Dow -195.01 at 17840.52, Nasdaq -82.22 at 4941.42, S&P -21.34 at 2085.51
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
It seems that market is finally getting a correction as it continued to profit taking after hitting the resistance level, but towards the end we could see some short covering. Economic data shown that the US economy still remains weak and this further pushed down on the Dollar Index to a recent low. That factors into another bullish run in crude oil as it continues to make a recent high. Basically I think the market might see more correction still judging from the economy condition and underperformance in the technology sector.
Market Summary
Industry Watch
Strong: Energy, Telecom Services
Weak: Consumer Discretionary, Health Care, Technology, Utilities
Other Market Moving Factor:
- Dollar Index tracking seventh consecutive decline following volatile session
- Apple (AAPL) under pressure after Wall Street Journalreported that some watch components provided by AAC Technologies (AACAY) may be defective
- Biotechnology underperforms
Equity indices faced selling pressure from the get-go with the largest sector—technology (-1.6%)—leading the daylong retreat. The influential group faced broad-based weakness with its top component—Apple (AAPL 125.15, -3.49)—sliding 2.7% after the Wall Street Journal reported that some watch components provided by AAC Technologies (AACAY 53.31, -2.79) may be defective. That being said, other sector members also struggled with Yelp (YELP 39.36, -11.92) cratering in reaction to its quarterly report. Shares of YELP tumbled 23.2% in reaction to disappointing earnings/revenue and cautious revenue guidance for Q2.
The tech sector contributed to the underperformance of the Nasdaq, but the index also faced significant weakness in the biotech group. The iShares Nasdaq Biotechnology ETF (IBB 333.66, -11.15) lost 3.2% and settled just above its 100-day moving average (331.05). The ETF dropped 2.8% in April while the health care sector (-1.5%) underperformed today and lost 1.4% for the month.
Elsewhere among influential groups, the industrial sector (-0.9%) ended ahead of the broader market, but that masked relative weakness among transport stocks. The Dow Jones Transportation Average lost 1.3%, ending the month lower by 1.7%. On the earnings front, freight carrier Con-way (CNW 41.10, -1.40) lost 3.3% after reporting a one-cent beat on light revenue while shipper Kirby (KEX 78.53, -3.37) dropped 4.1% after its cautious guidance overshadowed a one-cent beat.
All ten sectors finished the day in negative territory with energy (-0.4%) succumbing to the pressure during late afternoon action. The sector displayed intraday strength thanks to crude oil's 1.8% advance to $59.63/bbl. For the month, the energy sector gained 6.6% while crude oil spiked 20.8% amid a pullback in the dollar.
Fittingly, the Dollar Index (94.78, -0.43) retreated again today, which represented the seventh consecutive decline. Greenback weakness was a recurring theme in April with the Dollar Index losing 3.5% for the month after posting nine monthly gains. The euro benefitted from the pullback in the dollar with the single currency rising from 1.0731 to 1.1225 in April.
Treasuries retreated in the morning, but reclaimed all of their losses during the day. The 10-yr yield ended at 2.04%, representing the highest level since mid-March.
Today's participation was above average with month-end flows likely responsible for the difference. As a result, more than a billion shares changed hands at the NYSE floor.
