U.S. equities continued to quietly trade in an ultra-tight three-month trading range. But there is plenty of action elsewhere, with stocks in areas like transportation, financials and big-tech perking up nicely even as the broad market moved lazily lower.
Catalysts for the move included a lack of new stimulus measures by the European Central Bank.
In the end, the Dow Jones Industrial Average lost 0.2%, the S&P 500 dropped 0.2%, the Nasdaq Composite lost 0.5% and the Russell 2000 ended lower by 0.2%. The dollar was slightly higher, gold lost 0.6% and crude oil gained 4.7%.
Treasury bonds were hit hard by the scheduling of a speech by Federal Reserve governor Lael Brainard next Monday just ahead of the Fed’s pre-meeting media blackout period. Brainard is a dove, so the expectation is that she will likely further downplay the chances of a September (or even December) interest rate hike amid a recent weakening in the economic data.
Energy stocks are being lifted by a nice move higher in crude oil driven by solid inventory data. In fact, the data showed the largest weekly draw in crude stockpiles since 1999. The result has been some serious short covering in the oil and gas space and nice looking breakouts from three-month consolidation range in stocks like ConocoPhillips (NYSE:COP), pushing the Sept $42 calls recommended to Edge Pro subscribers on Wednesday to a gain of more than 430%.
And bank stocks are on the move thanks to the weakness in T-bonds, which is pushing up long-term interest rates and thus the net interest margins that factor directly into financial-sector profitability. The move is being driven by a surge in inflation expectations, driven by strength in crude oil and falling odds of a September or December interest rate hike by the Federal Reserve (bolstering chances that inflation will rise above the Fed’s 2% target).
That lifted the Sept $165 calls in Goldman Sachs Group Inc (NYSE:GS) recommended to Edge Pro subscribers back on August 15 to a gain of nearly 80%.
In corporate news, Apple Inc. (NASDAQ:AAPL) lost 2.6%, and threatens to fall below its late August low, as Wednesday’s iPhone 7 unveiling received a tepid reception with the internet panning the removal of the headphone jack (a move the company seriously described as courageous) in exchange for the support of new wireless ear buds (which will take about 30 seconds to lose and cost $159).
It also didn’t help that the company said it won’t report first weekend sales of the iPhone 7. Ostensibly, because they aren’t likely to be great given ongoing concerns about waning iPhone demand, slowing innovation and overall smartphone market saturation.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.
