Dow -106.38 at 17320.71, Nasdaq -68.50 at 4570.82, S&P -18.60 at 1992.67
Well it did not get too long before the bears take over the control after the market opened. Market remains very volatile as if taking a roller coaster ride. Basically I just think there is nothing right now for us to be optimistic about.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
Market Summary
Industry Watch
Strong: Consumer Staples, Materials, Telecom Services, Utilities
Weak: Energy, Financials, Technology
Other Market Moving Factor:
- Swiss National Bank abandons EURCHF 1.2000 floor, likely in anticipation of a QE announcement from ECB: franc surges higher by about 14.0% versus USD
- Crude oil surrenders morning advance
- S&P 500 fails to hold 100-day moving average (2,007)
[BRIEFING.COM] The major averages continued their rough week with the S&P 500 (-0.9%) registering its fifth consecutive decline after failing to hold the 100-day moving average (2007). The price-weighted Dow Jones Industrial Average (-0.6%) fared a bit better while the Nasdaq Composite (-1.5%) and Russell 2000 (-1.7%) underperformed.
This morning, market participants were greeted by an astounding move in the foreign exchange market. Specifically, the Swiss franc was up as much as 25.0% against the dollar after the Swiss National Bank abandoned the EURCHF 1.20 floor and lowered the benchmark deposit rate to -0.75%. The move was likely taken in anticipation of a QE announcement from the ECB, and the dollar/franc pair was able to narrow its loss to 15.0% (0.8687); however, that was still large enough to resonate with investors who were lulled into a false sense of security by the SNB's pledge to maintain the exchange rate floor.
Equity indices began the day with slim gains, but the morning strength faded alongside crude oil, which slid from a session high at $51.00/bbl to $46.57/bbl. The energy component ended the day lower by 4.1%, but that masked the fact that crude fell almost 9.0% from its best level of the day. Furthermore, that pullback was closely correlated with a broad-market slide, which was paced by cyclical sectors.
The two top-weighted groups—technology (-1.5%) and financials (-1.3%)—spent the day at the bottom of the leaderboard and their underperformance prevented the market from staging a notable rebound. Most large cap tech components held up relatively well, but Apple (AAPL 106.86, -2.94) fell 2.7% after Mizuho downgraded the stock to ‘Neutral' from ‘Buy.' Similarly, high-beta social media names lagged with the likes of Facebook (FB 74.05, -2.23), LinkedIn (LNKD 213.21, -6.22), and Yelp (YELP 50.12, -2.08) falling between 2.8% and 4.0%. Chipmakers also struggled, but the PHLX Semiconductor Index (-0.8%) ended ahead of the broader market thanks to an 8.7% surge in Taiwan Semiconductor (TSM 22.89, +1.83) after the company beat earnings estimates and issued upbeat guidance.
Elsewhere, the financial sector retreated under the weight of two more quarterly reports that missed their mark. Citigroup (C 47.23, -1.82) reported below-consensus earnings and revenue while Bank of America (BAC 15.20, -0.84) delivered a one-cent beat on light revenue. The two names posted respective losses of 3.7% and 5.2% while the sector extended its January decline to 6.1%.
Also of note, the consumer discretionary sector (-1.3%) finished among the laggards as retailers and homebuilders struggled. The SPDR S&P Retail ETF (XRT 92.12, -2.16) lost 2.3% while iShares Dow Jones US Home Construction ETF (ITB 24.60, -1.30) fell 5.0% despite better than expected earnings from Lennar (LEN 42.48, -3.28). The stock fell 7.2% after company management made cautious comments about its outlook, echoing the remarks made earlier this week by KB Home (KBH 12.39, -1.15).
On the upside, consumer staples (+0.2%) and utilities (+0.7%) posted gains while another countercyclical sector—health care (-1.1%)—was pressured by biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 307.70, -7.87) lost 2.5%, which contributed to the underperformance of the Nasdaq.
Treasuries registered solid gains with the 10-yr yield sliding nine basis points to 1.76%.
Today's participation was ahead of average with more than 850 million shares changing hands at the NYSE floor.
