Wednesday was wild as stocks started lower but rallied on a positive debt ceiling development. Conversely, natural gas prices started high in Europe but sold off in the United States thanks to an unexpected announcement from Russian President Vladimir Putin. Consumers aren’t waiting for a politician to save their holidays; they’re getting an early start.
Stocks Meeting Resistance on Many Fronts but a Debt Ceiling Could Prompt a Break
President Putin Surprises Energy Traders with a Commitment to Help with the Crises
Consumers Preparing for Santa’s Stuffed Supply Lines
(Thursday Market Open) Stocks look to push higher for the third day in a row as futures point to a higher open. Stocks built some positive momentum on Wednesday with news of a temporary debt ceiling resolution and easing in the global energy crunch. The developments appear to have assuaged investor fears and now investors may see the pullback as buying opportunity.
A few of the stocks that are moving premarket include Twitter (TWTR) which is up 2% in premarket trading on the announcement that it’s selling its mobile ad firm MoPub to AppLovin (APP) for $1.05 billion in cash. Private equity firm Blackstone (BX) was up more than 3% on plans to acquire a majority stake in outsourcing services provider VFS Global. Electric car maker Nio (NIO) rose more than 5% before the open after being upgraded by Goldman Sachs and given a new $56 price target. Finally, ConAgra (CAG) traded 1.7% higher on better than expected earnings.
Initial jobless claims were better-than-expected showing job gains in the services job sector. Continuing jobless claims were also lower-than-expected as more and more workers are getting back to work. With more workers hitting the job market, the Fed can feel more confident in its tapering plans.
On Wednesday, stocks shrugged off a negative open to close higher on news that Senate Majority Leader Mitch McConnell offered Democrats a chance to “kick the can down road.” The offer included an emergency debt ceiling extension into December of this year. However, investors used the trading session to buy defensive stocks in the Utilities, Consumer Staples, and Real Estate sectors.
Energy stocks were among the weakest groups despite crude oil inventory coming in at about half of what was expected by analysts. Oil futures (/CL) fell 2.38%. Earlier this week, oil prices broke a historical resistance level around $76.50. Technical analysts often look for securities to retest old resistance levels as new support. The ability to hold this level could be important for energy bulls.
Stocks and oil were interesting, but things got really wild in natural gas. A sudden drop in atural Gas (/NG) prices helped pull energy stocks lower. Natural gas dropped more than 9% on Wednesday despite Europe seeing prices surging 19% the night before. The fall was prompted by Russian President Vladimir Putin announcing that Moscow would work to help stabilize the global energy market. This seems to contradict a pervious report from OPEC+ that Russia and the OPEC members agreed to maintain current production levels.
CHART OF THE DAY: SUPPORT GROUPS. The S&P 500 (SPX—candlesticks) is battling declining resistance and rising support (yellow lines) or a triangle price pattern on an intraday chart. Triangle patterns are commonly considered continuation patterns of the recent trend. If support breaks, the index may test the 4200 support level (green line). Chart source: The thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.
Double Double Coil and Trouble: My charting friends tell me that price patterns are helpful when trying to identify levels of support and resistance. These levels can help identify areas of buying and selling. Triangle or coil patterns are commonly considered continuation patterns that often breakout out in the direction of the prevailing trend.
However, many technicians don’t get caught up in the labels of “continuation” and “reversal” because a breakout of either level could be a trading opportunity. A news item or unexpected announcement could trigger an unexpected breakout in the opposite direction.
Talking Turkey: Tyson Foods (TSN) announced plans to continue its pattern of investing in Mississippi by spending $61 million to expand its Vicksburg poultry plant. Tyson was able to renegotiate a $2.25 billion credit agreement with JPMorgan Chase (JPM), which could help fund the plant and payoff antitrust lawsuits from chicken and turkey farmers.
Tyson is a little more than 3% off its 52-week high. The stock has butted up against the $81 resistance level three times this year and failed to sustain a breakout in August. If Tyson can get its fiscal ducks in a row, perhaps investors may take another run at resistance.
Santa’s Supply Line Issues: Consumers are anticipating resistance and taking fiscal actions of their own. Swedish fintech firm Klarna Bank provides online payment services for online retailers. Last week, the company released its Holiday survey results, which found that 40% of U.S. shoppers plan to get an early start and 22% have already begun. Many consumers are aware of the supply chain headaches and half of those surveyed planned to start shopping earlier to ensure they get their gifts on time.
October is the beginning of “peak” retail season and already some companies are cutting expectations. For example, Nike (NKE) cut its forecasts because COVID-19 has caused factory closures in Vietnam. Port backups and cargo container shortages along with unfilled job openings could make Christmas a little less merry for some consumers. Based on FedEx (FDX) recent earnings call, seasonal hiring may be difficult. Companies like UPS (UPS) and Walmart (WMT), which often need seasonal help, could struggle too.
Maybe it’s time to stop rolling your eyes at the early Christmas displays and start shopping to ensure a happy Yuletide.
Check out all of our upcoming Webcasts or watch any of our hundreds of archived videos, covering everything from market commentary to portfolio planning basics to trading strategies for active investors. You can also deepen your investing know-how with our free online immersive courses. No matter your experience level, there’s something for everybody.
Looking to stay on top of the markets? Check out the TD Ameritrade Network, live programming which brings you market news and helps you hone your trading knowledge. And for the day’s hottest happenings, delivered right to your inbox, you can now subscribe to the daily Market Minute newsletter here.
TD Ameritrade Network is brought to you by TD Ameritrade Media Productions Company. TD Ameritrade Media Productions Company and TD Ameritrade, Inc. are separate but affiliated subsidiaries of TD Ameritrade Holding Corporation. TD Ameritrade Holding Corporation is a wholly owned subsidiary of The Charles Schwab Corporation.
for thinkMoney ®
Financial Communications Society 2016
for Ticker Tape
Content Marketing Awards 2016
Content intended for educational/informational purposes only. Not investment advice, or a recommendation of any security, strategy, or account type.
Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.
TD Ameritrade and all third parties mentioned are separate and unaffiliated companies, and are not responsible for each other’s policies or services.
Inclusion of specific security names in this commentary does not constitute a recommendation from TD Ameritrade to buy, sell, or hold.
Market volatility, volume, and system availability may delay account access and trade executions.
Past performance of a security or strategy does not guarantee future results or success.
Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.
Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.
This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union.
TD Ameritrade, Inc., member FINRA/SIPC, a subsidiary of The Charles Schwab Corporation. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2021 Charles Schwab & Co. Inc. All rights reserved.