Dow +121.45 at 18162.99, Nasdaq +73.84 at 5106.59, S&P +19.28 at 2123.47
It seems market recovered after hitting the support. Feel like a technical rebound as there was no economic data out on Wednesday. Nonetheless technology remains strong and led the market. The Dollar Index did not continue its rally and this increases more buying in crude oil. This is getting more uncertain to me...It was not quite a surprise to see the market suffered some more short selling on Tuesday as the rally to new high perviously was rather unconvincing. However I can't tell how much the market is going to correct ahead, I think there isn't much bullishness to cheer about at the moment.
Direction for Wednesday 27 May, 2015; Down
Market Summary
Industry Watch
Strong: Financials, Health Care, Technology
Weak: Energy, Utilities
Other Market Moving Factor:
- Dollar Index surrenders overnight gain
- Nasdaq tracking fresh record close
Equity indices began the session with modest gains and enjoyed an early surge amid reports that Greek officials and Eurogroup members have started crafting a staff-level agreement to secure funds for the country. However, those reports were refuted during the next hour with Bloomberg citing a Eurogroup official as saying the two sides have yet to begin working on a joint statement.
Strikingly, the stock market all but ignored the prompt refutation and continued rising into the afternoon with the technology sector (+1.8%) pacing the move.
The top-weighted tech sector enjoyed broad-based support from large cap components like Apple (AAPL 132.04, +2.42), Google (GOOGL 554.25, +7.06), and Microsoft (MSFT 47.61, +1.02) while chipmakers stole the show. To that point, the PHLX Semiconductor Index surged 3.9% after it was reported that Avago (AVGO 141.49, +10.19) is in advanced talks to acquire Broadcom (BRCM 57.13, +10.21). Shares of AVGO jumped 7.8% while Broadcom soared 21.8%.
Similar to technology, eight of the remaining nine sectors posted gains, but only financials (+0.9%) and health care (+1.1%) finished in-line with or ahead of the broader market. The growth-sensitive financial sector enjoyed broad support and extended its May gain to 2.7% while health care was boosted by biotechnology with iShares Nasdaq Biotechnology ETF (IBB 366.96, +6.66) climbing 1.9%.
Elsewhere, the consumer discretionary sector (+0.7%) finished not far behind the broader market after a few of its components reported earnings. Jeweler Tiffany & Co (TIF 94.54, +9.01) surged 10.5% following better than expected results while Michael Kors (KORS 45.93, -14.66) plunged 24.2% after reporting a one-cent miss and guiding Q1 results below analyst expectations. Also of note, homebuilder Toll Brothers (TOL 36.16, -0.83) lost 2.2% after reporting a two-cent beat on light revenue and narrowing its guidance.
On the downside, the energy sector (-0.1%) lagged throughout the session as crude oil struggled, falling 0.8% to $57.57/bbl.
Treasuries slumped to lows in reaction to the early report suggesting a Greek deal is near, but they reclaimed their losses as the session wore on. As a result, the 10-yr yield ended flat at 2.14%.
Today's participation was roughly in-line with last week's totals as 707 million shares changed hands at the NYSE floor.
Economic data was limited to the weekly MBA Mortgage Index, which fell 1.6% to follow last week's 1.5% decline.
Tomorrow, weekly Initial Claims (Briefing.com consensus 274K) will be released at 8:30 ET while April Pending Home Sales (consensus 1.0%) will be reported at 10:00 ET.
Global Market
ASIA
Asian Markets Close: Japan’s Nikkei +0.2%; Hong Kong’s Hang Seng -0.6%; China’s Shanghai Composite +0.6%
The majority of the markets in the Asia-Pacific region declined on Wednesday following the weak lead set by Wall Street on Tuesday. The Nikkei (+0.2%) and Shanghai Composite (+0.6%), however, were in the minority and continued their winning streaks.
