Dow +23.50 at 18053.71, Nasdaq +33.39 at 4806.86, S&P +6.89 at 2088.77
Market seems to have a mixed leadership. That is why it is likely to consolidate. There are going to have some profit-taking along as market continues to go higher. At this point in time, the likelihood of Santa Claus rally somehow daunted by the January Barometer (FYI January ended in red).
I am still cautious on the momentum. Let's see if the market is able to hold on to the bullishness...
Direction for Friday 26 Dec, 2014; Down
Although the market managed to hit a high, it did not seemed to be having much bullishness. Market was flat as I presumed and there was some profit taking before market closed for the week. Nonetheless the session did not have much volume supported as it is the Boxing Day.
Market Summary
Industry Watch
Strong: Consumer Discretionary, Health Care, Technology, Utilities
Weak: Energy, Financials, Industrials
Other Market Moving Factor:
- Biotechnology underpins health care sector and Nasdaq Composite
- Crude oil slides from overnight high near $56.50/bbl
- Light volume expected to cap holiday-shortened trading week
Although the major averages posted decent-sized gains, the advance occurred on below-average volume. In fact, today's NYSE floor volume of 436 million shares represented the second-lowest total of the year. This was well below the 50-day average of 808 million and only ahead of Wednesday's 340 million that was registered in a shortened session. Anemic volume wasn't unique to the U.S. session as equity indices across Europe were closed altogether while markets across Asia enjoyed a low-volume rally.
Seven sectors finished the day in the green with countercyclical utilities (+1.2%) and telecom services (+1.1%) in the lead. However, the two represent just a small fraction of the market and their performance was not as impactful as the strength in the third largest group by weight—health care (+0.7%).
The health care sector was powered by biotechnology as the industry group continued its rebound from a slip earlier in the week. The iShares Nasdaq Biotechnology ETF (IBB 306.61, +6.81) gained 2.3% and narrowed its weekly decline to 3.3% after being down as much as 7.9% at its lowest point on Tuesday.
Biotechnology was largely responsible for the outperformance of the Nasdaq, but the index also drew strength from large cap technology names like Apple (AAPL 113.99, +1.98), Google (GOOGL 541.52, +4.59), and Qualcomm (QCOM 75.62, +0.96). Chipmakers, meanwhile, struggled to keep pace with the PHLX Semiconductor Index adding 0.1%. As for the technology sector (+0.4%), the top-weighted cyclical group settled ahead of the broader market.
Elsewhere among cyclical sectors, consumer discretionary (+0.5%) was the only other area of outperformance thanks to broad strength. Groupon (GRPN 8.14, +0.25) caught some attention, spiking 3.2% after Korea Times reported that Goldman Sachs may purchase Groupon-owned Ticket Monster.
Other cyclical sectors finished behind the broader market with energy (unch) ending at the bottom of the leaderboard. The growth-sensitive sector began the day among the leaders, but was pressured from its early high by intraday weakness in crude oil. Crude futures were up as much as 1.0% overnight following reports of an attack on an oil storage tank at Libya's largest port. The strength was short-lived as oil reversed, and tumbled throughout the day to end lower by 2.0% at $54.65/bbl. The resulting weakness in the sector pressured major components like Chevron (CVX 113.25, -0.22) and ExxonMobil (XOM 93.21, -0.57), which in turn, weighed on the Dow Jones Industrial Average (+0.1%).
In other commodities, copper futures fell 1.5% to $2.812/lb into the neighborhood of early December lows while gold climbed 1.8% to $1.194.30/ozt.
Treasuries posted modest gains with the 10-yr yield slipping one basis point to 2.25%.
Monday's session will be free of economic data.
- Nasdaq Composite +15.1% YTD
- S&P 500 +13.0% YTD
- Dow Jones Industrial Average +8.9% YTD
- Russell 2000 +4.4% YTD
The stock market kicked off the abbreviated week with a Monday advance that sent the Dow Jones Industrial Average and S&P 500 to new all-time highs. The Dow finished ahead of the S&P 500 with 27 of its 30 components ending higher. Meanwhile, the S&P 500 was held back by the underperformance of health care names, and especially, biotechnology. Health care was weak due in large part to a large loss inGilead Sciences (GILD), which followed reports that pharmacy benefits manager Express Scripts (ESRX) is going to displace Gilead's hepatitis C drug, Sovaldi, in favor of a less expensive offering from AbbVie (ABBV), Viekira Pak, which recently won FDA approval and will become the exclusive option in the formulary for patients with genotype 1 hepatitis C.
