24 Apr 2015

Thursday, 23 Apr 2015 - AMC



Dow +20.42 at 18058.69, Nasdaq +20.89 at 5056.06, S&P +4.97 at 2112.93

Market remains volatile as we are in the midst of earnings season. A good Q2 earnings should give the market some upside after all April is considered as the most bullish month. We are going to see more earnings on Thursday and the unemployment claims could potentially be a catalyst for the market to break out.

Direction for Thursday 23 Apr, 2015; Up

Surprisingly the market managed to rally after the China and Euro were announcing weak economic data. However there was some profit taking before market closed and it appears to me that the market could not break above the resistance level except NASDAQ which continues to outperform. Crude oil also had a rally on Thursday as gasoline supplies fall.                                  

Market Summary

Industry Watch
Strong: Consumer Discretionary, Energy, Telecom Services

Weak: Consumer Staples, Financials, Health Care, Industrials, Technology

Other Market Moving Factor:
  • Disappointing Manufacturing PMI readings from China, Japan, and Eurozone
  • Revenue growth remains scarce as Q1 reports continue pouring in

    [BRIEFING.COM] The stock market posted its second consecutive gain with the S&P 500 (+0.2%) notching a fresh intraday record high at 2,120.49. More notably, the Nasdaq Composite (+0.4%) set a fresh closing record high at 5,056.06, which eclipsed the previous peak (5,048.62) that was notched on March 10, 2000. 

    Strikingly, today's advance occurred after Manufacturing PMI readings from China (49.2; consensus 49.6) and Japan (49.7; expected 50.8) missed expectations while European economies also delivered disappointing manufacturing surveys. Economic data did not improve much by the start of the U.S. session with the New Home Sales report for March missing expectations (481K; Briefing.com consensus 520K). Furthermore, a large portion of quarterly reports received since yesterday‘s close failed to show year-over-year revenue growth, which has been a recurring theme during this earnings season. 

    Normally, the aforementioned combination would serve as a recipe for weakness in equities, but instead, the macro and micro concerns morphed into expectations that the Fed would remain at the zero-bound for longer. Treasuries agreed with this assessment and climbed alongside equities, pressuring the 10-yr yield four basis points to 1.94%. Meanwhile, the Dollar Index (97.29, -0.64) fell 0.7% with the euro gaining 0.9% against the greenback (1.0825). 

    Conversely, the dollar weakness helped crude oil climb throughout the day to settle higher by 2.8% at $57.74/bbl. Fittingly, the strength underpinned the energy sector (+0.6%), which ended ahead of the remaining cyclical groups. Only the telecom services sector (+2.2%) had a better showing, thanks to AT&T (T 34.23, +1.37), which surged 4.2% despite missing earnings and revenue estimates. 

    Going back to the cyclical side, the consumer discretionary sector (+0.5%) represented the only other outperformer while the remaining growth-sensitive groups ended in-line with or behind the S&P 500. 

    The discretionary sector rallied behind apparel names after Skechers (SKX 86.87, +11.03) reported better than expected results. Shares of SKX surged 14.5% while the strength among its peers overshadowed losses in homebuilder names after PulteGroup (PHM 19.97, -1.72) reported disappointing results. The stock fell 7.9% while the iShares Dow Jones US Home Construction ETF (ITB 26.67, -0.78) lost 2.8%. 

    Elsewhere, the technology sector (+0.2%) finished in-line with the market as large cap names like Apple (AAPL 129.67, +1.05), Google (GOOGL 557.46, +8.28), and Microsoft (MSFT 43.34, +0.36) overshadowed losses among chipmakers after Texas Instruments (TXN 54.72, -4.01) missed estimates and lowered its guidance. The PHLX Semiconductor Index ended lower by 1.6%, but remains on track to end the week with a 1.4% gain versus a 1.5% advance for the S&P 500. 

    On the downside, the consumer staples sector (-0.5%) lagged throughout the day after two heavyweights reported earnings. Procter & Gamble (PG 80.95, -2.14) slumped 2.6% after reporting in-line results on disappointing revenue while PepsiCo (PEP 95.73, -1.55) surrendered 1.6% despite beating estimates. 

