Dow -170.69 at 17905.58, Nasdaq -40.11 at 5059.13, S&P -18.23 at 2095.84
There was quite a lot of selling ahead of Nonfarm Payroll. Market does not seem to be confident going forward amid bond markets sell off and uncertainty in Greece. Crude oil also took a dip as OPEC is meeting on Friday.Bulls is running out of steam somehow. But the better employment number from ADP is looking to give the market some confidence. I think the market is still uncertain ahead of this Friday Nonfarm Payroll. Judging from the reaction on Wednesday, I suppose market should continue with some downside.
Direction for Thursday 4 June, 2015; Down
Market Summary
Industry Watch
Strong: Consumer Discretionary, Utilities
Weak: Energy, Materials, Industrials, Telecom Services
Other Market Moving Factor:
- No change between Greece and creditors with Friday's payment to the IMF looming: Greek PM Tsipras expected to address Greek parliament Friday evening
- International Monetary Fund cuts 2015 GDP growth forecast for U.S. to 2.5% from 3.1% and urges Fed to delay first rate hike
- S&P 500 slides below 50-day moving average (2,100)
Equity indices struggled from the start as continued uncertainty surrounding Greece weighed on investor sentiment in Europe and the U.S. To that point, International Monetary Fund Managing Director, Christine Lagarde, voiced confidence that the troubled sovereign will make tomorrow's debt payment to the IMF. However, that contrasted with reports indicating Greece has requested permission to bundle all of its debt payments due this month into a single payment of about EUR1.60 billion to be paid on June 19. Meanwhile, Prime Minister Alexis Tsipras is scheduled to address the Greek parliament tomorrow evening.
In addition to commenting on Greece, Ms. Lagarde discussed the U.S., urging the Federal Reserve to delay its first rate hike until the first half of 2016. A lowered growth forecast was cited to support that argument with the IMF now expecting 2015 GDP growth of 2.5%, down from the previous forecast of 3.1%.
Treasuries marked fresh highs following the outlook change at the IMF, and built on their gains in the afternoon with the 10-yr yield falling six basis points to 2.31%. On a related note, the Dollar Index (95.49, +0.02) ended flat after erasing its overnight decline.
All ten sectors ended in the red with most growth-sensitive groups showing relative weakness. Energy (-1.2%) and materials (-1.3%) spent the bulk of the session behind other groups with energy pressured by a 2.8% drop in crude oil, which ended the pit session at $58.00/bbl ahead of tomorrow's semiannual OPEC meeting.
Elsewhere among cyclical sectors, industrials (-1.1%) and technology (-0.9%) also lost close to 1.0% apiece while the consumer discretionary sector (-0.7%) stayed ahead of the broader market thanks to mixed action among retail names. Teen apparel names rallied after Five Below (FIVE 37.77, +2.67) reported a one-cent beat and raised its guidance for the fiscal year. The stock spiked 7.6% while SPDR S&P Retail ETF (XRT 99.85, -0.09) shed 0.1%. Also of note, Dish Network (DISH 74.25, +3.44) jumped 4.9% after the Wall Street Journal reported the company has engaged in merger talks with T-Mobile US (TMUS 39.34, +1.01).
Moving to the countercyclical side, consumer staples (-0.8%), health care (-0.7%), and telecom services (-0.8%) settled near the broader market while the utilities sector (-0.2%) finished ahead of other groups thanks to today's drop in Treasury yields. The rate-sensitive sector extended this week's decline to 2.9%.
Today's participation was relatively strong when compared to recent averages as more than 710 million shares changed hands at the NYSE floor.
Economic data was limited to Initial Claims, Productivity/Unit Labor Cost Data, and Challenger Job Cuts:
- The initial claims level declined to 276,000 for the week ending May 30 from an upwardly revised 284,000 (from 282,000) for the week ending May 23 while the Briefing.com consensus expected a drop to 280,000
- Nonfarm productivity in the first quarter was revised down to -3.1% from an originally reported -1.9% in the advance release while the Briefing.com consensus expected a revision to -2.9%
- As expected from the negative revisions in second estimate of first quarter GDP, output growth was revised down to show a decline of 1.6% in Q1 2015, down from a previously reported 0.3% decline
- Hourly compensation was revised up to 3.3% from 3.1%. Combined with the decline in output, this caused a 6.7% increase in unit labor costs, up from the 5.0% reported in the preliminary reading
- The Challenger Job Cuts report for May showed a 22.5% year-over-year decline to follow the previous 52.8% spike
Global Market
Asian Markets Close: Japan’s Nikkei +0.1%; Hong Kong’s Hang Seng -0.4%; China’s Shanghai Composite +0.8%
Sharply rising bond yields around the globe dampened bullish sentiment and pushed a number of markets in the Asia-Pacific region lower on Thursday. China’s Shanghai Composite had an extraordinary session, losing as much as 5.4% at one point before rallying 6.5% over the final two hours of its trading session to end with a 0.8% gain. Reportedly, concerns about margin financing being curtailed contributed to the extreme volatility.
