DOW 17813.98 +259.70 (+1.48%), NASDAQ 4750.40 +82.98 (+1.78%),
S&P500 2063.15 +31.03 (+1.53%)
There is a lot of jitter around the ECB announcement, as they are expected to announce a fresh round of QE for Europe. On top of that the market remains unstable and uncertain going forward.
In lieu of the risk factors in play, I will be abstaining from this session.
Direction for Thursday 22 Jan 2015: ABSTAIN
So we got our nice injection of a few trillion dollars into the Eurozone, and welcome to Ben Bernanke round 2, together with the entire market upset that comes with it.
And that might just give this market a timely lift to fresh highs… as much as we really don’t need more highs.
Market Summary
from Briefing.com
Industry Watch
Strong: Consumer Discretionary, Financials, Industrials, Materials
Weak: Consumer Staples, Energy, Health Care, Utilities, Telecom Services
Other Market Moving Factors
European Central Bank leaves interest rate corridor unchanged and announces plans to purchase EUR60 billion per month through September 2016
S&P 500 retakes 50-day moving average (2046)
[BRIEFING.COM] The major averages registered their fourth consecutive advance on Thursday with the S&P 500 (+1.5%) reclaiming its 50-day moving average (2046/2047). The benchmark index erased its January loss while the Russell 2000 (+2.0%) displayed relative strength throughout the day.
This week has featured action from several major central banks and that extravaganza was topped off today when the European Central Bank announced the highly-anticipated launch of a quantitative easing program.
Prior to the U.S. open, ECB President Mario Draghi revealed plans to purchase investment-grade corporate and government debt in the amount of EUR60 billion per month. According to Mr. Draghi, the program will continue through September 2016 and will be deployed ‘decentrally,’ meaning national central banks will participate in the risk sharing. When asked about the program’s limits, Mr. Draghi said the take-up is limited to 25.0% of a given issue. The announcement boosted European debt (Italy 10-yr yield -14 bps to 1.55%) and weighed on the euro, sending the single currency lower by nearly 300 pips to 1.1340 against the dollar.
The resulting greenback strength pushed the Dollar Index (94.28, +1.37) above the 94.00 level for the first time since September 2003. In turn, this was a headwind for dollar-denominated commodities, and especially crude oil, which also had to contend with a larger than expected inventory build. The energy component fell 2.9% to $46.38/bbl while the energy sector (+0.6%) registered a modest gain after spending the first half of the session in negative territory.
Similar to energy, the materials sector (+1.3%) underperformed while the remaining cyclical groups finished ahead of the broader market.
The financial sector (+2.5%) settled in the lead, but the spike could not lift the group off the bottom of the January leaderboard. The sector narrowed its month-to-date loss to 2.9% while Dow components American Express (AXP 84.37, -3.30) and Travelers (TRV 108.17, +3.16) headed in opposite direction following earnings. American Express lost 3.8% after the company beat top-line estimates and announced plans to cut 4,000 jobs whereas Travelers rallied 3.0% in reaction to better than expected earnings.
Financials were followed by discretionary shares (+1.9%) with the group enjoying broad support. Online commerce names Amazon.com (AMZN 310.32, +13.07) and eBay (EBAY 57.14, +3.77) posted respective gains of 4.4% and 7.1% after eBay reported a one-cent beat and announced plans for a 7.0% reduction of the company’s workforce. It is also worth mentioning the company agreed to appoint an Icahn Capital executive to its Board of Directors.
Elsewhere, the top-weighted tech sector (+2.0%) displayed broad strength while the PHLX Semiconductor Index (+0.6%) struggled to keep pace due to disappointing guidance from Xilinx (XLNX 38.96, -2.55) and SanDisk (SNDK 78.90, -1.54). The pair lost 6.1% and 1.9%, respectively.
Also of note, the industrial sector (+1.6%) finished just ahead of the broader market, but transport stocks soared following better than expected results from Alaska Air (ALK 67.94, +2.96), Southwest Airlines (LUV 45.35, +3.52), JB Hunt (JBHT 84.23, +2.19), and Union Pacific (UNP 119.83, +5.43). The Dow Jones Transportation Average spiked 2.9% to erase its January decline.
