Market Commentary

Equities reversed most of the negative price damage incurred from last week. Meanwhile, commodities such as Gold and Crude Oil bounced upward from their extremely oversold positions. The Federal Reserve rate hike anticipated by many for the month of September is far from a “done deal” as Vice Chairman Fischer reminded the market today. Unlike equities, the bond market didn’t buy this jawboning and rates ticked up despite dovish comments.

Market breadth for the SP-500 components was overwhelmingly positive with 427 advancers vs. 5 unchanged and 68 decliners. 182 of the benchmark index’s stocks hit new 5 day highs vs. 17 new 5 day lows, in addition to 33 new 52-week highs and 5 new 52-week lows.

Stock price increases on surging volume

• Precision Cast Parts (PCP) @ 230.92 (+19.10%) on 1100% volume surge
• Sysco Corp (SYY) @ 37.59 ((+1.79%) on 226% volume surge
• Genworth Financial (GNW) @ 5.47 (+13.49%) on 190% volume surge
• Apache Corp (APA) @ 48.45 (+5.07%) on 175% volume surge
• Time Warner Inc. (TWX) @ 82.17 (+2.53%) on 112% volume surge

Stock price declines on surging volume

• Starbucks Corp (SBUX) @ 56.27 (-1.63%) on 51% volume surge
• Edison Int’l (EIX) @ 59.54 (-2.41%) on 46% volume surge
• Entergy Corp (ETR) @ 68.91 (-1.92%) on 39% volume surge
• Monster Beverage (MNST) @ 144.73 (-2.98%) on 38% volume surge

 Market Summary

Market Moving Events

Bullish Events

• Central Banks / Fed Reserve: Fed Reserve Vice Chairman, Stanley Fischer, calmed markets by stating that a Fed rate hike is still “not a done deal”.
• Mergers & Acquisitions: Warren Buffet’s Berkshire Hathaway will acquire Precision Cast Parts (PCP) for $37.2bn, a 21% premium above last Friday’s closing price.
• China / Economic Policy: China’s Shanghai Composite Index for stocks rose almost 5% on speculation that the government implement stimulus measures to revive the economy after news of China’s negative export and import trade report for July. Adding to the optimism was a report from the South China Post that China’s cabinet will approve plans to allow mergers of SOEs (state owned enterprises).
• China / Inflation: July CPI increased +1.6% yr/yr vs. consensus @ +1.5%

Bearish Events

• China / Trade: China’s July exports and imports fell more than expected. Its trade balance contracted to $43.05bn vs. expectations @ $54.7bn and previous month’s June @ $46.54bn. Mining companies and energy producers declined on the negative economic news.
• Europe / Economy: Investor confidence in the Eurozone failed to meet expectations as the August Sentix declined -0.1 to 18.4 vs. consensus @ 20.3.

Neutral Events

• N/A