures market. However, the major averages have not been able to build on their opening gains, and that has resulted in sideways action.

Nine sectors display midday gains while energy (-0.1%) has been pressured by weakness in crude oil as the energy component trades lower by 2.8% at $44.15/bbl. WTI crude has been active as of late, rallying nearly 30.0% between Thursday and Monday, while today's weakness has followed an inventory report that showed a larger than expected build. In addition, news that Senate has enough votes to back the Iran nuclear deal has also contributed to the weakness in oil.

On the flip side, the top-weighted technology sector (+1.5%) has outperformed since the start while consumer discretionary (+1.2%) and industrials (+1.2%) also trade ahead of the broader market.

For its part, the technology sector has received broad support with the likes of Apple (AAPL 110.35, +2.63), Google (GOOGL 637.16, +7.60), Intel (INTC 28.48, +0.66), and Facebook (FB 88.62, +1.39) showing gains between 1.2% and 2.6%. Similar to Intel, high-beta chipmakers outperform with the PHLX Semiconductor Index trading higher by 1.1%.

It is worth noting that other high-beta areas like biotechnology and transport stocks also trade ahead of the broader market, which could become a supportive factor during afternoon action. The iShares Nasdaq Biotechnology ETF (IBB 338.37, +5.03) is higher by 1.5% while the Dow Jones Transportation Average also trades up 1.5%.

Treasuries have climbed off their early-morning lows, but the 10-yr note remains in the red with its yield higher by a basis point at 2.17%.

Economic data included, ADP Employment Change, Q2 Productivity and Unit Labor Cost data, Factory Orders, and MBA Mortgage Index:

  • The ADP National Employment Report revealed that employment in the nonfarm private business sector rose by 190K in Augus while the Briefing.com consensus expected an increase of 201K
    • The July reading was revised down to 177,000 from 185,000
  • Productivity data for the second quarter showed an increase of 3.3% (Briefing.com consensus 2.8%), which was better than the 1.3% increase that had been reported in the preliminary reading
    • Unit labor costs for the second quarter were revised lower to reflect a decrease of 1.4% (Briefing.com consensus -0.9%) after they had reportedly increased 0.5% in the preliminary reading
  • Factory orders increased 0.4% in July after increasing an upwardly revised 2.2% (from 1.8%) in June while the Briefing.com consensus expected an increase of 0.9%
    • The relative softness in the factory orders data was the result of declining oil prices weighing down sales at petroleum refineries as refinery orders fell 7.9% in July after increasing 0.8% in June
  • The weekly MBA Mortgage Index spiked 11.3% to follow last week's 0.2% uptick

12:30 pm:

[BRIEFING.COM] Not much change in the market as the S&P 500 (+0.6%) remains within five points of its intraday low that was notched just ahead of 11:00 ET.

Although the market has pulled back from its opening high, there is still some relative strength present among heavily-weighted sectors like technology (+1.0%), consumer discretionary (+0.8%), and industrials (+0.9%) while health care (+0.5%) and financials (+0.5%) have struggled to keep pace with the S&P 500. This combination has resulted in sideways action that may not be resolved until the afternoon.

It is worth noting that Treasuries have climbed off their lows with the 10-yr yield now up just one basis point at 2.16%.

12:00 pm:

[BRIEFING.COM] Equity indices remain near their intraday lows with the S&P 500 up 0.5% while the Nasdaq Composite (+0.8%) continues trading ahead thanks to strength in the technology sector (+0.9%) and biotechnology.

Elsewhere, the financial sector has narrowed its advance to just 0.2% after being up more than 1.0% at the start. This week's second-worst performer has struggled to find support after losing 3.5% yesterday.

On the downside, the energy sector has widened its decline to 1.0% as crude oil remains weak, trading lower by 4.4% at $43.41/bbl., while the utilities sector also sits in the red, down 0.6%.

11:30 am:

[BRIEFING.COM] Equity indices remain near their recent levels with the S&P 500 trading higher by 0.8%.

