Dow -75.71 at 17890.36, Nasdaq -10.22 at 5112.19, S&P -6.27 at 2102.31
Market was flat in the first half of the session before we saw some selling after lunch time, and there is no sign of bullishness. That breakdown was more or less influenced by the result from Eurogroup meeting. It seems Greece did not settle on a deal yet. The Dollar Index was relatively flat on Thursday while crude oil went lower as we continue to see more drawdown in the inventories.I reckon Wednesday is more to a profit taking. Whether the market is going to be bearish that is still early to put a conclusion. However I think we might see a pullback reading from the technicals, or maybe a consolidation.
The Eurogroup meeting is continuing today and that should give us more insights to the Greece's situation. While in the US we are getting the unemployment claims and personal income/spending data.
Direction for Thursday 25 June, 2015: Up
Market Summary
Industry Watch
Strong: Consumer Discretionary, Health Care, Technology, Telecom Services
Weak: Energy, Financials, Industrials, Utilities
Other Market Moving Factor:
- S&P 500 slips below 50-day moving average (2,107)
- No progress between Greece and creditors with eurozone finance ministers stressing that time is running out
- Health care sector outperforms after Supreme Court upholds Affordable Care Act subsidies
Stocks began the day with slim gains, but retreated from their opening levels during the initial hour amid reports today's Eurogroup meeting was suspended to give the Greek delegation time to submit a better proposal to the creditors. The market dipped from its opening levels in reaction, but was able to briefly extend to a fresh session high with the health care (+0.5%) sector driving the move after the Supreme Court upheld federal subsidies to the Affordable Care Act. Hospital names benefited from the news with the likes of Tenet Healthcare (THC 56.21, +6.13), HCA (HCA 90.72, +7.35), and Universal Health (UHS 140.82, +10.14) spiking between 7.8% and 12.2%.
Staying in the health care sector, insurer Humana (HUM 197.37, +13.14) spiked during the afternoon and ended higher by 7.1% after Bloomberg reported the company received a takeover offer from Aetna (AET 132.60, +5.09).
Unlike health care, most of the remaining influential sectors struggled while the consumer discretionary space (-0.1%) settled just below its flat line, but ahead of other cyclical groups. Media names like Comcast (CMCSA 60.88, +0.52) and Time Warner (TWX 88.20, +1.10) posted gains close to 1.0% apiece while homebuilders also finished ahead of the broader market with iShares Dow Jones US Home Construction ETF (ITB 27.96, +0.04) adding 0.1%.
Elsewhere, the financial sector (-0.7%) underperformed today, and the growth-sensitive group is now down 0.5% for the week versus a 0.4% week-to-date decline for the S&P 500. Similar to financials, energy (-1.0%) and industrials (-0.8%) lagged throughout the day.
The energy sector struggled amid commodity weakness as crude oil fell 0.8% to $59.73/bbl. Today's decline widened the energy sector's June loss to 2.7%, which puts the group only ahead of the utilities sector (-0.7%). The rate-sensitive sector has given up 6.0% month-to-date.
For its part, the industrial sector endured losses among large cap names like General Electric (GE 27.04, -0.22) and Caterpillar (CAT 86.72, -1.45). That being said, transport stocks did not fare much better with the Dow Jones Transportation Average (-0.9%) extending this week's decline to 2.1%. The bellwether complex notched a fresh low for the month near levels that have not been seen since late October.
Also of note, the top-weighted technology sector (-0.3%) ended in-line with the broader market, but that masked modest strength among chipmakers. The PHLX Semiconductor Index shed 0.1%, but ARM Holdings (ARMH 53.86, +1.09) rallied 2.1% to a two-month high. On the flip side, Cree (CREE 27.51, -3.05) plunged 10.0% after issuing below-consensus guidance and announcing plans to restructure its LED business.
Treasuries spent the day in negative territory, but they cut their losses in half during afternoon action with the 10-yr yield ending higher by two basis points at 2.40%.