Economic data
- Australia
- MI Leading Index +0.1% month-over-month (prior -0.3%)
- Q1 Construction Work Done -2.4% quarter-over-quarter (expected -1.5%; prior -0.6%)
Equity Markets
- Japan’s Nikkei increased 0.2%, logging its ninth consecutive gain. The modest increase came on the back of strength in the technology (+0.9%), industrial (+0.4%), and consumer cyclical (+0.4%) sectors and further weakness in the yen. Sumitomo Electric Industries (+5.1%), Sojitz Corp (+4.6%), and Fuji Heavy Industries (+4.3%) sat atop the list of winners while Eisai Co (-2.5%) and J Front Retailing (-2.4%) paced the losers. Out of the 225 index members, 113 ended higher, 105 finished lower, and 7 were unchanged.
- Hong Kong’s Hang Seng declined 0.6% with losses in the financial (-4.3%) and technology (-2.2%) sectors weighing on the market. CK Hutchison Holdings (-28.4%), Li & Fung (-2.6%), Henderson Land Development (-2.5%), and Lenovo (-2.2%) were the biggest losers. Tingyi Cayman Islands Holding Corp (+6.7%) led all gainers. Out of the 49 index members, 16 ended higher and 33 finished lower.
- China’s Shanghai Composite stumbled early on the heels of Wall Street’s weak showing, but eventually regrouped and increased 0.6%, leaving it up 6.1% for the week. A report that industrial sector profits rose 2.6% year-over-year, marking the first annual increase since September, boosted the spirits of market participants. The utilities (+3.1%), basic materials (+2.6%), and technology (+2.0%) sectors were among the best-performing areas in the Chinese market on Wednesday.
- India’s Sensex increased 0.1% as strength in the communications (+2.1%), industrial (+1.4%), and energy (+1.2%) sectors helped offset weakness in the basic materials (-1.4%) and consumer cyclical (-0.8%) sectors. Tata Motors (-5.0%) was the biggest loser following its disappointing fourth quarter earnings report. Bharat Heavy Electricals (+3.8%) led winning issues.
- Australia’s S&P/ASX 200 declined 0.8% and finished near its lows for the day. Weakness was led by the consumer staples (-1.8%), metals & mining (-1.3%), and resources (-1.3%) sectors.
- Regional advancers: Taiwan +0.3%, Thailand +0.2%
- Regional decliners: South Korea -1.7%, Singapore -1.0%, Malaysia -0.5%, Indonesia -1.3%, Philippines -1.7%, Vietnam -0.1%
FX
- USD/CNY -0.04% at 6.2013
- USD/INR +0.1% at 64.056
- USD/JPY +0.5% at 123.66
EUROPE
Major European indices trade higher across the board with Italy’s MIB (+1.3%) showing relative strength. Elsewhere, G7 finance ministers and central bank officials have begun their three-day meeting in Dresden, Germany with Greece among the main issues on the agenda.
- Germany’s GfK June Consumer Climate ticked up to 10.2 from 10.1 (expected 10.0)
- France’s Consumer Confidence rose to 93 from 94 (consensus 95)
- Swiss Consumption Indicator declined to 1.25 from 1.34
Closing Prices
- UK’s FTSE: + 1.2%
- Germany’s DAX: + 1.3%
- France’s CAC: + 2.0%
- Spain’s IBEX: + 1.7%
- Portugal’s PSI: + 0.9%
- Italy’s MIB Index: + 2.3%
- Irish Ovrl Index: + 1.5%
- Greece ASE General Index: + 3.6%
Macroeconomic Data
Economic Data
from Briefing.com
- MBA Mortgage Index : -1.6% (Prior -1.5%)
Market Internals
NYSE:
Lower Volumes than the day before – 722.0M vs 811.4M
Advancers outpaced Decliners (adv/dec): 2255 / 813
New Highs outpaced New Highs (highs/lows): 61 / 42
NASDAQ:
Higher Volumes than the day before – 1795.4M vs 1712.0M
Advancers outpaced Decliners (adv/dec): 1942 / 865
New Highs outpaced New Highs (highs/lows): 86 / 47
VOLATILITY S&P500 (VIX)
13.27 -0.79 (-5.62%)
Definitely some drop in volume there and internals are looking towards some bullishness. VIX is still sitting on both 20 and 50 MAs, but I think it is likely to fall lower judging from the candlestick pattern. Somehow there is still underlying strength in the market...
