Monday, 1 June 2015 - AMC

Dow +29.69 at 18040.37, Nasdaq +12.90 at 5082.93, S&P +4.34 at 2111.73

Friday session was volatile but pretty much to the bearish side. Judging from the intra-day movement, I feels market is not yet convincing to be bearish. Perhaps there is still uncertainty in the market. Neither the market is bullish too.

Next week is the start of June and we will be seeing more economic data that should give us more insight to the US economy. That might also give the market more push to the downside. So stay close to that. OPEC meeting will be held on 5th June and that is likely to bring in more volatility to the oil futures.

Direction for Monday 1 June, 2015; Down

Uncertainty lingers on in the market. Market had a weak opening as we saw the some mixed results from the economic data and personal spending remains stagnant. Although there was a pullback at the second half but it did not last before another some selling brought the market near to the flat line. Crude oil was hovering around $60 price range prior to the OPEC meeting this Friday. 

China production was in line in expectation but it is still experiencing a slow growth.                

Market Summary

Industry Watch

Strong: Consumer Discretionary, Health Care, Financials

Weak: Energy, Industrials, Materials, Telecom Services

Other Market Moving Factor:

• Weekend passes without a deal between Greece and creditors
• Altera (ALTR) agrees to be acquired by Intel (INTC) for $16.70 billion

[BRIEFING.COM] The stock market began June on a modestly higher note with the S&P 500 adding 0.2%.  

Index futures spiked just before 7:00 ET, reacting to chatter that a deal between Greece and its creditors will be announced today. That rumor was struck down within 15 minutes of making the rounds, but equity futures did not retrace that morning spike until the cash market opened for action.  

The major averages returned to their flat lines once the cash session began, but persistent relative strength among influential groups like health care (+0.4%), technology (+0.3%), consumer discretionary (+0.3%), and industrials (+0.4%) helped the market climb to a fresh high during the afternoon. However, it is worth noting that the Monday advance occurred amid light volume with just 665 million shares changing hands at the NYSE floor. As for Greece, the country is expected to be presented with a final proposal prepared by leaders from France, Germany, and the EU.  

Eight sectors registered gains with industrials (+0.4%) ending atop the leaderboard thanks to a rebound in transport stocks. The Dow Jones Transportation Average rallied 1.1% with airlines pacing the move after the Chief Executive Officer of Southwest Airlines (LUV 37.85, +0.88) said the company plans to limit its seat capacity growth. Shares of LUV gained 2.4% while the Dow Jones Transportation Average narrowed its Q2 decline to 4.0%.  

Elsewhere among cyclical sectors, consumer discretionary (+0.3%) and technology (+0.3%) also displayed relative strength with M&A activity underpinning the tech sector. Specifically, Altera (ALTR 51.68, +2.83) spiked 5.8% after agreeing to be acquired by Intel (INTC 33.90, -0.55) for $54/share in an all-cash transaction valued at $16.70 billion.  

Overall, four of six cyclical sectors ended in-line with or ahead of the S&P 500 while energy (-0.2%) and materials (unch) struggled to keep pace. The energy sector was pressured in the early going by weakness in crude, but the sector narrowed its loss as the energy component also recovered its intraday decline, settling at $60.24/bbl. 

Moving to the countercyclical side, consumer staples (unch) and telecom services (-0.5%) lagged throughout the session while health care (+0.4%) and utilities (+0.2%) registered gains. The health care sector finished among the leaders even as biotechnology spent the day among the laggards. The iShares Nasdaq Biotechnology ETF (IBB 364.81, -0.22) shed 0.1%. 

Treasuries spent the day in a steady decline, sending the 10-yr yield higher by five basis points to 2.18%.  

Economic data included Personal Income/Spending data, Core PCE Prices, Construction Spending, and the ISM Index: 

• Personal income increased 0.4% in April after being flat in March while the Briefing.com Consensus expected an increase of 0.3% 
  • According to the wage data from the April employment report, aggregate earnings increased roughly 0.3%, which translated into a 0.2% increase in total employee compensation 
  • Personal spending was flat in April after increasing an upwardly revised 0.5% (from 0.4%) in March while the consensus expected an increase of 0.2% 
  • Core PCE prices rose 0.1% while the Briefing.com consensus expected a reading of 0.2% 
• Construction spending increased 2.2% in April after increasing an upwardly revised 0.5% (from -0.6%) in March while the Briefing.com consensus expected an increase of 0.8% 
  • That was the largest monthly increase in construction spending since a similar gain in May 2012 
• The ISM Manufacturing Index increased to 52.8 in May from 51.5 in April while the consensus expected an increase to 51.9 
  • Despite poor regional manufacturing reports, the national index showed a fairly well rounded acceleration in manufacturing activities 

Tomorrow, the Factory Orders report for April (Briefing.com consensus 0.0%) will be released at 10:00 ET.