Unlike the six cyclical sectors, defensively-oriented groups spent the day behind the market. Telecom services (-0.6%) and utilities (-0.4%) could not stay out of the red while consumer staples (+1.1%) and health care (+1.3%) ended in the green.
Treasuries finished with slim losses that sent the 10-yr yield higher by a basis point to 1.88%.
Today’s participation was ahead of average with roughly 871 million shares changing hands at the NYSE floor.
Economic data was limited to Initial Claims and the FHFA Housing Market Index:
The initial claims level declined to 307,000 from an upwardly revised 317,000 (from 316,000) while the Briefing.com consensus expected a decline to 302,000
This was the first time since July 2014 that the initial claims level exceeded 300,000 for three consecutive weeks
As with last week, the Department of Labor reported that there were no special factors impacting the initial claims level
Continuing claims increased to 2.443 million from an upwardly revised 2.428 million (from 2.424 million)
The FHFA Housing Price Index for November rose 0.8%, which followed an increase of 0.6% in October
Tomorrow’s data will be limited to Existing Home Sales for December (Briefing.com consensus 5.10 million) and December Leading Indicators (consensus 0.5%). Both reports will be released at 10:00 ET.
Nasdaq Composite +0.3% YTD
S&P 500 +0.2% YTD
Dow Jones Industrial Average -0.1% YTD
Russell 2000 -1.2% YTD
Global Markets
ASIA
Asian Markets Close: Nikkei +0.3%, Hang Seng +0.7%, Shanghai +0.6%
Markets gained across most of Asia.
Hong Kong’s inflation rate slowed to 4.9% YoY (5.1% YoY previous).
Australia’s MI Inflation Expectations eased to 3.2% (3.4% previous).
Japan’s Nikkei (+0.3%) closed on the 50 dma. Heavyweight Softbank provided support, adding 2.8%.
Hong Kong’s Hang Seng (+0.7%) climbed to its best levels since mid-September. Gaming names continued to rebound as Sands China rallied 3.6% and Galaxy Entertainment tacked on 3.1%.
China’s Shanghai Composite (+0.6%) gained for a third straight day and finished just shy of levels last seen in August 2009. Commodity plays saw strong gains as Zijin Mining and Shangdong Gold Mining gained 5.7% and 4.0%, respectively.
India’s Sensex (+0.4%) posted a record close for a third straight day. Gains were broad-based as Sun Pharmaceutical jumped 3.9% and Tata Motors gained 2.7%.
Australia’s ASX (+0.5%) was unable to reclaim the 200 dma. Heavyweight miners provided support with BHP Billiton lifting 2.9%.
Regional Decliners: South Korea UNCH…Philippines -0.8%
Regional Advancers: Singapore +0.5%…Taiwan +0.5%…Malaysia +0.7%…Indonesia +0.7%…Vietnam +1%…Thailand +1.5%
Fx: USDCNY slipped to 6.2098…USDINR ticked up to 61.60…USDJPY -45 pips @ 117.50…AUDUSD +45 pips @ .8125
EUROPE
Major European indices trade higher across the board. The European Central Bank made no changes to its interest rate corridor, leaving the main refinancing rate at 0.05%; however, ECB President Mario Draghi announced a QE program to the tune of EUR60 billion per month. According to Mr. Draghi, the program will continue through September 2016 and will be deployed ‘decentrally,’ meaning national central banks will participate in the risk sharing. The euro/dollar pair fell from 1.1620 to 1.1560 in reaction to the announcement while Germany’s 10-yr remains in the red with its yield up three basis points at 0.51%.
UK’s Public Sector Net Borrowing increased to GBP12.47 billion from GBP11.73 billion (expected GBP9.00 billion) while CBI Industrial Trends Orders slipped to 4 from 5 (consensus 5)
Italy’s Retail Sales ticked up 0.1% month-over-month, as expected (previous 0.0%) while Industrial New Orders fell 1.1% month-over-month (expected 0.4%; previous 0.1%)
Spain’s Unemployment Rate ticked up to 23.70% from 23.67% (expected 23.50%)
CLOSING PRICES
UK’s FTSE: + 1.0%
Germany’s DAX: + 1.3%
France’s CAC: + 1.5%
Spain’s IBEX: + 1.7%
Portugal’s PSI: + 2.4%
Italy’s MIB Index: + 2.4%
Irish Ovrl Index: + 1.4%
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.
