DOW 16851.84 +5.71 (+0.03%), NASDAQ 4397.93 +18.88 (+0.43%),
S&P500 1960.96 +3.74 (+0.19%)
Only one piece of data out tomorrow – and it’s going to be carefully watched.
With recent data movements relating closely to retail sales, personal income/spending, and consumer sentiment, the Michigan report tomorrow will be instrumental.
I for one, am not particularly confident.
Direction for Friday 27 Jun: DOWN▼
Direction for the Week of 23 Jun to 27 Jun: DOWN▼
To be fair we were down for the entire day until the last hour. A surge in volumes on the back of portfolio pumping and index adjustment sent the market to highs. Leadership remained mixed throughout, with Utilities and Technology leading, while Telecom Services lagged. Broader market performance was also mixed, with bonds staging a late decline on the longer term treasuries.
The DOW and S&P500 closed down for the week, but the NASDAQ managed to etch out a gain.
Market Summary
Economic Data & News
Technical Analysis
Market Internals
Bonds, Currencies & Commodities
Market Summary
Industry Watch
Strong: Consumer Discretionary, Technology, Utilities
Weak: Energy, Health Care, Materials, Telecom Services
Other Market Moving Factors
Japan’s National CPI surges 3.7% year-over-year, representing the sharpest increase since 1982
Rebalancing of the Russell indices expected to boost volume at the close
Nike (NKE) beats earnings and revenue estimates
DuPont (DD) guides lower
[BRIEFING.COM] The major averages ended the Friday session on a higher note thanks to a final-hour rally that sent the indices to session highs. The S&P 500 added 0.2%, narrowing its weekly loss to 0.1%, while the Nasdaq Composite settled higher by 0.4% to bring its weekly advance to 0.7%.
In general, equity indices respected narrow ranges until the last hour of action with the S&P 500 confined to a five-point range. The subdued activity was also reflected by below-average intraday trading volume, which received a big boost at the close from rebalancing of the Russell indices. Thanks to the final surge, almost 1.5 billion shares changed hands at the NYSE.
Only three sectors—energy, health care, and materials—ended in the red with materials (-0.4%) registering the largest decline. The smallest cyclical sector by weight (just 3.5% of the S&P 500) slumped out of the gate amid noteworthy weakness in the shares of DuPont (DD 65.44, -2.26). The Dow component tumbled 3.3% after lowering its Q1 and full-year guidance. Steelmakers also weighed with Market Vectors Steel ETF (SLX 47.44, -0.35) sliding 0.7%.
Meanwhile, the other commodity-related sector—energy (-0.1%)—also pressured the broader market, but erased the bulk of its loss in the late afternoon to end the week higher by 4.9%. For its part, crude oil settled little changed at $105.76/bbl.
Also of note, the health care sector (-0.2%) lagged throughout the session amid weakness in biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 256.73, +0.35) was down as much as 0.9% intraday, but settled on its high.
The underperformance of the biotech space did not stop the Nasdaq from outpacing the benchmark index. Large cap components contributed to the outperformance with Apple (AAPL 91.98, +1.08) and Microsoft (MSFT 42.25, +0.53) advancing close to 1.2% apiece. High-beta chipmakers struggled to keep up as the PHLX Semiconductor Index added 0.2%.
In addition to technology, three other influential sectors—consumer discretionary (+0.3%), financials (+0.2%), and industrials (+0.3%)—contributed to the afternoon spike to highs. Apparel retailers underpinned the discretionary space after Finish Line (FINL 29.56, +0.41) and Nike (NKE 77.68, +0.82) reported better than expected results.
Treasuries ended little changed with the 10-yr yield at 2.53%.
Economic data was limited to the Michigan Consumer Sentiment survey for June, which increased to 82.5 in its final reading for June. That was up from a preliminary report of 81.2 and up from 81.9 in May. The Briefing.com consensus expected the Index to increase to 81.7. The preliminary June report initially showed a decline in confidence. That didn’t jive with the big improvements in equity prices and employment conditions. However, the final reading brought the Consumer Sentiment Index in-line with the Conference Board’s Consumer Confidence Index, which increased to 85.2 in June from 82.2 in May.
On Monday, the Chicago PMI report for June (Briefing.com consensus 61.0) will be released at 9:45 ET and the Pending Home Sales report for May (consensus +1.5%) will cross the wires at 10:00 ET.
