Dow +82.08 at 17924.06, Nasdaq +25.90 at 4945.54, S&P +7.85 at 2088.00
Market did a pullback despite a selloff before the futures market opened. In the second half of the session, market started to consolidate which I suppose infer as the lack of momentum. It was reasonable as we will be expecting both Nonfarm payroll and unemployment rate on Friday that are going to influence the Fed's decision.Market was short selling for the past 2 days and it seems that the selling is slowing down. I think we should see some pullback prior to the Nonfarm Payroll on Friday. I am still sticking to my stance where the market is not on the bearish side yet as I feel market is more to a sideway trend. Although I still think we are not far from a correction.
Direction for Thursday 7 May, 2015; Up
Market Summary
Industry Watch
Strong: Financials, Health Care, Industrials, Technology, Utilities
Weak: Energy, Materials, Telecom Services
Other Market Moving Factor:
- Germany's 10-yr bund yield briefly touches 0.79% after ending last week at 0.36%
- U.S. Treasuries reclaim overnight losses
Equity indices vacillated near their flat lines during the opening hour and followed their shaky start with a broad-based rally. However, the cash market masked the fact that S&P 500 futures were down more than 15 points overnight. That weakness coincided with selling in the Treasury market, which abated once the benchmark 10-yr yield kissed the 2.30% level. To be fair, the overnight selloff in Treasuries did not take place in a vacuum as Germany's 10-yr bund endured a sharp plunge that briefly sent its yield as high as 0.79%. German bunds were able to retrace the entire move, returning to 0.59% while U.S. Treasuries did that and then some. The 10-yr note rallied throughout the session, dropping its yield six basis points to 2.18% and back below the 200-day moving average (2.19%).
In all likelihood, the Treasury market will be in focus once again tomorrow once the Nonfarm Payrolls report for April crosses the wires at 8:30 ET (Briefing.com consensus 218K).
Nine sectors finished the day in positive territory with heavily-weighted sectors like technology (+0.7%), financials (+0.7%), industrials (+0.6%), and health care (+0.5%) driving the advance.
The top-weighted technology sector gathered strength throughout the session while high-beta chipmakers outperformed from the get-go. The PHLX Semiconductor Index advanced 1.1% thanks to gains in about 90% of its components. SunEdison (SUNE 27.96, +3.13) and Atmel (ATML 7.96, +0.42) led the charge after reporting their quarterly results. Atmel jumped 5.6% after reporting a bottom line beat and issuing cautious guidance while SunEdison surged 12.6% following a loss that was not comparable to analyst estimates.
Staying in the technology space, Yelp (YELP 47.01, +8.79) spiked 23.0% after the Wall Street Journal reported the company is looking into a potential sale. The intraday spike helped the stock reclaim the bulk of its earnings-driven loss from late April and return above its 50-day moving average (46.80).
Elsewhere, the financial sector was underpinned by large components like Citigroup (C 53.31, +0.54) and JPMorgan Chase (JPM 64.50, +0.58) with their strength lifting the sector back into the green for the week. The growth-sensitive group will enter the Friday session with a week-to-date gain of 0.2%.
Over on the countercyclical side, the health care sector (+0.5%) finished ahead of its defensively-oriented peers thanks to strength in biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 344.11, +3.39) advanced 1.0%, but could not climb above its opening high.
On the downside, the energy sector (-1.1%) spent the day in negative territory as crude oil struggled amid dollar strength. WTI crude slumped 3.2% to $58.98/bbl while the Dollar Index (94.60, +0.51) gained 0.6%.
Today's participation was in-line with recent averages as more than 785 million shares changed hands at the NYSE floor.
