DOW 16960.57 -123.23 (-0.72%), NASDAQ 4449.56 -22.54 (-0.50%),
S&P500 1978.34 -9.64 (-0.48%)
Another light day.
But with the recent spike in the Dollar, it feels like this market is ripe to head down. Tomorrow should set the trend up for the following week.
Direction for Friday 25 Jul: DOWN▼
So… those odds are really good, seasonally. Would you dare call against them?
Given the sparse data over the course of the week, a lot of the focus will be on the situation in Ukraine, especially after the MH17 incident.
I don’t think we’ll be so lucky this time round.
Direction for the Week of 21 Jul to 25 Jul: DOWN▼
Don’t let the performance of the DOW fool you – the DOW was mainly dragged down by VISA (V).
Ultimately it was a day where neither bull nor bear participated, and the market was left to a bout of profit-taking. I suspect the major players aren’t willing to put positions over the weekend amidst developments in Ukraine.
On the week, the DOW closed in the red (mostly thanks to Friday), while the other two indices scraped a gain. But to be fair, if you had gone long on Monday – you’d be able to take off a hefty profit on Thursday. So… seasonally, yes it was profitable.
But it was shaky week. Most of the up days were gap-up-and-go-nowhere days, which made it all the more unsettling.
Market Summary
Economic Data & News
Technical Analysis
Market Internals
Bonds, Currencies & Commodities
Market Summary
Industry Watch
Strong: Materials, Telecom Services
Weak: Consumer Discretionary, Consumer Staples, Energy, Health Care
Other Market Moving Factors
Disappointing earnings and/or guidance from Amazon.com (AMZN), Chubb (CB), KLA-Tencor (KLAC), Visa (V), and WellCare Health Plans (WCG) weigh on sentiment
[BRIEFING.COM] The stock market capped the trading week with losses across the major averages. The S&P 500 fell 0.5% to surrender its weekly gain, while the Dow Jones Industrial Average (-0.7%) and Russell 2000 (-0.9%) underperformed. The two indices posted respective losses of 0.8% and 0.6% for the week.
Equity indices were pressured from the get-go after several heavyweights disappointed the market with their earnings and/or guidance, which led to some broader profit-taking. After the opening slide was complete, the major averages began inching higher, but were knocked to fresh lows in short order when it was reported that European Council President Herman Van Rompuy suggested the next round of sanctions against Russia should target oil (but not gas) companies.
The retreat in equities signaled the presence of underlying concerns that a new round of economic sanctions could have a boomerang effect on the global economy. For its part, oil futures responded by spiking off their lows to end little changed at $102.10/bbl.
Eight of ten sectors finished in the red with the consumer discretionary space (-1.2%) at the bottom of the leaderboard. The sector, and Nasdaq Composite (-0.5%), were pressured by shares of Amazon.com (AMZN 324.01, -34.60), which fell 9.7% in reaction to a bottom-line miss and cautious guidance. Other retailers did not escape unscathed with the SPDR S&P Retail ETF (XRT 84.33, -1.00) sliding 1.2%.
Elsewhere among cyclical groups, the top-weighted S&P 500 sector—technology (-0.2%)—ended ahead of the broader market despite a 3.6% drop in Visa (V 214.77, -7.97). The payment processor reported better than expected earnings, but its guidance was a point of concern for investors.
Deeper in the tech sector, high-beta chipmakers displayed broad losses after Freescale Semiconductor (FSL 19.98, -2.11), Maxim Integrated (MXIM 29.38, -3.56), and KLA-Tencor (KLAC 71.60, -1.42) reported disappointing results. The trio lost between 1.9% and 10.8%, while the PHLX Semiconductor Index fell 2.0%.
Even though the tech sector finished ahead of the broader market, other heavily-weighted sectors like energy (-0.8%) and financials (-0.6%) prevented the S&P 500 from staging an afternoon recovery.
