Dow -160.00 at 17823.07, Nasdaq -41.39 at 4736.05, S&P -21.45 at 2058.90
Market took a step back after a rally. I feel it is more of a profit taking and the market may be experiencing a pullback before going higher early next year. Nonetheless I feel that the January Barometer is still pretty reliable. This means that we might see December ends in red...
Direction for Wednesday 31 Dec, 2014; Down
Last trading day of 2014 ended in losses. Market started off rather sideway and ended up going south after a sell off later. As I thought, December ended up in red and I think we are not getting a Santa Claus rally this year...
Market Summary
Industry Watch
Strong:
Weak: Consumer Staples, Energy, Materials
Other Market Moving Factor:
- Entering final session of 2014: Nasdaq +14.4% YTD, S&P 500 +12.6% YTD, DJIA +8.5% YTD, Russell 2000 +4.3% YTD, 10-yr yield -85 bps YTD
[BRIEFING.COM] The stock market 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.
Before we delve into the details of today's trading day, it is important to note that trading volume at the NYSE was among the lowest of the year (650 million), suggesting few carbon-based life forms took part in the final affair of the year.
All ten sectors settled in the red with utilities (-1.9%) ending at the bottom of the leaderboard. In all likelihood, today's 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. Apple (AAPL 110.38, -2.14) began the day with a slim gain, but found itself in the red within the first 45 minutes of the session. The largest sector component continued retreating throughout the day while other large cap tech names followed suit. Shares of Apple fell 1.9% today, but still soared nearly 38.0% in 2014. Chipmakers, meanwhile, outperformed with the PHLX Semiconductor Index losing 0.6%.
The outperformance of chipmakers helped the Nasdaq exhibit some relative strength, but the index also received a helping hand from biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 303.35, -1.27) shed 0.4% while the health care sector (-1.0%) could not stay out of the red, narrowing its 2014 advance to 23.3%.
Elsewhere among cyclical groups, financials (-1.2%) lagged while the energy sector lost 0.8% to widen its 2014 decline to 10.0% amid another volatile day in oil trading pits. WTI crude dipped below the $52.60/bbl mark ahead of the close, but rocketed back to its session high to end the day lower by 1.0% at $53.49/bbl.
Also of note, the consumer discretionary sector (-0.4%) ended ahead of other groups. Homebuilders and retailers were responsible for the outperformance as iShares Dow Jones US Home Construction (ITB 25.88, +0.20) gained 0.8% while SPDR S&P Retail ETF (XRT 96.01, -0.28) slipped 0.3%.
Treasuries capped a strong year with another rally. As a result, the benchmark 10-yr yield fell two basis points to 2.17%, finishing 87 basis points below its close from December 31, 2014. On a somewhat related note, the Dollar Index (90.27, +0.28) climbed 0.3% to end the year at its best level since early 2006.
Economic data included Initial Claims, Chicago PMI, and Pending Home Sales:
- The initial claims level increased to 298,000 for the week ending December 27 from an upwardly revised 281,000 (from 280,000) while the Brieifng.com consensus expected an increase to 290,000
- The Department of Labor reported that there were no special factors driving the increase in unemployment insurance filings; however, it is possible that the Christmas holiday played at least a small part in the increase
- The continuing claims level fell to 2.353 million from an upwardly revised 2.406 million (from 2.403 million) while the consensus expected a decline to 2.375 million
- After four consecutive months above 60, the Chicago PMI fell from 60.8 in November to 58.3 in December while the Briefing.com consensus expected a decline to 60.0
- Pending home sales for November rose 0.8%, which was in-line with the Briefing.com consensus
Macroeconomic Data
Economic Data
from Briefing.com
- Initial Claims : 298K vs 290K (Prior 281K)
- Continuing Claims : 2353K vs 2375K (Prior 2406K)
- Chicago PMI : 58.3 vs 60.0 (Prior 60.8)
- Pending Home Sales : 0.8% vs 0.8% (Prior -1.2%)
- Crude Inventories : -1.754M (Prior 7.267M)
- Natural Gas Inventories : -26bcf (Prior -49bcf)
Highlights
- The initial claims level increased to 298,000 for the week ending December 27 from an upwardly revised 281,000 (from 280,000) for the week ending December 20. The Brieifng.com consensus expected the initial claims level to increase to 290,000.
