Friday shortened session was affected by the result from OPEC to continue with the current supply of crude oil. As we could see, all 3 indices suffered a huge sell off on the last two trading hours. The significant laggard was energy sector as oil prices continue to lower.
Market Summary
Industry Watch
Strong: Consumer Discretionary, Consumer Staples, Financials, Health Care, Technology, Utilities
Weak: Energy, Materials, Industrials
Other Market Moving Factor:
- Crude oil falls below $70/bbl after OPEC leaves production quotas unchanged
- Dow Jones Transportation Average outperforms with airlines leading
- NYSE to close early at 13:00 ET
Equities began the Black Friday session with investors paying more attention to the oil pits than mall parking lots as black gold was taking a beating. This morning, crude oil was trading near $69.00/bbl after yesterday's OPEC decision to maintain output at 30 million barrels per day. That represented a 6.0% loss, which led to comparable weakness in the energy sector.
Despite the plunge in energy, the market was able to recover with help from health care (+0.6%), technology (+0.5%), and the two consumer sectors (discretionary +1.2%; staples +1.3%), both of which benefited from strength among retailers. Dow component Wal-Mart (WMT 87.54, +2.56) spiked 3.0% after more than 22 million customers visited Wal-Mart stores on Thursday, suggesting a strong start to the holiday shopping season. The broader SPDR S&P Retail ETF (XRT 94.31, +0.84) advanced 0.9%.
However, as the session neared the end, the focus shifted to the oil pits once again where crude dropped below yesterday's low to $67.28/bbl, representing an 8.7% decline.
In turn, the slide in crude pressured the energy sector, and the broader market, to a fresh low for the day. Major sector components took a beating with BP (BP 39.32, -2.27), Chevron (CVX 108.87, -6.24), ExxonMobil (XOM 90.54, -3.94), and Halliburton (HAL 42.20, -5.14) sinking between 4.2% and 10.9%.
Elsewhere, the materials sector (-2.3%) could not escape the overall weakness among commodities. Copper tumbled 3.7% to $2.847/lb while gold fell 2.5% to $1.167.80/ozt. Last, but not least, silver cratered 7.0% to $15.44/ozt. Miners and steelmakers felt the weight with Market Vectors Steel ETF (SLX 39.50, -1.42) and Market Vectors Gold Miners ETF (GDX 18.36, -1.74) plunging 3.5% and 8.7%, respectively.
Making matters worse for commodities was the strengthening dollar, evidenced by a 0.5% advance in the Dollar Index (88.41, +0.39).
The commodity weakness also pressured some components of the industrial sector (-0.8%) like Caterpillar (CAT 100.60, -5.19), which fell 4.9%. However, the sector was able to avoid larger losses thanks to a flat finish from the Dow Jones Transportation Average. Still, the bellwether surrendered its intraday gain after a tug-of-war between railroad stocks and airlines. Rail carriers, who benefit from higher oil prices, tumbled with CSX (CSX 36.49, -1.42), Norfolk Southern (NSC 111.67, -5.53), and Union Pacific (UNP 116.81, -6.00) falling between 3.8% and 4.9%. In turn, air carriers like Delta Air Lines (DAL 46.67, +2.43) and United Continental (UAL 61.23, +4.63) cheered lower fuel prices, soaring higher by 5.5% and 8.2%, respectively.
When the dust settled, the major outage in the energy sector proved too much for the stock market to overcome. Furthermore, the inability of the sector to recover even a small portion of its losses, led to profit taking from areas that displayed strength. For instance, the iShares Nasdaq Biotechnology ETF (IBB 303.90, +0.03) ended flat after being up near 1.0% at the start. Meanwhile, small caps made new lows into the afternoon with the Russell 2000 ending lower by 1.5%.
Treasuries benefited from the sloppy equity session with the 10-yr yield sliding five basis points to 2.18%.
Participation was relatively heavy considering the abbreviated session. More than 635 million shares changed hands at the NYSE floor.
Monday's data will be limited to the November ISM Index, which will be released at 10:00 ET (Briefing.com consensus 58.0).
Week in Review: Stocks Climb Into Thanksgiving
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%.
Equities ended the Tuesday session on a flat note. The S&P 500 shed 0.1% after spending the day in a ten-point range while the other indices also settled near their unchanged levels. Despite the flat finish, equity indices rallied at the start after the second revision to Q3 GDP surprised to the upside (3.9%; Briefing.com consensus 3.2%). However, the opening spike marked the session high for the S&P 500, which returned to unchanged by the end of the first hour.