The benchmark index remains supported by relative strength in five sectors, but it is worth noting that financials (+0.6%) have pulled back after starting the session in the lead. Meanwhile, another heavily-weighted group-technology (+1.2%)-holds the lead thanks to solid gains among top-weighted components. To that point, the likes of Apple (AAPL 109.98, +2.26), Google (GOOGL 637.56, +8.00), and Intel (INTC 28.48, +0.66) show gains between 1.3% and 2.4%.

The outperformance in the technology sector has contributed to the relative strength in the Nasdaq (+1.2%), and the tech-heavy index has also drawn support from biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 339.38, +6.04) trades higher by 1.8%.

11:00 am:

[BRIEFING.COM] After hovering near their opening levels through the first hour, the major averages have backed away from their highs. The S&P 500 has narrowed its advance to 0.6% while the Nasdaq Composite remains higher by 0.9%.

The pullback from opening levels has caused all ten sectors to slide from their highs. Most notably, the energy sector (-1.0%) has dropped to the bottom of the leaderboard amid continued weakness in crude oil. The energy component is lower by 3.0% at $44.08/bbl after the latest storage report showed a large inventory build. In addition, reports from Washington indicate the Senate now has enough votes to back the Iran nuclear deal.

Elsewhere, Treasuries have not seen much action with the 10-yr holding near its low with the yield up three basis points at 2.18%.

10:40 am: [BRIEFING.COM]

  • The dollar index trended higher overnight, and has been rallying early this morning from lows near 95.46, largely ahead of the morning's set of US employment & labor cost data
  • In the face of lighter than expected ADP employment data, large increases in US productivity and decreased in unit labor costs have helped the dollar extend prior gains
  • The dollar is now modestly higher at +0.5% to 95.84, which has weighed most heavily on gold and silver so far this session. 
  • As gold has been pressed to modest negatives on the day at -0.4% to $1135.40/oz, silver is also seeing a moderate sell-off and is -0.5% to $14.54/oz 
  • Oil traded strongly lower overnight, fueled by last night's ADP inventory report that showed a larger than expected build (last week) of 7.6 mln barrels. 
  • WTI reversed that trend early this AM however, and rallied to near the flat line ahead of the morning's EIA inventory report (expected to show no change)
  • Upon release of the data which showed a larger than expected build, oil fell back to today's low near $42.17/barrel and is now at -1.8% to $44.58/barrel
  • Natural gas is holding large losses on shifting forecasts that now call for cooler national weather, and the December contract is now -1.8% to $2.65/MMBtu
  • Copper is jogging higher, at +1% to $2.33/lb

10:00 am:

[BRIEFING.COM] The S&P 500 (+0.9%) trades near its opening high with all ten sectors remaining in the green.

According to the just-released Factory Orders report for July, orders increased 0.4% while the Briefing.com consensus expected an increase of 0.9%.

9:40 am:

[BRIEFING.COM] As expected, the market began the trading day on an upbeat note amid strength in all ten sectors. The S&P 500 trades higher by 1.1% with yesterday's biggest laggard-financials (+1.3%)-setting the early pace.

Similar to financials, heavily-weighted consumer discretionary (+1.3%), technology (+1.1%), and health care (+1.3%) display early strength while the energy sector (+0.2%) trades behind the remaining nine groups. On a related note, crude oil has added 0.4%, climbing to $45.62/bbl.

Elsewhere, Treasuries remain near their lows with the 10-yr yield up three basis points at 2.19%.

9:13 am: [BRIEFING.COM] S&P futures vs fair value: +25.00. Nasdaq futures vs fair value: +62.40.

The stock market is on track for a higher open with S&P 500 futures trading 25 points above fair value.

Index futures rebounded overnight even as markets across Asia struggled. In Japan, the Nikkei fell 0.4% after spending early action above its flat line while China's Shanghai Composite was down more than 4.0%, but narrowed its decline to 0.2% ahead of an extended weekend.

Futures backed away from their highs at the start of the European session, but they have returned into the neighborhood of those levels not long ago.

On the economic front, the ADP National Employment Report revealed that employment in the nonfarm private business sector rose by 190K in August (Briefing.com consensus 201K) while Q2 Productivity growth was revised up to 3.3% from 1.3% (Briefing.com consensus 2.8%) and Q2 Unit Labor Costs were revised down to -1.4% from +0.5% (Briefing.com consensus -0.9%).