S&P 500 +6.1% YTD
Nasdaq Composite +5.3% YTD
Dow Jones Industrial Average +5.3% YTD
Russell 2000 +2.2% YTD
Week in Review: Range-Bound Ahead of Quarter End
The major averages started the week on a quiet note with the S&P 500 shedding less than a point. To be fair, the slight downtick was a function of some profit taking after the benchmark index registered six consecutive gains. Equity indices started the day in the red and maintained narrow ranges throughout the session. The S&P 500 tried to regain its flat line shortly after the open, but could not do so as three influential sectors weighed. Specifically, consumer staples (-0.6%), health care (-0.3%), and industrials (-0.6%) slumped out of the gate and pressured the market throughout the session. Industrials finished the trading day at the bottom of the leaderboard due to broad weakness among transport stocks. The Dow Jones Transportation Average lost 0.5% with 17 of 20 components ending in the red. Despite the loss, the Transportation Average remained higher by 7.8% for the quarter.
The stock market ended the Tuesday session on a lower note despite seeing early strength. The Dow Jones Industrial Average and S&P 500 posted respective losses of 0.7% and 0.6%, while the Nasdaq Composite shed 0.4%. Equity indices displayed modest losses at the start, but were quick to regain their flat lines after a pair of economic data points surprised to the upside. Briefly, the New Home Sales report for May came in well ahead of estimates (504K versus Briefing.com consensus 440K), while the Consumer Confidence report (85.2) registered its highest reading since early 2008. The economic news gave a boost to the consumer discretionary sector (-0.2%) and especially homebuilders. DR Horton (DHI) and Toll Brothers (TOL) both jumped 1.2%, while the iShares Dow Jones US Home Construction ETF (ITB) advanced 0.9%. For its part, the discretionary sector fell into the red during the afternoon when the overall market reversed and surrendered its gain.
On Wednesday, stocks advanced as participants looked past a pair of disappointing economic reports. The S&P 500 rose 0.5% with nine sectors ending higher, while the Nasdaq Composite (+0.7%) outperformed. Prior to the open, the S&P 500 appeared to be on track for its third consecutive decline after first quarter GDP was revised down to -2.9% from -1.0% (Briefing.com consensus -1.8%). In addition, a more recent report—May Durable Orders—also surprised to the downside. Despite starting on a lower note, the major averages were able to rebound swiftly with the move likely supported by some short covering.
Equity indices posted modest losses on Thursday, but a daylong rebound off the early lows helped the indices retrace the bulk of the decline. The S&P 500 shed 0.1% with six sectors ending in the red. Stocks did not waste any time this morning, sliding to session lows within the first 30 minutes of action. All ten sectors participated in the early retreat with financials (-0.3%) leading the market lower. Earlier in the week, the financial sector struggled to keep pace with the broader market, but Thursday’s opening loss was large enough to pressure the S&P 500. Citigroup (C) was the weakest performer among the majors, while European financials also struggled. Most notably, Barclays (BCS) fell 7.4% after New York Attorney General announced fraud charges against the company.
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.
FRIDAY 27 JUN
Michigan Sentiment – Final – 09:55 : 82.5 vs 81.7 (Prior 81.2)
MICHIGAN CONSUMER SENTIMENT
Highlights
The preliminary reading for the University of Michigan Consumer Sentiment report for June dipped to 81.2 from the final reading of 81.9 for May. The June figure is the lowest reading since March and it fell short of the Briefing.com consensus estimate, which was pegged at 82.9.
Key Factors
The Consumer Expectations Index fell to 72.2 from 73.7
The Current Conditions Index jumped to 95.4 from 94.5.
Big Picture
The June shortfall was not a major deviation from the final reading for May, yet it still qualifies as a disappointment when taking into account that stock markets were generally behaving well and employment conditions were improving during the survey period. It appears that consumer expectations acted as the drag on the overall number. As a reminder, sentiment does not have nearly as much impact on consumption as income growth does. As long as incomes continue to grow, consumption gains should be steady regardless of the ebb and flow in sentiment.
In Other News…
EMCOR Group Inc (EME) Subsidiary awarded contract for operations & maintenance and Fort Belvoir Community Hospital and Northern Region Medical Command. Read Article.
Philip Morris International (PM) seeks judicial review of EU’s Tobacco Products Directive. Read Article.
Technical Analysis
DOW JONES INDUSTRIAL AVERAGE
16851.84 +5.71 (+0.03%)
Volume: 137.6M (above average of 82.2M)
Range: 16773.84 – 16862.73
NASDAQ COMPOSITE
4397.93 +18.88 (+0.43%)
Volume: 1.1B (above average of 478.8M)
Range: 4371.60 – 4398.85
S&P500 INDEX
1960.96 +3.74 (+0.19%)
Volume: 737.0M (above daily average of 482.5M)
Range: 1952.18 - 1961.47
Supports continue to hold at 16700 on the DOW, 4350 on the NASDAQ, and 1950 on the S&P500.
