Dow -6.84 at 18105.77, Nasdaq -3.23 at 5007.79, S&P -1.64 at 2104.98
We are going to see earnings reports from Citigroup and Goldman Sachs. That would give the market a little push to breakout. There are some macroeconomic data out which can be the catalyst as well. The internals are showing the big boys are getting back in play and that will give the market some leadership.
I think tomorrow we should see more intense bulls vs bears fight and the market can possibly ended flat. It is better to be cautious that to be greedy at this point in time.
Direction for Thursday 16 Apr, 2015; Down
I won't say my call is entirely spot on but the market was surely volatile. Market was hitting the resistance at the early session followed with a breakout but it didn't last. With the Dollar Index falling we can see oil prices continue to rise higher. Greece's debt situation remains unsolved which could translate some trouble to the ECB.
Market Summary
Industry Watch
Strong: Consumer Discretionary, Consumer Staples, Financials, Health Care
Weak: Energy, Technology, Materials, Utilities
Other Market Moving Factor:
- IMF rejects Greece's request to extend May payment deadline
- Dollar Index tracking third consecutive decline
Equity indices struggled in the early going after an overnight report from the Financial Times indicated that Greek officials have asked the International Monetary Fund to reschedule debt repayments that will be due in May. The report was denied by Greek Finance Minister Yanis Varoufakis, but European investors displayed caution, which contributed to the lower start in the U.S.
However, a batch of better than expected earnings offset the Greece-related news. The S&P 500 ranged near its low during the opening hour and climbed into the afternoon. The index spent about an hour in the green, but slipped back into the red before the close.
Only three sectors registered gains, but most of the decliners finished not far below their flat lines. The utilities (-0.6%) sector was the weakest performer, but that had little impact on the market since the sector makes up just 3.0% of the S&P 500.
Elsewhere among countercyclical groups, the consumer staples sector (+0.4%) spent the day atop the leaderboard thanks to better than expected earnings and upbeat guidance from Philip Morris (PM 84.96, +6.83).
Moving to the cyclical side, the consumer discretionary sector (+0.2%) outperformed with help from the shares of Netflix (NFLX 562.05, +86.59), which surged 18.2% to a new record high after the company beat bottom line estimates. The big spike in Netflix overshadowed losses among homebuilders brought on by a disappointing Housing Starts report. The iShares Dow Jones US Home Construction ETF (ITB 27.91, -0.53) lost 1.9%.
Similar to the discretionary sector, financials (+0.1%) held a slim gain throughout the day after two major components reported earnings. Citigroup (C 54.02, +0.81) gained 1.5% in reaction to its bottom-line beat while Dow component Goldman Sachs (GS 200.21, -0.89) shed 0.4% despite beating estimates and boosting its quarterly dividend to $0.65/share.
On the downside, the technology sector (-0.3%) could not make it out of the red as chipmakers weighed after SanDisk (SNDK 67.97, -3.15) missed earnings expectations and guided below consensus while Taiwan Semiconductor (TSM 23.24, -0.27) beat on the bottom line beat, but issued cautious revenue guidance for Q2. The two lost 4.4% and 1.2%, respectively while the PHLX Semiconductor Index fell 0.5%.
Treasuries spent some time on either side of their flat lines before ending just above the unchanged level. The 10-yr yield slipped one basis point to 1.89%.
Today's participation was in-line with recent averages as roughly 740 million shares changed hands at the NYSE floor.