Global Market

ASIA

Asian Markets Close: Japan’s Nikkei +0.03%; Hong Kong’s Hang Seng +0.6%; China’s Shanghai Composite +4.7%
It was a relatively mixed showing on Monday from markets in the Asia-Pacific region. China’s Shanghai Composite, however, wasted little time in trying to get back on track. It surged 4.7% to begin the week with participants again playing the policy stimulus trade as the HSBC Manufacturing PMI report showed the third straight sub-50 reading. A number below 50 denotes contraction.

Economic data

• Japan
• Q1 Capital Spending +7.3% year-over-year (expected -0.1%; prior +2.8%)
• May Manufacturing PMI 49.2 (expected 49.2; prior 49.1)
• China
• May HSBC Manufacturing PMI 49.2 (expected 49.2; prior 49.1)
• May Manufacturing PMI 50.2 (expected 50.2; prior 50.1)
• May Non-Manufacturing PMI 53.2 (prior 53.4)
• Australia
• May AIG Manufacturing Index 52.3 (prior 48.0)
• May MI Inflation Gauge +0.3% (prior +0.3%)
• Q1 Business Inventories +0.4% month-over-month (expected +0.1%; prior -0.8%)
• April Building Approvals -4.4% month-over-month (expected -2.0%; prior +2.9%)
• April Private House Approvals +4.7% (prior +1.8%)
• South Korea
• May HSBC Manufacturing PMI 47.8 (expected 49.0; prior 48.8)
• May Trade Balance KRW 6.30 bln (expected KRW 6.20 bln; prior KRW 8.50 bln)
• May Exports -10.9% year-over-year (expected -9.0%; prior -8.0%)
• May Imports -15.3% year-over-year (expected -13.2%; prior -17.8%)
• India
• May HSBC Markit Manufacturing PMI 52.6 (expected 51.2; prior 51.3)

Equity Markets

• Japan’s Nikkei eked out a 0.03% gain after trading in negative territory for most of Monday’s session. The fractional gain was the twelfth consecutive increase for the Nikkei. The utilities (+1.9%) sector was the best-performing area while the consumer cyclical sector (-0.2%) lagged all others. Individual standouts included Nippon Suisan Kaisha (+4.6%), Teijin Ltd (+3.9%), and Tokyo Electric Power (+3.8%). Yahoo Japan (-3.2%) paced the decliners. Out of the 225 index members, 126 ended higher, 92 finished lower, and 7 were unchanged.
• Hong Kong’s Hang Seng increased 0.6%, following mainland shares higher. The advance was driven by the financial sector (+1.1%). The consumer cyclical sector (-2.1%) was the only sector to lose ground. Belle Intl. (+5.3%), Bank of Communications (+4.5%), and China Resources Power Holdings (+3.5%) were the best-performing issues. Galaxy Entertainment (-4.5%) and Sands China (-3.7%) led the decliners. Out of the 50 index members, 34 ended higher, 12 finished lower, and 4 were unchanged.
• China’s Shanghai Composite surged 4.7%. The rebound effort was fueled by renewed thoughts that more policy stimulus may soon be provided. That thinking was helped along by the HSBC Manufacturing PMI report, which at 49.2 was up a tick from March but still the third straight month of contraction. The diversified (+7.2%), utilities (+6.9%), and technology (+6.4%) sectors led the gains in the Chinese market on Monday where every sector gained at least 4.0%.
• India’s Sensex increased 0.1%, paced by the industrial (+2.8%), energy (+1.3%), and consumer cyclical (+1.2%) sectors. Individual standouts included Larsen & Toubro (+3.1%), Reliance Industries (+2.9%), and Maruti & Suzuki India (+2.6%). Sun Pharmaceutical (-9.2%), Bharti Airtel (-2.1%), and Tata Motors (-2.0%) were the worst-performing issues.
• Australia’s S&P/ASX 200 declined 0.7%, held back by a weak showing from the consumer staples (-1.3%) and metals & mining (-1.3%) sectors. Sirtex Medical (+14.4%) was the biggest gainer while Seven Group Holdings (-6.2%) led the laggards.
• Regional advancers: Philippines +1.2%, Vietnam +1.0%
• Regional decliners: Taiwan -0.8%, South Korea -0.6%, Malaysia -0.2%, Indonesia -0.1%
• Closed for holiday: Singapore (Vesak Day) and Thailand (Wisakha Bucha Day)

