Dow +39.05 at 17554.28, Nasdaq +12.58 at 4667.42, S&P +9.57 at 2032.12
I suppose the gain came from the ECB to implement their QE soon. There was some profit taking in the afternoon but I still don't see a clear leadership in the market. Guess it won't be long...Market is still remaining volatile and there is no clear direction. The flattening of yield curve is showing me that it makes no sense for me to go bullish at the time being.
Direction for Wednesday 21 Jan, 2015; Down
Market Summary
Industry Watch
Strong: Consumer Discretionary, Energy, Industrials, Materials
Weak: Consumer Staples, Financials, Health Care, Technology
Other Market Moving Factor:
- European markets pressured after ECB member Nowotny cautions not to get 'overexcited' for tomorrow's policy meeting
- Bank of England minutes show two previous dissenters join the majority, arguing for continuation of low rates: FTSE rallies
- Crude oil on the rise
[BRIEFING.COM] Equity indices enjoyed their third consecutive advance on Wednesday with the S&P 500 climbing 0.5%.
The highly-anticipated policy meeting at the European Central Bank will take place tomorrow morning, but that did not stop the Wednesday session from being filled with central bank-related storylines. The Bank of Japan got the ball rolling overnight by lowering its inflation outlook to 1.0% from 1.7%, which boosted the yen (117.80).
The Bank of England was next on tap with the minutes from its latest policy meeting. The minutes were a bit surprising as Messrs. McCafferty and Weale, who previously voted in favor of rate hikes, rejoined the majority in their belief that hiking rates too early would prolong the period of low inflation. The newfound dovish tilt at the BoE helped UK's FTSE spike 1.6% to outperform the region.
Meanwhile, other European indices struggled in the early going after ECB governing council member Ewald Nowotny said policymakers should maintain their long-term perspective and that "one should not get overexcited" about [the meeting].
Mr. Nowotny's remarks contributed to a cautious start in the U.S., but global equities jumped off their lows in reaction to reports indicating the European Central Bank is set to propose EUR50 billion in asset purchases through 2016. The euro wobbled on the news before ending the day near 1.1590 against the dollar. In a surprising move, Germany's 10-yr note tumbled, sending the benchmark yield higher by seven basis points to 0.47%.
The Bank of Canada completed the central bank bonanza with a surprise 25-basis point cut to 0.75% in response to crashing oil prices, which are expected to put downward pressure on Canadian inflation. The loonie retreated to its lowest level since early 2009, sending USDCAD to 1.2330 from 1.2070.
All ten sectors registered gains with energy (+1.8%) maintaining the lead throughout the session. The recently-batter sector was able to trim its January loss to 2.8% with help from crude oil, which spiked 2.7% to $47.78/bbl. Another commodity-related sector—materials (+1.0%)—followed not far behind with steelmakers underpinning the move. The Market Vectors Steel ETF (SLX 33.38, +0.68) gained 2.1%.
Elsewhere, the remaining cyclical sectors ended mixed with respect to the broader market. Industrials (+0.7%) and consumer discretionary (+0.6%) outperformed with the latter receiving a boost from above-consensus earnings reported by Netflix (NFLX 409.28, +60.48).
On the flip side, financials (+0.2%) and technology (+0.2%) spent the day among the laggards. The tech sector could not keep pace with the market due to a 3.1% loss in the shares of IBM (IBM 152.09, -4.86) after the Dow component missed revenue estimates and issued disappointing guidance. However, chipmakers rallied behind better than expected results from ASML (ASML 106.59, +2.78) and Cree (CREE 33.88, +1.54). The broader PHLX Semiconductor Index advanced 1.1%.
Over on the countercyclical side, the utilities sector (+1.0%) extended its January advance to 4.3% while consumer staples (+0.3%), telecom services (+0.2%), and health care (+0.1%) underperformed.
Treasuries notched their highs in the morning before giving up those gains in early afternoon action. As a result, the 10-yr yield jumped six basis points to 1.86%.
Participation was a bit below average with roughly 750 million shares changing hands at the NYSE floor.
