Dow -53.72 at 18232.02, Nasdaq -1.43 at 5089.36, S&P -4.76 at 2126.05
I can definitely feel market is over its top now. Friday session shows the lack of commitment from the bulls as there were a lot of profit taking as market could not overcome the resistance level. As we approaches the last week of May, we still do not see a sell in May.There is too much uncertainty in the market right now. Market does not look convincing to me on the rally. Neither it is looking like it is going to sell off. I think the market is on the tenterhooks now. I suppose the Fed Chair Yellen speech tomorrow might give us some more hints on where the market may head.
Direction for Friday 22 May, 2015; Down
Market Summary
Industry Watch
Strong: Consumer Discretionary, Technology, Materials
Weak: Consumer Staples, Energy, Health Care, Utilities
Other Market Moving Factor:
- Core CPI (+0.3%; Briefing.com consensus +0.2%) shows largest increase since January 2013
- S&P 500 enters Friday +0.4% for the week
Equity indices began the day with slim losses after the Core CPI for April (+0.3%; Briefing.com consensus 0.2%) showed the largest monthly increase since January 2013. The hotter than expected reading invited speculation that an uptick in inflation could provide ammunition for an argument favoring a rate hike in the near term, which kept a lid on equities today.
Furthermore, Fed Chair Janet Yellen spoke at the Greater Providence Chamber of Commerce and reiterated that the central bank is ready to begin raising rates later this year. Once again, Ms. Yellen stated that in order to begin normalizing policy, the Fed needs to see continued improvements in labor market conditions and there needs to be reasonable confidence that inflation will move back toward the 2.0% target over the medium term.
Treasuries hit their session lows after Ms. Yellen's speech crossed the wires, but they returned to their intraday levels shortly thereafter. The 10-yr note settled in the middle of its intraday range, pushing the benchmark yield higher by two basis points to 2.21%.
Nine sectors ended the day in negative territory while technology (+0.02%) avoided a lower close by a hair and contributed to the daylong outperformance of the Nasdaq Composite. Shares of Apple (AAPL 132.54, +1.15) climbed 0.9%, underpinning the move, while Hewlett-Packard (HPQ 34.76, +0.93) gained 2.8% after reporting a one-cent beat and guiding Q3 earnings below consensus. Most other large cap sector members registered losses, but high-beta chipmakers offset some of that weakness with the PHLX Semiconductor Index adding 0.2%.
Elsewhere, industrials (-0.4%) lagged throughout the day with transport stocks responsible for the weakness. As a result, the Dow Jones Transportation Average fell 0.8%, extending this week's decline to 2.3%. The underperformance among transport names overshadowed a 4.3% spike in the shares of Deere (DE 93.33, +3.87) after the company beat bottom-line estimates on light revenue.
Similar to industrials, the energy sector (-0.4%) lagged throughout the day. Crude oil kept the sector under pressure, falling 1.7% to $59.66/bbl. For the week, WTI crude lost 1.5% while the energy sector fell 0.8%.
True to recent form, today's participation was well below average with just 604 million shares changing hands at the NYSE floor, which represented the lowest total observed so far in 2015.
Economic data was limited to the Consumer Price Index:
- The CPI index increased an in-line 0.1% in April after increasing 0.2% in March
- After two consecutive months of increases, energy prices again turned negative in April with total energy prices falling 1.3% after increasing 1.1% in March
- Food prices were flat in April after declining 0.2% in March
- Excluding food and energy, core CPI increased 0.3% in April after increasing 0.2% in March while the consensus expected an increase of 0.2%
- That was the largest monthly increase in core prices since a 0.3% gain in January 2013
On Tuesday, April Durable Orders (Briefing.com consensus -0.6%) will be reported at 8:30 ET while the Case-Shiller 20-city Index for March (consensus 4.6%) and March FHFA Housing Price Index will both be released at 9:00 ET. The day's data will be topped off with the 10:00 ET release of April New Home Sales (consensus 510K) and the Consumer Confidence report for May (consensus 94.0).
