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Is There Anything Besides Brexit That Will Move the Markets?

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June 17, 2016

(NOTE TO READERS: JJ Kinahan is traveling today, so the following is a guest Market Update column written by Scott Connor, of the Trader Education group at TD Ameritrade, managing Swim Lessons trader educational programming, which TD Ameritrade clients can access live beginning 10:30 a.m. CT each trading day from the Support/Chat function within the thinkorswim platform).

(Friday Market Open) Investors appeared to be in a state of limbo in the early going Friday with very little impetus to push the markets in either direction after Thursday’s shocking murder of a Labour Party lawmaker put a halt to Brexit campaigning.

The three major benchmarks were marginally lower at the open after markets in Europe and Asia ended marginally higher. Will that state of uncertainty about Brexit keep the markets on edge?

The broader markets were falling throughout the day yesterday amid fears that Britain’s potential exit from the European Union, up for a vote next week, would rock global economies. Central banks across the globe, including the Federal Reserve, made no monetary policy movements on interest rates this week ahead of the vote.

But the shooting and stabbing death of Jo Cox, a vocal proponent of keeping Britain in the EU, put a halt to campaigning for or against Brexit as the nation absorbed the news. With that U.S. stocks snapped a five-day losing streak. The Dow Jones Industrials (DJIA) swung 280 points before finishing the session up 92 points at 17,733. Nine of the 10 S&P 500 (SPX) sectors shifted to high ground with the index adding 6 points to close at 2,077 and the Nasdaq Composite Index (COMP6) added nearly 10 points to settle at 4,844.

Crude oil prices slumped for the sixth straight day yesterday but were inching up this morning, with West Texas Intermediate (CLN6) sitting at $47.21 a barrel in early trading. Gold, considered a safe haven for investors in an uncertain market, sold off early today, to $1,291.40 an ounce.

“Market action suggests traders think this could become a trading point in the Brexit campaign, shifting the momentum for ‘Leave’ back to ‘Remain’ or delaying a vote,” Colin Cieszynski, chief market strategist of CMC Markets, wrote in a research note, according to MarketWatch. Would a delayed vote help or hurt the markets?

S&P 500

FIGURE 1: A REPRIEVE.

The S&P 500 (SPX), plotted through Thursday on the TD Ameritrade thinkorswim platform,  jumped around with the broader markets, edging higher at the close. Data source: Standard & Poor’s. For illustrative purposes only. Past performance does not guarantee future results.

Viacom Saga’s Upgrade. Amid all the hoopla that has surrounded Sumner Redstone’s mental capacity to make decisions about Viacom’s (VIAB) future comes a promotion of the stock. RBC upgraded the stock to sector perform today after yesterday’s big shakeup of the board. Redstone and his once-estranged daughter Shari said they were replacing five board members, including Phillipe Dauman, the long-time chairman. "Management change now seems inevitable, which removes an overhang, while earnings risk and strategic unknowns constrain the probability of a bull-case turnaround,” according to the research note. “While one overhang may be removed, future leaders of Viacom have their fair set of challenges.” Redstone owns National Amusements, a privately held company that controls 80% of the voting stock of VIAB and CBS Corp.

Microsoft Goes to Pot. In what some analysts consider a bold move, Microsoft (MSFT) said yesterday that it is making a venture into the marijuana business through a partnership with KIND Financial. The software giant will provide seed-to-sale software to state and local governments to manage cannabis commerce and distribution. That makes MSFT one of the first big-cap technology companies to recognize the rapid legalization of the substance, which is lawful in 24 states. MSFT shares were trading marginally higher on the news.

Mute Housing Starts. There was little change in the course of new-home construction, a key measure of GDP growth, in May, according to the Commerce Department. Housing starts slipped 0.3% last month to a 1.16 million annualized rate from 1.17 million in April. Building permits edged up 0.7% to a 1.14 million annualized rate. Single-family housing costs have risen dramatically in recent months because of a supply shortage while multi-family housing has leveled off. 

Good Trading,

Scott

Economic Report Calendar

FIGURE 2: THIS WEEK'S ECONOMIC REPORT CALENDAR.

Source: Briefing.com

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