FX

• USD/CNY +0.02% at 6.1995
• USD/INR -0.1% at 63.693
• USD/JPY -0.1% at 124.06

EUROPE

Major European indices hold gains with France’s CAC (+0.6%) in the lead. There has been no tangible progress with regards to Greece as the May 31 soft deadline passed without an agreement in sight. European indices did surge on a recent rumor that Greece has secured a deal with its creditors, but that rumor has been refuted shortly after surfacing.

• Eurozone May Manufacturing PMI 52.2 (consensus 52.3; previous 52.3)
• Germany’s May Manufacturing PMI 51.1 (expected 51.4; prior 51.4)
• UK’s May Manufacturing PMI 52.0 (expected 52.5; last 51.8)
• France’s May Manufacturing PMI 49.4 (consensus 49.3; last 49.3)
• Italy’s May Manufacturing PMI 54.8 (expected 53.6; previous 53.8)
• Spain’s May Manufacturing PMI 55.8 (consensus 54.8; last 54.2)
• Swiss May SVME PMI 49.4 (expected 48.4; prior 47.9)

Closing Prices

• UK’s FTSE: -0.4%
• Germany’s DAX: + 0.2%
• France’s CAC: + 0.4%
• Spain’s IBEX: + 0.2%
• Portugal’s PSI: 0.0%
• Italy’s MIB Index: -0.3%
• Irish Ovrl Index: June Bank Holiday — Closed
• Greece ASE General Index: Whit Holiday — Closed

Macroeconomic Data

Economic Data

from Briefing.com

• Personal Income : 0.4% vs 0.3% (Prior 0.0%)
• Personal Spending : 0.0% vs 0.2% (Prior 0.5% - Up)
• PCE Prices - Core : 0.1% vs 0.2% (Prior 0.1%)
• ISM Index : 52.8 vs 51.9 (Prior 51.5)
• Construction Spending : 2.2% vs 0.8% (Prior 0.5% - Up)

PERSONAL INCOME AND SPENDING

Highlights

• Personal income increased 0.4% in April after being flat in March. The Briefing.com Consensus expected personal income to increase 0.3%.
• Personal spending was flat in April after increasing an upwardly revised 0.5% (from 0.4%) in March. The consensus expected personal spending to increase 0.2%.

Key Factors

• According to the wage data from the April employment report, aggregate earnings increased roughly 0.3%. That translated into a 0.2% increase in total employee compensation.
• Income from assets rose 1.2%, which provided the bulk of the remaining increase in total personal income.
• A weak retail sales report (headline 0.0% and core 0.1%) resulted in a big decline in total goods spending. Spending on goods declined 0.5% after increasing 1.2% in March. Demand declined for both durable (-0.7%) and nondurable (-0.5%) goods.
• Services spending increased 0.2% for a second consecutive month.
• After a one-month respite, the personal savings rate again turned upward in April. Personal savings increased to 5.6% from 5.2% in March.

Big Picture

• The trend for higher savings returned in April. 

ISM INDEX

Highlights

• The ISM Manufacturing Index increased to 52.8 in May from 51.5 in April. The Briefing.com Consensus expected the index to increase to 51.9.

Key Factors

• Despite poor regional manufacturing reports, the national index showed a fairly well rounded acceleration in manufacturing activities.
• Production growth slowed, but remained at a still healthy 54.5 in May. That was down from 56.0 in April. New orders growth strengthened as the related index increased to 55.8 in May from 53.5 in April. Order backlogs exited a two-month contraction and increased to 53.5 from 49.5 in April.
• Employment also existed a contraction. The related index increased to 51.7 in May from 48.3 in April.

Big Picture

• This is a highly overrated index. It is merely a survey of purchasing managers. It is a diffusion index, which means that it reflects the number of people saying conditions are better compared to the number saying conditions are worse. It does not weight for size of the firm, or for the degree of better/worse. It can therefore underestimate conditions if there is a great deal of strength in a few firms. The data have thus not been either a good forecasting tool or a good read on current conditions during this business cycle. It must be recognized that the index is not hard data of any kind, but simply a survey that provides broad indications of trends.

