U.S. stocks lose opening bid, red takes hold

Euro STOXX 600 index up ~0.6%

  
A screen shows the final tally for the Dow Jones Industrial Average on the floor of the New York Stock Exchange, August 19, 2015. U.S. Image used for illustrative purposes

A screen shows the final tally for the Dow Jones Industrial Average on the floor of the New York Stock Exchange, August 19, 2015. U.S. Image used for illustrative purposes

REUTERS/Brendan McDermid

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U.S. STOCKS LOSE OPENING BID, RED TAKES HOLD (1005 EDT/14005 GMT)

Early Dowand S&P 500 strength on the back of stronger-than-expected retail sales data, has quickly faded with both indexes now trading modestly lower. The Nasdaq, which failed to climb into positive territory, is taking the biggest hit given tech and FANG weakness. 

All major S&P 500 sectors are now down on the day. This as the U.S. 10-Year Treasury yield has seen a near 10 basis point pop off Wednesday's intraday low.

The NYSE FANG+TM index is sliding nearly 1%, while tech and communication servicesare among weaker sectors. With this, there is a tilt in favor of value over growth.

Of note, the S&P 500's rising 50-day moving average, which has supported the market this week, now resides around 4,433. 

Meanwhile, amid higher yields, and dollar strength, silver and gold  are weak, leading to sharp losses in precious metals mining shares. 

Here is where markets stand in early trade:

(Terence Gabriel)

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SICK INTERNALS MAY KEEP THE NASDAQ BEDRIDDEN (0900 EDT/1300 GMT)

The Nasdaq Composite .IXIC ended a five-day losing streak on Wednesday.  That said, the Nasdaq McClellan Summation (McSum), a breadth/momentum measure based on advancing and declining issues, remains on the back foot suggesting the Composite may not yet be out of the woods:

Since topping in mid-February of this year at an all-time high of +1,967, the McSum collapsed to a mid-August low of -3,829. That was its lowest level since mid-April of last year.

A reprieve into early September stalled toward a resistance line from its February high, keeping a protracted divergence with the Composite in place. The McSum ended Wednesday on a down tick, at -2,632, and closed back below its 10-day moving average.

Just since late 2018, there have been a number of major and minor Nasdaq setbacks from record-high territory, all of which developed in the wake of McSum divergence. Of note, the IXIC has so far only fallen a little more than 2% on a closing basis from its Sept. 7 record finish. However, until internals show real improvement, the Composite's condition may remain tenuous.

What may be especially concerning is that since late 2018, the McSum has been respecting support and resistance lines drawn from certain points in 2012. As the market bottomed in December 2018 and again in March 2020, the support line contained McSum weakness. The McSum's record-high in February was essentially capped by the resistance line.

Therefore, a greater decline, to once again flirt with the support line, would call for a slide to the -7,000 area. In that event, the Composite would be at risk for a larger sell-off amid what would then be much more intense internal weakness.

(Terence Gabriel)

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(Terence Gabriel is a Reuters market analyst. The views expressed are his own)


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