Dow +0.34 at 18285.74, Nasdaq +19.05 at 5090.79, S&P +4.97 at 2130.81
Another boring session in the market. Despite market is struggling to make new high after the opening, it remained rather flat throughout the session. Again, this is making me question the extent of bullishness. Is it me that is thinking there are still some traders want to catch the last train for the bullish run?From the look of the market, I guess market isn't in the mood to continue the rally. In fact I think the market is not going anywhere now. For the breakout, it doesn't seems to be happening also. One thing for sure is that the market is getting defensive amid all the uncertainty. And that is not exactly a bullish signal to me...
Direction for Thursday 21 May, 2015; Down
Market Summary
Industry Watch
Strong: Consumer Discretionary, Industrials, Energy, Telecom Services
Weak: Consumer Staples, Financials, Health Care, Utilities
Other Market Moving Factor:
- Initial Claims (274,000; Briefing.com consensus 270,000) remain near 15-year low
- Cyclical sectors outperform
Equity indices spent the initial minutes of the session near their flat lines, but they 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.
Yesterday's session saw relative strength among countercyclical groups, but the opposite was true today as five of six growth-sensitive sectors registered gains while the financial sector (-0.2%) was the lone decliner on the cyclical side. Despite today's retreat, the sector remains higher by 0.6% for the week versus a 0.4% increase for the S&P 500.
Moving on, the energy sector (+0.9%) finished ahead of other cyclical sectors with help from crude oil, which surged 2.9% to $60.70/bbl. The energy component soared after the Energy Information Administration's storage report revealed the third consecutive weekly draw.
Elsewhere among cyclical groups, the industrial sector (+0.5%) received support from transport stocks. The Dow Jones Transportation Average rebounded from recent underperformance, climbing 0.6%, but the bellwether complex remains down 1.5% for the week.
Also of note, the consumer discretionary space (+0.4%) rallied with help from retailers after Best Buy (BBY 35.11, +1.33) and Williams-Sonoma (WSM 78.62, +0.73) reported better than expected results. The two names gained 3.9% and 0.9%, respectively while SPDR S&P Retail ETF (XRT 99.54, +0.54) gained 0.6%.
Over on the countercyclical side, the telecom services sector (+0.7%) displayed strength throughout the day while consumer staples (+0.2%), health care (unch), and utilities (-0.1%) ended near their flat lines.
Today's participation was in-line with recent totals as fewer than 700 million shares changed hands at the NYSE floor.
Economic data included Initial Claims, Leading Indicators, Existing Home Sales, and Philadelphia Fed Survey:
- The initial claims level increased to 274,000 for the week ending May 16 from an unrevised 264,000 while the Briefing.com consensus expected an increase to 270,000
- Despite this week's increase, the four-week moving average fell to 266,250 from 271,750, which is the lowest level since April 2000
- The continuing claims level declined to 2.211 mln for the week ending May 9 from a downwardly revised 2.223 mln (from 2.229 mln) while the Briefing.com consensus expected an increase to 2.250 mln
- The Leading Indicators report for April was up 0.7% while the Briefing.com consensus expected an increase of 0.3%
- The March reading was revised up to 0.4% from 0.2%
- Existing home sales for April were reported to have decreased 3.3% from March to an annualized rate of 5.04 million units while the Briefing.com consensus expected a reading of 5.24 million
- The Philadelphia Fed's Business Outlook Survey dropped to 6.7 in May from 7.5 in April while the Briefing.com consensus expected an increase to 8.0
- Despite the decrease, the general business production growth outlook actually strengthened
- Shipments exited a contraction as the related index increased to 1.0 in May from -1.8 in April
- Despite the decrease, the general business production growth outlook actually strengthened
Global Market
ASIA
Asian Markets Close: Japan’s Nikkei flat; Hong Kong’s Hang Seng -0.2%; China’s Shanghai Composite +1.9%
Markets in the Asia-Pacific region were mixed on Thursday, following in the footsteps of Wall Street’s mixed finish on Wednesday. China’s Shanghai Composite, however, stood out from the pack with a 1.9% gain that was fueled once again by policy stimulus speculation. That speculation kicked in following the HSBC Flash PMI reading for May, which showed the third straight month of manufacturing activity being in contraction.
