DOW 17042.90 -28.32 (-0.17%), NASDAQ 4493.39 -12.46 (-0.28%),
S&P500 1972.29 -5.51 (-0.28%)
Today’s session confirms that the bulls are done and dusted – out of this market. Despite a recovery and a reason for them to push higher, there was no such push. Instead the bulk of that push was from the bears – evident in the internals. With alarm bells ringing across the media, this sell-off seems set to continue.
Tomorrow’s data focus will likely be the German Unemployment, which is fairly insignificant. There’s nothing in particular on the homefront, except perhaps the Consumer Confidence report. That should set us up for an easy day.
The last day of Quarter 3 is also reliably bearish.
Direction for Tuesday 30 Sep 2014: DOWN▼
Turns out it wasn’t so bearish but a relatively flat-to-downside day. But let’s put it this way – if Monday was the rally, today was the indication that it’s fizzled out. Despite a recovery effort early in the day, the market slumped to opening lows and stayed there for the rest of the day.
Of interest to note, the Russell 2000 broke its 1100 support and closed lower during the last few minutes. Considering that the Russells have led the big caps throughout the year and now they underperform, this is a worrying move.
Oil and commodities took a beating as the US Dollar continued its move higher.
Market Summary
from Briefing.com
Industry Watch
Strong: Industrials, Technology, Telecom Services, Utilities
Weak: Consumer Discretionary, Energy, Health Care, Materials
Other Market Moving Factors
S&P 500 enters final September session down 1.3% month-to-date, but up 0.9% for Q3
Small caps underperform
Oil and a number of other commodities getting hit with increased selling pressure
Global Markets
Asia
Markets settled mixed across Asia
The ‘Occupy Central’ protests for democracy continue in Hong Kong
The Reserve Bank of India kept its benchmark interest rate unchanged at 8.00%, as expected
China’s HSBC Final Manufacturing PMI (50.2 actual v. 50.5 expected, 50.5 previous) fell short of estimates
Japanese data was mixed as household spending (-4.7% YoY actual v. -3.5% YoY expected) and preliminary industrial production (-1.5% MoM actual v. 0.2% MoM expected) missed while retail sales (1.2% YoY actual v. 0.4% YoY expected) and average cash earnings (1.4% YoY actual v. 1.1% YoY expected) beat
Japan’s Nikkei (-0.8%) fell from seven-year highs.
Hong Kong’s Hang Seng (-1.3%) fell to a three-month low as sellers remained in control for the sixth time in seven sessions
China’s Shanghai Composite (+0.3%) finished at a 19-month high ahead of Golden Week
India’s Sensex (+0.1%) held the 50 dma
Australia’s ASX (+0.5%) bounced off seven-month lows
Europe
UK’s FTSE: -0.4%
Germany’s DAX: + 0.6%
France’s CAC: + 1.3%
Spain’s IBEX: + 1.3%
Portugal’s PSI: + 0.6%
Italy’s MIB Index: + 1.8%
Irish Ovrl Index: + 1.4%
Greece ASE General Index: + 0.8%
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 : 6.7% vs 7.4% (Prior 8.1%)
Chicago PMI – 09:45 : 60.5 vs 61.5 (Prior 64.3)
Consumer Confidence – 10:00 : 86.0 vs 92.0 (Prior 93.4)
CHICAGO PMI
Highlights
The Chicago PMI fell to 60.5 in September from 64.3 in August. The Briefing.com consensus expected the index to fall to 61.5.
Key Factors
Even though the PMI dropped more than expected, the current reading is far from a disappointment. Levels have remained above 60 for five of the past six months, and readings above 60 are generally considered too strong for long-term stability. A further decline to 55 would still be considered a relatively strong month for manufacturing activities.
The production index fell to a still strong 64.9 in September from 74.7 in August. The softness in production was a result of slightly weaker new orders growth. That index fell to 60.0 in September from 65.6 in August. Order backlog levels dropped to 52.5 in September from 58.3 in August.
Relatively weaker production and demand growth had no effect on employment. The Employment Index increased to 56.2 in September from 55.9 in August.
Big Picture
The Chicago PMI has little overall economic value, and is only watched by the financial markets because it is usually released one day in advance of the similar national ISM manufacturing survey. A significant move in this regional survey will therefore sometimes be seen as having predictive value for the ISM index.
CONSUMER CONFIDENCE
Highlights
The Conference Board’s Consumer Confidence Index dropped to 86.0 in September from an upwardly revised 93.4 (from 92.4) in August. The Briefing.com consensus expected the index to fall to 92.0.
Key Factors
This was the lowest reading in the Consumer Confidence Index since May.
The University of Michigan consumer sentiment level increased in September following historically high equity prices, downward trending gasoline costs, and improvements in labor market conditions. Those same underlying conditions played no role in the consumer confidence index.
Instead, concerns over geopolitical problems in Russia and Iraq helped drive the Conference Board’s Expectations Index down to 83.7 in September from 93.1 in August. That was the largest one-month decline since falling 12.5 points in October 2013.
The Present Conditions Index fell to 89.4 in September from 93.9 in September.
The drop in consumer confidence is unlikely to have much of an impact on consumption growth. Spending relies upon income gains. As long as labor market conditions continue to improve, consumer spending should follow suit.
Big Picture
Income gains are the main catalyst for spending, yet rising levels of confidence over time tend to help on the margin.
Ticker News
from Briefing.com
HEADLINE NEWS
Abbvie (ABBV) has told Shire (SHPG) employees that merger will continue despite new rules on inversions, according to reports
Apple (AAPL) iPhone 6 & iPhone 6 Plus available in China on Friday, October 17
Dreamworks Animation (DWA): Softbank (SFTBY) merger talks with DWA being donwplayed, according to reports; also reports indicate SFTBY may purchase Legendary Pictures
eBay (EBAY) to separate eBay and PayPal into independent publicly traded companies in 2015; expects tax-free spin-off in the second half of 2015
FedEx (FDX) authorizes new stock repurchase program of up to 15 mln
Masco (MAS) announces strategic initiatives; Co to spin-off installation and other services segment, initiate share repurchase program and reduce corporate expense
EARNINGS/GUIDANCE
Big Lots (BIG) reaffirms Q3 EPS ($0.10)-(0.04) vs ($0.06) Capital IQ Consensus at TAG Conf.; comp results quarter-to-date (Aug/Sept) are within the Company’s stated guidance range of positive low single digits
Cintas (CTAS) beats by $0.04, reports revs in-line; adjusts FY15 guidance (Document Storage and Imaging business now discontinued operations)
eBay (EBAY): PayPal Rollout Call – Reconfirms Q3 guidance
Ford Motor (F) on Investor Day call says it will miss its 2014 pretax profit goal of $6 bln
Moody’s (MCO) raises full-year 2014 guidance — to acquire full ownership of Copal Amba
Synnex (SNX) beats by $0.11, beats on revs; guides Q4 above consensus
Walgreens (WAG) reports EPS in-line, revs in-line
ANALYST ACTIONS
Upgrades
Alcoa (AA) upgraded to Buy from Neutral at BofA/Merrill
Computer Sciences (CSC) upgraded to Outperform from Mkt Perform at Raymond James
Lockheed Martin (LMT) upgraded to Buy from Hold at Stifel
NiSource (NI) upgraded to Outperform from Neutral at Credit Suisse; tgt raised to $50 from $41
Raytheon (RTN) upgraded to Buy from Hold at Stifel
Downgrades
Ford Motor (F) downgraded to Hold from Buy at Craig Hallum; tgt $17
Kellogg (K) downgraded to Underweight from Equal-Weight at Morgan Stanley
Other
Apple (AAPL) initiated with a Hold at Jefferies; tgt $110
AutoZone (AZO) initiated with a Mkt Perform at William Blair
CDW (CDW) initiated with a Outperform at RBC Capital Mkts
Facebook (FB) target raised to $95 from $90 at Evercore; maintain Overweight
Ford Motor (F) target lowered to $16 at RBC Capital Mkts
Technical Analysis
DOW JONES INDUSTRIAL AVERAGE
17042.90 -28.32 (-0.17%)
Volume: 102,290,741 (above average of 76,050,772)
Range: 17017.11 – 17145.10
NASDAQ COMPOSITE
4493.39 -12.46 (-0.28%)
Volume: 574.5M (above average of 430.1M)
Range: 4483.91 – 4522.06
S&P500 INDEX
1972.29 -5.51 (-0.28%)
Volume: 590.9M (above average of 443.0M)
Range: 1968.96 – 1985.17
Shooting Star on the DOW, Dark Cloud on the NASDAQ, and the S&P500… a Bearish Kicker. Looks like the bounce is over.
The DOW got rejected off 17150 and the S&P500 of 1990 – a key resistance level. The general market remains under key levels as well – the DOW under the 20MA, the S&P500 and NASDAQ under their 50MAs. In fact the NASDAQ just slipped under its 50MA at today’s close.
Market Internals
NYSE:
Higher Volumes than the day before – 943.6M vs 653.4M
Decliners outpaced Advancers (adv/dec): 1145 / 1950
New Lows outpaced New Highs (highs/lows): 34 / 184
NASDAQ:
Higher Volumes than the day before - 2066.3M vs 1707.6M
Decliners outpaced Advancers (adv/dec): 834 / 1874
New Lows outpaced New Highs (highs/lows): 44 / 147
VOLATILITY S&P500 (VIX)
16.31 +0.33 (+2.07%)
Decliners outpaced Advancers by 1.93 on higher volumes than the day before (+648.9M +27.48%).
The Advancer/Decliner ratio isn’t so bearish, but the New Lows/New Highs are getting more and more extreme. It’ll only be a matter of time before this all comes crashing and the market makes a new low itself.
The VIX continues to surge, puncturing the 16.00. The previous high on the VIX was the 17.00 region, so watch for a possible reversal here.
Treasury Bonds, Currencies & Commodities
from Briefing.com
Treasury Bonds
Quarter-End Selling Hits Treasuries:
Treasuries finished on their lows as some quarter-end selling developed in the final minutes of trade.
The complex held small modest losses into the cash open, but wiped away the weakness in response to the trio of disappointing data.
Case-Shiller 20-city Index (6.7% actual v. 7.4% expected), Chicago PMI (60.5 actual v. 61.5 expected, 64.3 previous) and consumer confidence (86.0 actual v. 92.0 expected, 92.4 previous) all fell short of estimates.
An uneventful trade saw action hug the flat line for much of the session before selling developed in the final minutes of trade.
Up front, the 2Y slipped -1.5bps to 0.579%. Action flirted with 0.600%, but was once again rejected at the level.
In the belly, the 5Y ticked up +0.7bps to 1.780%. Early buying provided yet another test of 1.750% support, but the level held for a sixth straight day.
The 10Y climbed +1.7bps to 2.508%. The benchmark yield reclaimed the psychologically important 2.500% level, but stopped short of reclaiming the 100 dma (2.518%).
A the long end, the 30Y lagged, rallying +3.2bps to 3.212%. Today marked just the second loss for the long bond in nine sessions.
Selling swung the curve steeper as the 2-10-yr spread widened to 193bps.
2Yr 0.58 (unch), 5Yr 1.78 (+0.01), 10Yr 2.52 (+0.02), 30Yr 3.21 (+0.03)
2/10 Spread: 194bps (+2); 2/30 Spread: 263bps (+3)
Currencies
Dollar Marches Higher:
The Dollar Index sports modest gains as trade fights to hold the 85.90 level.
Early buying ran the greenback above the 86.00 level, and up to 86.20, for the first time since July 2010 before surrendering a portion of the advance in U.S. trade.
EURUSD is -60 pips @ 1.2625 as action readies for its lowest close in two years. The single currency came under early selling pressure after Germany saw a jump in unemployment and eurozone Flash CPI slowed to 0.3% YoY, the lowest on record. These levels will remain of interest into Thursday’s ECB rate decision with many expecting some clarity on the recently announced ABS purchases, However, few believe sovereign bond buying will be announced. Italian and Spanish Manufacturing PMI are due out tomorrow.
GBPUSD is -35 pips @ 1.6205 as trade slides to a three-week low. Today’s weakness comes in the face of mixed data that saw Q3 Final GDP tick up to 0.9% QoQ (0.8% QoQ expected), but the current account deficit widen. A break below the 1.6200 level puts the September lows in focus. Britain’s Manufacturing PMI will be announced tomorrow.
