Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Early Resiliency Falls Flat

By Marvin ClarkMarket OverviewMar 01, 2016 01:37AM ET
www.investing.com/analysis/early-resiliency-falls-flat-200119934
Early Resiliency Falls Flat
By Marvin Clark   |  Mar 01, 2016 01:37AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

The early gains in U.S. equities dissipated as quickly as they occurred, with stocks closing at their lows, as another tumble in China and disappointing reads on the economic front overshadowed support from commodity-related issues amid a rise crude oil price and further stimulus measures from China. Treasuries were mostly higher, gold saw a nice gain, while the U.S. dollar was flat.

The Dow Jones Industrial Average (DJIA) declined 124 points (0.7%) to 16,516 and the S&P 500 Index was 16 points (0.8%) lower at 1,932, and the Nasdaq Composite lost 36 points (0.7%) to 4,558. In heavy volume, 1.3 billion shares were traded on the NYSE and 2.0 billion shares changed hands on the Nasdaq. WTI crude oil rose $0.97 to $33.75 per barrel, wholesale gasoline increased $0.02 to $1.32 per gallon, and the Bloomberg gold spot price gained $16.44 to $1,239.90 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly unchanged at 98.17.

Valeant Pharmaceuticals International Inc. (N:VRX $66) announced the return of its Chief Executive Officer (CEO), J. Michael Pearson (L:PSON), following his recovery from severe pneumonia and other complications, effective immediately. Also, Robert A. Ingram has been appointed Chairman of the Board as the company has separated the roles of Chairman and CEO. As a result, VRX withdrew its prior financial guidance as it will be rescheduling its previously announced call to discuss preliminary 4Q 2015 results, deliver a business review, and provide updated guidance for 2016. Separately, the company disclosed that it is under investigation by the Securities and Exchange Commission for a previously undisclosed inquiry. VRX has not indicated what the investigation is focused on. Shares were over 18% lower.

Berkshire Hathaway Inc. (N:BRKa) (N:BRKb $134) traded nicely higher after the company posted stronger-than-expected 4Q earnings, on revenues that rose 7.0% year-over-year (y/y) to $51.8 billion.

Regional manufacturing and pending home sales reports miss forecasts

Pending home sales declined 2.5% month-over-month (m/m) in January, versus the Bloomberg projection of a 0.5% rise and following the upwardly revised 0.9% gain registered in December. Compared to last year, sales were 0.9% lower, versus forecasts of a 3.8% rise. Pending home sales reflect contract signings and are used as a gauge of the pipeline of existing home sales, which unexpectedly rose in January.

The Chicago Purchasing Managers Index fell back into contraction territory (below 50), dropping to 47.6 in February from 55.6 in January, and versus expectations of a decrease to 52.5. The index has been in contraction territory for three of the last four months, as production and new orders posted "significant declines," while employment hit the lowest since November 2009.

The Dallas Fed Manufacturing Index improved to -31.8 for February from January's unrevised -34.6 level—which was the lowest since April 2009—with economists forecasting an improvement to -30.0. However, a reading below zero denotes contraction.

Today's February manufacturing reports come ahead of tomorrow's key national reads on the sector, headlined by the ISM Manufacturing Index, expected to tick higher to 48.5, from 48.2 in January, but remain in contraction territory (below 50) for the fifth-straight month. However, Markit's Manufacturing PMI Index is projected to remain in expansion territory (above 50) after being revised slightly higher to 51.2 from the preliminary reading of 51.0, but down from January's 52.4 level. In addition, construction spending will be reported, with economists expecting a 0.5% m/m increase for January, as well as February auto sales to be released throughout the day.

At this point the leading economic indicators continue to point to a decent U.S. economic picture. Further, other indicators are not consistent with an impending recession. U.S. consumers continue to improve their financial position and represent 69% of US GDP. The low unemployment rate and continued historically low initial claims for unemployment may finally be pressuring wages higher. This should help to boost consumer spending, illustrated by a nice gain in retail sales, which doesn’t foretell a coming recession.

Treasuries were mixed, as the yield on the 2-year note ticked 1 basis point (bp) lower to 0.79%, while the yields on the 10-year note and the 30-year bond fell 3 bps to 1.73% and 2.61%, respectively.

Europe shows late-day charge to finish mostly higher, Asia lower

European equities finished mostly higher, courtesy of a late-session rally that was led by strength in the energy sector as crude oil prices gained ground. Also, stocks found some support from the announcement out of China of further stimulus measures in the form of a cut to its banking sector reserve requirement ratio. Traders digested some mixed economic data in the region, while some expressed disappointment with the lack of any concrete stimulus measures following the G-20 meeting in Shanghai over the weekend. Also, festering pressure on the financial sector hamstrung the markets, while political uncertainty in Ireland remained on the heels of its election results over the weekend. The Eurozone's Consumer Price Index (CPI) estimate declined 0.2% y/y, after January's 0.3% increase, and compared to the flat reading that economists had expected. In other economic news, German retail sales rose 0.7% m/m in January, after decreasing 0.2% in the month prior, and compared to the 0.3% gain that was projected. The euro traded lower versus the U.S. dollar, while bond yields in the region mostly moved to the downside.

Stocks in Asia finished mostly to the downside to begin the week, with the Chinese markets falling amid disappointment regarding the lack of an announcement of further stimulus measures over the weekend from the Chinese government and at the conclusion of the G-20 meeting in Shanghai. Also, global growth concerns remained ahead of this week's plethora of world economic data. However, after the closing bell, the People's Bank of China (PBoC) announced the reduction of the banking sector's reserve requirement ratio (RRR)—the amount that banks need to keep on reserve instead of being used in the financial system—by 50 bps to 17.00%.

Japanese equities traded lower, with the yen rallying amid heightened risk aversion, while the nation posted some mixed economic data. The country's preliminary January industrial production rose 3.7% m/m, after dropping 1.7% in December, and compared to the expected gain of 3.2%. However, Japan's retail sales dropped 1.1% m/m last month, on the heels of December's 0.2% decline, and versus the forecasted 0.1% increase. Stocks in India decreased as traders digested the nation's key annual budget, with some expressing disappointment regarding the tax proposals of the report, per Bloomberg. Meantime, markets in Australia finished flat, while South Korean securities were lower.

Tomorrow's international economic calendar will offer the Markit Manufacturing PMI Index from China and Japan, while the island nation will also report personal income, and employment data, South Korea's trade balance, and building approvals from Australia. From across the pond will come trade data, the Ifo Business Climate Index and GDP from Germany, while France will report confidence figures.

Schwab Center for Financial Research ("SCFR") is a division of Charles Schwab (N:SCHW) & Co., Inc. The information contained herein is obtained from third-party sources and believed to be reliable, but its accuracy or completeness is not guaranteed. This report is for informational purposes only and is not a solicitation, or a recommendation that any particular investor should purchase or sell any particular security. The investment information mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. All expressions of opinions are subject to change without notice in reaction to shifting market conditions.

Early Resiliency Falls Flat
 

Related Articles

Early Resiliency Falls Flat

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email