DOW 17673.02 +6.62 (+0.04%), NASDAQ 4716.70 -11.04 (-0.23%),
S&P500 2041.51 -8.52 (-0.42%)
Today’s momentum is encouraging and this upward recovery looks decently bullish, and it should continue.
However, watch for the Crude Inventory report as that might just upset things…
Direction for Wednesday 4 Feb 2015: UP▲
Despite the caution at the start of the day, the day remained modestly bullish with the market holding aloft. It’s not exactly encouraging bullishness, but against that selling the pressure we didn’t sell off badly either.
Leadership was more confused than anything else.
Market Summary
from Briefing.com
Industry Watch
Strong: Consumer Discretionary, Consumer Staples, Technology, Telecom Services
Weak: Energy, Health Care, Industrials, Materials, Utilities
Other Market Moving Factors
European investors maintain optimism after Greek Finance Minister Varoufakis meets with ECB President Draghi
Crude oil pulls back following three-day surge
Biotechnology extends recent retreat
[BRIEFING.COM] The stock market ended the Wednesday session on a lower note. The S&P 500 lost 0.4% after tumbling from its high to a new low during the final 30 minutes of action.
Equity indices endured some choppy waters after the S&P 500 spiked nearly 3.0% during the first two sessions of the week. The market appeared to be out of the woods by the start of the final hour, but the benchmark index plunged through its 50-day moving average after it was reported that the European Central Bank has lifted its waiver that allowed for the acceptance of Greek debt as collateral.
The announcement came with a caveat that the counterparty status of Greek banks remains unchanged and they may satisfy their liquidity needs through Emergency Liquidity Assistance. However, the news showed that the negotiations are likely to be tumultuous, which contrasted with the rosy picture painted over the last two days.
Despite the closing slide, a handful of influential sectors like consumer discretionary (+0.7%), technology (+0.1%), and consumer staples (+0.1%) were able to finish in the green.
The consumer discretionary space received solid support from carmakers and media names. General Motors (GM 35.83, +1.85) surged 5.4% after beating estimates and announcing plans to boost its dividend by 20.0% to $0.36. Meanwhile, Dow component Disney (DIS 101.28, +7.18) spiked 7.6% in reaction to above-consensus earnings and revenue.
Elsewhere among Dow members, the top-weighted listing—Visa (V 264.89, +5.10)—soared 2.0% and helped underpin the price-weighted index, which ended flat. Furthermore, the stock contributed to the relative strength of the technology sector. Other large sector components were mixed with Apple (AAPL 119.56, +0.91) and Microsoft(MSFT 41.83, +0.23) posting gains while Google (GOOGL 526.10, -7.20), IBM (IBM 156.96, -1.51), and Oracle (ORCL 42.42, -0.62) registered losses.
In turn, the tech sector provided a boost to the Nasdaq Composite (-0.2%), helping the index finish ahead of the broader market. The Nasdaq overcame another decline in the biotechnology group as the iShares Nasdaq Biotechnology ETF (IBB 312.55, -5.24) lost 1.7% and widened its week-to-date decline to 2.8%. Conversely, the health care sector (-1.4%) settled near the bottom of the leaderboard.
Health care was not the only influential group that struggled today. The energy sector (-1.6%) finished at the bottom of the leaderboard due to a daylong slide in crude oil. The energy component plunged 9.3% and surrendered the bulk of its February gain. As for the energy sector, the cyclical group trimmed its week-to-date gain to 4.2%.
Treasuries spiked during afternoon action, sending the 10-yr yield lower by three basis points to 1.76%.
Today’s participation was well above average with more than a billion shares changing hands at the NYSE floor.
Economic data included ADP Employment, ISM Services, and the MBA Mortgage Index:
The ADP National Employment Report revealed that employment in the nonfarm private business sector rose by 213K in January while the Briefing.com consensus expected an increase of 230K
The December reading was revised up to 253,000 from 241,000
The ISM Non-Manufacturing Index increased to 56.7 in January from a previously revised 56.5 (from 56.2) in December while the Briefing.com consensus expected the index to remain at 56.5
Overall, the non-manufacturing sector remained strong in January, but future gains may be difficult as backlogs contracted for the second consecutive month, falling to 49.0 from 49.5
Business activities in the non-manufacturing sector strengthened in January as the related index increased to 61.5 from 58.6 in December
The weekly MBA Mortgage Index rose 1.3% to follow last week’s 3.2% decline
Global Markets
ASIA
Asian markets ended mostly higher while China’s Shanghai Composite (-1.0%) lagged. Following the session, the People’s Bank of China cut its Reserve Requirement Ratio to 19.5% from 20.5% with the move likely aimed at increasing liquidity ahead of the Lunar New Year.
Elsewhere, Reserve Bank of New Zealand Governor Graeme Wheeler said the central bank will maintain its current policy stance unless domestic demand weakens enough to justify a rate cut
In economic data:
China’s HSBC Services PMI fell to 51.8 from 53.4 (expected 52.8)
Japan’s Average Cash Earnings rose 1.6% year-over-year, as expected (prior 0.1%) while Overtime Pay increased 0.5% (prior -0.9%)
Hong Kong’s Manufacturing PMI fell to 49.4 from 50.3
India’s HSBC Services PMI rose to 52.4 from 51.1
Australia’s AIG Services Index rose to 49.9 from 47.5 while NAB Quarterly Business Confidence fell to 2 from 6
New Zealand’s Employment Change came in at 1.2% quarter-over-quarter (expected 0.8%; prior 0.9%) while the Unemployment Rate jumped to 5.7% from 5.4% (consensus 5.3%)
——
Japan’s Nikkei jumped 2.0% amid broad strength. Sumitomo Heavy Industries, Mitsubishi Chemical, and Ebara gained between 5.8% and 6.6%. On the downside, Sharp fell 4.5%.
Hong Kong’s Hang Seng added 0.5%, but settled near its low. Energy names rallied for the second consecutive day with CNOOC and PetroChina spiking 4.3% and 1.9%, respectively.
China’s Shanghai Composite slumped into the close to end lower by 1.0%. Financials lagged with Avic Capital and Luxin Venture Capital both down near 4.4%.
India’s Sensex shed 0.4% with bank shares pacing the retreat. Axis Bank lost 4.8% and State Bank of India dropped 2.4%.
Australia’s ASX spiked 1.2% with help from miners. Rio Tinto soared 3.7% and BHP Billiton surged 4.4%.
Regional Advancers: Indonesia +0.5%, Malaysia +1.2%, Philippines +1.4%, Singapore +0.3%, South Korea +0.6%, Taiwan +0.7%, Vietnam +0.7%
Regional Decliners: Thailand -0.2%
FX: USDCNY ticked down to 6.2482, USDINR rose to 61.83, USDJPY is lower near 117.47, AUDUSD is little changed at 0.7790
EUROPE
Major European indices trade lower following two days of gains. European investors have maintained their optimism regarding a solution to the Greek crisis after Finance Minister Yanis Varoufakis said he had a ‘fruitful exchange’ with European Central Bank President Mario Draghi. Meanwhile, European Council President Donald Tusk said the talks will be ‘difficult.’
Eurozone Services PMI rose to 52.7 from 52.3 (expected 52.3) while Retail Sales increased 0.3% month-over-month (expected 0.2%; prior 0.7%)
Germany’s Services PMI climbed to 54.0 from 52.3 (expected 52.3)
UK’s Services PMI jumped to 57.2 from 55.8 (consensus 56.3)
French Services PMI ticked down to 49.4 from 49.5 (forecast 49.5)
Italy’s Services PMI rose to 51.2 from 49.4 (expected 50.0)
Spain’s Services PMI improved to 56.7 from 54.3 (expected 54.9)
CLOSING PRICES
UK’s FTSE: -0.3%
Germany’s DAX: + 0.2%
France’s CAC: + 0.4%
Spain’s IBEX: -0.2%
Portugal’s PSI: -0.6%
Italy’s MIB Index: -0.3%
Irish Ovrl Index: + 0.6%
Greece ASE General Index: + 0.9%
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.
