(eToro Blog) Equity markets remained on edge, with investors focused on Europe’s policymakers as their self-imposed European deadline to solve peripheral debt risk moved ever closer. The European summit is scheduled for Sunday, and Germany has successfully dampened market expectations, despite the need for a grand solution. The volatility in the marketplace dampened sentiment despite better than expected economic data on jobs, manufacturing and housing.
Economic data in the U.S. showed a solid bright spot in Manufacturing. According to the Philadelphia Federal Reserve Bank, the economic activity index jumped to 8.7 from -17.5 in October, which was the highest read since April 2011 and exceeded economists' expectations for -9.0. The Philly Fed provides the first monthly indicator of the health of U.S. manufacturing, leading up to the ISM report at the beginning of the month. Growth in manufacturing had slowed, but according to the Fed, the lag from supply chain disruptions after the dual Japanese crises in March has been curtailed and manufacturing is again moving forward.
New orders rose to 7.8 from -11.3, while shipments climbed to 13.6 from -22.8. The employment components were mixed, with the gauge of the number of employees easing to 1.4 from 5.8 and the average work week index gaining to 3.1 from -13.7.
Also on the employment front, jobless claims fell by 6,000 to 403,000 for the week ended October 15, according to the U.S. Labor Department. Claims filed in the previous week increased by 4,000 to an upwardly revised 409,000. The 4-week moving average of new claims fell by 6,250 to 403,000 last week.
On the housing front, existing-home sales declined by 3.0% in September to an annual rate of 4.91 million, according to the National Association of Realtors. August's sales pace was revised to 5.06 million per year. Economists surveyed had expected home sales to fall almost 3%, to an annual rate of 4.90 million. Inventory of previously owned homes listed for sale fell at the end of September to 3.48 million.
Stocks were relatively unaffected by news from Libya that Moammar Gadhafi died from gunshot wounds sustained during a final push by anti-Gadhafi forces to seize control of his hometown of Sirte. President Barack Obama announced during a press conference that the Gadhafi regime has come to an end.
Although equity markets consolidated, the VIX volatility index continued to climb, reflecting investors uncertainty that Europe would create a plan that would satisfy the investor community. The VIX bounced after breaking through support levels last Friday. For the week, the VIX is higher by nearly 25%, and at 35% the index remains well above the longer term average near 22%.
Technically the S&P 500 remains in a tight 30 point range as investors await the E.U. summit outcome. Resistance on the large cap index is near 1230. Monday will prove to be a big day for the markets, as good news could propel equities higher through resistance levels. Support is the bottom end of the current trading range which is nearly 100 point on the S&P 500 index or 8%.
The Nasdaq 100 has been lagging the major indexes since Apple announced its earnings on Tuesday evening. The large cap index has been under pressure, despite the fact that a majority of the earnings announcements were unexpectedly better; nearly 70% of those reporting beat analysts’ estimates, which is better than the historical average of 60%.
The Dow Industrials failed to make headway, as any buying was met by selling. The banking sector continued to keep the Dow buoyed. The Dow 30 is squeezed between 11,800 and 11,300, and continued to trade in a 250 point range during the past 5 trading sessions.
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