DOW 16315.19 -5.88 (-0.04%), NASDAQ 4227.17 +13.52 (+0.32%),
S&P500 1877.70 +2.96 (+0.16%)
We got our DFDM and with all three benchmarks officially below their 200MAs, this sell-off is becoming scarier and scarier. With a retracement no where in sight… it looks like the bears are going to keep selling this market down. However, today’s sell-down looks like something sparked off by panic selling, and there are signs in the market that says it isn’t as bearish as we think it is.
The first of major earnings announcements gets underway tomorrow as Citigroup releases their numbers BMO. Expect that number to move markets.
I think that a bounce is in order and the signs all point to a slowing in the sell-down, no matter what the indices might suggest.
Direction for Tuesday 14 Oct 2014: UP▲
This market is really becoming a test of a trader’s mettle. That was terribly messy, with the market unable to muster strength to extend the morning gains, a late sell-off saw the major indices push into the red. Curiously, though, the Russell 2000 and NASDAQ held their gains into the close, with the tech-heavy and small cap index holding above their opening lows.
In short, it was ultimately more flat with a tinge of bullishness in the underlying internals. While the “recovery effort” faded out towards the second half, internals continued to remain bullish as the bears waited out on the sidelines (are they?). However, defensive posturing was evident as bond yields dropped and Utilities were found among the market leaders.
Market Summary
from Briefing.com
Industry Watch
Strong:
Weak:
Other Market Moving Factors
Equity indices began the day with slim gains after investors received a trio of quarterly reports from the financial sector (+0.5%). Citigroup (C 51.47, +1.57) was a notable standout, surging 3.2%, in reaction to its better than expected results combined with news indicating the company will exit its consumer business in 11 markets around the world. However, the broader sector could not pull away from the S&P 500 as JPMorgan Chase (JPM 57.99, -0.17) and Wells Fargo (WFC 48.83, -1.37) weighed. Shares of JPM lost 0.3% following a bottom-line miss while Wells Fargo fell 2.7% after reporting in-line results.
Although the financial sector contributed to an opening boost, the market did not build on its early gain until the Russell 2000 climbed above its opening high. That strength emboldened bargain hunters who rushed into recently-battered areas like transports and chipmakers.
However, the intraday strength began fading shortly after noon ET with selling activity accelerating as crude oil plunged into the pit close. The energy component dove nearly 5.0% to $81.81/bbl, dragging the energy sector (-1.2%) down with it. The sharp drop sent oil to levels last seen in mid-2012, while the energy sector extended its October loss to 10.9%.
The afternoon retreat from highs was also fueled in part by weakness in the health care sector (-0.8%). The group tried to stage an intraday bounce, but was held back by Johnson & Johnson (JNJ 97.01, -2.11), which fell 2.1% despite beating earnings estimates and hiking its guidance.
Even though the S&P 500 gave back its entire advance, the areas that displayed strength in the morning maintained their gains. Transport stocks underpinned the industrial sector (+1.3%) with the Dow Jones Transportation Average climbing 2.6%. JetBlue Airways (JBLU 10.23, +0.82) soared 8.7% to lead the way while shipper Kirby (KEX 99.63, -0.20) was the lone decliner.
Elsewhere, the relative strength among chipmakers sent the PHLX Semiconductor Index higher by 1.9%. Skyworks (SWKS 48.91, +3.59) was the standard-bearer, rallying 7.9% after boosting its guidance while Intel (INTC 32.14, +0.67) rose 2.1% ahead of its quarterly report. For its part, the top-weighted technology sector (+0.3%) ended a bit ahead of the broader market.
Also of note, the Dollar Index (85.81, +0.28) spent the day in positive territory while Treasuries finished just below their overnight highs. The 10-yr note added 24 ticks to send its yield lower by nine basis points to 2.20%.
Participation remained on the strong side with more than 940 million shares changing hands at the NYSE floor.
