DOW 16677.90 +216.58 (+1.32%), NASDAQ 4452.05 +69.95 (+1.60%),
S&P500 1950.82 +23.71 (+1.23%)
As expected, we got a mid-week reversal. However, that drop isn’t as bearish as the numbers look. I’ll be looking for bearish follow through tomorrow to see if the bears take the initiative on this.
I’ll either be buying the dip or short-selling this market.
Direction for Thursday 23 Oct 2014: DOWN▼
So much for a bearish follow through. But that wasn’t as bullish as you think it was. The TRIN opened at 2.00, and stayed above 1 for the entire session. And the market made little headway after the open, with a late profit-take returning it to opening levels. That’s not bullish at all.
Market Summary
from Briefing.com
Industry Watch
Strong: Consumer Discretionary, Energy, Health Care, Industrials, Technology
Weak: Consumer Staples, Materials, Utilities, Telecom Services
Other Market Moving Factors
Manufacturing PMI readings from China, Japan, and eurozone surpass estimates
Above-consensus results from 3M, Caterpillar, Celgene, Comcast, General Motors, NXP Semiconductor, and United Continental
[BRIEFING.COM] The stock market ended the Thursday session with solid gains. The Russell 2000 (+1.8%) led the way while the S&P 500 settled higher by 1.2% with eight sectors in the green.
The key indices surged at the start of the trading day after the overnight session featured upbeat economic data from overseas. On that note, Manufacturing PMI readings from China, Japan, and the Eurozone surpassed estimates, but the headline figures masked some weakness below the surface. For instance, China’s HSBC Manufacturing PMI (50.4; expected 50.3) came in ahead of estimates, but the output and employment indices contracted.
Additionally, a set of better than expected quarterly results from several large cap names also provided a measure of support. However, stocks fell from their highs during the final 90 minutes of the action amid reports indicating a doctor, who treated Ebola patients in Africa, was rushed to Bellevue Hospital in New York. In all likelihood, the ten-point slip from highs reflected selling by weak-handed longs that entered the market during the recent rally.
For the first time this week, the Dow Jones Industrial Average (+1.3%) was able to settle ahead of the S&P 500 with help from 3M (MMM 145.05, +6.10) and Caterpillar (CAT 99.27, +4.70). The two names reported better than expected results and surged 4.4% and 5.0%, respectively. However, it is worth noting the better than expected results and guidance were primarily a by-product of cost cutting and deft management rather than robust demand. To wit, Caterpillar’s revenues were up just 0.9% year-over-year while 3M’s revenues were up just 2.8%, yet those two companies reported EPS increases of 12% and 11%, respectively.
The two Dow leaders underpinned the industrial sector (+2.2%), which spent the entire session atop the leaderboard. Transport stocks went along for the ride with the Dow Jones Transportation Average climbing 2.1%. GATX (GMT 60.63, +3.51) spiked 6.1% and had the best showing after its better than expected revenue overshadowed below-consensus earnings. On the downside, JetBlue Airways (JBLU 10.86, -0.32) lost 2.9% after missing bottom-line estimates.
Elsewhere, the energy sector (+1.8%) followed not far behind with help from crude oil. The energy component also climbed 1.8% to $82.01/bbl.
Meanwhile, the other commodity-related sector—materials (unch)—spent the day near its flat line. Fertilizer stocks lagged after Potash (POT 32.54, -0.24) reported disappointing results. Miners lagged in the early going, but the Market Vectors Gold Miners ETF (GDX 20.56, +0.12) turned positive by the close to end higher by 0.6%.
On the countercyclical side, the health care sector (+1.8%) was the only group that was able to outpace the market while consumer staples (-0.1%), telecom services (-1.2%), and utilities (+0.2%) lagged. Health care drew strength from biotechnology after Celgene (CELG 100.40, +5.64) reported strong results while the telecom sector was pressured by AT&T (T 33.66, -0.84), which fell 2.4% in reaction to a one-cent miss.