Economic data included Initial Claims, PPI, Empire Manufacturing, and the Philadelphia Fed Survey:
- The initial claims level increased to 316,000 from an upwardly revised 297,000 (from 294,000) while the Briefing.com consensus expected a drop to 290,000
- That was the largest initial claims level since the beginning of June 2014 when 318,000 claims were filed
- It is possible that the rise in claims is the beginning of an upward move in layoff levels from energy-related activities. Low oil prices are expected to cause layoffs as fracking becomes uneconomical
- Producer prices declined 0.3% in December after declining 0.2% in November while the Briefing.com consensus expected a decline of 0.4%
- Total energy prices fell 6.6% in December, which was the sixth consecutive month of price declines
- Excluding food and energy, core PPI increased 0.3% in December after being flat in November. The consensus expected an uptick of 0.1%
- The Empire Manufacturing Survey for January registered a reading of 9.9, which was above the prior month's reading of -1.2 and also above the Briefing.com consensus estimate, which was pegged at 6.5
- The Philadelphia Fed's Manufacturing Business Outlook Survey dropped to 6.3 in January from a downwardly revised 24.3 (from 24.5) while the Briefing.com consensus expected a drop to 19.0
- That was the lowest level since the index turned negative (-6.3) in February 2014
Macroeconomic Data
Economic Data
from Briefing.com
- Initial Claims : 316K vs 290K (Prior 297K)
- Continuing Claims : 2424K vs 2400K (Prior 2475K)
- PPI : -0.3% vs -0.4% (Prior -0.2%)
- Core PPI : 0.3% vs 0.1% (Prior 0.0%)
- Empire Manufacturing : 9.9 vs 6.5 (Prior -1.2)
- Philadelphia Fed : 6.3 vs 19.0 (Prior 24.3)
- Natural Gas Inventories : -236bcf (Prior -131bcf)
INITIAL CLAIMS
Highlights
- The initial claims level increased to 316,000 for the week ending January 10 from an upwardly revised 297,000 (from 294,000) for the week ending January 3. The Briefing.com Consensus expected the initial claims level to fall to 290,000.
- The continuing claims level fell to 2.424 mln for the week ending January 3 from an upwardly revised 2.475 mln (from 2.452 mln) for the week ending December 27. The consensus expected the continuing claims level to fall to 2.400 mln.
Key Factors
- That was the largest initial claims level since the beginning of June 2014 when 318,000 initial claims were filed.
- According to the DOL, there were no special factors that impacted the initial claims. However, it is possible that the rise in claims is the beginning of an upward move in layoff levels from energy-related activities. Low oil prices are expected to cause layoffs as fracking becomes uneconomical.
- We will learn more next week when the DOL reports on which states saw large increases in the initial claims level.
Big Picture
- The increase in claims may be the result of low oil prices impacting jobs in the energy sector.
PPI
Highlights
- Producer prices declined 0.3% in December after declining 0.2% in November. The Briefing.com Consensus expected the PPI to decline 0.4%.
- Excluding food and energy, core PPI increased 0.3% in December after being flat in November. The consensus expected these prices to increase 0.1%.
Key Factors
- Under the old PPI methodology, which excludes services, prices of finished goods declined 1.2%. That was the largest decline since July 2009.
- The catalyst for the decline in the headline index was energy prices. Total energy prices fell 6.6% in December, which was the sixth consecutive month of price declines. Gasoline prices declined 14.5%. Residential natural gas prices increased 3.2%.
- Food prices declined 0.4% in December after declining 0.2% in November. These prices have declined for four out of the last five months.
- Much of the increase in core prices was the result of a 0.2% increase in prices of final demand for services.
- Pipeline pressures remained weak. Core processed intermediate goods prices declined 0.6% in December. Unprocessed core intermediate goods prices declined 0.5% in December. Both indexes have declined for the past three consecutive months. Intermediate services prices were flat after increasing 0.3% in November.
Big Picture
- Continued weakness in energy costs is weighing down overall producer price growth.
PHILADELPHIA FED
Highlights
- The Philadelphia Fed's Manufacturing Business Outlook Survey dropped to 6.3 in January from a downwardly revised 24.3 (from 24.5) in December. The Briefing.com Consensus expected the index to fall to 19.0.
Key Factors
- That was the lowest level since the index turned negative (-6.3) in February 2014.
