Tuesday, 31 Mar 2015 - AMC

Dow -200.19 at 17776.12, Nasdaq -46.56 at 4900.88, S&P -18.35 at 2067.89

Market is not showing a convincing rally and maybe we might see some profit taking tomorrow after the spike from Monday morning. The Dollar Index is making it way back higher and crude oil took a beating. And the news from the Iran nuclear deal is giving the crude oil some volatility as well.

Generally I feel the market is still heading up but due to the list of major market movement data releasing later on this week, the market is remaining volatile. So I am calling a flat session ahead.

Direction for Tuesday 31 Mar, 2015; Down

Welcome to the last day of Q1. Market opened down and perhaps remained sideway until the selling in the last trading hour. As suspected there was some profit taking along the day. The Dollar Index is still heading strong and crude oil is still as volatile as the Iran nuclear deal is not a done deal yet.            

Market Summary

Industry Watch

Strong: Consumer Discretionary, Utilities

Weak: Energy, Financials, Health Care, Industrials, Materials, Technology

Other Market Moving Factor:

• Dollar Index rallies again: crude oil pressured
• Homebuilders outperform after DR Horton (DHI) upgrade at Susquehanna

[BRIEFING.COM] The stock market extended its March decline on Tuesday, but was able to end the first quarter in the green. The S&P 500 (-0.9%) lost 1.7% for the month, but added 0.4% during the first quarter. The tech-heavy Nasdaq (-0.9%) outperformed, losing 1.3% in March to narrow its Q1 gain to 3.5%. For its part, the Dow Jones Industrial Average (-1.1%) lost 2.0% in March and shed 0.3% in Q1. 

Equity indices started the day amid broad pressure while the Dollar Index (98.31, +0.33) added to yesterday's gain. The S&P 500 tried climbing off its opening low, but daylong weakness among heavily-weighted sectors like health care (-1.5%), industrials (-1.0%), and energy (-0.9%) prevented the index from turning positive. On the flip side, the consumer discretionary sector (-0.5%) held a modest gain into the afternoon, but slipped into the red during the final hour. 

Still, the discretionary sector ended ahead of its peers with homebuilders contributing to the relative strength after DR Horton (DHI 28.48, +0.47) was upgraded to ‘Positive' from ‘Neutral' at Susquehanna. Shares of DHI gained 1.7% while the iShares Dow Jones US Home Construction ETF (ITB 28.23, -0.03) surrendered its gain ahead of the close. Similarly, apparel and luxury retailers outperformed withMovado (MOV 28.49, +2.86) jumping 11.2% in reaction to better than expected results. 

Elsewhere among cyclical sectors, industrials (-1.0%) were pressured by large cap names like Boeing (BA 150.08, -2.62) and General Electric (GE 24.81, -0.31) while the energy sector (-0.9%) lagged amid weakness in crude oil. WTI crude fell 1.9% to $47.72/bbl and locked in a 12.7% decline for the quarter. For its part, the energy sector lost 3.6% in Q1. 

Once again, dollar strength was a headwind for oil as the Dollar Index added 0.3% for the day and ended the month higher by 2.7%. Furthermore, the index spiked more than 8.0% during the first quarter. 

Nine of ten sectors ended the month in negative territory while health care (-1.5%) gained 0.8% in March. Biotechnology helped the sector end the month ahead of its peers, but the group contributed to today's underperformance. The iShares Nasdaq Biotechnology ETF (IBB 343.48, -7.84) lost 2.2%, but still added 1.8% in March. 

Treasuries posted slim gains after a slow daylong climb. The 10-yr yield slipped two basis points to 1.93%. For the month, the benchmark yield fell seven basis points from 2.00%. 

Today's participation was better than average with roughly 950 million shares changing hands at the NYSE floor. 

Economic data included Chicago PMI, Consumer Confidence, and Case-Shiller 20-City Index: 

• The Conference Board's Consumer Confidence Index increased to 101.3 in March from an upwardly revised 98.8 (from 96.4) while the Briefing.com consensus expected the reading to hold at 96.4 
  • Labor market improvements catalyzed the increase in confidence as initial claims levels returned to their sub-300,000 trend over the past couple of weeks 
• The Chicago PMI increased to 46.3 in March from 45.8 in February while the Briefing.com consensus expected an increase to 52.0 
  • Chicago PMI fell from 59.4 to 45.8 in February, which was immediately blamed on extreme weather conditions. As weather conditions returned to normal in March, manufacturing activities were expected to return to their previous expansionary cycle, but that did not happen 
  • Conditions did improve modestly, but the overall index remained firmly in contraction for a second consecutive month, meaning the pullback that began in February was likely not the result of temporary weather problems 
• The Case-Shiller 20-city Home Price Index for January rose 4.6%, which is what the Briefing.com consensus expected 
  • The previous month's increase was revised to 4.4% from 4.5% 

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while the ADP Employment report for March (Briefing.com consensus 225K) will cross the wires at 8:15 ET. The day's data will be topped off with the 10:00 ET release of the March ISM Index (consensus 52.5) and the Construction Spending report for February (expected -0.3%). 

