Dow +9.92 at 17832.99, Nasdaq -9.24 at 4726.81, S&P -0.70 at 2058.20
First and foremost, a Happy New Year to everyone. This is my first post in 2015 and let's look forward for more profitable trading this year!December ended down after Wednesday session. Does this look like a short correction before market goes for another rally in 2015? I think the market is getting cautious lately and whether it is going up or down it is sure going to be volatile.
Some trivia here, years ending with '5' tends to have a good year. Well I don't think anyone can predict the future but at least that gives us a direction on how the market might behave...
Take note that market will be closed on Thursday, 1 Jan 2015 due to New Year.
Happy New Year and wishing everyone a prosperity year ahead!
Direction for Friday 2 Jan, 2015; Up
First trading day of the year did not started off well. Market ended flat as it suffered a selloff before managed to recover partial losses at the last two hours. Part of the reason the market under performed is probably the disappointment in the PMI data. I feel the market is still feeling wary as Friday session is more to a defensive play...
Market Summary
Industry Watch
Strong: Health Care, Telecom Services, Utilties
Weak: Consumer Discretionary, Energy, Industrials, Technology
Other Market Moving Factor:
- Small caps underperform
- Manufacturing PMI readings from China (50.1 from 50.3) and eurozone (50.6 from 50.8) decline
- Euro slides to 1.2050 versus dollar after Draghi op-ed calls for more integration in the eurozone
[BRIEFING.COM] The stock market began 2015 on a cautious note with the major averages surrendering their opening gains. The S&P 500 ended flat while the Dow Jones Industrial Average (+0.1%) settled just above its flat line.
Equity indices started the day with broad-based gains, but the early buying spree ended in a flash. The S&P 500 marked its high 11 minutes after the start of the session before reversing course. The index continued its retreat through the 9:00 ET release of disappointing Construction Spending and ISM reports, and marked its session low shortly after 13:30 ET.
The S&P 500 tried to fight its way back into the green during the afternoon, but losses among influential sectors like consumer discretionary (-0.7%), consumer staples (-0.4%), industrials (-0.2%), and technology (-0.2%) proved too large to overcome.
Notably, the discretionary sector suffered from broad weakness. Homebuilders and retailers lagged with iShares Dow Jones US Home Construction ETF (ITB 25.67, -0.21) and SPDR S&P Retail ETF (XRT 95.34, -0.67) falling 0.8% and 0.7%, respectively. The two groups helped the sector finish at the bottom of the leaderboard.
Elsewhere, industrials contributed to the persistent pressure as transport stocks underperformed. The Dow Jones Transportation Average lost 0.5% with all but five components ending in the red. Shipper Kirby (KEX 81.53, +0.79) outperformed while freight carrier CH Robinson (CHRW 73.84, -1.05) brought up the rear.
Similar to industrials, the technology sector kept the market under pressure during the afternoon. Large cap listings settled in mixed fashion, but Apple (AAPL 109.33, -1.05) fell 1.0%, which contributed to the underperformance of the Nasdaq Composite. However, chipmakers lagged early, but climbed into the afternoon, allowing the PHLX Semiconductor Index to end flat.
On the upside, the utilities sector (+0.6%) ended in the lead, but more notable was the outperformance of health care (+0.4%). The countercyclical group benefitted from daylong strength in biotechnology that sent the iShares Nasdaq Biotechnology ETF (IBB 306.34, +2.99) higher by 1.0%.
Also of note, the energy sector (+0.4%) ended in the green even as crude oil continued its retreat, dropping 1.6% to $52.57/bbl. Greenback strength factored into the move as the Dollar Index jumped 0.9% to 91.12. The dollar picked up about 1.5% against the British pound and 1.0% against the euro, with the latter sliding after a Financial Times op-ed penned by Mario Draghi was viewed as a preamble to a sovereign QE announcement from the European Central Bank.
Treasuries registered solid gains after erasing their overnight losses. The benchmark 10-yr yield fell five basis points to 2.12%.
Participation was in-line with recent totals as 628 million shares changed hands at the NYSE floor.
