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Market Update

Currency-Induced Volatility Hits Broad Stock Averages; Apple, Too

Print
August 12, 2015

U.S. stocks pointed to steep losses Wednesday as whipsaw action continues. Monday’s strong bounce erased last week’s stock losses; Tuesday’s tumble wiped out Monday’s rebound. And now, Wednesday is shaping up to be a down day in the wake of continued depreciation for China’s yuan and consequential U.S. dollar strength. The moves also complicate the big question of Federal Reserve policy timing, with some analysts speculating that currency moves could delay an expected first interest rate hike in September.

China’s actions to shore up its export economy rippled through the region, sending Japan’s Nikkei stock average to a two-year low. Chinese authorities said Tuesday that devaluing their currency was a one-off policy move; they promptly returned for more of the same on Wednesday as another installment of Chinese manufacturing data disappointed to the downside.

China’s reach was apparent in another bruising for Apple (AAPL) shares. The battered stock shed over 5% Tuesday and is down again early Wednesday. Investors have cited technical factors for selling the shares but they tossed in concern that yuan devaluation makes the iPhone maker’s gadgets more expensive—and so presumably less appealing—to Chinese customers.

FIGURE 1: DON’T LIKE THE STOCK MARKET’S DIRECTION? JUST WAIT.

The broad S&P 500 (SPX) charted here dropped 1% Tuesday, with the Dow Jones Industrial Average ($DJI) shedding 200 points and the tech-concentrated NASDAQ Composite (COMP) down 1.3% as currency-induced volatility continues. Data source: Standard & Poor’s. Chart source: TD Ameritrade’s thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.

Cheaper Oil Sparks Demand? Crude oil prices bounced mildly Wednesday from the six-year low reached in the previous session, a move also seen in the wake of the falling yuan and rising dollar. Driving the bounce? An International Energy Agency report said sub-$50 oil sparked the fastest jump in demand for crude in five years.

Macy’s Cuts Outlook. Macy's (M) is lower in early action after the department store chain cut its sales guidance for the year. That update followed steeper-than-expected drops in sales and profit in its Q2 versus a year earlier. Macy's reported a 2.1% decline in same-store sales for the second quarter ended Aug. 1. Macy’s now expects flat sales for the year, excluding new openings. It had previously forecast growth of 2%. It expects total sales to fall 1%, compared with its previous forecast for 1% growth.

BABA Bombs on Revenue. Alibaba Group Holdings (BABA) dropped almost 5% in pre-market trade Wednesday, after the Chinese e-commerce giant reported weaker-than-expected revenue for its fiscal Q1. Alibaba said it had net income of $1.92 a share, in the quarter, with the net number up 148% from the year-earlier quarter. Adjusted per-share earnings came to $0.59, just ahead of the Street view. But revenue of $3.265 billion was up 28% from a year ago, missing a Street consensus of $3.320 billion.

Good trading,
JJ
@TDAJJKinahan

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