Dow +259.70 at 17813.98, Nasdaq +82.98 at 4750.40, S&P +31.03 at 2063.15
Announcement of QE from the ECB gave the market a good run. Basically ECB is going to pump in more money into the Eurozone to spur their consumption. Deja vu? Yea we saw that plenty from the Fed already.I guess tomorrow will be affected by the ECB announcement of QE. Judging from that, not a doubt we going to see more volatility in the market next session.
Direction for Thursday 22 Jan, 2015; Down
Market Summary
Industry Watch
Strong: Consumer Discretionary, Financials, Industrials, Materials
Weak: Consumer Staples, Energy, Health Care, Utilities, Telecom Services
Other Market Moving Factor:
- European Central Bank leaves interest rate corridor unchanged and announces plans to purchase EUR60 billion per month through September 2016
- S&P 500 retakes 50-day moving average (2046)
[BRIEFING.COM] The major averages registered their fourth consecutive advance on Thursday with the S&P 500 (+1.5%) reclaiming its 50-day moving average (2046/2047). The benchmark index erased its January loss while the Russell 2000 (+2.0%) displayed relative strength throughout the day.
This week has featured action from several major central banks and that extravaganza was topped off today when the European Central Bank announced the highly-anticipated launch of a quantitative easing program.
Prior to the U.S. open, ECB President Mario Draghi revealed plans to purchase investment-grade corporate and government debt in the amount of EUR60 billion per month. According to Mr. Draghi, the program will continue through September 2016 and will be deployed ‘decentrally,' meaning national central banks will participate in the risk sharing. When asked about the program's limits, Mr. Draghi said the take-up is limited to 25.0% of a given issue. The announcement boosted European debt (Italy 10-yr yield -14 bps to 1.55%) and weighed on the euro, sending the single currency lower by nearly 300 pips to 1.1340 against the dollar.
The resulting greenback strength pushed the Dollar Index (94.28, +1.37) above the 94.00 level for the first time since September 2003. In turn, this was a headwind for dollar-denominated commodities, and especially crude oil, which also had to contend with a larger than expected inventory build. The energy component fell 2.9% to $46.38/bbl while the energy sector (+0.6%) registered a modest gain after spending the first half of the session in negative territory.
Similar to energy, the materials sector (+1.3%) underperformed while the remaining cyclical groups finished ahead of the broader market.
The financial sector (+2.5%) settled in the lead, but the spike could not lift the group off the bottom of the January leaderboard. The sector narrowed its month-to-date loss to 2.9% while Dow components American Express (AXP 84.37, -3.30) and Travelers (TRV 108.17, +3.16) headed in opposite direction following earnings. American Express lost 3.8% after the company beat top-line estimates and announced plans to cut 4,000 jobs whereas Travelers rallied 3.0% in reaction to better than expected earnings.
Financials were followed by discretionary shares (+1.9%) with the group enjoying broad support. Online commerce names Amazon.com (AMZN 310.32, +13.07) and eBay (EBAY 57.14, +3.77) posted respective gains of 4.4% and 7.1% after eBay reported a one-cent beat and announced plans for a 7.0% reduction of the company's workforce. It is also worth mentioning the company agreed to appoint an Icahn Capital executive to its Board of Directors.
Elsewhere, the top-weighted tech sector (+2.0%) displayed broad strength while the PHLX Semiconductor Index (+0.6%) struggled to keep pace due to disappointing guidance from Xilinx (XLNX 38.96, -2.55) and SanDisk (SNDK 78.90, -1.54). The pair lost 6.1% and 1.9%, respectively.
Also of note, the industrial sector (+1.6%) finished just ahead of the broader market, but transport stocks soared following better than expected results from Alaska Air (ALK 67.94, +2.96), Southwest Airlines (LUV 45.35, +3.52), JB Hunt (JBHT 84.23, +2.19), and Union Pacific (UNP 119.83, +5.43). The Dow Jones Transportation Average spiked 2.9% to erase its January decline.
Unlike the six cyclical sectors, defensively-oriented groups spent the day behind the market. Telecom services (-0.6%) and utilities (-0.4%) could not stay out of the red while consumer staples (+1.1%) and health care (+1.3%) ended in the green.
Treasuries finished with slim losses that sent the 10-yr yield higher by a basis point to 1.88%.
Today's participation was ahead of average with roughly 871 million shares changing hands at the NYSE floor.
