DOW 16713.58 +61.78 (+0.37%), NASDAQ 4453.00 +18.87 (+0.43%),
S&P500 1955.18 +8.46 (+0.43%)
Today’s performance wasn’t bullish. It was the typical gap-up-and-go-nowhere day.
I’m going to go with the technical view that we’re at resistance levels and should not be making any push higher.
Then again, we have quite a few data points – Eurozone GDP and Initial Claims – that will move the markets. And so I remain on the side of caution.
Direction for Thursday 14 Aug: DOWN▼
So the Eurozone stagnated, with Germany contracting. Initial Claims jumped more than expected – whether that number is a blip remains to be seen.
And we have another divergent day. Market up, TRIN above 1, bond yields down. This divergence is honestly getting on my nerves.
The single bright spot? That late spike in the last 5 minutes of the trading session. Where that came from, I have no idea. But with volumes notching the lowest tally of the year – I’m hard-pressed to say this bull is done with.
Market Summary
Economic Data & News
Technical Analysis
Market Internals
Bonds, Currencies & Commodities
Preview
Market Summary
Industry Watch
Strong: Consumer Discretionary, Financials, Health Care, Industrials, Utilities
Weak: Energy, Materials, Technology
Other Market Moving Factors
Eurozone GDP (0.0% versus expected 0.1%) misses expectations
Wal-Mart (WMT) reports in-line results, but lowers guidance for fiscal year 2015
Quick-service restaurant names pressured by disappointing earnings/guidance from Red Robin (RRGB) and Noodles & Co (NDLS)
[BRIEFING.COM] The major averages posted modest gains on Thursday with the S&P 500 (+0.4%) extending its week-to-date advance to 1.2%. Small caps lagged throughout the session as the Russell 2000 (+0.2%) was unable to reclaim its 200-day moving average (1145).
Despite receiving disappointing economic data from overseas (Eurozone GDP 0.0%; expected 0.1%), equity indices climbed out of the gate with yesterday’s leading sector—health care—pacing the advance. The third-largest sector added 1.2% with help from biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 261.20, +4.07) settled higher by 1.6% to extend its weekly gain to 3.8%.
The relative strength of biotechnology underpinned the Nasdaq Composite, but the tech-heavy index could not overtake the S&P 500 due to the underperformance of large cap technology names.
The tech sector (+0.1%) spent the entire session near its flat line as heavily-weighted components like Apple (AAPL 97.50, +0.26), Google (GOOGL 584.65, +0.09), IBM (IBM 187.88, -0.07), and Oracle (ORCL 40.22, -0.02) spun their wheels. Also of note, Cisco Systems (CSCO 24.54, -0.66) tumbled 2.6% with concerns about slow order growth overshadowing its better than expected earnings and revenue.
Chipmakers, however, finished a bit ahead of the sector with the PHLX Semiconductor Index adding 0.2%. Avago (AVGO 73.84, +1.87) outperformed, climbing 2.6% after agreeing to sell LSI’s Axxia Networking Business assets to Intel (INTC 33.94, -0.16) for $650 million.
Elsewhere among cyclical sectors, the consumer discretionary space (+0.8%) outperformed despite losses in the quick-service restaurant space after Red Robin Gourmet Burgers (RRGB 52.63, -11.92) and Noodles & Co (NDLS 21.16, -4.06) reported disappointing results. The two sank 18.5% and 16.1%, respectively, while the discretionary sector drew strength from homebuilders and retailers. The iShares Dow Jones US Home Construction ETF (ITB 23.04, +0.38) and SPDR S&P Retail ETF (XRT 85.36, +0.84) settled higher by 1.7% and 1.0%, respectively.
Switching to the countercyclical side, the utilities sector (+1.0%) followed not far behind health care, while consumer staples (+0.4%) and telecom services (+0.4%) ended right behind the S&P 500. In the staples sector, Wal-Mart (WMT 74.39, +0.36) added 0.5% after reporting in-line results and lowering its guidance for the full year.