The financial sector settled just behind the S&P 500, which was fitting as both the economically-sensitive sector and the benchmark index ended the week unchanged. Insurer Chubb (CB 89.62, -3.14) was a notable underperformer, falling 3.4% in reaction to a lowered full-year outlook on the back of a disappointing second quarter and larger than expected insurance payouts.
Although the market ended near its lows, that was not the case for El Pollo Loco (LOCO 24.03, +9.03), which made its debut today. The newcomer soared 60.2% after its IPO priced at $15.00 per share and opened at $19.00.
Treasuries rallied into the early afternoon and the 10-yr note settled on its high with the benchmark yield down four basis points at 2.47%.
Participation was well below average with under 558 million shares changing hands at the NYSE, suggesting there was no ‘rush for the exits’ taking place.
On the economic front, the durable orders report for June surpassed estimates (+0.7% versus Briefing.com consensus 0.3%), but shipments of goods declined 1.0%, which will be a negative for Q2 GDP.
Monday’s data will be limited to the Pending Home Sales report for June (Briefing.com consensus -0.8%), which will be released at 10:00 ET.
S&P 500 +7.0% YTD
Nasdaq Composite +6.5% YTD
Dow Jones Industrial Average +2.3% YTD
Russell 2000 -1.5% YTD
Week in Review: Earnings in Focus
Things could have been better on Monday for the stock market and they could have been worse. They were worse in the early going as the major indices backpedaled quickly at the start of trading. The ostensible catalysts for the opening retreat were geopolitical concerns over Israel’s ground assault in Gaza and the troublesome diplomatic dealings in the wake of Malaysian Air flight MH17 being shot down over eastern Ukraine last week. At their lows of the morning, the Dow, Nasdaq, and S&P 500 were down 126, 28, and 12 points, respectively. They would eventually battle back, though, to pare their losses, drawing encouragement from technical support holding at 1966 for the S&P 500 and a small sense of relief that remarks from President Obama did not include the imposition of any new sanctions against Russia.
The market finished the Tuesday session on an upbeat note with small caps pacing the rally. The Russell 2000 advanced 0.8%, while the S&P 500 added 0.5% with eight sectors ending in the green. Although geopolitical concerns factored into the modest retreat on Monday, the worries were cast aside on Tuesday after separatist forces in eastern Ukraine handed over black boxes from MH17 to Malaysian authorities and Secretary of State John Kerry began working on brokering a cease fire in Gaza. Furthermore, the sentiment was boosted by a slate of mostly better than expected earnings. Notably, Chipotle Mexican Grill (CMG) soared 11.8% after beating estimates and surpassing comparable restaurant sales growth expectations. However, McDonald’s (MCD) painted a less upbeat picture with its stock falling 1.3% in reaction to below-consensus earnings and revenue.
Equities ended the Wednesday session on a mixed note. The tech-heavy Nasdaq displayed relative strength, climbing 0.4%, while the S&P 500 added 0.2% with five sectors settling in the green. For its part, the Dow Jones Industrial Average (-0.2%) spent the entire trading day below its flat line. The midweek affair started on a rather unassuming note in the absence of market-moving news or economic releases. With those pieces missing from the equation, participants turned their attention to quarterly earnings as another dose of better than expected results pushed the S&P 500 into record territory.
On Thursday, stocks maintained a narrow trading range before ending the session essentially where they began. The S&P 500 added less than a point, while the small-cap Russell 2000 (-0.2%) underperformed. Equity indices displayed early strength thanks in part to an overnight boost from better than expected economic data in China and Europe. Specifically, China’s HSBC Manufacturing PMI surged to an 18-month high (52.0 from 50.7), while Eurozone Manufacturing PMI (51.9; expected 51.7) and Services PMI (54.4; expected 52.7) also surpassed estimates. In addition to upbeat data from overseas, participants received a batch of better than expected earnings, but the market had a difficult time building on its early gain. The S&P 500 surrendered its opening advance during the initial minutes, but was able to follow that with a rally to a fresh record high (1991.39). The index could not hold that level into the afternoon and slipped back to its flat line by the close.
