Will China, Interest-Rate Uncertainty Keep Markets In The Red?


The three major U.S. benchmarks appeared to be positioned in the early going for a second selloff this week, as worries about Chinas economic state surfaced again and put pressure on markets in Europe and Asia. Can these early losses be reversed?

Chinas exports took an unexpected 10% dive in September, the sixth-straight month that demands for goods from the worlds second-largest economy have softened. That puts another pressure point on Chinas economy, which has long relied on overseas shipments as a generator of growth. In turn, some analysts say, that sparks concerns about global demand.

Continue Reading Below

Wells Fargo & Co (NYSE:WFC) shares got a near 2% boost higher in the early going as shareholders absorbed news that Chief Executive John Stumpf is out immediately, replaced by Tim Sloane, the firms chief operating officer. Stumpfs decision was a surprise to the board, but Sloane told reporters that he had known about the embattled CEOs decision, which Sloane called selfless. Stumpf felt he was becoming a distraction and a hindrance to the companys recovery from the fake-accounts scandal that broke last month, Stumpf said, according to published reports.

Sideways trading in the S&P 500 (SPX) may take hold. Key chart points are in a narrow band, and some true tests may be ahead. Watch if support can hold at the 2,128 level.

More From Benzinga

Crude oil prices (CLX6) were flopping around the flat line in the early going, struggling to stay above that key $50.00 a barrel level. Some analysts are predicting that once this support level has been well established, $60.00 a barrel could be the new normal by the end of the year. Stay tuned.

Yield Breaks Resistance. The yield on benchmark 10-year Treasury note cracked above 1.8% yesterday for the first time since June. That appeared to help boost the yield to 1.793% for the Treasury Dept.s $20 billion in 10-year notes auctioned yesterday. Thats the highest level since early June, according to Reuters.

Having paced through the 200-day moving average, the 10-year yields next resistance level appears to be 1.903%. Thats the low from the market panic of Aug. 24, 2015, that was retested in early October of 2015, according to Morningstar. Today its at 1.746%, also struggling to continue making a meaningful move upward, but, as Morningstar notes, markets rarely move in straight lines.

More Juice for the Fed? This weeks economic calendar ends with the monthly report of the core producer price index, one of the economic measures on the Federal Reserves punch list that may help determine the pace of future interest-rate hikes. Producer prices are used as a forward-looking indicator of consumer-price inflation, something the Fed has watched like, well, a hawk.

The Fed has taken a pass on lifting rates at every meeting since December, often citing inflation concerns among the reasons. Yesterdays FOMC transcripts may be a take on a tale of two sides. The divide between members appears to put the hawks on a more do-it-now path while the doves are still holding onto their go-slow approach. The CMEs FedWatch tool didnt budge on its less than 70% probability of a hike in December.

Labor Force Holds Steady. Jobless claims were unchanged last week at 246,000, the Labor Dept. said this morning. But remember, they had been revised downward to that level. Wall Street economists were forecasting the number of first-time filings for unemployment to rise to 253,000. New claims under 250,000 are considered significantly low, while claims above that may signal weakness is ahead in the labor market.

TD Ameritrade and all third parties mentioned are separate and unaffiliated companies, and are not responsible for each others policies or services. Inclusion of specific security names in this commentary does not constitute a recommendation from TD Ameritrade to buy, sell, or hold. Market volatility, volume, and system availability may delay account access and trade executions. Past performance of a security or strategy does not guarantee future results or success. Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options. Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request. The information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for illustrative purposes only. Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading. TD Ameritrade, Inc., member FINRA/SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. 2016 TD Ameritrade IP Company, Inc. All rights reserved. Used with permission.

2016 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.