- The continuing claims level fell to 2.353 mln for the week ending December 20 from an upwardly revised 2.406 mln (from 2.403 mln) for the week ending December 13. The Briefing.com consensus expected the continuing claims level to fall to 2.375 mln.
Key Factors
- The DOL reported that there weren’t any special factors driving the increase in unemployment insurance filings. It is possible, however, that the Christmas holiday played at least a small part in the increase.
Big Picture
- The overall unemployment claims data are showing an economy at, or near, full employment.
CHICAGO PMI
Highlights
- After four consecutive months above 60, the Chicago PMI fell from 60.8 in November to 58.3 in December. The Briefing.com Consensus expected the index to fall to 60.0.
Key Factors
- A reading above 60.0 is not sustainable in the long term. The drop to 58.3 does not signal a major shift in manufacturing conditions in the Chicago region. The Production Index dipped to 61.6 in December from 66.7 in November. New orders growth also slowed as the related index fell to 59.1 in December from 61.9 in November. Order backlogs declined to 48.8 in December from 55.5 in November. That was the first contraction in unfilled orders since July.
- The Employment Index increased to 56.9 in December from 54.4 in November.
Big Picture
- The Chicago PMI has little overall economic value, and is only watched by the financial markets because it is usually released one day in advance of the similar national ISM manufacturing survey. A significant move in this regional survey will therefore sometimes be seen as having predictive value for the ISM index.
Market Internals
NYSE:
Lower Volumes than the day before – 259.1M vs 539.0M
Advancers outpaced Decliners (adv/dec): 1569 / 1483
New Highs outpaced New Lows (highs/lows): 157 / 28
NASDAQ:
Lower Volumes than the day before – 765.2M vs 1251.7M
Advancers outpaced Decliners (adv/dec): 1484 / 1276
New Highs outpaced New Lows (highs/lows): 107 / 35
VOLATILITY S&P500 (VIX)
19.20 +3.28 (+20.60%)
There is definitely fear building up in the market. VIX spiked to close to 20.00 during the session. As volume remains weak, internals are still pointing some bullishness... Is it a false disguise?
Technical Updates
17,823.07 -160.00 (-0.89%)
Volume: 82,836,188 (below average of 91,423,541)
Range: 17,820.88 - 18,043.22
4,736.05 -41.39 (-0.87%)
Volume: 422,142,201 (below average of 483,032,768)
Range: 4,734.11 - 4,806.43
S&P 500 INDEX (SPX: CBOE)
2,058.90 -21.45 (-1.03%)
Volume: 415,223,000 (below average of 539,353,277)
Range: 2,057.94 - 2,085.58
I suppose we are getting a reversal here. I am seeing a double top in NASDAQ and both DOW and S&P broke below their support/resistance level.
Commodities
Closing Commodities: Oil Rallies Over $1/Barrel In Last 10 Minutes Of Pit Trade, Ends With Modest Loss
- Gold and silver prices extended losses into the close today, finishing today’s pit trading session near today’s low.
- Feb gold ended today’s session $17.10 lower at $1183.30/oz, while Mar silver dropped 4.1% (or $0.67) to $15.59/oz. Mar copper lost 3 cents to end at $2.82/lb.
- Energy futures remained weak today as well, as oil and natural gas went on to extend losses in afternoon trading. However, in the last 10 minutes of pit trading, Feb crude rallied $1.05/barrel to end the session at $53.49/barrel. In electronic trade, Feb crude was down 1%.
Energy Price Action
- Jan crude oil fell $0.61/barrel to $53.49/barrel
- Natural gas fell 20 cents to $2.89/MMBtu
- RBOB Gasoline rose 1 cent to $1.48/gallon
- Heating oil rose 1 cent to $1.85/gallon
Agricultural Price Action
- Mar corn closed $0.09 lower at $3.97/bushel
- Mar wheat fell 13 cents to $5.90/bushel
- Jan soybeans ended $0.17 lower at $10.19/bushel
- Ethanol closed 1 cent lower at $1.56/gallon
- Sugar #11 fell 0.09 cents to 14.52 cents/gallon
Metals Price Action
- Feb gold ended today’s session $17.10 lower at $1183.30/oz
- Mar silver also ended $0.67 lower at $15.59/oz
- Mar copper closed $0.03 lower to $2.82/lb
Currencies
Currency Moves:
- The Dollar Index (90.08, +0.09) has traded relatively flat. The index is all but sure to end 2014 just below its best level of the year, which also represents the highest watermark for the index since early 2006
- EURUSD is -56 pips @ 1.2101, placing the pair below the 2014 low (1.2124) that was recorded yesterday. Greek President Karolos Papoulias has dissolved parliament, setting the course for elections on January 25.
