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T3's Take 3: China Cuts Rates and Saves America... for a Little While


Today's financial recap and tomorrow's financial outlook.

Today at T3 Live

T3 Live cordially invites you to our first annual Finance Festival, scheduled for November 6-8 in sunny Miami, Florida.

Scott Redler will be speaking about trading and technical analysis, and he'll be joined by a truly impressive team of Wall Street experts, including Barry Ritholz, Nicole Sherrod, Evan Lazarus, Doug Robertson, Josh Brown, JC Parets, and many more.

We've even booked a good old-fashioned bull vs. bear debate between Jeff Saut, Chief Investment Officer of Raymond James, and John Mauldin, founder of Mauldin Economics.

Read about theveent here.

China Cuts Rates

The historic that rocked Chinese markets yesterday continued today as the Shanghai Composite dropped an 7.63%.

To combat the downturn, the People's Bank of China cut its key lending rate by 0.25% to 4.6% and lowered the required amount of cash banks must keep in reserves. The move is to make it easier for banks to lend out money The PBOC injected an estimated $23.4 billion into financial markets.

Over the weekend, many investors were expecting the government to step in with some sort of stimulus to prevent shares from falling further. When the government didn't announce anything, a major sell-off occurred that rippled worldwide yesterday.

So traders were quite troubled by the decline when help actually did arrive.

World Equity Markets

European markets jumped as a result of the Chinese stimulus assault.

The German DAX came out on top, rallying 5.0% while the French CAC gained 4.14%. Markets were also helped by a small rally in oil prices. All companies in the oil and gas sectors

US markets initally followed suit, rallying as much as 2%.

As the day progressed, gains slowly disappeared, before sharply turning negative within the last 20 minutes of trading. High volatlity continued as the VIX hovered around 38 at the market close.

The S&P 500 closed down 1.3% at 1867.54 after reaching a morning high of 1948.04.

Case-Shiller housing data for June was released this morning. Home price growth remained largely flat. The home price index rose 4.5% in the 12 months ended in June. May saw a 4.4% increase. New home sales came in slightly below expectations, but nevertheless indicate a stabilizing housing market.

Markets in Asia were mixed during the day.

While losses in China continued, the Hong Kong Hang Seng managed to rally 0.72%.

Taiwan's TAIEX jumped 3.6% after the government announced its own stimulus program before its market open.

Stock News

Wells Fargo (WFC) upgraded Apple (AAPL) to outperform from market perform. The company cited CEO Tim Cook's e-mail sent to CNBC Jim Cramer yesterday as the reason. They specified that Cook's comments on Chinese demand potentially lowers risk for FY4Q and gives insights that others may not have.

Apple shares broke $111 in early trading, but the stock finished at $103.74, up just 0.6%.

Best Buy (BBY) shares are surged 12.6% today after its earnings release. CEO Hubert Joly credited a recovery in the housing market and new products such as health wearables for driving better sales. The company also mentioned that they would be allocating more store space for Apple products.

Netflix (NFLX) shares were also strong today, finishing up 4.8%. Yesterday, shares fell more than 10% amid the global sell-off. The company announced a partnership with one of Japan's major telecom companies, Softbank. The partnership will allow 37 million cell phone customers to pay for Netflix services in-store, online,. or through major electronic retailers. Softbank will also pre-install the Netflix app on its smartphones starting next month.

Wednesday's Financial Outlook

US economic data for tomorrow will include MBA morgage applications, durable goods orders & ex transportation, and capital goods reports orders.

Overseas economic data will include British BBA loans for house purchase, and Japan buying foreign bonds & stocks. 

Abercrombie & Fitch (ANF), Brown-Forman (BF.B), and the Royal Bank of Canada (RY) will release their earnings before the open tomorrow. Avago Tech (AVGO), PVH (PVH), and Williams-Sonoma (WSM) will release their earnings after the close.
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