Treasuries retreated throughout the day and spent the final hour of the action just above their lows. The 10-yr yield rose six basis points to 2.28%.
Today’s participation was ahead of average with more than 796 million shares changing hands at the NYSE floor.
Economic data was limited to Initial Claims, FHFA Housing Price Index, and Leading Indicators:
Weekly initial claims increased to 283,000 from a revised rate of 266,000 (from 264,000), while the Briefing.com consensus expected a reading of 285,000
Although the increase appears relatively large at first glance, it is worth noting last week’s reading represented a 14-year low
The August Housing Price Index from the FHFA rose 0.5%, which followed a revised increase of 0.2% (from 0.1%) observed during the prior month
September Leading Indicators increased 0.8% after a revised unchanged reading in August (from +0.2%), while the Briefing.com consensus expected an increase of 0.5%
Tomorrow’s data will be limited to the New Home Sales report (Briefing.com consensus 475,000), which will be released at 10:00 ET.
Global Markets
Asia
Markets fell across Asia
China’s HSBC Flash Manufacturing PMI (50.4 actual v. 50.2 expected, 50.2 previous) outpaced estimates
Australia’s NAB Quarterly Business Confidence (6) matched the previous reading
Japan’s Nikkei (-0.4%) held the 200 dma
Hong Kong’s Hang Seng (-0.3%) managed to hold its 200 dma
China’s Shanghai Composite (-1.0%) fell to a one-month low as an upcoming wave of IPOs led to profit taking
India’s Sensex was closed in observance of Diwali
Australia’s ASX (-0.1%) slipped for the first time in eight days
Europe
UK’s FTSE: + 0.3%
Germany’s DAX: + 1.2%
France’s CAC: + 1.3%
Spain’s IBEX: + 0.8%
Portugal’s PSI: + 0.5%
Italy’s MIB Index: + 0.9%
Irish Ovrl Index: + 0.3%
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 : 283K vs 285K (Prior 266K)
Continuing Claims – 08:30 : 2351K vs 2380K (Prior 2389K)
FHFA Housing Price Index – 09:00 : 0.5% (Prior 0.1%)
Leading Indicators – 10:00 : 0.8% vs 0.6% (Prior 0.2%)
Natural Gas Inventories – 10:30 : 94bcf (Prior 94bcf)
UNEMPLOYMENT CLAIMS
Highlights
The initial claims level rose to 283,000 for the week ending October 18 from an upwardly revised 266,000 (from 264,000) for the week ending October 11. The Briefing.com consensus expected the initial claims level to increase to 285,000.
The continuing claims level fell to 2.351 mln for the week ending October 11 from an unrevised 2.389 mln for the week ending October 4. The consensus expected the continuing claims level to fall to 2.380 mln.
Key Factors
While the magnitude of the increase in the initial claims level this week seems large, it was moving off the lowest reading in 14 years. Given the size of the current pool of employed workers, there was no way that the initial claims level could stay well below 280,000 for any prolonged period.
Claims still remain well below 300,000 and are at levels that signal an economy at, or near, full employment.
Big Picture
There are no special factor impacting the initial claims level. The recent sub-300,000 trend is a result of substantial improvements in labor market conditions.
LEADING INDICATORS
Highlights
The Conference Board’s Leading Economic Index increased 0.8% in September after reporting no change (from +0.2%) in August. The Briefing.com consensus expected the leading economic index to increase 0.5%.
Key Factors
Since 8 of the 10 components of the index are known prior to the release, the difference between the actual and consensus is generally small. In this case, expected orders of nondefense capital goods excluding aircraft were likely stronger than the what the consensus assumed.
With the lone exception of the Average Consumer Expectations for Business Conditions, all of the components contributed positively to the leading indicators index in September. This shows a broad-based increase in economic growth trends.
Big Picture
The Leading Indicators Index points toward a generally improving economy.
