DOW 17613.74 +39.81 (+0.23%), NASDAQ 4651.62 +19.08 (+0.41%),
S&P500 2038.26 +6.34 (+0.31%)
Given the tepid manner of Friday’s close, this rally seems to be slowing down significantly, especially with the NASDAQ not pushing higher at this point.
The 2nd week of November tends to be flat, and I reckon it’s a good time for us to take a slight dip to resume the rally.
Direction for Monday 10 Nov 2014: DOWN▼
Another move-up-and-go-nowhere day as all three indices notched fresh highs early in the session but failed to move higher in the afternoon. The market was once again led by the NASDAQ, but on a broader scale, the NASDAQ is actually lagging.
If anything, it was a quiet session with nothing in particular to be excited about.
Market Summary
from Briefing.com
Industry Watch
Strong: Financials, Health Care, Industrials, Technology, Utilities
Weak: Consumer Discretionary, Energy
Other Market Moving Factors
China’s Shanghai Composite jumps 2.3% after better than expected trade data and news of Shanghai-Hong Kong exchange link receiving approval
Homebuilders boosted by upbeat guidance from Toll Brothers (TOL)
Internet service providers slide after President Obama calls for utility-like regulation of the internet
[BRIEFING.COM] The stock market began the new trading week on an unassuming note with the key indices registering modest gains. The S&P 500 added 0.3% while Russell 2000 (+0.5%) outperformed.
Equity indices began the trading near their flat lines after the overnight session did little to change investor sentiment. China’s Shanghai Composite stood out, soaring 2.3%, after it was confirmed that the Shanghai-Hong Kong exchange link will begin operating on November 17.
Domestically, the S&P 500 resisted some mild selling efforts during the opening hour, but was able to advance alongside the biotechnology group. The iShares Nasdaq Biotechnology ETF (IBB 295.20, +5.06) gained 1.7% while the health care sector (+1.0%) settled in the lead despite starting among the laggards. Dow component Merck (MRK 58.81, -0.53) lost 0.9% after reporting disappointing trail data, but that had little impact on the sector.
Like health care, the remaining countercyclical groups started in the red, but ended with gains. The consumer staples sector added 0.4% with Dean Foods (DF 16.40, +1.98) surging 13.7% after beating bottom-line estimates and guiding Q4 earnings above consensus.
Elsewhere, the six cyclical sectors ended mixed with respect to the market. Technology (+0.3%) struggled at the start, but was able to end in-line with the S&P 500 amid strength in chipmaker names. The PHLX Semiconductor Index settled higher by 0.8% with just four names registering losses.
Similarly, industrials (+0.5%) and financials (+0.5%) finished ahead of the market while consumer discretionary (-0.1%) and energy (-0.8%) spent the bulk of the session in the red.
The discretionary sector was sent to lows during morning action after President Obama said the Federal Communications Commission should regulate the internet like a utility. The news pressured internet service providers with Charter Communications (CHTR 146.62, -9.75), Comcast (CMCSA 52.95, -2.20), and Time Warner Cable (TWC 136.50, -7.10) losing between 4.0% and 6.2%.
Meanwhile, homebuilders prevented the sector from registering additional losses. The iShares Dow Jones US Home Construction ETF (ITB 24.79, +0.24) rose 1.0% with Toll Brothers (TOL 32.96, +0.74) jumping 2.3% after issuing strong guidance for the fourth quarter.
For its part, the energy sector started in the lead, but slid to the bottom of the leaderboard with crude oil adding pressure. The energy component fell 1.4% to $77.26/bbl. Greenback strength presented a headwind with the Dollar Index (87.81, +0.16) erasing its overnight loss to end higher by 0.2%.
Treasuries retreated throughout the session, sending the 10-yr yield higher by six basis points to 2.36%.
Participation was in-line with long-term averages as 700 million shares changed hands at the NYSE floor.
Investors did not receive any economic data of note and tomorrow’s session will also be quiet on the economic front. Also of note, the bond market will be closed for Veterans Day.
Global Markets
Asia
Asian markets ended mostly higher. China’s Shanghai Composite +2.3%, Hong Kong’s Hang Seng +0.8%, and Japan’s Nikkei -0.6%.
