Dow -186.59 at 17427.09, Nasdaq -22.18 at 4639.32, S&P -11.76 at 2011.27
Market took a huge loss at the opening with some pullback after 2pm ET. Basically the market spent the whole session in red. And that is not the end I think...The bulls seem to run out of steams now. With earnings kicking in and more economic data releasing this week, I would expect more volatility in the market. Not to mention the crude oil factor.
I would expect a breakout or some short-coverning on Wednesday. Tomorrow we will have Beige book out at 2.00pm ET.
Direction for Wednesday 14 Jan, 2015; Up
Market Summary
Industry Watch
Strong: Energy, Health Care, Utilities
Weak: Consumer Discretionary, Financials, Industrials, Materials
Other Market Moving Factor:
- World Bank lowers 2015 GDP target to 3.0% from 3.4%: copper futures plummet
- December Retail Sales miss expectations (-0.9%; Briefing.com consensus +0.1%)
- JPMorgan Chase (JPM) reports below-consensus results
- S&P 500 looks to hold 100-day moving average (2007)
[BRIEFING.COM] The major averages endured their fourth consecutive decline with the S&P 500 (-0.6%) making an intraday appearance below its 100-day moving average (2,007). The tech-heavy Nasdaq outperformed, but still lost 0.5%.
Equities faced selling pressure from the start after the overnight session failed to alleviate the growth concerns that contributed to the recent weakness. Instead, the concerns grew larger, starting with the World Bank's reduced growth outlook for 2015 (to 3.0% from 3.4%) and 2016 (to 3.3% from 3.5%).
The lowered outlook pressured commodities, and especially copper, which remained under pressure throughout the day, ending lower by 4.9% at $2.51/lb after hitting a low near the $2.45/lb level. Crude oil, however, traded in the red during morning action, but rocketed into the pit close, which helped the broader market climb off its intraday low. As for crude, the energy component spiked 5.7% to $48.55/bbl.
The rebound in crude helped the energy sector (+0.1%) finish in the green, but other cyclical groups did not fare as well. Notably, the financial sector (-1.4%) ended at the bottom of the leaderboard, which was largely due to a 3.5% decline in JPMorgan Chase (JPM 56.81, -2.03) after the industry giant reported below-consensus earnings and revenue. For its part, Wells Fargo (WFC 51.25, -0.60) delivered an in-line report, but still lost 1.2%.
Financials inched away from their lows during afternoon action, but could not catch up to the broader market, which was also the case with the consumer discretionary sector (-1.2%). The fourth-largest sector by weight retreated following the disappointing December Retail Sales report (-0.9%; Briefing.com consensus 0.1%) while homebuilders lagged early, but ended just ahead of the broader market with theiShares Dow Jones US Home Construction ETF (ITB 25.90, -0.09) falling 0.4%.
Elsewhere among cyclical sectors, technology (-0.5%) finished just ahead of the broader market while chipmakers kept pace with the S&P 500. Shares of BlackBerry (BBRY 12.60, +2.88) spiked almost 30.0% in afternoon action after Reuters reported the company has been approached by Samsung about a potential takeover.
Unlike cyclical sectors, the four defensively-oriented groups spent the day ahead of the broader market. Health care (-0.1%) settled just below its flat line while the iShares Nasdaq Biotechnology ETF (IBB 315.57, +0.60) added 0.2%. The utilities sector (+0.9%) was the lone advancer on the countercyclical side, extending its January advance to 1.4%.
Treasuries jumped following this morning's data before surrendering a portion of their gains. The 10-yr yield fell six basis points to 1.84%. Also of note, the 30-yr yield ended at 2.45% (-3 bps), which represented the lowest close on record.
Today's participation was ahead of average with more than 900 million shares changing hands at the NYSE floor.
Economic data included Retail Sales, Import/Export Prices, Business Inventories, and the MBA Mortgage Index:
- Retail sales fell 0.9% in December after increasing a downwardly revised 0.4% (from 0.7%) in November, while the Briefing.com consensus expected an increase of 0.1%.
- The sharp pullback in sales was a direct result of poor income growth. The December employment report showed a contraction in the average hourly wage, which resulted in flat aggregate income growth after accounting for payrolls gains
- Without income growth, the only way for sales to improve was for consumers to dip into their savings. Households have been very reluctant to do so, which meant retail sales were poised for a pullback in December
- Excluding motor vehicles, sales declined 1.0% after increasing a downward revised 0.1% (from 0.5%) in November
- The consensus expected these sales to increase 0.1%
- Export prices, excluding agriculture, decreased 1.2% in December after decreasing 1.2% in the prior reading
- Excluding oil, import prices ticked down 0.1%, which followed last month's 0.3% decline
- Business Inventories rose 0.2% in November, while the Briefing.com consensus expected an increase of 0.3%
- The prior month's reading was left unrevised at +0.2%
- The weekly MBA Mortgage Index saw its biggest spike since November 2008, surging 49.1% to follow the previous 11.1% spike
Macroeconomic Data
Economic Data
from Briefing.com
- MBA Mortgage Index : 49.1% (Prior 11.1%)
- Retail Sales : -0.9% vs 0.1% (Prior 0.4%)
- Retail Sales ex-auto : -1.0% vs 0.1% (Prior 0.1%)
- Export Prices ex-agri : -1.2% (Prior -1.0%)
- Import Prices ex-oil : -0.1% (Prior -0.3%)
- Business Inventories : 0.2% vs 0.3% (Prior 0.2%)
- Crude Inventories : 5.389M (Prior -3.062M)
- Fed's Beige Book
RETAIL SALES
Highlights
- Retail sales fell 0.9% in December after increasing a downwardly revised 0.4% (from 0.7%) in November. The Briefing.com Consensus expected retail sales to increase 0.1%.