CONSTRUCTION SPENDING

Highlights

• Construction spending increased 2.2% in April after increasing an upwardly revised 0.5% (from -0.6%) in March. The Briefing.com Consensus expected construction spending to increase 0.8%.

Key Factors

• That was the largest monthly increase in construction spending since a similar gain in May 2012.
• Total private construction increased 1.8% in April after increasing 0.9% in March.
• Despite a solid upside surprise in the April housing starts data, residential construction did not play a large factor into the private construction gain. Residential construction spending increased only 0.6% in April after declining 1.0% in May. Spending on new structures increased 1.9% in April after declining 1.4% in March. Home improvement project spending declined for a third consecutive month, declining 3.0% in April after declining 0.1% in March.
• Nonresidential construction spending increased 3.1% in April after increasing 2.7% in March. Every nonresidential construction sector increased on a month-to-month basis except for the communication sector. That included a 3.3% increase in office spending, 3.2% increase in commercial spending, and a 4.6% increase in power spending.
• Total public construction spending increased 3.3% in April after declining 0.4% in March. Spending on highways and streets increased 8.5% in April after declining 1.5% in March.

Big Picture

• Construction spending surges in April

Market Internals

NYSE:

Higher Volumes than the day before – 682.2M vs 580.3M 


Advancers outpaced Decliners (adv/dec): 1637 / 1425

New Highs outpaced New Lows (highs/lows): 64 / 58

NASDAQ:

Higher Volumes than the day before – 1894.7M vs 1655.0M

Decliners outpaced Advancers (adv/dec): 1383 / 1393

New Highs outpaced New Highs (highs/lows): 105 / 51

VOLATILITY S&P500 (VIX)
13.97 +0.13 (+0.94%)

The internals are saying the market is getting confusing. Although volume is picking up but it doesn't really show anything much. Both New Highs and New Lows also increases slightly. VIX is showing a similar confusion state with a big range but closed just a few points higher. I think the market is certainly not directional right now.

Technical Updates

DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)

18,040.37 +29.69 (+0.16%)

Volume: 85,643,408 (below average of 99,602,048)
Range: 17,982.06 - 18,105.83

NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)

5,082.93 +12.90 (+0.25%)
Volume: 444,441,604 (above average of 429,052,899)

Range: 5,045.67 - 5,099.01

S&P 500 INDEX (SPX: CBOE)

2,111.73 +4.34 (+0.21%)

Volume: 488,083,000 (below average of 527,799,108)

Range: 2,102.54 - 2,119.15 

Overall the market is still rather bearish to me but NASDAQ seems to be more bullish as it went back to test its resistance level. Meanwhile S&P is held down by its 20 MA. DOW is sitting on its channel and it can break below any time now...

Commodities

Closing Commodities: Oil Recovers, Gold And Silver Erase Morning Gains

• WTI crude oil futures recovered in afternoon trade to erase most of its losses.
• July crude ended today’s session $0.02 lower at $60.24/barrel.
• July nat gas gained $0.02 to $2.65/MMBtu
• Precious metals lost steam following this morning’s econ-driven surge
• Aug gold ended today’s session $1.60 lower to $1188.50/oz, while July silver fell $0.01 to $16.70/oz
• Copper fell $0.01 today to $2.72/lb
• Wheat futures surged higher today, closing 4% higher to $4.95/bushel ahead of the weekly USDA crop progress report

Energy

• July crude oil futures fell $0.02 to $60.24/barrel
• June natural gas closed $0.02 higher at $2.65/MMBtu
• RBOB Gasoline closed $0.01 lower to $2.05/gallon
• Heating oil futures closed $0.02 lower at $1.93/gallon

Agriculture

• July corn closed $0.01 higher to $3.53/bushel
• July wheat closed $0.17 higher (+3.6%) to $4.95/bushel
• July soybeans closed $0.07 lower to $9.27/bushel
• Ethanol closed $0.02 lower at $1.50/gallon
• Sugar #11 closed 0.27 cents higher to 12.25 cents/lb

• Wheat futures saw session price action driven by sentiment ahead of this afternoon’s weekly USDA crop progress report (due out at 4 pm ET)

Metals

• August gold ended today’s session $1.60 lower to $1188.50/oz
• July silver closed $0.01 lower at $16.70/oz
• July copper closed $0.01 lower at $2.72/lb

