Wednesday, 29 Apr 2015 - AMC

Dow -74.61 at 18035.53, Nasdaq -31.78 at 5023.64, S&P -7.91 at 2106.85

Technology sector seems to run out of steam. They have been pushing the market higher lately and that could bring some weakness to the market. Anyway I feel that Tuesday was more of a pullback as many were short covering ahead of a big day on Wednesday.

Watch out for the GDP number and FOMC meeting. That is definitely giving the market more volatility. Wednesday is crucial as it should determine if the market would see a bullish breakout or correction.

Direction for Wednesday 29 Apr, 2015; Abstain

As expected from the FOMC meeting session, market was pretty volatile. But I don't really see much of a reaction from the market. GDP numbers was still disappointing and this might push the Fed to hold their decision in raising the interest rate. Meanwhile the Dollar Index suffered a huge downside throughout the week and influencing crude oil to rally as inventories report shows a possibility of slowdown in oil production.                                          

Market Summary

Industry Watch

Strong: Energy, Financials

Weak: Consumer Discretionary, Consumer Staples, Health Care, Industrials, Utilities

Other Market Moving Factor:

• Advance Q1 GDP misses estimates (0.2%; Briefing.com consensus 1.0%)
• Dollar Index on track for sixth consecutive decline
• FOMC policy statement expected at 14:00 ET

[BRIEFING.COM] The stock market ended the midweek session on a modestly lower note. The S&P 500 shed 0.4% while the Nasdaq Composite (-0.6%) underperformed throughout the session. 

Equity indices struggled in the early going after the advance reading of Q1 GDP (0.2%; Briefing.com consensus 1.0%) missed expectations. However, that disappointment was partially offset by the FOMC directive, which did not stir concerns of a rate hike taking place in the near term. Instead, the FOMC reiterated that the current policy stance will remain appropriate until there is reasonable confidence among members that inflation will move back to the 2.0% objective. 

Seven sectors registered losses while energy (+0.7%) outperformed throughout the session thanks to a 2.6% gain in crude oil, which settled at $58.52/bbl. The energy component was boosted by a storage report that showed a smaller than expected inventory build while dollar weakness also factored into the move higher. The Dollar Index (95.22, -0.88) fell 0.9%, registering its sixth consecutive decline. Most notably, the euro (1.1111) added 1.3% against the dollar. 

On the flip side, countercyclical consumer staples (-0.8%) and health care (-0.8%) ended at the bottom of the leaderboard, but health care managed to cut its loss in half thanks to modest gains in the biotech space. The iShares Nasdaq Biotechnology ETF (IBB 344.81, +0.31) added 0.1% to snap its three-day skid, but could not close above its 50-day moving average (348.51), which served as resistance for the second day in a row. Meanwhile, the broader health care sector slumped under the weight of Express Scripts (ESRX 84.79, -2.71) and Humana (HUM 168.05, -13.06) after both reported earnings. Express Scripts reported in-line and narrowed its guidance while Humana missed expectations. 

Elsewhere, the technology sector (-0.5%) ended a bit behind the broader market, but that masked a late afternoon spike in Salesforce.com (CRM 74.65, +7.76) after Bloomberg reported the company has hired bankers to discuss potential offers. As for high-beta chipmakers, the group struggled with the PHLX Semiconductor Index losing 0.6%. 

Similarly, another high-beta group—transport stocks—could not catch up to the broader market. The Dow Jones Transportation Average lost 1.2% with Norfolk Southern (NSC 103.18, -1.19) falling 1.1% after reporting in-line with its warning. However, airline stocks led the group lower amid rising fuel prices with Delta Air Lines (DAL 45.03, -1.17) sliding 2.5%. 

Treasuries retreated throughout the day, but they trimmed their losses during afternoon action. The 10-yr note ended essentially where it traded just ahead of the FOMC Statement with the benchmark yield higher by four basis points at 2.05%. 

Today's participation was ahead of recent averages with more than 845 million shares changing hands at the NYSE floor.