- Nasdaq Composite +7.5% YTD
- Russell 2000 +4.0% YTD
- S&P 500 +3.3% YTD
- Dow Jones Industrial Average +2.3% YTD
The stock market kicked off the trading week on an upbeat note. The Nasdaq Composite led the way, climbing 0.6%, while the Dow Jones Industrial Average (+0.1%) and S&P 500 (+0.3%) underperformed, but still registered new record closing highs. The first session of the week featured a range-bound opening hour that was followed by a steady advance. Heavily-weighted financials (+0.5%) and health care (+0.5%) displayed relative strength from the start while another influential group—technology (+0.4%)—climbed ahead of the market during the early afternoon.
The major averages ended the Tuesday session on an unchanged note after spending the entire day near their flat lines. The S&P 500 settled lower by 0.1% while the Dow Jones Industrial Average (+0.1%) outperformed slightly, edging up to another record closing high. Overall, the Tuesday session was a snoozer that saw the benchmark index bounce inside a five-point range that was expanded to nine points by the close. The index was able to set a fresh intraday record high at 2,133.02 during the afternoon, but returned near its session low by the close. For the second day in a row, heavily-weighted health care (+0.5%) and financials (+0.7%) outperformed throughout the day and kept the benchmark index from dipping too far below its flat line. The health care sector outperformed even as biotechnology struggled to keep pace with the iShares Nasdaq Biotechnology ETF (IBB 360.60, +0.30) adding just 0.1%.
The market finished the midweek session on a flat note. The S&P 500 shed 0.1%, but still marked a fresh intraday record high at 2,134.72 while the Nasdaq Composite (unch) outperformed. Equity indices spent the first half of the session near their flat lines with the S&P 500 maintaining a seven-point range that was violated to the upside during afternoon action once the Federal Open Market Committee released the minutes from its April policy meeting. The index could not hold its afternoon gain and returned to the flat line by the close. Above all, the minutes revealed that some participants believed that the weakness observed in the first quarter could extend into Q2 with many officials characterizing a rate hike in June as "unlikely." However, the minutes did not rule out a near-term rate hike in its entirety. Treasuries retreated immediately following the release, but they returned to their afternoon levels shortly thereafter. The 10-yr note settled near its high with the benchmark yield slipping four basis points to 2.25%.
Equity indices posted modest gain on Thursday, but the trading day was very quiet once again. The S&P 500 added 0.2% and settled at a new record high while the Nasdaq Composite (+0.4%) outperformed. The market spent the initial minutes of the session near its flat line, but climbed to highs after the Existing Home Sales report for April (5.04 million; Briefing.com consensus 5.24 million) and the May Philadelphia Fed Survey ( 6.7; Briefing.com consensus 8.0) missed estimates. The ensuing advance was accompanied by a rally in Treasuries, suggesting increased expectations that the Federal Reserve will maintain its current dovish stance. Treasuries continued climbing into the afternoon (10-yr yield -6 bps to 2.19%) while the major averages spent the day near their late-morning highs.
DOW
NASDAQ
S&P
Global Market
ASIA
Asian Markets Close: Japan’s Nikkei +0.3%; Hong Kong’s Hang Seng +1.7%; China’s Shanghai Composite +2.8%
The good times were rolling for most of the markets in the Asia-Pacific region on Friday, which followed the lead of the Shanghai Composite (+2.8%) to further gains. With Friday’s rally effort, the Shanghai Composite increased 8.1% for the week. The Nikkei for its part closed at a 15-year high on Friday as the Bank of Japan left its main policy rate unchanged at 0.10%.
Economic data
- Japan
- Bank of Japan leaves main policy rate unchanged at 0.10% as expected
- May Reuters Tankan Index 13 (prior 12)
Equity Markets
- Japan’s Nikkei increased 0.3% and finished at a 15-year high. The modest gain was underpinned by strength in the energy (+1.9%) and basic materials (+1.1%) sectors and followed the BOJ’s decision to leave its main policy rate unchanged at 0.10%. Individual standouts included Tokai Carbon Co (+4.3%), NH Foods (+3.8%), and Sumco Corp (+3.6%). MS&AD Insurance Group (-2.8%) and Pioneer Corp (-2.2%) were the worst-performing issues. Out of 225 index members, 122 ended higher, 91 finished lower, and 12 were unchanged. For the week, the Nikkei increased 2.7%.