Today's participation represented the largest amount of activity since Friday as more than 750 million shares changed hands at the NYSE floor.
Economic data included Initial Claims and Personal Income/Spending data:
- The initial claims level increased to 271,000 for the week ending June 20 from an upwardly revised 268,000 (from 267,000) while the Briefing.com consensus expected an increase to 271,000
- Over the last four weeks, the initial claims level has averaged 274,000, which is slightly above the 15-year lows reached in May, but still points toward strong employment trends
- Personal income increased 0.5% for a second consecutive month in May while the Briefing.com consensus expected an increase of 0.4%
- The personal savings rate dropped to 5.1% in May from 5.4% in April
- Personal spending increased 0.9% in May after an upwardly revised 0.1% (from 0.0%) in April while the Briefing.com consensus expected an increase of 0.7%
- Core PCE Prices rose 0.1%, as expected by the consensus
Global Market
Asian Markets Close: Japan’s Nikkei -0.5%; Hong Kong’s Hang Seng -1.0%; China’s Shanghai Composite -3.5%
Most markets in the Asia-Pacific region followed Wall Street’s lead and ended lower. The uncertainty over the Greek situation was cited as an ostensible catalyst for the weakness. China’s Shanghai Composite was the biggest loser with a 3.5% decline.
Economic data
- South Korea
- June Consumer Confidence 99 (expected 104; prior 105)
- Hong Kong
- May Trade Balance HKD -40.1 bln (expected HKD -32.2 bln; prior HKD -39.2 bln)
- Imports -4.7% month-over-month (expected -1.6%; prior -2.9%)
- Exports -4.6% month-over-month (expected +0.9%; prior +2.2%)
Equity Markets
- Japan’s Nikkei declined 0.5% and finished near its lows for the session. The utilities sector (-1.7%) was the biggest loser, yet most sectors ended lower, including the technology (-1.0%) and financial (-0.6%) sectors. TDK Corp (-4.5%), Yokohama Rubber Co (-4.3%), and Nippon Kayaku Co (-3.1%) led shares to the downside while JTEKT Corp (+4.0%) and Nikon Corp (+3.4%) sat atop the list of winners. Out of the 225 index members, 62 ended higher, 157 finished lower, and 6 were unchanged.
- Hong Kong’s Hang Seng declined 1.0% and ended near its lows for the session as selling efforts intensified in afternoon trade. The technology (-3.4%), industrial (-1.5%), and communications (-1.3%) sectors were the weakest areas. Bank of China (-5.7%), Lenovo Group (-3.4%), and Want Want China Holdings paced the losses. China Mengniu Dairy (+1.7%) and Tingyi Cayman Islands Holding Corp (+1.1%) were upside leaders. Out of the 50 index members, 14 ended higher, 35 finished lower, and 1 was unchanged.
- China’s Shanghai Composite declined 3.5% with the entirety of its loss incurred over the final two hours of trading. There was no specific news catalyst behind the intensified selling activity. Earlier in the session, it was reported that Chinese authorities did away with the 75% loan-to-deposit limit. The technology (-8.0%) and communications (-5.7%) sectors were the worst-performing areas in the Chinese market on Thursday.
- India’s Sensex increased 0.6% and ended near its best levels of the day. The gains were led by the industrial (+2.9%), utilities (+2.3%), and consumer cyclical (+1.5%) sectors. Out of the 30 index members, 16 ended higher and 14 finished lower.
- Australia’s S&P/ASX 200 declined 1.0% and ended at its lows for the day with the information technology (-2.1%), industrial (-1.6%), and consumer discretionary (-1.6%) sectors leading the way. Slater & Gordon (-17.5%) and Mineral resources (-7.3%) were the worst-performing stocks. Out of the 200 index members, 17 ended higher, 177 finished lower, and 6 were unchanged.
