Stocks sagged Monday as investors contemplated the chances of an interest rate increase this year and its impact on the earnings of multinational companies. The Dow Jones Industrial Average, S&P 500 and Nasdaq fell roughly 1%. Small-cap stocks were hit harder, with the Russell 2000 down 1.3%.
China released a report over the weekend showing a drop in exports for the fourth consecutive month. Hong Kong’s Hang Seng Index fell 0.6%, and Australia’s S&P/ASX 200 was down 1.8%. That started U.S. markets with a negative opening from which they only slightly recovered.
Caterpillar Inc. (CAT) fell 2.6%, International Business Machines Corp. (IBM) lost 2.1% and Nike Inc (NKE) declined 1% — all major global companies.
Apache Corporation (APA) spiked 13.2% following an unsolicited takeover offer, which the company apparently rejected. According to Bloomberg, the offer was for $18 billion. And Canadian Pacific Railway Limited (USA) (CP) is interested in acquiring Norfolk Southern Corp. (NSC), which jumped 11%.
The euro fell 0.1% to $1.0736. The yield on the 10-year Treasury note rose to 2.36% from 2.34% on Friday. Crude oil futures dropped 0.9% to $43.87 a barrel, and gold gained slightly at $1,087.90 an ounce.
At Monday’s close, the Dow Jones Industrial Average fell 180 points to 17,730, the S&P 500 lost 21 points at 2,079, the Nasdaq fell 52 points to 5,095, and the Russell 2000 was off 15 points at 1,184.
The NYSE Composite’s major exchange traded 974 million shares with total volume of 3.9 billion. The Nasdaq crossed 1.8 billion shares. On the Big Board, decliners led advancers by 3.7-to-1, and on the Nasdaq, decliners led by 2.3-to-1. Block trades fell to 5,273 from 5,898 on Friday.
Today’s charts of the CBOE Interest Rate 10 Year T Note and PowerShares DB US Dollar Index Bullish (UUP) are more important than any index or stock chart. This is because, as pointed out by fellow technician MarketWatch’s Michael Ashbaugh, historically higher interest rates coupled with a strong U.S. dollar have been a major headwind for stocks. Monday’s market’s reaction to the jobs report was decisively negative since it supports a Fed rate hike in December.
Conclusion
Monday’s broad-based retreat was led by stocks that are highly impacted by a strong dollar, i.e., the international giants. Fear of a global slowdown was evident from comments made by ECB members as they attempt to prop up their economies with their own forms of stimulus. And all of this is occurring just as proposed trade deals between the United States and the EU are under scrutiny and opposition.
We’ve recently been discussing my proprietary indicator, the Collins-Bollinger Reversal (CBR). For more on that, see the Trade of the Day.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.