Global Market

ASIA

Asian Markets Close: Japan’s Nikkei -1.1%; Hong Kong’s Hang Seng +0.2%; China’s Shanghai Composite -1.0%
The Asian equity markets generally finished lower this morning. The Shanghai led off this morning with a 1% fall, which seemed fairly predictable following the PBOC’s announcement to ease property curbs yesterday morning. As such, traders took profits out of the index on the last trading day of the quarter. Another local report out of the Mainland suggested that the policy change could boost new home sales by mid-single-digits by year end. Japan also closed lower, albeit on a rather quiet session with no tier one data released.

Economic data

• Japan
• Feb Vehicle Prod -5.3% vs -9.7% in Feb 2014
• Feb Housing Starts -3.1% vs -6.8% exp
• Aus
• Feb New Home Sales +1.1% vs +1.8%

Equity Markets

• Japan’s Nikkei lost 1.1%. All sectors finished in negative territory with Consumer Staples (-2.2%) and Financials (-1.9%) taking the brunt of the selling pressure.
• Hong Kong’s Hang Seng ended +0.2% higher with gains in the energy sector leading the way. Both CNOOC (+1.5%) and Petro China +0.8% outperformed the benchmark today.
• China’s Shanghai Composite decline 1.0% with some profit taking seen in some of the names that moved higher yesterday. Poly Real Estate closed down 3% on the day, while Bank of China lost 1.8%.
• India’s Sensex ended the day down just 0.1%, outperforming the region. Infosys (-0.6%) closed lower, but managaged to rally 2% off its lows with CLSA target increase.

FX

• USD/CNY -0.1% at 6.1997
• USD/INR -0.3% at 62.4975
• USD/JPY -0.1% at 119.95

EUROPE

Major European indices trade lower across the board with UK’s FTSE (-1.5%) leading the slide. Elsewhere, Greece and the Eurogroup remain at odds with just over a week until April 9, when a EUR460 million payment to the IMF becomes due. It is worth noting Greek Prime Minister Alexis Tsipras is scheduled to visit Russia on April 8.

• Eurozone March CPI -0.1% year-over-year and core CPI +0.6% year-over-year. Both figures matched expectations. Separately, Unemployment Rate ticked down to 11.3% from 11.4% (consensus 11.2%)
• Germany’s February Retail Sales -0.5% month-over-month (consensus -0.7%; prior 2.3%) while the Claimant Count declined by 15,000 (expected -12,000; prior -20,000). Separately, Unemployment Rate ticked down to 6.4% from 6.5% (consensus 6.5%)
• UK’s Q4 GDP was revised up to 0.6% quarter-over-quarter from 0.5% (consensus 0.5%) while Current Account deficit narrowed to GBP25.30 billion from GBP27.70 billion (expected deficit of GBP21.50 billion)
• French February Consumer Spending +0.1% month-over-month (consensus 0.8%; last 0.7%)
• Spain’s February Retail Sales +2.7% year-over-year (consensus 4.0%; last 4.0%)
• Italy’s Monthly Unemployment Rate rose to 12.7% from 12.6% (consensus 12.6%). Separately, March CPI +0.1%, as expected

CLOSING PRICES

• UK’s FTSE: -1.7%
• Germany’s DAX: -0.9%
• France’s CAC: -0.8%
• Spain’s IBEX: + 0.0%
• Portugal’s PSI: -0.9%
• Italy’s MIB Index: -0.4%
• Irish Ovrl Index: -1.3%
• Greece ASE General Index: + 0.4%

Macroeconomic Data

Economic Data

from Briefing.com

• Case-Shiller 20-city Index : 4.6% vs 4.6% (Prior 4.4% - Down)
• Chicago PMI : 46.3 vs 52.0 (Prior 45.8)
• Consumer Confidence : 101.3 vs 96.4 (Prior 98.8 - Up)

CHICAGO PMI

Highlights

• The Chicago PMI increased to 46.3 in March from 45.8 in February. The Briefing.com Consensus expected the index to increase to 52.0.