Treasuries retreated following the data, sending the 10-yr yield higher by two basis points to 2.18%.

More economic news will be released after the open with the July Factory Orders report (Briefing.com consensus 0.9%) set to be released at 10:00 ET while the Federal Reserve's September Beige Book will cross at 14:00 ET.

8:58 am: [BRIEFING.COM] S&P futures vs fair value: +24.20. Nasdaq futures vs fair value: +63.00.

The S&P 500 futures trade 24 points above fair value.

Most markets in the Asia-Pacific region suffered further losses on Wednesday, only they were much more modest in scope following Tuesday's selling pressure. Several markets rebounded from large losses that followed on the heels of Wall Street's ugly showing. China's Shanghai Composite, for instance, was down 4.6% shortly after it opened but ended the day down just 0.2%. In other developments, Australia's Q2 GDP growth of 0.2% was weaker than expected and down from 0.9% growth in the prior quarter, underscoring the drag of slumping commodity prices and economic slowing in the region.

  • In economic data:
    • Japan's Monetary Base +33.3% year-over-year (expected +33.2%; prior +32.8%)
    • Australia's Q2 GDP +0.2% quarter-over-quarter (expected +0.4%; prior +0.9%); +2.0% year-over-year (expected +2.2%; prior +2.5%)

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  • Japan's Nikkei declined 0.4%, coughing up a 1.7% gain on the heels of a renewed bout of selling interest in the afternoon session. The materials (-1.9%), financials (-1.3%), and consumer staples (-0.9%) sectors were the weakest areas. Yokohama Rubber Co. (-4.6%), Showa Shell Sekiyu (-4.4%), and Mazda Motor (-4.2%) paced losing issues while Sumitomo Dainippon Pharma (+4.8%), Kyowa Hakko Kirin (+2.7%), and Mitsubishi Logistics (+2.3%) led the winners. Out of the 225 index members, 33 ended higher, 188 finished lower, and 4 were unchanged.
  • Hong Kong's Hang Seng declined 1.2% in a roller-coaster trading session. The index was down 2.0% shortly after the start of trading, gained all of that loss back, and then dove in the afternoon session on renewed selling interest. Bank of Communications (-5.7%), Kunlun Energy (-4.3%), and Galaxy Entertainment Group (-4.2%) were the worst-performing issues. Belle International Holdings (+1.5%), CK Hutchison Holdings (+1.4%), and Want Want China Holdings (+1.3%) topped the small list of winners. Out of the 50 index members, 10 ended higher and 40 finished lower.
  • China's Shanghai Composite ended down 0.2%, but staged quite a comeback from an opening 4.6% decline. The scope and speed of the rebound, which occurred in the morning session, stirred some speculation that it was government-sponsored in front of the country's celebration of the end of World War II and the defeat of Japan. China's stock market will be closed on Thursday and Friday to commemorate Victory Day.

Major European indices hold gains after slipping from their opening highs. Overall, the trading action in Europe has been relatively subdued with the European Central Bank's latest policy statement set to be released tomorrow morning. The euro has retreated about 0.4% against the dollar, slipping to 1.1255.

  • Economic data was limited:
    • Eurozone July PPI -0.1% month-over-month, as expected (prior -0.1%); -2.1% year-over-year (consensus -2.1%; last -2.1%)
    • UK's August Construction PMI 57.3 (expected 57.5; last 56.1)
    • Spain's Unemployment Change 21,700 (consensus 35,500; last -74,000)

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  • UK's FTSE is higher by 0.7% with 3i Group, Inmarsat, and ARM Holdings up between 1.8% and 3.1%. On the downside, BP and Royal Dutch Shell hold respective losses of 1.5% and 1.1%.
  • In France, the CAC trades up 0.6% amid strength in financials. BNP Paribas, Credit Agricole, and Societe Generale show gains between 0.3% and 1.1% while Valeo is the weakest performer, down 1.6%.
  • Germany's DAX trades higher by 0.4% with roughly half of the index in the green. Infineon Technologies leads with a gain of 1.5% while exporters BMW, Daimler, and Volkswagen show losses between 0.6% and 0.9%.