Economic data included advance Q1 GDP, Pending Home Sales, and MBA Mortgage Index: 

• According to the advance estimate, Q1 2015 GDP increased 0.2% after increasing 2.2% in Q4 2014 while the Briefing.com consensus expected an increase of 1.0% 
  • Even more disappointing, the downside miss on the top-line growth number masked an even worse overall trend. If not for an increase in inventories, GDP would have been negative in the first quarter. Real final sales declined 0.5% in the first quarter after increasing 2.3% in Q4 2014. That was the worst quarter since real final sales declined 1.0% in Q1 2014. 
  • Personal consumption expenditures increased 1.9% in the first quarter, down from a 4.4% increase in Q4 2014 
  • Goods spending increased a modest 0.2%, down from 4.8% in the fourth quarter 
  • Services spending increased 2.8% after increasing 4.3% in the fourth quarter 
• Pending home sales for March rose 1.1% while the Briefing.com consensus expected an increase of 1.2% 
• The weekly MBA Mortgage Index fell 2.3% to follow last week's 2.3% increase 

Tomorrow, weekly Initial Claims (Briefing.com consensus 290K), Personal Income/Spending data for March, and Q1 Employment Cost Index (consensus 0.6%) will be released at 8:30 ET while the Chicago PMI report for April (expected 50.0) will cross the wires at 9:45 ET. 

Global Market

ASIA

Asian Markets Close: Japan’s Nikkei closed for holiday; Hong Kong’s Hang Seng -0.2%; China’s Shanghai Composite unch
Markets in the Asia-Pacific region were mostly lower on Wednesday, led by Indonesia (-2.6%) and Australia (-1.9%). The former was pinched by foreign-led selling and weakness in bank stocks, according to reports, while the latter was reportedly hit by concerns that Australia’s central bank may be done with its easing cycle. China’s Shanghai Composite had a roller-coaster session and ended the day flat.

Economic data

• South Korea
• May Manufacturing BSI Index 76 (prior 76)
• New Zealand
• April ANZ Business Confidence 30.2% (prior 35.8%)
• March Trade Balance NZD 631 mln (expected NZD 341 mln; prior NZD 50 mln)
• Exports NZD 4.93 bln (expected NZD 4.40 bln; prior NZD 3.92 bln)
• Imports NZD 4.30 bln (expected NZD 4.06 bln; prior NZD 3.87 bln)

Equity Markets

• Japan’s Nikkei was closed in observance of Showa Day
• Hong Kong’s Hang Seng declined 0.2%. Most sectors finished lower with the energy sector (-1.3%) leading the way. The technology sector (+1.5%) was the best-performing area on Wednesday. Individual standouts included Hang Lung Properties (+7.8%), New World Development Co (+2.5%), and China Resources Power Holdings (+2.1%). Wharf Holdings Ltd (-5.7%), China Shenhua Energy (-2.4%), and China Mengniu Dairy (-2.3%) paced the decliners. Out of the 50 index members, 23 ended higher, 26 finished lower, and 1 was unchanged.
• China’s Shanghai Composite overcame early losses and finished unchanged amid reports that local government debt could possibly be used as collateral by commercial banks seeking liquidity from the People’s Bank of China. The news overshadowed some disappointing earnings results from Agricultural Bank of China and Bank of Communications, according to a CNBC report.
• India’s Sensex declined 0.6% and finished near its low for the day. The weakest link was the communications sector (-3.3%) followed by the energy (-1.2%) and basic materials (-1.0%) sectors. Bharti Airtel (-3.3%), ITC Ltd (-2.8%), and Sesa Sterlite (-2.3%) were the worst-performing issues. Axis Bank (+3.2%), GAIL India (+2.2%), and Wipro (+1.8%) led individual gainers.
• Australia’s S&P/ASX 200 declined 1.9% in a broad-based retreat that was led by the health care (-2.6%), financial (-2.3%), and information technology (-2.2%) sectors. Reportedly, a stronger Australian Dollar and thoughts that the RBA’s easing cycle may have run its course weighed on sentiment.
• Regional advancers: None
• Regional decliners: Taiwan -1.0%, South Korea -0.2%, Singapore -0.2%, Malaysia -0.7%, Thailand -0.6%, Indonesia -2.6%, Philippines -0.8%, Vietnam -0.6%

FX

• USD/CNY -0.1% at 6.2002
• USD/INR +0.4% at 63.326
• USD/JPY +0.5% at 119.33

EUROPE

Major European indices trade in negative territory with Germany’s DAX (-1.5%) leading the pullback. Elsewhere, Greece remains in a precarious liquidity position with the European Central Bank increasing the Emergency Liquidity Assistance allowance for Greek banks by EUR1.40 billion to EUR76.90 billion.

