US stock markets climbed on Thursday as stimulus from Chinese policymakers helped put a stop to plunging Chinese shares.
The Chinese government has urged Chinese banks to buy up Chinese shares to stem the flow and has put a temporary hold on new IPOs. Chinese shares rebounded as a result and this helped lift equities both in Europe and the US with the S&P 500 Index climbing 0.22% to the close.
The rally would have been welcomed by most traders and investors after the selloff on Wednesday which came as the NYSE closed trading for three hours due to a software upgrade.
Six of 10 S&P 500 sectors finished up on Thursday, with financials, healthcare and energy leading gains. Shares in consumer goods company $PG fell by 0.41% after a $12.5 billion deal was announced with Coty. The market was clearly unimpressed with the news as Coty shares also fell nearly 5%.
Elsewhere, Apple shares fell 2.04% after UBS released a research note claiming that China is responsible for more than 50% of the company’s recent revenue growth. A slowdown in the Chinese economy could therefore represent a significant downturn in Apple’s profit for the rest of the year.
Looking ahead, price action in the major indices on Thursday indicates that traders must stay extra careful at this point. Throughout this bull market, we have seen many instances where stocks have rebounded off their lows and usually the market stays strong to the close. However, on Thursday, US equities gave up gains as the session wore on, with the Dow dropping around 200 points over the session. As a result, traders should prepare for more volatility ahead and the short-term trend could be down from this point.
On a personal note, the slide in stocks has caused some pain for my long-term portfolio, however, I have not made any major adjustments and remain bullish long-term, despite the noise out of China and Greece. My short-term fund is up ~50% on the year, however, a large amount of risk has been taken and this needs to be scaled back in order to preserve profits.
Here’s what I’ve been reading this week:
Trailer for new hedge fund drama Billions. Follow the money.
How to use the MACD indicator in a trending market.
Investigation into the dual momentum strategy. Still working or not?
A short video on what went wrong in Greece.
Interesting story about two pairs of identical twins raised separately (environment vs genes debate).
And here’s this week’s chart:
Chile is a screaming buy according to recent analysis from Citigroup. Chart from Bloomberg.