Daily Market Update 08.03 | Stocks on fire after PMI
MyntBit's Daily Market Update is dedicated to provide traders with recap and bring setups to watch for the next trading day.
Market Snapshot
RTTNews Market Update
Stocks moved sharply higher during trading on Wednesday, offsetting the pullback seen over the two previous sessions. The rally lifted the tech-heavy Nasdaq to a three-month closing high, while the S&P 500 reached its best closing level in almost two months.
The major averages pulled back off their highs going into the close but held on to strong gains. While the Nasdaq spiked 319.40 points or 2.6 percent to 12,668.16, the S&P 500 surged 63.98 points or 1.6 percent to 4,155.17 and the Dow jumped 416.33 points or 1.3 percent to 32,812.50.
The rebound on Wall Street partly reflected a positive reaction to some upbeat U.S. economic data, which helped ease concerns about a recession.
A report released by the Institute for Supply Management showed an unexpected acceleration in the pace of growth in U.S. services sector activity in the month of July.
The ISM said its services PMI rose to 56.7 in July from 55.3 in June, with a reading above 50 indicating growth in the sector. The uptick came as a surprise to economists, who had expected the index to dip to 53.5.
The unexpected increase by the services PMI came after the index edged down to its lowest reading since May 2020 in the previous month.
"Looking ahead, services activity will be fairly muted as hot inflation, tighter financial conditions, supply chain stress, downbeat sentiment and softening spending restrain growth," said Oren Klachkin, Lead US Economist at Oxford Economics.
"The recovery's best days are clearly in the rear-view mirror, but this doesn't mean an economic downturn has begun," he added. "We think fundamentals are strong enough to prevent a recession this year, though the window to achieving a softish landing is narrowing."
A separate report from the Commerce Department showed a significant increase in new orders for U.S. manufactured goods in the month of June.
The report showed factory orders shot up by 2.0 percent in June after surging by an upwardly revised 1.8 percent in May.
Economists had expected factory orders to advance by 1.1 percent compared to the 1.6 percent jump originally reported for the previous month.
Sector News
Airline stocks moved sharply higher on the day, with the NYSE Arca Airline Index soaring by 3.9 percent to its best closing level in almost two months.
Substantial strength was also visible among biotechnology stocks, as reflected by the 3.8 percent spike by the NYSE Arca Biotechnology Index.
Moderna (MRNA) helped lead the biotech sector higher, surging by 16 percent after reporting better than expected second quarter results.
Semiconductor stocks also turned in a strong performance on the day, driving the Philadelphia Semiconductor Index up by 2.7 percent to a nearly two-month closing high.
Brokerage, retail and computer hardware stocks also saw considerable strength on the day, while energy and gold stocks the uptrend amid decreases in commodities prices.
Other Markets
In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Wednesday. Japan's Nikkei 225 Index rose by 0.5 percent, while China's Shanghai Composite Index slid by 0.7 percent.
Meanwhile, the major European markets all moved to the upside on the day. While the U.K.'s FTSE 100 Index climbed by 0.5 percent, the French CAC 40 Index and the German DAX Index both jumped by 1.0 percent.
In the bond market, treasuries recovered from early weakness to end the session little changed. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by less than a basis point to 2.748 percent after reaching a high of 2.849 percent.
Looking Ahead
Reports on weekly jobless claims and the U.S. trade deficit are likely to attract attention on Thursday, although trading activity may be somewhat subdued ahead of the release of the more closely watched monthly jobs report on Friday.
Earnings news may also remain in focus, with Allstate (ALL), Clorox (CLX), eBay (EBAY), Hostess Brands (TWNK) and MetLife (MET) among the companies releasing their quarterly results after the close of today's trading.
Alibaba (BABA), Cigna (CI), ConocoPhillips (COP), Eli Lilly (LLY), Kellogg (K) and Wayfair (W) are also among the companies due to report their results before the start of trading on Thursday.
Market Heatmap
Futures Markets
Stocks rallied after the PMI and other key readings came in better than expected. On /ES our 4175 levels from the weekend’s newsletter held fairly well. But, as of now, nothing has changed from our weekly perspective.
Next up is Job data coming out tomorrow.
/ES - Emini S&P 500
Bullish Scenario
If we OPEN above 4150, the next resistance will be around 4175-4185, this area held fairly well today. But if that area is broken, next up is 4200 which will again be a strong supply zone where sellers will jump in.
Bearish Scenario
If we OPEN below 4150, the next level down is 4120 which needs to be retested and if that is broken then the next level down is 4100 where we might see buyers step in.
POC: 4161 | Range: 3723 - 4300
/NQ - Emini Nasdaq 100
Bullish Scenario
If we OPEN above 13200, we might see the test of 13300 which the sellers defend today but if that is broken then a move up to 13500 to our range top is possible.
Bearish Scenario
If we OPEN below 13200, we might see 13000, and if we break further down to the 12750 area is possible.
POC: 13262 | Range: 11390 - 13583
For the stock watchlist from the weekend and daily updates, please watch the below videos…
Earnings Calendar (Thurs. 08/04)
Economic Calendar (Thurs. 08/04)
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