Economic data included Initial Claims, Challenger Job Cuts, and Consumer Credit:
- The initial claims level increased to 265,000 for the week ending May 2 from an unrevised 262,000 for the week ending April 25 while the Briefing.com consensus expected an increase to 280,000
- There is no doubt that businesses have actively cut down on their layoff activity. The four-week moving average for initial claims declined to 279,500 from 283,750. For comparison, it was only a little more than a month ago in March wherein the four-week moving average was stable over 300,000
- In the entire history of the data set, the four-week moving average has been below 280,000 only a handful of times. The last time was in May 2000
- The April Challenger Job Cuts report indicated that planned layoffs increased 52.8% year-over-year to follow the prior 6.4% increase
- Total outstanding consumer credit increased by $20.50 billion in March after increasing a downwardly revised $14.80 billion (from $15.50 billion) in February while the Briefing.com consensus expected an increase of $16.00 billion
- That was the biggest increase in consumer credit since a gain of $21.50 billion in July 2014
Global Market
ASIA
Asian markets Close: Japan’s Nikkei -1.2%; Hong Kong’s Hang Seng -1.3%; China’s Shanghai Composite -2.8%
It was a sea of red for markets across the Asia-Pacific region on Thursday as the specter of rising interest rates in Europe and the U.S., a Morgan Stanley downgrade of the MSCI China Index, continued weakness in the Shanghai Composite (-2.8%), and some disappointing payroll change data out of Australia contributed to broad-based selling interest.
Economic data
- Japan
- Monetary Base +35.2% year-over-year (expected 34.3%; prior 35.2%)
- Australia
- April Employment Change -2900 (expected +5000; prior 48,200)
- April Unemployment Rate 6.2% (expected 6.2%; prior 6.1%)
- April AIG Construction Index 47.0 (prior 50.0)
Equity Markets
- Japan’s Nikkei declined 1.2%, coming off its extended holiday break. Leading the declines were the communications (-1.9%), industrial (-1.3%), and consumer non-cyclical (-1.3%) sectors. Casio Computer (-5.1%), Citizen Holdings (-4.9%), and NTN Corp (-4.1%) topped the list of individual decliners while Toho Co (+5.2%), Tokyo Electric Power (+3.9%), and IHI Corp (+3.7%) paced the winners. Out of the 225 index members, 56 ended higher, 162 finished lower, and 7 were unchanged.
- Hong Kong’s Hang Seng dropped 1.3%, following mainland shares lower once again and pressured by a Morgan Stanley downgrade of the MSCI China Index. The utilities sector (+0.1%) was the only gainer on the day. Every other sector, including the influential financial sector (-1.2%) lost between 1.0% and 3.0%. China Mengniu Dairy (-4.7%), China Merchants Holdings (-4.0%), China Resources Land (-3.6%), Lenovo Group (-3.0%), and China Unicom Hong Kong (-3.0%) were the biggest laggards. Tingyi Cayman Islands Holding Corp (+1.5%) and New World Development (+1.4%) were the only stocks to gain more than 1.0%. Out of the 50 index members, 6 ended higher, and 44 finished lower.
- China’s Shanghai Composite declined 2.8% and finished at its low for the day. Weakness was a function of momentum trading cutting the other way as participants have grown anxious about recent price action and regulators’ efforts to curb speculation. The utilities (-5.8%), energy (-4.7%), and industrial (-3.5%) sectors were the weakest areas in the Chinese market. China State Construction Engineering (-10.0%) and China Railway Group (-10.0%) were among the stocks falling by the daily maximum limit.
- India’s Sensex declined 0.4%, hitting its lowest level since mid-December. The financial sector (-1.7%) was the worst-performing sector while the technology sector (+2.2%) was the best performing. Axis Bank (-2.9%), Maruti Suzuki India (-2.5%), and Hindalco Industries (-2.5%) topped the list of decliners while Tata Consultancy Services (+3.3%), Bajaj Auto (+2.4%), and Coal India (+2.2%) led advancing stocks.
- Australia’s S&P/ASX 200 declined 0.8% following some weaker than expected employment data. Leading the declines were the gold (-3.2%), utilities (-2.2%), and REITs (-1.6%) sectors. Over the last eight trading sessions, the index has declined nearly 6.0%.
