US indices in the red as US100 falls to 7-month low

Summary:

US100 leading the declines and falls below the October low
More soft housing data from the US
Kudlow comments on China do little to boost risk appetite

The recovery seen in US stocks from the October low was fairly impressive, but in recent days this has come under serious threat for both the US500 and US30, while the US100 has actually fallen below last month’s low. The selling in Tech stocks has been largescale of late with the combined losses amongst FAANG (Facebook, Amazon, Apple, Netflix and Google) shares closing in on $1T from their recent highs.

In falling below 6583 the US100 has taken out the October low to trade at levels not seen since April. The market is down by over 400 points in the last two days alone. Source: xStation

On the data front there was some shockingly bad housing news yesterday when the NAHB housing market index fell to its lowest level since August 2015 at 60 compared to an expected 67 with the index for sales over the next six months declining to 65 from 75 beforehand. On this front today there’s been some further information with the number of building permits in the US falling to 1263k from 1270k for the month of October. At the same time housing starts for the month came in at 1228k vs 1225 expected. It is worth pointing out that these figures relate to October while yesterday’s bad miss was for November and therefore can be considered more timely.

Both US housing permits and starts remain not far from flat in Y/Y terms as the signs of a slowdown in the sector continue to grow. Source: XTB Macrobond

Given the recent declines it comes as little surprise that White House economic adviser Larry Kudlow has made a thinly veiled attempt to talk up the chances of the US reaching a deal with China. Speaking on Fox, Kudlow made the following remarks:

Trumps pro-growth policies won’t be overturned
US economy is roaring
Corrections on stock markets come and go
Trump believes China would like to have a deal
Very detailed talks ongoing with China on all levels
Trump to submit response to Mueller queries as early as today

The comments overall are clearly positive and perhaps an attempt to instill some confidence after the recent market falls. However, it appears that it will take more than some jawboning from politicians to boost these markets and the October low of 2603 in the US500 is now a key line in the sand. If the bulls fail to defend this level then a retest of the YTD lows of 2530 and even lower is possible. If buyers step in and provide a floor then some of these recent losses will be recouped with 2823 possible resistance.

October lows of 2603 are on the radar for the US500 with the market falling strongly lower in recent sessions. Source: xStation

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