Treasuries rallied overnight and the 10-yr note notched its high just ahead of the open before surrendering about half of its gain during the session. The benchmark 10-yr yield fell three basis points to 2.40%.
Participation was well below average with just 506 million shares changing hands at the NYSE floor, which represented the lowest total of the year.
Economic data was limited to initial claims and import/export prices:
The initial claims increased to 311,000 from an upwardly revised 290,000 (from 289,000), while the Briefing.com consensus expected an increase to 305,000
Over the past several weeks, the initial claims level had averaged below 300,000, which normally signals an economy at or near full employment
If the current levels hold for several weeks, the summer drop will be written off as resulting from poor seasonal adjustments, but if the return above the 300,000 mark is a one-time event, that will be a sign of health from the labor market
Export prices, excluding agriculture, increased 0.3% in July after decreasing 0.3% in the prior reading
Excluding oil, import prices were unchanged, which followed last month’s downtick of 0.1%
Global Markets
Asia
The major Asian bourses ended mixed
Bank of Korea cut its key rate 25bps to 2.25%
Japan’s core machinery orders climbed 8.8% MoM (15.5% MoM expected), but the number was well short of estimates
India’s Wholesale Price Index slid to 5.19% YoY (5.43% YoY previous)
Australia’s MI Inflation Expectations eased to 3.1% (3.8% previous)
Japan’s Nikkei (+0.7%) gained for a fourth straight session
Hong Kong’s Hang Seng (-0.4%) eased off its best levels since November 2010
China’s Shanghai Composite (-0.7%) fell off eight-month highs
India’s Sensex (+0.7%) climbed to a two-week high
Australia’s ASX (+0.6%) rallied for the third time in four days, supported by solid earnings
Europe
UK’s FTSE: + 0.4%
Germany’s DAX: + 0.3%
France’s CAC: + 0.3%
Spain’s IBEX: -0.1%
Portugal’s PSI: + 1.0%
Italy’s MIB Index: -0.3%
Irish Ovrl Index: + 1.0%
Greece ASE General Index: + 0.7%
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 : 311K vs 305K (Prior 290K▲)
Continuing Claims – 08:30 : 2544K vs 2523K (Prior 2519K▲)
Export Prices ex-ag. – 08:30 : 0.3% (Prior -0.3%)
Import Prices ex-oil – 08:30 : 0.0% (Prior -0.1%)
Natural Gas Inventories – 10:30 : 78bcf (Prior 82bcf)
UNEMPLOYMENT CLAIMS
Highlights
The initial claims increased to 311,000 for the week ending August 9 from an upwardly revised 290,000 (from 289,000) for the week ending August 2. The Briefing.com consensus expected the initial claims level to increase to 305,000.
The continuing claims level increased to 2.544 mln for the week ending August 2 from an upwardly revised 2.519 mln (from 2.518 mln) for the week ending July 26. The consensus expected the continuing claims level to increase to 2.523 mln.
Key Factors
Over the past several weeks, the initial claims level averaged below 300,000. Those levels normally signal an economy at or near full employment.
At the time, we advocated that the drop in claims was likely a result of seasonal biases due to the auto industry. Motor vehicle manufacturing plants that were normally closed for retooling may have been kept open to meet elevated demand. Meanwhile, the DOL reported that there were no special factors in the sub-300,000 claims results.
This week, the initial claims level returned to its previous range (310,000 – 320,000). Again, the DOL announced no special factors.
If claims stay at its current range over the next few weeks, the sudden drop earlier in the summer can be conclusively blamed on poor seasonal adjustments. If this week’s increase in claims is a one-time blip, then the labor market may be truly repaired.
Big Picture
Claims returned to its pre-summer range of 310,000 – 320,000.
