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Market Overview

U.S. Stocks Slip from Record Highs as Earnings Under Way

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U.S. stocks drifted lower on Thursday, dragged down by telecom and financials as Wall Street kicked off third-quarter earnings season.

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S&P 500, Dow Jones Ease Off Highs

All of Wall Street’s major stock indexes posted declines Thursday. The large-cap S&P 500 Index fell 0.2% to close at 2,550.93.

Five of 11 sectors registered losses, with major declines reported in telecommunications services. The sector plunged 3.5%. Financials shares reported a decline of 0.7%. Shares of consumer discretionary companies fell by a similar amount.

On the opposite side of the ledger, utilities and industrials each rose by 0.5%. Consumer staples and materials also edged higher.

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The Dow Jones Industrial Average fell 31.88 points, or 0.1%, to finish at 22,841.01. Eighteen of 30 index members finished lower.

Meanwhile, the technology-heavy Nasdaq Composite Index fell 0.2% to 6,591.51.

Earnings Under Way

Dow blue-chip J.P. Morgan Chase & Co (JPM) reported higher than expected earnings and revenue, but said bond trading revenue plummeted. The bank earned $1.76 per share on revenue of $26.2 billion. Analysts in a median estimate called for per-share earnings of $1.65 on sales of $25.23 billion.

Also Thursday, Citigroup Inc. (C) reported quarterly earnings and revenue that were higher than forecast. Citi reported a 3% year-over-year increase in global consumer banking sales.

Several banking giants are scheduled to report over the next two sessions, including Walls Fargo (WFC), Goldman Sachs Group Inc. (GS) and Morgan Stanley (MS).

Financial research firm FactSet estimates quarterly earnings growth of 2.8% for S&P 500 companies. That’s well below the June 30 estimate for 7.5% growth.

Economic Data Eyed

A fresh batch of U.S. consumer data will be released on Friday. The Labor Department will issue its monthly inflation report at 8;30 a.m. ET. The Consumer Price Index (CPI) is forecast to rise 2.3% annually in September, up from 1.9% the month before.

Retail sales are also scheduled for release at 8:30. Receipts at retail stores are expected to jump 1.7% in September, following a slight drop the previous month.

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Market Overview

Asian Market Update – Thursday: Asian stocks mixed on China GDP, Japan trade data

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Tokyo street

The Big Question: How long the Japanese stock market rally will last?

Most Asian stock indexes were trading in mixed mode during Thursday’s morning trading, with gains seen in Japan and South Korea and losses in other parts of the Asia Pacific.

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In Japan, the Nikkei 225 was up 0.66 percent to around 21,503. The Nikkei has now posted 12 consecutive days of gains and is on track to post another two-decade high.

Thursday morning’s gains came after the latest official data showed that Japanese exports rose for the 10th straight month in September, helped largely by a weaker yen and strong overseas demand.

In China, the Shanghai Composite Index was down 0.35 percent to about 3,369 before midday on Thursday. The CSI 300 Index, which tracks the 300 largest companies listed in Shanghai and Shenzhen, also lost 0.3 percent to 3,931 before midday.

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In Hong Kong, the Hang Seng Index was 0.07 percent lower to around 28,691 before midday.

Losses in stock indexes in Greater China on Thursday followed official data earlier in the morning suggesting the Chinese economy might be slowing. Official data on Thursday morning showed that the growth pace of the world’s second-largest economy slowed to 6.8 percent in the third quarter of the year from 6.9 percent in the previous quarter.

Though stocks reacted to the slower growth in the economy, most analysts in China believe that it is highly unlikely that the Chinese stock markets will experience major fluctuation during the weeklong meeting of the Party currently underway.

In South Korea, the Kospi moved up 0.05 percent to around 2,484 shortly before midday.

Down Under, the ASX 200 was also down 0.08 percent to around 5,895. That comes even as data showed that Australia in September enjoyed the fastest jobs growth since 2008, as the unemployment rate dropped to 5.5 percent.

Main Market Movers – Mid-day Asian Trading Session

Indexes Value at Midday Daily Change
Japan- Nikkei 225 21,503 0.66%
China-Shanghai Composite Index 3,369 -0.35%
China-CSI 300 3,931 -0.3%
South Korea-KOSPI 2,484 0.05%
Hong Kong –Hang Seng 28,691 -0.07%
Australia-ASX 200 5,895 -0.08%

Cryptocurrencies

Prices of cryptocurrencies were mixed overnight during the Asian trading session on Thursday morning.