Economic data
- China
- May HSBC Manufacturing PMI 49.1 (expected 49.3; prior 48.9)
- Japan
- May Manufacturing PMI 50.9 (expected 50.3; prior 49.9)
- All Industries Activity Index -1.3% month-over-month (expected -0.4%; prior +0.2%)
- Hong Kong
- April CPI +2.8% year-over-year (expected +4.3%; prior +4.5%)
- Australia
- MI Inflation Expectations 3.6% (prior 3.4%)
- New Zealand
- Budget Balance NZD -4.17 bln (prior NZD -4.00 bln)
- Credit Card Spending +7.1% year-over-year (prior +5.2%)
Equity Markets
- Japan’s Nikkei ended flat after being up as much as 0.6% earlier in the session. The financial (+1.5%) and utilities (+1.3%) sectors were the day’s best performers. Individual standouts on the stock side included Sompo Japan Nipponkoa Holdings (+7.4%), Tokyo Electric Power (+6.7%), and MS&AD Insurance Group (+5.4%). Kyowa Hakko Kirin Co (-3.7%) was the worst-performing issue. Out of the 225 index members, 118 ended higher, 99 finished lower, and 8 were unchanged.
- Hong Kong’s Hang Seng declined 0.2% with losses in the consumer non-cyclical (-1.5%) and communications (-0.9%) sectors weighing on matters. Leading laggards included China Unicom Hong Kong (-3.2%), Hengan Intl. (-2.6%), and China Resources Power Holdings (-2.4%). Galaxy Entertainment (+4.6%) topped the list of winners. Out of the 50 index members, 20 ended higher, 28 finished lower, and 2 were unchanged.
- China’s Shanghai Composite increased 1.9%, finishing at its highs for the day after the weaker than expected HSBC Flash PMI report for May triggered speculation that further policy stimulus will be provided. The industrial (+4.1%), diversified (+4.0%), and consumer non-cyclical (+3.8%) sectors were the best-performing areas in the Chinese market on Thursday. Financials (+0.3%) lagged the action.
- India’s Sensex declined 0.1%. Strength in the consumer cyclical (+1.6%) and industrial (+1.5%) sectors helped offset weakness in the basic materials (-3.6%) sectors. Tata Steel (-5.3%), Vedanta (-3.3%), and Cipla Ltd/India (-2.1%) paced the decliners while Bajaj Auto (+6.9%), Coal India (+3.4%), and Axis Bank (+2.2%) led the winners.
- Australia’s S&P/ASX 200 jumped 0.9%, scoring nearly all of its gains in the first hour of trading. The advance was led by the health care (+2.1%), energy (+1.8%), and materials (+1.5%) sectors.
- Regional advancers: Singapore +0.01%, Thailand +0.4%, Indonesia +0.4%, Vietnam +0.5%
- Regional decliners: Taiwan -1.1%, South Korea -0.8%, Malaysia -0.8%, Philippines -0.6%
FX
- USD/CNY -0.1% at 6.1968
- USD/INR +0.1% at 63.671
- USD/JPY -0.2% at 121.06
EUROPE
Major European indices trade mostly lower with Germany’s DAX (-0.6%) leading the move. In news, the Eurogroup is reportedly considering extending Greece’s current aid program into the fall if representatives from the country agree to certain terms during the first week of June.