Global Markets
Asia
Markets finished mixed across Asia
Japanese data saw Tokyo Core CPI hold CPI at 2.8% YoY (2.7% YoY expected) while the less closely followed National CPI eased to 3.3% YoY (3.3% YoY expected, 3.4% YoY previous)
Japan’s Nikkei (+1.1%) closed at a six-month high
Hong Kong’s Hang Seng (+0.3%) finished at its best level since April 2011
China’s Shanghai Composite (+1.0%) gained for a fourth straight day and ended at levels last seen in the middle of April
India’s Sensex (-0.6%) eased off record highs
Australia’s ASX (-0.1%) held near its best levels in more than six years
Europe
UK’s FTSE: -0.4%
Germany’s DAX: -1.5%
France’s CAC: -1.8%
Spain’s IBEX: + 0.3%
Portugal’s PSI: -0.3%
Italy’s MIB Index: -0.9%
Irish Ovrl Index: -0.3%
Greece ASE General Index: + 3.3%
Economic Data
from Briefing.com
Economic Data is listed as Actual vs Consensus. Prior Data is given in brackets. If Prior Data has been revised, revised data will be given instead, together with an indication whether it was revised upward or downward.
Durable Orders – 08:30 : 0.7% vs 0.3% (Prior -1.0%▼)
Durable Orders ex-trans – 08:30 : 0.8% vs 0.7% (Prior -0.1%▼)
DURABLE ORDERS
Highlights
Durable goods orders increased 0.7% in June after declining a downwardly revised 1.0% (from -0.9%) in May. The Briefing.com consensus expected durable goods orders to increase 0.3%.
Excluding transportation, durable goods orders increased 0.8% following a negatively revised 0.1% (from 0.0%) decline for May. The consensus expected these orders to increase 0.7%.
Key Factors
Transportation orders increased 0.6% in June after falling 2.8% in May. Aircraft orders rose 10.1%, in-line with the orders reports from Boeing (BA). Those gains, however, were partially offset by a 2.1% decline in motor vehicle and parts orders.
Orders demand was solid in many areas including a 2.4% increase in the machinery sector and a 0.8% increase in computer and electronic productions.
Business demand improved. Orders of nondefense capital goods excluding aircraft rose 1.4% after declining 1.2% in May. The positive effect on GDP, however, was minimal. For the third consecutive month shipments of business equipment orders declined, this time by 1.0%.
Manufacturers are continuing to stockpile orders rather than produce them. Unfilled orders of nondefense capital goods excluding aircraft increased 1.2% in June after increasing 0.5% in May.
Big Picture
For the past several months, manufacturers have stockpiled large amounts of unfilled orders. Typically, this should bolster production growth. However, manufacturers have been unwilling to produce out of the backlog.
