Intraday Market Update
Overnight the S&P 500 futures gained +12 within minutes of opening at 6:00 PM EST on the news that China plans to gradually let the yuan appreciate against the US dollar. The equity markets held onto their gains in early trading but the rally has been short lived as the S&P 500 has trimmed about -10 points from its highs. The index retreated after it hit its 50% retracement (near 1,130) from the April highs to the June lows. All of the indexes are well off of their highs and have been heading lower most of the session. The NASDAQ has dipped into negative territory while the DJIA and S&P 500 are struggling to hang onto gains.
China currently keeps its currency artificially low to bolster exports which makes imported goods expensive for consumers. So a stronger Yuan compared to the US dollar should allow U.S. manufacturers and exporters to be more competitive selling their products in China. The stronger Yuan may also reduce the threat of inflation in China, meaning the government may not have to raise interest rates anytime soon to curb rapid growth. Recently the country has tried to slow the pace of growth by forcing banks to hold larger reserves aimed at avoiding speculative bubbles in areas like real estate. But the sudden change in China's currency policy is helping tame investor concerns that China will need to take further steps to restrain its rapid growth. However, the PBOC said the Yuan's trading band would still remain in effect, and many analysts are waiting to see just how much the Yuan is allowed to move in the coming days to see whether China's announcement will turn out to be more than a goodwill gesture. Statements from our political leaders have expressed skepticism. Senator Chuck Schumer (D-NY) called the news vague and limited and a typical response from China.
Markets throughout the world were sharply higher on the news from China. After hitting a 52-week low on Friday, the Shanghai Index gained +2.9%, the Hang Seng Index tacked on +3.08%, and Nikkei Index gained +2.43%. The major exchanges in Europe all gained about +1.00%.
Commodities and commodity stocks were big gainers on the news out of China but they are also now off of their highs. Front month crude pushed towards $80.00 a barrel in early trading but has since backed off -$2 to about $78.00. Copper has gained +2%, Freeport McMoRan (FCX) is up +4.00% while Southern Copper (SCCO) has gained +3.00%. Coal stocks have also fared well as the coal ETF KOL is up +2.9%.
Core Sector List:
Overall reading: 10 sectors declining, 6 sectors advancing
Strongest Sectors: Banks, Transportation, Broker Dealers
Weakest Sectors: Gold Miners, Internet, Retail
S&P 500 - Daily and 30-minute Intraday Charts:
Dow Jones - Daily and 30-minute Intraday Charts:
NASDAQ - Daily and 30-minute Intraday Charts:
Russell 2000 - Daily and 30-minute Intraday Charts: