DOW 16912.11 -70.48 (-0.42%), NASDAQ 4442.70 -2.21 (-0.05%),
S&P500 1969.95 -8.96 (-0.45%)
With GDP numbers and Nonfarm Payrolls looming ahead, I suspect the market is merely taking a breather. The expectation from what it looks is for a massive dive thereafter, but an upside surprise on GDP and Nonfarm Payrolls (which should be expected) might give the market some life.
I’m not trading until Friday. We will likely see a relatively flat day tomorrow. Nonetheless, because I have no sideways arrow…
Direction for Tuesday 29 Jul: DOWN▼
Okay… EU sanctions on Russia at 11:00 and the whole market turned. Was it a kneejerk? I would like to think so. But the 2nd half performance indicated otherwise.
I’m not exactly convinced… yet. Just look at the leadership for the day.
Market Summary
Economic Data & News
Technical Analysis
Market Internals
Bonds, Currencies & Commodities
Preview
Market Summary
Industry Watch
Strong: Telecom Services
Weak: Financials, Industrials, Materials, Utilities
Other Market Moving Factors
FOMC begins two-day meeting
Dow components Merck (MRK) and Pfizer (PFE) report better than expected results
Dow Jones Transportation Average member UPS (UPS) misses estimates
EU officials expected to announce new sanctions against Russia
[BRIEFING.COM] The stock market ended the Tuesday session on a lower note after generally upbeat earnings took the back seat to geopolitical concerns. The S&P 500 (-0.5%) and Nasdaq Composite (-0.1%) ended on their lows, while the Russell 2000 (+0.3%) displayed relative strength.
Once again, market participants were focused on quarterly reports in the early going, but geopolitical worries overshadowed the impact of mostly better than expected earnings. Specifically, equities retreated after it was reported that European EU officials have prepared the new set of sanctions against Russia. The imposition of new sanctions may pique concerns about a boomerang effect on the global economy, and Europe in particular, but it is worth noting that the Russian ruble and Market Vectors Russia ETF (RSX 23.85, -0.50) strengthened in reaction to the news.
The reports of forthcoming sanctions were followed by afternoon headlines from Washington indicating the Treasury Department has added VTB, the Bank of Moscow, and Russian Agriculture Bank to the sanction list. After the news crossed the wires, the RSX and the ruble dropped to fresh lows, as did the S&P 500.
Nine of ten sectors registered losses with the industrial space (-1.2%) spending the day at the bottom of the leaderboard. The sector was pressured by transport stocks after UPS (UPS 98.86, -3.80) reported disappointing results and guided lower. For its part, the Dow Jones Transportation Average logged its fourth consecutive loss, tumbling 1.4% with 17 of its 20 components ending in the red.
Unlike the industrial sector, other cyclical groups fared a bit better. Financials (-0.6%) and materials (-0.7%) lagged, while consumer discretionary (-0.3%) and technology (-0.2%) displayed relative strength.
In the discretionary sector, Honda Motor (HMC 36.02, +0.84) advanced 2.4% after reporting a slim earnings beat. The carmaker underpinned the sector, which also drew strength from retailers. The SPDR S&P Retail ETF (XRT 84.24, 0.00) ended flat.
Elsewhere, the relative strength of the technology sector kept the broader market from sliding deeper into the red. High-beta chipmakers contributed to the outperformance with the likes of AMD (AMD 3.79, +0.06), Broadcom (BRCM 37.99, +0.27), and Taiwan Semiconductor (TSM 20.55, +0.18) adding between 0.7% and 1.6%.
Similarly, biotech companies also rallied with the iShares Nasdaq Biotechnology ETF (IBB 254.78, +2.87) ending higher by 1.1%. Meanwhile, the health care sector settled flat.
On the upside, only one sector finished in the green. Telecom services (+2.2%) rallied after Windstream (WIN 11.83, +1.30) was cleared by the Internal Revenue Service to spin off its assets into a publically-traded REIT. Peers AT&T (T 36.59, +0.94) and Verizon (VZ 51.97, +0.39) gained 2.6% and 0.8%, respectively on speculation they could also explore conversions into REITs.
On the fixed income side, Treasuries ended the session with modest gains that pressured the 10-yr yield lower by two basis points to 2.46%.
Participation was on the light side with 615 million shares changing hands at the NYSE.