- Regional advancers: Taiwan +0.8%, Thailand +0.1%
- Regional decliners: South Korea -0.02%, Malaysia -0.9%, Indonesia -0.7%, Singapore -0.04%, Vietnam -0.3%, Philippines -0.8%
FX
- USD/CNY +0.04% at 6.2094
- USD/INR +0.1% at 63.598
- USD/JPY -0.2% at 123.62
EUROPE
Major European indices have retreated from their highs as the market’s focus remains on Greece. Early reports suggested that the parties were able to iron out their differences; however, more recent headlines indicate the two sides remain at odds. With that in mind, Eurozone Finance Ministers have stressed the need to come to terms with the Greek delegation as quickly as possible considering any potential deal will need to be ratified by the Greek parliament.
- Germany’s July GfK Consumer Climate ticked down to 10.1 from 10.2 (expected 10.2)
- UK’s June CBI Distributive Trades Survey dropped to 29 from 51 (expected 32)
- Spain’s PPI -1.4% year-over-year (consensus -1.0%; prior -0.9%)
Closing Prices
- UK’s FTSE: -0.5%
- Germany’s DAX: + 0.0%
- France’s CAC: -0.1%
- Spain’s IBEX: -0.2%
- Portugal’s PSI: -0.4%
- Italy’s MIB Index: + 0.9%
- Irish Ovrl Index: -0.1%
- Greece ASE General Index: + 0.2%
Macroeconomic Data
Economic Data
from Briefing.com
- Initial Claims : 271K vs 271K (Prior 268K - Up)
- Continuing Claims : 2247K vs 2215K (Prior 2225K - Up)
- Personal Income : 0.5% vs 0.5% (Prior 0.5% - Up)
- Personal Spending : 0.9% vs 0.7% (Prior 0.1% - Up)
- PCE Prices - Core : 0.1% vs 0.1% (Prior 0.1%)
- Natural Gas Inventories : 75 bcf (Prior 89 bcf)
UNEMPLOYMENT CLAIMS
Highlights
- The initial claims level increased to 271,000 for the week ending June 20 from an upwardly revised 268,000 (from 267,000) for the week ending June 13. The Briefing.com Consensus expected the initial claims level to increase to 271,000.
- The continuing claims level increased to 2.247 mln for the week ending June 13 from an upwardly revised 2.225 mln (from 2.222 mln) for the week ending June 6. The consensus expected the continuing claims level to fall to 2.215 mln.
Key Factors
- Over the last four weeks, the initial claims level has averaged 274,000. That is slightly above the 15-year lows reached in May, but it still showcases a very strong employment sector.
Big Picture
- The recent upward move in the four-week average for initial claims is nothing to worry about.
PERSONAL INCOME AND SPENDING
Highlights
- Personal income increased 0.5% for a second consecutive month in May following an upward revision (from 0.4%) to the April data. The Briefing.com Consensus expected personal income to increase 0.4%.
- Personal spending increased 0.9% in May after an upwardly revised 0.1% (from 0.0%) in April. The Briefing.com Consensus expected spending to increase 0.7%.
Key Factors
- The big news in the report was the sharp drop in the personal savings rate, from 5.4% in April to 5.1% in May. Savings trends are still elevated compared to early 2014 levels, but the downward move coupled with a relatively large increase in income suggests that the concerns consumers have about the economy aren’t as dire as first thought.
- A further reduction in the savings rate over the coming months would help the economy reach its potential growth rate.
- The May employment report revealed a 0.5% increase in aggregate earnings. That translated into a 0.5% increase in wages and salaries, up from a 0.3% increase in April. That was the largest increase in wages since a 0.6% gain in January.
- That was the largest increase in spending since a 1.3% increase in August 2009.
- Spending on goods rose 2.0% after declining 0.4% in April. That was much larger than the retail sales report implied. Durable goods spending rose 2.2% in May after increasing 0.1% in April. Nondurable goods spending increased 1.9% after declining 0.6% in April.
- Spending on services increased 0.3% for a second consecutive month.
