Basically the market started off the week in a flat manner prior to Black Friday. There was some profit taking at the early session but finished with a slight gain. Meanwhile the rally in NASDAQ was led by a strong performance of Apple.
Crude oil is maintaing at a recent low amid
the OPEC conference to be held on Thursday.
Market Summary
Industry
Watch
Strong: Consumer
Discretionary, Financials, Health Care, Technology
Weak: Energy, Materials,
Telecom Services, Utilities
Other
Market Moving Factor:
- Global markets build on gains from Friday amid increased expectations for sovereign QE in Europe
[BRIEFING.COM] The major averages
kicked off the holiday-shortened week with an advance that was paced by the
Russell 2000 (+1.2%). The small-cap index was followed by the Nasdaq Composite
(+0.9%) while the Dow (+0.04%) and S&P 500 (+0.3%) ended closer to their
flat lines.
Stocks rallied out of the gate
with upbeat action overseas contributing to the early strength. Equities in
China and Hong Kong spiked in reaction to Friday's PBoC rate cut while European
markets were boosted by increased expectations of a forthcoming sovereign QE
program from the European Central Bank. To that point, Credit Suisse said it
expects the ECB to announce plans for sovereign asset purchases in December.
ECB member and German Bundesbank
President Jens Weidmann pushed back against the easing expectations, reminding
that monetary policy alone is unable to create growth and requires
corresponding measures from the fiscal side.
Despite Mr. Weidmann's comments,
the market's expectation for more QE manifested itself through increased demand
for Italian and Spanish debt. Italian and Spanish 10-yr yields both fell five
basis points to their respective 2.15% and 1.97%.
Unsurprisingly, heightened easing
expectations led to strength in European bank shares with Banco Santander (SAN
8.75, +0.25) and Deutsche Bank (DB 31.80, +0.87) spiking 2.9% and 2.8%,
respectively. As for the broader financial sector (+0.6%), the cyclical group
led at the start, but ceded the top spot to the consumer discretionary sector
(+0.9%).
The discretionary space enjoyed
broad support from homebuilders, retailers, and media names. The iShares Dow
Jones US Home Construction ETF (ITB 26.08, +0.22) gained 0.9% and the SPDR
S&P Retail ETF (XRT 93.90, +1.22) advanced 1.3%. Time Warner Cable (TWX
81.43, +1.38) stood out among broadcasters with a 1.7% spike.
Elsewhere among influential
sectors, technology (+0.7%) and health care (+0.5%) outperformed, helping the
market resist the pressure from energy (-0.7%), materials (-0.5%), and consumer
staples (-0.1%).
The tech sector, and Nasdaq
Composite, rallied behind the shares of Apple (AAPL 118.62, +2.16),
which surged 1.9%. Chipmakers also provided support with the PHLX Semiconductor
Index climbing 1.0%. Furthermore, the Nasdaq drew strength from biotechnology
as the iShares Nasdaq Biotechnology ETF (IBB 300.15, +5.14) jumped 1.7%.
On the downside, the energy
sector spent the day in a steady retreat. Meanwhile, crude oil held an
overnight gain, but gave that back and then some to end lower by 1.0% at
$75.75/bbl.
Treasuries registered modest
gains after erasing their overnight losses. The 10-yr yield slipped one basis
point to 2.30%.
Tomorrow, the second
estimate of Q3 GDP (Briefing.com consensus 3.2%) will be reported at 8:30 ET
while September Case-Shiller 20-city Index (consensus 4.6%) and FHFA Housing
Price Index will both be released at 9:00 ET. The day's data will be topped off
with the 10:00 ET release of the Consumer Confidence report for November
(expected 96.0).
Macroeconomic Data
Economic Data
from Bloomberg
FLASH
SERVICES PMI
Highlights
Markit's sample of US service providers
continues to report a loss of momentum from June's recovery peak, at a flash
reading of 56.3 this month vs a final 57.1 in October and vs a flash that month
of 57.3. Growth in incoming work, now at a 7-month low, is the chief factor
behind the slowing. Yet despite the slowing in incoming work, backlog
accumulation remains strong and is helping to lift employment growth which is
at a 5-month high. Another plus is a 5-month high in the sample's business
outlook.
One likely reason for the gain in
confidence is moderation underway for input costs, the result of falling oil
prices. Price traction for output, however, is probably not a plus as this
reading is at its lowest point since July.
Today's report, specifically the erosion in new
business, points to a lack of fourth-quarter punch for the economy. For the
calendar, the report points to further moderation for next week's
non-manufacturing report for November from the ISM which has also been coming
down from its recovery peak, in this case hit in August. Note that the ISM's
non-manufacturing report also includes mining, a sector that slowed sharply in
October, and construction which is on a 6-month downtrend.
Market Internals
NYSE:
Lower Volumes than the
day before –709.5M vs 1037.3M
Advancers outpaced Decliners (adv/dec): 1920 / 1146
New Highs outpaced New Lows (highs/lows): 155 / 17
NASDAQ:
Lower Volumes than the
day before – 1555.5M vs 1844.8M
Advancers outpaced Decliners (adv/dec): 1949 / 802
New Highs outpaced New Lows (highs/lows): 117 / 43
VOLATILITY S&P500 (VIX)
12.62 -0.28 (-2.17%)
Volumes are weak since we are on
Thanksgiving week. However I still see a divergence in the internals. Despite
so VIX has fallen to a support level.
Technical Updates
DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)
17,817.90 +7.84 (+0.04%)
Volume: 85,505,296 (below average of
87,882,990)
Range: 17,793.19 – 17,855.27
NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)
4,754.89 +41.92 (+0.89%)
Volume: 413,326,025 (below average of 495,157,003)
Range: 4,723.62 –
4755.02
S&P 500 INDEX (SPX: CBOE)
2,069.41 +5.91
(+0.29%)
Volume: 483,152,000
(below average of 518,150,738)
Range: 2,065.07 –
2070.17
I was right to an extent that the market
consolidated. As I mentioned previously that volume remains weak, with the
market reaching a high that makes it easy to go south.
Commodities, Currencies and Bonds
Currency: Dollar Dips in Quiet Trade
- The Dollar Index continues to hold small losses as action probes the 88.15 level.
- The Index has spent the entire U.S. session stuck in a 20 cent range as trade holds below the breakeven line.
- EURUSD is +50 pips @ 1.2440 as action presses session highs. The single currency has been able to hold 27-month lows as German Ifo Business Climate topped estimates, and saw follow through buying as Bundesbank head Jens Weidmann once again spoke out against sovereign QE purchases by the ECB. The 1.2400 level remains key.
- GBPUSD is +40 pips @ 1.5695 as trade flirts with the upper end of the range that has been in place for nearly two weeks. A lack of news and data out of the UK has kept trade closely tracking the euro. Britain's BBA Mortgage Approvals and the latest Inflation Report Hearings are due out tomorrow.
- USDCHF is -25 pips @ .9670 as trade pulls back from 16-month highs. The pair saw little reaction to the in-line employment data, and remains tightly tied to the euro.
- USDJPY is +60 pips @ 118.35 as action holds just off seven-year highs. The pair has been an afterthought during today's session as Japanese banks were closed in observance of Labor Thanksgiving Day. Bank of Japan Governor Haruhiko Kuroda will speak in Nagoya after the latest policy minutes are released.
- AUDUSD is -60 pips @ .8605 as trade slides back onto key support. The hard currency tested the .8700 level in early trade, but has been unable to hold above the important .8650 area. A breakdown of .8550 will have the pair at levels last seen in July 2010.
- USDCAD is +65 pips @ 1.1295 as action bounces off key support. Trade opened on the key 1.1200 area and the 50 dma, but has managed to hold the level. Canadian data set for tomorrow is limited to retail sales.
Bonds: Yields Finish on Key Support
- Treasuries eked out small gains after recovering their early losses.
- The complex saw some light overnight selling after the encouraging German Ifo Business Climate survey, but turned around as U.S. equity markets opened for business.
- A session sans data made for steady buying over the course of the morning with maturities ticking to fresh highs into this afternoon's $28B 2Y note auction.
- The 2Y auction was strong, drawing 0.542% (WI 0.554%) and a 3.71x bid/cover. A healthy indirect takedown (35.8%) provided support as directs (16.2%) were a tad light.
- Post-auction buying lifted maturities to their best levels of the day before plateauing into the close.
- Yields across much of the curve finished on key support.
- Up front, the 2Y eased -1.6bps to 0.497% as action probes the lower end of the 0.500%/0.550% range that has held up throughout November.
- In the belly, the 5Y shed -0.8bps to 1.603%. Traders will be watching support in the 1.600% area over the coming days.
- The 10Y eased -0.5bps to 2.310%. The benchmark yield ended near the important 2.300% level.
- Little change at the long end dropped the 30Y -0.2bps to 3.019%. The yield on the long bond is pressing the lower bound of the 3.00%/3.100% range that has been in place over the past month.
- Selling swung the curve steeper as the 2-10-yr spread widened to 181.5bps.
- Precious metals were flat with gold and silver finishing @ $1198 and $16.44, respectively.
- Data: GDP - Second Estimate (8:30), Case-Shiller 20-city Index, FHFA Housing Price Index (9), and consumer confidence (10).
- Auction: $35 bln 5Y notes.
- 2 Year Note 0.53% UNCH
- 5 Year Note 1.62% -0.01
- 10 Year Note 2.30% -0.01
- 30 Year Bond 3.01% -0.03
2/30 Spread: 248 bps ( -3 ) … 2/10
Spread: 177 bps ( -1 )
Preview for Tuesday 25 November, 2014
Summary
Well Monday has been quite a profit taking
day despite NASDAQ rallied. As there was no major economic news, it is been
understandable that the market remains sideway.
We are going to see Prelim GDP and Consumer
Confidence tomorrow and that is likely to be a market moving factor. I think we
should see the market continues to be bullish if the number beats expectation.
Plus we are heading into a holiday season, it will be hard to be bearish. But
well, I could be wrong too…
Direction for the Tuesday 25 November,
2014; Up
Daily Directional
Accuracy (from 25 November 2014): - (00.00%)
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