U.S. equities didn’t do much on Thursday, oscillating around the unchanged line as investors digested the political fallout from President Trump’s surprise agreement with Democrats in Congress to extend the debt ceiling and budget until December, tying legislation to Hurricane Harvey relief.
Efforts to push ahead with tax reform continued. And the European Central Bank was in focus overnight, saying further decisions on its quantitative easing program could be made in October. The Federal Reserve, for its parts, is likely to consider quantitative tightening at its policy meeting later this month.
In the end, the Dow Jones Industrial Average lost 0.1%, the S&P 500 lost a fraction, the Nasdaq Composite gained 0.1% and the Russell 2000 lost 0.3%. Treasury bonds rallied, the dollar was down hard on reports Trump and Democrats could push to ditch the debt ceiling altogether hitting levels not seen since early 2015, gold gained 0.8%, and crude oil lost 0.1%.
Click to Enlarge Healthcare stocks led the way with a 1.1% gain amid ongoing excitement following the loss of momentum on healthcare reform, the FDA approval of an expensive new cancer treatment, and intense M&A activity. Telecoms and financials were the laggards, down 2.1% and 1.7%, respectively. Breadth was slightly positive and volume was at 104% of the NYSE’s 30-day average.
Click to Enlarge RH (NYSE:RH) exploded 45% higher after reporting a Q2 earnings and revenue beat on better-than-expected comp-store sales.
Also helping was an announcement that since the beginning of the year the company had repurchased nearly 50% of its free float, spending nearly $1 billion amid an ongoing cash burn.
The funds were raised via debt/loan issuance, providing the ammunition needed to wage war on the shorts.
GoPro Inc (NASDAQ:GPRO) gained 12.4% after pre-announcing strong Q3 revenue and margins thanks to reduced inventory levels heading into the holiday shopping season.
On the downside, Walt Disney Co (NYSELDIS) fell 4.4% after CEO Bob Iger told a conference that fiscal 2017 earnings per share would be in-line with 2016’s result; the street was looking for non-GAAP earnings of $5.89 per share vs. $5.72 last year. General Electric Company (NYSE:GE) fell 3.6% after JPMorgan analysts cited downside risks from the power, oil and gas, and transportation businesses.
Conclusion
Click to Enlarge Aside from the U.S. dollar’s meltdown, the major technical development in play is the performance gap between stocks and Treasury bonds. The tranquility on the surface for equities is belied by the safe-haven bid in bonds and precious metals, for that matter.
The action in T-bonds has accelerated this week, pushing up to levels not seen since early November — when the world believed Hillary Clinton would be the next President of the United States.
What are investors so upset about? The specter of an unholy alliance between Trump and Democrats motivated to borrow and spend? The realization we are just weeks away from the Fed pulling back on its $4.4 trillion balance sheet? The ECB hinting at tapering? Or maybe the steady headlines of hurricane carnage?
Check out Serge Berger’s Trade of the Day for Sept. 8.
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.
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Anthony Mirhaydari is the founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.
