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Market Update

Caution Creeps In On China Growth Cut, Payrolls Nerves

Print
March 5, 2015

Early stock indicators reveal some Wall Street worry following downbeat news for China’s economy (it cut this year’s growth forecast to 7%) and another potentially critical meeting of the European Central Bank (ECB), where policy-makers are feeling increased pressure to detail plans for fixing Europe’s economy and boosting market faith. What’s more, jobless claims spiked in the latest reporting week, which could mean traders simply want to dig in and wait for Friday morning’s monthly jobs report.

FIGURE 1: SPX HUGGING 2100.

The S&P 500 (SPX) dipped below 2100 and may need a solid-footed close above it to reenergize the bulls. Data source: Standard & Poor’s. Chart source: TD Ameritrade’s thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.

Watching 2100. On Wednesday, major stock averages logged a back-to-back decline, pushing the S&P 500 (SPX) to its lowest level in two weeks with a dip below the closely watched 2100 line (figure 1). We may tip above that mark in early action, but what will really matter for the bulls is can we close above 2100. The CBOE Volatility Index (VIX), the measure of market “fear,” had spiked as much as 9% at one point Wednesday but by the closing bell had trimmed that gain to some 2%.  

Plan in Action. The ECB will begin buying government bonds on March 9 as part of its 1.1 trillion euro ($1.22 trillion) bond-buying program aimed at boosting growth and inflation in the euro-zone. ECB President Mario Draghi said the easing measures from the central bank have already boosted the euro-zone economy. In fact, he said borrowing conditions for businesses have improved "considerably." The central bank announced its aggressive bond-buying or quantitative easing (QE) program at its Jan. 22 meeting, but did not disclose when the sovereign-debt purchases would take place. Now we know and just the availability of details should go toward lifting European market confidence.

Costco Comes Through. Costco (COST) topped Street expectations with its fiscal Q2 results, helped by lower fuel prices and tax benefits. This may be the retail earnings report that salvages a so-so quarter. Bulls will find it encouraging that at least some retail name could blow it out of the water. Earlier in the week, the nation’s second-largest retailer announced an exclusive credit-card agreement with Citigroup (C) and Visa (V) after it dumped American Express (AXP).

Good trading,
JJ
@TDAJJKinahan

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