In Other News…
HEADLINE NEWS
Allergan (AGN) acquires LiRIS program from TARIS Biomedical for upfront payment of $67.5 mln in cash; has also agreed to make certain milestone payments
Amgen (AMGN) announces top-line results from Phase 3 focus trial of Kyprolis in patients with relapsed and advanced refractory multiple myeloma did not meet its primary endpoint; issues voluntary recall of Aranesp (darbepoetin alfa) (500 mcg) prefilled syringes in several countries outside of the United States due to the presence of visible particulates
Exxon Mobil (XOM) and Total (TOT) end South Sudan oil search plans, according to reports
FedEx (FDX) and UPS (UPS) to service more cities in China, according to reports
Merck (MRK) confirms FDA approval of BELSOMRA (suvorexant) for the treatment of insomnia
McCormick (MKC) issues voluntary recall of ground oregano due to possible salmonella risk
Oracle (ORCL) expiration date of tender offer for MICROS Systems, Inc. shares extended to September 2, 2014
Pfizer (PFE): Advisory Committee on Immunization Practices votes to recommend Prevnar 13 vaccine in adults aged 65 years and older
Weyerhaeuser (WY) increases dividend by 32% and announces $700 mln share repurchase program
EARNINGS/GUIDANCE
China Mobile (CHL) reports H1 EPS of RMB 2.83 versus RMB 2.72 two est average; revs rose 7.1% YoY to RMB 324.68 bln versus RMB 320.42 bln Capital IQ consensus
Cisco Systems (CSCO) beats by $0.02, beats on revs
Dangdang (DANG) beats by $0.04; beats on revs; sees Q3 revs above consensus
Kohl’s (KSS) beats by $0.06, misses on revs; Q2 comps -1.3%
Lenovo (LNVGY) reports in-line results; beats on revs
NetApp (NTAP) beats by $0.03, beats on revs; guides Q2 EPS in-line, revs in-line
Perrigo (PRGO) beats by $0.19, beats on revs; guides FY15 EPS below consensus
Plug Power (PLUG) reports EPS in-line, beats on revs
Wal-Mart (WMT) reports EPS in-line, beats on revs; guides Q3 EPS in-line; lowers FY15 EPS below consensus
ANALYST ACTIONS
Upgrades
Helmerich & Payne (HP) upgraded to Neutral from Underperform at Credit Suisse
NetApp (NTAP) upgraded to Buy from Hold at Needham
Progressive (PGR) upgraded to Buy from Neutral at Citigroup
Downgrades
Freeport-McMoRan (FCX) downgraded to Hold from Buy at Stifel
Infosys (INFY) downgraded to Hold from Buy at Jefferies
Other
Delphi Automotive (DLPH) initiated with a Outperform at Credit Suisse; tgt $8
E*TRADE (ETFC) initiated with a Hold at Deutsche Bank; tgt $23
Ford Motor (F) initiated with a Neutral at Credit Suisse; tgt $18
General Motors (GM) initiated with a Underperform at Credit Suisse; tgt $33
Molson Coors Brewing (TAP) initiated with a Outperform at Credit Suisse; tgt $84
NetApp (NTAP) target raised to $46 from $42 at Piper Jaffray; Overweight
Tesla Motors (TSLA) initiated with a Outperform at Credit Suisse; tgt $325
Technical Analysis
Range: 16651.67 – 16714.22
NASDAQ COMPOSITE
4453.00 +18.87 (+0.43%)
Volume: 334.3M (below average of 447.3M)
Range: 4433.94 – 4453.00
S&P500 INDEX
1955.18 +8.46 (+0.43%)
Volume: 322.1M (below average of 449.8M)
Range: 1947.41 – 1955.23
So we nudged above our support levels… And I use nudge because it wasn’t a breakout. Not with that divergent performance.
Both the DOW and S&P500 remain below their 20 and 50 MAs, while the NASDAQ moves to contend with resistance around the 4450 confluence. These levels should keep the market pressured downward for now.
A possible third candle reversal also sit on the horizon.
Market Internals
New Highs outpaced New Lows (highs/lows): 77 / 21
New Lows outpaced New Highs (highs/lows): 44 / 46
VOLATILITY S&P500 (VIX)
12.42 -0.48 (-3.72%)
Advancers outpaced Decliners by 1.68 on lower volumes than the day before (-178.9M -8.32%).
Looks like the bulls are losing the initiative. The VIX closed solidly lower but remains stuck within the 12.00 confluence.