    Today's participation was in-line with average as more than 780 million shares changed hands at the NYSE floor. 

    Economic data included Initial Claims and New Home Sales: 
    • The initial claims level increased to 295,000 for the week ending April 18 from an unrevised 294,000 for the week ending April 11 while the Briefing.com consensus expected a decline to 288,000 
      • According to the Department of Labor, there were no special factors that impacted this week's claims reading 
      • The four-week moving average inched up to 285,000 from 283,000 
      • Continuing Claims rose to 2.325 million from 2.275 million 
    • New home sales declined 11.4% in March to 481,000 from an upwardly revised 543,000 (from 539,000) in February while the Briefing.com consensus expected a decline to 520,000 
      • From January 2013 through November 2014, new home sales averaged about 430,000 per month with little volatility. December 2014 was a turning point that saw sales near 500,000 for the first time since May 2008. 
    Tomorrow's economic data will be limited to the 8:30 ET release of the Durable Orders report for March (Briefing.com consensus 0.5%).


    Global Market

    ASIA

    Asian Markets Close: Japan’s Nikkei +0.3%; Hong Kong’s Hang Seng -0.4%; China’s Shanghai Composite +0.4%
    It was a mixed showing from markets in the Asia-Pacific region on Thursday following the weaker-than-expected HSBC PMI report for China, which showed manufacturing activity slipping to a one-year low. That didn’t deter the Shanghai Composite, though, as it jumped another 0.4%. Taiwan (+1.9%) was the big winner on Thursday, benefiting from speculation about the possible implementation of a stock connect program with China like the one Shanghai has with Hong Kong.

    Economic data
    • China
      • April HSBC Manufacturing PMI 49.2 (expected 49.6; prior 49.6)
    • Japan
      • April Manufacturing PMI 49.7 (expected 50.8; prior 50.3)
    • Hong Kong
      • March Unemployment Rate 3.3% (expected 3.3%; prior 3.3%)
    • Australia
      • NAB Quarterly Business Confidence 0.0 (prior 2.0)
    • New Zealand
      • Credit Card Spending +5.2% year-over-year (prior +5.8%)
    • Singapore
      • March CPI -0.3% year-over-year (expected -0.5%; prior -0.3%)
    • South Korea
      • Q1 GDP +0.8% quarter-over-quarter (expected +0.7%; prior +0.3%); +2.4% year-over-year (expected +2.4%; prior +2.7%)

    Equity Markets
    • Japan’s Nikkei increased 0.3% following some weaker than expected manufacturing PMI data, helped by a late-session push that pre-empted a dip into negative territory. The energy (+1.6%), industrial (+0.5%) and consumer cyclical (+0.4%) sectors provided support. Individual standouts included Kawasaki Kisen Kaisha (+5.5%), Japan Tobacco (+5.3%), and Nippon Yusen KK (+4.2%). Atop the list of decliners were Yahoo Japan (-4.3%), Eisai Co (-2.9%), and Mitsubishi UFJ Financial (-2.0%). Out of the 225 index members, 139 ended higher, 79 finished lower, and 7 were unchanged.
    • Hong Kong’s Hang Seng declined 0.4%, relinquishing strong gains posted in early trading and closed at its low for the session. The consumer cyclical (-1.0%), industrial (-0.7%), and communications (-0.6%) sectors were the main pockets of weakness. Ping An Insurance Co (-3.0%), Sands China (-2.5%), Industrial & Commercial Bank of China (-2.4%), and China Life Insurance Co (-2.3%) topped the list of decliners. Want Want China (+4.8%) led all gainers. Out of the 50 index members, 19 ended higher, 28 finished lower, and 3 were unchanged.
    • China’s Shanghai Composite increased 0.4%, brushing aside the HSBC PMI report that showed manufacturing activity hitting a one-year low in April and remaining in contraction territory. Gains in the basic materials (+4.1%), consumer cyclical (+2.1%), and energy (+1.4%) sectors helped keep Chinese markets aloft.
    • India’s Sensex declined 0.6% after starting Thursday’s session on a positive note. The consumer non-cyclical (-1.0%) and industrial (-1.0%) sectors led the retreat. Sun Pharmaceuticals (-2.7%), Tata Motors (-2.2%), and State Bank of India (-2.2%) topped the list of decliners. Tata Steel (+5.2%) was the best-performing issue followed by Coal India (+1.3%) and Cipla Ltd (+1.1%).
    • Australia’s S&P/ASX 200 increased 0.1%, aided by a late-day buying push that made the difference. The metals & mining (+1.9%), resources (+1.6%), and materials (+1.3%) sectors led the way for the index.
    • Regional advancers: Taiwan +1.9%, South Korea +1.4%, Singapore +0.2%, Philippines +0.8%
    • Regional decliners: Malaysia -0.5%, Thailand -0.5%, Indonesia -0.02%, Vietnam -0.2%