Economic data included initial claims, Personal Income/Spending data, Q1 Employment Cost Index, and Chicago PMI:
- The initial claims level declined to 262,000 for the week ending April 25 from an upwardly revised 296,000 (from 295,000) while the Briefing.com consensus expected a decline to 290,000
- According to the Department of Labor, there were no special factors that impacted the initial claims reading, which hit the lowest level since April 2000
- Personal income growth was virtually flat in March after increasing 0.4% in February while the Briefing.com consensus expected an increase of 0.2%
- That was the weakest personal income increase since December 2013
- Personal spending increased 0.4% in March after increasing an upwardly revised 0.2% (from 0.1%) in February while the consensus expected an increase of 0.5%
- The Employment Cost Index increased 0.7% in Q1 2015 after increasing a downwardly revised 0.5% (from 0.6%) in Q4 2014 while the Briefing.com consensus expected an increase of 0.6%
- Wages and salaries increased 0.7% in the first quarter, up from a 0.6% increase in Q4 2014
- Benefits spending growth held steady at 0.6%
- The Chicago PMI increased to 52.3 in April from 46.3 in March while the Briefing.com Consensus expected an increase to 50.0
- The increase ended two consecutive monthly contractions
- The Production Index increased to 52.7 in April from 49.3 in March
Global Market
ASIA
Asian Markets Close: Japan’s Nikkei -2.7%; Hong Kong’s Hang Seng -0.9%; China’s Shanghai Composite -0.8%
Major markets in Asia all declined on Thursday in a profit-taking sweep that followed Wall Street’s weak showing on Wednesday and amid concerns about overheated conditions. Japan (-2.7%) led the selling, suffering its biggest loss in four months. On a related note, the Bank of Japan left its key lending rate unchanged at 0.10% as expected.
Economic data
- Japan
- March Industrial Production -0.3% month-over-month (expected -2.3%; prior -3.1%)
- March Housing Starts +0.7% year-over-year (expected -1.9%; prior -3.1%)
- March Construction Orders +10.8% year-over-year (prior +1.0%)
- Bank of Japan held key lending rate steady at 0.10% (expected 0.10%; prior 0.10%)
- South Korea
- March Industrial Production -0.4% month-over-month (expected +0.3%; prior +2.3%); -0.1% year-over-year (expected -1.8%; prior -5.0%)
- March Retail Sales -0.6% month-over-month (expected +1.1%; prior +2.6%)
- March Service Sector Output -0.4% month-over-month (prior +1.6%)
- Australia
- March Private Sector Credit +0.5% month-over-month (expected +0.5%; prior +0.5%)
- Q1 Import Price Index -0.2% quarter-over-quarter (expected +1.1%; prior +0.9%)
- Q1 Export Price Index -0.8% quarter-over-quarter (expected -0.8%; prior 0.0%)
- Singapore
- Q2 Business Expectations 5.00 (prior -3.00)
Equity Markets
- Japan’s Nikkei declined 2.7%, suffering its largest loss in four months with disappointing earnings overshadowing some better-than-expected data for industrial production and housing starts. Separately, the Bank of Japan held its key lending rate steady at 0.10% as expected. Every sector was lower, paced by weakness in the communications (-3.6%), industrial (-2.8%), basic materials (-2.6%), and consumer cyclical (-2.6%) sectors. Ricoh (-9.0%), Sumitomo Heavy Industries (-7.6%), Shin-Etsu Chemical (-7.0%), and Honda Motor (-6.7%) were the worst-performing issues. Out of the 225 index members, 20 ended higher, 203 finished lower, and 2 were unchanged.
- Hong Kong’s Hang Seng declined 0.9%. Every sector finished lower with the exception of the market’s most influential sector: the financial sector (+0.5%). The communications (-2.5%) and consumer non-cyclical (-2.5%) sectors were the weakest links. China Unicom Hong Kong (-5.8%), China Mengniu Dairy (-4.6%) and BOC Hong Kong Holdings (-4.4%) topped the list of individual decliners while China Resources Land (+7.4%), China Overseas Land & Investment, and Link REIT (+2.7%) paced the winners. Out of the 50 index members, 16 ended higher, 33 finished lower, and 1 was unchanged.
- China’s Shanghai Composite declined 0.8%, succumbing to a wave of selling interest in the final hour that knocked it down from unchanged levels. The energy (-2.7%), basic materials (-1.7%), and financial (-1.3%) were the primary weak spots in the Chinese market.
- India’s Sensex declined 0.8% with losses in all sectors except the energy sector (+0.1%). The biggest decliners were the communications (-1.6%) and consumer cyclical (-1.6%) sectors. Tata Motors (-2.4%), Mahindra & Mahindra (-2.4%), and Coal India (-2.2%) topped the list of decliners while Axis Bank (+2.9%), Reliance Industries (+1.5%), and Sesa Sterlite (+1.4%) led the winners.
