Market Analysis

Beyond the Numbers

Chinese Sell-off, Oil Price Slide May Pressure Stocks
11/27/2015 8:20 AM

The major U.S. index futures are pointing to a higher opening on Friday, with sentiment suggesting indecision in a truncated session. Asian stocks closed mostly lower, as geopolitical tensions, some mixed domestic data and a slump in Chinese markets unnerved traders. The European markets are also going about in a nervous manner and are currently mixed. Crude oil prices are declining, while rest of the commodities are seeing mixed sentiment. In the absence of any major domestic catalysts, an uneventful session is in the offing.
U.S. stocks ended Wednesday’s session mixed, as traders digested a slew of domestic economic data.

The major averages opened higher but saw some volatility in early trading. After holding mostly above the unchanged line thereafter, the averages pulled back going into the close to end the day mixed.

The Dow Industrials ended up 1.20 points or 0.01 percent at 17,813 and the Nasdaq Composite closed at 5,116, up 13.33 points or 0.26 percent. Meanwhile, the S&P 500 Index retreated 0.27 points or 0.01 percent before ending at 2,089.

Among the 30 Dow components, thirteen stocks advanced and one stock ended unchanged, while the remaining sixteen stocks ended lower. General Electric (GE) and Microsoft (MSFT) were among the biggest decliners of the session, while Pfizer (PFE), Nike (NKE) and UnitedHealth (UNH) rose notably.

Among the sectors, biotechnology stocks gained ground, while computer hardware stocks came under selling pressure.

On the economic front, the Commerce Department reported that durable goods orders rose 3 percent month-over-month in October, ahead of the 1.5 percent increase expected. Excluding transportation, orders were up a slightly bigger than expected 0.5 percent. Non-defense capital goods orders, excluding aircraft and parts, were up 1.3 percent.

The Labor Department reported that jobless claims fell to 260,000 in the week ended November 21st from an upwardly revised reading of 272,000 for the previous week. The consensus estimate called for claims to edge down to 270,000 from the 271,000 originally estimated for the previous week. The four-week average was unchanged at the previous week’s revised average of 271,000. Continuing claims calculated with a week’s lag rose to 2.207 million units in the week ended November 14th from 2.173 in the previous week.

A separate Commerce Department report showed that personal income rose 0.4 percent month-over-month in October, in line with expectations. However, personal spending was up a mere 0.1 percent compared to the 0.3 percent growth expected by economists. The core personal consumption expenditure price index was up 1.3 percent year-over-year, the same pace as in September but still below the Fed’s 2 percent target. On a monthly basis, the index was unchanged.

The Commerce Department also reported that new home sales came in at a seasonally adjusted annual rate of 495,000 in October compared to a downwardly revised 447,000 rate in September. Economists expected new home sales of 499,000 compared to the originally reported reading of 468,000 for the previous month.

Inventories measured in terms of months of supply fell to 5.5 months from 6 months in September, while in absolute terms, inventories rose to 226,000 from 208,000. The median price of a new home fell 8.5 percent month-over-month to $281,500. Annually, the median price is down 6 percent.

The University of Michigan’s consumer sentiment index fell for November was downwardly revised to 91.3 from 93.1 but still came in above the final October reading of 90.0. Economists expected an unchanged reading.

Currency, Commodity Markets

Crude oil futures are sliding $0.76 to $42.28 a barrel after rising $0.17 to $43.04 a barrel on Wednesday. An ounce of gold is currently trading at $1,060.80, down $9.20 from the previous session’s close of $1,070. On Wednesday, gold fell $3.80.

On the currency front, the U.S. dollar is trading at 122.63 yen compared to the 122.57 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.0583 compared to $1.0610.


The major Asian markets ended lower, with the Chinese market leading the declines, although the Indian and New Zealand markets bucked the downtrend. Geopolitical tensions and the sell-off in China on worries concerning an investigation being launched into several major brokerages over suspected trading violations impacted market mood.

The Japanese market was pressured by a rising yen in the wake of risk aversion. The Nikkei 225 Index opened higher and held above the unchanged line till early afternoon trading. Thereafter, the average pulled back below the unchanged line before ending down 60.47 points or 0.30 percent at 19,884, off a 3-month high.

Export stocks saw mixed sentiment. Construction, real estate, utility, retail, chemical, pharma, glass, cement and financial stocks came under selling pressure, while mining stocks gained ground.

After holding mostly above the unchanged line till late afternoon trading, Australia’s All Ordinaries Index retreated into negative territory, closing down 8.30 points or 0.16 percent at 5,251.

Consumer staple, IT, material and utility stocks came under selling pressure, while energy stocks rallied strongly.

China’s Shanghai Composite plunged 199.25 points or 5.48 percent before ending at a 3-week low of 3,436 and Hong Kong’s Hang Seng Index closed at 22,068, down 420.62 points or 1.87 percent.

A slew of data released from Japan came in mixed, with a report released by Japan’s Ministry of Internal Affairs and Communications showing core inflation remained negative in October. Core inflation was at -0.1%, the same rate as in September, dragged lower primarily by energy prices. The headline inflation rate was 0.3% and consumer prices, excluding food and energy, rose 0.7 percent.

Another report showed that the Japanese jobless rate slid to 3.1 percent in October from 3.4 percent in September, hitting the lowest level since 1995. The ministry also released consumer spending data showing a 2.4 percent drop in household spending, belying expectations of an unchanged reading.

Profits earned by Chinese industrial enterprises decreased for the fifth consecutive month in October, figures from the National Bureau of Statistics showed. Industrial profits fell by 4.6 percent year-over-year in October, much faster than the slight 0.1 percent decrease in September.


After opening lower, European stocks recouped their losses and are currently trading on a mixed note. The conflict between Russia and Turkey over the shooting down of one of the former’s warplanes has generated uneasiness among traders.

On the economic front, the results of a survey by GfK showed that German consumer confidence is expected to worsen in December, although by less than expected. The consumer confidence index is set to dip to 9.3 from 9.4 in November, while economists expected a reading of 9.2.

Revised estimates released by the U.K. Office for National Statistics showed that U.K. GDP rose 0.5 percent sequentially in the third quarter, as estimated earlier. The annual growth was also left unrevised at 2.3 percent. Another report showed that the index of services rose 2.7 percent year-over-year in September.

The European Commission’s survey showed that economic confidence in the euro area remained unchanged in November, as consumer sentiment and the morale among service providers and the construction sector improved, offsetting worsening confidence among manufacturers and retailers. The economic confidence index was unchanged at 106.1, while economists expected a reading of 105.9.

U.S. Economic Reports

There are no market moving economic reports due for the day.

Stocks in Focus

Retailers may be in focus on reports of Black Friday sales. Target (TGT) announced a strong start to its Black Friday weekend. Wal-Mart (WMT) also said its stores bustled with shoppers, with Thanksgiving meal fixings and electronic items in demand.
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