Now it’s time to wait and watch if we do get a bounce. Or not. A breakdown below those levels should send us much lower.
Market Internals
NYSE:
Higher Volumes than the day before – 1338.6M vs 591.6M
Advancers outpaced Decliners (adv/dec): 2050 / 1019
New Highs outpaced New Lows (highs/lows): 203 / 8
NASDAQ:
Higher Volumes than the day before – 2629.3M vs 1541.8M
Advancers outpaced Decliners (adv/dec): 1700 / 997
New Highs outpaced New Lows (highs/lows): 82 / 31
VOLATILITY S&P500 (VIX)
11.26 -0.37 (-3.18%)
Advancers outpaced Decliners by an average of 1.86 on higher volumes than the day before (+1834.5M +86.00%).
Modestly bullish internals overall. The spike in volumes came in the last hour of the trading day due to portfolio pumping and index addition. I’d pass it off as a one-off event.
The VIX dropped back below 12.00, but ended just above the 11.00 line. For now it still looks like the VIX is positioned to make a move higher, or flat.
Treasury Bonds, Currencies & Commodities
Treasury Bonds from Briefing.com
Treasuries See Weekly Advance as GDP Posts Worst Reading Since Q2 2009: 10-yr: -01/32..2.534%..USD/JPY: 101.38..EUR/USD: 1.3645
The Week in Review
Treasuries saw weekly gains. Click here to see an intraweek yields chart.
Trade was supported by the Q1 GDP – Third Estimate print of -2.9%, which was the worst since Q2 2009.
Durable orders (-1.0% actual v. 0.4% expected), personal spending (0.2% actual v. 0.4% expected), and Case-Shiller 20-city Index (10.8% actual v. 11.6% expected) also saw disappointing results.
Existing home sales (4.89 mln actual v. 4.80 mln expected), new home sales (504K actual v. 440K expected), consumer confidence (85.2 actual v. 84.0 expected), and Michigan Sentiment – Final (82.5 actual v. 81.7 expected) all outpaced estimates.
The complex also had to grapple with comments from St. Louis Fed President James Bullard that suggested, “We are pretty close to normal, I don’t’ think policymakers, markets have digested that.”
This week’s auctions were forgetful.
Tuesday’s $30 bln 2y note auction drew 0.511% (the highest since May 2011) and light 3.23x bid/cover. A tepid indirect bid (23.1%) was slightly offset by a solid direct takedown (27.4%). Primary dealers were left with 49.5% of the supply.
Wednesday’s $35 bln 5y note auction drew 1.670% (WI 1.670%) and a solid 2.74x bid/cover. A strong showing from indirect bidders (52.5%) made up for the light direct bid (9.3%). Primary dealers ended up with just 38.2% of the supply.
Thursday’s $29 bln 7y note auction drew 2.152% (WI 2.140%) and a soft 2.44x bid/cover. Both indirect (40.6%) and direct (16.6%) bids were light, but primary dealers still ended up with just 42.8% of the supply. The auction may have been impacted by the USA-Germany World Cup match.
A flat week up front saw the 2y hold @ 0.457% after some mid-week selling provoked a test of 0.500%, a level last seen during the debt ceiling showdown in September.
The 5y fell -6bps to 1.638%. The yield slipped back below its 50 dma and ended Friday’s session with its lowest close in three weeks.
The 10y shed -9bps to 2.532%. The benchmark yield broke below 2.580%/2.600% support and holds near its lowest levels of June. A push through 2.500% puts the late-May low near 2.400% in play.
At the long end, the 30y erased -9bps to 3.336%. The yield ended the week on key trendline resistance off the January 2014 highs.
A flatter curve won out as the 2-10-yr spread narrowed to 207.5bps and the 5-30-yr spread tightened to 172.5bps.
The Week Ahead
Data kicks off the week on Monday with Chicago PMI (9:45) and pending home sales (10). SF’s Williams makes an appearance at the Montana & Utah Banker Association’s 2014 convention (14:10).
Tuesday will see ISM Index, construction spending (10), and auto/truck sales (14).
Data continues to flow on Wednesday with the weekly MBA Mortgage Index (7), Challenger Job Cuts (7:30), ADP Employment Change (8:15), and factory orders (10). Fed Chair Janet Yellen speaks at the IMF (11).
Data is heavy on Thursday as nonfarm payrolls, nonfarm private payrolls, unemployment rate, hourly earnings, average workweek, initial and continuing claims, trade balance (8:30), and ISM Services (10) are due out. U.S. equity markets will close at 1pm ET and the U.S. Treasury stops trading at 2pm ET for Independence Day.