Technical Updates
18,162.99 +121.45 (+0.67%)
Volume: 96,398,205 (below average of 99,330,907)
Range: 18,045.08 - 18,190.35
Range: 18,045.08 - 18,190.35
5,106.59 +73.84 (+1.47%)
Volume: 425.2M (below average of 429,075,078)
Volume: 425.2M (below average of 429,075,078)
Range: 5,039.37 - 5,111.54
S&P 500 INDEX (SPX: CBOE)
2,123.48 +19.28 (+0.92%)
Volume: 511.2M (below average of 526,801,092)
Range: 2,105.13 - 2,126.22
Both DOW and NASDAQ rebound at the support level. NASDAQ hit its resistance level as it is about to make a new high. However in the case of DOW and S&P, it does look like a short covering.
Commodities
Closing Commodities: WTI Crude Modestly Lower Ahead Of Data, Dollar and Nat Gas Fail to Hold AM GainsCommodities
- The dollar index is trading lower from yesterday’s levels, after an early AM rally failed to hold its gains.
- The index traded as high as 97.80 during the day, but is now down near 97.38
- Crude oil saw moderate selling pressure throughout afternoon trading and into the close, largely reflecting sentiment regarding tomorrow’s EIA supply data release
- The July contract settled at -0.8% to $57.57/barrel
- Natural gas traded in a narrow range following a pullback from mid-morning gains (as high as $2.92) to close $0.01 lower at $2.83/MMBtu
- Silver closed modestly lower by -0.5% to $16.66/oz while June gold ended flat at $1185.70/oz
- July copper ended the session $0.01 lower to $2.77/oz
Energy
- July crude oil futures fell $0.47 to $57.57/barrel
- June natural gas closed $0.01 higher at $2.83/MMBtu
- RBOB Gasoline closed $0.05 lower to $1.93/gallon
- Heating oil futures closed $0.04 lower at $1.86/gallon
Agriculture
- July corn closed $0.06 lower to $3.49/bushel
- July wheat closed $0.04 lower to $4.89/bushel
- July soybeans closed $0.05 higher to $9.27/bushel
- Ethanol closed $0.04 lower at $1.53/gallon
- Sugar #11 closed 0.21 cents lower to 11.87 cents/lb
Metals
- June gold ended today’s session $1.00 lower to $1185.70/oz
- July silver closed $0.09 lower at $16.66/oz
- July copper closed $0.01 lower to $2.77/lb
Currencies
- EUR/USD recovered early morning losses to trade up 0.08% to $1.0890 after some false rumors were released about an imminent deal between Greece and its creditors. While the rumor was dispelled, gains were maintained in Greek stocks, Greek sovereign debt, and the euro currency, suggesting that either the market was way offsides or that there actually is a deal coming that only the smart money knows about
- The Gfk German Consumer Climate Index for June showed that German consumers are the most confident they've been since 2001. The index hit 10.2 in June, ahead of expectations and the May reading of 10.1
- USD/JPY: The pair made fresh multi-year highs, rallying 0.73% to 123.88
- The market is weighing whether or not the yen's weakness will prompt criticism from other members at the G7 meeting
- USD/CHF: -0.07% to 0.9517
- USD/CAD: +0.42% to 0.40%
- AUD/USD: -0.21% to $0.7725
- NZD/USD: -0.13% to $0.7236
- The U.S. Dollar Index is up 0.06% to 97.36
Bonds
Governments Little Changed
- The Treasury complex held onto most of its move higher from Tuesday, excepting the 2-year note which hadn't participated in the flight to quality. The yield curve continued its flattening posture as well, with 2's and 5's losing ground while bonds made a fresh 2-week high
- Yield Check:
- 2-yr: +1 bps to 0.65%
- 5-yr: +1 bp to 1.53%
- 10-yr: unch at 2.14%
- 30-yr: -3 bps to 2.88%
- News:
- The European Central Bank maintained the size of Greece's Emergency Liquidity Assistance (ELA) facility at 80.2 billion euro. This was supposedly not because the ECB is trying to apply more pressure but rather because Greek banks have enough liquidity, a 3 billion euro buffer to be exact. The Greek central bank will disclose official numbers on Thursday
- The MBA Mortgage Index fell 1.6% for the week of 5/23 versus a decline of 1.5% in the prior week
- There was a rumor reported by Bloomberg around the time of the equity open that a Greek deal was imminent. The rumor was later denied by multiple sources, but the equity shorts were already on the run and the denials failed to send stocks back down. While Treasuries were initially sold on the rumor, they recovered their lost ground after the 5-year note auction
- The $35 billion 5-year note auction was well-received by investors, although the bid-to-cover was lower than average:
- High yield: 1.560%
- Bid-to-cover: 2.46
- Indirect bid: 58.4%
- Direct bid: 10.0%
- Commodities:
- WTI Crude: -0.65% to $57.65/bbl
- Gold: +0.02% to $1,187.10/troy oz.