- Hong Kong’s Hang Seng jumped 1.7%, which saved it from having a losing week. Gains were paced by the energy (+2.0%), financial (+1.9%), and consumer cyclical (+1.8%) sectors. Belle Intl. (+12.6%), BOC Hong Kong Holdings (+8.2%), and Ping An Insurance (+5.5%) led all gainers. Lenovo Group (-4.4%), which reported its earnings, MTR Corp (-2.5%), and Li & Fung Ltd. (-2.3%) were the biggest laggards. Out of the 50 index members, 45 ended higher and 5 finished lower. For the week, the Hang Seng gained 0.6%.
- China’s Shanghai Composite surged 2.8% and finished at its highs for the day in another momentum-based rally. The financial sector (+3.3%) was an influential leader in the Chinese market on Friday along with the basic materials (+3.1%) and energy (+3.3%) sectors. For the week, the Shanghai Composite increased 8.1%.
- India’s Sensex increased 0.5%, led by the technology (+1.1%), industrial (+0.9%), and energy (+0.8%) sectors. Top gainers included Housing Development Finance Corp (+2.6%), Tata Consultancy Services (+2.4%), and Sun Pharmaceutical (+1.9%). Hindalco Industries (-1.6%) and Vedanta (-1.3%) were the worst-performing issues and the only stocks to lose more than 1.0%. For the week, the Sensex was up 2.3%.
- Australia’s S&P/ASX 200 ended up 0.04%, surrendering the bulk of a 0.5% gain registered shortly after the start of trading. The gold (+2.0%), energy (+1.9%), and REIT (+1.1%) sectors helped the index stay above the unchanged mark. For the week, the S&P/ASX 200 declined 1.2%.
- Regional advancers: Taiwan +0.6%, South Korea +1.1%, Singapore +0.3%, Indonesia +0.04%, Vietnam +1.7%
- Regional decliners: Malaysia -0.4%, Thailand -0.2%, Philippines -0.3%
FX
- USD/CNY +0.01% at 6.1974
- USD/INR -0.1% at 63.526
- USD/JPY -0.2% at 120.84
EUROPE
Major European indices trade mostly lower while UK’s FTSE (+0.5%) outperforms.
- Germany’s Q1 GDP was left unrevised at 0.3% quarter-over-quarter, as expected, while the year-over-year held at 1.1% (consensus 1.0%). Separately, Ifo Business Climate Index ticked down to 108.5 from 108.6 (expected 108.3) as Business Expectations declined to 103.0 from 103.4 (expected 103.1) while Current Assessment improved to 114.3 from 114.0 (consensus 113.5)
- UK’s April Public Sector Net Borrowing GBP6.04 billion (expected GBP7.80 billion; prior GBP6.06 billion)
- France’s Business Survey rose to 103 from 102 (expected 101)
- Italy’s March Retail Sales -0.1% month-over-month (expected 0.2%; last -0.1%) while March Industrial New Orders -0.3% month-over-month (consensus 0.7%; prior 0.8%)
Closing Prices
- UK’s FTSE: + 0.3%
- Germany’s DAX: -0.4%
- France’s CAC: -0.1%
- Spain’s IBEX: -0.4%
- Portugal’s PSI: 0.0%
- Italy’s MIB Index: + 0.2%
- Irish Ovrl Index: + 0.2%
- Greece ASE General Index: -0.7%
Macroeconomic Data
Economic Data
from Briefing.com
- CPI : 0.1% vs 0.1% (Prior 0.2%)
- Core CPI : 0.3% vs 0.2% (Prior 0.2%)
CPI
Highlights
- The CPI index increased 0.1% in April after increasing 0.2% in March. The Briefing.com Consensus expected the CPI index to increase 0.1%.