- Excluding motor vehicles, sales declined 1.0% after increasing a downward revised 0.1% (from 0.5%) in November. The consensus expected these sales to increase 0.1%.
Key Factors
- The sharp pullback in sales was a direct result of poor income growth. The December employment report showed a contraction in the average hourly wage, which - after accounting for payroll gains - resulted in flat aggregate income growth.
- Without income growth, the only way for sales to improve was for consumers to dip into their savings. Households have been very reluctant to do so, which meant retail sales were poised for a pullback in December.
- Motor vehicle sales declined 0.7% in December after increasing 1.6% in November. That drop was in-line with the pullback in unit sales reported by the motor vehicle manufacturers last week.
- A large portion of the decline in retail demand was due to lower gasoline prices. Sales at gasoline stations declined 6.5% in December after declining 3.0% in November.
- Core sales - which exclude motor vehicle dealers, building materials and supply stores, and gasoline stations - declined 0.2% in December after increasing 0.5% in November.
Big Picture
- Consumption growth requires income growth. Flat income growth in December resulted in a sharp pullback in retail sales.
BUSINESS INVENTORIES
Highlights
- Business inventories increased 0.2% in November after increasing by the same amount in October. The Briefing.com Consensus expected business inventories to increase 0.3% in November.
Key Factors
- The changes in inventories for manufacturers (0.1%) and merchant wholesalers (0.8%) were known prior to the release. The only piece of new information was that retailer inventories declined 0.3% in November after being flat in October.
- The drop in retailer inventories was primarily the result of a 1.2% decline in motor vehicle and parts inventories and a 0.4% decline in building materials and supply stores.
- Total business sales declined 0.2% in November after declining 0.3% in October. Declines from manufacturers (-0.6%) and wholesalers (-0.3%) offset a 0.4% increase in retailer sales.
- The inventory-to-sales ratio remained at 1.31 for a second consecutive month.
Big Picture
- Business inventories include wholesale inventories, manufacturing inventories, and retail inventories. Inventories are a component of GDP, and thus are of interest to economists, but the financial markets don't pay much attention to this release. Over the long term, the inventory-to-sales ratio has been declining, due to improving techniques for inventory management.
Market Internals
NYSE:
Higher Volumes than the day before – 928.6M vs 875.9M
Decliners outpaced Advancers (adv/dec): 1235 / 1881
New Lows outpaced New Highs (highs/lows): 132 / 218
NASDAQ:
Lower Volumes than the day before – 2058.5M vs 2153.6M
Decliners outpaced Advancers (adv/dec): 1004 / 1755
New Lows outpaced New Highs (highs/lows): 51 / 142
VOLATILITY S&P500 (VIX)
21.48 +0.92 (+4.47%)
Internals are showing sign of bearishness. VIX continues to escalate and this translates to more downside in the market.
Technical Updates
17,427.09 -186.59 (-1.06%)
Volume: 109,180,530 (above average of 89,132,295)
Range: 17,264.90 - 17,609.06
4,639.32 -22.18 (-0.48%)
Volume: 527,383,577 (above average of 459,816,776)
Range: 4,595.98 - 4,655.37
S&P 500 INDEX (SPX: CBOE)
2,011.27 -11.76 (-0.58%)
Volume: 673,001,000 (above average of 519,518,906)
Range: 1,988.44 - 2,018.40
The three indices are sitting on a support level and maybe we might see a pullback. But looking at the volume it seems to suggest more downside.
Commodities
Currencies
Commodities
Closing Commodities: Crude Oil And Natural Gas Post Big Gains; WTI Crude Almost Hits $49/barrel In Electronic Trade
- Natural gas futures surged higher today and have extended gains in electronic trading
- Nat gas closed today’s session, but is now over 11% higher
- WTI crude oil made a strong recovery off of today’s lows. Near the end of today’s pit trading session, crude gained some steam and rallied higher
- Feb crude almost hit $49/barrel. At the end of the session earlier, Feb crude finished +6% at $48.55/barrel
- Feb nat gas closed 10% higher at $3.23/MMBtu
- Feb gold rose $1.20 higher to $1235/oz, while Mar silver lost $0.14 to $16.9/oz.
