Dow -26.99 at 18285.40, Nasdaq +1.71 at 5071.74, S&P -1.98 at 2125.84
Another boring day in the market. Market was moving in a flat and I am doubting the strength that will carry the bullish momentum. It is yet to know how exactly the market reacted to the Fed's minutes, perhaps we would see it the next day. The Dollar Index was mostly influenced by the FOMC minutes and remained volatile. Another drawdown in the crude oil inventories gave the oil prices some push to the upside while it also stood relatively flat for most of the time.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
Market Summary
Industry Watch
Strong: Consumer Staples, Health Care, Telecom Services, Utilities
Weak: Consumer Discretionary, Financials, Industrials
Other Market Moving Factor:
- Cyclical sectors underperform
- FOMC Minutes reveal that many participants view June rate hike as "unlikely"
- Dollar Index struggles to hold overnight gain
Equity indices spent the first half of today's session near their flat lines with the S&P 500 maintaining a seven-point range that was violated to the upside during afternoon action once the Federal Open Market Committee released the minutes from its April policy meeting. The index could not hold its afternoon gain and returned to the flat line by the close.
Above all, the minutes revealed that some participants believed that the weakness observed in the first quarter could extend into Q2 with many officials characterizing a rate hike in June as "unlikely." However, the minutes did not rule out a near-term rate hike in its entirety.
Treasuries retreated immediately following the release, but they returned to their afternoon levels shortly thereafter. The 10-yr note settled near its high with the benchmark yield slipping four basis points to 2.25%.
On a related note, the Dollar Index (95.50, +0.23) endured a whipsaw afternoon after holding a modest intraday gain. The index surged to its session high following the minutes and then slumped to its low, but still ended the day with a slim gain of 0.2%.
Five sectors ended in the green with three countercyclical groups showing relative strength throughout the day. Rate-sensitive telecom services (+0.5%) and utilities (+0.2%) benefitted from lower rates while the health care sector (+0.1%) was underpinned by biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 363.59, +3.11) gained 0.9% with the industry group contributing to the outperformance of the Nasdaq.
Similarly, high-beta chipmakers also gave a boost to the tech-heavy index. The PHLX Semiconductor Index added 0.2% with the move paced by a 4.3% gain in Analog Devices (ADI 66.18, +2.73) after the company reported a one-cent beat. For its part, the broader technology sector displayed afternoon strength, but returned to its flat line by the close.
Elsewhere among cyclical sectors, consumer discretionary (-0.2%), industrials (-0.4%), and financials (-0.4%) lagged throughout the day. Notably, the industrial sector suffered from losses among transport stocks that sent the Dow Jones Transportation Average lower by 2.0%. Airlines paced the slide with Delta Air Lines (DAL 43.62, -2.59), Southwest Airlines (LUV 37.19, -3.72), and United Continental (UAL 54.54, -6.27) losing between 5.6% and 10.3% after Southwest lowered its guidance. In addition, investors showed concern over potential pricing pressures that could result from the entry of three subsidized Arabian Gulf carriers into the U.S. market.
Lastly, the financial sector (-0.4%) spent the day among the laggards. The long-awaited settlement between the Department of Justice and five large banks was announced today with fines against Citigroup (C 54.89, -0.44), JPMorgan Chase (JPM 66.48, -0.53), Barclays (BCS 16.86, +0.56), UBS (UBS 21.96, +0.83), and Royal Bank of Scotland (RBS 11.05, +0.21) totaling $5.80 billion.
Today's participation was comparable to totals observed earlier in the week with fewer than 700 million shares changing hands at the NYSE floor.
Economic data was limited to the weekly MBA Mortgage Index, which fell 1.5% to follow last week's 3.5% decline.
Tomorrow, weekly Initial Claims (Briefing.com consensus 270K) will be released at 8:30 ET while April Existing Home Sales (consensus 5.24 million), April Leading Indicators (expected 0.3%), and May Philadelphia Fed Survey (expected 8.0) will cross the wires at 10:00 ET.
