US stock rally heaves a sigh of relief as China raises concerns over global growth

Soft data out of China put a damper on US stocks on Monday, with investors holding on for breath after last week’s extension of the surge into mid-June.

how stocks are trading
  • Dow Jones Industrial Average DJIA
    fell 71 points, or 0.2%, to 33,690.

  • S&P 500 SPX
    It was down 17 points or 0.4% at 4,264.

  • Nasdaq Composite Comp
    It traded down 46 points or 0.4% at 13,002.

The S&P 500 advanced 3.3% last week, its fourth straight weekly gain and its longest such winning streak since November. The Dow rose 2.9% last week, while the Nasdaq Composite gained 3.1%.

what is driving the market

Disappointing economic news out of China helped set a negative tone with retail sales, investment and industrial production all slowing and missing forecasts. China’s central bank cut lending rates.

“The poor data from China has also raised concerns about a recession for the rest of the world,” Ipek Ozkardeyskaya, senior analyst at Swissquote Bank, said in a note.

In addition, the New York Fed’s Empire State Business Conditions Index, a gauge of manufacturing activity in the state, fell 42.4 points in August to negative 31.3, the regional Fed Bank said on Monday.

The figure didn’t help sentiment, though economists were taking it with a grain of salt.

The Empire State data “wasn’t entirely bad: Delivery times were stable for the first time in nearly two years, employment grew, and inflationary pressures didn’t increase,” said Oren Kluchkin, chief US economist at Oxford Economics. Comment.

“At the same time, the producers were not happy about the outlook for the next six months. We take care not to take too much from this report as NY manufacturing is a small part of the country’s manufacturing base,” he wrote.

Concerns about slowing demand from China weighed on the energy sector, with WTI crude futures falling CL.1 5.3% to trade near $87 a barrel. Energy Select Sector SPDR ETF
XLE
fell 3.7% but has remained around 37% for the year to date.

Reading: Energy remains a sweet spot for investors. Here’s a list of ‘energetic’ stocks to consider.

Stocks were struggling to maintain upward momentum after a strong run that saw the S&P 500 see a four-week winning streak, which delivered its best percentage advance for such a period since November 2020.

Similarly, the tech-heavy Nasdaq Composite sits near a four-month high after rising 22.6% from its mid-June low. Stocks rallied last week as the US consumer-price index and producer-price index showed inflation cooling, though still pretty hot.

“The good inflationary news on the heels of a very strong July payrolls report has reinforced confidence in a ‘soft landing’ for the economy. Solita Marcelli, America’s chief investment officer at UBS Global Wealth Management, said in a note, This is an outcome that we considered to be at least bearish, and now the markets are moving closer to pricing in this scenario.

“The risk is that markets tend to overtake themselves, especially as investor FOMO begins to kick in,” she wrote, referring to a phenomenon known as “fear of missing out.”

Technical indicators speak of a better tone of late. Cboe Volatility Index VIX,
A gauge of expected market volatility that typically rises when investors panic, closed last week below its long-term average of 20. However, the VIX, as it is also known, rose 5.2% to 20.55 on Monday.

See: Could the stock market hit bottom ‘panic’ levels without Wall Street’s fear gauge?

The breadth of the market’s latest surge is also considered supportive, noting Bespoke Investments trading S&P 500 shares above their 50-day moving average, rising from just 2% on June 16 to 88%.

Source: Bespoke Investing

Also on Friday, the S&P 500 closed above 4,231, marking a retracement of more than 50% of its 2022 sell-off from its January 3 record close to its June 16 low. Technical analysts noted that the S&P 500 has not retraced 50% of bear-market selloffs over the past half-century and then set off new cycles, although they cautioned that there was still the potential for sharp losses and near-term losses. Is. instability.

Reading: Why Stock Market Bulls Are Appreciating the S&P 500’s Close Above 4,231

In other economic data, the National Association of Home Builders’ monthly confidence index fell 6 points to 49 in August, the trade group said on Monday – for the first time since 2020 that it fell below the break-even measure of 50.

companies in focus
  • shares of Walt Disney Company
    district
    Dan Loeb said Monday that his hedge fund Third Point LLC liquidated a major stake in the entertainment giant earlier this year, repurchasing a “significant stake” in the company and working with its management team. wanted to do. The pursuit of strategic change.

  • Tesla Inc.
    TSLA
    Chief executive Elon Musk noted a company milestone on Sunday, tweeting that the electric-vehicle maker had produced more than three million vehicles, a third of which were made in China. The stock rose 1.4%.

  • shares of Bed Bath & Beyond Inc.
    bbby
    It rose 7.9%, putting the meme stock on track for a fourth-straight gain. The stock was up 21.8% on Friday, and was up 32.3% since it fell 14.2% on August 9 and broke its longest winning streak in 15 years. The home goods retailer’s meme stock is headed for its 13th gain in 14 sessions.

How are other properties doing
  • 10-Year Treasury Yield BX:TMUBMUSD10Y
    fell 6.8 basis points to 2.782%.

  • ICE US Dollar Index DXY
    Up 0.6%, and strong buck helped propel gold GC00
    It was trading below $1,794 an ounce, down 1.2%.

  • bitcoin btc/usd
    Raised above $25,000 for the first time since June, but then reversed, falling 1.1% to $24,000.

  • In Europe, Stoxx 600 XX:SXXP
    Up 0.3%, while London’s FTSE 100 UK:UKX
    was flat.

  • In Asia, Shanghai Composite CN:SHCOMP
    ended partially down, while the Hang Seng Index HK:HSI
    Hong Kong 0.7% and Japan’s Nikkei 225 JP:NIK
    Advanced 1.1%.

Hear from Carl Icahn at the Best New Ideas at Money festival on September 21 and 22 in New York. Veteran traders will share their thoughts on this year’s wild market ride.

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