- Inflation trends remain very benign.
- Core PCE prices rose 0.1% for a second consecutive month in May. Year-over-year, core prices are up only 1.2%. That is down from a 1.3% y/y increase in April and well below the Fed’s 2.0% target. Core inflation growth has been below 1.5% since October.
Big Picture
- Spending growth it a six-year high in May.
Market Internals
NYSE:
Higher Volumes than the day before – 773.8M vs 740.3M
Decliners outpaced Advancers (adv/dec): 1106 / 1974
New Lows outpaced New Highs (highs/lows): 76 / 108
NASDAQ:
Lower Volumes than the day before – 1598.6M vs 1608.5M
Decliners outpaced Advancers (adv/dec): 1298 / 1526
New Highs outpaced New Highs (highs/lows): 114 / 51
VOLATILITY S&P500 (VIX)
14.01 +0.75 (+5.66%)
Technical Updates
17,890.36 -75.71 (-0.42%)
Volume: 78,993,189 (below average of 94,652,554)
Range: 17,890.36 - 18,036.10
Range: 17,890.36 - 18,036.10
5,112.19 -10.22 (-0.20%)
Volume: 404,118,588 (below average of 417,485,700)
Volume: 404,118,588 (below average of 417,485,700)
Range: 5,102.16 - 5,141.71
2,102.31 -6.27 (-0.30%)
Volume: 494,346,000 (below average of 509,646,523)
Range: 2,101.78 - 2,116.04
DOW broke below its 100 MA and trend line, indicating the market might be going more downside. Next support level should be around 17,800. While NASDAQ and S&P are sitting on their respective support levels. NASDAQ is likely to form another support at 5080 region. S&P seems to have broke below its 20/50MAs and finding a support on both its trend line and channel. I think the next support would be around 2090 level.
Commodities
Closing commodities: WTI oil closes below $60/barrel, nat gas climbs 3.3%Commodities
- The dollar index traded flat to modestly lower today, so it wasn’t a big catalyst for commodities today.
- Oil lost steam, while natural gas futures rallied on storage data.
- Aug crude finished the day $0.50 lower at $59.73/barrel. July nat gas rose $0.09 to $2.85/MMBtu.
- Metals were mixed/mostly flat to given the action in the dollar index.
- Aug gold ended today’s floor trading session $0.80 lower to $1171.80/oz.
- July silver lost $0.06 to $15.80/oz and July copper ended unchanged at $2.62/lb
- August crude oil futures fell $0.50 to $59.73/barrel
- August natural gas closed $0.09 higher at $2.85/MMBtu
- RBOB Gasoline closed $0.01 lower at $2.01/gallon
- Heating oil futures closed $0.01 lower to $1.87/gallon
Agriculture
- July corn closed $0.11 higher at $3.77/bushel
- September wheat closed $0.16 higher at $5.39/bushel
- November soybeans closed $0.20 higher to $9.76/bushel
- Ethanol closed $0.02 higher at $1.56/gallon
- Sugar #11 closed 0.01 cents higher to 11.52 cents/lb
Metals
- August gold ended today’s session $0.80 lower at $1171.80/oz
- July silver closed $0.06 lower at $15.80/oz
- July copper closed flat at $2.62/lb
Currencies
- The U.S. Dollar Index lost 0.09% to 95.18 today as the trade was more focused on Greece than on economic data
- EUR/USD: unch at $1.1205
- The Greek crisis meetings ended with an agreement to have....more meetings. There was a demonstrated willingness of the IMF to compromise on issues like VAT and pensions, which had been a stumbling block in the past. The parties are now planning to meet over the weekend
- The GfK German Consumer Climate indicator was lower than expected, falling to 10.1 in July from 10.2 in June
- Spain's Producer Price Index declined 1.4% y/y in May, more than expected and more than the 0.9% y/y fall in April
- USD/JPY: -0.21% to 123.59
