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Watching the Markets Slide to Start the Q2 .

Nasdaq’s Market Intelligence Desk (MID) is designed to provide critical touch-points for timely trading analysis and market information.

Watching the Markets Slide to Start the Q2

Monday, April 2, 2018, 11:00 AM, EST
  • NASDAQ Composite -2.28% Dow -1.21% S&P 500 -1.71% Russell 2000 -1.42%
  • NASDAQ Advancers: 829 Decliners: 1146
  • Today’s Volume (vs. Thursday) -5.3%

U.S. equity markets are trading broadly lower to start the week on this snowy Monday in New York. With trade rhetoric heating up and most European markets still closed for Easter, investors are acting cautious to begin Q2’18. Currently all 11 S&P 500 sectors are in trading lower with Consumer Discretionary (-2.43%) and Tech (-2.07%) the worst performers. Crude oil is down 2.16%, while Gold is up 1.05%, the dollar is higher and the yield on the 10-yr has increased to 2.748%.

  • Manufacturing output cooled slightly in March with ISM Manufacturing coming in a little below expectations at 59.3 versus a reading of 60.8 in February. However backlogs rose to a 14-year high in a reflection of robust demand . The prices-paid index rose to 78.1, its highest in seven years while the employment gauge dropped to 57.3 from 59.7.
  • Last weekhad 6 new listing make their debut on Nasdaq bringing the total number of initial public offerings (IPOs) on Nasdaq to 37 for Q1’18, raising nearly $7 billion. Compared to this point last year, Nasdaq listed 17 IPOs raising $3.5 billion. 2018 is the best start for the IPO market since 2014 when Nasdaq saw 189 new listings which raised nearly $22 billion.
  • Mall vacanciesin the U.S. are at a 6 year high as more brick and mortar locations shutter their doors. Nearly 7,000 stores closed in 2017 and Q1’18 is showing no sign of those locations being replaced. The WSJ, quoting Reis Inc. data, reported that, “vacancy rate in big U.S. malls increased to 8.4% in the first quarter of 2018, up from 8.3% in the fourth quarter and the highest since the fourth quarter of 2012…The numbers show that bricks-and-mortar malls and shopping centers continue to be hurt by shifting consumer spending patterns, particularly the increasing use of online retail. Numerous department stores and other retailers that traditionally have been mainstays of shopping areas have been contracting or have failed.” Consumer spend is an important factor in U.S. GDP and any signs of strength there should be viewed as a positive for the economy.
  • Crushing student debt is hindering Americans from buying homes. CNBC reported that nearly 45 million people in the U.S. have student loans. “The average borrower owes more than $30,000” and “almost a fifth owe more than $100,000…” This impacts the potential home owner as their debt-to income ratio will hinder their ability to get a mortgage. This makes sense as mortgage rates are on the rise as the Federal Reserve is expected to raise interest rates at least 3 times this year.

Technical Take: Stormy Markets Energizing Utilities

Equities are down across nearly all sectors and sizes, however one group showing relative strength not just today but since early March has been utilities. After making 52-week highs back in mid-November, utilities then went on to decline more than 17% into early February due in part to a sharp increase in rates. Rising rates make the high dividend paying utilities look relatively less attractive. At the February lows the utility sector ETF, ticker XLU, bottomed at the clearly defined rising trend line connecting the lows from 2012, 2013, 2015, and 2016. At that time the widespread turmoil in the equity market helped drive inflows into safe haven treasuries and the defensive sectors.

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Although the XLU closed out Q1 down 4.2%, it was the top performing sector in March with a gain of 3.4%. The more recent relative strength chart to the S&P 500 (XLU/SPX) shows a major breakdown in December below a twelve month support range which then led to a steep decline lasting ten weeks peak to trough. After a bottoming process from mid-January through Mid-march, a clear reversal has been underway over the past two plus weeks. The potential here is for a retest of the prior support range which suggests utilities would outperform in the days and weeks ahead. Barring a sharp reversal higher in rates, the near term absolute and relative outlook for the group appears constructive.

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Nasdaq's Market Intelligence Desk (MID) Team includes:

Michael Sokoll, CFA is a Senior Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over 25 years of equity market experience. In this role, he manages a team of professionals responsible for providing NASDAQ-listed companies with real-time trading analysis and objective market information. 

Jeffrey LaRocque is a Director on the Market Intelligence Desk (MID) at Nasdaq, covering U.S. equities with over 10 years of experience having learned market structure while working on institutional trading desks and as a stock surveillance analyst. Jeff's diverse professional knowledge includes IPOs, Technical Analysis and Options Trading. 

Steven Brown is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over twenty years of experience in equities. With a focus on client retention he currently covers the Financial, Energy and Media sectors. 

Christopher Dearborn is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq. Chris has over two decades of equity market experience including floor and screen based trading, corporate access, IPOs and asset allocation. Chris is responsible for providing timely, accurate and objective market and trading-related information to Nasdaq-listed companies.

Annie O'Callaghan is Director on the Market Intelligence Desk (MID) at Nasdaq. Annie has worked for NASDAQ in a variety of roles including support of Nasdaq C-level management in client retention and customer service. Annie also served as a Sales Director in Nasdaq’s Transactions Services business. Prior to joining Nasdaq, Annie worked at AX Trading, managing accounts for its Alternative Trading System and served on Credit Suisse's trading desk as an Electronic & Algorithmic Sales Trading Analyst.

Brian Joyce, CMT is a Director on the Market Intelligence Desk (MID) at Nasdaq. Before joining Nasdaq Brian spent 16 years as an institutional trader executing equity and options orders for both the buy side and sell side. He also provided trading ideas and wrote technical analysis commentary for an institutional research offering. Brian focuses on helping Nasdaq’s Financial, Healthcare and Transportation companies, among others, understand the trading in their stock. Brian is a Chartered Market Technician (CMT).

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MID Chart for April 2, 2018
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