Global Market
ASIA
Asian Markets Close: Japan’s Nikkei +0.9%; Hong Kong’s Hang Seng -0.4%; China’s Shanghai Composite +0.7%
Most markets in the Asia-Pacific region finished higher on Wednesday, bolstered by a better than expected Q1 GDP report out of Japan.
Economic data
- Japan
- Q1 GDP +0.6% quarter-over-quarter (expected +0.4%; prior +0.3%); +2.4% year-over-year (expected +1.5%; prior +1.1%)
- Q1 GDP Price Index +3.4% year-over-year (expected +3.6%; prior +2.4%)
- Leading Index 106.0 (expected 105.5; prior 105.5)
- Australia
- May Westpac Consumer Sentiment 6.4% (prior -3.2%)
Equity Markets
- Japan’s Nikkei increased 0.9% following its stronger than expected Q1 GDP report. Top-performing sectors included the utilities (+2.0%), technology (+1.0%), and basic materials (+1.0%) sectors. Shiseido Co (+6.9%), Tokyo Electric Power (+5.8%), and Sumitomo Realty & Development (+5.3%) led individual gainers. Tokio Marine Holdings (-3.7%) was the worst-performing issue. Out of the 225 index members, 147 ended higher, 68 finished lower, and 10 were unchanged.
- Hong Kong’s Hang Seng declined 0.4%, weighed down by modest losses in most sectors. The technology (+0.8%) and utilities (+0.1%) sectors were the only sectors to end with a gain. Bank of Communications (-3.6%), Kunlun Energy Co (-2.7%), China Resources Land (-1.8%), and Tencent Holdings (-1.7%) topped the list of decliners. Hang Lung Properties (+2.0%) led individual winners. Out of the 50 index members, 15 ended higher, 32 finished lower, and 3 were unchanged.
- China’s Shanghai Composite increased 0.7%, topping the 4500 level at one point before succumbing to some late selling interest that knocked it back below 4450. The industrial (+2.3%), communications (+1.2%), and consumer cyclical (+1.1%) sectors were the best-performing sectors in the Chinese market on Wednesday.
- India’s Sensex jumped 0.7%, led by gains in the technology (+1.6%) and financial (+1.5%) sectors. Housing Development Finance Corp (+2.4%), Wipro (+2.1%), and Tata Consultancy Services (+1.8%) led the winners while Bajaj Auto (-2.3%), Tata Steel (-1.9%), and Bharat Heavy Electrical (-1.7%) paced the losers.
- Australia’s S&P/ASX 200 declined 0.1%, recovering most of the losses it suffered in an early retreat that took the index down 0.7%. The metals & mining (-2.2%), resources (-2.0%), and gold (-1.9%) sectors were the weakest links on Wednesday.
- Regional advancers: South Korea +0.9%, Malaysia +0.02%, Indonesia +0.4%, Philippines +0.1%, Vietnam +2.5%
- Regional decliners: Taiwan -0.3%, Singapore -0.4%
FX
- USD/CNY -0.05% at 6.2037
- USD/INR +0.07% at 63.836
- USD/JPY +0.2% at 120.96
EUROPE
Major European indices have slid from their early highs with Germany’s DAX (-0.5%) trailing the region. Elsewhere, the Bank of England released the minutes from its latest meeting, which revealed no changes among the voting members with all supporting the status quo.