Economic data was limited to the Case-Shiller 20-city Index and the Consumer Confidence report:
The Case-Shiller 20-city Home Price Index for May rose 9.3%, while a 10.0% increase had been expected by the Briefing.com consensus
This followed the previous month’s increase of 10.8%
The Conference Board’s Consumer Confidence Index spiked to 90.9 in July from an upwardly revised 86.4 (from 85.2), while the Briefing.com consensus pegged the Index at 85.6
Consumer confidence is now at its highest level since October 2007
The Present Situation Index increased to 88.3 from 86.3 and the Expectations Index rose to 92.7 from 86.4
Global Markets
Asia
Markets gained across most of Asia
Japanese data was mixed as household spending (-3.0% YoY actual v. -3.7% YoY expected) beat and retail sales (-0.6% YoY actual v. -0.4% YoY expected) missed
Australia’s HIA New Home Sales climbed 1.2% MoM
Japan’s Nikkei (+0.6%) rallied to a six-month high
Hong Kong’s Hang Seng (+0.9%) advanced for a sixth straight session to finish at levels last seen in November 2010
China’s Shanghai Composite (+0.2%) climbed to a seven-month high as shares rallied for a sixth session
Australia’s ASX (+0.2%) closed at its best level in more than six years
Europe
UK’s FTSE: + 0.3%
Germany’s DAX: + 0.6%
France’s CAC: + 0.4%
Spain’s IBEX: + 0.1%
Portugal’s PSI: -1.4%
Italy’s MIB Index: + 0.7%
Irish Ovrl Index: + 0.8%
Greece ASE General Index: -1.5%
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.
Case-Shiller 20-city Index – 09:00 : 9.3% vs 10.0% (Prior 10.8%)
Consumer Confidence – 10:00 : 90.9 vs 85.6 (Prior 85.2)
CONSUMER CONFIDENCE
Highlights
The Conference Board’s Consumer Confidence Index spiked to 90.9 in July from an upwardly revised 86.4 (from 85.2) in June. The Briefing.com consensus pegged the Consumer Confidence Index at 85.6.
Key Factors
Consumer confidence is now at its highest level since October 2007.
The Present Situation Index increased to 88.3 in July from 86.3 in June. The Expectations Index rose to 92.7 in July from 86.4 in June.
Historically high equity prices, a reduction in gasoline costs, and improvements in labor conditions all worked in conjunction to boost confidence. However, there was some concern that confidence levels would remain stagnant because the similarly measured University of Michigan Consumer Sentiment Index declined slightly in its preliminary reading.
The strong confidence reading does not necessarily mean that an acceleration in consumption growth is forthcoming. Consumption gains rely on income growth. As long as the improvements in overall labor conditions translate into increased wages, consumption growth will follow.
Big Picture
Income gains are the main catalyst for spending, yet rising levels of confidence over time tend to help on the margin.
In Other News…
HEADLINE NEWS
Bank of America (BAC) and DoJ settlement has hit a roadblock, according to reports
Boeing (BA) delivers ANA’s first 787-9 Dreamliner
Bristol-Myers (BMY) and Pfizer (PFE) announce the European Commission has approved Eliquis for the treatment of DVT and PE, and the prevention of recurrent DVT and PE in adults
Darden Restaurants (DRI) announces leadership succession plan; Clarence Otis to step down as Chairman and CEO; Board separates Chairman and CEO roles and appoints Charles Ledsinger, Jr. Independent Non-Executive Chairman of the Board
McDonald’s (MCD) accused of not cooperating with China food investigation, according to reports
Microsoft (MSFT) target of anti trust investigation in China, according to reports
Windstream (WIN) to spin off assets into publicly traded REIT; co’s board of directors approved the plan following the receipt of a favorable private letter ruling from the IRS
Smartphone processor shipments in China to increase in second half of this year, according to reports
EARNINGS/GUIDANCE
Aetna (AET) beats by $0.09, beats on revs; raises FY14 EPS in-line
CONSOL Energy (CNX) misses by $0.35, beats on revs
Corning (GLW) misses by $0.01, beats on revs; sees continued growth
Eastman (EMN) beats by $0.08, slightly misses on revs; reaffirms FY14 EPS guidance
