Investors Still Pushing Toward Safe-Haven Assets
U.S. equities moved higher on Wednesday in response to news of a debt-ceiling deal between President Donald Trump and Democratic leadership in Congress. The deal will push the fiscal issues into December, when the budget, the debt ceiling and tax reform will all need to be hammered out. Democrats, for their part, are trying to also gain leverage on the immigration issue that flared up this week.
Trump also de-escalated the North Korean situation by saying that war was “not first priority” as diplomatic solutions involving tightened sanctions come into focus.
In the end, the Dow Jones Industrial Average gained 0.3%, the S&P 500 gained 0.3%, the Nasdaq Composite gained 0.3% and the Russell 2000 gained 0.2%. Treasury bonds were weaker, the dollar was mixed, gold lost 0.4% and oil gained 1.5% as Hurricane Irma looks set to make a right turn and slam into Florida — sparing Gulf of Mexico energy infrastructure.
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Breadth was positive, with 1.7 advancers for every declining issue with volume at 107.8% of the NYSE’s 30-day average. Energy stocks led the way with a 1.6% gain while telecoms were the laggards, down 1.2%.
Fiat Chrysler Automobiles NV (NYSE:FCAU) gained 5.5% thanks to an upgrade note from Barclays Capital noting growing M&A hype and a solid operating story. On the downside, travel booking site Trivago NV – ADR (NASDAQ:TRVG) fell 16.3% after lowering fiscal year guidance on a slowdown in traffic and revenue growth. United Continental Holdings Inc (NYSE:UAL) fell 1.3% after cutting Q3 revenue and margin guidance on Hurricane Harvey impacts.
And finally, on the economic front, Federal Reserve vice-chairman Stanley Fischer unexpected announced his retirement for “personal reasons” increasing the number vacant positions on the Board of Governors to four out of seven. This increases the changes for Trump to put his stamp on the central bank, with nominees likely to come from the ranks of conservative economists or non-academics with business backgrounds.
Conclusion
While stocks did their best to sound the “all clear” today, the recent bid in safe haven assets like Treasury bonds and gold appears unencumbered. Treasury bonds pushed to October 2016 levels while gold is hitting September 2016 levels.
The Russell 2000 small-cap index also remains below its 50-day moving average — suggesting the pullback from the late July high remains intact.
Check out Serge Berger’s Trade of the Day for Sept. 7.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.
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Anthony Mirhaydari is the founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.
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