Economic data was limited to Initial Claims and the FHFA Housing Market Index:
- The initial claims level declined to 307,000 from an upwardly revised 317,000 (from 316,000) while the Briefing.com consensus expected a decline to 302,000
- This was the first time since July 2014 that the initial claims level exceeded 300,000 for three consecutive weeks
- As with last week, the Department of Labor reported that there were no special factors impacting the initial claims level
- Continuing claims increased to 2.443 million from an upwardly revised 2.428 million (from 2.424 million)
- The FHFA Housing Price Index for November rose 0.8%, which followed an increase of 0.6% in October
Macroeconomic Data
Economic Data
from Briefing.com
- Initial Claims : 307K vs 302K (Prior 317K)
- Continuing Claims : 2443K vs 2400K (Prior 2428K)
- FHFA Housing Price Index : 0.8% (Prior 0.4%)
- Natural Gas Inventories : -216bcf (Prior -236bcf)
- Crude Inventories : 10.071M (Prior 5.389M)
UNEMPLOYMENT CLAIMS
Highlights
- The initial claims level declined to 307,000 for the week ending January 17 from an upwardly revised 317,000 (from 316,000) for the week ending January 10. The Briefing.com Consensus expected the initial claims level to decline to 302,000.
- The continuing claims level increased to 2.443 mln for the week ending January 10 from an upwardly revised 2.428 mln (from 2.424 mln) for the week ending January 3. The consensus expected the continuing claims level to fall to 2.400 mln.
Key Factors
- This was the first time since July 2014 that the initial claims level exceeded 300,000 for three consecutive weeks.
- As with last week, the DOL reported that there were no special factors impacting the initial claims level.
- There have been anecdotal reports that low oil prices have caused increased layoff activities in the energy sector, which may be the cause of the recent increase in claims. So far, however, the data do not support that theory. While energy-heavy states like Texas (12,312) and North Dakota (1,066) reported layoffs in excess of 1,000 for the week ending January 10, the state supplied comments do not blame increased layoffs in drilling or other energy-supported activities.
Big Picture
- Despite the recent increase in the initial claims, the current level still supports payroll growth above 200,000.
Market Internals
NYSE:
Higher Volumes than the day before – 890.4M vs 771.4M
Advancers outpaced Decliners (adv/dec): 2444 / 658
New Highs outpaced New Lows (highs/lows): 268 / 33
NASDAQ:
Higher Volumes than the day before – 1986.4M vs 1827.6M
Advancers outpaced Decliners (adv/dec): 2021 / 757
New Lows outpaced New Highs (highs/lows): 64 / 81
VOLATILITY S&P500 (VIX)
16.40 -2.45 (-13.00%)
We see more confidence coming back into the market in addition to the QE from ECB. VIX continues to go lower and approaching the support at 15.00. However TRIN was above 1.00 for most of the session and that is showing some divergence.
Technical Updates
17,813.98 +259.70 (+1.48%)
Volume: 111,976,264 (above average of 87,926,943)
Range: 17,482.54 - 17,840.89
4,750.40 +82.98 (+1.78%)
Volume: 515.8M (above average of 448,672,166)
Range: 4,644.57 - 4,752.60
S&P 500 INDEX (SPX: CBOE)
2,063.15 +31.03 (+1.53%)
Volume: 643.5M (above average of 510,341,338)
Range: 2,026.38 - 2,064.62
It seems that there is a bullish breakout with the support of volumes. The indices broke above their 20 and 50 MAs respectively. Certainly showing more bullishness here.
Commodities
Currencies
Commodities
Closing Commodities: Crude Oil Gives Up Gains, Closes Lower
- WTI crude oil prices gave back today’s gains to finish the day at a loss
- Mar crude oil ended the day $1.40 lower at $46.38/barrel
- Natural gas futures fell today, which was helped by the weekly storage data that was released earlier this morning
- Feb nat gas ended the day $0.14 lower at $2.84/MMBtu
- Precious metals posted a modest gains with Feb gold rising $8.20 to $1301.50/oz and Mar silver gaining $0.17 to $18.36/oz
Energy Price Action
- Mar crude oil fell $1.40/barrel to $46.38/barrel
- Feb Natural gas fell 14 cents to $2.84/MMBtu
- RBOB Gasoline closed 1 cent higher to $1.33/gallon
- Heating oil closed unchanged at $1.61/gallon
Agricultural Price Action
- Mar corn closed $0.04 lower at $3.84/bushel
- Mar wheat closed $0.02 lower at $5.34/bushel
- Feb soybeans ended $0.06 lower at $9.78/bushel
- Ethanol closed unchanged at $1.39/gallon
- Sugar #11 fell 0.01 cents to 15.91 cents/gallon
Metals Price Action
- Feb gold ended today’s session $8.20 higher at $1301.50/oz
- Mar silver ended $0.17 higher at $18.36/oz
- Mar copper closed $0.03 lower to $2.58/lb
Dollar Crosses 94.00:
- The Dollar Index trades above 94.00 for the first time September 2003.
