DOW 17049.00 -19.71 (-0.12%), NASDAQ 4591.81 +5.28 (+0.12%),
S&P500 1997.4 +1.76 (+0.09%)
So, what next? Today’s session was as unclear as it gets. With neither bull nor bear taking advantage, this market might just continue in limbo again… But what’s certain is that the uptrend is dying, and I find it unlikely that we’ll get a catalyst to spark another push higher.
With the small caps not being too enthusiastic about today’s recovery and the recent bullish trend, I daresay we aren’t going any higher from here.
Tomorrow’s economic calendar is fairly busy, with the usual weekly unemployment claims out before the opening bell. The afternoon will also see the Treasury Budget, which might move markets. Ultimately, I don’t think there’s anything in particular to look out for.
Tomorrow will be the indication on where this market is headed for the next few weeks. A continued downside movement should put us on track for a continued sell-off.
Direction for Thursday 11 Sep: DOWN▼
So will someone tell me if that was up or down? Another unclear day… Of interest though, the Russell 2000 rallied right into the green, but the big caps remained weak throughout the day.
On the economic front, Initial Claims ticked upward, but one uptick in data doesn’t represent a change in the employment market. The Treasury Budget narrowed, and actually moved markets. Bonds didn’t exactly respond to the data, however. The Dollar Index remains at highs, and should continue to put pressure on the equity space.
Ultimately, nothing has fundamentally changed in the market. The S&P500 remains below 2000, having broken that support level, and we’re still in September, seasonally one of the weakest periods.
Market Summary
from Briefing.com
Industry Watch
Strong: Financials, Telecom Services, Utilities
Weak: Health Care, Technology
Other Market Moving Factors
President Obama announces U.S. will increase support for Syrian rebels and lead a coalition effort against ISIS
Spanish debt pressured by worries about the Catalan independence movement gathering steam
[BRIEFING.COM] The Dow Jones Industrial Average (-0.1%), Nasdaq (+0.1%), and S&P 500 (+0.1%) ended the Thursday affair on a flat note, while the relative strength among small caps sent the Russell 2000 higher by 0.7%.
Equity indices began the trading day on a cautious note following last evening’s remarks from President Obama who announced increased support for Syrian rebels and a U.S.-led coalition effort targeting ISIS militants in Syria and Iraq. The address led to some risk aversion overnight, but that sentiment faded during the day. Treasuries climbed overnight, but wiped out all of their gains over the course of the session. The 10-yr yield ended at 2.55% after marking a low at 2.51% shortly before the opening bell.
Meanwhile, the underperformance of three influential sectors—energy (+0.1%), technology (+0.1%), and health care (-0.3%)—drove the market to lows during the first 90 minutes of action. For the second consecutive day, the energy sector opened with a loss near 1.0%, but was able to shake off the weakness with help from crude oil, which surged 1.3% to $92.89/bbl.
The energy sector staged a nice turnaround, but remains lower by 3.8% so far in September. Influential sector members were mixed with Dow components Chevron (CVX 123.83, -0.45) down 0.4% and ExxonMobil (XOM 97.03, +0.22) up 0.2%.
Elsewhere, technology was among the early laggards, but rejoined the broader market in the afternoon. Chipmakers rallied off their intraday lows with Applied Materials (AMAT 22.93, +0.56) setting the pace. The stock rose 2.5%, while the broader PHLX Semiconductor Index added 0.3%.
While two of the early laggards were able to rebound, the health care sector could only trim about half of its loss as biotechnology weighed. The iShares Nasdaq Biotechnology ETF (IBB 273.35,-1.06) fell 0.4%.
The remaining three countercyclical groups fared a bit better with consumer staples shedding 0.1%, while telecom services and utilities rose 0.6% and 0.9%, respectively.
Participation was below average with 591 million shares changing hands at the NYSE floor.