- Excluding food and energy, core CPI increased 0.3% in April after increasing 0.2% in March. The consensus expected these prices to increase 0.2%.
Key Factors
- After two consecutive months of increases, energy prices again turned negative in April. Total energy prices fell 1.3% after increasing 1.1% in March. A significant portion of the decline was the result of a 1.7% decrease in gasoline prices. Fuel oil (-8.5%) and natural gas utilities prices (-2.6%) also contributed to the pullback in energy costs.
- Food prices were flat in April after declining 0.2% in March.
- That was the largest monthly increase in core prices since a 0.3% gain in January 2013.
- There were no outliers in the core CPI data. Price growth was fairly universal across all consumption sectors. That included a 0.3% increase in shelter costs and a 0.7% increase in medical care prices, which was the largest monthly increase since January 2007.
- Core price growth is unlikely to be sustainable at this level without a change in income growth trends. Lackluster income growth will keep downward pressure on price gains.
Big Picture
- CPI growth trends are well below the Fed's target level, and there are very few underlying pressures that would cause these trends to suddenly change.
Market Internals
NYSE:
Lower Volumes than the day before – 593.3M vs 708.0M
Decliners outpaced Advancers (adv/dec): 1100 / 1930
New Highs outpaced New Lows (highs/lows): 77 / 52
NASDAQ:
Lower Volumes than the day before – 1530.3M vs 1671.5M
Decliners outpaced Advancers (adv/dec): 1194 / 1583
New Highs outpaced New Lows (highs/lows): 80 / 48
VOLATILITY S&P500 (VIX)
12.13 +0.02 (+0.17%)
Internals was not really pointing to any bullishness or bearishness but the volume was significantly weaker. This is suggesting the lack of participation as market has no clear leadership. VIX formed a reversal candlestick pattern and I suppose we should see it move higher next week.
Technical Updates
18,232.02 -53.72 (-0.29%)
Volume: 78,885,066 (below average of 99,864,644)
Range: 18,217.14 - 18,286.87
Range: 18,217.14 - 18,286.87
5,089.36 -1.43 (-0.03%)
Volume: 363,368,424 (below average of 435,807,325)
Volume: 363,368,424 (below average of 435,807,325)
Range: 5,085.19 - 5,103.84
S&P 500 INDEX (SPX: CBOE)
2,126.06 -4.96 (-0.22%)
Volume: 423,419,000 (below average of 533,089,708)
Range: 2,126.06 - 2,132.15
Both DOW and S&P went below their support and trend respectively. I am thinking market is about to take a reversal. From the looks of MACD, it seems that the bullish momentum is running out of steam too. Possibility of market moving into downside is quite high.
Commodities
Closing Commodities: Commodities Continue To Feel Pressure On Strong Dollar IndexCommodities
- CPI data really pushed the dollar index higher this morning and caused a real sell off in commodities.
- The dollar index continued to trade higher today, mostly sitting near the day’s high all session, which continued to weigh on commodities.
- July WTI crude oil closed $1.04 lower to $59.66/barrel, while June natural gas lost $0.07 to $2.88/MMBtu.
- Metals provided less action today with June gold closing floor trading $0.30 higher at $1204.20/oz and July silver ending $0.09 lower to $17.05/oz.
- July cooper lost $0.04 to end today’s session at $2.81/lb.