Key Factors

• In January, the Chicago PMI stood at 59.4. The sudden drop into a significant contraction in February was immediately blamed on extreme weather conditions. As weather conditions returned to normal in March, manufacturing activities were expected to return to their previous expansionary cycle.
• That did not happen.
• Conditions did modestly improved, but the overall index remained firmly in a contraction for a second consecutive month. The pullback that began in February was likely not the result of temporary weather problems.
• Furthermore, the underlying details in March suggest that weakness that started in February may be the beginning of a longer and weaker trend.
• The overall production index increased to 49.3 in March from 44.8 in February, but remains underneath the expansion/contraction threshold. The contraction in both new (42.3 from 42.0) and unfilled (41.9 from 41.1) orders were virtually unchanged. There are not enough unfilled orders on the books to push production back into an expansion without a sizable increase in new orders growth.
• One positive note, employment returned to an expansion, albeit a weak one, as the related index increased to 50.3 from 49.8 in February.

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.

CONSUMER CONFIDENCE

Highlights

• The Conference Board's Consumer Confidence Index increased to 101.3 in March from an upwardly revised 98.8 (from 96.4) in February. The Briefing.com Consensus pegged the Consumer Confidence Index at 96.4.

Key Factors

• Improvements in labor market conditions was the main catalyst for the increase in confidence. That follows an initial claims level that returned to its sub-300,000 trend over the past couple of weeks.
• Unlike the University of Michigan Consumer Sentiment Index, which dropped to 93.0 in March from 95.4 in February, higher gasoline prices and volatility in the equity markets seemed to have little impact on the Consumer Confidence Index this month.
• The Expectations Index increased to 96.0 in March from 90.0 in February. The Present Conditions Index fell to 109.1 from 112.1 in February.
• Improvements in confidence will likely have no bearing on consumption trends. Consumption relies on income growth and not changes in confidence. As long at the labor market situation continues to improve, consumption should follow.

Big Picture

• Consumer sentiment has little influence on consumption. As long as payroll levels continue to expand, the resulting income growth should keep consumption gains steady regardless of the monthly ebbs and flows in sentiment.

Market Internals

NYSE:

Higher Volumes than the day before – 966.7M vs 676.3M 


Decliners outpaced Advancers (adv/dec): 1257 / 1807

New Highs outpaced New Lows (highs/lows): 109 / 33

NASDAQ:

Higher Volumes than the day before – 1793.2M vs 1767.4M

Decliners outpaced Advancers (adv/dec): 1106 / 1669

New Highs outpaced New Lows (highs/lows): 78 / 43

VOLATILITY S&P500 (VIX)

15.29 +0.78 (+5.38%)

The internals is not looking that bearish which justifies the profit taking in the market (with the support of volumes). It does concern me as VIX had a sharp rise in the last hour, but the market in general still remains confidence.    

Technical Updates

DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)

17,776.12 -200.19 (-1.11%)

Volume: 119,467,764 (above average of 99,665,629)

Range: 17,773.02 - 17,965.37

NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)

4,900.89 -46.56 (-0.94%)

Volume: 509,763,013 (above average of 455,378,706)
Range: 4,899.31 - 4,940.87

S&P 500 INDEX (SPX: CBOE)

2,067.89 -18.35 (-0.88%)

Volume: 663,987,000 (above average of 551,144,277)

Range: 2,067.04 - 2,084.05 

I believe market is likely to continue going sideway judging from the technicals. Also, the indices are not willing to go down further their respective support levels which would means more upside in the market.                              

Commodities

Closing Commodities: WTI Oil Falls Back Below $48/Barrel As Iran Talks Extend Longer

• WTI crude oil pulled back below $48/barrel in afternoon trading
• May crude ultimately closed $0.93 lower at $47.72/barrel
• May natural gas lost $0.01 to $2.64/MMBtu
• Copper futures were in the red all day and finished floor trading $0.04 lower at $2.74/lb
• June gold fell $2.30 to $1183.20/oz, while May silver lost $0.08 to $16.60/oz

Energy Price Action

• May crude oil futures fell $0.93/barrel to $47.72/barrel
• May natural gas closed $0.01 lower at $2.64/MMBtu
• RBOB Gasoline closed $0.02 lower at $1.77/gallon
• Heating oil closed $0.02 lower at $1.71/gallon

Agricultural Price Action

• May corn closed $0.17 lower at $3.77/bushel
• May wheat closed $0.17 lower at $5.13/bushel
• May soybeans closed $0.04 higher at $9.73/bushel
• Ethanol closed $0.04 lower at $1.50/gallon
• Sugar #11 closed 0.06 cents lower at 11.93 cents/lb

Highlights:

• Agricultural commodity price action was highlighted by the release of the USDA’s market-moving Annual Prospective Planting and Quarterly Grain Stocks reports (See 12:10 and 12:23 commentary for color)

Metals Price Action

• June gold ended today’s session $2.30 lower at $1183.20/oz
• May silver closed $0.08 lower at $16.60/oz
• May copper closed $0.04 lower at $2.74/lb

