U.S. equities posted a feeble rebound on Friday, as the bulls were still apparently shell shocked from Thursday’s rout that took the Dow Jones Industrial Average below the 22,000 level.
Tensions between North Korea and the United States remain high, with President Trump warning that the U.S. military is “locked and loaded” and ready to strike if needed.
Adding to the headwinds was a softer-than-expected Consumer Price Index report showing inflation slowing notably suggesting the U.S. economy is stalling once more. With stocks locked into the first confirmed downtrend since June — as measured by the parabolic stop-and-reverse indicator — breadth continued to deteriorate.
In the end, the Dow gained 0.1%, the S&P 500 gained 0.1%, the Nasdaq Composite gained 0.6% and the Russell 2000 gained 0.1%. Treasury bonds were mostly stronger, the dollar was weaker, gold gained 0.3% extending its recent strength and crude oil rallied 0.5%.
Click to Enlarge Breadth was positive with advancing issues beating decliners by a 1.1 to 1 ratio while volume was at 97% of the NYSE’s 30-day average. Technology led the way with a 0.8% gain while energy was the laggard, down 0.7%.
In a rare bit of good news for the retail sector, Camping World Holdings Inc (NYSE:CWH) gained 10.3% after Q2 revenues, operating earnings, and earnings per share all beat estimates.
But there was some bad news too, with J C Penney Company Inc (NYSE:JCP) down 16.8% after reporting an earnings miss despite better sales. A compression in margins — a concern with other retailers — was noted amid an increased discount tempo and store closures.
Snap Inc (NYSE:SNAP) fell 14.1% after reporting weaker-than-expected earnings and revenue amid soft user growth metrics. Recent momentum sweetheart Nvidia Corporation (NASDAQ:NVDA) lost 5.3% despite reporting better-than-expected results as the datacenter segment missed. Blue Apron Holdings Inc (NYSE:APRN) fell another 0.6% following multiple sell-side downgrades following tepid results on Thursday (which sent shares down 17.5%).
Click to Enlarge On the economic front, the Consumer Price Index ticked down to a 1.7% year-over-year rate as inflation pressure fades. This complicates the policy outlook for the Federal Reserve. And it also suggests the U.S. economy has hit another air pocket.
The big news is the reappearance of volatility after a period of dormancy. The selling is particularly acute in small caps, with the Russell 2000 suffering its worst week since February 2016. The CBOE Volatility Index (INDEXCBOE:VIX) posted its largest percentage spike since August 2015, boosting the Short-Term VIX (VXX) recommended to Edge subscribers to a gain of nearly 11%.
The big news on a technical basis is that the Russell 2000 is testing its 200-day moving average for the first time since last summer. That’s a major loss of support, and suggests the nine-month-long trading pattern has been broken.
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.