- Germany’s April PPI +0.1% month-over-month (expected 0.2%; prior 0.1%); -1.5% year-over-year (consensus -1.4%; last -1.7%)
- Spain’s trade deficit narrowed to EUR890 million from EUR2.04 billion (expected deficit of EUR2.00 billion)
- Swiss ZEW Expectations improved to -0.1 from -23.2
Closing Prices
- UK’s FTSE: + 0.2%
- Germany’s DAX: 0.0%
- France’s CAC: + 0.3%
- Spain’s IBEX: + 0.7%
- Portugal’s PSI: -0.6%
- Italy’s MIB Index: + 0.3%
- Irish Ovrl Index: + 0.6%
- Greece ASE General Index: -0.7%
Macroeconomic Data
Economic Data
from Briefing.com
- MBA Mortgage Index : -1.5% (Prior -3.5%)
- Crude Inventories : -2.674M (Prior -2.191M)
- FOMC Minutes
Market Internals
NYSE:
Lower Volumes than the day before – 692.1M vs 739.3M
Advancers outpaced Decliners (adv/dec): 1580 / 1440
New Highs outpaced New Lows (highs/lows): 106 / 28
NASDAQ:
Higher Volumes than the day before – 1772.9M vs 1708.8M
Decliners outpaced Advancers (adv/dec): 1388 / 1405
New Highs outpaced New Lows (highs/lows): 109 / 48
VOLATILITY S&P500 (VIX)
12.88 +0.03 (+0.23%)
Internals is behaving like meh and I don't think there is much to say about. It is still flat with no leadership. VIX has been moving in a narrow range this week and chances are it is not going to last for long. I am thinking it should tick higher soon.
Technical Updates
18,285.40 -26.99 (-0.15%)
Volume: 80,186,213 (below average of 100,599,720)
Range: 18,272.56 - 18,350.13
Range: 18,272.56 - 18,350.13
5,071.74 +1.71 (+0.03%)
Volume: 401,518,169 (below average of 437,785,454)
Volume: 401,518,169 (below average of 437,785,454)
Range: 5,050.21 - 5,097.52
S&P 500 INDEX (SPX: CBOE)
2,125.85 -1.98 (-0.09%)
Volume: 477.7M (below average of 536,956,313)
Range: 2,122.59 - 2,134.72
DOW and S&P are getting the reversal pattern while NASDAQ formed the long-legged doji which can be referred as an end in trend. I think market is unlikely to hold on to its high without a significant volume in play. I am looking for some correction here.
Commodities
Commodities
Closing Commodities: WTI Crude Rises Almost $1, But Ends Just Below $59/Barrel
Energy
Agriculture
Metals
Dollar Holds Gains after Dovish FOMC Minutes
Bonds
- WTI crude oil futures rallied following the API storage data.
- Following this morning’s weekly storage data, WTI sold off back near the unchanged mark, even thought the data was overall bullish.
- Ultimately, July crude oil ended today’s session $0.98 higher at $58.97/barrel.
- June nat gas lost some steam today, closing $0.03 lower at $2.92/MMBtu.
- Precious metals posted modest gains. June gold rose $1.50 to $1208.40/oz, while July silver gained $0.04 to $17.12/oz.
Energy
- July crude oil futures rose $0.98 to $58.97/barrel
- June natural gas closed $0.03 lower at $2.92/MMBtu
- RBOB Gasoline closed $0.04 higher at $2.04/gallon
- Heating oil futures closed $0.02 higher at $1.95/gallon
- EIA weekly storage data released this morning, showed a crude oil inventory draw of 2.674 mln (vs. 1.6 mln consensus) and a gasoline inventory draw of 0.241 mln (vs. calls for a build)
Agriculture
- July corn closed $0.02 lower to $3.60/bushel
- July wheat closed $0.02 higher to $5.13/bushel
- July soybeans closed $0.05 lower to $9.41/bushel
- Ethanol closed $0.06 lower at $1.60/gallon
- Sugar #11 closed 0.27 cents lower to 12.59 cents/lb
Metals
- June gold ended today’s session $1.50 higher to $1208.40/oz
- July silver closed $0.04 higher at $17.12/oz
- July copper closed $0.01 lower at $2.83/lb
Currencies