- Copper: -0.34% to $2.7685/lb.
- Currencies:
- EUR/USD: +0.11% to $1.0893
- USD/JPY: +0.71% to 123.86
- Data out Thursday:
- Initial Jobless Claims for the week of 5/23 and Continuing Jobless Claims for the week of 5/16 (08:30 ET)
- April Pending Home Sales (10:00 ET)
- Natural Gas Inventories for the week of 5/23 (10:30 ET)
- Crude Inventories for the week of 5/23 (11:00 ET)
- New Supply:
- $29 billion 7-year note auction (13:00 ET)
- Fed Speakers:
- San Francisco Fed President Williams (FOMC voter) speaks at Banking Supervision and Regulation joint conference (02:20 ET)
- Minneapolis Fed President Kocherlakota (non-FOMC voter) speaks on monetary policy (14:45 ET)
Treasury Yields:
- 2 Year Note 0.64% UNCH
- 5 Year Note 1.53% -0.01
- 10 Year Note 2.14% UNCH
- 30 Year Bond 2.88% -0.01
2/30 Spread: 234 bps ( -1 ) … 2/10 Spread: 150 bps ( UNCH )
Preview for Thursday 28 May, 2015
Economic Data
Thursday (28 May) :
- Initial Claims : 274K (Prior 274K)
- Continuing Claims : 2250K (Prior 2211K)
- Pending Home Sales : 1.0% (Prior 1.1%)
- Natural Gas Inventories : (Prior 92 bcf)
- Crude Inventories : (Prior -2.674M)
Earnings Highlights
Thursday (28 May) :
BMO - ANF AMSC EARS CMCO DANG EXPR FLO FRED IKGH JKS MIXT MOD OA RY SAFM SDRL SHLD SIG TECD TITN TD XCRA
AMC - AVGO BOOT DECK EXA GME BLOX OVTI PSUN QUNR SPLK SPWH ULTA VEEV
BMO - ANF AMSC EARS CMCO DANG EXPR FLO FRED IKGH JKS MIXT MOD OA RY SAFM SDRL SHLD SIG TECD TITN TD XCRA
AMC - AVGO BOOT DECK EXA GME BLOX OVTI PSUN QUNR SPLK SPWH ULTA VEEV
Summary
I am quite skeptical as the market recovers on Wednesday. One concern would be the technology sector. Looking at NASDAQ, it seems that they are going for a breakout. They can be a tipping point for the market. Other than that I suppose what we saw was mostly short-covering and some dip buying. Maybe the market is pricing in prior to the release of macroeconomic data.
Direction for Wednesday 27 May, 2015; Up
2015 Daily Directional Accuracy: 43/79 (54.43%)
2015 Daily Directional Accuracy: 43/79 (54.43%)
2015 Weekly Directional Accuracy: 10/18 (55.56%)
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