The Roller Coaster Ride Continues
Today’s Spotlight Market
Stock indices snapped back yesterday, recovering some of the losses from Tuesday?s trading sessions on positive job data from ADP. Chinese markets will be closed on Thursday and Friday to commemorate the 70th anniversary of the end of World War II. This does not necessarily mean that sanity will return to the equity market, due to the ECB meeting today and non-farm payroll data on Friday. The August non-farm payroll report may be especially important in light of the fact that it is the last NFP before the September FOMC rate meeting. There is much speculation that the central bank will raise interest rates if the labor market continues to show improvements.
Fundamentals
While equities will get a break from fresh economic news out of China for the remainder of the week, the negative pressure from the world?s second largest economy is likely far from over. Chinese manufacturing is below 50 on the PMI in July, meaning it is now in the contraction zone. The government put a restriction on construction and production in the lead up to the WWII anniversary commemoration, meaning August and September could be sluggish as well. The 13 percent drop in Chinese exports could lead to another Yuan devaluation. For the next two sessions, however, traders have time to refocus their attention on the ECB and US economic data. The ECB decided to keep interest rates steady and the policy statement from Mario Draghi paved the way for potentially more quantitative easing. ADP reported the US economy added 190,000 jobs in August, suggesting the job market is heating up. It will be interesting to see if tomorrow?s non-farm payroll data will line up with ADP and show solid growth.
Technical Notes? – View Today’s Chart
Turning to the chart, we see the Sep e-mini S&P contract bouncing back after trading down to the mid 1800?s last week. Prices have been reluctant to test the 2000 level, instead flirting with the 1980?s before falling back. If prices are able to break through 1980 and 2000, the market could see more sustained momentum.
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