The key indices ended Wednesday near their best levels of the day with the Nasdaq Composite (+0.6%) finishing in the lead. The S&P 500 settled higher by 0.3% while the Dow Jones Industrial Average hovered near its flat line throughout the session. Meanwhile, the benchmark index spent the day in a slow and steady advance despite a heavy batch of disappointing economic data that was reported on Wednesday. The index did show some signs of defensive posturing as all four countercyclical sectors ended ahead of the market while cyclical sectors traded in mixed fashion. The telecom services sector (+1.2%) finished in the lead after trending higher throughout the day, but more notably, the heavily-weighted health care sector (+0.7%) posted a solid gain with help from biotechnology.
DOW
NASDAQ
S&P
Macroeconomic Data
- No economic Data
Economic Data
from Bloomberg
- No economic Data
Market Internals
NYSE:
Lower Volumes than the day before – 605.7M vs 700.0M
Decliners outpaced Advancers (adv/dec): 1141 / 1856
New Highs outpaced New Lows (highs/lows): 305 / 164
NASDAQ:
Lower Volumes than the day before – 980.0M vs 1348.8M
Decliners outpaced Advancers (adv/dec): 897 / 1794
New Highs outpaced New Lows (highs/lows): 179 / 89
VOLATILITY S&P500 (VIX)
13.33 +1.26 (+10.44%)
Market internals was bearish amid low volume on Friday. However looking at the new highs vs new lows ratio, I think that might probably caused by the fall in oil prices. Is the market going to correct now? I think we could tell from it next week.
Technical Updates
17,828.24 +0.49 (+0.00%)
Volume: 80,469,197 (below average of 87,697,906)
Range: 17,807.78 - 17,893.42
4,791.63 +4.31 (+0.09%)
Volume: 300,150,925 (below average of 491,861,542)
Range: 4,786.72 - 4,810.86
S&P 500 INDEX (SPX: CBOE)
2,067.56 -5.27 (-0.25%)
Volume: 411,804,000 (below average of 519,872,185)
Range: 2,065.06 - 2,075.76
Seems like we are heading into a correction. I guess the sales result next week from Black Friday and Cyber Monday would provide a reason to be bullish or short selling...
Commodities, Currencies and Bonds
Currency: Yen Nears Seven-Year Lows
- The Dollar Index has slipped off its best levels of the day, and is fighting to hold the 88.00 level.
- EURUSD is +10 pips @ 1.2475 as action presses the highs. The single currency holds small gains following today's mixed data. German retail sales (1.9% MoM actual v. 1.7% MoM expected) topped estimates while French consumer spending (-0.9% MoM actual v. 0.2% MoM expected) missed. CPI Flash Estimate posted an in-line 0.3% YoY. Action remains stuck in the 1.2400/1.2600 range that has been in place for the past month.
- GBPUSD is -40 pips @ 1.5695 as trade slides for a second day. Sterling has seen some selling pressure develop after Nationwide Home Price Index (0.3% MoM actual v. 0.4% MoM expected) was the latest reading to fall short of estimates. The 1.5600 level remains under close watch.
- USDCHF is -10 pips @ .9630 as trade piggybacks the euro. The pair has seen little response to KOF Economic Barometer diving to 98.7 (100.1 expected, 99.5 previous), its worst since July.
- USDJPY is +55 pips @ 118.25 as trade contends with its best finish in seven years. Data out of Japan was mostly positive as household spending (-4.0% YoY actual v. -4.8% YoY expected) and preliminary industrial production (0.2% MoM actual v. -0.4% MoM expected) beat while retail sales (1.4% YoY actual v. 1.5% YoY expected) missed. Traders are taking note of Tokyo Core CPI, which posted a hotter than anticipated 2.4% YoY (2.3% YoY expected). Any close above 118.26 will be the best in seven years.
- AUDUSD is -25 pips @ .8515 as action flirts with fresh 52-month lows. Early selling probed .8500 for the second time in three days, but so far the level been able to hold. The .8400 area is setting up as key support. USDCNY ticked up to 6.1447.
- USDCAD is +60 pips @ 1.1390 as trade sees a second day of solid gains. The recent highs near 1.1450 will be watched into today's GDP and RMPI reports.
Bonds: Yields Press to One-Month Lows
The Week in Review
Treasury Yields:- Treasuries gained every day this week, running their winning streak to six and pushing yields to one-month lows.
- Record low yields across Europe provided support, causing money to move into the higher yielding U.S. Treasuries.
- Economic data was dismal as only GDP - Second Estimate (3.9% actual v. 3.2% expected) was the only notable data point of the week to outpace estimates.