Economic data included Initial Claims, Housing Starts, and Philadelphia Fed Survey:
- The initial claims level increased to 294,000 for the week ending April 11 from an upwardly revised 282,000 (from 281,000) while the Briefing.com consensus expected a decline to 280,000
- Despite the increase, the four-week moving average was virtually unchanged at 283,000, a level last seen in 2000
- Continuing claims fell to 2.268 million from an upwardly revised 2.308 million (from 2.304 million) while the consensus expected an increase to 2.325 million
- Housing starts increased 2.0% in March to 926,000 from an upwardly revised 908,000 (from 897,000) in February while the Briefing.com consensus expected an increase to 1.045 million
- In February, housing starts dropped 15.3%, which was blamed on adverse weather, meaning starts should have rebounded in the hardest hit areas of the country
- The Northeast did return to January levels, as expected, but the rebound in the Midwest was poor and remained well below previous trends
- Furthermore, starts in the unaffected West (-19.3%) and South (-3.5%) fell to levels not seen since the first half of 2014, suggesting economic reasons and not weather bear responsibility for the lackluster start to the year
- In February, housing starts dropped 15.3%, which was blamed on adverse weather, meaning starts should have rebounded in the hardest hit areas of the country
- The Philadelphia Fed's Business Outlook Survey increased to 7.5 in April from 5.0 in March while the Briefing.com consensus expected an increase to 7.2
Global Market
ASIA
Asian Markets Close: Japan’s Nikkei +0.1%; Hong Kong’s Hang Seng +0.4%; China’s Shanghai Composite +2.7%
Markets in the Asia-Pacific region were mostly higher on Thursday, led by none other than China’s Shanghai Composite, which reclaimed all of Wednesday’s losses and then some with a 2.7% gain. That move was pinned yet again on policy stimulus speculation. Encouraging employment data out of Australia helped underpin the broader bullish bias in the region.
Economic data
- China
- March Foreign Direct Investment +11.3% (prior +17.0%)
- Australia
- March Employment Change +37,700 (expected 15,000; prior 41,900)
- March Unemployment Rate 6.1% (expected 6.3%; prior 6.2%)
- March Participation Rate 64.8% (expected 64.6%; prior 64.7%)
- March Inflation Expectations 3.4% (prior 3.2%)
- March New Motor Vehicle Sales +0.5% month-over-month (prior +2.7%)
Equity Markets
- Japan’s Nikkei bounced back from early losses and closed on an upswing, gaining 0.1% for the session. A strong showing from the financial (+2.3%) and energy (+4.0%) sectors helped lead the way. Individual standouts included Fukuoka Financial Group (+7.8%), Chiba Bank Ltd (+7.4%), Shizuoka Bank Ltd (+6.3%), Bank of Yokohama Ltd (+6.3%), and Sumitomo Mitsui Trust Holdings (+6.1%). Toho Co (-3.5%) and MEIJI Holdings (-3.0%) topped the list of declining issues. Out of the 225 index members 149 ended higher, 70 finished lower, and 6 were unchanged.
- Hong Kong’s Hang Seng increased 0.4% on the back of strength in the energy (+2.6%), consumer cyclical (+1.3%), and financial (+0.4%) sectors. Leading gainers included China Life Insurance Co (+4.1%), PetroChina (+4.0%), Galaxy Entertainment (+3.8%), CNOOC (+3.4%), and Ping An Insurance (+3.1%). Sino Land Co (-2.5%) and Wharf Holdings Ltd (-2.1%) topped the list of declining issues. Out of the 50 index members, 22 ended higher, 23 finished lower, and 5 were unchanged.
- China’s Shanghai Composite didn’t waste any time rebounding from Wednesday’s losses. It jumped 2.7% on Thursday and finished at its high for the day (and a multi-year high) as this year’s buying momentum, bolstered by policy stimulus speculation, was renewed. The consumer non-cyclical (+3.9%), utilities (+3.9%), and energy (+3.7%) sectors led the way in a broad-based advance. The Shanghai Composite is up 29.7% year-to-date.
- India’s Sensex declined 0.5%, pressured by a weak showing from the consumer non-cyclical (-1.8%), industrial (-1.7%), and technology (-1.3%) sectors. Hero MotoCorp (-3.8%), Sun Pharmaceutical (-2.7%), Cipla Ltd (-2.3%), Tata Consultancy Services (-2.1%), and Dr Reddy’s Laboratories (-2.0%) paced declining issues. Oil & Natural Gas Corp (+3.4%) and Mahindra & Mahindra (+1.3%) were the biggest gainers.
- Australia’s S&P/ASX 200 increased 0.7% following some stronger than expected employment data for the month of March. The gold (+1.8%), metals & mining (+1.8%), and resources (+1.7%) sectors paced the advance.