Economic data was limited to Construction Spending and ISM:
- Construction spending in November declined 0.3% from October, which was revised up to show an increase of 1.2% versus 1.1% previously
- The November reading was below the Briefing.com consensus estimate, which called for a 0.1% increase
- The disappointment was rooted in public construction spending, which declined 1.7% to a seasonally adjusted annual rate of $277.30 billion largely due to a 2.5% pullback in educational construction spending
- The ISM Index for December checked in at 55.5, down 3.2 percentage points from the high 58.7 reading in November
- The December reading marked the 19th consecutive month of expansion; however, it was weaker than the Briefing.com consensus estimate, which was pegged at 57.5
- A number above 50 denotes expansion, so the pullback in December doesn't connote weakness so much as it connotes the manufacturing sector cooling down from a very hot November
- Dow Jones Industrial Average +0.1% YTD
- S&P 500 UNCH YTD
- Nasdaq -0.2% YTD
- Russell 2000 -0.6% YTD
The holiday-shortened week began with a full day of trading on Monday, yet the stock market acted like it was still on vacation. Volume was light and the major indices held to narrow trading ranges that bracketed the unchanged line for much of the session. The S&P 500 managed to eke out its seventh gain in the last eight sessions. In doing so, it established another record closing high that pulled it ever closer to the 2100 level. However, most of the action happened away from the U.S. stock market. To that end, European bourses had a roller-coaster session, riding a wave of Greek politics that included a third failed vote for the prime minister's preferred presidential candidate, the subsequent announcement that parliament would be dissolved, and news that snap elections would be held on January 25.
The stock market ended Tuesday on a broadly lower note. The Nasdaq Composite (-0.6%) was the weakest performer among the major averages while the S&P 500 (-0.5%) ended a bit ahead of the tech-heavy index. Equities began the day in negative territory and remained below their flat lines until the close. However, participation was very limited with just 524 million shares changing hands at the NYSE floor. The light activity was also reflected by narrow trading ranges with the S&P 500 bounded between 2,080 and 2,084 for most of the session. Cyclical sectors were responsible for the bulk of the weakness as three of six growth-sensitive groups settled in-line with or behind the broader market while the utilities sector (-2.1%) was the only laggard on the countercyclical side.
Equities ended the last session of 2014 on a lower note. The S&P 500 lost 1.0%, but that did not stop the benchmark index from gaining 11.4% over the course of 2014. Meanwhile, the tech-heavy Nasdaq ended the session (-0.9%) and the year (+13.4%) ahead of the S&P 500. All ten sectors settled in the red with utilities (-1.9%) ending at the bottom of the leaderboard. In all likelihood, the selling was a function of profit taking after the countercyclical sector led the 2014 market rally with a gain of 24.3%. The remaining groups did not fare much better. The top-weighted technology sector (-1.2%) was among the early leaders, but began fading from its high not long before noon ET, dragging the broader market down with it.
Bond and equity markets were closed on Thursday for New Year.
DOW
NASDAQ
S&P
Macroeconomic Data
Economic Data
from Briefing.com
- ISM Index : 55.5 vs 57.5 (Prior 58.7)
- Construction Spending : -0.3% vs 0.1% (Prior 1.2%)
Highlights
- The ISM Index for December checked in at 55.5, down 3.2 percentage points from the high 58.7 reading in November. The December reading marked the 19th consecutive month of expansion; however, it was weaker than the Briefing.com consensus estimate, which was pegged at 57.5.
Key Factors
- The pullback in December was driven by the new orders and production indexes. The former fell to 57.3 from 66.0 while the latter dropped to 58.8 from 64.4.
- The employment index increased to 56.8 from 54.9 while the prices index fell to 38.5 from 44.5, reflecting the impact of lower raw materials prices.
- The inventories index slipped into contraction with a 45.5 reading that was down six percentage points from November.
- The backlog of orders and export indexes both fell to 52.5 from 55.0. The import index was down one percentage point to 55.0.
Big Picture
- A number above 50 denotes expansion, so the pullback in December doesn't connote weakness so much as it connotes the manufacturing sector cooling down from a very hot November.
CONSTRUCTION SPENDING
Highlights
- Construction spending in November declined 0.3% from October, which was revised up to show an increase of 1.2% versus 1.1% previously. The November reading was below the Briefing.com consensus estimate, which called for a 0.1% increase.