USDCHF is +35 pips @ .9545 as action likes almost certain to close at a fresh 14-month high. The pair tested the .9600 level in early action, but has pulled back as the euro rallies off its lows.
USDJPY is +20 pips @ 109.65 as trade ticks to a six-year high. Traders will be monitoring the 110.00 level into tonight’s Tankan Manufacturing and Tankan Non-Manufacturing releases.
AUDUSD is +25 pips @ .8745 as action ticks off seven-month lows. The hard currency tested key support at the .8700 level for a second session, and buyers emerged despite the disappointing Chinese HSBC Final Manufacturing PMI. Australian data set for tonight is limited to retail sales while China’s Manufacturing PMI will be released. Chinese banks will be closed for Golden Week.
USDCAD is +40 pips @ 1.1200 as buyers remain in control for the seventh time in eight days. Today’s advance developed after Canada’s GDP (0.0% MoM actual v. 0.2% MoM expected) and RMPI (-2.2% MoM actual v. -1.7% MoM expected) readings both fell short of estimates with action on track to close at its best level in six months. Traders will be monitoring the 1.1250/1.1300 area as a breakout would produce levels last seen in July 2009.
Commodities
NYMEX Energy Closing Prices
Nov crude oil fell $3.37 to $91.16/barrel
Crude oil fell below the $91 level today after pulling back from a session high of $94.85 set moments after pit trade opened. The energy component traded as low as $90.86 while the dollar index held gains. Unable to find buying support, it settled 3.6% lower, booking a loss of 11.5% for the quarter.
Nov natural gas fell 2 cents to $4.12/MMBtu
Natural gas also retreated into negative territory after touching a session high of $4.17 in early morning action. It settled 0.5% lower, bringing losses for the quarter to 7.6%.
Nov heating oil fell 6 cents to $2.65/gallon
Nov RBOB fell 7 cents to $2.44/gallon
CBOT Agriculture and Ethanol/ICE Sugar Closing Prices
Dec corn fell 6 cents to $3.20/bushel
Dec wheat fell 4 cents to $4.78/bushel
Nov soybeans fell 11 cents to $9.12/bushel
Nov ethanol rose 1 cent to $1.57/gallon
Nov sugar (#16 (U.S.)) fell 0.11 of a penny to 25.84 cents/lb
COMEX Metals Closing Prices
Dec gold fell $7.40 to $1211.40/oz
The commodities space was mostly weaker today as the dollar index traded higher. Gold touched a session high of $1220.70 in morning action but quickly retreated back into negative territory. Earlier in overnight trade, the yellow metal fell as low as $1204.30, its lowest level since early January. It managed to erase some of the losses as it headed into the close and settled 0.6% lower, booking a loss of 8.4% for the quarter.
Dec silver fell $0.51 to $17.07/oz
Silver slid to $16.85 in early afternoon pit trade, its lowest level since February 2010. It recovered back above $17 later in the session and settled with a 2.9% loss, declining 19.1% over the quarter.
Dec copper fell 4 cents to $3.01/lb
Preview: Wednesday 1 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 -4.1%
ADP Employment Change – 08:15 : 202K (Prior 204K)
ISM Index – 10:00 : 58.5 (Prior 59.0)
Construction Spending – 10:00 : 0.4% (Prior 1.8%)
Crude Inventories – 10:30 : Prior -4.273M
Auto Sales – 14:00 : Prior 6.2M
Truck Sales – 14:00 : Prior 7.9M
Corporate Earnings
BMO :
AZZ AYI
AMC :
OFIX
Other Events of Interest
Fed/Treasury/Political Events
None
Economic Events
Eurozone PMI – 04:00
Commentary
Today’s session was mostly flat to the downside, but with much of the market leaning to the bearish end of things. With the small caps breaking lower and Dollar pushing higher, the big caps will follow eventually.
Tomorrow’s key data highlight will be the ADP Employment Report as the market gears up for the Nonfarm Payrolls due on Friday. But I reckon we should be heading lower.
The first day of October has also seen the DOW down 5 of the last 8.
Direction for Wednesday 1 Oct 2014: DOWN▼
Daily Directional Accuracy (from 14 May 2014): 62/93 (66.67%)
Weekly Directional Accuracy (from 16 May 2014): 10/18 (55.56%)