Treasury Bonds, Currencies & Commodities
from Briefing.com
Treasury Bonds
30Y Closes at 3.192%, Lowest Since May 2013: 10-yr: +06/32..2.402%..USD/JPY: 102.45..EUR/USD: 1.3367
Treasuries posted a second day of gains as trade was supported by this afternoon’s strong 30y bond auction. Click here to see an intraday yields chart.
The complex held little changed into the cash open with most maturities climbing to their best levels of the session in response to the disappointing initial (311K actual v. 305K expected) and continuing (2544K actual v. 2523K expected) claims data.
Sellers managed to take control and drop action back onto the flat line as equity markets churned higher and traders prepared for this afternoon’s $16 bln 30y bond auction.
The auction drew 3.224% (WI 3.247%) and a solid 2.60x bid/cover (12-auction average 2.38x) as indirect (45.9%) and direct (24.4%) bids both outpaced their 12-auction averages. Primary dealers were left with just 29.7% of the supply.
Post-auction buying pushed the 30y down -4.9bps to 3.192% as trade settled at its lowest level since May 2013.
The 10y eased -1.3bps to 2.400% and closed at its lowest level in 13 months.
The 5y slipped -1bp to 1.567% as action finished at a two-month low. Support in the 1.550% area will be in focus in the days ahead.
Up front, the 2y lagged, tacking on +0.8bps to 0.408%. Today’s selling caused the yield to tick off its lowest close since June.
A flatter curve developed with the 2-10-yr spread tightening to 199bps.
2Yr 0.42 (-0.01), 5Yr 1.58 (-0.01), 10Yr 2.40 (-0.03), 30Yr 3.20 (-0.04)
2/10 Spread: 198bps (-2); 2/30 Spread: 278bps (-3)
Currencies
Dollar Drifts Little Changed: 10-yr: +02/32..2.406%..USD/JPY: 102.48..EUR/USD: 1.3361
The Dollar Index drifts little changed near 81.60. Click here to see a daily Dollar Index chart.
The greenback pressed to session lows near 81.40 following this morning’s larger than expected initial and continuing claims, but has rallied throughout U.S. trade as equities continue to march higher.
EURUSD is flat @ 1.3365 as trade has managed to shrug off this morning’s disappointing GDP data from the region. Action has tested support near 1.3350 for the past week, but support in the area has been able to hold. French and Italian banks are closed tomorrow for Assumption Day.
GBPUSD is -10 pips @ 1.6680 as trade looks likely to settle at a four-month low. Sterling saw some light follow through selling after yesterday’s comments from Bank of England Governor Mark Carney suggested a rate hike may not come as soon as markets were anticipating. Support near 1.6650 is guarded by the 200 dma. Britain’s Second Estimate GDP is scheduled to cross the wires tomorrow.
USDCHF is -10 pips @ .9065 as trade slips following three days of gains. The pair saw yet another test of .9100, but was once again rejected at the level. Trade remains closely correlated to the euro.
USDJPY is +10 pips @ 102.50 as buyers remain in control for a fourth day. Today’s bid comes after core machinery orders surged 8.8% MoM, but fell well short of the 15.5% MoM advance that was expected. The 102.80 level will be watched closely in the days ahead.
AUDUSD is +10 pips @ .9310 as action holds onto small gains. Resistance near .9340 remains under close watch as the 100 dma provides additional help.
USDCAD is -5 pips @ 1.0910 after recovering its early losses. The pair dipped to 1.0885, its lowest of August, but recouped those losses after the in-line New Home Price Index (0.2% MoM) reading. Canadian data scheduled for tomorrow is limited to manufacturing sales.
Commodities
Closing Commodities: Crude oil continues sell-off, drops 2.1% in today’s session
Dec gold popped to a session high of $1321.80 per ounce in early morning trade following economic data that showed the initial claims increased to 311K from an upwardly revised 290K (from 289K) while the Briefing.com consensus expected an increase to 305K.
