Dow -7.74 at 18060.49, Nasdaq +5.50 at 4981.69, S&P -0.64at 2098.48
Market started off strong but revert to the flat line after an hour. Perhaps the weak retail sales was what pushed the market higher at the opening. The Dollar Index continues to slide as economic data is not much optimistic. Crude oil has been rising with the effect of a lower dollar and the concern of slowdown in production. In general the market is still cautious amid the volatility.Tuesday session certainly show some underlying bullishness in the market. With quite a number of economic data releasing in China, Euro, UK and US, it is likely that market would be influenced by the numbers. I suspect tomorrow session is going to be shaky as well.
Direction for Wednesday 13 May, 2015; Up
Market Summary
Industry Watch
Strong: Industrials, Technology, Telecom Services
Weak: Consumer Discretionary, Energy, Financials, Materials, Utilities
Other Market Moving Factor:
- April Retail Sales miss expectations (0.0%; Briefing.com consensus 0.2%)
- Dow Jones Transportation Average underperforms
Prior to the open, the Retail Sales report for April (0.0%; Briefing.com consensus 0.2%) missed expectations for the fifth consecutive month. The economic disappointment helped Treasuries extend their overnight gains with the benchmark 10-yr yield hitting a morning low at 2.19%; however, Treasuries reversed from their morning highs and spent the day in a steady retreat (10-yr yield +3 bps to 2.28%) while the stock market followed suit.
Only four sectors registered gains, but the top-weighted technology sector (+0.5%) held the lead throughout the session and prevented the S&P 500 from registering a larger loss. In addition, the sector fueled the Nasdaq's outperformance with large cap names like Intel (INTC 32.64, +0.39), Microsoft (MSFT 47.62, +0.27), and Qualcomm (QCOM 69.73, +0.95) climbing between 0.6% and 1.4%.
Elsewhere among cyclical sectors, the industrial space (+0.2%) also spent the day in the green even as transport stocks lagged notably. The Dow Jones Transportation Average lost 1.1%, widening its year-to-date decline to 6.4% as 17 of its 20 components ended in the red. Delta Air Lines (DAL 46.78, +0.68) was a notable standout, adding 1.5% after announcing a $5 billion buyback program and boosting its dividend 50% to $0.135.
On the downside, the utilities sector (-1.1%) spent the session behind its peers while the consumer discretionary space (-0.6%) was the second-weakest performer. Sector heavyweight Comcast (CMCSA 56.28, -1.05) fell 1.8% while retailers also struggled following the disappointing economic data. The SPDR S&P Retail ETF (XRT 98.30, -0.29) lost 0.3%.
Also of note, the energy sector (-0.3%) was among the early leaders, but the growth-sensitive group was pressured by crude oil, which fell 0.4% to $60.46/bbl. The energy component could not rally even as the Dollar Index (93.72, -0.81) lost 0.9%.
Today's participation was in-line with Monday and Tuesday as roughly 700 million shares changed hands at the NYSE floor.
