(Thursday Market Open) The three major U.S. benchmarks appeared to be positioned in the early going for a second selloff this week, as worries about China’s economic state surfaced again and put pressure on markets in Europe and Asia. Can these early losses be reversed?
China’s exports took an unexpected 10% dive in September, the sixth-straight month that demands for goods from the world’s second-largest economy have softened. That puts another pressure point on China’s economy, which has long relied on overseas shipments as a generator of growth. In turn, some analysts say, that sparks concerns about global demand.
Wells Fargo (WFC) shares got a near 2% boost higher in the early going as shareholders absorbed news that Chief Executive John Stumpf is out immediately, replaced by Tim Sloane, the firm’s chief operating officer. Stumpf’s decision was a surprise to the board, but Sloane told reporters that he had known about the embattled CEO’s decision, which Sloane called “selfless.” Stumpf felt he was becoming a “distraction and a hindrance” to the company’s recovery from the fake-accounts scandal that broke last month, Stumpf said, according to published reports.
Sideways trading in the S&P 500 (SPX) may take hold. Key chart points are in a narrow band, and some true tests may be ahead. Watch if support can hold at the 2,128 level.
Crude oil prices (CLX6) were flopping around the flat line in the early going, struggling to stay above that key $50.00 a barrel level. Some analysts are predicting that once this support level has been well established, $60.00 a barrel could be the new normal by the end of the year. Stay tuned.
Yield Breaks Resistance. The yield on benchmark 10-year Treasury note cracked above 1.8% yesterday for the first time since June. That appeared to help boost the yield to 1.793% for the Treasury Dept.’s $20 billion in 10-year notes auctioned yesterday. That’s the highest level since early June, according to Reuters.
Having paced through the 200-day moving average, the 10-year yield’s next resistance level appears to be 1.903%. That’s the low from the market panic of Aug. 24, 2015, that was retested in early October of 2015, according to Morningstar. Today it’s at 1.746%, also struggling to continue making a meaningful move upward, but, as Morningstar notes, “markets rarely move in straight lines.”
More Juice for the Fed? This week’s economic calendar ends with the monthly report of the core producer price index, one of the economic measures on the Federal Reserve’s punch list that may help determine the pace of future interest-rate hikes. Producer prices are used as a forward-looking indicator of consumer-price inflation, something the Fed has watched like, well, a hawk.
The Fed has taken a pass on lifting rates at every meeting since December, often citing inflation concerns among the reasons. Yesterday’s FOMC transcripts may be a take on a tale of two sides. The divide between members appears to put the hawks on a more do-it-now path while the doves are still holding onto their go-slow approach. The CME’s FedWatch tool didn’t budge on its less than 70% probability of a hike in December.
Labor Force Holds Steady. Jobless claims were unchanged last week at 246,000, the Labor Dept. said this morning. But remember, they had been revised downward to that level. Wall Street economists were forecasting the number of first-time filings for unemployment to rise to 253,000. New claims under 250,000 are considered “significantly” low, while claims above that may signal weakness is ahead in the labor market.
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