- GBPUSD is +25 pips @ 1.5588 as the pair tries for its second consecutive gain. That being said, cable is on track to end 2014 just above the lowest level of the year (1.5500), which was tested on multiple occasions over the past few days.
- USDCHF is +47 pips @ 0.99937. The pair has continued its advance off the mid-December low and is likely to end the year near its best level from July 2012
- USDJPY is +39 pips @ 119.86. The currency pair retreated yesterday, but found overnight support at its 10-day moving average. Today's action has been confined to a narrow range with markets in Japan closed.
Bonds
Some Year for the Front End and the Back End:
- Amid thin trading conditions, Treasuries closed 2014 on a winning note. Seemed only fitting because they won for most of the year despite the Fed ending its asset purchase program and ongoing talk of the U.S. economy gaining recovery traction.
- 10-yr note yield settled 2014 at 2.17% versus 3.04% at end of 2013
- 30-yr bond yield settled at 2.75% versus 3.98% at end of 2013
- Some carnage at the front end, though, as the 2-yr yield went from 0.38% at end of 2013 to 0.67% by end of 2014
- Wednesday's winning effort was helped along by:
- Safe-haven posturing in front of the New Year's holiday, which will be the start of a four-day weekend for a number of market participants
- Continued repression of inflation fears as oil prices lost ground again despite weekly inventory reports showing a drawdown in crude stockpiles (-1.754 mln barrels) and natural gas (-26 bcf)
- WTI crude futures -2.3% at $52.90/bbl
- Brent crude futures -1.8% at $56.84/bbl
- Festering angst about the political dealings in Greece and both political/economic matters in Russia
- Interest rate differentials as sovereign bond yields in Europe continued to drop (German bund at a lowly 0.53%)
- EUR/USD hit a new low for 2014 in Wednesday's trading (1.209), taking it below the level it was at when ECB President Draghi pledged in July 2012 to do whatever it takes to preserve the euro
- U.S. Dollar strength weighed on commodity prices in general
- Gold -1.4% at $1184.00/troy ounce
- Silver -4.3% at $15.59/troy ounce
- Copper -1.1% at $2.82/lb
- Economic data came and went without much impact, although it was generally supportive for Treasuries being in-line with, or slightly weaker, than headline expectations
- Initial Claims for week ending December 27 rose by 17,000 to 298,000 (Briefing.com consensus 290,000)
- Continuing claims for week ending December 20 fell by 53,000 to 2.353 million (Briefing.com consensus 2.375 million)
- Chicago PMI for December was 58.3 (Briefing.com consensus 60.0), down from 60.8 for November
- Pending Home Sales for November +0.8% (Briefing.com consensus +0.8%) versus downwardly revised 1.2% decline (from -1.1%) in October
- Buying interest pretty evenly distributed across the curve
- 2-yr yield -2 bps to 0.67%
- 5-yr yield -3 bps to 1.65%
- 7-yr yield -2 bps to 1.97%
- 10-yr yield -2 bps to 2.17%
- 30-yr yield -1 bps to 2.75%
- 2-10-yr spread narrowed slightly to 150 bps from 151 bps at Tuesday's settlement (and from 266 bps at end of 2013)
- Early close today in front of New Year's holiday
Treasury Yields:
- 2 Year Note 0.67% -0.02
- 5 Year Note 1.65% -0.03
- 10 Year Note 2.17% -0.03
- 30 Year Bond 2.75% -0.01
2/30 Spread: 208 bps ( +1 ) … 2/10 Spread: 150 bps ( -1 )
Preview for Friday 2 Jan, 2015
Summary
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!
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
Daily Directional Accuracy (from 2 January 2015): 0/0 (0.00%)
Weekly Directional Accuracy (from 2 January 2015): 0/0 (0.00%)
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Daily Directional Accuracy (from 25 November 2014): 14/22 (61.90%)
Weekly Directional Accuracy (from 31 October 2014): 3/7 (42.86%)
Weekly Directional Accuracy (from 31 October 2014): 3/7 (42.86%)
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