The Dow Jones Industrial Average (+0.4%) and S&P 500 (+0.2%) rallied to new record highs on Tuesday with the Dow crossing above the 18,000 mark for the first time. However, widespread losses in the biotechnology group prevented the Nasdaq Composite (-0.3%) from taking part in the rally. Equity indices began the day in the green after a better than expected revision to Q3 GDP (5.0%; Briefing.com consensus 4.3%) provided a pre-market boost. The GDP report was a bright spot among a torrent of mostly disappointing data, which was taken in stride by the market. Nine of ten sectors registered gains with the energy space (+1.3%) ending in the lead. The growth-sensitive sector opened ahead of other groups and held the lead into the close. Crude oil, meanwhile, settled higher by 3.1% at $57.09/bbl and continued its advance in electronic trading with the move taking place even as the Dollar Index (90.13, +0.36) climbed 0.4%.
The stock market had the rug pulled out from under it as the Christmas Eve session headed for the close. The S&P 500 ended flat after surrendering a five-point gain while the Nasdaq Composite (+0.2%) outperformed. The key indices started with slim gains and inched higher into the afternoon amid light volume, before a wave of selling interest knocked the indices from their highs. Only 340 million shares changed hands at the NYSE floor, which was a far cry from the average full session total of about 826 million. Only three sectors finished in the green while energy (-0.8%) played the role of Grinch. The growth-sensitive group could not make it into positive territory as crude oil weighed. The energy component fell 3.6% to $55.08/bbl with a larger than expected inventory build contributing to the weakness.
Bond and equity markets were closed on Thursday for Christmas.
DOW
NASDAQ
S&P
Macroeconomic Data
- No Economic Data
Economic Data
from Briefing.com
- No Economic Data
Market Internals
NYSE:
Higher Volumes than the day before – 444.8M vs 348.8M
Advancers outpaced Decliners (adv/dec): 2051 / 1013
New Highs outpaced New Lows (highs/lows): 223 / 19
NASDAQ:
Higher Volumes than the day before – 919.8M vs 719.5M
Advancers outpaced Decliners (adv/dec): 1814 / 944
New Highs outpaced New Lows (highs/lows): 134 / 31
VOLATILITY S&P500 (VIX)
14.50 +0.13 (+0.90%)
Volume remained low amid Christmas period. Market internals are still looking bullish. But looking at the movement from VIX, it seems as though the market is not feeling bullish entirely...
Technical Updates
18,053.71 +23.50 (+0.13%)
Volume: 52,566,003 (below average of 92,847,525)
Range: 18,038.30 - 18,103.45
4,806.86 +33.39 (+0.70%)
Volume: 264,823,467 (below average of 491,199,388)
Range: 4,787.85 - 4,814.95
S&P 500 INDEX (SPX: CBOE)
2,088.77 +6.89 (+0.33%)
Volume: 286,785,000 (below average of 547,706,692)
Range: 2,084.30 - 2,092.70
Technically the indices are losing some bullish momentum here. I suppose we will be seeing a breakout for all three indices next week as they are facing their support/resistance level. The breakout would probably determine whether December will end with a gain or loss.
Commodities
Closing Commodities: Oil Slides Lower, Nat Gas Recovered In Electronic Trade
- Oil prices sold off in afternoon trade, ending the day $1.12 lower at $54.74/barrel
- Natural gas ended the day 2 cents lower at $3.01/MMBtu.
- However, in electronic trading activity, nat gas is climbing a little higher and moved back into positive territory
- In the end of today’s pit trading session, Feb nat gas fell 2 cents to $3.01, but ran back up to $3.05/MMBtu after hours
- Precious metals showed some nice gains today
- Feb gold rose $20.70/oz to $1195.30/oz, while Mar silver gained $0.41 to $16.16/oz
- Copper sold off a bit today, ending the session 4 cents lower at $2.81/lb
Currencies
Dollar Holds Steady:
- The Dollar Index drifts little changed near the 200 mma (89.95) as a quiet holiday trade remains in place.
- The Index has spent the majority of the U.S. session trapped in an extremely tight five cent range.
- EURUSD is -40 pips @ 1.2180 as trade flirts with its lowest close in 28 months. The 1.2170 level remains in focus.
- GBPUSD is flat @ 1.5555 as trade hovers little changed. Sterling has spent the entire session in a tight 30 pip range because of the light holiday participation.
