Equity Market Insights: January 23, 2018

Tuesday, January 23, 2018, 11:00 AM, EST

• NASDAQ Composite +0.61% Dow +0.08% S&P 500 +0.27% Russell 2000 -0.23% S&P MID 400 -0.01%
• NASDAQ Advancers: 914 Decliners: 1274
• Today's Volume (100 day avg.) +20%

The Nasdaq Composite is widely outpacing the Dow and S&P this week, helped by strong results from Netflix, while the US Government shut down officially ended last night, paving the way for President Trump's attendance at the World Economic Forum in Davos. Despite the broad-based rally for US equities in 2018 the CBOE Volatility Index, aka "the fear index", has also made gains to start the year, up 12% since 1/3. Crude Oil is making marginal gains this morning ahead of tomorrow's EIA inventory figure, expected to show a decline for the 10th consecutive week. empty

• Netflix ( NFLX ) reported earnings last night that beat analyst expectations . The stock is reacting in kind trading higher today. With today's price increase, NFLX becomes one of only 64 companies to cross the $100 billion market cap level. Another debut member of the $100 billion club today is PayPal ( PYPL ), making a new all-time high. Other members of the club making new all-time highs include Alphabet ( GOOGL , GOOG ), crossing the $800 billion mark and Microsoft ( MSFT ) also making a new all-time high and becoming only the third company to cross the $700 billion level. As the markets continue to make record highs, look for these names and other $100 billion market cap companies for leadership.
• Let the trade wars begin… The Trump administration announced tariffs on imported solar panels and washing machines directly mostly toward South Korean and Chinese manufacturers. In context of the global economy the impact is not seen as overly disruptive, but how China responds is the wildcard. For solar panels the four-year plan starts tariffs at 30% then gradually declines to 15%, less than the US International Trade Commission proposed. That's not the case for washing machines, with first-year tariffs of 20% on the first 1.2 million units going to 50% on any additional imports. It is very likely that the tariffs will get challenged at the WTO.
• Yesterday we saw mega deals from CELG / JUNO and SNY / BIVV in the healthcare space. Per StreetAccount, the FT points out that healthcare companies have announced ~$30B of acquisitions year-to-date in the sector's strongest start for deal making in more than a decade. Bloomberg reports that just three weeks into the year, the value of announced mergers totals $152.5B , the highest for the same period since 2000. It adds that bankers point to the US tax cut, robust economies, and rising stock markets as underpinning increased CEO confidence in the transactions.

Technical Take:

What's a Ute?

Utilities are having a difficult couple of months with a MTD decline of (3.6%) so far in January, following December's drop of (6.4%). Their underperformance is due in part to rising interest rates which makes their relatively high dividend payouts less attractive. Now more than 12% from its 52-week high, the S&P 500 Utilities Index is at a key inflection point as it is currently testing a cluster of long term support at the 50 level. This support represents the trendline connecting the 2009 and 2015 lows, as well as the January 2015 high. The monthly RSI now at 48 remains in the bullish zone, however it is also less than two points from making a seven low. A break below this long term support opens a path to the late 2016 pivot low at $45.33 and would damage the long term momentum the group has seen for so many years.

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 is a Director on the Market Intelligence Desk (MID) at Nasdaq. Before joining Nasdaq Brian spent 16 years as an institutional trader executing equity and options orders for both the buy side and sell side. He also provided trading ideas and wrote technical analysis commentary for an institutional research offering. Brian focuses on helping Nasdaq's Financial, Healthcare and Transportation companies, among others, understand the trading in their stock. Brian is a Chartered Market Technician (CMT).

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.