MBA Mortgage Index – 07:00 : 1.3% (Prior -3.2%)
ADP Employment Change – 08:15 : 213K vs 230K (Prior 253K▲)
ISM Services – 10:00 : 56.7 vs 56.5 (Prior 56.5)
Crude Inventories – 10:30 : 6.333M (Prior 8.874M)
ISM SERVICES
Highlights
The ISM Non-Manufacturing Index increased to 56.7 in January from a previously revised 56.5 (from 56.2) in December. The Briefing.com Consensus expected the index to remain at 56.5.
Key Factors
Overall, the non-manufacturing sector remained strong in January, but future gains may be difficult.
Business activities in the non-manufacturing sector strengthened in January as the related index increased to 61.5 from 58.6 in December.
Unfortunately, most of the gain in production was likely the result of firms paring down their backlog. Even though new demand firmed from gains in the New Orders Index (59.5 from 59.2), the increase was negligible. Instead, the focus was on the second consecutive monthly contraction in backlogs. That index fell to 49.0 in January from 49.5 in December. Unless new orders growth accelerates in February, a lack of solid back order level may make it difficult for continued production growth.
Employment conditions weakened as the Employment Index fell to 51.6 in January from 55.7 in December.
Big Picture
The market generally doesn’t pay much attention to the services index because the services sector is less cyclical than the manufacturing sector. To that end, October marked the 57th consecutive month in which economic activity in the non-manufacturing sector has expanded.
Technical Analysis
DOW JONES INDUSTRIAL AVERAGE
17673.02 +6.62 (+0.04%)
Volume: 102,555,242 (above average of 92,033,891)
Range: 17,603.21 – 17,782.22
NASDAQ COMPOSITE
4716.70 -11.04 (-0.23%)
Volume: 550.1M (above average of 448.4M)
Range: 4,697.79 – 4,744.33
S&P500 INDEX
2041.51 -8.52 (-0.42%)
Volume: 638.9M (above average of 524.9M)
Range: 2,036.72 – 2,054.74
As usual, the market fails to push higher and continues to confirm this consolidation period.
Those candlestick patterns now point to a possible reversal coming, which means we might take a dip again…
Market Internals
NYSE:
Lower Volumes than the day before – 899.9M vs 981.2M
Decliners outpaced Advancers (adv/dec): 1091 / 2000
New Highs outpaced New Lows (highs/lows): 123 / 21
NASDAQ:
Higher Volumes than the day before – 2196.5M vs 2143.7M
Decliners outpaced Advancers (adv/dec): 1063 / 1684
New Highs outpaced New Lows (highs/lows): 75 / 36
VOLATILITY S&P500 (VIX)
18.33 +1.00 (+5.77%)
Decliners outpaced Advancers by 1.71 on marginally lower volumes than the day before (-28.50 -0.91%).
Internals don’t indicate definite bearishness, with barely a 2-1 beat on Advancer/Decliners. The New Highs and New Lows also don’t point to a lot of bearishness in the market.
Treasury Bonds, Currencies & Commodities
from Briefing.com
Treasury Bonds
Winner by Draw:
Treasury prices were up in overnight action and then started to fall as the sun rose in Chicago. When the noon hour arrived, though, buyers returned, and what had been lost in the morning had been reclaimed by settlement time. We’ll call it a draw, but ultimately a win for the Treasury market, which refused to buckle to follow-through selling efforts.
