A Bittersweet Experience for the Bulls
By Laif Meidell, CMT, president of American Wealth Management, and portfolio manager of the AdvisorShares Meidell Tactical Advantage ETF (MATH)
Though U.S. stocks broke their three-day decline on Wednesday to finish the day in the green, it was a bittersweet experience for the bulls, which managed to give up more than half of their early-morning gains before closing positive on the day. At one point during the morning, the Standard & Poor’s 500 was up over 19 points above Tuesday’s close, but the bears (sellers) were able to push the bulls (buyers) back leaving the index higher by 6.52 points, a gain of 0.31 percent on the day.
It started out as a bad-news-is-good-news type of day, as investors drove stocks higher in early trading following the early morning ADP employment report. The report estimates only 185,000 private jobs were created in July, below the consensus estimate and well below the 237,000 May estimate. Although the ADP employment report is far from perfect, it was designed to help predict the nonfarm payrolls report from the Bureau of Labor Statistics, due out this Friday. If the report is correct, this Friday’s employment report may come in below current expectations. Stocks rallied on the news that potentially fewer jobs were created in July than expected. Such a report on Friday may stave off the Fed from raising rates in September.
Half an hour into the trading day, good news became bad news, as the ISM nonmanufacturing index for July showed an acceleration in nonmanufacturing business with a reading of 60.3 in July, above the May reading of 56, and the highest reading in 10 years. Any reading of 50 or greater indicates expansion. The industries that reported growth during July were retail trade, transportation and warehousing, and construction. Whereas mining was one of the two that was lower for the month. The good news is that nonmanufacturing is doing well so far this year and offsetting any potential slowdown in the manufacturing sector, the bad news for investors is it strengthens the Feds case for raising rates in September.
After a rocky past two months, foreign stocks appear to be stabilizing and attempting to move higher. On Wednesday, Greek Prime Minister Alexis Tsipras said, “We are in the final stretch” of negotiations. Many are hopeful a deal can be reach by the Aug. 20, when a 3.2 billion-euro Greek bond held by the ECB matures. This week’s top-performing countries are Egypt and Mexico, with the Market Vectors Egypt index gaining 3.88 percent over the past five trading days, followed by the MSCI Mexico Investable Market index, up 2.88 percent over the same period.
This commentary originally published in the Reno Gazette-Journal. Performance numbers used in this article were obtained through eSignal and are not guaranteed to be accurate.