In Other News…
HEADLINE NEWS
Apple (AAPL): Judge troubled by $450 mln e-books deal, according to reports
Bayer AG (BAYRY) and Onyx Pharmaceuticals report Phase 3 trial results of NEXAVAR in patients with advanced breast cancer did not meet its primary endpoint
China Telecom (CHA) will start selling Microsoft (MSFT) Xbox one in September, according to reports
Gilead Sciences (GILD): EMA recommends approval of two new treatment options for rare cancers; confirms European CHMP adopts positive opinion for Gilead’s zydelig for the treatment of chronic lymphocytic leukemia and follicular lymphoma
McDonald’s (MCD) has taken chicken nuggets off menu in Hong Kong, according to reports; MCD Japan has stopped sourcing from China
Time Warner Cable (TWC), ESPN (unit of DIS), and Bright House Networks reach agreement to carry SEC Network for August 14, 2014 debut
TripAdvisor (TRIP) enters into agreement to acquire Viator
EARNINGS/GUIDANCE
AbbVie (ABBV) beats Q2 estimates; guides Q3 EPS towards high end; reaffirms recently raised Fy14 EPS guidance (ex-Shire)
Altera (ALTR) beats by $0.04, beats on revs; guides Q3 revs in-line; quarterly dividend 20% to $0.18/share
Amazon.com (AMZN) misses by $0.12 (operating income above guidance/estimates), reports revs in-line; guides Q3 revs in-line, operating income (loss) below consensus — all per usual
American Electric (AEP) beats by $0.05, reports revs in-line; reaffirms FY14 EPS guidance
Aon (AON) beats by $0.05, misses on revs
Cerner (CERN) reports EPS in-line, beats on revs; guides Q3 EPS in-line, revs above consensus; raises FY14 guidance ever so slightly
Chubb (CB) misses by $0.19, beats on revs; guides FY14 EPS below consensus
Covidien (COV) beats by $0.04, reports revs in-line
KLA-Tencor (KLA) misses by $0.06, reports revs in-line
Moody’s (MCO) beats by $0.11, beats on revs; reaffirms FY14 EPS and margin guidance; raises rev guidance
Republic Services (RSG) beats by $0.02, beats on revs; reaffirms FY14 EPS guidance; raises dividend 7.7% QoQ to $0.28/share
Stanley Black & Decker (SWK) beats by $0.06, misses on revs; raises FY14 EPS above consensus
Starbucks (SBUX) beats by $0.01, reports revs in-line; guides Q4 EPS in-line; guides FY15 EPS in-line, revs in-line; Q3 comps +6%
Tyco (TYC) reports EPS in-line, revs in-line
VeriSign (VRSN) beats by $0.04, reports revs in-line
Visa (V) beats by $0.08, reports revs in-line; lowers FY14 rev growth slightly; narrows FY14 EPS
Xerox (XRX) beats by $0.01, reports revs in-line; guides Q3 EPS in-line; raises low end of FY14 EPS guidance
ANALYST ACTIONS
Upgrades
Edison (EIX) upgraded to Buy from Hold at Argus
Northern Trust (NTRS) upgraded to Neutral from Underweight at JP Morgan
VeriSign (VRSN) upgraded to Neutral from Sell at Citigroup
Downgrades
Amazon.com (AMZN) downgraded to Neutral from Buy at B. Riley & Co.
Cabot Oil & Gas (COG) downgraded to Neutral at Robert W. Baird
Crown Castle (CCI) downgraded to Sector Perform from Outperform at Pacific Crest
EQT Corp. (EQT) downgraded to Buy from Strong Buy at ISI Group
Exxon Mobil (XOM) downgraded to Underweight from Equal Weight at Barclays
General Motors (GM) downgraded to Outperform from Buy at Credit Agricole
Mylan Labs (MYL) downgraded to Neutral from Buy at Citigroup
Starwood Hotels (HOT) downgraded to Market Perform from Outperform at Wells Fargo
Other
Baidu.com (BIDU) target raised to $222 from $206 at Piper Jaffray; Overweight
Cerner (CERN) target raised to $62 at Topeka Capital Markets
Precision Castparts (PCP) removed from Conviction Buy list at Goldman
RF Micro Device (RFMD) target raised to $14 at Brean Capital
Starbucks (SBUX) target raised to $88 from $84 at Jefferies; Buy
Wyndham Worldwide (WYN) target raised to $87 at FBR Capital
Technical Analysis
DOW JONES INDUSTRIAL AVERAGE
16960.57 -123.23 (-0.72%)
Volume: 67,289,449 (below average of 77,496,569)
Range: 16915.65 – 17082.33
NASDAQ COMPOSITE
4449.56 -22.54 (-0.50%)
Volume: 420.3M (below average of 461.7M)
Range: 4430.43 – 4457.95
S&P500 INDEX
1978.34 -9.64 (-0.48%)
Volume: 414.6M (below average of 457.3M)
Range: 1974.37 – 1984.60
From a purely technical perspective, we see why the market hit a low and rebounded – the S&P500 and NASDAQ triggered their 20 DSMAs. At the same time, the NASDAQ closed in a doji.