- Australia’s S&P/ASX 200 declined 0.8%, pressured by weakness in the gold (-2.2%), financial (-1.5%), and telecom services (-1.4%) sectors.
- Regional advancers: Singapore +0.01%, Thailand +0.3%
- Regional decliners: Taiwan -0.3%, South Korea -0.7%, Malaysia -1.3%, Indonesia -0.4%, Philippines -1.4%
- Holiday closure: Vietnam (Saigon Liberation Day)
FX
- USD/CNY +0.01% at 6.2010
- USD/INR +0.08% at 63.510
- USD/JPY -0.05% at 118.96
EUROPE
Major European indices hold gains with Germany’s DAX (+1.0%) showing relative strength.
Economic data was plentiful:
- Eurozone April CPI 0.0% year-over-year (expected -0.1%; prior -0.1%); core CPI +0.6% year-over-year, as expected. Separately, the Unemployment Rate held at 11.3% (expected 11.2%)
- Germany’s March Retail Sales -2.3% month-over-month (consensus 0.4%; last -0.1%); +3.5% year-over-year (expected 3.2%; last 3.3%). Separately, April Unemployment Change -8,000 (expected -13,000; prior -14,000)
- French March Consumer Spending -0.6% month-over-month (expected -0.3%; last 0.2%)
- Italy’s April CPI +0.3% month-over-month (consensus 0.2%; prior 0.1%); 0.0% year-over-year (expected -0.1%; last -0.1%). Separately, Monthly Unemployment Rate rose to 13.0% from 12.7% (consensus 12.6%)
- Spain’s Q1 GDP rose 0.9% quarter-over-quarter (consensus 0.8%; last 0.7%); 2.6% year-over-year (expected 2.5%; prior 2.0%). February Current Account deficit widened to EUR2.03 billion from EUR400 million while April CPI -0.6% year-over-year (expected -0.7%; prior -0.7%)
Closing Prices
- UK’s FTSE: + 0.2%
- Germany’s DAX: + 0.2%
- France’s CAC: + 0.1%
- Spain’s IBEX: + 0.1%
- Portugal’s PSI: + 1.4%
- Italy’s MIB Index: + 0.2%
- Irish Ovrl Index: -0.6%
- Greece ASE General Index: + 3.1%
Macroeconomic Data
Economic Data
from Briefing.com
- Initial Claims : 262K vs 290K (Prior 296K - Up)
- Continuing Claims : 2253K vs 2318K (Prior 2327K - Up)
- Personal Income : 0.0% vs 0.2% (Prior 0.4%)
- Personal Spending : 0.4% vs 0.5% (Prior 0.2% - Up)
- PCE Prices - Core : 0.1% vs 0.2% (Prior 0.1%)
- Employment Cost Index : 0.7% vs 0.6% (Prior 0.5% - Down)
- Chicago PMI : 52.3 vs 50.0 (Prior 46.3)
- Natural Gas Inventories : 81 bcf (Prior 90 bcf)
EMPLOYMENT CLAIMS
Highlights
- The initial claims level declined to 262,000 for the week ending April 25 from an upwardly revised 296,000 (from 295,000) for the week ending April 18. The Briefing.com Consensus expected the initial claims level to decline to 290,000.
- The continuing claims level declined to 2.253 mln for the week ending April 18 from an upwardly revised 2.327 mln (from 2.325 mln) for the week ending April 11. The consensus expected the continuing claims level to decrease to 2.318 mln.
Key Factors
- According to the Department of Labor, there were no special factors that impacted the initial claims reading.
- That is the lowest initial claims level since April 2000. The four-week moving average is holding at 15-year lows. Layoff activities have clearly improved.
Big Picture
- The initial claims level remains at 15-year lows.
PERSONAL INCOME AND SPENDING
Highlights
- Personal income growth was virtually flat in March after increasing 0.4% in February. The Briefing.com consensus expected income to increase 0.2%.