Energy
- July crude oil futures fell $1.04 to $59.66/barrel
- June natural gas closed $0.07 lower at $2.88/MMBtu
- RBOB Gasoline closed $0.04 lower to $2.04/gallon
- Heating oil futures closed $0.03 lower at $1.96/gallon
Agriculture
- July corn closed $0.04 lower to $3.60/bushel
- July wheat closed $0.05 lower to $5.15/bushel
- July soybeans closed $0.13 lower to $9.25/bushel
- Ethanol closed flat at $1.58/gallon
- Sugar #11 closed 0.18 cents lower to 12.31 cents/lb
Metals
- June gold ended today’s session $0.30 higher to $1204.20/oz
- July silver closed $0.09 lower at $17.05/oz
- July copper closed $0.04 lower at $2.81/lb
Currencies
- The U.S. Dollar Index jumped by a full percentage point this morning after the Core Consumer Price Index for April rose 0.3%. The Briefing.com consensus called for +0.2%. The Headline CPI grew 0.1%, in line with the Briefing.com consensus but lower than the +0.2% in March
- Higher prices mean sooner and higher (rather than lower and slower) rate hikes and therefore greater returns to owning dollars relative to other currencies
- The Dollar Index is currently trading up 1.05% to 96.26
- EUR/USD: -0.93% to 1.1006
- Germany's Ifo Business Climate Index fell to a better-than-expected 108.5 in May from 108.6 in April
- GBP/USD: -1.23% to 1.5470
- The Bank of England's Deputy Governor, Minouche Shafik, said that the headwinds to inflation and economic growth in the U.K. are transitory and will subside over the next few years
- USD/JPY: +0.42% to 121.56
- USD/CHF: +0.82% to 0.9444
- USD/CAD: +0.90% to 1.2309
- AUD/USD: -1.05% to $0.7812
- NZD/USD: -0.67% to 0.7302
Bonds
Governments Drop on Core CPI Beat
- Treasuries declined today in a curve-flattening trade after higher-than-expected Core CPI data was released for the month of April
- Yield check:
- 2-yr: +3 bps to 0.61%
- 5-yr: +5 bps to 1.56%
- 10-yr: +2 bps to 2.21%
- 30-yr: unch at 2.98%
- News:
- The Core CPI rose 0.3% m/m in April, greater than the Briefing.com consensus of +0.2%. The increase in March was only 0.2%.
- Headline CPI rose 0.1%, in line with expectations and lower than the +0.2% from March
- There were no outlying components in the core CPI data. Price growth was fairly universal across all consumption sectors. That included a 0.3% increase in shelter costs and a 0.7% increase in medical care prices, which was the largest monthly increase since January 2007
- Fed Chair Janet Yellen spoke in Providence, RI
- She said that the first rate hike would come this year if the economy performs as the FOMC expects
- After the first increase, Yellen expects the pace to be gradual
- She said that the economy still faces headwinds from persistently low business investment and energy sector weakness and that it will be several years before Fed funds is back to normal level
- The Core CPI rose 0.3% m/m in April, greater than the Briefing.com consensus of +0.2%. The increase in March was only 0.2%.
- Commodities:
- WTI crude: -1.53% to $69.79/bbl
- Gold: +0.11% to $1,205.40/troy oz.
- Copper: -1.67% to $2.801/lb.
- Currencies:
- EUR/USD: -0.87% to $1.1013
- USD/JPY: +0.41% to 121.54
- Week Ahead:
- Monday: Cleveland Fed President Mester (non –FOMC voter) speaks on “The Influence of Research on Financial Stability Policy” (09:10 ET); Fed Vice Chair Fischer (FOMC voter) speaks on “Global Economic Developments” (11:30 ET)