Initial Claims – 08:30 : 307K vs 300K (Prior 317K)
Continuing Claims – 08:30 : 2443K vs 2380K (Prior 2428K)
FHFA Housing Price Index – 09:00 : 0.8% (Prior 0.6%)
Natural Gas Inventories – 10:30 : -216bcf (Prior -236bcf)
Crude Inventories – 11:00 : 10.071M (Prior 5.389M)
UNEMPLOYMENT CLAIMS
Highlights
The initial claims level declined to 307,000 for the week ending January 17 from an upwardly revised 317,000 (from 316,000) for the week ending January 10. The Briefing.com Consensus expected the initial claims level to decline to 302,000.
The continuing claims level increased to 2.443 mln for the week ending January 10 from an upwardly revised 2.428 mln (from 2.424 mln) for the week ending January 3. The consensus expected the continuing claims level to fall to 2.400 mln.
Key Factors
This was the first time since July 2014 that the initial claims level exceeded 300,000 for three consecutive weeks.
As with last week, the DOL reported that there were no special factors impacting the initial claims level.
There have been anecdotal reports that low oil prices have caused increased layoff activities in the energy sector, which may be the cause of the recent increase in claims. So far, however, the data do not support that theory. While energy-heavy states like Texas (12,312) and North Dakota (1,066) reported layoffs in excess of 1,000 for the week ending January 10, the state supplied comments do not blame increased layoffs in drilling or other energy-supported activities.
Big Picture
Despite the recent increase in the initial claims, the current level still supports payroll growth above 200,000.
Technical Analysis
DOW JONES INDUSTRIAL AVERAGE
17813.98 +259.70 (+1.48%)
Volume: 111,976,264 (above average of 87,926,943)
Range: 17,482.54 – 17,840.89
NASDAQ COMPOSITE
4750.40 +82.98 (+1.78%)
Volume: 515.8M (above average of 447.6M)
Range: 4,644.57 – 4,752.60
S&P500 INDEX
2063.15 +31.03 (+1.53%)
Volume: 643.5M (above average of 508.2M)
Range: 2,026.38 – 2,064.62
So we get a bullish breakout of a typically bearish downside triangle. Odd, don’t you think? But let’s not dictate what the market is supposed to do and trade based on wht we see.
It definitely looks like a decent breakout with supporting volumes, but now we have the 100% Fibonacci lines to deal with.
Market Internals
NYSE:
Higher Volumes than the day before – 890.4M vs 771.4M
Advancers outpaced Decliners (adv/dec): 2444 / 658
New Highs outpaced New Lows (highs/lows): 268 / 33
NASDAQ:
Higher Volumes than the day before – 1986.4M vs 1827.6M
Advancers outpaced Decliners (adv/dec): 2021 / 757
New Lows outpaced New Highs (highs/lows): 64 / 81
VOLATILITY S&P500 (VIX)
16.40 -2.45 (-13.00%)
Advancers outpaced Decliners by 3.16 on higher volumes than the day before (+227.80M +10.69%).
There we go.. decent bullish strength with the VIX dropping to a relatively safe range, indicating a reduction of fear in the market.
Treasury Bonds, Currencies & Commodities
from Briefing.com
Treasury Bonds
Yields Firm Amid Volatile Trade:
Treasuries lost ground amid a volatile trade.
The complex pressed to session lows ahead of this morning’s Mario Draghi press conference before surging back into positive territory as Europe’s QE program was announced.
European QE will consist of purchases totaling EUR60 bln per month through September 2016 and will not discriminate against bonds with a negative yield.
The volatile session produced a range of 15bps in yields at the long end of the curve.
Up front, the 2Y added +2bps to 51.5bps. This area remains under close watch as it has been viewed as a key pivot since June.
In the belly, the 5Y rallied +4.6bps to 1.382%. Resistance in the 1.450%/1.500% region remains in focus.
The 10Y climbed +4.3bps to 1.896%. The benchmark yield probed 1.950% ahead of the ECB announcement before tumbling to a low of 1.812%.
Selling at the long end caused the 30Y to edge up +2.9bps to 2.469%. The yield finished today’s session at a one-week high.
A steeper curve won out as the 2-10-yr spread widened to 138bps.