In economic data:
China’s trade surplus expanded to $45.41 billion from $31.00 billion (expected surplus of $42.00 billion) as imports rose 4.6% year-over-year (consensus 5.5%; previous 7.0%) and exports increased 11.6% (expected 10.6%; prior 15.3%). Separately, PPI fell 2.2% year-over-year (expected -2.0%; last -1.8%) and CPI was unchanged month-over-month (consensus 0.1%; prior 0.5%) while the year-over-year reading rose 1.6%, as expected
Australia’s Home Loans fell 0.7% month-over-month (consensus -0.3%; prior -0.9%)
In news:
Markets in China and Hong Kong rallied after it was confirmed that the Shanghai-Hong Kong exchange link will begin operating on November 17.
Europe
UK’s FTSE: + 0.7%
Germany’s DAX: + 0.7%
France’s CAC: + 0.8%
Spain’s IBEX: + 1.5%
Portugal’s PSI: + 1.9%
Italy’s MIB Index: + 0.9%
Irish Ovrl Index: -0.1%
Greece ASE General Index: -1.1%
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
No Economic Data Releases
Ticker News
from Briefing.com
HEADLINE NEWS
Dendreon (DNDN) -62% after commencing voluntary chapter 11 proceedings to implement restructuring agreements
BlackBerry (BBRY) considering China partnerships, meets with Lenovo (LNVGY), according to reports
GT Advanced Tech (GTATQ) accuses Apple (AAPL) of bait and switch, according to reports
CIGNA (CI) planning restructure of HIV benefits, according to reports
Brookfield Property Partners (BPY) and Johnson Controls (JCI) joint venture has secured $8.5 bln Canada contract, according to reports
General Motors (GM) ordered switches prior to recall, according to reports
Petrobras Brasileiro (PBR) may face criminal US investigation for alleged bribery, according to reports
Boeing (BA) and SMBC Aviation Capital announce order for eighty 737 MAXs valued at more $8.5 bln
EARNINGS / GUIDANCE
Berkshire Hathaway (BRK.B) reported Q3 earnings of $2876.00 per share, $282.15 better than the Capital IQ Consensus Estimate of $2593.85
Transocean (RIG) +1.3% after reporting Q3 (Sep) results, beat on revs
Gogo (GOGO) -5% misses by $0.03, reports revs in-line; reaffirms FY14 guidance
Cheetah Mobile (CMCM) +11.5% after co beat by $0.01, beat on revs; guided Q4 revs in-line
WhiteWave Foods (WWAV) +3% beat by $0.01, beat on revs; guided Q4 EPS below consensus, revs in-line
Toll Brothers (TOL) +1.5% after co issued upside 4Q14 rev guidance
Rayonier (RYN) beat by $0.08, missed on revs; realigns strategy, cuts dividend 17%, restates financials from Q1/2; lowers FY14 guidance, guides FY15
RSP Permian (RSPP) slight higher after co beat by $0.02, missed on revs
Dresser-Rand (DRC) little changed after missing by $0.24, missed on revs
Kronos Worldwide (KRO) beat by $0.06, reports revs in-line
Curis (CRS) missed by $0.01, missed on revs
ArQule (ARQL) beat by $0.03, beat on revs; reaffirmed FY14 guidance
TravelCenters of America (TA) missed by $0.11, missed on revs
Entropic Comms (ENTR) beat by $0.04, reported revs in-line; implements restructuring plan
ANALYST ACTIONS
Upgrades:
Biomarin Pharm (BMRN) upgraded to Buy from Neutral at Goldman; tgt raised to $104 from $78
Newfield Expl (NFX) upgraded to Buy from Hold at Deutsche Bank; tgt raised to $42 from $28
Downgrades
W.W. Grainger (GWW) downgraded to Sell from Hold at Deutsche Bank
Eaton Vance (EV) downgraded to Underweight from Neutral at JP Morgan; tgt raised to $41 from $38
Wipro (WIT) downgraded to Sell at UBS
Other
Myriad Genetics (MYGN) initiated with a Underweight at Morgan Stanley
CoStar Group (CSGP) initiated with a Overweight at JP Morgan; tgt $195
FireEye (FEYE) added to Focus List at JP Morgan
Technical Analysis
DOW JONES INDUSTRIAL AVERAGE
17613.74 +39.81 (+0.23%)
Volume: 71,431,565 (below average of 86,136,017)
Range: 17,547.51 – 17,621.87
NASDAQ COMPOSITE
4651.62 +19.08 (+0.41%)
Volume: 471.4M (below average of 484.7M)
Range: 4,626.49 – 4,653.38
S&P500 INDEX
2038.26 +6.34 (+0.31%)
Volume: 459.5M (below average of 505.7M)
Range: 2,030.17 – 2,038.70
The NASDAQ continues its stall, while the DOW and S&P500 seemingly surges to new highs. MACD Divergence continues to persist and volumes on all three indices fall below recent averages.