8:33 am: [BRIEFING.COM] S&P futures vs fair value: +17.20. Nasdaq futures vs fair value: +48.60.

The S&P 500 futures trade 17 points above fair value.

The ADP National Employment Report revealed that employment in the nonfarm private business sector rose by 190K in August. That was below the increase of 201K expected by the Briefing.com consensus. The July reading was revised down to 177,000 from 185,000.

Productivity data for the second quarter showed an increase of 3.3%, which was better than the 1.3% increase that had been reported in the preliminary reading. It was also above the 2.8% increase that had been expected by the Briefing.com consensus. Unit labor costs for the second quarter were revised lower to reflect a decrease of 1.4% after they had reportedly increased 0.5% in the preliminary reading. Economists polled by Briefing.com had expected that unit labor costs would be revised down to -0.9%.

7:57 am: [BRIEFING.COM] S&P futures vs fair value: +16.70. Nasdaq futures vs fair value: +44.80.

U.S. equity futures trade modestly higher in pre-market action, but they have retreated from their overnight highs. The S&P 500 futures remain 17 points above fair value after being up almost 30 points prior to the European opening bell.

Meanwhile, Treasuries are little changed with the 10-yr yield at 2.16%.

On the economic front, the weekly MBA Mortgage Index spiked 11.3% to follow last week's 0.2% uptick. More data will be released today with the August ADP Employment Change survey (Briefing.com consensus 203K) set to cross the wires at 8:15 ET while Q2 Productivity and Unit Labor Cost data will follow at 8:30 ET. The Factory Orders report for July (Briefing.com consensus 0.9%) will be reported at 10:00 ET and the day's data will be topped off with the 14:00 ET release of the Federal Reserve's September Beige Book.

In U.S. corporate news of note:

  • Ambarella (AMBA 80.00, -9.61): -10.7% after cautious guidance overshadowed better than expected results.
  • Navistar (NAV 14.87, -2.49): -14.3% in reaction to below-consensus results.
  • SunEdison (SUNE 11.08, +0.32): +3.0% after Point72 Asset Management disclosed a 5.1% passive stake in the company.

Reviewing overnight developments:

  • Asian markets ended mostly lower. Hong Kong's Hang Seng -1.2%, Japan's Nikkei -0.4%, and China's Shanghai Composite -0.2%.
    • In economic data:
      • Japan's Monetary Base +33.3% year-over-year (expected +33.2%; prior +32.8%)
      • Australia's Q2 GDP +0.2% quarter-over-quarter (expected +0.4%; prior +0.9%); +2.0% year-over-year (expected +2.2%; prior +2.5%)
    • In news:
      • Brokers in China are reportedly providing funds to China Securities Finance Corp for market intervention purposes
  • Major European indices trade mostly higher, but they have slipped from their opening levels. UK's FTSE +0.1%, Germany's DAX +0.3%, and France's CAC +0.3%. Elsewhere, Italy's MIB +0.9% and Spain's IBEX -0.3%
    • Economic data was limited:
      • Eurozone July PPI -0.1% month-over-month, as expected (prior -0.1%); -2.1% year-over-year (consensus -2.1%; last -2.1%)
      • UK's August Construction PMI 57.3 (expected 57.5; last 56.1)
      • Spain's Unemployment Change 21,700 (consensus 35,500; last -74,000)
    • Among news of note:
      • Trading action in Europe has been relatively subdued with the European Central Bank's latest policy statement set to be released tomorrow morning. The euro has retreated about 0.4% against the dollar, slipping to 1.1260

5:48 am: [BRIEFING.COM] S&P futures vs fair value: +15.80. Nasdaq futures vs fair value: +43.70.

5:48 am: [BRIEFING.COM] Nikkei...18095.40...-70.30...-0.40%.  Hang Seng...20934.94...-250.50...-1.20%.

5:48 am: [BRIEFING.COM] FTSE...6045.30...-13.30...-0.20%.  DAX...9970.11...-45.50...-0.50%.

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