    FX
    • USD/CNY +0.05% at 6.1987
    • USD/INR +0.4% at 63.240
    • USD/JPY unch at 119.93

    EUROPE

    Major European indices trade lower across the board with Germany’s DAX (-1.3%) leading the decline. European markets displayed gains in the early going as investors responded to a swath of better than expected earnings, but the upbeat start was followed by a retreat in reaction to disappointing PMI readings.
    • Eurozone Flash April Manufacturing PMI dropped to 51.9 from 52.2 reported in March (expected 52.6) while Flash Services PMI fell to 53.7 from 54.2 in March (consensus 54.5)
    • Germany’s Flash April Manufacturing PMI fell to 51.9 from 52.8 in March (expected 53.0) while Flash Services PMI dropped to 54.4 from 55.4 in March (consensus 55.5). Separately, May GfK Consumer Climate ticked up to 10.1 from 10.0 (expected 10.2)
    • UK’s March Retail Sales -0.5% month-over-month (expected 0.4%; prior 0.6%); +4.2% year-over-year (consensus 5.4%; last 5.4%). Separately, March Core Retail Sales +0.2% month-over-month (consensus 0.4%; last 0.6%); +5.0% year-over-year (expected 5.4%; prior 4.8%)
    • French Flash April Manufacturing PMI dropped to 48.4 from 48.8 in March (consensus 49.2) while Flash Services PMI declined to 50.8 from 52.4 in March (expected 52.5)
    • Spain’s Q1 Unemployment Rate increased to 23.78% from 23.70% (consensus 23.60%)
    • Italy reported no month-over-month Wage Inflation in March while the year-over-year reading increased 1.0%

    Closing Prices
    • UK’s FTSE: + 0.4%
    • Germany’s DAX: -1.2%
    • France’s CAC: -0.6%
    • Spain’s IBEX: + 0.1%
    • Portugal’s PSI: -0.5%
    • Italy’s MIB Index: -0.5%
    • Irish Ovrl Index: -0.4%
    • Greece ASE General Index: + 2.4%

      Macroeconomic Data

      Economic Data
      from Briefing.com

      • Initial Claims : 295K vs 288K (Prior 294K)
      • Continuing Claims : 2325K vs 2330K (Prior 2275K - Up)
      • New Home Sales : 481K vs 520K (Prior 543K - Up)
      • Natural Gas Inventories : 90 bcf (Prior 63 bcf)

       UNEMPLOYMENT CLAIMS


      Highlights

      • The initial claims level increased to 295,000 for the week ending April 18 from an unrevised 294,000 for the week ending April 11. The Briefing.com Consensus expected the initial claims level to decline to 288,000.
      • The continuing claims level increased to 2.325 mln for the week ending April 11 from an upwardly revised 2.275 mln (from 2.268 mln) for the week ending April 4. The consensus expected the continuing claims level to increase to 2.330 mln.

      Key Factors

      • According to the Department of Labor, there were no special factors that impacted this week’s claims reading.
      • The four-week moving average inched up to 285,000 from 283,000. Those levels are indicative of a labor sector that is nearing full employment.

      Big Picture

      • After inching up past 300,000 in February, the trends in the initial claims level have dropped to 15-year lows.

