Daily Agenda: Following Record-High Closes, It’s Risk On for Equity Markets

Vodafone beats analysts’ forecasts; oil prices continue to skid; new China-U.S. tech trade agreement.


Victor J. Blue

Equity market sentiment took a risk on tone yesterday, with a record-high close on the Dow and S&P 500 and the highest close on the NASDAQ since March 2000. The question now is what can derail the current sense of optimism? With earnings season nearly complete and continued indifference toward macro headwinds, the bulls appear firmly in control. In a note this morning Adam Grimes, managing partner and CIO at Waverly Advisors in Pittsford, New York, reaffirmed his bullish stance on U.S. stocks and said that any dip, particularly one in small caps, would represent a buying opportunity. “Today’s holiday session will result in lower liquidity but sometimes these thin sessions see clean directional moves,” he continued. “Do not assume that markets will be quiet.”

Equity eyes are on Europe. As today is Veteran’s Day, a federal holiday, in the U.S., European equity market earnings announcements are the focus of equity investors today. London–headquartered telecom Vodafone reported today a 1.5 percent decline in service revenue for the most recent quarter, significantly beating analysts’ forecasts.

China and U.S. announce technology trade agreement. With the Asia-Pacific Economic Cooperation Summit in Beijing as a backdrop, the U.S. and China announced a new trade agreement today as the two nations continue to walk the fence between geopolitical tension and economic interdependence. The pact, named the Information Technology Agreement, will eliminate tariffs on many information technology hardware and software products.

Oil slides further. Brent front-month crude oil futures reached the lowest level in four years in overnight trading as supply levels globally continue to expand. Consensus forecasts for Energy Information Administration crude stockpile data for the U.S., scheduled for release tomorrow, call for an increase of more than 380 million barrels for the week. OPEC members, particularly Saudi Arabia, have maintained strong production levels in recent months despite slack global demand signals. Many analysts forecast that the 12-country bloc will not cut production levels in next week’s summit despite falling prices.

Shell sells. Netherlands–headquartered, U.K.–incorporated Royal Dutch Shell reiterated plans today to divest an additional $15 billion in assets despite lower oil prices. The decision to liquidate global capacity is a continuation of the firm’s plan to bolster cash flow and trim exposure to less profitable markets.