- Shipments contracted in January as the related index fell to -6.9 from 15.1 in December. Yet, new orders growth remained robust with a reading of 8.5, down from 13.6 in December. Surprisingly, given the strength in new orders and the contraction in production, unfilled orders entered a contraction cycle. That index fell to -8.6 from 2.7 in December.
- The employment sector was notably weaker in January. There were contractions in both payrolls (-2.0 from 8.4) and average hours worked (-6.7 from 4.1).
Big Picture
- According to the underlying fundamentals, businesses reported more contractions (7) than expansions (2) in the subindexes. Yet overall, manufacturers still believe conditions are expanding.
Market Internals
NYSE:
Lower Volumes than the day before – 879.6M vs 928.6M
Decliners outpaced Advancers (adv/dec): 1100 / 2006
New Highs outpaced New Lows (highs/lows): 191 / 122
NASDAQ:
Lower Volumes than the day before – 1951.9M vs 2058.5M
Decliners outpaced Advancers (adv/dec): 618 / 2163
New Lows outpaced New Highs (highs/lows): 35 / 141
VOLATILITY S&P500 (VIX)
22.39 +0.91 (+4.24%)
I am seeing more bearishness in the internals and looking at the volume just indicates the bulls are missing. VIX is showing no sign of retreat at the moment. I think we are seeing a correction at the moment for sure. The million dollar question is when does this ends?
Technical Updates
17,320.71 -106.38 (-0.61%)
Volume: 94,515,451 (above average of 88,869,124)
Range: 17,298.04 - 17,517.41
4,570.82 -68.50 (-1.48%)
Volume: 525,693,671 (above average of 457,243,652)
Range: 4,567.39 - 4,663.96
S&P 500 INDEX (SPX: CBOE)
1,992.67 -18.60 (-0.92%)
Volume: 608,258,000 (above average of 518,992,508)
Range: 1,991.47 - 2,021.35
DOW is having a breakout but it is still holding on to the trend line as a support. NASDAQ seems to be leading with the most downside and broke out of its PHib-fan. It is also approaching the 61.8% Fibonacci line. Technically speaking I don't really see much upside in the market.
Commodities
Currencies
Commodities
Closing Commodities: Oil Prices Surge Higher, But Lost Steam, Erasing Gains
- WTI crude oil displayed huge volatility again today, ultimately closing $2.19 lower at $46.36/barrel
- This is well off of today’s high of $51.27/barrel
- Feb natural gas fell 6 cents today to close at $3.17/MMBtu
- Feb gold rose $29.60 to $1264.60, while Mar silver rose $0.11 to $17.10/oz
Energy Price Action
- Feb crude oil fell $2.19/barrel to $46.36/barrel
- Natural gas fell 6 cents to $3.17/MMBtu
- RBOB Gasoline closed 5 cents lower to $1.30/gallon
- Heating oil fell 3 cents to $1.63/gallon
Agricultural Price Action
- Mar corn closed $0.02 lower at $3.80/bushel
- Mar wheat fell $0.04 cents to $5.34/bushel
- Feb soybeans ended $0.19 lower at $9.92/bushel
- Ethanol closed $0.02 lower at $1.31/gallon
- Sugar #11 rose 0.42 cents (or +2.8%) to 14.93 cents/gallon
Metals Price Action
- Feb gold ended today’s session $29.60 higher at $1264.60/oz
- Mar silver ended $0.11 higher at $17.10/oz
- Mar copper closed $0.05 higher to $2.56/lb
Currencies
Dollar Firms in Volatile Trade:
- The Dollar Index holds small gains as trade continues to test the 92.30 area that has served as a headwind over the past couple of sessions.
- The greenback has been whipped around in one of the more volatile trade in recent memory as markets digest today's action by the Swiss National Bank.
- EURUSD is -170 pips @ 1.1620 as trade flirts with its worst close in 11 years. The single currency has been pressured in response to today's developments at the Swiss National Bank, which has led many to believe a European-style QE program is coming at next week's meeting. Eurozone data due out tomorrow is limited to Final CPI.
- GBPUSD is -45 pips @ 1.5185 after giving up its early gains. The 1.5000 region remains in focus with a breakdown pushing sterling to levels last seen in June 2010.