- Eurozone Current Account surplus narrowed to EUR18.60 billion from EUR27.30 billion (expected surplus of EUR26.00 billion). Separately, May Flash Manufacturing PMI 52.3 (expected 52.0; prior 52.0) and Flash Services PMI 53.3 (consensus 53.9; prior 54.1)
- Germany’s May Flash Manufacturing PMI 51.4 (consensus 52.3; prior 52.1) and Flash Services PMI 52.9 (expected 53.9; previous 54.0)
- UK’s April Retail Sales +1.2% month-over-month (expected 0.4%; prior -0.7%) and Core Retail Sales +1.2% month-over-month (consensus 0.3%; previous 0.2%). Separately, May CBI Industrial Trends Orders -5 (expected 3; last 1)
- France’s Flash Manufacturing PMI 49.3 (consensus 48.5; prior 48.0) while Flash Services PMI 51.6 (consensus 51.9; last 51.4)
- Italy’s April Wage Inflation 0.2% month-over-month (prior 0.0%)
Closing Prices
- UK’s FTSE: + 0.1%
- Germany’s DAX: + 0.1%
- France’s CAC: + 0.3%
- Spain’s IBEX: + 0.2%
- Portugal’s PSI: + 0.1%
- Italy’s MIB Index: -0.1%
- Irish Ovrl Index: -0.5%
- Greece ASE General Index: + 0.6%
Macroeconomic Data
Economic Data
from Briefing.com
- Initial Claims : 274K vs 270K (Prior 264K)
- Continuing Claims : 2211K vs 2250K (Prior 2223K- Down)
- Existing Home Sales : 5.04M vs 5.24M (Prior 5.21M - Up)
- Philadelphia Fed : 6.7 vs 8.0 (Prior 7.5)
- Leading Indicators : 0.7% vs 0.3% (Prior 0.4% - Up)
- Natural Gas Inventories : 92 bcf (Prior 111 bcf)
UNEMPLOYMENT CLAIMS
Highlights
- The initial claims level increased to 274,000 for the week ending May 16 from an unrevised 264,000 for the week ending May 9. The Briefing.com Consensus expected the initial claims level to increase to 270,000.
- The continuing claims level declined to 2.211 mln for the week ending May 9 from a downwardly revised 2.223 mln (from 2.229 mln). That is the lowest continuing claims level since November 2000. The Briefing.com Consensus expected the continuing claims level to increase to 2.250 mln.
Key Factors
- Despite this week’s increase, the four-week moving average fell to 266,250 from 271,750. That is the lowest level since April 2000.
- These trends show that employment conditions have materially improved over the past several weeks.
Big Picture
- Employment conditions remain strong as the initial claims level holds at 15-year lows.
EXISTING HOME SALES
Highlights
- Existing home sales declined 3.3% in April to 5.04 mln SAAR from an upwardly revised 5.21 mln SAAR (from 5.19 mln SAAR) in March. The Briefing.com Consensus expected existing home sales to increase to 5.24 mln SAAR.
Key Factors
- Buying conditions were ripe for a breakout in April: employment conditions materially improved over the past few months, income growth returned, mortgage purchasing applications were on the rise, and the pending home sales index moved higher. Yet sales gave back much of the gain seen in March.
- The National Association of Realtors blamed the lackluster report on low supply, which has resulted in upward trending prices. As proof of this, the average property sold in April was only marketed for 39 days, which was the fastest selling pace since July 2013; moreover, roughly 40% of the properties sold went at or above asking price.
- Inventories did manage to increase in April, up 10% to 2.210 mln, but are down 0.9% year-over-year. That represents a 5.3 months’ supply at the current sales rate, which is well below the 6 months’ supply that occur during normal selling periods.
- The median home price increased 8.9% year-over-year to $219,400.
- Looking forward, sales growth trends remain uneven. Buyers will not only have to deal with inventory shortages and price growth but also with the threat of rising mortgage rates.
- All-cash sales represented 24% of all sales in April. That was unchanged from March and down from 32% a year ago. Individual investor sales (14%) and distressed sales (10%) were also unchanged from March levels.
Big Picture
- Despite improvements in underlying economic conditions, existing home sales weakened in April.
PHILADEPHIA FED
Highlights
- The Philadelphia Fed’s Business Outlook Survey dropped to 6.7 in May from 7.5 in April. The Briefing.com Consensus expected the index to increase to 8.0.
Key Factors
- Despite the decrease in the survey, the general business production growth outlook actually strengthened. Shipments exited a contraction as the related index increased to 1.0 in May from -1.8 in April.