2-yr yield hit 0.56% but ended unchanged at 0.51%
5-yr yield hit 1.33% but ended unchanged at 1.29%
10-yr yield hit 1.83% but ended unchanged at 1.80%
30-yr yield hit 2.43% but ended unchanged at 2.38%
There were a number of outside factors to consider today, which created the indigestion for a Treasury market waiting on its next big catalyst (i.e. the January Employment Situation report on Friday)
The People’s Bank of China cut its required reserve ratio (RRR) by 50 basis points to 19.50%. That was the first cut in the RRR since May 2012 and it was implemented to help support growth in China’s economy.
The cut followed an ISM Services number (51.8) that marked the slowest pace of expansion in six months
There was some angst over headlines that German Chancellor Merkel and Greek Prime Minister Tsipras aren’t exactly seeing eye-to-eye on renegotiating Greece’s debt burden
Oil prices got clobbered leading up to, and following, the latest inventory report from the Energy Information Administration (EIA), triggering market concerns that the recent rally was little more than a short squeeze
WTI crude settled at $48.44/bbl, down 8.7%
EIA said crude stockpiles increased by 6.33 million barrels for the week ending January 30
The U.S. stock market had a choppy day of trading but was surging to its highs for the day as of this post
Cleveland Fed President Mester (a non-FOMC voter) said the Fed should likely raises rates in the first half of 2015 due to underlying and sustainable strength in the economy
Mixed data
MBA Mortgage Applications Index +1.3% versus -3.2% in the prior week, featuring a 3% gain in the refinancing index but a 2% decline in the purchase index
ADP Employment Change report for January showed 213,000 positions were added to private sector payrolls (Briefing.com consensus 230,000) while the prior month’s number was revised up to 253,000 from 241,000
ISM Services report for January a touch stronger than expected at 56.7 (Briefing.com consensus 56.5; prior 56.5
U.S. Dollar Index bounced back, up 0.4% to 93.98
EUR/USD -0.6% to 1.1423
USD/JPY -0.3% to 117.41
2Yr 0.52 (unch), 5Yr 1.29 (+0.01), 10Yr 1.81 (+0.02), 30Yr 2.39 (+0.02)
2/10 Spread: 129bps (+2); 2/30 Spread: 187bps (+2)
Currencies
Currency Commentary: DXY Erases Some of Yesterday’s Losses
The Dollar Index is in the midst of recovering some of yesterday’s losses. The DXY tumbled into the middle of the 93 area before finding support and moving back higher. The DXY is now testing the 94 level for support. Economic data was relatively mixed/in line and is not really having an impact on trade. The ADP number was a little light but not enough to cause concern ahead of Friday’s BLS numbers. The Services PMI and ISM numbers were both slightly better than expected.
The euro has dipped back to the 1.14 area after running into resistance at 1.15. The region did see solid economic data this morning with Retail Sales outpacing expectations and PMI Services numbers generally coming in better than expected. But that has given way to technical trading. Of note, Greece held a short term T-bill auction, selling EUR 812 mln of 6-month T-bills. The yield was 2.75%, up 42 bps from prior sale and the bid/cover was 1.3x, down from 1.6x in the prior. The demand was the lowest since 2006, highlighting the worries around Greece, However the sale will allow the country to cover a $1.1 bln bill coming due on Friday. Discussions between Greek and EU officials continue today in Brussels and Germany.
The pound has pushed above the key 1.52 support level following a better than expected Services PMI number. However the currency is in the midst of seeing a double top at 1.5250. This has been a difficult resistance level for sterling to find bids above and early indications are that will continue.
The yen found support at 118 in an overnight test. There were rumors of the Bank of Japan naming a new dovish member to its board which may have helped provide some selling pressure. However the technical levels remained stout and held and yen continues to roll around in the 117 area. The tight consolidating pattern on the currency suggests market uncertainty on risk at the moment (BONDX, FOREX).
