T3’s Take 3: Stocks Get Stuck in First Gear
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1) Stuck in First Gear
Stocks were stuck in first gear today following a downturn in Europe overnight.
European banks fell hard after Deutsche Bank (DB) said the Department of Justice is seeking $14 billion to settle a legal case related to mortgage-backed securities. Bloomberg Intelligence had estimated the settlement would be in the range of $4 – $8 billion.
The S&P 500 fell as low as 2131.20, but recovered some of its losses into the close and finished at 2139.09, down -0.4%.
The Nasdaq outperformed due to strength in large-cap biotech names, notably Celgene (CELG), which reported positive study data.
Crude oil declined again, sending energy shares down, with notable weakness in oil service.
This morning, Intel (INTC) raised its third-quarter revenue and gross margin guidance on rebounding demand for PC’s.
Intel shares rose 3.0%, but failed to significantly lift the broader semiconductor universe.
2) CPI Surprise!
US economic data has been deteriorating since the July 29 Q2 GDP report, which had some traders losing faith in the Fed’s ability to hike rates this year.
But the hawks got a small boost today with the better-than-expected August Consumer Price Index report, the last major economic data release before Tuesday’s Federal Reserve rate decision.
The CPI rose 1.1% year-over-year, beating the 1.0% consensus, while the core CPI, which excludes volatile food and energy prices, rose 2.3%.
The report had traders upping their rate hike bets, and Fed funds futures now imply a 55% chance of a December rate hike, up from 50% earlier today.
3) Traders Sell the Apple News
Apple’s (AAPL) iPhone 7 went on sale today after a week of positive news, though they were not easy to find.
In fact, demand is so strong that some iPhone models will not be delivered until November.
Earlier this week, T-Mobile (TMUS) and Sprint (S) both said that iPhone pre-orders grew substantially from last year.
iPhone 7 reviews have been very positive, and meanwhile, the Samsung Galaxy Note 7 – a key iPhone 7 competitor — has been recalled due to exploding batteries. That certainly tipped the iPhone vs. Galaxy debate in Apple’s favor.
However, Apple shares saw a “sell the news” reaction to the actual release today as traders locked in profits after 4 days of strong gains.
Monday’s Trading Calendar
US Economics (Time Zone: EDT)
10:00 NAHB Housing Market Index (Sep): exp. 60 , prior 60
Global Economics
21:30 AUD Monetary Policy Meeting Minutes
Earnings
Before Open:
None of Significance
After Close:
None of Significance
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