- USDCHF is +45 pips @ .9875 as action contends with its best close since August 2012. Action remains tightly correlated to the euro.
- USDJPY is +30 pips @ 120.35 as the disappointing data released overnight has put a bid in the pair following two days of small losses. The early December highs near 122.00 remain on the radar.
- AUDUSD is flat @ .8115. A choppy session has kept the hard currency trapped near 54-month lows.
- USDCAD is unchanged @ 1.1625. The pair has seen just a 25 pip range during today's session.
Bonds
The Week in Review
- Treasuries lost ground during the holiday-shortened week.
- Other than the strong Q3 GDP - Third Estimate (5.0% actual v. 4.3% expected) and slight personal spending (0.6% actual v. 0.5% expected) beat data was disappointing across the board.
- Durable orders -ex transportation (-0.4% actual v. +1.0% expected), Michigan Sentiment - Final (93.6 actual v. 93.8 expected), personal income (0.4% actual v. 0.5% expected), PCE Prices - Core (0.0% actual v. 0.1% expected), and new home sales (438K actual v. 460K expected) all missed estimates.
- Auctions started out the week alright, but got progressively worse as the light holiday trade set in.
- Monday's $27B 2Y note auction was average. The auction drew 0.703% and a light 3.21x bid/cover. A solid indirect bid (35.7%) provided support as directs (14.5%) fell short of their 12-auction averages. Primary dealers were left with 49.8% of the supply.
- Tuesday's $35 bln 5Y note auction tailed. The auction drew 1.739% and a light 2.39x bid/cover. Indirect bidders (58.7%) provided support as directs (7.3%) were light. Primary dealers were left with just 34% of the supply.
- Wednesday's $29B 7Y note auction disappointed. The auction drew 2.125% (WI 2.119%) and a light 2.39x bid/cover. A strong indirect bid (56.5%) provided support as directs (5.9%) were light. Primary dealers ended up with just 37.6% of the supply.
- Up front, the 2Y jumped +9bps to 0.739%. The yield ticked to its highest levels since April 2011.
- In the belly, the 5Y rallied +11bps to 1.756%. Action tested settled at key resistance that dates back to the beginning of September.
- The 10Y climbed +9bps to 2.250%. The benchmark yield holds near 2.300% resistance and the 50 dma (2.262%).
- Outperformace at the long end saw the 30Y tack on +6bps to 2.814%. Support in the 2.700% area and resistance near 2.900 % will be under close watch in the days ahead.
- A flatter curve developed as the 2-10-yr spread narrowed to 151bps. This week's action saw the 5-30-yr spread tighten to less than 105bps for the first time since June 2008.
- There is no data Monday.
- Data for the week kicks off on Tuesday as Case-Shiller 20-city Index (9) and consumer confidence (10) are released.
- Data picks up on Wednesday as the weekly MBA Mortgage Index (7), initial and continuing claims (8:30), Chicago PMI (9:45), and pending home sales (10) are due out.
- The U.S. Treasury market will close at 2pm ET for New Year's Eve.
- Markets are closed Thursday in observance of New Year's Day.
- Friday will see ISM Index and construction spending (10) cross the wires.
Treasury Yields:
- 2 Year Note 0.73% UNCH
- 5 Year Note 1.75% -0.01
- 10 Year Note 2.25% -0.02
- 30 Year Bond 2.81% -0.02
2/30 Spread: 208 bps ( -2 ) … 2/10 Spread: 152 bps ( -2 )
Preview for the week Monday 29 Dec, 2014 to Friday 2 Jan, 2015
Summary
Next week is the last week of the year. December is still positive and we will see if there is a Santa rally this year too.
Market sentiment is cautious I would say. Economy in the US is still recovering in a stable manner. Given January ended in red and according to January Barometer, I am not on the bullish side yet. But if we are seeing otherwise, this would probably mean a positive start for the next year since we are in the best six month of the year after all...
Market sentiment is cautious I would say. Economy in the US is still recovering in a stable manner. Given January ended in red and according to January Barometer, I am not on the bullish side yet. But if we are seeing otherwise, this would probably mean a positive start for the next year since we are in the best six month of the year after all...
Direction for Monday 29 Dec, 2014; Down
Daily Directional Accuracy (from 25 November 2014): 11/19 (57.89%)
Weekly Directional Accuracy (from 31 October 2014): 3/7 (42.86%)
Weekly Directional Accuracy (from 31 October 2014): 3/7 (42.86%)
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