      NEW HOME SALES


      Highlights

      • New home sales declined 11.4% in March to 481,000 from an upwardly revised 543,000 (from 539,000) in February. The Briefing.com Consensus expected new home sales to fall to 520,000.

      Key Factors

      • From January 2013 through November 2014, new home sales averaged about 430,000 per month with little volatility. December 2014 was a turning point that saw sales near 500,000 for the first time since May 2008. 
      • It was only natural that new home demand would slow in March following such a big spike over the previous three months. Still, the three-month moving average is a robust 512,000, and 2015 sales are on pace to surpass 2008 levels.
      • The regional demand data were downbeat. With the exception of a 5.9% increase in the Midwest, sales fell in the Northeast (-33.3%), South (-15.8%) and West (-3.4%).
      • Total supply increased 1.9% to 213,000, which represents a 5.3 months’ supply at the current sales rate. That is still below the 6 months’ supply that builders typically maintain during a normally functioning market.
      • The median new home price declined 1.7% y/y in March to $277,400. That was the first year-over-year decline since September 2014.

      Big Picture

      • New home demand has accelerated from 2013 and 2014 levels.


      Market Internals

      NYSE:
      Higher Volumes than the day before – 797.5M vs 753.9M 

      Advancers outpaced Decliners (adv/dec): 2043 / 974
      New Highs outpaced New Lows (highs/lows): 115 / 10

      NASDAQ:
      Higher Volumes than the day before – 1843.0M vs 1680.5M
      Advancers outpaced Decliners (adv/dec): 1681 / 1073
      New Highs outpaced New Lows (highs/lows): 140 / 41

      VOLATILITY S&P500 (VIX)
      12.48 -0.23 (-1.81%)

      Internals are returning to a bullish state. And I can see that volume is also improving. VIX is sitting on its support line but the intra-day suggests to me that VIX might tick higher next session.              


      Technical Updates

      DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)
      18,058.69 +20.42 (+0.11%)
      Volume: 100,244,859 (below average of 100,263,754)
      Range: 17,966.77 - 18,133.03

      NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)
      5,056.06 +20.89 (+0.41%)
      Volume: 436.8M (below average of 441,275,714)
      Range: 5,019.30 - 5,073.09


      S&P 500 INDEX (SPX: CBOE)
      2,112.93 +4.97 (+0.24%)
      Volume: 566.8M (above average of 543,705,078)
      Range: 2,103.19 - 2,120.49 

      There is a breakout in NASDAQ while S&P and DOW are unable to do so. Looking at the candlestick I don't think there is much upside actually. But NASDAQ might be a factor in influencing the market movement. Would we see a breakout or is it time for a correction?


       Commodities

      Closing Commodities: WTI Oil Closes Below $58/Barrel
      • Natural gas sold off overnight/this morning and held loss following the weekly EIA storage data. Nat gas ended $0.03 lower today at $2.57/MMBtu
      • WTI crude oil rallied higher today, climbing above $58/barrel before settling $1.46 higher at $57.66/barrel by the time floor trading ended
      • Metals rose on weakness in the dollar index.
      • June gold gained $7.60 to $1194.40/oz, May silver rose $0.08 to $15.86/oz and May copper rose $0.02 to $2.69/lb

      Energy
      • June crude oil futures rose $1.46/barrel to $57.66/barrel
      • May natural gas fell $0.03 to $2.57/MMBtu
      • RBOB Gasoline closed $0.06 higher at $1.99/gallon
      • Heating oil rose $0.06 to $1.93/gallon
      Notes:
      • Natural Gas: EIA data for the week ending April 17, showed that working gas in storage was 1,629 bcf, representing a net increase of 90 bcf over the previous week.