At midday in Asia, the bitcoin price was up 0.64 percent to $5,617. That’s more than $100 higher than the same time on Tuesday. Bitcoin has posted gains of more than $500 since yesterday and the uptrend remained solid on Thursday morning.

Ethereum gained a slight 0.2 percent to about $314 before midday. That’s largely unchanged from the level around the same time on the previous day. Ethereum, too, has made some nice gains since yesterday, surging from a low of $287.

Litecoin was down 0.65 percent to about $60 at midday. After three days in decline, litecoin has also been moving up nicely since yesterday.

Currencies

The Japanese yen lost 0.05 percent the US dollar at midday Thursday to 111.97 per dollar.

The Chinese yuan lost 0.08 percent against the US dollar at 6.6329 per dollar.

The Australian dollar gained 0.06 percent on the dollar, changing hands at 1.2732 per dollar at midday.

Commodities

WTI Oil was down 0.15 percent to $51.92 per barrel.

Brent Crude lost 0.28 percent to $58.02 per barrel.

Gold was down 0.15 percent to $1,277.96 an ounce.

Business News across Asia

In China: Though third-quarter GDP growth slowed to 6.8, other data from the country’s statistics bureau showed that China’s industrial output rose 6.6 percent, beating earlier market expectations. Retail sales also outperformed.

Take Away: Just like the mixed performance in GDP numbers, industrial output and retail sales, the Chinese economy is really complex. The overall slowing trend is a good indication, but the pace at which it happens remains uncertain.

 In Japan, electronics giant Toshiba is reportedly under investigation for their accounting practices by the Japanese securities watchdog. Details of the investigation were unclear on Thursday in a Reuters report, which cited insider sources.

Take Away: The dust has not even settled from the Kobe Steel scandal yet before a new Japanese company comes under investigation. Watch out for any signs of problems with corporate culture in Japan. Share prices of other Japanese companies may also be affected.

Featured image from Pixabay.

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Analysis

Daily Analysis: Dow Leapfrogs 23,000 as IBM Beats Estimates

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Wednesday Market Recap

Asset Current Value Daily Change
S&P 500 2560 0.13%
DAX 13043 0.35%
WTI Crude Oil 52.02 0.29%
GOLD 1284.00 -0.23%
Bitcoin 5435 -3.15%
EUR/USD 1.1793 0.23%

IBM surged higher today, as the company beat analysts’ expectations across the board, pushing the company’s shares up by more than 10% and helping the Industrial Average to a new all-time high yet again. The other major US indices kept on grinding higher as well for most of the day, despite the strong overvaluation, with the Volatility Index (VIX) still hovering around the 10 level. The NASDAQ and the S&P 500 finished virtually unchanged after a late-session sell-off, while small caps outperformed in the mixed environment.

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DOW 30 Index, Daily Chart Analysis

Global stocks also edged higher, with the Nikkei still leading the way, although the momentum of the move is still weak. The Yen’s weakness was the most apparent trend in currency markets, while the Pound rebounded well, despite the persistent Brexit worries, with the Dollar giving back some of its recent gains compared to its major peers. Gold also remained under pressure after retreating back below $1300 this week, while crude oil rallied on a bigger than expected, hurricane-related decline in US production.

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Gold 4-Hour Chart Analysis

Cryptocurrencies

The major coins had a hectic and bearish session, especially in early trading, as Bitcoin’s overbought conditions coupled with Ripple’s sudden downturn led to a segment-wide decline. Ethereum continued to slip, as the Byzantium-related optimism faded away, but it remained well above the $285 level, and recovered above $300 towards the end of the session. NEO and IOTA still have a negative correlation with the rest of the market, as the two coins surged higher in early trading and gave back their gains during the late-day rebound.

BTC/USD, 4-Hour Chart Analysis

Technical Picture

The DAX closed on a marginal new all-time high again, but the lengthy momentum divergence in the MACD indicator suggests that the steep uptrend continues to be in jeopardy. The low-volatility drift carried the benchmark above the 13,000 level, but a correction towards at least the 12,850 level is likely in the coming days, with another support level at 12,650 serving as a longer-term target. As the long-term uptrend is clearly intact, bears shouldn’t go all-in here but bulls should consider exiting their positions and wait until a correction to trade the long side again.

