7/8/2015
By Dominique Paul, Research Analyst

On July 8^th, the New York Stock Exchange (NYSE) temporarily suspended trading of all stocks on the exchange from 11:32 AM until 3:10 PM. NYSE commented that it was experiencing technical issues after noticing inaccuracies in the stock quotes being produced. With United Airlines reporting network connections problems earlier in the day and the Wall Street Journal experiencing an outage, many observers began to speculate that the NYSE being closed was more than just a coincidence; they believed the NYSE, United Airlines, and the Wall Street Journal were all hacked. Officials quickly put those rumors to bed. After the NYSE reopened for business, stocks continued to slump and the Dow Jones Industrial average closed over 261 points down, erasing gains from the day before.

Initially, market volatility was attributed to developments in China. The Shanghai composite index had fallen 5.9% and closed at 3507. At the start of June, the index was hovering around 5146; that’s nearly a 32% decline from June highs. The trading of 1331 companies had been halted, leaving $2.6 trillion in shares (40% of China’s market value) frozen. With the government spitting out more and more restrictions on trading and asking corporations to buy shares, it was hard to get a good read on the true values of the companies trading on the Shanghai composite. Observers became more anxious as China’s selloff may actually spell trouble for multinational corporations.

The Mortgage Bankers’ Association (MBA) reported a turnaround in the mortgage market. The organization’s composite application index rebounded during the week ended July 3^rd, rising 4.6% after falling 4.7% in the prior week. Strength was driven by new purchases. The organization’s purchasing component jumped 7.0% week-over-week after falling 4.0% in the prior week. The refinancing index also recovered, gaining 3.0% in the week after falling 5.0% in the prior week. The rebound is not too surprising as recent housing reports indicated that homes have been becoming more affordable for consumers. Plus, home-ownership is much more attractive now that we’re in a time where monthly rental payments are rising at a rate faster than income growth. Lastly, it helps that the 30-year mortgage rate for conforming balances of $417,000 or less declined slightly to 4.23%.

The Energy Information Administration’s release of its weekly Petroleum Status Report led to oil prices falling a little steeper on Wednesday. In the week ended July 3^rd, the United States saw a second weekly build in crude oil inventories of 0.4 million barrels to 465.8 million barrels. Refineries were operating at 94.7% of capacity. Gasoline inventories saw a build of 1.2 million barrels after falling 1.8 million barrels in the prior week. Distillates rose approximately 1.6 million barrels following a build of 0.4 million barrels in the prior week. The higher inventories indicate that there is a slowdown in the demand for oil. With more supply than demand, it only makes sense for oil prices to fall. Crude oil futures fell to $51.23, down nearly 2% for the Wednesday session.

Dominique Paul
Wall Street Strategies

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