Currencies

Dollar up but off of Highs

• The US Dollar Index climbed today, but ended well off of its high of 98.67, rising 0.35% to 98.32. The dollar gained against the euro and antipodean currencies, while the pound sterling rallied against the dollar on an upward revision to Q4 2014 GDP
• EUR/USD fell 0.73% to 1.0745 
  • Eurozone headline and core CPI came out in line with estimates at -0.1% and 0.6%, respectively
• GBP/USD rose 0.32% to 1.4850 
  • Q4 2014 GDP was upwardly revised from 0.5% to 0.6%
  • FY 2014 GDP was revised up from 2.7% to 3.0%
• Aussie and Kiwi declined, as commodity prices dropped and the Shanghai Composite fell 1.02% to 3,747.90
  • AUD/USD: -0.50% to $0.7612
  • NZD/USD: -0.16% to $0.7478
• USD/JPY: -0.12% to 119.92

Bonds

Treasuries End Near Session Highs:

• Treasuries traded higher in a curve-steepening trade, as a weak March Chicago PMI outweighed a strong beat on the March Consumer Confidence number 
• Yield check:
  • 2-yr: -2 bps to 0.57%
  • 5-yr: -3 bps to 1.38%
  • 10-yr: -2 bps to 1.93%
  • 30-yr: -1 bp to 2.54%

• News:
  • The Chicago Purchasing Manager's Index for March badly missed expectations at 46.3 versus a Briefing.com consensus estimate of 52.0 and a reading of 45.8 in February
    • The contractions in both new and unfilled orders were virtually unchanged. There are not enough unfilled orders on the books to push production back into expansion without a sizeable increase in new orders
  • March Consumer Confidence was 101.3, versus the Briefing.com consensus of 96.4 and a prior reading of 98.9
    • An improvement in the labor market was the chief catalyst for the better reading. While the Present Conditions Index fell to 109.1 from 112.1 in February, the Expectations Index rose to 96.0 from 90.0 in February

• Commodities:
  • WTI Crude fell 2.61% to $47.43/bbl
    • The market is awaiting the conclusion of talks between Iran and 6 other nations. An easing of sanctions could add significantly to global oil supply
  • Gold fell 0.13% to $1183.7/troy oz.
  • Copper fell 4 cents (-0.153%) to $2.74/lb.

• Currencies:
  • EUR/USD: -0.71% to $1.0748
  • USD/JPY: -0.11% to 119.93

• Data On Deck for Wednesday: 
  • MBA Mortgage Index for week ending 3/28 (07:00 ET)
  • February ADP Employment Report (08:15 ET)
  • March ISM Index (10:00 ET)
  • February Construction Spending (10:00 ET)
  • Crude Inventories for the week ending 3/28 (10:30 ET)
  • March Auto and Truck Sales (17:00 ET) 
• Fed Speakers:
  • San Francisco Fed President Williams (FOMC voter) moderates panel before the 2015 Financial Markets Conference (08:30 ET)
  • Atlanta Fed President Lockhart (FOMC voter) chairs panel before the 2015 Financial Markets Conference (time TBA)

Treasury Yields:

• 2 Year Note 0.56% -0.02
• 5 Year Note 1.37% -0.04
• 10 Year Note 1.94% -0.02
• 30 Year Bond 2.54% -0.01

2/30 Spread: 198 bps ( +1 ) …  2/10 Spread: 138 bps ( UNCH )

Preview for Wednesday 1 Apr, 2015

Economic Data

Wednesday (1 Apr) :

• MBA Mortgage Index : (Prior 9.5%) 
• ADP Employment Report : 228K (Prior 212K)
• ISM Index : 52.5 (Prior 52.9)
• Construction Spending : -0.2% (Prior -1.1%)
• Crude Inventories : (Prior 8.170M)
• Auto Sales : (Prior 5.2M)
• Truck Sales : (Prior 7.9M)

Earnings Highlights

Wednesday (1 Apr) :
BMO - AYI IKGH MON UNF
AMC - CUB FC PRGS SIGM SPWH

Summary

Market is looking cautious and volatile amid the week of massive economic data. However the market is still staying quite optimistic and it is looking for a catalyst to go higher. Meanwhile crude oil remains unstable due to the nuclear deal with Iran and it seems there will be a decision by Wednesday, together with the inventories report this might really bring in a huge volatility.

Tomorrow we will be expecting the ADP employment report and ISM index. Well it might not give the market much impact but it is still better to be cautious. I think we should see the market bounce back on the next session.

Direction for Wednesday 1 Apr, 2015; Up

2015 Daily Directional Accuracy: 24/46 (52.17%) 
2015 Weekly Directional Accuracy: 6/10 (60.00%)