Economic data included Retail Sales, Import/Export Prices, Wholesale Inventories, and MBA Mortgage Index:
- Retail sales were flat in April after increasing an upwardly revised 1.1% (from 0.9%) in March while the Briefing.com consensus expected retail sales an increase of 0.2%
- Auto manufacturers reported a steep decline in the number of units sold in April (16.5 million SAAR from 17.1 million SAAR). That translated into a 0.4% decline at motor vehicle and parts dealers, down from a prior 2.9% increase
- Excluding motor vehicles, retail sales increased a modest 0.1% after increasing an upwardly revised 0.7% (from 0.4%) in March while the consensus expected an increase of 0.4%
- In the first quarter, the added income that was derived from lower oil prices was used to stockpile additional savings instead of boosting consumption. Now that gasoline prices are again on the rise, consumers are not only not liquidating their savings to pay for the higher gasoline costs, but they are adding more to their savings stockpile
- Export prices, excluding agriculture, decreased 0.7% in April after increasing 0.2% in the prior reading
- Excluding oil, import prices fell 0.4%, which followed last month's 0.4% decline
- Business inventories increased 0.1% in March after increasing a downwardly revised 0.2% (from 0.3%) in February while the Briefing.com Consensus expected an increase of 0.2%
- The changes in inventories for manufacturers (-0.2%) and merchant wholesalers (0.1%) were known prior to the release. The only new information was that retailer inventories increased 0.3% in March, down from a 0.5% increase in February
- The weekly MBA Mortgage Index fell 3.5% to follow last week's 4.6% decline
Global Market
ASIA
Asian Markets Close: Japan’s Nikkei +0.7%; Hong Kong’s Hang Seng -0.6%; China’s Shanghai Composite -0.6%
Markets in the Asia-Pacific region finished mostly higher on Wednesday. The Hang Seng (-0.6%) and the Shanghai Composite (-0.6%) were the notable exceptions as they fell prone to selling pressure following a batch of economic data from the mainland, including retail sales, industrial production, and fixed asset investment, that was weaker than expected.
Economic data
- Japan
- March Current Account JPY 2.795 tln (expected JPY 2.060 tln; prior JPY 1.440 tln)
- April Bank Lending +2.6% year-over-year (expected +2.5%; prior +2.6%)
- April Economy Watchers Current Index 53.6 (expected 52.1; prior 52.2)
- China
- April Fixed Asset Investment +12.0% year-over-year (expected +13.5%; prior +13.5%)
- April Industrial Production +5.9% year-over-year (expected +6.0%; prior +5.6%)
- April Retail Sales +10.0% year-over-year (expected +10.5%; prior +10.2%)
- April New Loans CNY 707.9 bln (expected CNY 903.0 bln; prior CNY 1,180.0 bln)
- April Outstanding Loan Growth 14.1% (expected 14.0%; prior 14.0%)
- April M2 Money Stock +10.1% year-over-year (expected +11.9%; prior +11.6%)
- South Korea
- April Export Price Index -6.1% year-over-year (prior -6.8%)
- April Import Price Index -17.1% (prior -17.1%)
- Australia
- Q1 Wage Price Index +0.5% quarter-over-quarter (expected +0.6%; prior +0.6%); +2.3% year-over-year (expected +2.4%; prior +2.5%
- New Zealand
- April FPI -0.3% month-over-month (prior +0.1%)
Equity Markets
- Japan’s Nikkei increased 0.7% and finished near its highs for the day after the country posted its largest current account surplus in seven years, according to reports. The gains were led by the basic materials (+1.2%), energy (+1.1%), and consumer cyclical (+1.1%) sectors. Toho Zinc Co (+9.9%), Pacific Metals Co (+7.6%), and Shimizu Corp (+6.5%) topped the list of individual winners while Mitsumi Electric Co (-8.1%), Yokogawa Electric (-5.3%), and Nippon Soda Co (-5.2%) paced the losers. Out of the 225 index members 134 ended higher, 90 finished lower, and 1 was unchanged.
- Hong Kong’s Hang Seng declined 0.6%, trailing off in the afternoon trade after sporting modest gains early in the session. The decline was led by the financial (-0.8%) and basic materials (-0.8%) sectors. China Resources Land (-6.3%), China Merchants Holdings (-2.7%), and Tingyi Cayman Islands Holding Corp (-2.6%) were the biggest individual losers. Hang Seng Bank (+2.9%) and Kunlun Energy Co (+1.7%) were the only two stocks to gain in excess of 1.0%. Out of the 50 index members, 8 ended higher and 42 finished lower.
- China’s Shanghai Composite declined 0.6% with the bulk of the losses coming in the final hour of trade. The losses came on the back of a raft of April data that was weaker than consensus views, including fixed asset investment, industrial production, retail sales, and new loans for April. The technology (-1.8%), financial (-1.1%), and industrial (-0.9%) sectors were influential laggards in the Chinese market on Wednesday.