Global Markets
Asia
Markets finished mixed across Asia
Singapore’s GDP grew at 2.4% YoY
India’s Wholesale Price Index eased to 2.38% YoY (3.74% YoY previous)
Australia’s NAB Business Confidence fell to 5 (7 previous)
Japan’s Nikkei (-2.4%) tumbled to a two-month low following the extended holiday weekend
Hong Kong’s Hang Seng (-0.4%) surrendered its early gains and slipped back below the 200 dma
China’s Shanghai Composite (-0.3%) fell for a third straight day as trade continued to slide off levels last seen in February 2013
India’s Sensex (-0.1%) continued its choppy trade as action remained near two-month lows
Australia’s ASX (+1.0%) rallied off eight-month lows as iron ore staged its biggest one-day price jump in more than two years
Europe
UK’s FTSE: + 0.6%
Germany’s DAX: + 0.2%
France’s CAC: + 0.2%
Spain’s IBEX: + 0.2%
Portugal’s PSI: + 0.3%
Italy’s MIB Index: + 0.1%
Irish Ovrl Index: + 1.2%
Greece ASE General Index: -5.7%
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.
No Economic Data
Ticker News
from Briefing.com
HEADLINE NEWS
Cliffs Natural Resources (CLF) disclosed it entered into an agreement with Casablanca Capital pursuant to which Casablanca agreed to certain standstill
Citigroup (C) disbans a legacy Mexican Banamex personal security services unit after investigation reveals fraud
Costco (COST) makes China market debut through Alibaba Group’s (BABA) Tmall Global Platform
Google (GOOG) announced expanded same day delivery to 3 new cities: Chicago, Boston, and Washington, D.C
Salesforce.com (CRM) and Microsoft (MSFT) announce ‘significant’ progress in strategic partnership; unveil Salesforce1 for Windows, Salesforce for Office and Power BI for Office 365, and Excel integrations with Salesforce
Tesla Motors (TSLA) and China’s Minsheng Bank agree on charging station deal, according to reports
EARNINGS/GUIDANCE
Burberry (BURBY) sees H1 revs in-line with estimates
Citigroup (C) beats by $0.02, beats on revs; announces strategic actions to exit 11 markets
Domino’s Pizza (DPZ) beats by $0.02, beats on revs
Johnson & Johnson (JNJ) beats by $0.06, reports revs in-line; raises FY14 EPS above consensus
JPMorgan Chase (JPM) misses by $0.03, beats on revs; Mortgage originations were $21.2 billion, down 48% from the prior year and up 26% from the prior quarter; NIM declines 5bps QoQ
Skyworks (SWKS) raises Q4 guidance
Wells Fargo (WFC) reports EPS in-line, revs in-line; NIM declines 9 bps QoQ; mortgage originations reported at $48 bln, up $1 bln QoQ
ANALYST ACTIONS
Upgrades
Ford Motor (F) upgraded to Neutral from Underperform at Buckingham Research
T-Mobile US (TMUS) upgraded to Outperform from Sector Perform at RBC Capital Mkts; tgt lowered to $35 from $36
Downgrades
Corning (GLW) downgraded to Neutral from Buy at BofA/Merrill; tgt $20
Ford Motor (F) downgraded to Neutral from Buy at Goldman
Home Depot (HD) downgraded to Neutral from Buy at Sun Trust Rbsn Humphrey
Johnson Controls (JCI) downgraded to Market Perform from Outperform at Wells Fargo
Lowe’s (LOW) downgraded to Neutral from Buy at Sun Trust Rbsn Humphrey
NetScout Systems (NTCT) downgraded to Hold at Wunderlich; tgt lowered to $40
Wynn Resorts (WYNN) downgraded to Neutral from Buy at BofA/Merrill; tgt lowered to $195 from $210
Other
Alibaba (BABA) initiated with a Buy at UBS; tgt $100
Apple (AAPL) target raised to $110 from $96 at Credit Suisse; maintain Neutral
BHP Billiton (BHP) upgraded to Neutral from Underperform at Credit Suisse
F5 Networks (FFIV) initiated with a Outperform at Credit Suisse; tgt $140
General Motors (GM) removed from Conviction Buy list at Goldman
Goodyear Tire (GT) target lowered to $31 from $36 at Goldman; removed from Conviction Buy list; maintain Buy
Michael Kors (KORS) initiated with a Hold at Stifel
Norfolk Southern (NSC) initiated with a Buy at UBS; tgt $130
Union Pacific (UNP) initiated with a Buy at UBS; tgt $123
Technical Analysis
DOW JONES INDUSTRIAL AVERAGE
16315.19 -5.88 (-0.04%)
Volume: 110,405,316 (above average of 81,369,113)
Range: 16273.64 – 16463.67
NASDAQ COMPOSITE
4227.17 +13.52 (+0.32%)
Volume: 652.3M (above average of 461.5M)
Range: 4212.82 – 4281.34
S&P500 INDEX
1877.70 +2.86 (+0.16%)
Volume: 689.4M (above average of 476.0M)
Range: 1871.79 – 1898.71
That dragonfly doji looks exceptionally scary if you ask me. With all three indices continuing to remain below their 200 MAs, it looks like the bulls have no fight in this anymore.
