Hi Everyone,
The stock market finished slightly lower following a nervous and mixed session on Wall Street, with the diplomatic skirmish between the U.S. and China weighing on the benchmarks toward the end of the day. The Dow was down 148 or 0.6%, to 25,401, the Nasdaq lost 43, or 0.5%, to 9,369, while the S&P 500 fell by 4, or 0.1%, to 3,032. Decliners outnumbered advancing issues by a more than 2-to-1 ratio on the NYSE, where volume was slightly below average.
Traders said that despite the late-session pullback, stocks are still in a bullish trend, and the technical damage was limited today. As one trader explained, “The leaders of this week’s rally took a breather while defensive issues enjoyed inflows, although a full-on trade war with China is now a possibility, bulls only suffered minor wounds today.”
Stocks sold off sharply yet again in the last hour of trading, not unlike on Tuesday, and the reason was also the same, a scary China-related headline. President Trump confirmed that he would hold a press conference tomorrow, where he will likely address the new Chinese national security law, and possibly announce sanctions against Chinese officials, according to the recent rumors. Besides stocks, the Chinese yuan also took a nosedive following the confirmation, and the currency is trading only a tad above its all-time low against the dollar, despite the reserve currency’s dip compared to its major peers.
As the domestic reopening push continues to be successful with no visible increase in the number of new cases, the race for the presidency is starting to heat up. The President’s all-out attack on China could be part of his campaign strategy, while the planned further stimulus packages will also take center stage in the coming weeks. Based on the latest polls and the largest prediction markets, the outcome of the elections is impossible to predict. We are almost certainly in for a very active campaign period, and U.S. politics will likely play a more and more critical role in the day-to-day price action as summer progresses.
Even though the headline jobless claims number was slightly worse-than-expected again, and last week’s reading was revised lower, we saw encouraging trends under-the-hood for the second week in a row. The number of continuing claims dropped sharply, by nearly 4 million, and that could mean that a large portion of the lockdown-induced layoffs will prove temporary. The coming weeks will provide more clarity regarding the state of the jobs market, but it seems likely that we have seen the worst of the first wave of the pandemic.
As always, have a great evening and stay tuned!!!
Joe