Eaton (ETN) reports EPS in-line, revs in-line; guides Q3 EPS below consensus; lowers high end of FY14 EPS guidance
Intl Paper (IP) beats by $0.11, misses on revs
Jacobs (JEC) misses by $0.03, misses on revs; reaffirms FY14 EPS guidance
Masco (MAS) beats by $0.04, beats on revs
McGraw-Hill Financial (MHFI) beats by $0.07, beats on revs; raises FY14 EPS (midpoint above consensus)
Merck (MRK) beats by $0.04, beats on revs; raises bottom end of FY14 EPS in line; reaffirms FY14 rev guidance
Natl Oilwell Varco (NOV) beats by $0.17, misses on revs
Pfizer (PFE) beats by $0.01, beats on revs; reaffirms FY14 EPS guidance, lowers FY14 revs, in-line
Range Resources (RRC) misses by $0.05, reports revs in-line
Reynolds American (RAI) beats by $0.02, misses on revs; raises bottom end of FY14 EPS guidance, in-line
UPS (UPS) misses by $0.04, beats on revs; loweres FY14 EPS below consensus; US daily package volume +7.4%
Waste Mgmt (WM) beats by $0.01, misses on revs; Co plans to meet or exceed its FY14 EPS guidance; Co executes agreements to repurchase $600 mln in shares, sells Wheelabrator Technologies for $1.94 bln in cash
Wynn Resorts (WYNN) beats by $0.17, misses on revs
ANALYST ACTIONS
Upgrades
Barclays PLC (BCS) upgraded to Buy from Add at Numis
Costco (COST) upgraded to Buy from Neutral at Goldman; added to Conviction Buy list
Downgrades
Allstate (ALL) downgraded to Mkt Perform from Outperform at William Blair
Barnes Group (B) downgraded to Hold from Buy at Deutsche Bank; tgt lowered to $40 from $46; removed from Short-Term Buy list
Dollar Tree (DLTR) downgraded to Mkt Perform from Outperform at BMO Capital Mkts
Family Dollar (FDO) upgraded to Neutral from Underweight at Piper Jaffray
Trulia (TRLA) downgraded to Hold at Needham; downgraded to Hold from Buy at Deutsche Bank
Wal-Mart (WMT) downgraded to Neutral from Buy at Goldman
Other
Armstrong World Industries (AWI) removed from Conviction Buy list at Goldman
Boston Scientific (BSX) initiated with a Neutral at Sterne Agee; tgt $13.50
XL Group plc (XL) added to Best Ideas list at Morgan Stanley
Technical Analysis
DOW JONES INDUSTRIAL AVERAGE
16912.11 -70.48 (-0.42%)
Volume: 75,984,025 (below average of 76,979,917)
Range: 16912.11 – 17056.46
NASDAQ COMPOSITE
4442.70 -2.21 (-0.05%)
Volume: 486.4M (above average of 458.8M)
Range: 4441.03 – 4470.97
S&P500 INDEX
1969.95 -8.96 (-0.45%)
Volume: 492.8M (above average of 452.8M)
Range: 1969.95 – 1984.85
The DOW looks like it’s gone leg off the cliff. The NASDAQ and S&P500 are still in better shape.
But with everything going to be news driven this week, technicals should be taking a backseat…
Market Internals
NYSE:
Higher Volumes than the day before – 627.7M vs 588.9M
Decliners outpaced Advancers (adv/dec): 1194 / 1830
New Highs outpaced New Lows (highs/lows): 94 / 33
NASDAQ:
Higher Volumes than the day before – 2087.5M vs 1770.0M
Advancers outpaced Decliners (adv/dec): 1366 / 1322
New Highs outpaced New Lows (highs/lows): 71 / 61
VOLATILITY S&P500 (VIX)
13.28 +0.72 (+5.73%)
Decliners outpaced Advancers by 1.23 on higher volumes than the day before (+356.3M +15.10%).
I said something about not being convinced right? With such messy internals like that, I just can’t put my money into this.
Bullish engulfing on the VIX. That does not look good either.
Treasury Bonds, Currencies & Commodities
from Briefing.com
Treasury Bonds
Yields Fall as Consumer Confidence Hits Seven-Year High:
Treasuries finished near their highs, supported by today’s strong 5y note auction.
Maturities ticked to their best levels of the day ahead of the cash open before surrendering those gains in response to the strongest consumer confidence reading (90.9 actual v. 85.6 expected, 85.2 previous) in seven years.
Post-data selling dropped maturities back onto their respective breakeven lines ahead of the 5y auction.
The auction drew 1.720% and a solid 2.81x bid/cover. Strong bids from both indirects (48.2%) and directs (25.9%) left primary dealers with just 25.9% of the supply. A post-auction bid developed, running maturities back near their highs into the cash close.
