China Growth Concerns Weigh on Markets
Today's financial recap and tomorrow's financial outlook.
Market participants took this to mean that the government was backing away from its recent stimulus measures and the Shanghai Composite (SHCOMP) was down 1.70%. However, they are quick to forget that just five days ago the People's Bank of China (PBoC) injected 500 billion yuan into the banking system and cut its repo rate by 20bps.
US markets were weak this morning in sympathy to the Chinese growth concerns. The S&P 500 (SPX) opened down five points and after a quick bounce in first thirty minutes proceeded to sell off for the rest of the day. The benchmark index went out near its lows, down 0.80% for the session, with all 10 of its sectors negative, led by consumer discretionary stocks. The small cap Russell 2000 (RUT) underperformed by 0.65%, led by declines in energy stocks.
Apple's (AAPL) first weekend of sales of iPhone6 models made a new record, topping 10 million. CEO Tim Cook lamented in the statement that sales would have been higher if there was a greater supply available, but this has been a consistent theme for past releases. The stock was one of the few to close positive today.
Existing home sales for August fell to a 5.05 million annual rate from 5.14 million in the month prior. The slowdown was attributed to a slowdown in investor purchases, now only 12% of total purchases, down from a persistent average of 16%. National Association of Realtors (NAR) stated that the dropoff was due to investors concern over the Fed's first rate hike.
Tomorrow's Financial Outlook
There is a smorgasbord of Fed speeches tomorrow. Presidents Bullard, George, Kocherlakota, and Board Member Powell are scheduled to speak. Bullard has consistently been a hawkish voice in the past year with Kocherlakota his antithesis. Also scheduled is the July government home price index, Markit US manufacturing PMI, and the Richmond regional manufacturing survey. To wrap things up, the US Treasury will sell $29 billion in 2-year notes in the afternoon.
The main catalyst overnight for risk assets is the preliminary Chinese HSBC manufacturing index for September. Although Chinese equities have been more sensitive to changes in liquidity by the government, this will stay a play a role in the price action overnight due to investors' concern on Chinese growth issues today. Similar indices are due out from Germany, France, and the broader eurozone.
The major earnings reports scheduled for tomorrow are Carmax (CMX), Carnival (CCL), and Bed Bath & Beyond (BBBY).
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