- Tuesday: April Durable Goods Orders and Durable Goods Orders ex transportation (08:30 ET); March Case-Shiller 20-City Index (09:00 ET); March FHFA Housing Price Index(09:00 ET); April New Home Sales (10:00 ET); May Consumer Confidence (10:00 ET);F ed Vice Chair Fischer speaks on “The Federal Reserve and the Global Economy”( 12:30 ET); $26 billion 2-year note auction (13:00 ET); Richmond Fed President Lacker (FOMC voter) gives speech, “From Country Banks to SIFIs: The 100-Year Quest for Financial Stability” (20:10 ET)
- Wednesday: MBA Mortgage Index for the week of 5/23 (07:00 ET); $35 billion 5-year note auction (13:00 ET)
- Thursday: San Francisco Fed President Williams (FOMC voter) speaks at Banking Supervision and Regulation joint conference (02:20 ET); Initial Jobless Claims for the week of 5/23 and Continuing Jobless Claims for the week of 5/16 (08:30 ET); April Pending Home Sales (10:00 ET); Natural Gas Inventories for the week of 5/23 (10:30 ET); Crude Inventories for the week of 5/23 (11:00 ET); $29 billion 7-year note auction (13:00 ET); Minneapolis Fed President Kocherlakota (non-FOMC voter) speaks on monetary policy (14:45 ET)
- Monday: Cleveland Fed President Mester (non –FOMC voter) speaks on “The Influence of Research on Financial Stability Policy” (09:10 ET); Fed Vice Chair Fischer (FOMC voter) speaks on “Global Economic Developments” (11:30 ET)
- Friday: Q1 GDP – Second Estimate and GDP Deflator – Second Estimate (08:30 ET); May Chicago PMI (09:45 ET); May Michigan Sentiment – Final (10:00 ET)
Treasury Yields:
- 2 Year Note 0.64% +0.04
- 5 Year Note 1.57% +0.04
- 10 Year Note 2.21% +0.02
- 30 Year Bond 2.99% +0.01
2/30 Spread: 235 bps ( -3 ) … 2/10 Spread: 157 bps ( -2 )
Preview for the week Monday 25 May to Friday 29 May, 2015
Economic Data
Monday (25 May) :
- No Economic Data
- Durable Orders : -0.6% (Prior 4.4%)
- Durable Goods - ex transportation : 0.3% (Prior 0.4%)
- Case-Shiller 20-city Index : 4.6% (Prior 5.0%)
- FHFA Housing Price Index : (Prior 0.7%)
- New Home Sales : 510K (Prior 481K)
- Consumer Confidence : 94.0 (Prior 95.2)
- MBA Mortgage Index : (Prior -1.5%)
- Initial Claims : 274K (Prior 274K)
- Continuing Claims : 2250K (Prior 2211K)
- Pending Home Sales : 1.0% (Prior 1.1%)
- Natural Gas Inventories : (Prior 92 bcf)
- Crude Inventories : (Prior -2.674M)
- GDP - Second Estimate : -0.7% (Prior 0.2%)
- GDP Deflator - Second Estimate : -0.1% (Prior -0.1%)
- Chicago PMI : 53.0 (Prior 52.3)
- Michigan Sentiment - Final : 89.0 (Prior 88.6)
Earnings Highlights
Monday (25 May) :
No Earnings Announcements
No Earnings Announcements
Tuesday (26 May) :
BMO - AZO CAE CYRN NAO SKYS
AMC - VNET FWM NMBL GOMO TDW TIVO WDAY ZPIN
Wednesday (27 May) :
BMO - BMO BWS CHS CRRC DSW LITB KORS MOV ROLL THR TIF TOL VAL
AMC - ANW UHAL CPRT COST PANW PLKI RENT SB SMTC SPTN TLYS
Thursday (28 May) :
BMO - ANF AMSC EARS CMCO DANG EXPR FLO FRED IKGH JKS MIXT MOD OA RY SAFM SDRL SHLD SIG TECD TITN TD XCRA
AMC - AVGO BOOT DECK EXA GME BLOX OVTI PSUN QUNR SPLK SPWH ULTA VEEV
Friday (29 May) :
BMO - BIG CCG CMGE DXLG FRO GCO GHM BNS
AMC - None Scheduled
Summary
The week ended relatively flat again. From Friday session, it seems that market is more likely to go down than up. That being said, market is uncertain and I suppose we need more confirmation. Next week we will see the GDP number releasing and that might give us some indications.
Market is closed on Monday for Memorial Day.
Market is closed on Monday for Memorial Day.
Direction for Tuesday 26 May, 2015; Down
Direction for the week Tuesday 26 May to Friday 29 May, 2015; Down
Direction for the week Tuesday 26 May to Friday 29 May, 2015; Down
2015 Weekly Directional Accuracy: 10/18 (55.56%)
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