- Regional advancers: Taiwan +1.2%, South Korea +0.9%, Malaysia +0.4%, Thailand +1.4%, Indonesia +0.1%, Philippines +0.5%, Vietnam +0.7%
- Regional decliners: Singapore -0.2%
FX
- USD/CNY -0.1% at 6.1969
- USD/INR -0.3% at 62.250
- USD/JPY -0.1% at 119.04
EUROPE
Major European indices trade lower across the board with Germany’s DAX (-1.7%) leading the retreat. European markets have retreated alongside U.S. futures after the Financial Times reported that Greek officials have approached the IMF about the possibility of rescheduling its repayments that are due in May, suggesting the country will have difficulty meeting the upcoming deadlines. The news gave a boost to German debt, pressuring the 10-yr bund yield three basis points to 0.08%.
- Italy’s February trade surplus expanded to EUR3.54 billion from EUR230 million (expected surplus of EUR1.21 billion)
- Swiss March PPI +0.2% month-over-month (expected 0.1%; prior -1.4%); -3.4% year-over-year (consensus -3.7%; last -3.6%)
Closing Prices
- UK’s FTSE: -0.5%
- Germany’s DAX: -1.9%
- France’s CAC: -0.6%
- Spain’s IBEX: -1.4%
- Portugal’s PSI: -2.4%
- Italy’s MIB Index: -1.8%
- Irish Ovrl Index: + 0.1%
- Greece ASE General Index: + 1.1%
Macroeconomic Data
Economic Data
from Briefing.com
- Initial Claims : 294K vs 280K (Prior 282K - Up)
- Continuing Claims : 2268K vs 2325K (Prior 2308K - Up)
- Housing Starts : 926K vs 1045K (Prior 908K - Up)
- Building Permits : 1039K vs 1081K (Prior 1102K - Up)
- Philadelphia Fed : 7.5 vs 7.2 (Prior 5.0)
- Natural Gas Inventories : 63 bcf (Prior 15 bcf)
UNEMPLOYMENT CLAIMS
Highlights
- The initial claims level increased to 294,000 for the week ending April 11 from an upwardly revised 282,000 (from 281,000) for the week ending April 4. The Briefing.com Consensus expected the initial claims level to decline to 280,000.
- The continuing claims level fell to 2.268 mln for the week ending April 4 from an upwardly revised 2.308 mln (from 2.304 mln) for the week ending March 28. The consensus expected the continuing claims level to increase to 2.325 mln.
Key Factors
- Despite the increase in claims, the four-week moving average was virtually unchanged at 283,000. That level was last reached in 2000.
- That is the lowest continuing claims level since December 2000.
Big Picture
- After inching up past 300,000 in February, the trends in the initial claims level have dropped to 15-year lows.
HOUSING STARTS
Highlights
- Housing starts increased 2.0% in March to 926,000 from an upwardly revised 908,000 (from 897,000) in February. The Briefing.com Consensus expected housing starts to increase to 1.045 mln.
Key Factors
- In February, housing starts dropped 15.3% from 1.072 mln in January and fell below 1.00 mln for the first time since August 2014. At the time, the collapse in starts was blamed on extreme inclement weather conditions that impacted the Northeast and the Midwest.
- Going by the weather theory, starts should have rebounded in those two areas of the country, and stability in the South and West should have brought total starts back to January levels.
- The Northeast did return to January levels, as expected. However, the rebound in the Midwest was poor and remained well below previous trends.
- Furthermore, starts in the unaffected West (-19.3%) and South (-3.5%) fell to levels not seen since the first half of 2014.
- Altogether, the trends in the housing market point to lackluster production for economic reasons as opposed to a one-time exogenous shock.
- Single-family starts increased 4.4% in March to 618,000 from 592,000 in February. Excluding February, that was the worst month of new single-family construction since only 593,000 were started in June 2014.
- Multifamily starts declined 2.5% to 308,000 in March from 316,000 in February.
- The number of homes currently under construction increased 0.6% to 842,000 in March from 837,000 in February. All of the gain came from the relatively cheaper per unit multifamily sector, which means that overall residential construction spending growth likely softened from February levels.
Big Picture
- The lackluster rebound in March housing starts shows that the decline in February was not completely due to weather-related effects.
PHILADELPHIA FED
Highlights
- The Philadelphia Fed's Business Outlook Survey increased to 7.5 in April from 5.0 in March. The Briefing.com Consensus expected the index to increase to 7.2.