However, the yellow metal quickly retreated towards the unchanged line where it chopped around until it settled just 50 cents higher at $1315.20 per ounce.
Sep silver spent most of today’s session in positive territory, rising as high as $19.99 per ounce. It eventually settled with a 0.3% gain at $19.90 per ounce.
Sep crude oil trended lower in negative territory today after pulling back from a session high of $97.38 per barrel set at floor trade open. Unable to find buying interest, it fell as low as $95.28 per barrel and settled with a 2.1% loss at $94.54 per barrel.
Sep natural gas, on the other hand, rallied to a session high of $3.95 per MMBtu on better-than-anticipated inventory data. The EIA reported that for the week ending Aug 8, inventories showed a build of 78 bcf when a build of 81-83 bcf was expected.
It spent the remainder of the session trading slightly below the session high and settled at $3.90 per MMBtu, or 2.1% higher.
NYMEX Energy Closing Prices
Sep crude oil fell $2.02 to $94.54/barrel
Gold trended lower in negative territory today after pulling back from a session high of $97.38 set at floor trade open. Unable to find buying interest, it fell as low as $95.28 and settled with a 2.1% loss.
Sep natural gas rose 8 cents to $3.90/MMBtu
Natural gas, on the other hand, rallied to a session high of $3.95 on better-than-anticipated inventory data. The EIA reported that for the week ending Aug 8, inventories showed a build of 78 bcf when a build of 81-83 was expected. It spent the remainder of the session trading slightly below the session high and settled with a 2.1% gain.
Sep heating oil fell 8 cents to $2.82/gallon
Sep RBOB rose fell 8 to $2.67/gallon
CBOT Agriculture and Ethanol/ICE Sugar Closing Prices
Sep corn rose 5 cents to $3.63/bushel
Sep wheat rose 8 cents to $5.37/bushel
Nov soybeans rose 9 cents to $10.56/bushel
Sep ethanol rose 1 cent to $2.18/gallon
Nov sugar (#16 (U.S.)) settled unchanged at 25.88 cents/lb
COMEX Metals Closing Prices
Dec gold rose $0.50 to $1315.20/oz
Gold popped to a session high of $1321.80 in early morning trade following economic data that showed the initial claims increased to 311K from an upwardly revised 290K (from 289K) while the Briefing.com consensus expected an increase to 305K. However, the yellow metal quickly retreated towards the unchanged line where it chopped around until it settled just 50 cents higher.
Sep silver rose $0.06 to $19.90/oz
Silver spent most of today’s session in positive territory, rising as high as $19.99. It eventually settled with a 0.3% gain.
Sep copper fell 2 cents to $3.09/lb
Preview: Thursday 14 Aug
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.
PPI – 08:30 : 0.2% (Prior 0.4%)
Core PPI – 08:30 : 0.2% (Prior 0.2%)
Empire Manufacturing – 08:30 : 15.5 (Prior 25.6)
Net Long-Term TIC Flows – 09:00 : Prior $19.4B
Industrial Production – 09:15 : 0.3% (Prior 0.2%)
Capacity Utilisation – 09:15 : 79.2% (Prior 79.1%)
Michigan Sentiment – 09:55 : 81.7 (Prior 81.8)
Corporate Earnings
BMO :
EL JD
AMC :
None
Other Events of Interest
Fed/Treasury/Political Events
Fed’s Kocherlakota (2014 voting) speaks – 10:45
Economic Events
UK GDP – 04:00
Analyst/Investor Meetings
None
Commentary
Tomorrow is August Expiration Day, which has seen the DOW up 8 of the last 10. We will also receive the heaviest data lot, though perhaps not the most significant. Data to watch will be the PPI and Michigan Consumer Sentiment, as well as the UK GDP.
It’s only a matter of when this whole thing starts to crash and burn. With such poor volumes, this bull run shouldn’t take us any higher and instead set us up nicely for next week.
Direction for Friday 15 Aug: DOWN▼
Daily Directional Accuracy (from 14 May 2014): 42/64 (65.63%)
Weekly Directional Accuracy (from 16 May 2014): 7/12 (58.33%)