Key Factors
- The drop in construction in November was rooted in public construction spending, which declined 1.7% to a seasonally adjusted annual rate of $277.3 billion. A 2.5% pullback in educational construction spending was a key drag on public construction spending.
- Total private construction spending increased 0.3%, bolstered by a 0.9% increase in residential construction to a seasonally adjusted annual rate of $352.7 billion.
- Nonresidential construction spending, however, declined 0.3% on the back of declines in office (-1.7%), commercial (-1.9%), health care (-4.4%), and educational (-2.0%) spending.
Big Picture
- The value of construction put in place factors into GDP computations.
Market Internals
NYSE:
Higher Volumes than the day before – 598.6M vs 259.1M
Advancers outpaced Decliners (adv/dec): 1715 / 1377
New Highs outpaced New Lows (highs/lows): 80 / 17
NASDAQ:
Higher Volumes than the day before – 1056.4M vs 765.2M
Decliners outpaced Advancers (adv/dec): 1155 / 1605
New Highs outpaced New Lows (highs/lows): 51 / 22
VOLATILITY S&P500 (VIX)
17.79 -1.41 (-7.34%)
There is some bullishness in the internals. However NASDAQ remains lagging behind. VIX had a large range but closed flat. I don't think the market is likely to go down further.
Technical Updates
17,832.99 +9.92 (+0.06%)
Volume: 76,273,096 (below average of 90,082,624)
Range: 17,731.30 - 17,951.78
4,726.81 -9.24 (-0.20%)
Volume: 367,738,133 (below average of 473,733,479)
Range: 4,698.11 - 4,777.01
S&P 500 INDEX (SPX: CBOE)
2,058.20 -0.70 (-0.03%)
Volume: 426,937,000 (below average of 529,652,662)
Range: 2,046.04 - 2,072.36
The three indices are sitting on their respective 20MAs. DOW and S&P formed a doji showing some confusion in the market.
Commodities
Closing Commodities: Dollar Jumps; Crude Dives
- Commodities endured a volatile session that was accentuated by a rally in the greenback that pushed the Dollar Index (91.10, +0.83) higher by 0.9%.
- Crude oil traded just below the $54.00/bbl level overnight, but slumped as low as $52.15/bbl during morning action. The energy component rallied off its low after the start of the pit session, but was unable to stay in the green. A return into the neighborhood of the morning low locked in a decline of 1.6% at $52.57/bbl.
- Natural gas climbed through the majority of the trading day, but a wave of selling just ahead of the close narrowed its gain to 2.5% at $2.98/MMbtu.
- Precious metals spent some time on either side of their flat lines, but ultimately ended in the green. Gold added 0.2%, settling at $1,186.10/ozt while silver climbed 0.8% to $15.73/ozt.
- Copper teetered on its December support level in the $2.810/lb area before settling lower by 0.3% at $2.8175/lb.
Energy Price Action
- Feb crude oil fell $0.92/barrel to $52.57/barrel
- Natural gas jumped 10 cents to $2.99/MMBtu
- RBOB Gasoline dropped 5 cents to $1.43/gallon
- Heating oil dropped 5 cents to $1.80/gallon
Agricultural Price Action
- Mar corn closed $0.01 lower at $3.96/bushel
- Mar wheat fell 09 cents to $5.81/bushel
- Jan soybeans ended $0.17 lower at $10.02/bushel
- Ethanol closed 2 cents higher at $1.58/gallon
- Sugar #11 fell 0.35 cents to 14.17 cents/gallon
Metals Price Action
- Feb gold ended today’s session $2.80 higher at $1186.10/oz
- Mar silver ended $0.18 higher at $15.77/oz
- Mar copper closed $0.01 lower to $2.82/lb
Currencies
Dollar Crosses 91.00:
- The Dollar Index holds near session highs as trade probes the 91.00 level and readies for its best close in none years.
- EURUSD is -90 pips @ 1.2015 as trade slides to its worst levels since June 2010. Weighing on the single currency were comments from ECB President Mario Draghi suggesting inflation was slowing and a sovereign bond buying program may be needed. The psychologically important 1.2000 level remains under close watch. Eurozone data scheduled for Monday includes German preliminary CPI and Spanish unemployment change.