- Personal spending increased 0.4% in March after increasing an upwardly revised 0.2% (from 0.1%) in February. The consensus expected personal spending to increase 0.5%.
Key Factors
- That was the weakest personal income increase since December 2013.
- The March personal income and spending data were already incorporated in yesterday’s advance Q1 2015 GDP estimate. The only new information pertained to how revisions to January and February data would impact the March growth rates.
- February personal income growth was unrevised, but January growth was revised down from 0.4% to 0.3%. Personal spending growth in February was revised up to 0.2% from 0.1%, and spending in January was revised down to -0.3% from -0.2%.
- Wages and salaries increased 0.2% in March after increasing 0.3% in February. That was in-line with the weak March employment report.
- Goods spending increased 1.0% on strong durable goods (1.8%) demand. Services spending increased 0.2% in March, down from a 0.3% gain in February.
- The personal savings rate declined to a still elevated 5.3% in March from 5.7% in February.
Big Picture
- Elevated personal savings is constraining economic growth.
EMPLOYMENT COST INDEX
Highlights
- The Employment Cost Index increased 0.7% in Q1 2015 after increasing a downwardly revised 0.5% (from 0.6%) in Q4 2014. The Briefing.com Consensus expected employment costs to increase 0.6%.
Key Factors
- Wages and salaries increased 0.7% in the first quarter, up from a 0.6% increase in Q4 2014. Benefits spending growth held steady at 0.6%.
- Private industry compensation increased 0.7% in Q1 2015 after increasing 0.5% in Q4 2014. Both wages and salaries (0.7% vs. 0.5%) and benefits (0.6% vs. 0.5%) accelerated in the first quarter.
- Public compensation growth decelerated in the first quarter, up only 0.5% after increasing 0.6% in Q4 2014. Wages and salaries were steady, up 0.4% for a second consecutive quarter. Benefits spending increased 0.5% in Q1 2015 after increasing 0.9% in Q4 2014.
Big Picture
- Employment costs are the major component of business costs. The trend in these data therefore have important implications for cost-push inflationary pressures and for profit margins.
CHICAGO PMI
Highlights
- The Chicago PMI increased to 52.3 in April from 46.3 in March. The Briefing.com Consensus expected the Chicago PMI to increase to 50.0.
Key Factors
- That increase ended two consecutive monthly contractions.
- The Production Index increased to 52.7 in April from 49.3 in March. Order levels were mixed. New Orders expanded as the related index increased to 55.1 in April from 42.3 in March. Unfilled orders, however, failed to end a contraction despite the related index increasing to 48.5 in April from 41.9 in March. Without a solid supply of backlogs, future production growth will be highly reliant upon new order gains.
- The Employment Index increased to 54.0 in April from 50.3 in March.
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.
Market Internals
NYSE:
Higher Volumes than the day before – 1078.5M vs 868.6M
Decliners outpaced Advancers (adv/dec): 700 / 2369
New Lows outpaced New Highs (highs/lows): 37 / 51
NASDAQ:
Higher Volumes than the day before – 2249.3M vs 1857.9M
Decliners outpaced Advancers (adv/dec): 667 / 2140
New Lows outpaced New Highs (highs/lows): 48 / 94
VOLATILITY S&P500 (VIX)
14.55 +1.16 (+8.66%)
14.55 +1.16 (+8.66%)
Certainly the internals are picturing a bearish session with a significant increase in volume supporting. New Lows continues to rise while New Highs drops. VIX broke above its 20 and 50 MAs which reflects the growing fear in the market. I reckon it is still going higher.