- India’s Sensex increased 1.4% and finished near its highs for the day. Leading sectors included the financial (+2.7%), industrial (+2.0%), and utilities (+1.7%) sectors. Axis Bank (+4.9%), GAIL India (+3.0%), and State Bank of India (+2.6%) topped the list of individual winners. Hindalco Industries (-3.0%), Bharti Airtel (-2.3%), and NTPC Ltd (-2.3%) led declining issues.
- Australia’s S&P/ASX 200 jumped 0.7% and ended near its highs for the day as investors responded favorably to the government’s latest federal budget. The advance was led by the gold (+2.4%), consumer staples (+1.7%), and consumer discretionary (+1.2%) sectors.
- Regional advancers: Taiwan +0.5%, South Korea +0.8%, Singapore +0.3%, Malaysia +0.3%, Thailand +0.7%, Indonesia +0.8%, Philippines +0.2%
- Regional decliners: Vietnam -0.3%
FX
- USD/CNY -0.07% at 6.2046
- USD/INR -0.5% at 63.980
- USD/JPY -0.1% at 119.78
EUROPE
Major European indices trade higher across the board with France’s CAC (+1.1%) in the lead. Elsewhere, Greece’s Interior Minister Nikos Voutsis said the government has no plans to call a referendum or snap elections. He added that a request has been made to hold an additional Eurogroup meeting on May 22.
- Eurozone Q1 GDP +0.4% quarter-over-quarter (expected 0.5%; prior 0.3%); +1.0% year-over-year (consensus 1.1%; last 0.9%). Separately, March Industrial Production -0.3% month-over-month (expected 0.2%; last 1.0%); +1.8% year-over-year, as expected (prior 1.9%)
- Germany’s Q1 GDP +0.3% quarter-over-quarter (expected 0.5%; prior 0.7%); +1.1% year-over-year (expected 1.2%; last 1.6%). Separately, April CPI 0.0% month-over-month (consensus -0.1%; last -0.1%); +0.5% year-over-year (consensus 0.4%; last 0.4%)
- UK’s March Average Earnings Index + Bonus +1.9% (expected 1.7%; prior 1.7%). Separately, April Claimant Count -12,600 (expected -20,000; last -16,700) while the unemployment rate ticked down to 5.5% from 5.6%, as expected
- French Q1 GDP +0.6% quarter-over-quarter (expected 0.4%; prior 0.1%). Separately, Q1 Nonfarm Payrolls -0.1% quarter-over-quarter (expected 0.0%; prior 0.0%) and April CPI +0.1% month-over-month (consensus 0.2%; last 0.7%)
- Italy’s Q1 GDP +0.3% quarter-over-quarter (consensus 0.2%; prior 0.0%); 0.0% year-over-year (expected -0.2%; last -0.5%). Separately, April CPI +0.2% month-over-month (expected 0.3%; prior 0.2%); -0.1% year-over-year (consensus 0.0%; prior -0.1%)
- Spain’s April CPI +0.9% month-over-month (consensus 1.0%; prior 0.6%); -0.6% year-over-year, as expected
Closing Prices
- UK’s FTSE: + 0.2%
- Germany’s DAX: -1.1%
- France’s CAC: -0.3%
- Spain’s IBEX: + 0.0%
- Portugal’s PSI: + 0.9%
- Italy’s MIB Index: + 0.5%
- Irish Ovrl Index: + 0.1%
- Greece ASE General Index: 0.0%
Macroeconomic Data
Economic Data
from Briefing.com
- MBA Mortgage Index : -3.5% (Prior -4.6%)
- Retail Sales : 0.0% vs 0.2% (Prior 1.1% - Up)
- Retail Sales ex-auto : 0.1% vs 0.4% (Prior 0.7% - Up)
- Export Prices ex-agri : -0.7% (Prior 0.2%)
- Import Prices ex-oil : -0.4% (Prior -0.4%)
- Business Inventories : 0.1% vs 0.2% (Prior 0.2% - Down)
- Crude Inventories : -2.191M (Prior -3.882M)
RETAIL SALES
Highlights
- Retail sales were flat in April after increasing an upwardly revised 1.1% (from 0.9%) in March. The Briefing.com Consensus expected retail sales to increase 0.2%.