Ticker News
from Briefing.com
HEADLINE NEWS
Apple (AAPL) to increase store count in China, according to reports
Diamond Offshore (DD) announces special cash dividend of $0.75; announces regular dividend of $0.125/share
Eli Lilly (LLY) and Zymeworks announce expansion of strategic licensing and collaboration agreement; LLY opts to expand the collaboration by up to potentially $375 mln in milestones and other payments
CarMax (KMX) raises share repurchase authorization by $2 bln
GT Advanced Tech. (GTATQ) announces settlement agreement with Apple (AAPL); GT retains ownership of production assets in Mesa and ability to sell ASF furnaces in the marketplace without restrictions
Phillips 66 Partners (PSXP) announces acquisition of strategic logistics assets from Phillips 66 (PSX) for total consideration of $340 mln; acquisition is expected to be immediately accretive to unitholders
PulteGroup (PHM) increases quarterly dividend to $0.08 from $0.05/share; and increases share repurchase authorization by $750 million
Seagate Technology (STX) raises targeted annual dividend 26% to $2.16, up from previous annual dividend of $1.72
Visa (V) increases quarterly dividend 20% to $0.48 from $0.40/share
EARNINGS / GUIDANCE
3M (MMM) beats by $0.02, misses on revs; narrows FY14 EPS guidance
AT&T (T) misses by $0.01, reports revs in-line
CA Tech (CA) beats by $0.03, reports revs in-line
Caterpillar (CAT) beats by $0.38, beats on revs; raises FY14 EPS guidance above consensus, narrows revs above consensus
Citrix Systems (CTXS) beats by $0.02, misses on revs; guides FY14 EPS in-line, revs below consensus
Coca-Cola Ent (CCE) beats by $0.08, misses on revs; guides FY14 revs below consensus
Comcast (CMCSA) beats by $0.02, reports revs in-line
Eli Lilly (LLY) misses by $0.01, reports revs in-line; reaffirms FY14 EPS guidance, lowers high end of FY14 revs guidance
Lam Research (LRCX) beats by $0.02, reports revs in-line; guides DecQ EPS in-line, revs in-line
PulteGroup (PHM) beats by $0.01, reports revs in-line
Sallie Mae (SLM) reports EPS in-line; guides FY14 EPS below consensus
Southwest Air (LUV) beats by $0.02, reports revs in-line; Co reports record third quarter net income
ANALYST ACTIONS
Upgrades
Boston Scientific (BSX) upgraded to Neutral from Sell at Goldman; tgt raised to $13 from $11; removed from America’s Sell list
Dow Chemical (DOW) upgraded to Buy from Hold at Deutsche Bank; tgt $58
Fifth Third (FITB) upgraded to Buy from Neutral at Goldman; tgt $22
Yelp (YELP) upgraded to Buy from Neutral at B. Riley & Co.
Downgrades
3D Systems (DDD) downgraded to Hold at Brean Capital
BB&T Corp (BBT) downgraded to Neutral from Buy at Goldman; tgt lowered to $39 from $41
Boeing (BA) downgraded to Neutral from Outperform at Credit Suisse; tgt lowered to $133 from $162
Citrix Systems (CTXS) downgraded to Neutral from Buy at BofA/Merrill; tgt lowered to $70 from $78
Yelp (YELP) downgraded to Hold from Buy at Stifel
Other
AbbVie (ABBV) resumed with a Overweight at JP Morgan; tgt $67
EMC (EMC) target raised to $33 at Needham
Southwestern Energy (SWN) initiated with a Positive at Susquehanna; tgt $42
Urban Outfitters (URBN) initiated with a Hold at BB&T Capital Mkts
Technical Analysis
DOW JONES INDUSTRIAL AVERAGE
16677.90 +216.58 (+1.32%)
Volume: 99,423,314 (above average of 85,080,897)
Range: 16468.07 – 16767.52
NASDAQ COMPOSITE
4452.79 +69.94 (+1.60%)
Volume: 509.3M (above average of 475.5M)
Range: 4421.56 – 4475.55
S&P500 INDEX
1950.82 +23.71 (+1.23%)
Volume: 560.1M (above average of 496.5M)
Range: 1931.02 – 1961.95
We aren’t out of the woods yet. Yes, we erased yesterday’s losses – the seeming dark cloud cover – but we’ve got upper shadows across the board. And we’re back to resistance levels.
