Equity Market Insight from Nasdaq MID - November 13, 2017

Monday, November 13, 2017, 9:45 AM, EST

• NASDAQ Composite -0.25% Dow -0.16% S&P 500 -0.24% Russell 2000 -0 .54%
• NASDAQ Advancers: 605 Decliners: 1463
• Today's Volume (100 day avg.) +14%

The broad indices in the US fell last week for a first weekly loss following eight straight weekly increases. The Dow fell a modest 0.5% and the S&P 500 0.2% after concerns over the tax plan, specifically a Senate proposal to delay the corporate tax cut by a year, pressured stocks.

• U.S. equities started lower today taking cues from Europe as bonds, the dollar and Euro government debt all rose indicating a risk off mentality. There is a light economic release calendar today but later this week we will see PPI & CPI releases that will give a read on October inflation before an expected rate increase next month. Import prices, Jobless claims and Industrial production statements will round out theeconomic calendarlater in the week.
• The IMF reported that the global economy is benefiting from Europe's robust growth. It sees 2.4% expansion in the Eurozone this year, up from 1.6% in 2016. Monetary stimulus has been a factor in reducing unemployment and increasing consumption. Near term upside outweighs downside risks, though in the long term demographic trends and flat productivity could impact the sustainability of the rebound.
• Back home, one warning signal may be found in the high yield market, with the WSJ reporting over the weekend threat a drop in the "junk" bond market and the pulling of two bond offerings may be an indicator or risk to the market as stocks had their worst week since September. Last week we highlighted the "canary in the coalmine" risk to equities: http://business.nasdaq.com/marketinsite/2017/MID-November/November-8-2017.html
• Earnings season is largely behind us, with over 90% of S&P companies reporting this week and a handful of mostly smaller companies reporting this week in what is mostly the final week of releases before the market turns its attention to Thanksgiving week vacations. NetApp, NetEase, Bed Bath & Beyond and Wal-Mart are among the more notable earnings releases scheduled for later this week.

Technical Take

The 2-yr Treasury yield has seen a remarkable rally over the last two months beginning with the lifting of the debt ceiling in early September. Since bottoming on September 8th at 1.25%, the short yield has rallied 42 bps over eight weeks to a high today of 1.67%. This is the highest level since October 2008 and largely a reflection of the three Fed rate hikes since December 2016. Markets are currently pricing a 92% probability the Fed will raise rates again this December despite softening inflation readings from select indicators, particularly the PCE, which the Fed has "dismissed' as transitory. One inflation indicator which has been steadily increasing throughout 2017 is the core Consumer Price Index (CPI) which last month came in at 2.2%, its highest level since May 2012. The October CPI will be released on Wednesday and economists are forecasting a continued rise of 2.3% YoY. Anything in-line should see a muted reaction from markets however a wider variance, particularly below, could see a sharp reaction in the two year yield given its recent gains. The weekly RSI (not shown) is now at 75 which makes an 11-year high.

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Nasdaq's Market Intelligence Desk (MID) Team includes:

Michael Sokoll, CFA is a Senior Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over 25 years of equity market experience. In this role, he manages a team of professionals responsible for providing NASDAQ-listed companies with real-time trading analysis and objective market information.

Jeffrey LaRocque is a Director on the Market Intelligence Desk (MID) at Nasdaq, covering U.S. equities with over 10 years of experience having learned market structure while working on institutional trading desks and as a stock surveillance analyst. Jeff's diverse professional knowledge includes IPOs, Technical Analysis and Options Trading.

Steven Brown is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over twenty years of experience in equities. With a focus on client retention he currently covers the Financial, Energy and Media sectors.

Christopher Dearborn is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq. Chris has over two decades of equity market experience including floor and screen based trading, corporate access, IPOs and asset allocation. Chris is responsible for providing timely, accurate and objective market and trading-related information to Nasdaq-listed companies.

Annie O'Callaghan is Director on the Market Intelligence Desk (MID) at Nasdaq. Annie has worked for NASDAQ in a variety of roles including support of Nasdaq C-level management in client retention and customer service. Annie also served as a Sales Director in Nasdaq's Transactions Services business. Prior to joining Nasdaq, Annie worked at AX Trading, managing accounts for its Alternative Trading System and served on Credit Suisse's trading desk as an Electronic & Algorithmic Sales Trading Analyst.

Brian Joyce, CMT has 16 years of trading desk experience. Prior to joining Nasdaq Brian executed equity orders and provided trading ideas to institutional clients. He also contributed technical analysis to a fundamental research offering. Brian focuses on helping Nasdaq's Financial, Healthcare and Airline companies among others understand the trading in their stock. Brian is a Chartered Market Technician.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.