- Excluding motor vehicles, retail sales increased a modest 0.1% after increasing an upwardly revised 0.7% (from 0.4%) in March. The consensus expected these sales to increase 0.4%.
- Core retail sales, which exclude motor vehicle dealers, gasoline stations, and building material and supply stores, increased 0.1% in April. That was down from a 0.6% gain in March. Core sales more closely match with the goods component in the personal consumer expenditures category of GDP.
Key Factors
- The key to the report is that consumers are continuing to hold on to their savings.
- In the first quarter, the added income that was derived from lower oil prices was used to stockpile additional savings instead of boosting consumption. Now that gasoline prices are again on the rise, consumers are not only not liquidating their savings to pay for the higher gasoline costs, but they are adding more to their savings stockpile.
- Spending in April was well below the 0.3% increase in aggregate earnings that was reported in the April employment report.
- The trend of maintaining an elevated savings rate in lieu of consumption will keep second quarter growth from returning to its potential rate (2.8% - 3.2%).
- Auto manufacturers reported a steep decline in the number of units sold in April (16.5 mln SAAR from 17.1 mln SAAR). That translated into a 0.4% decline at motor vehicle and parts dealers, down from a prior 2.9% increase.
Big Picture
- Consumers continue to prefer savings over spending.
BUSINESS INVENTORIES
Highlights
- Business inventories increased 0.1% in March after increasing a downwardly revised 0.2% (from 0.3%) in February. The Briefing.com Consensus expected business inventories to increase 0.2%.
Key Factors
- The changes in inventories for manufacturers (-0.2%) and merchant wholesalers (0.1%) were known prior to the release. The only new information was that retailer inventories increased 0.3% in March, down from a 0.5% increase in February.
- Gains in motor vehicles and parts (0.6%), clothing stores (0.8%), and food and beverage stores (0.9%) were partially offset by declines in general merchandise stores (-0.5%) and furniture and electronics stores (-0.5%).
- Total business sales rose 0.4% in March after declining 0.2% in February.
- The inventory-to-sales ratio dipped to 1.36 in March from 1.37 in February.
Big Picture
- Business inventories include wholesale inventories, manufacturing inventories, and retail inventories. Inventories are a component of GDP, and thus are of interest to economists, but the financial markets don't pay much attention to this release. Over the long term, the inventory-to-sales ratio has been declining, due to improving techniques for inventory management.
Market Internals
NYSE:
Higher Volumes than the day before – 719.8M vs 710.2M
Advancers outpaced Decliners (adv/dec): 1701 / 1379
New Highs outpaced New Lows (highs/lows): 54 / 35
NASDAQ:
Lower Volumes than the day before – 1662.9M vs 1694.4M
Advancers outpaced Decliners (adv/dec): 1382 / 1366
New Highs outpaced New Lows (highs/lows): 74 / 34
VOLATILITY S&P500 (VIX)
13.76 -0.10 (-0.72%)
I would say it is another divergence session. Internals are neither bullish nor bearish and volume is remaining light. VIX had another volatile day and closed a bit lower than the day before. Again this is reflecting the lack of leadership in the market.