What’s certain is that this rebound has hit a stall, and whether we continue to the upside or not remains to be seen. If you ask me, that rebound came too fast to be a rebound and it feels more like a massive short-covering rally instead. Which means the bears are lurking and waiting before selling this down again.
Market Internals
NYSE:
Higher Volumes than the day before – 818.7M vs 802.0M
Advancers outpaced Decliners (adv/dec): 2410 / 703
New Highs outpaced New Lows (highs/lows): 107 / 29
NASDAQ:
Higher Volumes than the day before – 1930.8M vs 1455.8M
Advancers outpaced Decliners (adv/dec): 1986 / 741
New Highs outpaced New Lows (highs/lows): 54 / 46
VOLATILITY S&P500 (VIX)
16.53 -1.34 (-7.50%)
Advancers outpaced Decliners by 3.04 on higher volumes than the day before (+491.7M +27.78%).
Internals all point to a decently bullish day, but consider that the TRIN remained above 1 all the way till the close. In fact it opened at 2.
And the VIX bottomed out. Don’t you find that strange? I do.
Treasury Bonds, Currencies & Commodities
from Briefing.com
Treasury Bonds
30Y Settles at 3.00%:
Treasuries booked small losses.
The complex was bid into the cash open before pressing to its worst levels of the day in response to the mixed CPI (0.1% actual v. 0.0% expected) and Core CPI (0.1% actual v. 0.2% expected) data.
Maturities trimmed those losses over the course of the afternoon as equity markets turned red, but were unable to reclaim their respective flat lines.
Up front, the 2Y edged up +2bps to 0.370%. Action tested resistance in the .400% area before pulling back.
Selling had the biggest impact on the belly as the 5Y added +3.1bps to 1.441%. The 1.500%/1.550% area is home to some resistance.
The 10Y climbed +2.1bps to 2.229%. The benchmark yield finished at a one-week high as action moves towards 2.300% resistance.
The 30Y lagged, adding +1.6bps to 3.000%. Resistance in the 3.050% area is in focus.
A steeper curve persisted as the 2-10-yr spread widened to 186bps.
2Yr 0.41 (unch), 5Yr 1.52 (+0.06), 10Yr 2.29 (+0.04), 30Yr 3.05 (+0.04)
2/10 Spread: 188bps (+4); 2/30 Spread: 264bps (+4)
Currencies
Dollar Nears 86.00 as Data Remains Strong:
The Dollar Index holds small gains as trade tests session highs near 85.90.
Traders continue to watch the 86.00 level as a breakout would put the nearly four and a half-year highs from early-October in the crosshairs.
EURUSD is +5 pips @ 1.2650 as trade has given up its early gains. The single currency climbed to a high of 1.2675 following this morning’s mostly better than expected PMI data from the region. However, the gains would not hold as strong U.S. economic data and skittishness over the upcoming weekend stress tests of EU banks wiped away those gains. The 1.2600 area remains firmly in focus. GfK German Consumer Climate will cross the wires tomorrow.
GBPUSD is -10 pips @ 1.6030 as sellers fight to remain in control for a third day. A trio of disappointing data in the form of retail sales, BBA Mortgage Approvals, and CBI Industrial Order Expectations led to early action probing 1.6000 support, but buyers managed to defend the level and prevent a retest of the 11-month lows near 1.5900. Britain’s Preliminary GDP will be released tomorrow.
USDCHF is flat @ .9540 as trade continues to flirt with resistance at the level. Action remains closely tied to the euro.
