Dow +13.51 at 18312.39, Nasdaq -8.41 at 5070.03, S&P -1.38 at 2127.82
That was some uncertainty in the market. Market didn't move much and hovered around the flat line. Although market did reach a high again but it didn't stay there for long. It looks as though the breakout is not sustaining. The Dollar Index remains strong and meanwhile crude oil went lower alongside.I hardly see any increase in volume given market makes a new high, so it is most likely to be hype up action. However I am not entirely bearish as technology sector might be the turning point. Nonetheless if volume is going to remain weak, I reckon a correction is not too far from happening.
Direction for Tuesday 19 May, 2015; Down
Market Summary
Industry Watch
Strong: Consumer Discretionary, Financials, Health Care, Utilities
Weak: Consumer Staples, Energy, Materials, Industrials, Technology
Other Market Moving Factor:
- European Central Bank to frontload asset purchases in hopes of avoiding low liquidity in the summer, according to executive member Benoit Coeure
- Housing Starts beat expectations in April (1.135 mln; Briefing.com consensus 1.019 mln)
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 0.1%.
Elsewhere, the financial sector continued its recent outperformance amid increasing Treasury yields that are expected to boost net interest margins for banks. Thanks to today's gain, the sector is now up 3.4% in May versus a 2.0% gain for the S&P 500.
Treasury yields rose once again today, but not before an overnight rally in global bonds that followed remarks from European Central Bank executive member Benoit Coeure who said the ECB plans to frontload its asset purchases in hopes of avoiding thin liquidity conditions in July and August. The remarks boosted global bonds and weighed on the euro, sending the single currency lower by 1.5% against the dollar to 1.1150. Furthermore, the timing of the comments from Mr. Coeure was viewed as controversial because the original speech was delivered on Monday evening, London time, when the ECB member appeared before a private group of hedge fund investors; however, the speech was not released to the public until this morning. In response, the European Central Bank blamed the delay on an "internal procedural error."
Despite rallying overnight, U.S. Treasuries surrendered their gains in the morning after the April Housing Starts report beat expectations (1.135 mln; Briefing.com consensus 1.019 mln). True to recent form, the better than expected data point was seen as a potential headwind to the market considering a strong showing from the housing sector is likely to be used as an argument in favor of the Fed hiking rates sooner rather than later. That being said, homebuilder stocks outperformed with iShares Dow Jones US Home Construction ETF (ITB 27.30, +0.19) climbing 0.7%. Meanwhile, the broader consumer discretionary sector settled just below its flat line.
Also of note, another cyclical sector—energy—lost 1.2%, and settled behind the remaining nine groups as crude oil weighed. WTI crude ended lower by 3.6% at $58.08 and surrendered its May gain with the 1.1% increase in the Dollar Index (95.29, +1.07) adding to the pressure.
Today's participation represented an improvement from yesterday as more than 720 million shares changed hands at the NYSE floor.
Economic data was limited to Housing Starts and Building Permits:
- Housing starts increased 20.2% in April to 1.135 mln from an upwardly revised 944,000 (from 926,000) in March while the Briefing.com consensus expected an increase to 1.019 mln
- After the subpar first quarter, when housing starts plummeted to some of their worst levels since the middle of last year, construction levels rebounded significantly in April.
- This was the first time starts reached 1.135 mln since November 2007 and it was the first time starts increased by at least 20.2% in a month since a 20.9% increase in February 1991.
- Single-family starts increased 16.7% in April to 733,000 from 628,000 in March. That was the most single-family homes started since January 2008 when 773,000 were started.
- Building permits rose to a seasonally adjusted annualized rate of 1.143 mln in April from a revised 1.038 mln for March (from 1.039 mln) while the Briefing.com consensus expected a reading of 1.065 mln
Global Market
ASIA
Asian Markets Close: Japan’s Nikkei +0.7%; Hong Kong’s Hang Seng +0.4%; China’s Shanghai Composite +3.1%
Most markets in the Asia-Pacific region gained ground on Tuesday on the back of Wall Street’s record-setting showing. China’s Shanghai Composite (+3.1%) was the biggest mover, drawing further support from news that Beijing is planning some investor-friendly reform efforts.
