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Stocks Pop, Then Drop Following Weaker ISM Data

By Michael KramerStock MarketsAug 03, 2021 01:00AM ET
www.investing.com/analysis/stocks-pop-then-drop-following-weaker-ism-data-200595639
Stocks Pop, Then Drop Following Weaker ISM Data
By Michael Kramer   |  Aug 03, 2021 01:00AM ET
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Stocks finished the day lower, with theS&P 500 falling by roughly 20 basis points. The index started higher, rising all the way to 4,420 and finishing lower around 4,385, an intraday decline of about 85 basis points.

The index managed to fill the gap from Friday’s drop at the open and reversed lower once the gap was filled. The weakness came following the ISM manufacturing report, which was worse than expected and suggests that growth may be slowing faster than the consensus viewpoint. This sent yields and spread sharply lower.

SPX 60-Min Chart
SPX 60-Min Chart

We still have a lower sloping RSI, MACD, and advance/decline line. Additionally, the index appears to want to move lower towards that trend line around 4,330.

S&P 500 Index Daily Chart
S&P 500 Index Daily Chart

Rates

Yields on the 10-year Treasury note moved sharply lower Monday following the weaker than expected ISM reading. The yield curve continued to flatten, and while many speculated on the reason, the only one that mattered was that the flatter curve was telling bonds were worried about future growth rates. Based on the 10-year, it would seem that rates still have further to fall and have not bottomed yet. We could see 1.12% relatively soon.

US Government Bonds 10 Yr Yield Daily Chart
US Government Bonds 10 Yr Yield Daily Chart

S&P 500

This isn’t good for the reflation trade, and yestereday, the Invesco S&P 500® Equal Weight ETF (NYSE:RSP) started sharply higher up by nearly 1% but managed to finish the day down 15 bps. The RSP was starting to look like a failed breakout attempt, but it was still too early to say for sure.

RSP Daily Chart
RSP Daily Chart

Bank of America

Bank of America (NYSE:BAC) looked weak, and it should, given the falling rate and contracting spread environment. However, $37 looked like one place it could stop falling.

Bank of America 1-Hr Chart
Bank of America 1-Hr Chart

Ford

Ford Motor Company (NYSE:F) has given back all of its post-earnings gains, with a clear downtrend and support somewhere around $12.75.

Ford Daily Chart
Ford Daily Chart

Amazon

Amazon.com (NASDAQ:AMZN) had a fairly weak response today to Friday’s big sell-off, with the stock finishing the day flat. It probably doesn’t speak very well of what is to come. Given the weaker growth outlook, it seems lower prices are likely to come, with the next level of support at 3,160.

Amazon Inc Daily Chart
Amazon Inc Daily Chart

Original Post

Stocks Pop, Then Drop Following Weaker ISM Data
 

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Stocks Pop, Then Drop Following Weaker ISM Data

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clayton park
clayton park Aug 03, 2021 4:11AM ET
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35 basis pts on spx you meant?
 
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