Bright start for stocks fades; Home Depot slides

Summary:

• DE30 back to flat after reaching YTD peak

• US indices pullback from record highs

• Home Depot results coincide with sell-off

In spite of mixed moods spotted during Asian trading hours, stocks in Europe opened higher on Tuesday. Shares from Germany, Spain and Russia outperformed the most during the opening while Polish and Dutch equities were among top laggards. The upbeat moods prevailed and after an hour of trading, DAX reached fresh YTD high. DE30 finally made a break out of the consolidation range that has limited its moves during the past two weeks. 

Strong upward move was launched after the opening of today’s cash session. The index smashed through resistance levels at 13265 and 13300 pts and continue to move higher. In turn, a fresh YTD high can be spotted on DE30 chart. In fact, the German index is trading at the highest level since January 2018. However, this rally has subsequently fizzled out somewhat with the market back at 13200 on the European close. This could be seen as a possible false break higher and prior support around 13100 may now be in for a retest. 

Technical breakouts higher in European bourses swept the US indices along with futures in all 3 major benchmarks making new all-time highs this morning. There was little by the way of a clear catalyst behind the moves although a bounce in Asian equities overnight no doubt played a part in boosting sentiment. 

The Dow Jones Industrial Average began at its highest ever level this afternoon. The market has rallied over 2400 points from the early October low and while price is getting a little stretched with an RSI reading of 73.9, this isn’t too extreme and is lower than previous peaks. The market is the first major index to show some signs of the impending reversal, largely due to a swift drop after Home Depot announced its latest results. 

Home Depot, which has a weighting of just under 6% on the broader DJIA index, is trading firmly lower and the release of the firm’s latest results had a clear negative impact on the benchmark. To give a rough idea of the impact the stock can have, when it was trading down by 4.8% in the pre-market this translated to a 78-point drop in the Dow. The results for the 3rd quarter were as follows:

• Earnings per share: $2.53 vs %2.52 exp

• Revenue: $27.22B vs $27.53B exp

• Global same-store sales growth: 3.6% s 4.7% exp

Home Depot is trading in the red and lower by around 4% at the time of writing.