- Regional advancers: Vietnam +0.7%
- Regional decliners: Taiwan -1.2%, South Korea -0.7%, Singapore -0.8%, Malaysia -0.9%, Thailand -1.4%, Indonesia -0.7%, Philippines -0.7%
FX
- USD/CNY +0.2% at 6.2080
- USD/INR +0.9% at 64.181
- USD/JPY -0.3% at 119.09
EUROPE
Major European indices trade mostly lower, but they have climbed off their worst levels of the day. Still, UK’s FTSE remains down 0.5% with the general election underway. However, there is little expectation for any particular party coming away with an outright majority, meaning a coalition government is more likely.
On a separate note, German bunds have faced continued selling pressure with the 10-yr yield higher by five basis points at 0.64% after briefly touching 0.79% in earlier action.
- Eurozone Retail PMI 49.5 (prior 48.6)
- Germany’s March Factory Orders +0.9% month-over-month (expected 1.5%; prior -0.9%)
- France’s March Industrial Production -0.3% month-over-month (consensus 0.1%; last 0.5%); March Trade Balance -EUR4.60 billion (expected -EUR3.60 billion; prior -EUR3.60 billion)
- Swiss Q2 SECO Consumer Climate -6 (expected -11; previous -6)
Closing Prices
- UK’s FTSE: -0.7%
- Germany’s DAX: + 0.5%
- France’s CAC: -0.3%
- Spain’s IBEX: + 0.2%
- Portugal’s PSI: -0.6%
- Italy’s MIB Index: + 0.8%
- Irish Ovrl Index: + 0.8%
- Greece ASE General Index: + 3.0%
Macroeconomic Data
Economic Data
from Briefing.com
- Challenger Job Cuts : 52.8% (Prior 6.4%)
- Initial Claims : 265K vs 280K (Prior 262K)
- Continuing Claims : 2228K vs 2295K (Prior 2256K - Up)
- Natural Gas Inventories : 76 bcf (Prior 81 bcf)
- Consumer Credit : $20.5B vs $16.0B (Prior $14.8B)
UNEMPLOYMENT CLAIMS
Highlights
- The initial claims level increased to 265,000 for the week ending May 2 from an unrevised 262,000 for the week ending April 25. The Briefing.com Consensus expected the initial claims level to increase to 280,000.
- The continuing claims level declined to 2.228 mln for the week ending April 25 from 2.256 mln for the week ending April 18. The Briefing.com Consensus expected the continuing claims level to increase to 2.295 mln.
Key Factors
- There is no doubt that businesses have actively cut down on their layoff activity. The four-week moving average for initial claims declined to 279,500 from 283,750. For comparison, it was only a little more than a month ago in March wherein the four-week moving average was stable over 300,000.
- In the entire history of the data set, the four-week moving average has been below 280,000 only a handful of times. The last time was in May 2000.
- Furthermore, the Department of Labor stated that no special factors caused the change in trends.
- That is the lowest continuing claims level since November 2000.
Big Picture
- The initial claims level is showing vast improvements in labor force conditions.
CONSUMER CREDIT
Highlights
- Total outstanding consumer credit increased by $20.5 bln in March after increasing a downwardly revised $14.8 bln (from $15.5 bln) in February. The Briefing.com Consensus expected consumer credit to increase by $16.0 bln.
Key Factors
- That was the biggest increase in consumer credit since a gain of $21.5 bln in July 2014.
- Typically, consumer credit goes through sizable revisions before the final numbers are released. Any future revision is unlikely to materially impact current trends.
- Revolving credit increased by $4.4 bln, from $885.1 bln in February to $889.4 bln in March.
- Nonrevolving credit increased to $2,474.9 bln in March from $2,457.7 bln in February, a gain of $16.2 bln.
Big Picture
- Consumer credit has increased by an average of $18.0 bln each month over the past 12 months.