Technical Updates
17,840.52 -195.01 (-1.08%)
Volume: 129,211,446 (above average of 101,009,814)
Range: 17,774.89 - 18,033.33
Range: 17,774.89 - 18,033.33
4,941.42 -82.22 (-1.64%)
Volume: 591,667,148 (above average of 442,359,313)
Volume: 591,667,148 (above average of 442,359,313)
Range: 4,921.56 - 5,015.96
S&P 500 INDEX (SPX: CBOE)
2,085.51 -21.34 (-1.01%)
Volume: 686,082,000 (above average of 542,477,344)
Range: 2,077.59 - 2,105.52
The 3 indices could not overcome their resistance/support level and broke below their 20 MAs. S&P is breaking out of its PHib-Fan which signals bearishness. The convergence from MACD also seems to hint the market is likely to go down as well. But the indices are either sitting on their trend support and 50MAs so that could provide some pullback on Friday. Nonetheless I don't think that is going to stop the sliding anyway.
Commodities
Commodities
Closing Commodities: Nat Gas Surges 6% On Storage Data
- Natural gas futures surge higher on storage data, closing floor trading 6% higher at $2.75/MMBtu
- WTI crude oil was strong as well, rally above the $59/barrel level, closing +$1.02 at $59.54/barrel’
- Precious metals tanked today, but recovered some
- June gold lost -2.3% (or -$27.80) to $1182.20/oz, while July silver closed -3.2% to $16.15/oz
- July copper rallied +$0.08 to $2.88/lb
Energy
- June crude oil futures rose $1.02/barrel to $59.54/barrel
- June natural gas closed $0.15 higher at $2.75/MMBtu
- RBOB Gasoline closed $0.03 higher at $2.04/gallon
- Heating oil closed $0.03 higher at $1.98/gallon
Agriculture
- July corn closed $0.02 lower to $3.62/bushel
- July wheat closed $0.08 lower to $4.76/bushel
- July soybeans closed $0.12 lower at $9.77/bushel
- Ethanol closed $0.02 lower at $1.60/gallon
- Sugar #11 closed 0.11 cents lower to 12.98 cents/lb
Metals
- June gold ended today’s session $27.80 (-2.3%) lower to $1182.20/oz
- July silver closed $0.53 lower (-3.2%) at $16.15/oz
- July copper closed $0.08 higher to $2.88/lb
Currencies
- The U.S. Dollar Index fell 0.43% to 94.80, extending its losing streak to 7 days
- The breadth of the Index's losses has declined, however, as the dollar gained against all majors except for euro and Swiss franc
- EUR/USD rallied 1.00% to $1.1228 as the Greek 10-yr yield declined 83 basis points to 10.40%
- Eurozone unemployment missed expectations, remaining stable at 11.3% in March
- The eurozone drew a line under its 4-month bout of deflation as the CPI change for the bloc was 0.0% in April versus -0.1% in March. The market had expected deflation to continue
- USD/JPY rallied 0.42% to 119.54
- The Bank of Japan stayed the course on its monetary policy
- AUD/USD fell 1.20% to $0.7902
- NZD/USD rallied 0.08% to $0.7623
- The Reserve Bank of New Zealand maintained its official cash rate at 3.5%
- The central bank said that it would cut interest rates if inflationary pressures don't materialize
- USD/CAD rallied 0.57% to 1.2089
- USD/CHF fell 0.80% to 0.9324 and remains volatile as a flight to quality is underway in response to heavy Nasdaq 100 and Russell 2000 losses
Bonds
Treasuries Reverse Losses in Flight To Quality
- Accelerating equity selling after 2:00 ET stimulated buyers for government notes and bonds today, eliminating earlier losses and putting 10's and 30's back above significant technical levels. Ironically, the losses in equities seem to have been triggered by moves higher in U.S. and European interest rates over the past week
- Yield check:
- 2-yr: unch at 0.56%
- 5-yr: +1 bp to 1.43%
- 10-yr: -1 bp to 2.04%
- 30-yr: -1 bp to 2.74%
- News:
- Initial Jobless Claims declined to 262,000 for the week ending April 25 from an upwardly revised 296,000 (from 295,000) for the week ending April 18. The Briefing.com Consensus expected the Initial Claims level to decline to 290,000
- That was the lowest Initial Claims number since April 2000. The four-week moving average is holding at 15-year lows. Layoff activities have clearly improved
- The Continuing Claims level declined to 2.253 mln for the week ending April 18 from an upwardly revised 2.327 mln (from 2.325 mln) for the week ending April 11. The consensus expected Continuing Claims to decrease to 2.318 mln
- The Employment Cost Index increased 0.7% in Q1 2015 after increasing a downwardly revised 0.5% (from 0.6%) in Q4 2014. The Briefing.com Consensus expected employment costs to increase 0.6%
- Wages and salaries increased 0.7% in the first quarter, up from a 0.6% increase in Q4 2014. Benefits spending growth held steady at 0.6%
- The Chicago PMI increased to 52.3 in April from 46.3 in March. The Briefing.com Consensus expected the Chicago PMI to increase to 50.0
- At the lows of the day, the 30-year yield traded 2.815% and the 10-year yield was 2.112%. The 5-year yield hit 1.507%
- Initial Jobless Claims declined to 262,000 for the week ending April 25 from an upwardly revised 296,000 (from 295,000) for the week ending April 18. The Briefing.com Consensus expected the Initial Claims level to decline to 290,000
- Commodities:
- WTI Crude: +1.67% to $59.53/bbl
- Gold: -2.40% to $1180.9/troy oz.