But put together the performance of every other element of the market – the VIX, bonds, the dollar, Gold – I doubt there’ll be a rebound.
Market Internals
NYSE:
Lower Volumes than the day before - 527.0M vs 631.6M
Decliners outpaced Advancers (adv/dec): 1013 / 2022
New Highs outpaced New Lows (highs/lows): 74 / 40
NASDAQ:
Lower Volumes than the day before - 1683.7M vs 1885.1M
Decliners outpaced Advancers (adv/dec): 868 / 1818
New Lows outpaced New Highs (highs/lows): 56 / 58
VOLATILITY S&P500 (VIX)
12.69 +0.85 (+7.18%)
Decliners outpaced Advancers by 2.04 on lower volumes than the day before (-306M -12.16%).
While most of the other internals were relatively aligned, the TRIN remained firmly below 1 for a good part of the day – indicating that most of the downside movements was profit-taking.
But as mentioned earlier, piece together everything else – the Advancers, Decliners, the New Lows & Highs (esp on the NASDAQ), and the VIX and it’s actually more bearish than this one divergence suggests.
Treasury Bonds, Currencies & Commodities
from Briefing.com
Treasury Bonds
The Week in Review: 30y Drops to 3.244%, 13-Month Low
Treasuries finished the week mixed as selling took place up front while buyers were in control of longer dated maturities.
A quiet economic calender saw mixed results as existing home sales (5.04 mln actual v. 5.00 mln expected) and durable orders (0.7% actual v. 0.3% expected) beat and new home sales (406K actual v. 475K expected) missed.
CPI posted an in-line 0.3% print.
Treasury held an in-line $15 bln 10y TIPs auction. The auction drew 0.249% and a 2.49x bid/cover. Indirect bidders took down 53.1% of the supply while direct bidders bought 10.3%.
Buying at the long end dropped the 30y -4bps to 3.244%. The yield ended the week at its lowest level in 13 months as action now tests support in the 3.200%3.250% area.
The 10y shed -1bps to 2.469% as trade settled near its lowest levels since the end of May. Traders will have their eye on the 2.440% level into next week as a flush below there would produce the lowest close since June 2013, and put 2.200%/2.250% support on the radar.
In the belly, the 5y tacked on +3bps to 1.676%. Action tested support in the 1.650% area that is guarded by the 50 and 100 dma early in the week, but was unable to penetrate the level.
Up front, the 2y climbed +4bps to 0.484%. The 0.500% region will be in focus in the days ahead as a punch through there puts the September 2013 highs in play.
A flatter curve won out as the 2-10-yr spread tightened to 198.5bps and the 5-30-yr spread narrowed to 157bps.
2Yr 0.53 (unch), 5Yr 1.69 (-0.03), 10Yr 2.48 (-0.04), 30Yr 3.24 (-0.06)
2/10 Spread: 195bps (-4); 2/30 Spread: 271bps (-6)
Currencies
Dollar Crosses 81.00: 10-yr: +10/32..2.465%..USD/JPY: 101.78..EUR/USD: 1.3435
The Dollar Index drifts near session highs as trade fights for its first close above the 81.00 level since the beginning of February. Click here to see a weekly Dollar Index chart.
Today’s bid has the Index higher for the tenth time in twelve sessions, and has trade nearing the key 81.40 area.
EURUSD is -30 pips @ 1.3430 as action contends with its lowest close since Veterans’ Day. Weighing on the euro was today’s disappointing German Ifo Business Climate survey, and reports European governments are considering further sanctions against Russia. Support near 1.3400 looms large.
GBPUSD is -15 pips @ 1.6970 as trade presses lower for an eighth day. The losing streak has shaved off approximately 175 pips, and has trade testing support in the 1.6950/1.7000 area that is helped by the 50 dma.
USDCHF is +20 pips @ .9045 as trade readies for its best close in almost six months. The .9100 area is setting up as a key level, but action will remain closely correlated to the euro.