Key Factors
- The contraction in shipments lightened in April as the related index increased to -1.8 from -7.8 in March. The improvement, however, came at a cost to backlogs. Unfilled orders contracted again as the related index increased to -7.1 in April from -13.8 in March. New orders growth slowed, dropping from 3.9 to 0.7. Without an influx of new orders, the shipments index is likely to contract for a third consecutive month in May.
- The employment data improved in April. The Number of Employees Index increased to 11.5 in April from 3.5 in March. The Average Employee Workweek Index exited a recession and increased to 3.4 in April from -11.4 in March.
Big Picture
- Another contraction in shipments highlight the weakness in the manufacturing sector.
Market Internals
NYSE:
Lower Volumes than the day before – 755.3M vs 877.0M
Decliners outpaced Advancers (adv/dec): 1346 / 1707
New Highs outpaced New Lows (highs/lows): 68 / 11
NASDAQ:
Lower Volumes than the day before – 1658.6M vs 1781.2M
Decliners outpaced Advancers (adv/dec): 1309 / 1455
New Highs outpaced New Lows (highs/lows): 123 / 24
VOLATILITY S&P500 (VIX)
12.60 -0.24 (-1.87%)
Internals is showing some divergence. I am seeing some bearishness returning and New Highs seems to fall as well. However VIX went down instead and it is approaching the support level. Supposedly it is telling the underlying confidence in the market going higher but I suppose it lacks conviction. Maybe we should the VIX ticking higher soon.
Technical Updates
18,105.77 -6.84 (-0.04%)
Volume: 89,515,996 (below average of 99,476,445)
Range: 18,063.86 - 18,169.26
Range: 18,063.86 - 18,169.26
5,007.79 -3.23 (-0.06%)
Volume: 384.2M (below average of 440,409,491)
Volume: 384.2M (below average of 440,409,491)
Range: 4,996.00 - 5,016.00
S&P 500 INDEX (SPX: CBOE)
2,104.99 -1.64 (-0.08%)
Volume: 494.7M (above average of 541,269,154)
Range: 2,100.02 - 2,111.30
From the technicals, the market is unable to break higher the resistance level yet. I think we might still see the market continues to consolidate. Given enough volume then I believe we will see the breakout. Otherwise it would be just another correction...
Commodities
Closing Commodities: Oil Closes Modestly Higher, Below $57/Barrel
- WTI oil rallied off its morning low to well over $57/barrel in trade today
- May crude ultimately closed $0.46 to $56.71/barrel
- May nat gas futures held gains following post-data rally. May NG closed near its HoD, ending $0.07 at $2.68/MMBtu
- Copper also held earlier gains, closing near today’s high. May copper ended pit trading $0.05 higher at $2.77/lb.
- June gold finished $3.10 lower at $1198.20/oz, while May silver ended flat at $16.30/oz
Energy
- May crude oil futures rose $0.46/barrel to $56.71/barrel
- May natural gas rose $0.07 to $2.68/MMBtu
- RBOB Gasoline closed $0.01 higher at $1.94/gallon
- Heating oil closed $0.02 higher at $1.91/gallon
Highlights:
- Natural Gas: EIA storage data released in early morning trade showed a build of 63 bcf vs. 49 bcf consensus, highlighting price action throughout the day
Agriculture
- May corn closed $0.01 higher at $3.77/bushel
- May wheat closed $0.04 higher at $4.95/bushel
- May soybeans closed flat at $9.65/bushel
- Ethanol closed flat at $1.59/gallon
- Sugar #11 closed 0.43 cents higher (+3.3%) at 13.43 cents/lb
Metals
- June gold ended today’s session $3.10 lower at $1198.20/oz
- May silver closed flat at $16.30/oz
- May copper closed $0.05 higher at $2.77/lb
Currencies
- The U.S. Dollar Index dropped 0.83% today to 97.50, as the front-month WTI Crude futures made new highs for 2015 at $57.42
- EUR/USD rallied 1.09% to 1.0792 despite a lot of bad news regarding Greece
- According to the Financial Times, the Greek government inquired with the IMF about getting a delay for them to make a debt repayment
- This news sent Greek 10-year yields up to a multi-year high at 12.56%
- USD/JPY traded down 0.21% to 118.91