Economic data was limited to weekly initial claims and the Treasury Budget for August:
Initial claims increased to 315,000 from an upwardly revised 304,000 (from 302,000), while the Briefing.com consensus expected a decline to 300,000
Throughout July and August, the initial claims level had averaged roughly 300,000 per week, a level normally associated with an economy that is running at, or near, full employment, but this week’s increase in claims brought the level back to its average from March through June
We believed that the claims data over the previous two months were biased by poor seasonal adjustments from the motor vehicle sector and we expected claims to rebound to the 310,000 — 320,000 range once the biases left
The Treasury Budget for August showed a deficit of $128.70 billion, which followed the prior deficit of $147.90 billion, while the Briefing.com consensus expected a deficit of $129.00 billion
Global Markets
Asia
Markets pressed lower across most of Asia
Reports out overnight suggested the Bank of Japan is buying short-term bills at a yield less than zero
Bank Indonesia (7.50%) and the Philippines’ central bank (3.75%) both held their benchmark interest rates steady, as expected
Japan’s BSI Manufacturing Index (12.7 actual v. -10.3 expected, -13.9 previous) topped estimates
China’s CPI (2.0% YoY actual v. 2.2% YoY expected, 2.3% YoY previous) and PPI (-1.2% YoY actual v. -1.1% YoY expected, -0.9% YoY previous) both posted cooler than expected readings
Australia’s employment change surged 121.0K (15.2K expected) and the unemployment rate declined to 6.1% (6.3%expected, 6.4% previous), but the data was likely skewed by a change in the calculation and a large amount of part-time jobs
Japan’s Nikkei (+0.8%) neared its best level of 2014
Hong Kong’s Hang Seng (-0.2%) closed at a one-month low as shares lost ground for a fifth straight day
China’s Shanghai Composite (-0.3%) saw a third day of selling
India’s Sensex (-0.2%) continued to slide off all-time highs as trade pressed lower for a third day
Australia’s ASX (-0.5%) fell for the sixth time in seven days
Europe
UK’s FTSE: -0.5%
Germany’s DAX: -0.1%
France’s CAC: -0.2%
Spain’s IBEX: -0.6%
Portugal’s PSI: + 0.0%
Italy’s MIB Index: -0.2%
Irish Ovrl Index: + 0.2%
Greece ASE General Index: -0.4%
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.
Initial Claims – 08:30 : 315K vs 300K (Prior 304K)
Continuing Claims – 08:30 : 2487K vs 2495K (Prior 2478K)
Natural Gas Inventories – 10:30 : 92bcf (Prior 79bcf)
Treasury Budget – 14:00 : -$128.7B vs $-129B (Prior -$147.9B)
UNEMPLOYMENT CLAIMS
Highlights
The initial claims level increased to 315,000 for the week ending September 6 from an upwardly revised 304,000 (from 302,000) for the week ending August 30. The Briefing.com consensus expected the initial claims level to fall to 300,000.
The continuing claims level increased to 2.487 mln for the week ending August 30 from an upwardly revised 2.478 mln (from 2.464 mln) for the week ending August 23. The consensus expected the continuing claims level to increase to 2.490 mln.
Key Factors
Throughout July and August, the initial claims level averaged roughly 300,000 per week. That level is normally associated with an economy that is running at, or near, full employment. This week’s increase in claims brought the level back to its average from March through June.
We believed that the claims data over the previous two months were biased by poor seasonal adjustments from the motor vehicle sector. We expected initial claims to rebound back to the 310,000 – 320,000 range once the biases left. Thus, the increase in claims is not a change in labor market conditions.
On the other hand, the DOL has consistently stated that no special factors have affected the claims data, and that the drop in claims over the last two months has been the result of a real decline in layoff levels. That continued with the statement this week. If the DOL is correct in its assessment, then this week’s increase in claims could be a sign of a wavering labor market.
To make matters even more confusing, this week’s claims data included an earlier than normal Labor Day holiday period. The DOL is notorious for making poor seasonal adjustments around national holidays, and the increase could be nothing more than a one-time calendar-based shock.
