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Market Update

Weekly Stock Losses Could Follow Commodities Shake Out, China’s Growth Pause

July 24, 2015

Early stock indicators point up but there’s likely not enough conviction to reverse weekly losses for the broader market. Bulls may declare short-term victory if a challenged S&P 500 (SPX) can hold key psychological support at 2100. Caution persists even as upbeat earnings from (AMZN), Visa (V), and others, plus more health industry deal news, fill up the news feeds. Instead, earnings buzz shares space with the continued plunge in many commodities groups.

Gold is on course for its biggest weekly loss in nine months, after a drop through support opened up more selling; gold is now well below the $1,100 line and down some 4% for the week. Copper is caught up in this broad selloff across the metals segment (most commodities and mining stocks, in fact); it’s trading at its lowest since 2009, logging a nearly 5% drop for the week. Interest rate differentials are driving the retreat but so is concern for Chinese demand.

One measure on Friday showed activity in the world’s second-largest economy contracted at the fastest pace in 15 months in July. The flash Caixin/Markit China purchasing managers index dropped to 48.2, the lowest reading since April last year and the fifth straight month under 50—the level that divides growth from contraction.



Gold futures chart shows recent drop to multi-year lows for gold as traders weigh currency and interest-rate differentials and global demand factors. Chart source: TD Ameritrade’s thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results. 

Cloud Lifts Amazon Sales. (AMZN) shares soared early Friday, on track to knock out record highs. The performance follows the e-commerce giant’s Street-beating quarterly earnings and revenue results in an after-hours report. The company reported a profit of $0.19 per share not the $0.14 per-share loss expected on Wall Street. Sales were up 20% from the year-ago comparable, to $23.18 billion and well ahead of even the rosiest estimates in the Thomson Reuters survey. Sales for Amazon Web Services, the company's cloud computing business, rose to $1.82 billion, up 81% from a year earlier.

Volume Helps Visa. Visa (V) said profits jumped 25% in its latest fiscal quarter, led by double-digit growth in payment volume; it did log notable operating expenses, too. Still, the results topped Street analyst estimates. Visa said it earned $1.7 billion, or $0.69 per share, up from $0.54 a year earlier and above the Thomson Reuters consensus for $0.59. Revenue rose to $3.52 billion from $3.16 billion, also above the expected $3.36 billion.

Health Industry Tie-Ups Continue. Anthem (ANTM) agreed to buy Cigna (CI) for more than $54 billion including debt in a transaction that continues the trend of managed care consolidation that some analysts say comes in the wake of Obamacare and other factors.

Good trading,

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