The stock markets in the United States slightly recovered (except the NASDAQ) from yesterday’s global market selloff yesterday, which was caused by the reignited concerns among investors regarding the slowing Chinese economy.
China decided to support its falling stock market with state-controlled funds buying equities. The country’s securities regulator indicated that it would extend the six-month sales ban on shareholders holding more than 5% stake in a single stock. The sales ban is supposed to expire on January 8. Yesterday, the CSI 300 Index dropped 7%, which prompted a market-wide trading halt.
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The concerns about China’s economy also continue to affect oil prices. The WTI crude dropped 2.48% to $35.85 per barrel, and the Brent crude declined 2.42% to $36.32 a barrel. China is largest oil consumer worldwide.
Mark Luschini, chief investment strategist at Janney Montgomery Scott, told Reuters, “We’re working off of a pretty significant decline on the first day of trading in 2016. There are a lot of divergences on a macroeconomic, monetary and geopolitical front, any of which could undermine one’s base case for how the year should unfold.”
According to him, investors are “puzzled” because of these factors. He added, “That shows up in these kinds of move where you’re trading off of noise rather than signal.”
Meanwhile, analysts at Citigroup downgraded their rating on U.S. equities to Underweight and indicated that the U.S. bull market is ending. The analysts told investors that they could find better opportunities elsewhere.
The analysts led by Robert Buckland explained, “Decent EPS momentum and continued central bank support mean that we prefer Europe ex UK and Japan equities. Fading EPS momentum and rising Fed funds mean that, after 6 consecutive years of outperformance, we cut the US to Underweight.”
- Dow Jones Industrial Average (DJIA) – 17, 159.07 (-0.06%)
- S&P 500- 2,016.74 (-0.20%)
- NASDAQ- 4,491.43 (-0.24%)
- Russell 2000- 1,149.59 (-0.24%)
- EURO STOXX 50 Price EUR- 3,178.01 (+0.42%)
- FTSE 100 Index- 6,137.24 (+0.72%)
- Deutsche Borse AG German Stock Index DAX- 10,310.10 (+0.26%)
- Nikkei 225- 18,374.00 (-0.42%)
- Hong Kong Hang Seng Index- 21,188.72 (-0.65%)
- Shanghai Shenzhen CSI 300 Index- 3,748.78 (+0.28%)
Stocks in Focus
The stock price of Fitbit plummeted more than 18% to $24.30 per share. Daniel Amir, an analyst at Ladenburg Thalmann & Co., commented that Fitbit will face more competition citing the reason the technology required to develop fitness devices is not unique. He added brand and design is the key to success in the market. According to him, Fitbit is now competing head to head with Apple in the watch category. Apple Watch is expected to cannibalize Fitbit’s fitness tracking business.
First Solar climbed more than 7% to $72.03 per share. Analysts at Goldman Sachs Group upgraded their rating on the stock to Buy from Neutral and raised their price target to $1oo from $61 per share. The analysts said First Solar has the strongest balance sheet in the industry.
The shares of Volkswagen fell more than 5% to $28.35 per share on the OTC Markets. The automaker is facing billions of dollars in penalties in connection with its violations of the Clean Air Act. The U.S. Department of Justice (DOJ) filed a lawsuit against the Volkswagen for installing illegal devices to defeat emissions testing. The automaker could face a penalty as much as $46 billion.