- Consumer confidence (88.7 actual v. 96.0 expected), durable orders- ex transportation (-0.9% actual v. +0.5% expected), Chicago PMI (60.8 actual v. 63.0 expected), and new home sales (458K actual v. 470K expected) were among the notable misses.
- This week's auctions were mostly impressive.
- Monday's $28B 2Y note auction was strong. The auction drew 0.542% (WI 0.554%) and a strong 3.71x bid/cover. Indirect (35.8%) bids provided support as directs (16.2%) missed their 12-auction averages.
- Tuesday's $35B 5Y note auction was the best of the week. The auction drew 1.595% (WI 1.612%) and a superb 2.91x bid/cover. Indirect (65.0%) bids posted their best showing in 10 years while directs (9.9%) were a bit light. Primary dealers ended up with just 25.1% of the supply.
- Wednesday's 7Y note auction was in-line. The auction drew 1.960% (1.955%) and a 2.63x bid/cover. Indirect bidders (50.0%) provided support as directs (12.8%) were a bit light. Primary dealers were left with 37.2% of the supply.
- Up front, the 2Y slipped -3bp to 0.473%. The yield finished at its lowest levels of November, and is probing the lower end of the 0.500%/0.550% range that has been in place over the past month.
- In the belly, the 5Y shed -12bps to 1.492%. Action ended Friday's session at a one-month low and on minor support.
- The 10Y tumbled -15bps to 2.172%. The benchmark yield settled near its 50% retracement of the move off the October 15 lows.
- Buying at the long end dropped the 30Y -14bps to 2.893%. The yield on the long bond closed the week at its lowest level since October 15.
- A flatter curve developed over the course of the week with the 2-10-yr spread tightening to 170bps.
- Monday's data is limited to ISM Index (10). NY's Dudley speaks at Baruch College (12:15) and Fed Vice Chair Stanley Fischer takes part in a panel about the "100th Anniversary of the Federal Reserve" (13).
- Tuesday will see construction spending (10) and auto/truck sales (14). Fed Vice Chair Stanley Fischer sits on a panel at the 2014 Wall Street CEO Council Annual Meeting (8:10). Fed Chair Janet Yellen makes opening remarks at the 2014 College Fed Challenge National Finals (8:30). Fed Governor Brainard opens the Economic Growth and Regulatory Paperwork Reduction Act Outreach Meeting (12). NY's Dudley appears at Lehman College (15:30).
- Data picks up on Wednesday as MBA Mortgage Index (7), ADP Employment Change (8:15), productivity-rev., unit labor costs-rev. (8:30), ISM Services (10), and the Fed's Beige Book (14) are due out. Philly's Plosser gives his economic outlook (12:30). Fed Governor Brainard discusses "Financial Stability: a Conversation with Lael Brainard" (14). Dallas' Fisher talks on the economy and monetary policy (19:30).
- Thursday's data includes Challenger Job Cuts (7:30) and initial and continuing claims (8:30). Cleveland's Mester makes opening remarks at the 2014 Financial Stability Conference (8:30). Fed Governor Brainard duplicates his speech from the previous day (13:15).
- Friday's data is the most anticipated of the week as nonfarm payrolls, nonfarm private payrolls, unemployment rate, hourly earnings, average workweek, trade balance (8:30), factory orders (10), and consumer credit (15) are released.
- 2 Year Note 0.47% -0.06
- 5 Year Note 1.49% -0.07
- 10 Year Note 2.18% -0.06
- 30 Year Bond 2.89% -0.06
2/30 Spread: 242 bps ( UNCH ) … 2/10 Spread: 171 bps ( UNCH )
Preview for the week Monday 1 Dec to Friday 5 Dec, 2014
Summary
Well, market didn't really went up from the holiday season as it was held up by the decision from OPEC meeting. Energy sector was badly affected by the fall in oil prices.
Monday we will be having the results from the retailers and from there we would be able to see if there is any sign of correction. Judging from the consumer spending trend, I am still cautious about the market at the moment.
FYI, the yield curve continues to flatten as the longer terms yield are falling. This does not sound good to me and the economy though...
Monday we will be having the results from the retailers and from there we would be able to see if there is any sign of correction. Judging from the consumer spending trend, I am still cautious about the market at the moment.
FYI, the yield curve continues to flatten as the longer terms yield are falling. This does not sound good to me and the economy though...
Direction for the Monday 1 Dec, 2014; Down
Direction for the week Monday 1 Dec to Friday 5 Dec, 2014; Down
Direction for the week Monday 1 Dec to Friday 5 Dec, 2014; Down
Daily Directional Accuracy (from 25 November 2014): 0/3 (00.00%)
Weekly Directional
Accuracy (from 31 October 2014): 2/5 (40.00%)
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