Today, the SP-500 retreated below its 50 day moving average. Some media pundits downplayed the market’s negative performance by citing the relatively even breadth on the NYSE, i.e. 48% advancers vs. 49% decliners. However, the SP-500 told a completely different story with 26% advancers and 73% decliners. Considering that the majority of volume dollars traded on any given day is comprised of SP-500 stocks, one may want to bias their investment opinions accordingly.
Lately, some have called for a decoupling of equities from crude oil price movements. Be careful with wishes. As oil goes, so has gone the SP-500 index, but not today. Stocks faded as oil prices continued to advance throughout the remainder of the trading session. (See chart below)
The landscape behind today’s market is the attempted stimulus induced recovery of China, the world’s second largest economy (while the third largest, i.e. Japan? Well, we know how that story is going right now). On Wednesday and Friday, the U.S. will resume center stage in the global financial theatre respectively with the ADP Non-Farm Payroll and U.S. Non Farm Payroll reports.
Stay Hillbent for the Market Direction…
Summary of Market Events
- Central Banks / China: The PBOC reduced the reserve requirement ratio for banks by 50 bps to 17% for China’s largest banks, effective as of March-1-2016. This measure increases the potential lending capacity for its banks by 700 billion yuan ($107 billion USD).
- Central Banks / Global Meeting: Finance ministers representing the G-20 economies at this weekend’s meeting in Shanghai failed to come up with any viable global economic stimulus to support growth.
- Currencies / Japanese Yen: The Yen’s surge against the US Dollar (USD/JPY) led to further selling of Japanese stocks.
- Economy / Consumer Inflation / Europe: The EU witnessed a weaker than expected drop in the CPI. For the month of February, it fell to -0.2% vs. estimats @ 0.0%. Year-over-year it rose to 0.7% vs. estimates @ 0.9% and a previous reading @ 1.0%. The surprisingly weak data supports the case for an expanding economic stimulus when the ECB meets next week.
- Economy / Manufacturing / USA: The Chicago PMI indicated a contraction @ 47.6 vs. estimates @ 52.9 and previous @ 55.6.
- Real Estate / Residential / USA: Pending Home Sales in January-2016 contracted -2.5% vs. estimates @ 0.5% and previous @ 0.9%. The Pending Home Sales Index has now fallen to 106 vs. previous @ 108.7.
*Trends: ST = short-term; MT = Intermediate-term; LT = long-term
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