DAX, 4-Hour Chart Analysis

Key Economic Releases on Wednesday

Time, CET Country Release Actual Expected Previous
3:30 EUROZONE Mario Draghi Speaks
3:30 UK Average Earnings 2.2% 2.1% 2.1%
14:30 UK Claimant Count 1,700 3,200 -2,800
14:30 UK Unemployment Rate 4.3% 4.3% 4.3%
16:00 CANADA Manufacturing Sales 1.6% -0.1% -2.6%
14:30 US Building Permits 1.22 mill 1.25 mill 1.27 mill
16:00 US Housing Starts 1.13 mill 1.18 mill 1.18 mill
15:45 US Crude Oil Inventories -5.7 mill -4.7 mill -2.7 bill

Key Economic Releases on Thursday

Time, CET Country Release Expected Previous
2:30 AUSTRALIA Employment Change 15,200 54,200
2:30 AUSTRALIA Unemployment Rate 5.6% 5.6%
4:00 CHINA GDP 6.8% 6.9%
4:00 CHINA Industrial Production 6.4% 6.0%
10:30 UK Retail Sales -0.1% 1.0%
14:30 US Unemployment Claims 245,000 243,000
14:30 US Philly Fed Index 22.2 23.8
15:45 US Chicago PMI 58.6 58.9

Featured image from Shutterstock

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Bitcoin

Money Leads to More Money – Power to More Power

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Every 5 years the Central People’s Government of China has a grand political event to reshuffle the distribution of power in the world’s most populated country.

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In today’s 19th National Congress the most powerful man in the world just became even more powerful. President Xi delivered an eloquent three hour speech stressing the importance of globalization and China’s role of leadership going into the future.

The reaction from financial markets in Asia was rather muted given the recent gains in global markets.

@MatiGreenspan
eToro, Senior Market Analyst

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Please note: All data, figures & graphs are valid as of October 18th. All trading carries risk. Only risk capital you can afford to lose.

Market Overview

A brand new record high for the Dow Jones and a huge milestone of 23,000 points. The index is now up approximately 25% since Donald Trump was elected last November!!

Though Donald Trump might make a comment or tweet on this fact later today the rally may not be entirely Trump related.

Correlation does not equal causation!!

The Trump election did indeed wake the markets from a deep slumber that it was in with little movement between 2014 and 2016. However, if we zoom out and take a look, we’ll see that since the bottom of the market after the crash of 2008 we’re up 228%.

Many analysts agree that earnings ratios are at their peak yet investor sentiment remains extremely bullish on stocks.

Why are stocks going up?

The reasons are simple. First, there’s still plenty of cash ready for investment left over from the central bank injections over the past decade. Rates for borrowing money are still very cheap, which allows investment firms to borrow money easily and put it in the stocks.

Furthermore, any portfolio manager currently sitting on the sidelines is getting squashed. Try explaining to your clients that you missed out on a 25% rally because you think the markets are overvalued and watch them leave and go to a competitor.

This circle can indeed go on for a while as money does have a tendency to lead to more money.

In this cycle particularly, due to the ample assistance from the central banks, I’m not even certain that historic PE ratios are even a factor.

Bitcoin Volumes

The Crypto Market is pulling back a bit. After the incredible highs we saw over the weekend it only makes sense.

Specifically regarding bitcoin, we need to understand where the excitement and the action are coming from. Sure, many people are fed up with government backed money and I do believe that the financial revolution is well underway. But besides grandiose ideology, there is one country that stands above the rest as far as bitcoin adoption.

According to an article in bitcoin.com 60% of all volume on bitcoin is coming from Japan, with an additional 25% coming from the USA and 9% from South Korea.

Well, that makes sense. After legalizing bitcoin as a currency in April, Japanese vendors and businesses are adopting it at an incredible rate.

We continue to watch other interesting countries that seem to be on the verge of this type of adoption particularly Russia, Australia, and hopefully someday soon, India.

Many thanks to a local band that I’m fond of for the title of today’s update. And many thanks to everyone who continues to send me your comments, feedback, and relevant articles. Keep tagging me!!

This content is provided for information and educational purposes only and should not be considered to be investment advice or recommendation.
The outlook presented is a personal opinion of the analyst and does not represent an official position of eToro.

Past performance is not an indication of future results. All trading involves risk; only risk capital you are prepared to lose.

Important: Never invest money you can't afford to lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here.



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