Technical Updates
18,060.49 -7.74 (-0.04%)
Volume: 85,179,764 (below average of 99,427,492)
Range: 18,039.20 - 18,132.79
Range: 18,039.20 - 18,132.79
4,981.69 +5.50 (+0.11%)
Volume: 385.2M (below average of 434,216,089)
Volume: 385.2M (below average of 434,216,089)
Range: 4,977.49 - 5,012.97
S&P 500 INDEX (SPX: CBOE)
2,098.48 -0.64 (-0.03%)
Volume: 473.5M (below average of 530,423,453)
Range: 2,096.04 - 2,110.19
Both NASDAQ and S&P seemed to be held down by their 20MAs while DOW is still unable to break above the resistance level. Furthermore NASDAQ forms a head and shoulder pattern and that might trigger some downside in the market. I won't say the bullish steam is out of the game yet as market was just rather flat. Also market is still in a midst of consolidation.
Commodities
Commodities
Closing Commodities: WTI Oil Drops Notably, Back Down Near $60/Level In Electronic Trade
Energy
Agriculture
Metals
Dollar Slumps
Bonds
- Despite notable weakness in the dollar index and despite draws seen in API oil storage data and draws seen in EIA oil, gas and distillate storage data, WTI crude oil prices lost steam and have been sliding lower today
- There was a period of about two hours and 15 minutes where WTI crude was climbing higher. However, it has been downhill since then (about 1:15pm ET) as crude slid down near the $60/barrel level in current trade
- In the floor trading session, June crude closed the day -$0.27 at $60.46/barrel, before extending losses
- Weakness in the dollar index helped provide strength in other commodities, such as gold and silver
- June gold closed the day +2.1% at $1217.90/oz, while July silver rallied +4.1% to $17.23/oz
Energy
- June crude oil futures fell $0.27 to $60.46/barrel
- June natural gas closed $0.03 higher at $2.93/MMBtu
- RBOB Gasoline closed flat at $2.04/gallon
- Heating oil futures closed flat at $2.00/gallon
Agriculture
- July corn closed $0.01 higher to $3.62/bushel
- July wheat closed $0.01 higher at $4.82/bushel
- July soybeans closed $0.01 higher to $9.57/bushel
- Ethanol closed $0.01 higher at $1.64/gallon
- Sugar #11 closed 0.62 cents loiwer to 12.96 cents/lb
Metals
- June gold ended today’s session $25.20 higher (+2.11%) to $1217.90/oz
- July silver closed $0.68 higher (+4.1%) at $17.23/oz
- July copper closed flat at $2.93/lb
Currencies
- In the span of a month, the U.S. Dollar Index has dropped from 100 to its current level of 93.62. It now stands down 0.97% on the day, losing against all of the majors
- EUR/USD: +1.27% to $1.1360
- Eurozone GDP grew 1.0% y/y in Q1 2015, slower than expectations but better than the 0.9% performance in Q4 2014
- Eurozone Industrial Production fell 0.3% m/m in March, worse than expectations and the prior reading of 1.0%
- GBP/USD:
- In the U.K., the unemployment rate fell to 5.5% as expected. That level is a post-crisis low
- The number of jobless fell 35K to 1.83 million and the Average Earnings Index rose 1.9%, faster than expected
- The Bank of England cut its growth forecast for 2015 to 2.5% from 2.9%
- In the U.K., the unemployment rate fell to 5.5% as expected. That level is a post-crisis low
- USD/JPY: -0.65% to 119.11
- AUD/USD: +1.47% to $0.8102
- NZD/USD: +1.08% to $0.7474
- USD/CHF: -1.23% to 0.9173
- USD/CAD: -0.32% to 1.1970
Bonds
Yield Curve Steepens
- The major theme in the fixed income complex today was the steepening of the yield curve, as the 2-year note yield dropped 2 basis points and the 30-year bond yield rose 5 basis points. This is rather uncommon
- Yield check:
- 2-yr: -2 bps to 0.58%
- 5-yr: -1 bp to 1.56%