Economic data
- South Korea
- Q1 GDP +0.8% month-over-month (expected +0.8%; prior +0.8%)
- Australia
- April Retail Sales 0.0% (expected +0.4%; prior +0.2%)
- April Trade Balance AUD -3.888 bln (expected AUD -2.250 bln; prior AUD -1.231 bln)
- Exports -6.0% (prior -2.0%)
- Imports +4.0% (prior -2.0%)
Equity Markets
- Japan’s Nikkei increased 0.1%, aided by strength in the financial sector (+1.1%). Dia-ichi Life Insurance (+6.3%), Ebara Corp (+4.4%), and T&D Holdings (+4.2%) led all gainers while SCREEN Holdings (-5.3%) and Tokyo Electric Power (-4.8%) paced the losers. Out of the 225 index members, 133 ended higher, 85 finished lower, and 7 were unchanged.
- Hong Kong’s Hang Seng declined 0.4% after being down as much as 2.0% earlier in the day. The consumer cyclical sector (+2.1%) was the only winning sector. The energy (-3.0%) and basic materials (-1.9%) sectors were the worst-performing areas. Top decliners included China Shenhua Energy (-5.7%), Cheung Kong Property Holdings (-5.5%), and CNOOC (-4.0%). Bank of Communications (+5.5%), Sands China (+4.8%), and Galaxy Entertainment (+3.3%) topped the list of winners. Out of the 50 index members, 18 ended higher, 31 finished lower, and 1 was unchanged.
- China’s Shanghai Composite had a wild ride, losing as much as 5.4% at one point before storming back in the final two hours of action to close with a 0.8% gain. Citing analysts it spoke to, CNBC said the selloff was triggered by reports of a brokerage house halting all margin financing on the start-up board Chinext and the potential that others could follow suit. For whatever reason, participants shook off the concerns and fueled an astounding 6.5% gain in the last two hours of trading action. The financial sector (+2.0%) was a key driver in the Chinese market on Thursday.
- India’s Sensex declined 0.1%, but cut larger losses in the final hour of trading. The basic materials sector (-2.1%) was a weak spot, but losses there were offset in part by gains in the energy (+0.7%), financial (+0.7%), and industrial (+0.6%) sectors. Relaince Industries (+1.8%) sat atop the list of winners while Tata Steel (-2.6%) sat atop the list of losers. Out of the 30 index members, 10 ended higher, and 20 finished lower.
- Australia’s S&P/ASX 200 declined 1.4% following a disappointing retail sales report for April. The worst-performing sectors were the gold (-3.1%), utilities (-2.4%), and REIT (-2.0%) sectors. Magellan Financial Group (+2.6%) was the best-performing issue while Metcash (-17.7% was the worst. Out of the 200 index members, 35 ended higher, 156 finished lower, and 9 were unchanged.
- Regional advancers: South Korea +0.5%, Thailand +0.6%, Vietnam +0.2%
- Regional decliners: Taiwan -2.2%, Singapore -0.1%, Malaysia -0.2%, Indonesia -0.7%, Philippines -0.1%
FX
- USD/CNY +0.05% at 6.2011
- USD/INR -0.1% at 64.021
- USD/JPY -0.2% at 124.04
EUROPE
Major European indices trade lower across the board with UK’s FTSE (-1.0%) leading the retreat. Differences remain between Greece and its creditors as tomorrow’s debt payment to the IMF nears. Elsewhere, the Bank of England made no changes to its policy stance, keeping its interest rate and the purchase program at their respective 0.5% and GBP375 billion.