      Agriculture
      • May corn closed $0.02 lower to $3.71/bushel
      • July wheat closed $0.03 higher to $5.02/bushel
      • July soybeans closed $0.08 higher at $9.80/bushel
      • Ethanol closed flat at $1.62/gallon
      • Sugar #11 closed 0.43 cents higher (+3.4%) to 13.09 cents/lb

      Metals
      • June gold ended today’s session $7.60 higher to $1194.40/oz
      • May silver closed $0.08 higher at $15.86/oz
      • May copper closed $0.02 higher to $2.69/lb

      Currencies

      Dollar Falls on New Home Sales
      • The U.S. dollar fell against all the majors today as the releases of U.S. economic data did not confirm that the soft patch of growth in March has passed
        • March New Home Sales fell to 481K versus the Briefing.com consensus of 520K and 543K in April
      • USD/CHF fell 1.63% to 0.9537 as yesterday's rally, which came on the removal of exemptions for the SNB's negative interest rate policy, was reversed
      • USD/JPY: -0.37% to 119.54
      • EUR/USD: +1.05% to $1.0837
        • April Manufacturing PMI's for Germany, France, and the eurozone as a whole missed expectations this morning, but the news flow regarding Greece has improved with that country's 10-year yield declining 60 bps to 12.13%
          • German Chancellor Merkel and Greek Prime Minister Tsipras have agreed to a primary surplus of 1.5% this year, according to Bloomberg
      • The U.S. Dollar Index neared a 2-week low, falling 0.74% to 97.21
      • AUD/USD rallied 0.33% to $0.7778

      Bonds

      Treasuries Rally After Auction
      • Treasuries were deeply oversold in the short run after yesterday's break and today's 5-year TIPS auction ignited an afternoon rally
      • Yield check:
        • 2-yr: -2 bps to 0.53%
        • 5-yr: -5 bps to 1.35%
        • 10-yr: -4 bps to 1.94%
        • 30-yr: -3 bps to 2.63%
      • News:
        • Initial Jobless Claims for the week ending 4/18 were 295K, higher than both the Briefing.com consensus of 288K and the prior reading of 294K
        • Continuing Jobless Claims for the week ending 4/11 came in at 2325K versus the Briefing.com consensus of 2330K. The prior reading was 2275K (revised up from 2268K)
        • March New Home Sales were a seasonally-adjusted 481K, less than the Briefing.com consensus of 520K and the 543K from February (revised from 539K)
          • The median sales price declined 1.7% y/y to $277,400, the first y/y decline since September 2014
          • The regional demand data were poor, with the exception of a 5.9% increase in the Midwest
        • 5-Year TIPS auction results: 
          • High yield -0.335%
          • Bid-to-cover 2.27
          • Indirect bid 61.4% 
          • Direct bid 6.23%
      • Commodities:
        • WTI Crude: +2.71% to $57.68/bbl
        • Gold: +0.70% to $1,195.20/troy oz.
        • Copper: +1.26% to $2.699/lb.
      • Currencies:
        • EUR/USD: +0.97% to $1.0829
        • USD/JPY: -0.41% to 119.49
      • Data Out Friday:
        • March Durable Goods Orders and Durable Goods Orders ex-Transportation (08:30 ET)
      Treasury Yields:
      • 2 Year Note 0.55% -0.02
      • 5 Year Note 1.37% -0.04
      • 10 Year Note 1.96% -0.03
      • 30 Year Bond 2.63% -0.03

      2/30 Spread: 208 bps ( -1 ) …  2/10 Spread: 141 bps ( -1 )




      Preview for Friday 24 Apr, 2015



      Economic Data

      Friday (24 Apr) :
      • Durable Orders : 0.5% (Prior -1.4%)
      • Durable Orders ex-transportation : 0.5% (Prior -0.6%)

      Earnings Highlights

      Friday (24 Apr) : 
      BMO - AAN AAL AJG AZN AVX B BIIB BGG COG DTE EHTH FNFG FLIR IMGN IMS INFY IPG LEA LYB MOG.A NPBC OFB PB PFS SPG STT SHOO TYC VTR XRX
      AMC - None Scheduled

      Summary
      As the market is still volatile, technology sector is the one that led the market higher. Over at Euro side, there is a Eurogroup meeting on Friday and China is still struggling to stay afloat. Nonetheless I think the market might react to the bad economic data on Friday and we would see some more profit taking to end the week.

      Direction for Friday 24 Apr, 2015; Down

      2015 Daily Directional Accuracy: 30/58 (51.72%) 
      2015 Weekly Directional Accuracy: 8/13 (61.54%)

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