- Order levels also improved. The New Orders Index increased to 4.0 from 0.7. The ongoing contraction in unfilled orders softened as the related index increased to -1.1 from -7.1.
- Employment levels weakened. The Number of Employees Index declined to 6.7 from 11.5 and the Average Employee Workweek Index dropped into a contraction (-5.6 from 3.4).
Big Picture
- Manufacturing conditions remain uneven in the Philadelphia region.
LEADING INDICATORS
Highlights
- The Conference Board's Leading Economic Index increased 0.7% in April after increasing an upwardly revised 0.4% (from 0.2%) in March. The Briefing.com Consensus expected the index to increase 0.3%.
Key Factors
- That was the largest increase in the leading indicators since a 1.0% increase in July 2014.
- Since 8 of the 10 components of the index are known prior to the release, the difference between the consensus and the actual is generally minor.
- In this case, however, the data on building permits were not released until after the consensus already made its prediction. Building permits easily topped expectations (1.143 mln vs. 1.065 mln) and contributed 0.29 percentage points to the leading indicators growth rate.
- According to the report, the Conference Board expects a minor increase in manufacturer orders of nondefense capital goods excluding aircraft in April.
Big Picture
- The Leading Economic Index maintains steady growth.
Market Internals
NYSE:
Higher Volumes than the day before – 708.0M vs 692.1M
Advancers outpaced Decliners (adv/dec): 1702 / 1359
New Highs outpaced New Lows (highs/lows): 71 / 23
NASDAQ:
Lower Volumes than the day before – 1671.5M vs 1772.9M
Advancers outpaced Decliners (adv/dec): 1400 / 1380
New Highs outpaced New Lows (highs/lows): 86 / 53
VOLATILITY S&P500 (VIX)
12.11 -0.77 (-5.98%)
I daresay the volume remained weak and market internal is still suggesting a lack of leadership. It looks like the New Highs is dropping. All these could not possibly translate to a bullish stance. VIX dipped on Thursday to the support level and somehow it feels to me that it was the last struggle for the bulls to push the market up.
Technical Updates
18,285.74 +0.34 (+0.00%)
Volume: 84,266,204 (below average of 100,364,664)
Range: 18,249.90 - 18,314.89
Range: 18,249.90 - 18,314.89
5,090.79 +19.05 (+0.38%)
Volume: 381.5M (below average of 437,243,467)
Volume: 381.5M (below average of 437,243,467)
Range: 5,062.51 - 5,098.23
S&P 500 INDEX (SPX: CBOE)
2,130.82 +4.97 (+0.23%)
Volume: 468.6M (below average of 537,198,234)
Range: 2,122.95 - 2,134.28
DOW formed a doji at its resistance/support level. While NASDAQ and S&P is still carrying some bullishness in them. I would say this is getting divergence and that is not a good sign. Even so, market has not show any willingness to go down yet.
Commodities
Commodities
Closing Commodities: WTI Crude Oil Gains 3%
Energy
Agriculture
Metals
- Energy commodities rose today with crude oil showing a particularly nice run
- July crude oil ended the day +$1.73 to $60.70/barrel.