2Yr 0.53 (unch), 5Yr 1.39 (+0.04), 10Yr 1.90 (+0.03), 30Yr 2.46 (+0.02)
2/10 Spread: 137bps (+3); 2/30 Spread: 193bps (+2)
Currencies
Dollar Crosses 94.00:
The Dollar Index trades above 94.00 for the first time September 2003.
EURUSD is -230 pips @ 1.1380 as trade presses to a fresh 11-year low following Mario Draghi’s introduction of European QE. Today’s announcement outlined a EUR60 bln per month of purchases in various securities, 33% of which will be sovereign debt, lasting until September 2016. Mr. Draghi noted the program will not discriminate against bonds with a negative yield. The 1.1000 area is setting up as the next key level. Eurozone data is heavy as Flash Manufacturing and PMI data from across the region is released.
GBPUSD is -120 pips @ 1.5020 as action slides to an 18-month low. Sterling managed cross 1.5200 early despite the disappointing public sector net borrowing and CBI Industrial Order Expectations numbers, but pushed through key 1.5100 support as traders digested today’s ECB action. Britain’s retail sales will cross the wires tomorrow.
USDCHF is +130 pips @ .8720 as buyers take control for the first time in three days. The .8400/.8800 range has been in place for the past week and will be monitored closely.
USDJPY is +25 pips @ 118.20. Early selling following the ECB announcement pressed the pair onto support in the 117.25 area, but buyers once again stepped up in defense of the level. The bulls will look for another test of the 50 dma (118.71), which served as a headwind during the previous two sessions.
AUDUSD is -20 pips @ .8060 as action flirts with its lowest close since July 2009. Recent selling has come amid speculation the Reserve Bank of Australia could join the Bank of Canada in announcing a surprise rate cut. Chinese data out tonight is limited to HSBC Flash Manufacturing PMI.
USDCAD is +55 pips @ 1.2395 as trade climbs to a new six-year high. The late 2008/early 2009 highs near 1.3000 are setting up as an important level. Canada’s CPI and retail sales data is due out tomorrow.
Commodities
Closing Commodities: Crude Oil Gives Up Gains, Closes Lower
WTI crude oil prices gave back today’s gains to finish the day at a loss
Mar crude oil ended the day $1.40 lower at $46.38/barrel
Natural gas futures fell today, which was helped by the weekly storage data that was released earlier this morning
Feb nat gas ended the day $0.14 lower at $2.84/MMBtu
Precious metals posted a modest gains with Feb gold rising $8.20 to $1301.50/oz and Mar silver gaining $0.17 to $18.36/oz
Energy Price Action
Mar crude oil fell $1.40/barrel to $46.38/barrel
Feb Natural gas fell 14 cents to $2.84/MMBtu
RBOB Gasoline closed 1 cent higher to $1.33/gallon
Heating oil closed unchanged at $1.61/gallon
Agricultural Price Action
Mar corn closed $0.04 lower at $3.84/bushel
Mar wheat closed $0.02 lower at $5.34/bushel
Feb soybeans ended $0.06 lower at $9.78/bushel
Ethanol closed unchanged at $1.39/gallon
Sugar #11 fell 0.01 cents to 15.91 cents/gallon
Metals Price Action
Feb gold ended today’s session $8.20 higher at $1301.50/oz
Mar silver ended $0.17 higher at $18.36/oz
Mar copper closed $0.03 lower to $2.58/lb
Preview: Friday 23 Jan 2015
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.
Existing Home Sales – 10:00 : 5.10M (Prior 4.93K)
Leading Indicators – 10:00 : 0.4% (Prior 0.6%)
Corporate Earnings
BMO : BK FHN FNFG GE HON KSU KMB MCD PB COL STT SYF
AMC : None
Other Events of Interest
Fed/Treasury/Political Events
Greece Elections – 04:00
Economic Events
Eurozone PMI – 04:00
UK Retail Sales – 04:00
Commentary
It’s been a nicely bullish week, and as we close off the week I’m expecting this to end off nicely flat with some profit-taking.
Direction for Friday 23 Jan 2015: DOWN▼
Daily Directional Accuracy: 8/11 (66.67%)
Weekly Directional Accuracy: 2/2 (100.00%)