Market Internals
NYSE:
Higher Volumes than the day before – 972.3M vs 905.4M
Advancers outpaced Decliners (adv/dec): 1883 / 1209
New Lows outpaced New Highs (highs/lows): 36 / 360
NASDAQ:
Higher Volumes than the day before – 2477.5M vs 2451.4M
Advancers outpaced Decliners (adv/dec): 1701 / 1034
New Lows outpaced New Highs (highs/lows): 24 / 207
VOLATILITY S&P500 (VIX)
22.79 -1.85 (-7.51%)
Advancers outpaced Decliners by 1.60 on higher volumes than the day before (+93.0M +2.77%).
Well, if that’s the bulls coming back, they sure aren’t so convincing. The next session should be able to tell us the real picture.
Treasury Bonds, Currencies & Commodities
from Briefing.com
Treasury Bonds
Treasuries Rally on Global Growth Fears:
Treasuries gained for the 14th time in 18 sessions with long dated yields pressing to their lowest levels since mid-2013.
Worries of a slowdown in Europe sparked another wave of buying as money saw an early rush into the complex and held maturities managed to hold onto the bulk of their gains.
Intraday caused yield to see a significant bounce off their session lows before buying into the cash close allowed Treasuries to book moderate gains.
Up front, the 2Y fell -6.4bps to 0.376%. The yield pressed below support in the 0.400% area to post its lowest close since the end of May.
Outperformance in the belly dropped the 5Y -8.5bps to 1.452%. Action posted its lowest close since February and is now off -42bps from the September highs.
The 10Y shed -8bps to 2.206%. Traders will continue to watch support in the 2.200% area, which bond guru Jeff Gundlach noted is the likely bottom for the year.
The long end lagged as the 30Y lost -5.7bps to 2.957%. The yield on the long bond broke below 3.000% for the first time since May 2013 and finished at a 17-month low.
Curve flattening continued as the 2-10-yr spread narrowed to 183bps.
2Yr 0.39 (-0.06), 5Yr 1.45 (-0.10), 10Yr 2.21 (-0.10), 30Yr 2.95 (-0.08)
2/10 Spread: 182bps (-4); 2/30 Spread: 256bps (-2)
Currencies
Dollar Holds 85.50 Support:
The Dollar Index probes session highs near 85.80 after recouping its early losses.
The Index pressed to 85.30 in overnight trade, but has managed to regain support in the 85.50 area.
EURUSD is -85 pips @ 1.2655 as trade holds just off session lows. The euro has come under pressure during today’s session as data from the region remained weak. Eurozone industrial production and ZEW Economic Sentiment missed estimates, but the real worry was the first negative ZEW Economic Sentiment print for Germany in two years. That number has fanned fears the region’s biggest economy is entering recession. Headlines have been plentiful today as traders have also had to grapple with the Greek 10Y spiking back above 7.00% after the country announced it was planning an early exit from the IMF bailout and anti-euro sentiment gaining steam among the troubled periphery. Two-year lows near 1.2500 are likely to be retested on a break of 1.2600. European Central Bank head Mario Draghi speaks tomorrow morning and tomorrow afternoon in Frankfurt.