- The U.S. Dollar Index is up 0.15% to 95.41 despite the release of minutes from the April FOMC meeting that the Treasury market is perceiving as dovish
- The euro currency, which makes up roughly 58% of the index, dove overnight after the Greek parliament's spokesman said that the country would not be able to make its June 5th, 305 million euro payment to the IMF without further bailout funds
- EUR/USD: -0.29% to $1.1115
- USD/JPY: +0.38% to 121.14
- Japan reported better-than-expected GDP last night, but the news couldn't lift the moribund yen after data showing very strong U.S. Housing Starts and Building Permits were released on Tuesday
Bonds
Treasuries End in Green
- U.S. government coupon securities rallied today, with 2's and 5's making fresh highs on the day after the release of the FOMC minutes from the April meeting
- Yield check:
- 2-yr: -3 bps to 0.59%
- 5-yr: -5 bps to 1.55%
- 10-yr: -4 bps to 2.25%
- 30-yr: -2 bps to 3.06%
- News:
- Chicago Fed President Evans (FOMC voter) delivered a speech on current economic conditions and monetary policy in Munich and reiterated his view that he would like to wait until early 2016 to hike rates
- The MBA Mortgage Index for the week ending 05/16 fell 1.5% versus a fall of 3.5% for the prior week
- The Greek parliament's spokesman said that the country would be unable to make a 305 million euro payment to the IMF on June 5th without further assistance
- The FOMC released minutes from its April meeting
- The minutes suggested that a June rate hike is highly unlikely and that the first move will probably come later this year
- Some members saw the economic weakness from the first quarter as persisting
- Commodities:
- WTI crude: +1.57% to $58.90/bbl
- Gold: +0.30% to $1,210.30/troy oz.
- Copper: -0.30% to 2.829/lb.
- Currencies:
- EUR/USD: -0.35% to 1.1108
- USD/JPY: +0.39% to 121.14
- Data out Tomorrow:
- Initial Jobless Claims for the week ending 05/16 and Continuing Jobless Claims for the week ending 05/09 (08:30 ET)
- April Existing Home Sales (10:00 ET)
- May Philadelphia Fed (10:00 ET)
- April Leading Indicators (10:00 ET)
- Natural Gas Inventories for the week ending 05/16 (10:30 ET)
- New Supply:
- $13 billion 10-Year TIPS auction (reopening) (13:00 ET)
- Fed Speak:
- San Francisco Fed President Williams (FOMC voter) participates in “Policy Panel on the Impact of Reform in Practice” (19:00 ET)
Treasury Yields:
- 2 Year Note 0.60% -0.03
- 5 Year Note 1.57% -0.03
- 10 Year Note 2.26% -0.01
- 30 Year Bond 3.06% +0.01
2/30 Spread: 246 bps ( +4 ) … 2/10 Spread: 166 bps ( +2 )
Preview for Thursday 21 May, 2015
Economic Data
Thursday (21 May) :
- Initial Claims : 270K (Prior 264K)
- Continuing Claims : 2250K (Prior 2229K)
- Existing Home Sales : 5.24M (Prior 5.19M)
- Philadelphia Fed : 8.0 (Prior 7.5)
- Leading Indicators : 0.3% (Prior 0.2%)
- Natural Gas Inventories : (Prior 111 bcf)
Earnings Highlights
Thursday (21 May) :
BMO - AAP AKRX BBY BONT BAH BRC BKE CATO DLTR DCI KIRK LITB MNRO MOV NM PDCO QSII SHLD STFC SMRT TTC TSL
AMC - WUBA ACXM ARO CRMT ARUN BRCD CVCO DRC GPS HPQ INTU JMEI MRVL NWY OESX QUNR ROST TFM TC ZUMZ
BMO - AAP AKRX BBY BONT BAH BRC BKE CATO DLTR DCI KIRK LITB MNRO MOV NM PDCO QSII SHLD STFC SMRT TTC TSL
AMC - WUBA ACXM ARO CRMT ARUN BRCD CVCO DRC GPS HPQ INTU JMEI MRVL NWY OESX QUNR ROST TFM TC ZUMZ
Summary
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
2015 Weekly Directional Accuracy: 9/17 (52.94%)
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