• Eurozone April Business and Consumer Survey ticked down to 103.7 from 103.9 (expected 103.9).
• UK’s April CBI Distributive Trades Survey fell to 12 from 18 (consensus 25) while April Nationwide HPI rose 1.0% month-over-month (expected 0.2%; prior 0.1%)
• Spain’s March Retail Sales rose 2.8% year-over-year (last 2.5%)
• Italy’s April Business Confidence rose to 104.1 from 103.7 (expected 103.7) while Consumer Confidence slipped to 108.2 from 110.7 (consensus 110.5)

Closing Prices

• UK’s FTSE: -1.2%
• Germany’s DAX: -3.2%
• France’s CAC: -2.6%
• Spain’s IBEX: -1.9%
• Portugal’s PSI: -1.4%
• Italy’s MIB Index: -2.3%
• Irish Ovrl Index: -3.1%
• Greece ASE General Index: -1.0%

Macroeconomic Data

Economic Data

from Briefing.com

• MBA Mortgage Index : -2.3% (Prior 2.3%) 
• GDP-Adv. : 0.2% vs 1.0% (Prior 2.2%)
• Chain Deflator-Adv. : -0.1% vs 0.5% (Prior 0.1%)
• Pending Home Sales : 1.1% vs 1.2% (Prior 3.6% - Up)
• Crude Inventories : 1.910M (Prior 5.315M)
• FOMC Rate Decision : 0.25% vs 0.25% (Prior 0.25%)

ADVANCE GDP

Highlights

• According to the advance estimate, Q1 2015 GDP increased 0.2% after increasing 2.2% in Q4 2014. The Briefing.com Consensus expected first quarter GDP to increase 1.0%.
• Even more disappointing, the downside miss on the topline growth number masked an even worse overall trend. If not for an increase in inventories, GDP would have been negative in the first quarter. Real final sales declined 0.5% in the first quarter after increasing 2.3% in Q4 2014. That was the worst quarter since real final sales declined 1.0% in Q1 2014.

Key Factors

• There is going to be a lot of talk that weather conditions played a major role in the first quarter downturn. We, however, don’t believe it.
• Personal consumption expenditures increased 1.9% in the first quarter, down from a 4.4% increase in Q4 2014. Goods spending increased a modest 0.2%, down from 4.8% in the fourth quarter. Services spending increased 2.8% after increasing 4.3% in the fourth quarter.
• The entire increase in consumption spending was the result of lower prices. Nominal consumption declined by nearly $2.0 bln in the fourth quarter. That was the first decline in nominal consumption spending since Q2 2009.
• Weather factors shouldn’t have reduced nominal spending considering the even worse weather of Q1 2014 resulted in a nominal increase of $75.2 bln.
• Fixed investment spending declined 2.5% in Q1 2015 after increasing 4.5% in Q4 2014.
• Nonresidential investment declined 3.4% after increasing 4.7% in Q4 2014. The entire decline in business investment came from a 23.1% decline in structures spending. While the nonresidential construction spending data will be unavailable until tomorrow, most of that decline is likely the result of lower energy prices reducing mining construction.
• Equipment spending increased 0.1% in Q1 2015 after increasing 0.6% in Q4 2014. That was the worst two quarters of equipment demand since the Great Recession.
• Intellectual property products increased 7.8% in the first quarter, down from a 10.3% increase in Q4 2014.
• Residential investment increased 1.3%, down from a 3.8% increase in the fourth quarter.
• The trade deficit widened to $522.1 bln in Q1 2015 from $471.4 bln in Q4 2014. That increase reduced first quarter GDP growth by 1.25 percentage points. Export levels decreased 7.2% in the first quarter after increasing 4.5% in the fourth quarter. Imports increased 1.8% after increasing 10.4% in the fourth quarter.
• Government spending declined 0.8% in Q1 2015 after declining 1.9% in the fourth quarter. Federal government spending increased 0.3% and state and local spending declined 1.5%.

Big Picture

• That was the worst economic performance since the contraction in Q1 2014.

Market Internals

NYSE:

Higher Volumes than the day before – 868.6M vs 786.6M 


Decliners outpaced Advancers (adv/dec): 1019 / 2032

New Highs outpaced New Lows (highs/lows): 45 / 24

NASDAQ:

Lower Volumes than the day before – 1857.9M vs 2020.8M

Decliners outpaced Advancers (adv/dec): 887 / 1872

New Highs outpaced New Lows (highs/lows): 63 / 55

VOLATILITY S&P500 (VIX)
13.39 +0.98 (+7.90%)

I think internals are looking more bearish still with the New Lows increasing and New Highs dropping. VIX is indicating a flat session but I reckon we should see it ticks higher.

Technical Updates

DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)

18,035.53 -74.61 (-0.41%)

Volume: 102,076,849 (above average of 100,719,396)
Range: 17,953.69 - 18,096.46

NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)

5,023.64 -31.78 (-0.63%)
Volume: 444.0M (above average of 441,369,643)

Range: 4,999.83 - 5,053.85

S&P 500 INDEX (SPX: CBOE)

2,106.85 -7.91 (-0.37%)

Volume: 550.8M (above average of 543,560,875)

Range: 2,097.41 - 2,113.65 

From the intra-day session, the 3 indices are forming a double top pattern. Maybe we should start to see more downside soon. DOW and S&P are still at their resistance levels while NASDAQ is sitting on its support level.  

