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Will Reconstruction Help the Homies Buck the Trend? .

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Will Reconstruction Help the Homies Buck the Trend?

Tuesday, September 11, 2018, 10:97 AM, EST
  • NASDAQ Composite+0.09%Dow+0.08%S&P 500+0.05%Russell 2000-0.21%
  • NASDAQ Advancers:815Decliners:1351
  • Today’s Volume (vs. yesterday)+18.5%

On this 17th anniversary of the 9/11 attacks on the World Trade Center and the Pentagon, the markets opened mixed in a quiet start to the day. Stocks in Asia were mixed to lower overnight and European markets are mostly lower. Little new on the trade front although there is some chatter than the Trump administration is threatening sanctions on China due to Muslim detention camps. On today’s economic calendar the National Federation of Independent Business Optimism Index hit 108.8, its highest ever with business owners saying their biggest challenge is finding qualified workers. That sentiment is bolstered by JOLTs Job Openings, which rose to a record 6.939 million in July. Most sectors are in the red with Materials (-0.5%) off the most and Industrials and Consumer Staples aren’t far behind, and Technology leads with a modest 0.2% advance. The dollar index is 0.2% higher, gold off 0.5% and WTI crude oil is up just 0.2%

  • Investor attention is shifting toward the approaching hurricane and its market impact is already apparent. The Financials sector was up nearly 0.5% yesterday morning yet it ended the day with a slight decline as the Insurance sub-sector fell -0.7% and Property & Casualty index fell -1.3%. Bloomberg estimates the storm’s cost could be in the $15 -$20 billion range based on similar storms over the past fifty years. Last year Congress borrowed and spent well over $100 billion to fund recovery efforts from storms and wildfires according to Bloomberg, but the National Flood Insurance Program remains more than $20 billion in debt. “Too much of the US’s response to natural disaster is completely reactionary, we throw a bunch of money after it happens,” says Rob Moore, senior policy analyst at the Natural Resources Defense Council.
  • The Federal Reserve released consumer credit numbers for July yesterday, showing another uptick for the month which was higher than forecast. According to the FOMC total credit increase to $16.6 billion from $14 billion M/o/M. Bloomberg stated “the surge in non-revolving debt, which includes loans for education and automobiles, in part reflects support in demand for big-ticket items. The increase in revolving debt, which includes credit cards, is consistent with reports showing consumers were spending more freely at the start of the third quarter. Retail sales posted a solid gain in July as Americans bought clothes, shopped online, and headed to restaurants. Strong hiring and lower taxes are helping households even though inflation is ticking higher. The Fed’s consumer credit report doesn’t track debt secured by real estate, such as mortgages and home equity lines of credit.”
  • Though US stocks are holding their own, trade disputes with the US have battered stocks in Asia sending the MSCI Asia Pacific Index down for a ninth day, one of the longest streaks in four years. The Shanghai Composite is in bear market territory having declined nearly 26% from its January high, and stocks in Hong Kong are on the cusp of bear market status. It’s no secret that emerging markets have been under strain. Yesterday UBS says the rout in EM stocks is likely nearing an end and the firm removed its bearish call but have not yet issued a buy recommendation. However internal strife in Turkey, Argentine and elsewhere are dampening investor appetite and the strong US dollar is dampening EM economies with no quick fix in sight.

Technical Take:   Will Reconstruction Help the Homies Buck the Trend?

Just over 12 months ago in late August 2107, Hurricane Harvey made landfall in Texas and went on to become one of the costliest natural disasters on record with $125B in damages. While Hurricane Florence is not expected to be nearly as damaging, the post reconstruction process can be a positive event for corporations. The S&P Homerbuilders ETF, ticker XHB, is compromised not just of homebuilders, but also building material, retail, home furnishing, and textile companies. The XHB gained 31% in 2017, which included 16% in the final four months of the year following Harvey. It is currently down 15% from its January highs and -9.2% YTD. This year’s low was made four months ago around the ~$38.75 level along which a number of weekly bottoming candlestick patterns can be found. A move above the $41 level would be a change of character marking a breakout above the declining trend line and establishing the first higher high in more than six months. Near term support is clustering at the $39.73 gap, as well as the 50 and 100-day ma’s, $40.03 and 39.92.

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

Charles Brown is Associate Vice President on The Market Intelligence Desk with over 20 years of equity capital markets experience. Charlie has extensive knowledge of equity trading on both floor and screen based marketplaces. Charlie assists with the management of The Market Intelligence Desk and works with Nasdaq listed companies providing them with insightful objective trading analysis.

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.

Brian Joyce, CMT is a Managing 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).

Michael Sokoll, CFA is Associate Vice President 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. 

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