Currencies

Dollar Gains on ISM Beat

• The U.S. Dollar Index rallied 0.51% to 97.40 on the back of a better-than-expected report from the Institute of Supply Management. The Index increased to 52.8 in May from 51.5 in April
• EUR/USD fell 0.47% after the ISM release, despite Manufacturing PMI's in Europe that generally beat expectations. Italy and Spain were particularly strong
  • According to Bloomberg, top level talks between the IMF, the ECB, the French and German leaders, and European Commission President Jean-Claude Juncker are set to take place tonight
• GBP/USD: -0.61% to $1.5201
• USD/JPY: +0.57% to 124.84
• USD/CAD: +0.57% to 1.2526
• AUD/USD: -0.48% to 0.7607
  • The Reserve Bank of Australia meets on June 2

Bonds

Treasuries Sink on Strong Data

• Government notes and bonds lost significant ground today after better-than-expected ISM and Construction Spending data were released at 10:00 ET. The yield curve steepened slightly, but the 2-year note still lost 4 basis points, extraordinary weakness for that maturity which has so far held up quite well despite the global bond sell-off
• Yield Check:
  • 2-yr: +4 bps to 0.65%
  • 5-yr: +7 bps to 1.55%
  • 10-yr: +6 bps to 2.18%
  • 30-yr: +6 bps to 2.94%

• News:
  • Personal income increased 0.4% in April after being unchanged in March. The Briefing.com Consensus expected personal income to increase 0.3%
  • Personal spending was flat in April after increasing an upwardly revised 0.5% (from 0.4%) in March. The consensus expected personal spending to increase 0.2%
  • Fed vice-chairman Fischer spoke today, saying that it might be appropriate for the Fed to use monetary policy to prevent financial instability. There is an ongoing debate about whether or not macroprudential regulation can accomplish this task alone
  • Boston Fed President Rosengren (non-FOMC voter) made dovish remarks, saying that he did not see a snapback in the economic data from the first quarter soft patch and that he did not expect to see timely improvements in the unemployment rate and sufficient progress towards the 2% inflation target to justify rate hikes
  • The ISM Manufacturing Index increased to 52.8 in May from 51.5 in April. The Briefing.com Consensus expected the index to increase to 51.9
    • Despite poor regional manufacturing reports, the national index showed a fairly well rounded acceleration in manufacturing activities
    • New orders growth strengthened as the related index increased to 55.8 in May from 53.5 in April. Order backlogs exited a two-month contraction and increased to 53.5 from 49.5 in April
  • Construction spending increased 2.2% in April after increasing an upwardly revised 0.5% (from -0.6%) in March. The Briefing.com Consensus expected construction spending to increase 0.8%
    • That was the largest monthly increase in construction spending since a similar gain in May 2012

• Commodities:
  • WTI Crude: -0.07% to $60.26/bbl
  • Gold: unch at $1,189.80/troy oz.
  • Copper: -0.31% to $2.72/lb.

• Currencies:
  • EUR/USD: -0.51% to $1.0927
  • USD/JPY: +0.54% to 124.81

• Data out Tuesday:
  • April Factory Orders (10:00 ET)
  • May Auto and Truck Sales (17:00 ET)

Treasury Yields:

• 2 Year Note 0.64% +0.03
• 5 Year Note 1.55% +0.06
• 10 Year Note 2.19% +0.07
• 30 Year Bond 2.94% +0.06

2/30 Spread: 230 bps ( +3 ) …  2/10 Spread: 155 bps ( +4 )

Preview for Tuesday 2 June, 2015

Economic Data

Tuesday (2 June) :

• Factory Orders : 0.0% (Prior 2.1%)
• Auto Sales : (Prior 5.3M)
• Truck Sales : (Prior 7.9M)

Earnings Highlights

Tuesday (2 June) :
BMO - AMWD CCG CONN CBRL DAKT DG MDT NKA SOL
AMC - ABM AMBA ASNA GIII GES GWRE NCS PRGN VMEM

Summary

Put it simply, Monday session was literally flat. I feel the market is more to the bearish side and the bulls are doing their best to fight back. But this week have quite a number of major economic data that is likely to be market mover. So market can go anywhere.

With that aside, I think there should be some more pullback in tomorrow session. However I am not too surprised if the market moves in sideway or start to sell off...  

Direction for Tuesday 2 June, 2015; Up

2015 Daily Directional Accuracy: 43/81 (53.09%) 

2015 Weekly Directional Accuracy: 11/19 (57.89%)