Economic data was limited to Housing Starts/Building Permits and the MBA Mortgage Index:
- Led by a large increase in single-family construction, new housing starts increased 4.4% in December to 1.089 million from an upwardly revised 1.043 million (from 1.028 million) in November
- The Briefing.com consensus pegged new housing starts at 1.040 million
- Single-family construction increased 7.2% to 728,000 from 679,000 in November, representing the largest number of single-family starts January 2008 (773,000)
- Building permits fell to a seasonally adjusted annualized rate of 1.032 million versus a revised 1.052 million for November (from 1.035 million)
- The Briefing.com consensus expected permits to come in at 1.060 million
- The weekly MBA Mortgage Index spiked 14.2% to follow last week's 49.1% surge
Macroeconomic Data
Economic Data
from Briefing.com
- MBA Mortgage Index : 14.2% (Prior 49.1%)
- Housing Starts : 1089K vs 1040K (Prior 1043K)
- Building Permits : 1032K vs 1060K (Prior 1052K)
HOUSING STARTS
Highlights
- Led by a large increase in single-family construction, new housing starts increased 4.4% in December to 1.089 mln from an upwardly revised 1.043 mln (from 1.028 mln) in November. The Briefing.com Consensus pegged new housing starts at 1.040 mln.
Key Factors
- Single-family construction increased 7.2% in December to 728,000 from 679,000 in November. That was the largest number of single-family starts since 773,000 were started in January 2008. The difference now is that construction is recovering as opposed to dropping rapidly after the bubble burst.
- The NAHB Homebuilders Index has recovered following an unexpected contraction in the middle of 2014. That recovery, however, has not really translated into significant housing starts growth. Given that the increase in starts was due to the normally stable single-family sector, the improvements in sentiment may finally be translating into actual construction growth. If this is true, we would expect to see continued growth in the industry in 2015.
- Multifamily construction declined 0.8% in December to 361,000 from 364,000 in November. Over the past several months, multifamily construction has followed a sawtooth pattern. The small dip keeps multifamily construction on trend.
Big Picture
- Housing starts increased 8.7% to 1.006 mln in 2014. That was the most starts since 1.355 mln were started in 2007.
Market Internals
NYSE:
Lower Volumes than the day before – 771.4M vs 861.0M
Advancers outpaced Decliners (adv/dec): 1969 / 1119
New Highs outpaced New Lows (highs/lows): 133 / 56
NASDAQ:
Lower Volumes than the day before – 1827.6M vs 1828.7M
Decliners outpaced Advancers (adv/dec): 1161 / 1601
New Lows outpaced New Highs (highs/lows): 45 / 101
VOLATILITY S&P500 (VIX)
18.85 -1.04 (-5.23%)
It is not entirely bullish if you look into the internals. I am seeing some divergence especially in NASDAQ. On the contrary VIX is showing some confidence despite still remaining above 15.00.
Technical Updates
17,554.28 +39.05 (+0.22%)
Volume: 95,530,961 (above average of 87,104,174)
Range: 17,396.04 - 17,599.58
4,667.42 +12.58 (+0.27%)
Volume: 463,216,778 (above average of 448,564,362)
Range: 4,629.59 - 4,692.46
S&P 500 INDEX (SPX: CBOE)
2,032.12 +9.57 (+0.47%)
Volume: 539.0M (above average of 507,053,159)
Range: 2,012.04 - 2,038.29
It is still uncertain to me whether market is getting back its bullishness. I am seeing a breakout pattern and that should give me some confirmation.
Commodities
Currencies
Commodities
Closing Commodities: WTI Crude Oil And Natural Gas Move Higher
- Energy futures posted some gains today.
- WTI crude oil rallied over the $48/barrel level, but pulled back some and close below here
- However, WTI crude rallied $1.27 overall and closed today’s session at $47.78/barrel
- Feb natural gas futures recovery some of yesterday’s losses and ended $0.15 higher today at $2.98/MMBtu
- Precious metals sold off following some ECB comments
- Feb gold lost steam and close $0.60 lower at $1293.30/oz
- Mar silver finished with a small gain of $0.23 to $18.19/oz
Energy Price Action
- Mar crude oil rose $1.27/barrel to $47.78/barrel
- Feb Natural gas rose 15 cents to $2.98/MMBtu
- RBOB Gasoline closed 1 cent higher to $1.32/gallon
- Heating oil rose 2 cents to $1.61/gallon
Agricultural Price Action
- Mar corn closed $0.02 lower at $3.88/bushel
- Mar wheat closed unchanged at $5.36/bushel
- Feb soybeans ended $0.02 higher at $9.84/bushel
- Ethanol closed unchanged at $1.39/gallon
- Sugar #11 rose 0.09 cents to 15.92 cents/gallon
Metals Price Action
- Feb gold ended today’s session $0.60 lower at $1293.30/oz
- Mar silver ended $0.23 higher at $18.19/oz
- Mar copper closed $0.02 higher to $2.61/lb Metals price action
Dollar Little Changed in Volatile Trade:
- The Dollar Index has recouped its early losses and now drifts little changed near 93.00.