Extrapolating from one week’s worth of data is not advisable, but it is worth watching closely.
Big Picture
After two months of sub-300,000 claims readings, the initial claims level returned to its March through June average.
TREASURY BUDGET
Highlights
The Treasury budget showed a deficit of $128.7 bln in August, down from a deficit of $147.9 bln in August 2013. The Treasury data are not seasonally adjusted, and the August data cannot be compared to the $94.5 bln deficit in July.
Key Factors
The reported August deficit was in-line with the CBO’s forecast of a $129 bln shortfall.
Total revenues increased to $194.2 bln in August 2014 from $185.4 bln in August 2013, a gain of $8.8 bln.
Total outlays fell by $10.3 bln in August 2014, from $333.3 bln in August 2013 to $323.0 bln.
Year-to-date, the deficit is $589.2 bln, $166.2 bln less than the comparable period in FY13.
Big Picture
Raw data available at http://www.fms.treas.gov/mts/index.htmL
Ticker News
from Briefing.com
HEADLINE NEWS
American Airlines (AAL) to replace flight manuals with tablets to lower cost of fuel, according to reports
Baxter (BAX) announces Baxalta as the name of new global biopharmaceutical company
Dow Chemical (DOW) not allowed to receive $1 bln in tax deductions over partnerships, according to reports
Starboard discloses that it believes that Darden Restaurants (DRI) has not complied in good-faith with a Florida Circuit Court’s order to turn over certain books and records
Intel (INTC) purchases Powerwave patent portfolio, terms not disclosed
JDS Uniphase (JDSU) to separate into two public companies
YUM! Brands (YUM) increases quarterly dividend 11% to $0.41 from $0.37/share
EARNINGS/GUIDANCE
1-800-FLOWERS (FLWS) reports EPS in-line, misses on revs; guides FY15
JDS Uniphase (JDSU) reaffirms Q1 guidance in its release
Kroger (KR) beats by $0.01, beats on revs; raises FY15 guidance slightly
lululemon athletica (LULU) beats by $0.04, beats on revs; guides Q EPS in-line, revs in-line; guides FY15 EPS in-line, revs mid point above consensus
Men’s Wearhouse (MW) beats by $0.04, misses on revs
Progressive (PGR) August EPS $0.14 vs. $0.11 last year; net premiums written +10% to $1.50 bln
RadioShack (RSH) misses by $0.33, misses on revs
Restoration Hardware (RH) beats by $0.03, misses on revs; guides OctQ EPS above consensus, revs in-line; guides FY15 EPS in-line, revs below consensus
Wet Seal (WTSL) misses by $0.05, misses on revs; guides Q3 EPS below consensus; Q2 consolidated comps -12.4%
ANALYST ACTIONS
Upgrades
JDS Uniphase (JDSU) upgraded to Outperform at RBC Capital Mkts; tgt raised to $18
SeaWorld Entertainment (SEAS) upgraded to Outperform from Neutral at Macquarie
Downgrades
Crocs (CROX) downgraded to Neutral from Buy at Buckingham Research
Express Scripts (ESRX) downgraded to Neutral from Buy at Goldman
Macy’s (M) downgraded to Neutral from Buy at Sterne Agee
Other
CBOE Holdings (CBOE) initiated with a Buy at Deutsche Bank; tgt $63
CME Group (CME) initiated with a Buy at Deutsche Bank; tgt $85
F5 Networks (FFIV) tgt raised to $150 from $135 at Deutsche Bank; Buy
GrubHub (GRUB) initiated with a Mkt Perform at Barrington Research
IntercontinentalExchange (ICE) initiated with a Hold at Deutsche Bank; tgt $202
NASDAQ (NDAQ) initiated with a Hold at Deutsche Bank; tgt $46
Twitter (TWTR) initiated with a Buy at Canaccord Genuity; tgt $62
Technical Analysis
Range: 16983.88 – 17057.41
NASDAQ COMPOSITE
4591.81 +5.29 (+0.12%)
Volume: 407.6M (below average of 435.3M)
Range: 4544.84 – 4587.10
Range: 1985.93 – 1997.65
The same support levels continue to hold in play.