- 10-yr: +2 bps to 2.27%
- 30-yr: +5 bps to 3.07%
- News:
- The MBA Mortgage Index fell 3.5% for the week ending May 9. The index had read -4.6% the week prior
- Retail sales were flat in April after increasing an upwardly revised 1.1% (from 0.9%) in March. The Briefing.com Consensus expected retail sales to increase 0.2%
- Excluding motor vehicles, retail sales increased a modest 0.1% after increasing an upwardly revised 0.7% (from 0.4%) in March. The consensus expected these sales to increase 0.4%
- Treasuries popped on the announcement but those highs would last for the rest of the day
- Export Prices ex-agriculture fell 0.7% in April versus a gain of 0.2% in March
- Import Prices ex-oil fell 0.4% in April versus a 0.4% fall in in March
- Business inventories rose 0.1% in March after a downwardly revised reading of 0.2% in February. The Briefing.com consensus was looking for +0.2%
- The changes in inventories for manufacturers (-0.2%) and merchant wholesalers (0.1%) were known prior to the release. The only new information was that retailer inventories increased 0.3% in March, down from a 0.5% increase in February
- The $24 billion 10-year note auction was met with strong demand, showing a 1.4 basis point stop-through (high yield of 2.237% minus 2.251% when-issued quote at 13:00 ET)
- High yield: 2.237%
- Bid-to-cover: 2.72
- Indirect bid: 60.2%
- Commodities:
- WTI Crude: -0.81% to $60.25/bbl
- Gold: +1.85% to $1,214.40/troy oz. Gold is now trading within striking distance of multi-week highs. The curve-steepening trade in the Treasury complex today, suggesting that markets are not confident in the Fed's inflation-fighting commitment, confirms the bullishness in gold
- Copper: -0.12% to $2.928/lb.
- Currencies:
- EUR/USD: +1.17 to $1.1349
- USD/JPY: -0.62% to 119.14
- Data out Thursday:
- Initial Jobless Claims for the week ending 05/09 and Continuing Jobless Claims for the week ending 05/02 (08:30 ET)
- April PPI and Core PPI (08:30 ET)
- Natural Gas Inventories for the week ending 05/09 (10:30 ET)
- New Supply:
- $16 billion 30-year bond auction
Treasury Yields:
- 2 Year Note 0.59% -0.02
- 5 Year Note 1.57% -0.01
- 10 Year Note 2.27% -0.01
- 30 Year Bond 3.07% +0.05
2/30 Spread: 248 bps ( +7 ) … 2/10 Spread: 168 bps ( +1 )
Preview for Thursday 14 May, 2015
Economic Data
Thursday (14 May) :
- Initial Claims : 275K (Prior 265K)
- Continuing Claims : 2300K (Prior 2228K)
- PPI : 0.2% (Prior 0.2%)
- Core PPI : 0.1% (Prior 0.2%)
- Natural Gas Inventories : (Prior 76 bcf)
Earnings Highlights
Thursday (14 May) :
BMO - BDRBF CMGE CSTM CYRN GIL HIMX HSGX KITE KSS MMYT MANU NCFT PERY PFNX PBH PPP QIWI STOR TK TNK PLCE VWR
AMC - AMAT ANET HTHT CSC DAR DDS EXP LOCO GLOB JYNT KING MDLY JWN QUNR RLGT SANW SINA SYMC UPLD VCYT WB
BMO - BDRBF CMGE CSTM CYRN GIL HIMX HSGX KITE KSS MMYT MANU NCFT PERY PFNX PBH PPP QIWI STOR TK TNK PLCE VWR
AMC - AMAT ANET HTHT CSC DAR DDS EXP LOCO GLOB JYNT KING MDLY JWN QUNR RLGT SANW SINA SYMC UPLD VCYT WB
Summary
Market has been flat for the past few sessions and it looks as though market is finding a reason to do a breakout or selloff. I think unemployment claims tomorrow will justify last Friday's employment report. That might give the market a catalyst to adjust. To be honest I am finding it harder to give the market a proper direction. It comes down to the battle between the bulls and the bears, and that could mean sideway for the time being.
Direction for Thursday 14 May, 2015; Up
2015 Weekly Directional Accuracy: 9/16 (56.25%)
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