Economic data
- Australia
- CB Leading Index -0.1% month-over-month (prior +0.5%)
- South Korea
- April PPI 0.0% month-over-month (prior -0.1%); -3.6% year-over-year (prior -3.7%)
- New Zealand
- Q1 PPI Input -1.1% quarter-over-quarter (expected -0.7%; prior -0.4%)
- Q1 PPI Output -0.9% quarter-over-quarter (prior -0.1%)
Equity Markets
- Japan’s Nikkei increased 0.7%, reclaiming a stance above the 20,000 level. Gains were seen across all sectors, yet no sector gained more than 1.0%. The consumer cyclical (+0.9%) and industrial (+0.9%) sector set the pace. Individual standouts included Shiseido Co (+5.1%), Nitto Boseki (+4.7%), and Nisshin Seifun Groyup (+4.1%). Nippon Yusen KK (-2.6%) was the worst-performing stock. Out of the 225 index members, 134 ended higher, 79 finished lower, and 12 were unchanged.
- Hong Kong’s Hang Seng jumped 0.4%, supported by strength in the mainland market and gains in the industrial (+1.7%), basic materials (+0.7%), and financial (+0.6%) sectors. Bank of Communications (+2.9%), China Life Insurance (+2.9%), and China Resources Land (+2.3%) led individual gainers while Power Assets Holdings (-2.9%), Kunlun Energy (-1.6%) and China Merchants Holdings Intl. (-1.4%) led decliners. Out of the 50 index members, 28 ended higher, 20 finished lower, and 2 were unchanged.
- China’s Shanghai Composite surged 3.1% and ended at its highs for the session. Sentiment was lifted by Wall Street’s record-setting performance, talk of a potential Shenzhen-Hong Kong Stock Connect program, and news, according to CNBC, that Beijing plans to implement reform efforts that include improving the IPO system, developing the capital markets, and gradually pulling back controls over deposit rates. The financial sector (+4.6%) led all sectors in Tuesday’s broad-based rally effort.
- India’s Sensex declined 0.2%, weighed down by weakness in the financial sector (-1.0%). Tata Motors (-2.1%), Housing Development Finance Corp (-1.9%), and Oil & Natural Gas Co (-1.3%) were the worst-performing issues. Hero MotoCorp (+2.4%), Vedanta (+1.9%), and Wipro (+1.5%) led all gainers.
- Australia’s S&P/ASX 200 declined 0.8% and ended near its lows for the day, shrugging off the implication in the Reserve Bank of Australia meeting minutes that the door is still open for additional interest rate cuts if necessary. Losses were led by the consumer staples (-1.9%), energy (-1.0%), and gold (-1.0%) sectors.
- Regional advancers: Taiwan +1.2%, South Korea +0.3%, Thailand +1.0%, Indonesia +0.6%, Vietnam +1.5%
- Regional decliners: Singapore -0.2%, Philippines -0.5%
FX
- USD/CNY +0.04% at 6.2067
- USD/INR +0.01% at 63.718
- USD/JPY +0.1% at 120.07
EUROPE
Major European indices trade higher across the board with Germany’s DAX (+1.9%) setting the pace. European equities spiked while the euro fell more than 100 pips against the dollar to 1.1185 after European Central Bank member Benoit Coeure said the central bank plans to purchase a large amount of assets up front in order to avoid thin liquidity conditions that are expected in July and August.
- Eurozone April CPI +0.2% month-over-month; 0.0% year-over-year. Both reading matched expectations. Separately, Core CPI +0.3% month-over-month; +0.6% year-over-year, as expected. Also of note ZEW Economic sentiment fell to 61.2 from 64.8 (expected 62.4) and the March trade surplus widened to EUR23.40 billion from EUR20.30 billion (expected surplus of EUR22.80 billion)
- Germany’s ZEW Economic Sentiment fell to 41.9 from 53.3 (consensus 49.0)
- UK’s April CPI +0.2% month-over-month (expected 0.4%); -0.1% year-over-year (consensus 0.0%). Separately, Core CPI +0.8% year-over-year (expected 1.0%; last 1.0%). Also of note, Input PPI -11.7% year-over-year (expected -11.5%; prior -12.8%) and House Price Index rose 9.6% year-over-year (consensus 7.7%; previous 7.2%)
Closing Prices
- UK’s FTSE: + 0.4%
- Germany’s DAX: + 2.2%
- France’s CAC: + 2.1%
- Spain’s IBEX: + 1.4%
- Portugal’s PSI: + 0.5%
- Italy’s MIB Index: + 2.2%
- Irish Ovrl Index: + 1.7%
- Greece ASE General Index: + 2.6%
Macroeconomic Data
Economic Data
from Briefing.com
- Housing Starts : 1135K vs 1019K (Prior 944K - Up)
- Building Permits : 1143K vs 1065K (Prior 1038K - Down)
Highlights
- Housing starts increased 20.2% in April to 1.135 mln from an upwardly revised 944,000 (from 926,000) in March. The Briefing.com Consensus expected housing starts to increase to 1.019 mln.