- Copper: +2.72% to $2.875/lb.
- Currencies:
- EUR/USD: +0.98% to $1.1226
- USD/JPY: +0.34% to 119.42
- Data Out Friday:
- April ISM Index (10:00 ET)
- March Construction Spending (10:00 ET)
- April Michigan Sentiment – Final (10:00 ET)
- April Auto and Truck Sales (17:00 ET)
- Fed Speakers:
- Cleveland Fed President Mester speaks on “Issues in Consumer Credit” (08:30 ET)
- San Francisco Fed Williams speaks on “Monetary Policy in Financial Markets; Is There a New Paradigm?” (15:45 ET)
Treasury Yields:
- 2 Year Note 0.58% +0.02
- 5 Year Note 1.43% UNCH
- 10 Year Note 2.05% -0.01
- 30 Year Bond 2.75% -0.01
2/30 Spread: 217 bps ( -3 ) … 2/10 Spread: 147 bps ( -3 )
Preview for Friday 1 May, 2015
Economic Data
Friday (1 May) :
- ISM Index : 52.0 (Prior 51.5)
- Construction Spending : 0.4% (Prior -0.1%)
- Michigan Sentiment - Final : 96.0 (Prior 95.9)
- Auto Sales : (Prior 5.4M)
- Truck Sales : (Prior 8.2M)
Earnings Highlights
Friday (1 May) :
BMO - AON BERY BTH BCO BPL CPN CBM CBOE CHTR CVX CLX CTB CVS DUK XLS FE GWR GLPW HPY NSP ITT KCG LM LPNT MSG MNTA MGI TYPE MCO MOG.A MOSY NWL NTLS ZEUS PNW PNM PEG RYAM RUTH SXI SUP TDS TRP USM VFC WY WETF
AMC - AEC BRK.B VNR
BMO - AON BERY BTH BCO BPL CPN CBM CBOE CHTR CVX CLX CTB CVS DUK XLS FE GWR GLPW HPY NSP ITT KCG LM LPNT MSG MNTA MGI TYPE MCO MOG.A MOSY NWL NTLS ZEUS PNW PNM PEG RYAM RUTH SXI SUP TDS TRP USM VFC WY WETF
AMC - AEC BRK.B VNR
Summary
Thursday gave us the sign that market is about to take a reversal. There is a possibility that we would see a pullback on Friday but I feel that market should still continue heading down. Basically I feel as there is nothing optimistic in the market for the rally, a correction is more appropriate.
Happy Labours' Day and have a nice weekend.
Happy Labours' Day and have a nice weekend.
Direction for Friday 1 May, 2015; Down
2015 Daily Directional Accuracy: 32/62 (51.61%)
2015 Weekly Directional Accuracy: 8/14 (57.14%)
2015 Weekly Directional Accuracy: 8/14 (57.14%)
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