But we got a bearish harami / hammer on the DOW, which is conflicting, and the possibility of a 3rd candle reversal on the NASDAQ and S&P500.
Market Internals
New Highs matched New Lows (highs/lows): 40 / 40
New Highs outpaced New Lows (highs/lows): 68 / 48
VOLATILITY S&P500 (VIX)
12.80 -0.08 (-0.62%)
Advancers outpaced Decliners by 1.35 on lower volumes than the day before (-101.0M -4.21%).
That is no beat too. With every so-called “beat” coming on lower volumes, I’m inclined to say this isn’t a reversal in the making.
The VIX remains largely unchanged near 13.00.
Treasury Bonds, Currencies & Commodities
from Briefing.com
Treasury Bonds
Treasuries Give Back Post-Auction Gains, Finish Little Changed: 10Y: unch..2.542%..USD/JPY: 107.08..EUR/USD: 1.2919
Treasuries ended little changed after giving up their post-auction gains. Click here to see an intraday yields chart.
The complex was modestly bid into the cash open as President Obama talked tough against ISIL and approved airstrikes in Syria, but leaked lower throughout the day as stocks recovered their early losses.
Maturities retested session highs following the strong $13 bln 30Y reopening that drew 3.240% and a solid 2.67x bid/cover. Indirect (45.5%) and direct (21.8%) bids were both strong, leaving primary dealers with just 32.7% of the supply.
However, trade slipped over the remainder of the afternoon, causing most maturities to finish near their respective flat lines.
Up front, the 2Y slid -1.2bps to 0.548%. Action continues to test levels last seen in May 2011.
In the belly, the 5Y closed -0.2bps @ 1.780%. The yield slipped off a five-month closing high, but remained near the key 1.800% level.
The 10Y eased -0.3bps to 2.531% as trade ended above the 100 dma for a second straight session. Action continues to press resistance in the area.
Outperformance at the long end dropped the 30Y -1.5bps to 3.254%. The yield on the long bond pressed to 3.236% in response to the strong auction, but climbed off that level into the cash close.
A steeper curve developed as the 2-10-yr spread widened to 198.5bps.
2Yr 0.58 (unch), 5Yr 1.79 (unch), 10Yr 2.54 (unch), 30Yr 3.27 (+0.01)
2/10 Spread: 196bps (unch); 2/30 Spread: 269bps (+1)
Currencies
Dollar Drifts Little Changed: 10Y: +02/32..2.530%..USD/JPY: 106.93..EUR/USD: 1.2930
The Dollar Index drifts little changed near 84.25. Click here to see a daily Dollar Index chart.
The greenback has held in negative territory throughout today’s session as trade has whipped around in response to headlines emerging from all corners of the globe.
EURUSD is +10 pips @ 1.2925 as trade continues to hold near 14-month lows. The single currency saw some volatility early in the session as details emerged of the latest sanctions against Russia. Eurozone data scheduled for tomorrow is limited to industrial production.
GBPUSD is +40 pips @ 1.6240 as trade gains for a third straight session. Sterling has witnessed a continuation bid following yesterday’s poll results which showed 53% of voters will for ‘NO’ for Scottish independence.
USDCHF is -15 pips @ .9350 as action slips off its best levels in a year. A quiet session for news and data out of Switzerland has kept action tethered to the euro.
USDJPY is +10 pips @ 106.95 as a volatile trade draws to a close. Early buying ran the pair to 107.20 before headlines indicating BOJ chief Kuroda sees no need to change policy at this time pressured trade to the lows near 106.45. Action has since recouped those losses and remains on track for a fourth straight gain. Bank of Japan Governor Haruhiko Kuroda speaks tomorrow morning in Tokyo.