Commodities

Closing Commodities: WTI Oil Ends Higher, But Below $59/Barrel, Nat Gas Rises 3%

• Commodities had a number of catalysts today, including industry data, Fed data and morning econ data
• WTI crude oil futures were sitting near the day’s high, at the time, just ahead of the weekly EIA storage data
• Following the data, WTI oil extended gains above $59/barrel, but closed the day +$1.47 at $58.52/barrel
• Natural gas futures rallied 3% today to end at $2.60/MMBtu
• Precious metals sold off today, extending losses post-Fed
• June gold ended -$3.80 at $1210/oz, while May silver +$0.07 at $16.55/oz

Energy

• June crude oil futures rose $1.47/barrel to $58.52/barrel
• May natural gas closed $0.07 higher (+2.77%) at $2.60/MMBtu
• RBOB Gasoline closed $0.01 higher at $2.01/gallon
• Heating oil closed $0.03 higher at $1.95/gallon

Agriculture

• May corn closed $0.02 higher to $3.64/bushel
• July wheat closed $0.08 higher to $4.84/bushel
• July soybeans closed $0.12 higher at $9.89/bushel
• Ethanol closed $0.01 higher at $1.62/gallon
• Sugar #11 closed 0.08 cents lower to 13.09 cents/lb

Metals

• June gold ended today’s session $3.80 lower to $1210.00/oz
• May silver closed $0.07 higher at $16.68/oz
• July copper closed $0.02 higher to $2.80/lb

Currencies

Dollar Declines

• The dollar declined today against the euro, pound sterling, and swissy
• The main theme in the financial markets was higher yields, both in Europe and the United States. The German Bund yield rose 12 basis points to 0.28%, and this rise made owning euro much less unattractive
  • EUR/USD:  +1.23% to 1.1106
  • The situation with respect to Greece's debt crisis actually deteriorated and the Greek 10-year yield rose 40 basis points to 11.23%
• Dollar/yen tested made a 1-week low before ripping higher on the FOMC statement, finishing up 0.17% to 119.03
• AUD/USD rallied 0.39% to $0.8038
• NZD/USD fell 0.25% to $0.7710
• USD/CAD fell 0.18% to 1.2011
• GBP/USD made a fresh 7-week high, up 0.63% to $1.5430
  • The U.K.'s Nationwide House price index rose more than expected, up 5.2% y/y in April versus 5.1% in March

Bonds

Treasuries Decline Sharply

• Treasuries fell today in a curve-steepening trade. A weak GDP number and a strong 7-year note auction failed to generate demand for governments as oil prices scooted higher and European sovereign debt fell sharply
• Yield check:
  • 2-yr: unch at 0.56%
  • 5-yr: +5 bps to 1.43%
  • 10-yr: +4 bps to 2.05%
  • 30-yr: +5 bps to 2.75%

• News:
  • According to the advance estimate, Q1 2015 GDP increased 0.2% after increasing 2.2% in Q4 2014. The Briefing.com Consensus expected first quarter GDP to increase 1.0%
    • Real final sales declined 0.5% in the first quarter after increasing 2.3% in Q4 2014. That was the worst quarter since real final sales declined 1.0% in Q1 2014
    • Fixed investment spending declined 2.5% in Q1 2015 after increasing 4.5% in Q4 2014
  • The MBA Mortgage Index for the week ending 4/25 fell 2.3% versus a 2.3% rise in the prior week
  • The National Association of Realtors' pending home sales showed its strongest reading since 2013, rising 1.1% in March. This rise still fell short of expectations
  • The Treasury auctioned off $29 billion of 7-year notes and it was taken well by the market:
    • High yield: 1.820%
    • Bid-to-cover: 2.44
    • Indirect bid: 54.1%
    • Direct bid: 12.8%
  • The FOMC statement made no mention of the calendar and that was a change from past statements where the statement mentioned specific meetings where it may or may not have been appropriate to raise rates. This omission underlines the "data-dependency" theme
    • Markets were barely changed after the announcement, although the dollar was slightly higher

• Commodities:
  • WTI Crude: +2.61% to $58.55/bbl
  • Gold: -0.76% to $1,204.70/troy oz.
  • Copper: +0.02% to $2.787/lb.