A solid bid dropped the 30y -4bps to 3.222%. The yield on the long bond settled at its lowest level in 13 months.
The 10y fell -2.9bps to 2.462%. Today’s bid produced the lowest close for the benchmark yield in two months, and puts the May closing low of 2.438% in jeopardy.
In the belly, the 5y slipped -1.7bps to 1.686%. Many traders continue to monitor the 1.650% level as both the 50 and 100 dma aid support in the area.
Up front, the 2y eased -0.8bps to 0.535%. Early action caused the yield to print at its highest level since May 2011.
A flatter curve persisted as the 2-10-yr spread narrowed to 192.5bps and the 5-30-yr spread tightened to 153.5bps.
2Yr 0.54 (unch), 5Yr 1.70 (-0.03), 10Yr 2.47 (-0.03), 30Yr 3.22 (-0.04)
2/10 Spread: 193bps (-3); 2/30 Spread: 268bps (-4)
Currencies
Dollar Sees Sixth Gain in Seven Sessions: 10-yr: +04/32..2.465%..USD/JPY: 102.13..EUR/USD: 1.3407
The Dollar Index trades on session highs near 80.20 as trade looks to put in its best close in almost six months. Click here to see a weekly Dollar Index chart.
The rally off the early July lows near 79.80 has many turning their focus towards the key 81.40 level.
EURUSD is -30 pips @ 1.3410 as trade drops to an eight-month low. The single currency hovered little changed into the start of U.S. trade, but has seen a leg lower on headlines indicating European leaders have agreed on further Russian sanctions. A breakdown of the 1.3400 level puts the 1.3300/1.3350 support band in play. German preliminary CPI accompanies Spanish Flash CPI and Spanish Flash GDP.
GBPUSD is -45 pips @ 1.6940 as sellers remain in control for the ninth time in ten sessions. Today’s weakness comes following the slight net lending to individuals miss, and has pushed action to its lowest level in one and a half months. Many traders are taking note of today’s downside breach of the 50 dma as action fights to hold minor support near 1.6900.
USDCHF is +30 pips @ .9070 as action flirts with its best close in seven months. The recent ‘golden cross’ has many looking for further upside with .9000 acting as support. Swiss data is limited to the KOF Economic Barometer.
USDJPY is +30 pips @ 102.15 as buyers hold control for an eighth straight session. The current rally has action testing its best levels since the beginning of July as resistance and both the 100 and 200 dma come under pressure. Japan’s preliminary industrial production will cross the wires tonight.
AUDUSD is -25 pips @ .9380 as trade slips for a third time in four days. Support near .9350 is guarded by the 50 dma.
USDCAD is +55 pips @ 1.0850 as trade climbs to its best levels since the middle of June. Today’s bid has allowed the pair to reclaim the 200 dma while testing key resistance in the area. Canada’s Raw Materials Price Index is due out tomorrow.
Commodities
Closing Commodities: Oil and gold end the day lower
Aug gold fell into negative territory after trading as high as $1310.30 per ounce in morning action as the dollar index strengthened. The yellow metal brushed a session low of $1295.50 per ounce and eventually settled with a 0.4% loss at $1298.20 per ounce.
Sep silver also pulled back from its session high of $20.79 per ounce set in early morning pit trade and brushed a session low of $20.50 per ounce. It inched slightly higher heading into the close and settled 1 cent higher at $20.58 per ounce.
Sep crude oil extended yesterday’s losses as the stronger dollar index weighed on prices. The energy component spent its entire floor session in the red, trading as low as $100.32 per barrel. Unable to gain buying support, it settled at $100.91 per barrel, or 0.8% lower.
Sep natural gas dipped to a session low of $3.74 per MMBtu in morning action and chopped around slightly below the unchanged level. Buyers stepped in during the last hour of floor trade and took prices up as high as $3.83 per MMBtu. Natural gas settled at $3.82 per MMBtu, or 1.3% higher.
NYMEX Energy Closing Prices
Sep crude oil fell $0.77 to $100.91/barrel
Crude oil extended yesterday’s losses as a stronger dollar index weighed on prices. The energy component spent its entire floor session in the red, trading as low as $100.32. Unable to gain buying support, it settled with a 0.8% loss.
Sep natural gas rose 5 cents to $3.82/MMBtu
Natural gas dipped to a session low of $3.74 in morning action and chopped around slightly below the unchanged level. However, buyers stepped in during the last hour of floor trade and took prices up as high as $3.83, leaving natural gas to settle with a 1.3% gain.