- Meanwhile, June natural gas rose $0.03 to $2.95/MMBtu
- Metals ended mixed with June gold losing $4.50 to $1203.90/oz and July silver rising $0.02 to $17.14/oz
- July copper gained $0.02 To $2.85/lb
Energy
- July crude oil futures rose $1.73 to $60.70/barrel
- June natural gas closed $0.03 higher at $2.95/MMBtu
- RBOB Gasoline closed $0.04 higher at $2.08/gallon
- Heating oil futures closed $0.04 higher at $1.99/gallon
- The EIA released its estimates of working gas in storage this morning, which showed 1,989 bcf, representing a 92 bcf build (vs. a 96-97 bcf build consensus)
Agriculture
- July corn closed $0.04 higher to $3.64/bushel
- July wheat closed $0.07 higher to $5.20/bushel
- July soybeans closed $0.03 lower to $9.38/bushel
- Ethanol closed $0.02 lower at $1.58/gallon
- Sugar #11 closed 0.10 cents lower to 12.49 cents/lb
Metals
- June gold ended today’s session $4.50 lower to $1203.90/oz
- July silver closed $0.02 higher at $17.14/oz
- July copper closed $0.02 higher at $2.85/lb
Currencies
- After a strong run this week, the dollar took a break today, with the U.S. Dollar Index declining 0.14% to 95.30. The index reached its low around 06:15 ET, and the negative Philadelphia Fed and Existing Home Sale data did not prompt a revisitation of that level
- EUR/USD rallied despite weaker-than-expected PMI data for Germany and the eurozone as a whole
- EUR/USD: +0.25% to $1.1122
- USD/JPY fell 0.24% to 120.96 ahead of tonight's BoJ announcement. The central bank is expected to maintain its current pace of quantitative easing
- Retail Sales for April in the United Kingdom blew away estimates. GBP/USD is up 0.88% to $1.5672
- The Swissy and commodity currencies were little changed
- USD/CHF: -0.12% to 0.9355
- USD/CAD: +0.02% to 1.2208
- AUD/USD: +0.23% to $0.7891
- NZD/USD: +0.50% to $73.32
Bonds
Treasuries Gain Big, Curve Flattens
- Government notes and bonds rallied sharply today on weaker-than-expected economic data, potentially turning around what had been a very difficult week
- Yield check:
- 2-yr: -2 bps to 0.57%
- 5-yr: -4 bps to 1.51%
- 10-yr: -6 bps to 2.19%
- 30-yr: -7 bps to 2.98%
- News:
- Initial Jobless Claims for the week ending May 16th were ever-so-slightly worse than expectations at 274K versus the Briefing.com consensus of 270K. The prior week's reading was 264K
- Continuing Claims declined to 2211K from a downwardly revised 2223K for the prior week. The Briefing.com consensus had called for 2250K
- The Philadelphia Fed’s Business Outlook Survey dropped to 6.7 in May from 7.5 in April. The Briefing.com consensus was 8.0
- The employment and prices paid components fell while new orders rose
- Existing home sales declined 3.3% in April to a seasonally-adjusted rate of 5.04 million from an upwardly revised 5.21 million (from 5.19 mln SAAR) in March. The Briefing.com consensus expected existing home sales to increase to 5.24 million
- The U.S. government auctioned off $13 billion in 10-year TIPS (reopening). The auction tailed over a basis point, but the Treasury market took it in stride
- High yield: 0.358%
- Bid-to-cover: 2.33
- Indirect bid: 67.1%
- Direct bid: 4.5%
- Initial Jobless Claims for the week ending May 16th were ever-so-slightly worse than expectations at 274K versus the Briefing.com consensus of 270K. The prior week's reading was 264K
- Commodities:
- WTI crude: +2.97% to $60.73/bbl
- Gold: -0.27% to $1,205.40/troy oz.
- Copper: +0.74% to $2.85/lb.
- Currencies:
- EUR/USD: +0.26% to $1.1123
- USD/JPY: -0.24% to 120.96
- Data out Friday:
- April CPI and Core CPI (08:30 ET)
Treasury Yields:
- 2 Year Note 0.60% UNCH
- 5 Year Note 1.53% -0.04
- 10 Year Note 2.19% -0.07
- 30 Year Bond 2.98% -0.08
2/30 Spread: 238 bps ( -8 ) … 2/10 Spread: 159 bps ( -7 )
Preview for Friday 22 May, 2015
Economic Data
Friday (22 May) :
- CPI : 0.1% (Prior 0.2%)
- Core CPI : 0.2% (Prior 0.2%)
Earnings Highlights
Friday (22 May) :
BMO - ANN CPB DE FL HIBB MENT TNP
AMC - None Scheduled
BMO - ANN CPB DE FL HIBB MENT TNP
AMC - None Scheduled
Summary
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
2015 Weekly Directional Accuracy: 9/17 (52.94%)
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