Market Internals
NYSE:
Lower Volumes than the day before – 807.1M vs 823.5M
Advancers outpaced Decliners (adv/dec): 1779 / 1295
New Lows outpaced New Highs (highs/lows): 26 / 57
NASDAQ:
Lower Volumes than the day before – 2032.0M vs 2126.1M
Advancers outpaced Decliners (adv/dec): 1545 / 1218
New Lows outpaced New Highs (highs/lows): 47 / 69
VOLATILITY S&P500 (VIX)
15.13 -0.02 (-0.13%)
15.13 -0.02 (-0.13%)
Internals seemed to validate that market is consolidating. Volume remains strong but internals are not suggesting neither a strong bullish or bearishness. VIX closed with a narrow range and was volatile as well prior to Friday.
Technical Updates
17,924.06 +82.08 (+0.46%)
Volume: 80,924,946 (below average of 99,487,055)
Range: 17,796.94 - 17,973.07
Range: 17,796.94 - 17,973.07
4,945.55 +25.91 (+0.53%)
Volume: 470.6M (above average of 434,935,119)
Volume: 470.6M (above average of 434,935,119)
Range: 4,914.53 - 4,957.12
S&P 500 INDEX (SPX: CBOE)
2,088.00 +7.85 (+0.38%)
Volume: 523.8M (below average of 532,756,063)
Range: 2,074.99 - 2,092.90
The 3 indices are back to test their 50 MAs and I reckon it is more to short-covering. If the market could not break above the 50MA, I think we are likely to see more "Sell in May" scene. MACD is also indicating the increasing bearish momentum and tomorrow session should give us a rough guide on where market might be heading into.
Commodities
Commodities
Closing Commodities: WTI Crude Lost Steam, Ends Below $59/Barrel
Energy
Agriculture
Metals
Dollar Rallies
Bonds
- WTI took a hit today, sliding lower and ending the day below $59/barrel
- June crude ultimately closed $1.96 lower at $58.98/barrel
- June natural gas futures lost $0.05 to $2.73/MMBtu
- Strength in the dollar index kept pressure on metals today such as gold and silver
- June gold fell $8.30 to $1182.30/oz, while July silver lost $0.18 to $16.32/oz
Energy
- June crude oil futures fell $1.96/barrel to $58.98/barrel
- June natural gas closed $0.05 lower at $2.73/MMBtu
- RBOB Gasoline closed $0.04 lower at $1.99/gallon
- Heating oil futures closed $0.05 lower to $1.96/gallon
Agriculture
- July corn closed $0.05 lower to $3.61/bushel
- July wheat closed $0.06 lower to $4.73/bushel
- July soybeans closed $0.08 lower at $9.75/bushel
- Ethanol closed $0.01 lower at $1.64/gallon
- Sugar #11 closed 0.09 cents higher to 12.96 cents/lb
Metals
- June gold ended today’s session $8.30 lower to $1182.30/oz
- July silver closed $0.18 lower at $16.32/oz
- July copper closed $0.01 lower to $2.91/lb
Currencies
- The dollar gained against every other major currency today in general synchronicity with Treasuries and supported by stronger data in the United States
- Initial and Continuing Jobless Claims in the U.S. beat expectations (Initial Claims were 265K versus the Briefing.com consensus of 280K. Continuing CLaims were 2228K versus the Briefing.com consensus of 2295K)
- U.S. Dollar Index: + 0.67% to 94.71
- EUR/USD: -0.69% to $1.1268
- German Factory Orders rose 0.9% m/m in March, lower than expectations but better than the 0.9% decline in February
- AUD/USD: -0.83% to $0.7899
- The jobs report showed that Australian employment dropped by 2,900 in April, short of estimates and the 37,700 gain in March
- NZD/USD: -0.64% to $0.7442
- USD/CAD: +0.89% to 1.2146
- USD/CHF:+0.62% to 0.9217
- USD/JPY: +0.36% to 119.83
Bonds
First Up Day in Eight