- Overnight, CPI data for Japan and the Tokyo region will be released. The minutes of the BoJ's May meeting reported concern among the members that Tokyo's CPI was weak. Household Spending and the Jobs/Job Applications ratio will also be reported
- GBP/USD:
- +0.14% to $1.5732
- USD/CHF: +0.31% to 0.9365
- USD/CAD: -0.52% to 1.2321
- AUD/USD: +0.43% to $0.7742
- NZD/USD: +0.26% to 0.6909
Bonds
Treasuries End in Red
- Treasuries were deeply red in late morning after positive Personal Income and Personal Spending data were released for May, but the complex recovered ground as the day wore on and equities sold off into negative territory
- Yield Check:
- 2-yr: unch at 0.68%
- 5-yr: +2 bps to 1.70%
- 10-yr: +2 bps to 2.40%
- 30-yr: +2 bps to 3.16%
- News:
- Personal Spending for May grew 0.9% m/m, better than the Briefing.com consensus of 0.7% and the prior reading of 0.1%
- Personal Income rose 0.5% in May, the same growth seen in April but better than the Briefing.com consensus which had forecast only a 0.4% gain
- Core PCE Prices climbed 0.1% in May, in line with estimates and April's reading (which was revised up from 0.0%)
- The main takeaway of the data is that households have opened their pocketbooks in a reversal of the trend we've been seeing since the beginning of 2015. This is good for growth in the short run, as spending = income
- Initial Jobless Claims for the week ending 6/20 were 271K, exactly as expected and 4K higher than the prior week's reading of 267K
- Continuing Jobless Claims for week ending 6/13 were 2247K, higher than the Briefing.com consensus of 2215K and the prior reading of 2222K
- The $29 bln 7-year note auction drew strong demand, with the high yield stopping through more than 1 basis point below where the when-issued security was trading at 12:59 ET
- High yield 2.153%
- Bid-to-cover 2.38
- Indirect bid 56.6%
- Direct bid 11.9%
- On Greece, the IMF made some concessions to Greek negotiators on the crucial subjects of value-added tax and pensions. These have been sticking points this week, and the IMF has been the most uncompromising of Greece's official creditors. The IMF's willingness to bargain suggests that Greek Prime Minister Alexis Tsipras can save face and keep Greece on the euro, as most of his citizens would prefer (according to polls)
- Commodities:
- WTI crude: -1.01% to $59.66/bbl.
- Gold: -0.05% to $1,172.30/troy oz.
- Copper: -0.15% to $2.6205/lb.
- Currencies:
- EUR/USD: -0.01% to $1.1205
- USD/JPY: -0.20% to 123.59
- Data out Friday:
- June Michigan Sentiment – Final (10:00 ET)
- Kansas City Fed President George (non-FOMC voter) speaks on “The Payments System” (12:45 ET)
Treasury Yields:
- 2 Year Note 0.68% UNCH
- 5 Year Note 1.70% +0.01
- 10 Year Note 2.40% +0.02
- 30 Year Bond 3.16% UNCH
2/30 Spread: 248 bps ( UNCH ) … 2/10 Spread: 172 bps ( +2 )
Preview for Friday 26 June, 2015
Economic Data
Friday (26 June) :
- Michigan Sentiment - Final : 94.8 (Prior 94.6)
Earnings Highlights
Friday (26 June) :
BMO - FNL
AMC - None Scheduled
BMO - FNL
AMC - None Scheduled
Summary
The Greece debt saga is going to drag the market until an agreement is met, perhaps with more profit taking. There is not much bullishness in the market now. For tomorrow, I am looking to see whether the support is going to hold. If it does, we should see a higher low which is likely to see an upside next week.
Direction for Friday 26 June, 2015: Down
2015 Daily Directional Accuracy: 55/96 (57.29%)
2015 Daily Directional Accuracy: 55/96 (57.29%)
2015 Weekly Directional Accuracy: 13/22 (59.09%)
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