US aim to recover after worst day of 2019

Summary:

  • Wednesday saw the Dow post largest daily drop of the year

  • Trade rumours continue to drive the markets

  • Alibaba shares gain after earnings beat

 

US indices have begun a little higher this afternoon, after Wednesday’s session saw the Dow Jones Industrial Average (US30 on xStation) have its worst day of the year. The market posted a drop of 800 points during cash hours (just over 3%) in what is in fact the 4th largest daily drop ever in points terms. To pinpoint an exact cause for the declines is a little tricky although a combination of three factors can be attributed to the drop. 

The Dow suffered its second large down day in the past couple of weeks yesterday. The 38.2-41-4% Fib level from 24946-25136 could be seen as a key support zone going forward. Source: xStation

 

On the data front soft industrial data from China and the German economy slipping into contraction did little to help sentiment but it seems that the main cause was simply a lack of follow through after Tuesday’s gains. The rally after the US Treasury announced a delay to some tariffs on China was swift and sizable, but price failed to build on the initial move and eventually turned lower. For a long time there’s been an idea in the markets that there is a so-called “Trump put” whereby he will take a less hawkish approach to trade if the markets are sufficiently lower, but the concern now is that a significant concession has failed to keep the stock market bid. 

 

One stock enjoying a bright start to the session is Alibaba after the e-commerce giant posted a better than expected set of results for the second quarter. Revenue of 114.92B yuan ($16.74B) represents an increase of 42% year-on-year and well above the 111.73B yuan ($16.28) expected according to Refinitiv. However, this pace of growth is below the 61% seen in the same period last year. Diluted earnings per share was 12.55 yuan vs 10.25 yuan expected.   Annual active consumers on Alibaba’s China retail marketplaces reached 674 million, an increase of 20 million from the 12-month period ended March 31, 2019. The company said that over 70% of those new consumers were from less-developed cities, highlighting its push into lower tier Chinese cities. The stock has begun higher by around 3%. 

Alibaba stock has started brightly after the latest set of results with the market moving back above the 200 SMA. Source: xStation

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