- EURUSD is -230 pips @ 1.1380 as trade presses to a fresh 11-year low following Mario Draghi's introduction of European QE. Today's announcement outlined a EUR60 bln per month of purchases in various securities, 33% of which will be sovereign debt, lasting until September 2016. Mr. Draghi noted the program will not discriminate against bonds with a negative yield. The 1.1000 area is setting up as the next key level. Eurozone data is heavy as Flash Manufacturing and PMI data from across the region is released.
- GBPUSD is -120 pips @ 1.5020 as action slides to an 18-month low. Sterling managed cross 1.5200 early despite the disappointing public sector net borrowing and CBI Industrial Order Expectations numbers, but pushed through key 1.5100 support as traders digested today's ECB action. Britain's retail sales will cross the wires tomorrow.
- USDCHF is +130 pips @ .8720 as buyers take control for the first time in three days. The .8400/.8800 range has been in place for the past week and will be monitored closely.
- USDJPY is +25 pips @ 118.20. Early selling following the ECB announcement pressed the pair onto support in the 117.25 area, but buyers once again stepped up in defense of the level. The bulls will look for another test of the 50 dma (118.71), which served as a headwind during the previous two sessions.
- AUDUSD is -20 pips @ .8060 as action flirts with its lowest close since July 2009. Recent selling has come amid speculation the Reserve Bank of Australia could join the Bank of Canada in announcing a surprise rate cut. Chinese data out tonight is limited to HSBC Flash Manufacturing PMI.
- USDCAD is +55 pips @ 1.2395 as trade climbs to a new six-year high. The late 2008/early 2009 highs near 1.3000 are setting up as an important level. Canada's CPI and retail sales data is due out tomorrow.
Bonds
Yields Firm Amid Volatile Trade:
- Treasuries lost ground amid a volatile trade.
- The complex pressed to session lows ahead of this morning's Mario Draghi press conference before surging back into positive territory as Europe's QE program was announced.
- European QE will consist of purchases totaling EUR60 bln per month through September 2016 and will not discriminate against bonds with a negative yield.
- The volatile session produced a range of 15bps in yields at the long end of the curve.
- Up front, the 2Y added +2bps to 51.5bps. This area remains under close watch as it has been viewed as a key pivot since June.
- In the belly, the 5Y rallied +4.6bps to 1.382%. Resistance in the 1.450%/1.500% region remains in focus.
- The 10Y climbed +4.3bps to 1.896%. The benchmark yield probed 1.950% ahead of the ECB announcement before tumbling to a low of 1.812%.
- Selling at the long end caused the 30Y to edge up +2.9bps to 2.469%. The yield finished today's session at a one-week high.
- A steeper curve won out as the 2-10-yr spread widened to 138bps.
- Precious metals went off near their best levels of the day as gold added +$11 to $1305 and silver climbed +$0.27 to $18.47.
- Data: Existing home sales and leading indicators (10).
Treasury Yields:
- 2 Year Note 0.53% UNCH
- 5 Year Note 1.39% +0.04
- 10 Year Note 1.90% +0.03
- 30 Year Bond 2.46% +0.02
2/30 Spread: 193 bps ( +2 ) … 2/10 Spread: 137 bps ( +3 )
Preview for Friday 23 Jan, 2015
Earnings Highlights
Friday :
BMO - BK, FHN, FNFG, GE, HON, KSU, KMB, MCD, PB, COL, STT, SYF
AMC - None Scheduled
BMO - BK, FHN, FNFG, GE, HON, KSU, KMB, MCD, PB, COL, STT, SYF
AMC - None Scheduled
Summary
It seems like my calls are getting more wrong than right. Well that gives me more learning opportunity. No harm.
I think no one is going to let the QE in the Eurozone to stop the market from getting higher. Perhaps some profit-taking along the way?
I think no one is going to let the QE in the Eurozone to stop the market from getting higher. Perhaps some profit-taking along the way?
Direction for Friday 23 Jan, 2015; Up
2015 Daily Directional Accuracy: 4/13 (30.77%)
2015 Weekly Directional Accuracy: 1/2 (50.00%)
2015 Weekly Directional Accuracy: 1/2 (50.00%)
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