- USDCHF is -1340 pips @ .8845 amid an historic session. Earlier, the Swiss National Bank stunned markets by removing its EURCHF1.20 floor and cutting its Libor Rate -50bps to -75bps. An equally spectacular move took hold in EURCHF, which is -1735 pips @ 1.0275. Swiss retail sales will cross the wires tomorrow.
- USDJPY is -85 pips @ 116.45 as sellers remain in control for a fifth day. The pair has been offered throughout the day despite the overnight core machinery orders miss and a reiteration by the Bank of Japan that it will do what's necessary to hit its 2% inflation target. Many participants have taken note of the Nikkei report that came out during U.S. trade, which indicated some members of the BOJ are questioning the benefits of further easing. A breakdown of 116.00 puts the 100 dma (113.31) in focus. Japan's tertiary industry activity is scheduled for release tonight.
- AUDUSD is +65 pips @ .8215. The hard currency saw an overnight boost in response to the strong jobs report, and managed to shrug off the disappointing Chinese new loans data. Action remains on target to close at a one-month high.
- USDCAD is -10 pips @ 1.1940 Early selling dropped the pair to 1.1800, but a steady bid into the equity open helped erase those losses. Six-year highs in the 1.2000 area are being watched closely.
Bonds
Treasuries See 14th Gain in 15 Days:
- Treasuries booked their 14th gain in 15 days.
- The complex held losses early on in overnight trade before rallying into positive territory in response to the surprise action by the Swiss National Bank. The SNB eliminated its EURCHF1.20 floor and cut its Libor Rate -50bps to -75bps ahead of what is perceived to be the introduction of European-style QE at next week's ECB meeting.
- Action pressed to its best levels of the morning of the data, but slumped back to the flat line after PPI (-0.3% actual v. -0.4% expected) and Core PPI (+0.3% actual v. +0.1% expected) posted hotter than expected results while Empire Manufacturing (9.9 actual v. 6.5 expected) beat and both initial (316K actual v. 290K expected) and continuing (2424K actual v. 2400K expected) disappointed.
- Maturities would be unable to hold their breakeven lines and trade presses higher into the lunchtime hour after Philly Fed (6.3 actual v. 19.0 expected, 24.3 previous) missed.
- Afternoon weakness in equities ran maturities to their best levels of the day ahead of the cash close.
- Up front, the 2Y eased -4.9bps @ 0.436%. The yield finished the day at levels last seen around Halloween.
- In the belly, the 5Y tumbled -7.9bps to 1.224%. The yield closed at levels last seen in June 2013, but was unable to put in a print below the October 15 low (1.118%).
- The 10Y shed -6.2bps to 1.775%. The benchmark yield put in fresh 20-month lows and is now less than 40bps from an all-time low print.
- The long end lagged with the 30Y falling -4bps to 2.411%. Action dipped below the previous record low of 2.395%, hitting 2.393% before ticking higher into the close.
- Curve flattening continued as the 2-10-yr spread narrowed to 134bps.
- Precious metals saw a mixed session as gold added +$24 to $1259 and silver slid -$0.12 to $16.86.
- Data: CPI (8:30), industrial production and capacity utilization (9:15), Michigan Sentiment (9:55) and Net Long Term TIC Flows (16).
- Fed Speak: Minny's Kocherlakota gives his "Goal-Based Monetary Policy Report" (8:50) and St. Louis' Bullard discusses the economy and monetary policy (13:10).
- 2 Year Note 0.44% -0.07
- 5 Year Note 1.22% -0.11
- 10 Year Note 1.77% -0.09
- 30 Year Bond 2.40% -0.07
2/30 Spread: 196 bps ( UNCH ) … 2/10 Spread: 133 bps ( -2 )
Preview for Friday 16 Jan, 2015
Earnings Highlights
Friday :
BMO - SCHW, CMA, GS, PVTB, STI, WIT
AMC - None Scheduled
Summary
Market has been going on a wild ride right now. Judging from the market sentiment, I don't think the bulls are coming back anytime soon. In other words I am expecting a bearish session to end the week.
Direction for Friday 16 Jan, 2015; Down
2015 Daily Directional Accuracy: 3/9 (33.33%)
2015 Weekly Directional Accuracy: 0/1 (0.00%)
2015 Weekly Directional Accuracy: 0/1 (0.00%)
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