Markets are closed Friday in observance of Independence Day.
2Yr 0.45 (-0.01), 5Yr 1.64 (unch), 10Yr 2.54 (+0.01), 30Yr 3.36 (+0.01)
2/10 Spread: 209bps (+2); 2/30 Spread: 291bps (+2)
Currencies from Briefing.com
Dollar Fights to Hold 80.00: 10-yr: -01/32..2.532%..USD/JPY: 101.36..EUR/USD: 1.3645
The Dollar Index presses session lows as trade looks to avoid its first sub-80.00 close since May 12. Click here to see a daily Dollar Index chart.
EURUSD is +30 pips @ 1.3640 as steady buying over the course of the session has trade contending with its best close in three weeks. Resistance in the 1.3650 area moves into focus as the 200 dma also lurks in the vicinity. Eurozone data is heavy as M3 money supply, private loans, and CPI Flash Estimate accompany German retail sales.
GBPUSD is -5 pips @ 1.7020 as trade holds just off the lows. Sterling saw some light buying early on in the session, but has been in a steady decline since the wider than anticipated trade deficit. The 1.7050 area has provided resistance over the past two weeks, and the inability to push through that level has caused some to turn their attention towards the 1.6900 level. British data is limited to net lending to individuals.
USDCHF is -25 pips @ .8910 as trade breaks down to a one and a half-month low. Today’s selling has the pair probing its 50 dma, and comes amid strength in the euro.
USDJPY is -30 pips @ 101.35 as action lingers near one-month lows following the large drop in household spending an in uptick in the national inflation reading. The 101.25 area will be watched closely in the days ahead as support at the level dates back to the beginning of February. Japan’s preliminary industrial production is due out Sunday evening.
AUDUSD is +5 pips @ .9415 amid a rather subdued trade. Early buying threatened the .9450 level sellers were once again able to stand their ground. Any close above .9420 would be the best since November.
USDCAD is -30 pips @ 1.0665 as trade looks likely to book its lowest close since January 7. Today’s selling comes despite a larger than expected decline in Canada’s Raw Materials Price Index (-0.4% actual v. 1.3% expected), and has trade testing key support in the area. Canada’s GDP will be released on Monday.
Commodities from Briefing.com
Closing Commodities: Natural Gas Falls 2.9% Over the Week
Aug gold traded slightly above the breakeven level today, rising to a session high of $1321.90 per ounce. It eventually settled 0.2% higher at $1320.00 per ounce, gaining 0.3% over the week.
Sep silver traded near the unchanged line in a range between 21.07 per ounce and $21.22 per ounce. Unable to gain buying support, it settled 0.1% lower at $21.14 per ounce, booking a 0.7% gain for the week.
Aug crude oil pulled back from its session high of $106.17 per barrel shortly after equity markets opened and spent the remainder of floor trade chopping around in negative territory. It touched a session low of $105.33 per barrel and eventually settled at $105.76 per barrel, or four cents lower, booking a 1.0% loss for the week.
Aug natural gas spent the tire pit session in the red, trading as low as $4.38 per MMBtu. It inched slightly higher heading into the close and settled with a 0.5% loss at $4.42 per MMBtu. Today’s weakness brought losses for the week to 2.9%.
NYMEX Energy Closing Prices
Aug crude oil fell $0.04 to $105.76/barrel
Crude oil pulled back from a session high of $106.17 shortly after equity markets opened and spent the remainder of floor trade chopping around in negative territory. It touched a session low of $105.33 and eventually settled just four cents below the unchanged line, booking a 1.0% loss for the week.
Aug natural gas fell 2 cents to $4.42/MMBtu
Natural gas spent the entire pit session in the red, trading as low as $4.38. It inched slightly higher heading into the close and cut losses to 0.5%. Today’s weakness brought losses for the week to 2.9%.
Aug heating oil fell 2 cents to $3.02/gallon
Aug RBOB rose 1 cent to $3.07/gallon
CBOT Agriculture and Ethanol/ICE Sugar Closing Prices
Sep corn rose 3 cent to $4.42/bushel
Sep wheat rose 8 cents to $5.93/bushel
Aug soybeans fell 5 cents to $13.77/bushel
Sep ethanol rose cent to $2.00/gallon
Sep sugar (#16 (U.S.)) rose 0.05 of a penny to 26.13 cents/lbs
Conclusion
What a week. While the market closed lower on the week, intraday, the market showed significant upward strength.
That strength might just carry us onto Q3, considering that the first month of the quarter is the most bullish of the 3.
Daily Directional Accuracy (from 14 May 2014): 20/31 (64.50%)
Weekly Directional Accuracy (from 16 May 2014): 3/6 (50.00%)