AUDUSD is -50 pips @ .9110 as trade drops to its lowest levels since the end of March. The hard currency saw an initial spike above .9215 in response to the strong employment report, but eventually pulled back as a change in the calculation and a large jump in part-time jobs made the reading look more impressive.
USDCAD is +100 pips @ 1.1045 as trade readies for its best close in more than five months. Today’s advance has been supported by the weak New Home Price Index (0.0% MoM actual v. 0.2% MoM expected) report.
Commodities
NYMEX Energy Closing Prices
Oct crude oil rose $1.18 to $92.89/barrel
Crude oil trended higher after lifting from its session low of $90.74 set at pit trade open. The energy component broke into positive territory in late morning action and rose as high as $92.99 before settling with a 1.3% gain. During overnight electronic trade, crude oil touched $90.43, the lowest level for the continuous contract since May 2013.
Oct natural gas fell 13 cents to $3.83/MMBtu
Natural gas fell deeper into negative territory following inventory data that showed a build of 92 bcf when a build of 79-82 bcf was anticipated. Prices tumbled as low as $3.81 after trading at a session high of $3.93 earlier in the session. Natural gas eventually settled with a 3.3% loss.
Oct heating oil rose 1 cent to $2.76/gallon
Oct RBOB fell 1 cent to $2.52/gallon
CBOT Agriculture and Ethanol/ICE Sugar Closing Prices
Dec corn fell 4 cents to $3.41/bushel
Dec wheat fell 11 cents to $5.09/bushel
Nov soybeans fell 12 cents to $9.82/bushel
Oct ethanol fell 7 cents to $1.82/gallon
Nov sugar (#16 (U.S.)) rose 0.03 of a penny to 25.32 cents/lb
COMEX Metals Closing Prices
Dec gold fell $6.40 to $1238.90/oz
Gold fell for a fourth consecutive session despite a rise in jobless claims. Weekly initial claims increased to 315K from an upwardly revised 304K (from 302K), while the Briefing.com consensus expected a decline to 300K. The yellow metal popped to a session high of $1248.50 in morning action but quickly retreated into negative territory. It traded as low as $1235.30, its lowest level since January, and settled with a 0.5% loss.
Dec silver fell $0.33 to $18.60/oz
Silver traded in the red during all of today’s floor trade, falling as low as $18.57, its new low since June 2013. Unable to find buying support, it settled with a 1.7% loss.
Dec copper fell 2 cents to $3.09/lb
Preview: Friday 12 Sep
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.
Retail Sales – 08:30 : 0.6% (Prior 0.0%)
Retail Sales ex-auto – 08:30: 0.3% (Prior 0.1%)
Export Sales ex-ag. – 08:30 : Prior 0.3%
Import Prices ex-oil – 08:30 : Prior 0.0%
Michigan Sentiment – 09:55 : 83.5 (Prior 82.5)
Business Inventories – 10:00 : 0.4% (Prior 0.4%)
Corporate Earnings
BMO :
DRU SNOW NTWK
AMC :
None
Other Events of Interest
Fed/Treasury/Political Events
None
Economic Events
Eurozone Industrial Production – 04:00
China Industrial Production & Retail Sales (Sat 13 Sep 01:30)
Analyst/Investor Meetings
Seagate Technology Analyst Meeting
Blackbaud Investor Day 2014
Commentary
Today’s session is another unclear session, with the bulls seemingly interesting in a recovery but failing to muster the strength, and the bears… waiting? All-in-all, participation seems lacklustre and it’s probably due to September.
Tomorrow is the final session of the week… We’ve got the heaviest economic calendar with Retail Sales on tap.
Friday will set us up nicely for the following week, and I’m not optimistic.
Direction for Friday 12 Sep: DOWN▼
Daily Directional Accuracy (from 14 May 2014): 52/81 (64.19%)
Weekly Directional Accuracy (from 16 May 2014): 9/15 (57.14%)