• Currencies:
  • EUR/USD: +1.27% to $1.1112
  • USD/JPY: +0.18% to 119.03
  • U.S. Dollar Index: -0.90% to 95.22

• Data Out Thursday:
  • Initial Jobless Claims for the week ending 4/25 and Continuing Claims for the week ending 4/18 (08:30 ET)
  • March Personal Income and Personal Spending (08:30 ET)
  • March PCE Prices – Core (08:30 ET)
  • Q1 Employment Cost Index (08:30 ET)
  • April Chicago PMI (09:45 ET)
  • Natural Gas Inventories for the week ending 4/25 (10:30 ET)

Treasury Yields:

• 2 Year Note 0.56% UNCH
• 5 Year Note 1.43% +0.04
• 10 Year Note 2.06% +0.06
• 30 Year Bond 2.76% +0.08

2/30 Spread: 220 bps ( +8 ) …  2/10 Spread: 150 bps ( +6 )

Preview for Thursday 30 Apr, 2015

Economic Data

Thursday (30 Apr) :

• Initial Claims : 290K (Prior 295K)
• Continuing Claims : 2318K (Prior 2325K)
• Personal Income : 0.2% (Prior 0.4%) 
• Personal Spending : 0.5% (Prior 0.1%)
• PCE Prices - Core : 0.2% (Prior 0.1%)
• Employment Cost Index : 0.6% (Prior 0.6%)
• Chicago PMI : 50.0 (Prior 46.3)
• Natural Gas Inventories : (Prior 90 bcf)

Earnings Highlights

Thursday (30 Apr) :
BMO - ACIWACOR APD ARG ALKS ALLE AB ANR AMT ABC AIT AWI ARW AAWW ADP AVP BLL BCE BZH BDC BKCC BOFI BWA BG CCMP CRR CAH CRS CSH CTRX CDK CELG CLDX GTLS CI CWEI CME CCE CL COMM COP CTCM CVI UAN CVRR CY DLPH DBD DIN UFS ERJ EME ENDP ECYT NPO EPD EXLS STAY XOMFSS FIS FMS FCN GK GLOP GNRC THRM GEO GNC GG GOV GPX GTI HEES HAR HHS HST HUN IDA IMAX INCY INGR I SNAK IVZ ITG IRMD IRDM IRM ITC KVHI LLL LANC LBY LKQ LPLA MGLN MPC VAC MMC MLM MTRN MD MFA MVIS MINI MOSMPLX MSCI MYL NAP NMM NTCT NBIX NYT NCT NI NOK NVO OAK ODFL OMG ORN PCRX PBF PBFX PWE PCYC PSX PSXP PF PES PBI POT QLTI PWR RDWR RGS ROK RDS.A RGLD RYL SBH SCG SEE SNMX SQBG SHPG SKYS SNE SPB SMP STRZA STFC STM TLMR TASR TDY TFX TEVA TWC TKR TWI TREE UPL VLY VNTV VGR VIAB VVI VICL VA WLT WMAR WST WILN WRLD WWE XEL XYL ZMH
AMC - ARAY ADUS AEM LNT AIMC AIG AVD AIV ATR ATHN ADNC AXTI BMRN BCOR EPAY BYD BFAM BCOV BRKS BMTC BVN CAP CLMS CALD CPT CATM CEMP CENX CHSP CLD COHU CXP COLM CPSI CTCT CTRL CROX CUBE CMLS DCT DGI DWA DRC EMN LOCO EGO ELLI EEP EXXI EVHC EXEL EXPE EZPW FRGI FEYE FBP FFBC FPO FSLR FLT FLS FLR FBHS G GERN GILD GSIT HABT THG HCI HLS HME HTCH IMMR PODD IART ISBC XXIA JDSU JUNO KRG LEG LLNW LNKD LYV LRE FISH MTZ MATW MXL MGRC MITK MOBL MRH MRC NFG NKTR NR NTRI OMCL ONTY PE PCCC PDFS PKI PXLW POL PRAA PKT PSA QLGC RGC RJET ROVI RKUS SCSC SQI SGEN SEM SKUL SKYW SWKS SPF SPWR SPN SRDX SYNC TNDM TSYS TNAV TS TER TSRO TXTR TMST TRMB TUES UIL UTI VR V WWWW WU GB INT WSFS YRCW ZFGN

Summary

With month of May approaching, I feel that there should be some profit taking but perhaps we might see some last push for the market to go higher. From the FOMC meeting, the Fed is still hoping to see the economy picks up before raising the rates. There are some more economic data out tomorrow that could determine the Fed's decision. Watch out for that.

Direction for Thursday 30 Apr, 2015; Down

2015 Daily Directional Accuracy: 31/61 (50.82%) 
2015 Weekly Directional Accuracy: 8/14 (57.14%)