Sep heating oil rose 1 cent to $2.90/gallon
Sep RBOB rose 1 cent to $2.86/gallon
CBOT Agriculture and Ethanol/ICE Sugar Closing Prices
Sep corn fell 6 cents to $3.62/bushel
Sep wheat fell 14 cents to $5.21/bushel
Aug soybeans fell 7 cents to $12.29/bushel
Sep ethanol fell 1 cent to $2.08/gallon
Sep sugar (#16 (U.S.)) rose 0.07 of a penny to 24.65 cents/lbs
COMEX Metals Closing Prices
Aug gold fell $5.00 to $1298.20/oz
Gold fell into negative territory after trading as high as $1310.30 in morning action as the dollar index strengthened. The yellow metal brushed a session low of $1295.50 and eventually settled with a 0.4% loss.
Sep silver rose $0.01 to $20.58/oz
Silver also pulled back from its session high of $20.79 set in early morning pit trade and brushed a session low of $20.50. It inched slightly higher heading in the close and settled 1 cent above the unchanged line.
Sep copper fell 2 cents to $3.22/lbs
Preview: Wednesday 30 Jul
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.
MBA Mortgage Index – 07:00 : Prior 2.4%
ADP Employment Change – 08:15 : 215K (Prior 281K)
GDP – Adv – 08:30 : 3.2% (Prior -2.9%)
Chain Deflator – Adv – 08:30 : 2.1% (Prior 1.3%)
Crude Inventories – 10:30 : Prior -3.969M
FOMC Rate Decision – 14:00 : 0.25% (Prior 0.25%)
Corporate Earnings
BMO :
ACCO ADT ALKS AB AMED AMT ARQL ATRO AUO BDC BOKF BAH CVE GIB CFR DEST DHX D DORM DX ENR EVER BEN GRMN GLYC GT HAE HES HSP HUM HUN ICLR INGR IACI IXYS KVHI LFUS LO LPLA LL MMYT MCGC MWV MRGE MINI MGAM NICE NVMI PTRY PAG PSX PSXP PBI PROV PEG RYAM ROK RRD SGNT SAIA SEE SNH SODA SONS SO SPB S SPW SMP TASR TFX TRI VLO VLY WLP WILN WEC
AMC :
ABX AEL AEM AKAM ALB ALL ALLE AMC AMSF ANIK ARII ASGN ATEN ATW AUY AVG AXLL BALT BGC BLKB BMRN BRKL CATM CAVM CBT CENX CHDN CJES CLUB CMO CNL CNW CODE COHR CTRP CUZ CVG CW CWT DAVE DDR DRE DRIV EGN EHTH ELGX ENTR EQIX EQY ESRT ESV EXL EXR FBHS FEIC FISH FIX FMC FNF FOE FORM FORR GLUU HIG HK HOLX HOS HR HTH HVT HY INT IPI ISIL JD KBR KEX KGC KRA KFRT KS LGCY LNC LOCK LPSN LRCX MAA MANT MC MDAS MEOH MET MN MOBL MOH MTGE MTW MUR NANO NBIX NCIT NE NEWP NOW OI OTEX PDM PEIX PGTI PPC PSB PVA QUIK RKUS ROVI RRTS SAM SBRA SCI SFLY SIGI SIMG SPN SPRT SQI SSS STAA STAG STMP STNR STR SU SWM SZYM TCO TGB TGI TRUE TS TSO TTEK TTMI TWTC UNM VGR VPRT WDC WFM WLL WMB WPZ WSTL WTW YELP
Other Events of Interest
Fed/Treasury/Political Events
$29bln 7-Year Treasury Note Auction – 13:00
Economic Events
Eurozone Industrial Confidence – 04:00
Argentina July 30th Default Dateline – 10:00
Analyst/Investor Meetings
None
Conclusion
Calling this will be tricky. The GDP number will determine the direction today – and will make or break this market. Any miss will likely send this market to the floor in a hurry.
But… I’m going to be a little daring and… (It’s ultimately a gamble, ok?)
To be fair, everything else screams down.
Add-on: I forgot about the FOMC Decision at 14:00. But it’s likely to be a non-event with the Fed continuing to taper at 10bln.
Direction for Wednesday 30 Jul: UP▲
Daily Directional Accuracy (from 14 May 2014): 36/52 (69.23%)
Weekly Directional Accuracy (from 16 May 2014): 6/10 (60.00%)