- Treasuries finally mustered a bounce today despite stronger-than-expected economic data. The yield curve flattened as it had been steepening though most of the sell-off
- Yield check:
- 2-yr: -2 bps to 0.62%
- 5-yr: -4 bps to 1.55%
- 10-yr: -6 bps to 2.18%
- 30-yr: -8 bps to 2.91%
- News:
- Initial Jobless Claims increased to 265,000 for the week ending May 2 from an unrevised 262,000 for the week ending April 25. The Briefing.com Consensus expected the Initial Claims to increase to 280,000
- The four-week moving average for Initial Claims declined to 279,500 from 283,750. In the entire history of the data set, the four-week moving average has been below 280,000 only a handful of times. The last time was in May 2000
- Voters in the U.K. went to the polls today. The outcome may be drawn out as even a victorious party will likely have to form a coalition government
- European sovereign yields spiked again today with the 10-year Bund yield hitting 0.79% and the French 10-year OAT yield touching 1.10%
- Chicago Fed President Charles Evans spoke on CNBC this morning and reiterated that the FOMC can wait until 2016 to begin tightening policy. He is an FOMC voter and on the hawkish wing of the committee. When asked if Fed Chair Yellen's remarks regarding equity market valuations on Wednesday were appropriate (they're high, she said), he said that as long as Fed policy is criticized for creating financial instability, it will be the business of the Fed to mind financial markets
- March Consumer Credit rose $20.5 bln, higher than the Briefing.com consensus of $16 bln
- Commodities:
- WTI Crude declined 3.46% to $58.82/bbl and broke its uptrend on a daily chart from March 18th
- Gold fell 0.71% to $1,182.0/troy oz.
- Copper fell 0.34% to $2.916/lb.
- Currencies:
- EUR/USD: -0.69% to $1.1267
- USD/JPY: +0.33% to 119.80
- Data out Friday:
- April Employment Situation Report (08:30 ET)
- March Wholesale Inventories (10:00 ET)
Treasury Yields:
- 2 Year Note 0.63% -0.02
- 5 Year Note 1.55% -0.03
- 10 Year Note 2.18% -0.07
- 30 Year Bond 2.90% -0.08
2/30 Spread: 227 bps ( -6 ) … 2/10 Spread: 155 bps ( -5 )
Preview for Friday 8 May, 2015
Economic Data
Friday (8 May) :
- Nonfarm Payrolls : 213K (Prior 126K)
- Nonfarm Private Payrolls : 205K (Prior 129K)
- Unemployment Rate : 5.4% (Prior 5.5%)
- Hourly Earnings : 0.2% (Prior 0.3%)
- Average Workweek : 34.6 (Prior 34.5)
- Wholesale Inventories : 0.3% (Prior 0.3%)
Earnings Highlights
Friday (8 May) :
BMO - AMRN AOL BECN BBG BCRX BITA NILE BR CST TRAK DRH EBIX ERF ESNT FLY GTXI HCN HMSY HZNP ZINC SNOW JD KOP LXU MHR NWHM NRF NYLD SSP SIRO LNCE SJI TTI TREX TPH TRCO VICL WWAV WLH
AMC - None Scheduled
BMO - AMRN AOL BECN BBG BCRX BITA NILE BR CST TRAK DRH EBIX ERF ESNT FLY GTXI HCN HMSY HZNP ZINC SNOW JD KOP LXU MHR NWHM NRF NYLD SSP SIRO LNCE SJI TTI TREX TPH TRCO VICL WWAV WLH
AMC - None Scheduled
Summary
Friday is going to be a closely monitored session as everyone is waiting for the release of employment numbers in the US. For the past two days, market did not really move much or put it simply - volatile.
I won't be commenting much on the market as bad news might turn out to be good news. But I will be watching the market for the post-movement.
I won't be commenting much on the market as bad news might turn out to be good news. But I will be watching the market for the post-movement.
Direction for Friday 8 May, 2015; Abstain
2015 Weekly Directional Accuracy: 9/15 (60.00%)
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