The U.S. stock market showed strength on Wednesday’s open while building on the gains throughout the session to snap three-session losing streaks. News that Senate leader Mitch McConnell is planning a Thursday vote on a relief bill totaling about $500-$700 billion helped sentiment. While the bill is expected to be dead-on-arrival, there is renewed optimism both parties will continue to negotiate to get a deal done.
There was disappointing news on the coronavirus vaccine front after a major drug maker paused its clinical trials due to a participant having an unexplained illness. However, the vaccine news had no impact on the rally as evident by the strong gains shown by the major indexes throughout the session.
The Nasdaq showed the most strength after soaring 2.7% with the 2nd half high tapping 11,217. Prior and lower resistance from mid-August at 11,200-11,300 was cleared but held. A close above the latter would signal additional strength towards the 11,400-11,500 area.
The S&P 500 rebounded 2% while trading to a session peak of 3,424. Prior and lower resistance at 3,400-3,425 was tripped but held. A move above the latter would indicate additional upside towards 3,450-3,475.
The Dow jumped 1.6% after trading to an afternoon high of 28,206. Current and lower resistance at 28,000-28,250 was cleared but held. A close above the latter would suggest a retest towards 28,500-28,750 with last Wednesday’s peak at 29,199.
The Russell 2000 was up 1.5% following the late day run to 1,532. Near-term and lower resistance at 1,520-1,535 was breached and held. A move above the latter would signal ongoing upside towards 1,550-1,565.
Technology was the strongest sector after zooming 3.3% while Materials and Consumer Discretionary rallied 2.6% and 1.9%, respectively. There was no sector weakness.
European markets closed higher ahead of the European Central Bank’s policy meeting on Thursday. Analysts are not expecting any changes in rate policy, and will be focused instead on the central bank’s inflation outlook and commentary on the euro’s recent strength.
Germany’s DAX 30 soared 2.1% and the Belgium20 gained 1.8%. The Stoxx 600 was up 1.6% while France’s CAC 40 and UK’s FTSE 100 added 1.4%.
Asian markets settled lower across the board.
Australia’s S&P/ASX 200 sank 2.2% and China’s Shanghai tanked 1.9%. South Korea’s Kospi fell 1.1% and Japan’s Nikkei lost 1%. Hong Kong’s Hang Seng was lower by 0.6%.
MBA Mortgage Applications rose 2.9% last week, following a -2% drop in the prior week, while snapping a string of 3 consecutive weekly losses. Much of the strength was in the refi component which jumped 3% after a -3.1% decline previously. The purchase index rose 2.6% after a -0.2% dip previously. The 12-month measures strengthened with the purchase index rallying to a 51.8% year-over-year clip from the prior 35.4% rate. Refis were at a 59.6% year-over-year pace versus 40.1% preciously, while the purchase index posted a 40% year-over-year rate from 28.3%. The 30-year fixed rate dipped slightly to 3.07% from 3.08%, and is just off the 3.06% all-time low from early August. The 5-year ARM slid to 2.99% from 3.08%.
The July JOLTS report showed job openings increased another 617,000 to 6,618,000, versus expectations for a print of 5,950,000, and follows the 630,000 June climb to 6,001,000. This represented the best level since February when openings were at 7,012,000. The job openings rate rose to 4.5% versus 4.2% previously. However, July hirings dropped -1,183,000 to 5,787,000 after sliding -229,000 to 6,970,000 in June. As a result, the hire rate slid to 4.1% from 5.1%. Quitters increased 344,000 to 2,949 000 after the 538,000 bounce to 2,605,000 previously. The rate moved up to 2.1% from 1.9%.
Johnson Redbook reported chain store sales dropped -1% in the September 5th week. The 12-month weekly pace slid -0.1% year-over-year versus the 4.6% rate from the previous week. According to the report, the Labor Day holiday promotions helped underpin sales, which were driven by back-to-school and purchases of seasonal apparel.
The iShares 20+ Year Treasury Bond ETF (TLT) was down for the 2nd time in 3 sessions following the second half pullback to $162.76. Current and upper support at $163-$162.50 was breached but held. A close below the latter would indicate a possible retest towards $161-$160.50 with the late August low at $160.64.
Resistance is at $164.50-$165 with additional hurdles at $165.50-$166 and the 50-day moving average.
The S&P 500 Volatility Index ($VIX) was down for the 2nd time in 3 sessions following the intraday pullback to 28.12. Prior and upper support at 28.50-28 was breached but held. A close below the latter and the 200-day moving average would be a more bullish signal the recent selling pressure in the market has abated.
Lowered resistance at 30-30.50 followed by 31.50-32.
The S&P 400 Mid Cap Index ($MID) snapped a 3-session slide following the late day bounce to 1,888. Fresh and lower resistance at 1,875-1,900 and 50-day moving average was reclaimed. A close above the latter would be a slightly bullish signal for a retest towards 1,925-1,950 with the monthly peak at 1,970 and the August top at 1,975.
Current support is at 1,850-1,825 and the 200-day moving average.
RSI is back in a slight uptrend with lower resistance at 45-50 holding. A close above the 50 level would signal additional strength towards 55-60 with the latter representing the monthly high. Support is at 40 and a level that has been holding since early April.
The Consumer Staples Select Spiders (XLP) closed higher for the 1st time in 4 sessions after trading to an afternoon high $65.72. Fresh and lower resistance at $65.50-$66 was cleared but held. A close above the latter would be an ongoing bullish signal for a retest towards $67-$67.50 with last week’s all-time peak at $67.61.
Near-term support is at $64.50-$64. A close below the latter would be a renewed bearish signal with additional pullback potential towards $63-$62.50 and the 50-day moving average.
RSI rebounded with lower resistance at 55-60 getting cleared and holding. A move above the latter would suggest additional strength towards 65-70. Key support is at 50 and a level that has been holding since early July.