USDJPY is -5 pips @ 101.75 after surrendering its early gains. The pair threatened the 102.00 mark in response to this morning’s CPI data, but has seen steady selling over the course of the U.S. session as the bears stepped in at the convergence of the 50, 100, and 200 dma. On the downside, the 101.00/101.25 area remains key.
AUDUSD is -20 pips @ .9395 as selling takes hold for a second day. Support near .9350 remains in focus as the 50 dma also lurks in the vicinity.
USDCAD is +70 pips @ 1.0815 as trade surges to its best level since the middle of June. Today’s bid has run the pair above its 50 dma, and has action testing resistance guarded by the 200 dma.
Commodities
Closing Commodities: Precious Metals Book Weekly Losses Despite Rising on Ukraine, Gaza Tension
Precious metals climbed higher today on further geopolitical tension in Ukraine and Gaza. Headlines indicated that Russia’s foreign minister reiterated his belief that the U.S. shares blame for the bloodshed in Ukraine. In addition, chatter circulated that Israel has officially rejected a ceasefire proposal.
Despite strength in the dollar index, Aug gold came off its session low of $1293.30 per ounce and rose as high as $1303.80 per ounce. It settled 1.0% higher at $1303.00 per ounce, booking a 0.5% loss for the week.
Sep silver traded as high as $20.65 per ounce after lifting from a session low of $20.42 per ounce. It settled with a 1.1% gain at $20.64 per ounce, cutting weekly losses to 1.1%.
Sep crude oil chopped around near the unchanged line after trading as low as $100.95 per barrel in early morning action. The energy component touched a session high of $102.53 per barrel and settled 4 cents higher at $102.10 per barrel, booking a 0.1% gain for the week.
Aug natural gas fell deeper into negative territory as it retreated from its session high of $3.82 per MMBtu. It brushed a session low of $3.76 per MMBtu and settled 1.8% lower at $3.78 per MMBtu, bringing losses for the week to 4.3%.
NYMEX Energy Closing Prices
Sep crude oil rose $0.04 to $102.10/barrel
Aug natural gas fell 7 cents to $3.78/MMBtu
Aug heating oil rose 5 cents to $2.92/gallon
Aug RBOB rose 2 cents to $2.86/gallon
CBOT Agriculture and Ethanol/ICE Sugar Closing Prices
Sep corn rose 2 cents to $3.63/bushel
Sep wheat rose 9 cents to $5.38/bushel
Aug soybeans rose 4 cents to $12.12/bushel
Sep ethanol rose 3 cents to $2.04/gallon
Sep sugar (#16 (U.S.)) rose 0.01 of a penny to 24.54 cents/lbs
COMEX Metals Closing Prices
Aug gold rose $12.80 to $1303.00/oz
Gold climbed higher today on continued geopolitical tension over Ukraine and Gaza. Headlines indicated Russia’s foreign minister reiterated his belief that the U.S. shares blame for the bloodshed in Ukraine. The yellow metal came off its session low of $1293.30 and touched a session high of $1303.80 moments before settling with a 1.0% gain. Despite today’s advance, gold booked a 0.5% loss for the week.
Sep silver rose $0.23 to $20.64/oz
Silver also traded in positive territory, trading as high as $20.65. It settled with a 1.1% gain, cutting weekly losses to 1.1%.
Sep copper fell 3 cents to $3.24/lbs
Conclusion
Well, the weekend’s here again… It’s been a quiet week, to say the least.
Friday’s performance was interesting. While the rest of the week has been relatively peaceful, Friday’s performance suggests next week might not be so peaceful. Despite it being a “flatly-down” day, safe haven securities – bonds, VIX, Dollar, Gold – saw a greater bid compared to what the downside might suggest.
If anything, that sets us up for a scary week ahead…
Daily Directional Accuracy (from 14 May 2014): 34/50 (68.00%)
Weekly Directional Accuracy (from 16 May 2014): 6/10 (60.00%)