Commodities
Closing Commodities: WTI Crude Oil Drops 9%; Heating Oil and RBOB Fall Sharply As Well
WTI crude oil slid lower all day and ultimately dropped 9% today (or $4.60/barrel) to $48.44/barrel
Mar natural gas lost $0.10 to $2.66/MMBtu. Heating oil and RBOB gasoline futures fell sharply as well.
Heating oil dropped 5% to $1.76/gallon and RBOB fell 8% to $1.48/gallon
Metals posted some gains today
Apr gold rose $5 to $1264.60/oz while Mar silver rose $0.09 to $17.41/oz
Mar copper rose $0.01 to $2.59/lb
Energy Price Action
Mar crude oil futures fell $4.60/barrel in pit trading to $48.44/barrel
Mar natural gas fell $0.10 cents to $2.66/MMBtu
RBOB Gasoline closed $0.12 lower (or -7.5%) at $1.48/gallon
Heating oil closed $0.09 lower (or -4.9%) at $1.76/gallon
Agricultural Price Action
Mar corn closed $0.02 lower at $3.84/bushel
Mar wheat closed $0.01 lower at $5.12/bushel
Feb soybeans ended $0.12 lower at $9.73/bushel
Ethanol closed $0.03 lower at $1.44/gallon
Sugar #11 closed $0.02 lower at 14.45 cents/lb
Metals Price Action
Apr gold ended today’s session $5 higher at $1264.60/oz
Mar silver ended $0.09 higher at $17.41/oz
Mar copper closed $0.01 higher at $2.59/lb
Preview: Thursday 5 Feb 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.
Challenger Job Cuts – 07:30 : Prior 6.6%
Initial Claims – 08:30 : 290K (Prior 265K)
Continuing Claims – 08:30 : 2375K (Prior 2385K)
Trade Balance – 08:30 : -$38.0B (Prior -$39.0B)
Productivity-Prel. – 08:30 : 0.2% (Prior 2.3%)
Unit Labor Costs – 08:30 : 1.2% (Prior -1.0%)
Natural Gas Inventories – 10:30 : Prior -94bcf
Corporate Earnings
BMO : ADS AMSC APO AINV ARW BLL BCE BDX BDC BCO BR CSL CHTR CI CFX COTY CMI DLPH DNKN DFT ETR EQT EQM EL FIS FBP IT GLT GPK GPI GRUB ICE IVC IRMD LAZ LIOX LQDT MMP MMS MDSO KORS MSCI NGD NUS OZM ODFL PTEN PRGO PM PJC PMFG PPL PBH PRLB RFP RSTI SBH SQNS SIRI SNA SPH SNCR TE TDC TEVA TW UTEK USG VLP VSH VMC GRA XYL
AMC : ACET ATVI ASEI ASYS AIV ATR ARCW AHL ATHN ADNC ACLS BMI BEBE BCOV BRS BRKS BWLD CALD CPST ECOM CME CTRL CTS CUTR DCT DV ECHO EGAN RDEN ENH EXPE FWM FFG FLT FLDM GPRO HME IMPV KMPR KIM KRG LF LNKD LGF MRIN MXWL MCK MTD MC MFLX UEPS NTGR EGOV NUAN OLN ONNN OUTR P PCTY PDFS PDM PXLW PPS RENT SQI SWIR SIMG SSD SLH SPSC SPF SRCL SYMC TSYS TPX TBI TWTR UBNT UTI VRSN WAIR YELP YRCW
Other Events of Interest
Fed/Treasury/Political Events
Bank of England Decision – 07:00
Economic Events
None
Commentary
The day doesn’t look as bearish as it would seem, as the market still managed to hold aloft. But there was a fair bit of concerted selling and this might carry on to tomorrow.
It’s also the day before the all-important Nonfarm Payrolls, so I wouldn’t be surprised if we get some cautious profit-taking.
Direction for Thursday 5 Feb 2015: DOWN▼
Daily Directional Accuracy: 14/18 (77.78%)
Weekly Directional Accuracy: 3/4 (75.00%)