USDJPY is +105 pips @ 108.25 as trade zooms to a two-week high in the midst of the current six-day winning streak. The return to risk has fueled the rally that has action nearing a test of 108.50 resistance. A retest of six-year highs at 110.00 cannot be ruled out.
AUDUSD is flat @ .8760 as trade presses its worst levels of the day. The hard currency drifted little changed into U.S. trade before climbing to its best levels of the day in response to strong Caterpillar earnings. However, buyers exhausted and trade has drifted lower over the remainder of the day. Bulls cannot be comfortable as a break out of the .8650/.8850 range appears imminent.
USDCAD is -5 pips @ 1.1235 as an uneventful session draws to a close. The pair has been virtually ignored in today’s trade as investigators continue to piece together the details of yesterday’s shooting at Canada’s Parliament.
Commodities
Closing Commodities: Gold Ends Near Today’s Lows, WTI Crude Oil Climbs 2%
Crude oil trended higher today overall and finished up today’s session 2% (or $1.49) higher at $82.01/barrel
Gold was notably weak today and ended trading near today’s lows, ending 1.3% lower at $1229.20/oz
Dec silver lost 0.5% at $17.15/oz
Natural gas erased most of its losses today, but still closed with a modest loss (-1% at $3.62/MMBtu)
Corn prices gained after USDA reports weekly exports, which came in higher than expectations (although declined notably from last week)
Energy price action
Crude oil rose $1.49 (+1.8%) to $82.01/barrel
Crude overtook yday’s session low of $80.05 in overnight trading, trending higher from there and eventually reaching its HoD of 82.37 around 11 this morning.
Natural gas fell 4 cents (-1%) to $3.619/MMBtu
Natural gas inventory showed a build of 94 bcf vs expectations for a build of ~96-97 bcf; futures spiked higher on this news reaching its HoD of 3.683. After notching in the high, futures sold-off, eventually trading and settling below the level it was trading at prior to the release.
Heating oil rose 2.6 cents (+1%) to $2.50/gallon
RBOB rose 4.9 cents (+2.3%) to $2.205/gallon
Agricultural price action
Corn rose 7 cents (+2%) to $3.60/bushel
Wheat rose 4.25 cents (+0.8%) to $5.265/bushel
Soybeans rose 30.75 cents (+3.2%) to $9.935/bushel
Ethanol fell 6.8 cents (-3.8%) to $1.708/gallon
Suger #11 fell 2% to $16.17 cents/lb
Metals price action
Gold fell $16.20 (-1.3%) to $1229.20/oz.
Gold took a leg lower on Sept leading indicators (+0.8% vs +0.5% Briefing.com consensus; Prior +0.2%), and for the most part traded flat after that data point, closing near the LoD of 1226.3.
Silver fell 8 cents (-0.5%) to $17.15/oz
Copper rose 1.6 cents (+0.5%) to $3.0335/oz
Preview: Friday 24 Oct
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.
New Home Sales – 10:00 : 473K (Prior 504K)
Corporate Earnings
AAN AIMC AVY B BIN BMY CHH CL CMCO COG DLPH DTE EDU ERIC F FLIR FNFG GRC IDXX IMGN IMS LEA LPNT LYB MCO MGLN MOSY NDAQ NPBC OCR OFC PG SFE SHPG STT SXC TCB UPS VTR WBC WYN
AMC :
None
Other Events of Interest
Fed/Treasury/Political Events
None
Economic Events
UK GDP – 04:00
Commentary
I’m still not convinced that this rebound will continue. Today’s performance wasn’t all bullish as the numbers and percentages look, and there are signs in the market suggesting that defensive plays are still on the cards, indicating that this sell-off isn’t quite over.
Tomorrow is the final session of the week and we should be seeing some profit-taking ahead of the weekend, given the tepid state of the market.
Direction for Friday 24 Oct 2014: DOWN▼
Daily Directional Accuracy (from 14 May 2014): 73/110 (66.36%)
Weekly Directional Accuracy (from 16 May 2014): 13/21 (61.90%)