- The greenback saw a volatile morning as trade was whipped around in response to the mixed US housing data and central bank headlines out of Europe and Canada.
- EURUSD is +30 pips @ 1.1580 as trade fights to avoid a fresh 11-year low. The single currency rallied to its best levels of the day in an immediate response to reports suggesting tomorrow's European Central Bank meeting will be the introduction of a EUR50 bln per month sovereign debt buying program that will last through 2016. However, trade gave up those gains as participants digested the news over the course of the morning. The recent lows near 1.1540 are being watched closely. Spain's unemployment rate will cross the wires ahead of tomorrow's decision.
- GBPUSD is -25 pips @ 1.5115 after surrendering its early gains. Sterling shrugged off this morning's strong jobs report and instead traded lower in response to the unanimous MPC vote for keeping rates on hold (two previously voted for a hike), pushing back expectations the Bank of England would be the first major Western central bank to hike rates. The 1.5100 area remains in focus. British data scheduled for tomorrow includes public sector net borrowing and CBI Industrial Order Expectations.
- USDCHF is -135 pips @ .8615. The pair has struggled to gain traction since last week's shocking removal of the EURCHF1.20 floor, failing several times at the .8800 level. Bulls will look to defend the .8400 area and put in a tradable bottom.
- USDJPY is -100 pips @ 117.80 after the Bank of Japan lowered its inflation forecast for the fiscal year to 1% (1.7% previous). The 117.00 level remains under scrutiny as a breakdown puts key 116.00 support in the crosshairs.
- AUDUSD is -80 pips @ .8090 as trade slides back onto key support. The hard currency was bid early in the session, but reversed into negative territory after today's surprise from the Bank of Canada as many fear the RBA may be the next central bank to surprise with a rate cut. Australia's inflation expectations will be released tonight.
- USDCAD is +250 pips @ 1.2360 as action presses to its best levels since April 2009. The pair surged to fresh six-year highs after the Bank of Canada surprised markets with a 25bp cut to 75bps. The 200 mma (1.2325) provides some resistance in the area.
Bonds
Treasuries Give Up Early Gains, Finish Decisively Red:
- Treasuries closed lower after surrendering their early gains.
- The complex pressed to its best levels of the morning following the mixed housing starts (1089K actual v. 1040K expected) and building permits (1032K actual v. 1060K expected) data, but quickly ran into a wave of selling as central banks made headlines on both sides of the Atlantic.
- First, reports surfaced suggesting tomorrow's European Central Bank meeting will introduce a EUR50 bln per month sovereign bond buying program.
- Then, the Bank of Canada announced a surprise 25bp rate cut to 75bps.
- The flurry of headlines sparked a flight into riskier assets, causing money to move out of the safety of Treasuries.
- Up front, the 2Y ticked up +0.9bps to 49.5bps. The 50bp area has served as a key pivot level since June.
- In the belly, the 5Y is +4.3bps @ 1.336%. Three days of selling has run the yield 17bps off Friday's lows and has action moving towards a test of 1.450%/1.500% resistance.
- The 10Y rallied +4.6bps to 1.853%. The benchmark yield has little resistance to contend with until the 2.000% area.
- Selling at the long end ran the 30Y up +4.2bps to 2.440%. An early bid pushed the yield on the long bond to a record low 2.351% before climbing nearly 9bps off the low.
- A steeper curve won out as the 2-10-yr spread widened to 136bps.
- Precious metals ended mixed as gold fell -$1 to $1293 and silver climbed +$0.25 to $18.20.
- Data: Initial and continuing claims (8:30), and FHFA Housing Price Index (9).
Treasury Yields:
- 2 Year Note 0.53% UNCH
- 5 Year Note 1.35% +0.04
- 10 Year Note 1.87% +0.05
- 30 Year Bond 2.44% +0.05
2/30 Spread: 191 bps ( +5 ) … 2/10 Spread: 134 bps ( +5 )
Preview for Thursday 22 Jan, 2015
Earnings Highlights
Thursday :
BMO - COV, NTCT, SASR, TZOO, WBS
AMC - ASB, COF, CE, COBZ, FFIN
BMO - COV, NTCT, SASR, TZOO, WBS
AMC - ASB, COF, CE, COBZ, FFIN
Summary
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
2015 Daily Directional Accuracy: 4/12 (33.33%)
2015 Weekly Directional Accuracy: 1/2 (50.00%)
2015 Weekly Directional Accuracy: 1/2 (50.00%)
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