- AUD/USD rallied sharply, up 1.81% to $0.7815
- Australian unemployment fell to 6.1% and the economy added 37,700 jobs in March. These numbers far surpassed expectations
- USD/CAD: -1.19% to 1.2158
- GBP/USD: +0.97% to 1.4968
Bonds
Front End and Belly of Curve Rally
- The Treasury complex ended higher despite a mid-day dip off of a positive surprise on the Philly Fed Manufacturing survey
- Yield check:
- 2-yr: -2 bps to 0.48%
- 5-yr: -3 bps to 1.29%
- 10-yr: -1 bp to 1.88%
- 30-yr: +2 bps to 2.56%
- News:
- There were 294K initial jobless claims for the week ending April 11th, more than the Briefing.com consensus of 280K and the 282K from the prior week
- There were 2268K continuing claims for the week ending April 4th. That was less than the Briefing.com consensus of 2325K and the prior number of 2308K
- Despite the increase in claims, the four-week moving average was virtually unchanged at 283,000. That level was last reached in 2000
- Housing starts fell well short of expectations in March at 926K versus the Briefing.com consensus of 1.045M
- In February, housing starts dropped 15.3% from 1.072 mln in January and fell below 1.00 mln for the first time since August 2014. At the time, the collapse in starts was blamed on extreme inclement weather conditions that impacted the Northeast and the Midwest. Going by the weather theory, starts should have rebounded in those two areas of the country, and stability in the South and West should have brought total starts back to January levels
- April Philadelphia Fed was 7.5 versus the Briefing.com consensus of 7.5 and the prior month's 5.0
- The contraction in shipments lightened in April as the related index increased to -1.8 from -7.8 in March. The improvement, however, came at a cost to backlogs. Unfilled orders contracted again as the related index increased to -7.1 in April from -1.8 in March. New orders growth slowed, dropping from 3.9 to 0.7. Without an influx of new orders, the shipments index is likely to contract for a third consecutive month in May
- There were three Fed speakers today, but none of them was an FOMC voter who clarified his/her opinions for us. The only FOMC voter was Atlanta Fed President Lockhart and he is a known dove and said that he wanted to see data to confirm that the economy is on the desired path before raising rates
- Currencies:
- EUR/USD: +1.20% to $1.0805
- USD/JPY: -0.26% to 118.84
- Commodities:
- WTI Crude: +0.44% to $56.64/bbl
- Gold: -0.17% to $1,199.30/troy oz.
- Copper: +2.43% to $2.7785/lb.
- Iron Ore: +0.35% to $48.77/metric ton
- Data Out Friday:
- March CPI and Core CPI (08:30 ET)
- April Michigan Sentiment (10:00 ET)
- March Leading Indicators (10:00 ET)
Treasury Yields:
- 2 Year Note 0.50% -0.01
- 5 Year Note 1.31% -0.02
- 10 Year Note 1.90% -0.01
- 30 Year Bond 2.56% +0.01
2/30 Spread: 206 bps ( +2 ) … 2/10 Spread: 140 bps ( UNCH )
Preview for Friday 17 Apr, 2015
Economic Data
Friday (17 Apr) :
- CPI : 0.3% (Prior 0.2%)
- Core CPI : 0.1% (Prior 0.2%)
- Mich Sentiment : 94.0 (Prior 93.0)
- Leading Indicators : 0.3% (Prior 0.2%)
Earnings Highlights
Friday (17 Apr) :
BMO - CMA FHN GE HON RAI STX SYF
AMC - None Scheduled
Summary
Market is still lacking the leadership that results in the sideway trend we are seeing now. I don't see any reason for the market to rally and maybe a correction is more appropriate. Better than expected earnings reports are what I see that is pushing the market higher. Oil prices is still in a rally and it is looking to hit $60 mark soon. It seems that the production level is not going to reach any point higher anymore. On the contrary the Dollar Index has been going a downtrend as macroeconomic data released were not up to expectation.
Direction for Friday 17 Apr, 2015; Down
2015 Daily Directional Accuracy: 26/53 (49.06%)
2015 Weekly Directional Accuracy: 7/12 (58.33%)
2015 Weekly Directional Accuracy: 7/12 (58.33%)
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