Key Factors
- After the subpar first quarter, when housing starts plummeted to some of their worst levels since the middle of last year, construction levels rebounded significantly in April. In fact, the April new home construction report revealed a lot of historic “firsts.” Contrary to most of the economic data thus far in 2015, these “firsts” were the good ones.
- That was the first time starts reached 1.135 mln since November 2007. That was the first time starts increased by at least 20.2% in a month since a 20.9% increase in February 1991. That was the first time starts increased by at least 191,000 since starts rose by 279,000 in January 2006.
- The news gets even better.
- Single-family starts increased 16.7% in April to 733,000 from 628,000 in March. That was the most single-family homes started since January 2008 when 773,000 were started. That was the largest monthly increase, in both percentage and absolute terms, since November 2013.
- Since single-family construction is typically a stable sector, the gain puts housing starts back on its late-2014 path.
- Multifamily construction increased to 402,000 in April from 316,000 in March.The number of homes currently under construction increased 1.5% in April to 853,000 from 840,000 in March.
- Unfortunately for GDP, most of the increase came from the multifamily sector. Spending on a per unit basis in the multifamily sectors is much smaller than on a single-family home. That means the residential investment gain is smaller than if the bulk of the increase in the number of units under construction came from the single-family sector.
Big Picture
- After a big pullback in housing starts in the first quarter, construction levels rebounded in a big way in April. Starts are now back on its 2014 upward path.
Market Internals
NYSE:
Higher Volumes than the day before – 739.3M vs 669.3M
Decliners outpaced Advancers (adv/dec): 1238 / 1831
New Highs outpaced New Lows (highs/lows): 118 / 38
NASDAQ:
Higher Volumes than the day before – 1708.8M vs 1630.6M
Decliners outpaced Advancers (adv/dec): 1212 / 1585
New Highs outpaced New Lows (highs/lows): 132 / 53
VOLATILITY S&P500 (VIX)
12.85 +0.12 (+0.94%)
Internals are not reflecting much direction in the market lately. The only significant is the no. of New Highs. Volume is slowing returning to the market as well. VIX also did not show any optimism but it is still below both 20 and 50 MAs.
Technical Updates
18,312.39 +13.51 (+0.07%)
Volume: 87,200,383 (below average of 100,207,210)
Range: 18,261.35 - 18,351.36
Range: 18,261.35 - 18,351.36
5,070.03 -8.41 (-0.17%)
Volume: 413.2M (below average of 437,752,393)
Volume: 413.2M (below average of 437,752,393)
Range: 5,062.80 - 5,087.35
S&P 500 INDEX (SPX: CBOE)
2,127.83 -1.37 (-0.06%)
Volume: 493,349,000 (below average of 536,407,453)
Range: 2,124.50 - 2,133.02
From what I see, the 3 indices are forming a reversal candlestick pattern. DOW is back to its support level while S&P is sitting on its pHib-Fan. It seems that we might see more downside ahead.
Commodities
Commodities
Closing Commodities: Commodities Feel Continued Pressure From Strong Dollar
Energy
Agriculture
Metals
Dollar Index Gains for Second Day
Bonds
- Strength in the dollar index continued to pressure commodities all day
- WTI oil, natural gas, gold and copper futures all ended the day near today’s lows
- July crude oil closed up pit trading -2.4% at $57.99/barrel
- June natural gas lost 2% to $2.95/MMBtu
- June gold fell $20.70 today to $1206.90/oz, while July silver fell $0.65 to $17.08/oz
- July copper fell $0.06 to $2.84/lb
Energy
- June crude oil futures fell $1.45 (-2.4%) to $57.99/barrel
- June natural gas closed $0.06 lower (-1.9%) at $2.95/MMBtu
- RBOB Gasoline closed $0.04 lower at $2.00/gallon
- Heating oil futures closed $0.06 lower at $1.93/gallon
Agriculture
- July corn closed $0.06 lower to $3.62/bushel
- July wheat closed $0.11 lower to $5.11/bushel
- July soybeans closed $0.09 lower to $9.46/bushel
- Ethanol closed $0.03 lower at $1.66/gallon
- Sugar #11 closed 0.08 cents higher to 12.86 cents/lb
Metals
- June gold ended today’s session $20.70 lower to $1206.90/oz
- July silver closed $0.65 lower at $17.08/oz
- July copper closed $0.06 lower at $2.84/lb
Currencies