Energy Price Action
- Feb crude oil rose $2.63/barrel (or +5.7%) to $48.55/barrel
- Natural gas rose 28 cents (or +9.5%) to $3.23/MMBtu
- RBOB Gasoline closed 8 cents higher to $1.35/gallon
- Heating oil rose 3 cents to $1.66/gallon
Agricultural Price Action
- Mar corn closed $0.04 lower at $3.82/bushel
- Mar wheat fell $0.10 cents to $5.38/bushel
- Feb soybeans ended $0.06 higher at $10.11/bushel
- Ethanol closed $0.08 lower at $1.33/gallon
- Sugar #11 rose 0.06 cents to 14.93 cents/gallon
Metals Price Action
- Feb gold ended today’s session $1.20 higher at $1235/oz
- Mar silver ended $0.14 lower higher at $16.99/oz
- Mar copper closed $0.13 lower (or -4.9%) to $2.51/lb
Currencies
Dollar Struggles Near 92.30:
- The Dollar Index has reclaimed the 92.00 level, but remains in negative territory.
- Early buying once again failed at the 92.30 level as action pressed to session lows near 91.60 in response to this morning's weak retail sales data.
- EURUSD is +15 pips @ 1.1785 as buyers look to put in the first gain in three days. The single currency saw early selling pressure trade to a fresh nine-year low of 1.1727 after the ECJ ruled the ECB's OMT program was acceptable, but has come off that level after US retail sales disappointed. The January 22 ECB meeting that will potentially announce a European QE and the January 25 Greek election remain key drivers in the days ahead. Tomorrow, German Bundesbank head Jens Weidmann gives his 2015 outlook.
- GBPUSD is +70 pips @ 1.5225 as trade lifts to a one-week high. Support in the 1.5100 area has held up for the past week, causing some to turn their focus towards 1.5500 resistance.
- USDCHF is -5 pips @ 1.0195. A lack of news and data out of Switzerland has kept action tightly tethered to the euro.
- USDJPY is -70 pips @ 117.20 as trade presses lower for a fourth straight day. Early selling tested the 116.00 support level, but support dating back to mid-November was able to hold. Japan's core machinery orders are due out this evening.
- AUDUSD is -25 pips @ .8140. The hard currency probed the important .8100 level early, but managed to fight its way back to the flat line amid this morning's dollar weakness. However, sellers were not able to run action back into positive territory, causing many to look back towards .8100 support. Australian data set for tonight includes employment change and the unemployment rate.
- USDCAD is +15 pips @ 1.1970 as trade fights to close at its best level in six years. The psychologically important 1.2000 level was breached early, but a close above it looks unlikely barring a late-day surge from the bulls.
Bonds
30Y Closes at 2.451%, Lowest on Record:
- Treasuries gained for the 13th time in 14 days.
- The complex held small gains into the cash open and raced to its best levels of the day as retail sales (-0.9% actual v. +0.1% expected) and retail sales ex-auto (-1.0% actual v. +0.1% expected) both missed estimates by a wide margin.
- Business inventories (0.2% actual v. 0.3% expected), export prices ex-ag (-1.2%), and import prices ex-oil (-0.1%) also posted uninspiring results.
- Yields would bottom as the data was digested and spend the remainder of the session in a steady climb higher.
- Up front, the 2Y fell -5.2bps to 0.485%. Support at the level dates back to Halloween.
- In the belly, the 5Y eased -5.6bps to 1.303%. The yield finished on the 50 mma while posting its lowest close since October 2013.
- The 10Y ended -5.3bps @ 1.837%. The benchmark yield broke below the October 15 panic low and settled at levels last seen in May 2013.
- Buying at the long end pressured the 30Y lower by -3.1bps to 2.451%. The yield on the long bond broke below 2.400% early and managed to close at a record low.
- Little change along the curve saw the 2-10-yr spread hold near 135bps.
- Precious metals lost ground with gold slipping -$2 to $1232 and silver sliding -$0.19 to $16.97.
- Data: Initial and continuing claims, PPI, Empire Manufacturing (8:30) and Philly Fed (10).
- 2 Year Note 0.51% -0.03
- 5 Year Note 1.33% -0.04
- 10 Year Note 1.86% -0.05
- 30 Year Bond 2.47% -0.02
2/30 Spread: 196 bps ( +1 ) … 2/10 Spread: 135 bps ( -2 )
Preview for Thursday 15 Jan, 2015
Earnings Highlights
Thursday:
BMO - BAC, BLK, C, CBSH, FAST, FRC, HOMB, IIIN, LEN, MTB, PPG, TSM, WNS
AMC - OZRK, INTC, MBFI, PBCT, SLB, WTFC
BMO - BAC, BLK, C, CBSH, FAST, FRC, HOMB, IIIN, LEN, MTB, PPG, TSM, WNS
AMC - OZRK, INTC, MBFI, PBCT, SLB, WTFC
Summary
I am just not feeling bullish at the time being as market continues to be defensive. As the yield curve continues to flatten, it is hinting more doubt or fear. However we should expect some pullback soon.
Direction for Thursday 15 Jan, 2015; Up
2015 Daily Directional Accuracy: 3/8 (37.50%)
2015 Weekly Directional Accuracy: 0/1 (0.00%)
2015 Weekly Directional Accuracy: 0/1 (0.00%)
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