GBPUSD is -165 pips @ 1.5910 as action presses to an 11-month low. A slowdown in CPI and PPI Input has pushed back expectations the Bank of England will become the first major Western central bank to hike rates and emerge from the global financial crisis. Britain’s jobs report is due out tomorrow.
USDCHF is +60 pips @ .9545 as trade has recovered the majority of yesterday’s losses. A cool PPI print has aided the bid, but trade remains closely tied to the euro.
USDJPY is +10 pips @ 107.10 as action looks to put in its first gain in seven days. Minor support in the 107.00 area remains of interest with further help coming from the 50 dma (106.00).
AUDUSD is -35 pips @ .8725 as trade lingers near its worst levels of 2014. The pair spiked above .8800 early in the session as a jump in iron ore prices offset the slip in NAB Business Confidence. However, the hard currency has been unable to hold onto its gain and remains near nine-month lows. Australia’s Westpac Consumer Sentiment and new motor vehicles sales will cross the wires tonight. China’s CPI and PPI will be released this evening.
Commodities
Energy price action
Crude oil fell $3.93 (-4.6%) to $81.81/barrel, its biggest one day loss since 2012, with the next level of support likely the 6/28/12 low of $77.28. The selling pressure accelerated shortly after lunch, and futures sold off quickly, now trading near the LoD of $81.32.
Natural gas fell $0.10 (-2.5%) to $3.819/MMBtu; futures trended lower throughout the session, having reached its HoD of $3.955 just after the equity markets opened. Nov futures are near their LoD of $3.806.
Heating Oil fell 8 cents (-3%) to $2.48/gallon
RBOB fell 8 cents (-3.7%) to $2.17/gallon
Agricultural price action
Ag futures are moving higher together for a second day on concern that rain will delay the harvest in the US.
Corn rose 11 cents (+3%) to $3.57/bushel
Wheat rose 4 cents (+0.8%) to $5.09/bushel
Soybeans 20 cents (+2.1%) to $9.66/bushel; futures are now hitting 3-week highs
Ethanol rose 4 cents (+2.6%) to $1.68/gallon
Sugar #11 rose slightly (+1%) to $16.83 cents/lb
Metals price action
Gold advanced alongside equities, higher by $4.50 (+0.35%) to $1234.50/oz. The HoD of $1238.6 was notched in shortly after the pit session open, and the metal trended slightly lower from there as equities advanced.
Silver also advanced, climbing $0.06 (+0.35%) to $17.41, though it too hit its HoD shortly the after pit session opened.
Copper climbed $0.05 (+1.5%) to $3.09/lb
Preview: Wednesday 15 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.
MBA Mortgage Index – 07:00 : Prior 3.8%
Retail Sales – 08:30 : -0.1% (Prior 0.6%)
Retail Sales ex-auto – 08:30 : 0.3% (Prior 0.3%)
PPI – 08:30 : 0.1% (Prior 0.0%)
Core PPI – 08:30 : 0.1% (Prior 0.1%)
Empire Manufacturing – 08:30 : 20.0 (Prior 27.5)
Business Inventories – 10:00 : 0.4% (Prior 0.4%)
Fed Beige Book – 14:00
Corporate Earnings
BMO :
ASML BAC BLK CBSH IGTE KEY MTG PNC STJ
During Market Hours :
WABC
AF AXP BMI CNS EBAY EPB HNI KMI KMP LVS NAVI NFLX PTP RLI UFPI UMPQ URI WIRE
Other Events of Interest
Fed/Treasury/Political Events
None
Economic Events
None
Commentary
The economic calendar gets underway tomorrow with a massive slew of data releases. I reckon that this volatility isn’t going away any time soon and we should continue to see increasingly wild swings, even pre-market.
Today’s session provides little indication to what the underlying momentum is, and with the Russells still not participating in that late sell-off, I reckon we still have some upside to see. But don’t be too bullish about it.
Direction for Wednesday 15 Oct 2014: UP▲
Daily Directional Accuracy (from 14 May 2014): 69/103 (66.99%)
Weekly Directional Accuracy (from 16 May 2014): 12/20 (60%)