If anything, caution is the name of the game and I’m not optimistic about this market stretching much further.
Market Internals
NYSE:
New Highs outpaced New Lows (highs/lows): 202 / 28
NASDAQ:
New Highs outpaced New Lows (highs/lows): 148 / 45
VOLATILITY S&P500 (VIX)
12.67 -0.45 (-3.43%)
Advancers outpaced Decliners by 1.44 on lower volumes than the day before (-110.8M -4.19%).
The VIX continues to extend its move and now breaks into the 12 region. That’s actually pretty optimistic and should keep this market afloat.
However… Internals continue to show mixed indications and I can’t be too optimistic about that. Not to mention that the TRIN yesterday was above 1 for a good part of the day.
Treasury Bonds, Currencies & Commodities
from Briefing.com
Treasury Bonds
Go Pack Go:
The Treasury market performed on Monday a lot like the Chicago Bears performed on Sunday night. That is, they looked pretty good during pre-game warm ups, but when the real action started, they got clobbered.
The trading action favored sellers from 6:00 a.m. ET onward and was as lopsided as Aaron Rodgers’ six, first-half passing touchdowns
There wasn’t a specific news catalyst for the reversal of early fortune, yet it had the semblance of being an exit trade as every instrument from the 2-yr note to the 30-yr bond saw their highs for the day around 6:00 a.m. ET and remained under steady selling pressure the rest of the session, finishing at their lows for the day
2- yr note saw a six basis point swing in yield from 0.48% to 0.54%
5-yr note swung from 1.55% to 1.64%
10-yr note pivoted from 2.28% to 2.36%
30-yr bond moved from 3.01% to 3.09%
Selling activity picked up for a variety of reasons
The lack of follow-through from Friday’s post-employment report rally
The 10-yr note could not maintain a posture below the 2.30% level
Weak response to seemingly supportive macro factors (China CPI near 5-yr low; China PPI -2.2% year-over-year; falling oil prices; and Moody’s saying it does not expect much change in global GDP growth the next two years)
A relatively weak $26 billion 3-yr note auction didn’t help matters
High yield of 0.998%
Bid-to-cover ratio 3.18x (prior 3.42x; 12-auction average of 3.34x)
Indirect bidders 37.7% (prior 35.5%; 12-auction average of 33.0%)
2Yr 0.55 (+0.04), 5Yr 1.65 (+0.05), 10Yr 2.38 (+0.06), 30Yr 3.09 (+0.05)
2/10 Spread: 183bps (+2); 2/30 Spread: 254bps (+1)
Currencies
Dollar Drifts Higher in Quiet Trade: The Dollar Index has been drifting higher over the course of a quiet day. The DXY slipped to 87.25 in early trade but has recovered most of its losses to push back to 87.80. As a reminder, U.S. Bond markets are closed tomorrow in observance of Veteran’s Day.
The euro has been trending lower but so far has been able to hold the 1.24 level. The single currency rallied early to push to 1.25 but was rejected at that level and has been on the decline for most of the day.
The pound is testing LoD as we head into the close of U.S. equities trade. Sterling has been showing signs of holding 1.58 the past two sessions but has been weaker over the course of the day after getting rejected at 1.59.
The yen has been treading just above the 115 level over the course of the day. While it has held the 115 level it has shown little signs of being able to move of that area. As we head towards the close yen is sliding towards a retest of the session lows,
Commodities
Energy price action
Crude oil fell $1.38 (-1.4%) to $77.26/barrel
Oil remains at depressed levels, falling overnight on concerns that OPEC is not in any hurry to cut output. WTI hit its HoD of 79.85 in GLOBEX trading overnight, and then seems to have found a bottom for the session at of 77.31. Futures have gone back and tested that level two more times, and has now settled right in that range.