- GBPUSD is -230 pips @ 1.5350 as action breaks down to its worst levels since August 2013. Today's disappointing Manufacturing PMI number provided a backdrop for today's weakness, but a lot of it was due to the broad-based strength of the greenback. Britain's Construction PMI will cross the wires Monday.
- USDCHF is +80 pips @ 1.0010. Today's advance ran action to parity for the first time in four years.
- USDJPY is +65 pips @ 120.35 as trade tests minor resistance in the area. A breakout above the level will put the December highs near 122.00 in focus.
- AUDUSD is -70 pips @ .8110 as trade flirts with a fresh 54-month low. The December lows at .8100 are under scrutiny.
- USDCAD is +130 pips @ 1.1745 as trade surges to its best levels since May 2009. Minor resistance appears to be located in the 1.1950/1.200 region.
Bonds
Treasuries Reverse Early Losses, Gain on First Trading Day of New Year:
- Treasuries gained on the first trading day for the fourth consecutive year.
- The complex saw overnight weakness, but recouped those losses and climbed into positive territory as yields across much of the eurozone put in all-time lows and U.S. economic data missed estimates.
- Yields in France, Germany, Italy and Spain all put in record lows after European Central Bank President Mario Draghi hinted low inflation may provoke a sovereign bond buying spree.
- U.S. economic data disappointed as both ISM Index (55.5 actual v. 57.5 expected) and construction spending (-0.3% actual v. 0.1% expected) fell short of expectations.
- Up front, the 2Y slipped -0.4bps to 0.665%. The yield pulled back onto support in the 0.650% area that dates back to the beginning of December.
- In the belly, the 5Y shed -3.5bps to 1.618%. The yield failed at 1.700% early before pressing below the 100 and 200 dma and closing on the 50 dma.
- The 10Y fell -4.7bps to 2.123%. The benchmark yield is now testing trendline support near 2.100%.
- Outperformance at the long end dropped the 30Y -5.2bps to 2.697%. The yield on the long bond flirted matched its lowest print since September 2012.
- Curve flattening caused the 2-10-yr spread to narrow to 146bps.
- Precious metals edged up as gold added +$1 to $1185 and silver tacked on +$0.11 to $15.71.
- Data: Auto/truck sales (14).
Treasury Yields:
- 2 Year Note 0.66% -0.01
- 5 Year Note 1.61% -0.04
- 10 Year Note 2.12% -0.05
- 30 Year Bond 2.69% -0.06
2/30 Spread: 203 bps ( -5 ) … 2/10 Spread: 146 bps ( -4 )
Preview for the week Monday 5 Jan to Friday 9 Jan, 2015
Earnings Highlights
Monday : None scheduled
Tuesday :
BMO - CVGM, CMC, LMN, ZEP
AMC - LNDC, MU, SD, SONC, TISI
Wednesday :
BMO - GBX, MON, MSM, SVU, UNF
AMC - DRWI, GEF, HGR, MG, RECN
Thursday :
BMO - APOL, STZ, FDO, GPN, SCHN
AMC - BBBY, TCS, EOPN, PRGS, RT
Friday :
BMO - AYI, AZZ, INFY, SYRG
Summary
As we are heading into 2015, market is still looking rather weak as volume is less than average and the disappointment from the economic data. I think next week we will see how the market react when the traders are all back from the holiday.
Next week will be packed with quite a number of economic data especially FOMC minutes and Non-Farm Payroll. And that is sure going to affect the market movement. Nevertheless I think we should see some bullishness coming back for the coming week.
Next week will be packed with quite a number of economic data especially FOMC minutes and Non-Farm Payroll. And that is sure going to affect the market movement. Nevertheless I think we should see some bullishness coming back for the coming week.
Direction for Monday 5 Jan, 2015; Up
Direction for the week Monday 5 Jan to Friday 9 Jan, 2015; Up
2015 Daily Directional Accuracy: 1/1 (100.00%)
2015 Weekly Directional Accuracy: 0/0 (0.00%)
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