- The dollar is rallying against all of the majors today, with the Dollar Index up 1.11% to 95.27. The first wave of gains came after the ECB announced that it would front-load its asset purchase program to take advantage of better market liquidity in May and June. The second wave came after the 08:30 ET release of April's Housing Starts and Building Permits data which was substantially better than expect
- Crude oil and gold both fell in sympathy, down 3.64% and 1.63%, respectively
- EUR/USD: -1.50% to $1.1150
- The ZEW Economic Sentiment Index for Germany fell to 41.9 in May from 53.3 in April. This level was well short of expectations
- Eurozone CPI and Core CPI for April both came out as expected at +0.2% y/y and +0.6% y/y, respectively
- Greek 10-year yields were down 24 basis points to 10.91% and Greek equities rallied 2.59% on optimism for a deal between Greece and its creditors
- GBP/USD: -0.99% to $1.5505
- Inflation in the United Kingdom fell short of expectations, with the CPI declining 0.1% y/y in April versus +0.0% in March
- USD/JPY: +0.62% to 120.71
- GDP for Q1 2015 will be released tonight
- USD/CHF: +1.24% to 0.9375
- USD/CAD: +0.58% to 1.2221
- AUD/USD: -0.98% to $0.7916
- NZD/USD: -0.47% to $0.7346
Bonds
Treasuries Lose Despite ECB
- The U.S. Treasury complex caught a bid overnight on remarks from the ECB that it would move forward some of its asset purchases. Those gains disappeared quickly after April Housing Starts and April Building Permits were released at 08:30 ET. Treasuries bottomed around 09:30 ET, but only the 30-year bond has mustered much of a bounce since then and the complex is pointing toward its lows at the time of writing
- Yield check:
- 2-yr: +3 bps to 0.61%
- 5-yr: +6 bps to 1.59%
- 10-yr: +4 bps to 2.28%
- 30-yr: +3 bps to 3.06%
- News:
- Executive Board member Benoit Coeure of the ECB announced that the European Central Bank will front-load its asset purchase program in May and June to avoid the illiquidity of the summer months. He also said that more assets could be purchased in September. The total size of the program will remain the same, at 60 billion euro/month until September of 2016
- Greek Finance Minister Yanis Varoufakis said that a deal with Greece's creditors is close, but officials from the creditor side of negotiations denied that
- There were 1135K seasonally-adjusted Housing Starts in April, significantly higher than the Briefing.com consensus of 1019K and the 944K starts in March
- That was the first time starts reached 1.135 mln since November 2007. That was the first time starts increased by at least 20.2% in a month since a 20.9% increase in February 1991. That was the first time starts increased by at least 191,000 since starts rose by 279,000 in January 2006
- The rate of new Building Permits was 1143K, higher than the Briefing.com consensus of 1065K and March's figure of 1038K
- Commodities:
- WTI Crude: -3.57% to $58.09/bbl, its lowest level since April
- Gold: -1.57% to $1208.30/troy oz.
- Copper: -2.58% to $2.8315/lb.
- Currencies:
- EUR/USD: -1.51% to $1.1150
- USD/JPY: +0.63% to 120.72
- Data out Tomorrow:
- MBA Mortgage Index for the week ending 05/16 (07:00 ET)
- Crude Inventories for the week ending 5/16 (10:30 ET)
- FOMC Minutes (14:00 ET)
- Fed Speak:
- Chicago Fed President Evans (FOMC voter) speaks on current economic conditions and monetary policy in Munich (03:00 ET)
Treasury Yields:
- 2 Year Note 0.63% +0.05
- 5 Year Note 1.60% +0.06
- 10 Year Note 2.27% +0.04
- 30 Year Bond 3.05% +0.03
2/30 Spread: 242 bps ( -2 ) … 2/10 Spread: 164 bps ( -1 )
Preview for Wednesday 20 May, 2015
Economic Data
Wednesday (20 May) :
- MBA Mortgage Index : (Prior -3.5%)
- Crude Inventories : (Prior -2.191M)
- FOMC Minutes
Earnings Highlights
Wednesday (20 May) :
BMO - AEO ATTO CTRN EV EVLV HRL LOW MIK SFUN SPLS TGT
AMC - EGHT BOOT BOX BRS HGR LB NTAP RXN CRM SCVL SNPS WSTL WSM XNET YOKU
BMO - AEO ATTO CTRN EV EVLV HRL LOW MIK SFUN SPLS TGT
AMC - EGHT BOOT BOX BRS HGR LB NTAP RXN CRM SCVL SNPS WSTL WSM XNET YOKU
Summary
Prior to FOMC minutes releasing on Wednesday, market movement was pretty much flat. Looking at the market right now, I think that is going to give the market some swing. Be ready to expect the unexpected.
Direction for Wednesday 20 May, 2015; Down
2015 Weekly Directional Accuracy: 9/17 (52.94%)
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