Natural gas fell 13.6 cents (-3%) to $4.274/MMBtu
Natural gas gapped higher upon GLOBEX session open on Sunday hitting a high of 4.544 before trending downward. One analyst believes weakness is due to the developing cold in gas consuming regions due to Typhoon Nuri, rather than a sustained change in weather patterns. Futures settled near the LoD of 4.246.
Heating oil fell 3 cents (-1.2%) to $2.469/gallon
RBOB fell 3.1 cents (-1.5%) to $2.104/gallon
Agricultural price action
Corn rose 2 cents (+0.5%) to $3.695/bushel
Wheat rose 4.5 cents (+0.9%) to $5.19/bushel
Soyrbeans fell 12.25 cents (-1.25%) to $10.245/bushel
Ethanol rose 4 cents (+2.1%) to $1.92/gallon
Sugar #11 fell 0.3% to 15.64 cents/lb
Metals price action
Gold fell $10.50 (-0.9%) to $1159.30/oz
Gold has trended lower since its GLOBEX open on Sunday afternoon, with another leg lower coming around 11. Gold continues to trade around an important an level around 1170.
Silver fell 6.4 cents (-0.4%) to $15.65/oz
Silver remains at depressed levels, still trading at 4.5 year lows. Like gold, it too has trended lower since its open on Sunday afternoon, reaching a LoD 15.53 just before the lunch hour.
Copper fell 1.75 cents (-0.6%) to $3.021
USDA Report
Global 2014/15 wheat supplies are lowered 1.1 mln tons with decreased production offsetting higher beginning stocks.
U.S. wheat supplies for 2014/15 are decreased 10 mln bushels based on updated production estimates for the states resurveyed following the Sept 30 Small Grains report.
U.S. feed grain production for 2014/15 is lowered this month as lower corn, barley, and oats output more than offsets a small increase for sorghum.
Corn production is forecast 68 mln bushels lower, but still a record at 14,407 mln bushels.
The national average corn yield is reduced 0.8 bushels per acre to 173.4 bushels. U.S. corn use for 2014/15 is projected slightly higher with a 5-mln-bushel increase in expected food, seed, and industrialuse.
Corn used in ethanol production is projected 25 mln bushels higher with a reduction in expected sorghum use for ethanol and the strong pace of weekly ethanol production reported so far for the marketing year.
Mostly offsetting this increase is a 20- mln-bushel reduction in other food and industrial use.
Global oilseed production for 2014/15 is projected at a record 528.9 mln tons, up 0.5 mln from last month. Soybean production is forecast at 3,958 mln bushels, up 31 mln on higher yields.
The soybean yield is projected at a record 47.5 bushels per acre, up 0.4 bushels mainly on gains for Iowa and South Dakota.
Preview: Monday 10 Nov
Economic Data
Economic Data is listed as Consensus by default. Prior data will be given in brackets. If Consensus Data is not available, Prior data will be given without brackets. If Prior Data has been revised, the revised data will be given together with an indication whether it was an upward or downward revision.
No Economic Data
Corporate Earnings
ACM CST DHI FMSA ICD INSY LGIH OTIV PETX QIWI RDUS SABR SPNS TOUR TRBAA
EVDY FOSL HMIN INGN LMNS LXFT NOAH OPWR PAHC PE STKL SUPN TAHO YY
Other Events of Interest
Fed/Treasury/Political Events
None
Economic Events
German Wholesale Price Index – 04:00
Commentary
With volumes on a decline and mixed signals continuing to persist, I am not too optimistic about this rally. But for all you know, we could just stagnate at these levels and go nowhere.
It’s probably best to just wait it out and see where this market ends up. But we don’t want to be buying the highs, in any case.
Tomorrow is Veteran’s Day and the US Bond Market will be closed in observance.
Direction for Tuesday 11 Nov 2014: DOWN▼
Daily Directional Accuracy (from 14 May 2014): 80/122 (65.57%)
Weekly Directional Accuracy (from 16 May 2014): 13/24 (54.16%)