Markets Fight Back from Disastrous Open

In trading today, markets were mixed after a disastrous open sent the three major indices plummeting. The Dow was essentially flat, losing less than a point to close where it opened at 17,402.51. The NASDAQ led the day in gains with 0.15% worth of progress. It rose 7.60 points to close at 5,044.39. The S&P 500 was also in the black, albeit with even smaller gains than the NASDAQ. It added 1.98 points to close out the trading day at 2,086.05.

Blame it on the Yuan

China has been playing games with its currency, the yuan.
In order to boost exports and make Chinese goods more cheap abroad, they’ve been inflating the yuan artificially. This move has shaken markets around the world, and taken a toll on trading here at home.

Specifically, this new move will hurt companies like Apple (AAPL) and Yum! Brands (YUM) which have been expanding into the Asian markets. Apple, for instance, relies on Asia for a full 20% of its revenues. Both companies do best when the Chinese yuan is strong, so artificial devaluation like the sort that we're dealing with now is going to hurt America's bottom line.

It's already affected the bottom line of other Asian countries. Japan's Nikkei has posted losses for two days straight. Today in Japan, the market fell over 300 points to close at 20,392.77. It's hurt Chinese currency as well, with the yen falling versus the dollar for the second day in a row.

Despite all of the downsides, China is happy to take action like this. Its own economy is finally faltering after many, many quarters of sustained growth. The trend has been toward 4% growth in China, and that just can't last forever. Still, the Chinese government is willing to do everything it possibly can to keep their growth going, despite the costs to the rest of the world.

Market Support Coming from Some Unlikely Places

It's just about one step removed from a miracle that the markets rebounded today. After an opening that saw share prices plunge by more than 200 points, stocks rallied for the rest of the day and made it all back. While world markets were posting losses, our markets were making the best of a bad situation. Some of the stocks that fueled the comeback aren't what you'd expect.

Apple (AAPL), for instance, posted gains despite a worsening situation in China. Intel (INTC) was up in the face of tough tech competition. Exxon Mobile (XOM) posted gains of over a point despite oil's recent implosion, and so did Chevron (CVX). The health Services sector also had a strong day, as some biotech stocks began to bounce back. All in all it was a much-needed rally, but it was an unlikely one to say the least.
Published on Aug 12, 2015
By Aaron Phillips
Aaron Phillips is a financial researcher and journalist based out of Michigan. He regularly writes the IG Daily and IG Weekly columns.

Copyrighted 2020. Content published with author's permission.

Posted in ...