- Eurozone Retail PMI 51.4 (previous 49.5)
- UK’s May Halifax House Price Index -0.1% month-over-month (expected 0.3%; prior 1.6%); +8.6% year-over-year (consensus 8.5%; last 8.5%)
- France’s Unemployment Rate ticked down to 10.3% from 10.4% (expected 10.4%)
Closing Prices
- UK’s FTSE: -1.3%
- Germany’s DAX: -0.7%
- France’s CAC: -0.9%
- Spain’s IBEX: -1.1%
- Portugal’s PSI: -1.1%
- Italy’s MIB Index: -1.2%
- Irish Ovrl Index: -0.7%
- Greece ASE General Index: -1.3%
Macroeconomic Data
Economic Data
from Briefing.com
- Challenger Job Cuts : -22.5% (Prior 52.8%)
- Initial Claims : 276K vs 280K (Prior 282K)
- Continuing Claims : 2196K vs 2215K (Prior 2222K)
- Productivity-Rev : -3.1% vs -2.9% (Prior -1.9%)
- Unit Labour Cost-Rev : 6.7% vs 5.9% (Prior 5.0%)
- Natural Gas Inventories : 132 bcf (Prior 112 bcf)
UNEMPLOYMENT CLAIMS
Highlights
- The initial claims level declined to 276,000 for the week ending May 30 from an upwardly revised 284,000 (from 282,000) for the week ending May 23. The Briefing.com Consensus expected the initial claims level to fall to 280,000.
- The continuing claims level declined to 2.196 mln for the week ending May 23 from an upwardly revised 2.226 mln (from 2.222 mln) for the week ending May 16. The consensus expected the continuing claims level to fall to 2.215 mln.
Key Factors
- Over the past couple of weeks, four-week average for initial claims has drifted upward. The level still remains near 15-year lows, however, and points to a labor market where businesses have severely cut back on layoffs.
Big Picture
- The minor upward move in the four-week average for initial claims is nothing to worry about.
PRODUCTIVITY - PRELIM
Highlights
- Nonfarm productivity in the first quarter was revised down to -3.1% from an originally reported -1.9% in the advance release. Productivity declined 2.1% in Q4 2014. The Briefing.com Consensus expected nonfarm productivity to be revised down to -2.9%.
Key Factors
- As expected from the negative revisions in second estimate of first quarter GDP, output growth was revised down. Output declined 1.6% in Q1 2015, down from a previously reported 0.3% decline.
- Hours worked were relatively unchanged, up 1.6% vs. a 1.7% increase in the advance estimate.
- The big decrease in output coupled with the minor revision to hours worked caused the large downward revision to productivity.
- Hourly compensation was revised up to 3.3% from 3.1%.
- The increase in compensation coupled with the decline in output caused a big upward revision (6.7% from 5.0%) in unit labor costs. That was the largest increase in unit labor costs since an 11.5% increase in Q1 2014.
Big Picture
- Productivity gains help keep cost-push inflation pressures from rising wages in check. Over the long term, it is productivity gains that provide the increase in output that have led to the consistent gains in living standards in free market economies.
Market Internals
NYSE:
Higher Volumes than the day before – 729.7M vs 684.3M
Decliners outpaced Advancers (adv/dec): 679 / 2386
New Lows outpaced New Highs (highs/lows): 34 / 80
NASDAQ:
Lower Volumes than the day before – 1795.1M vs 1841.7M
Decliners outpaced Advancers (adv/dec): 790 / 2018
New Highs outpaced New Highs (highs/lows): 89 / 37
VOLATILITY S&P500 (VIX)
14.71 +1.05 (+7.69%)
I think internals are starting to shift towards more bearishness. VIX remained volatile but from what I see, there is still fear in the market as it continues to rise and it is approaching the 15.00 resistance level.
Technical Updates
17,905.58 -170.69 (-0.94%)
Volume: 93,468,665 (below average of 99,656,832)
Range: 17,876.95 - 18,087.15
Range: 17,876.95 - 18,087.15
5,059.13 -40.10 (-0.79%)
Volume: 407.6M (below average of 427,487,527)
Volume: 407.6M (below average of 427,487,527)
Range: 5,046.29 - 5,101.11
2,095.84 -18.23 (-0.86%)
Volume: 521.6M (below average of 527,799,431)
Range: 2,093.23 - 2,112.89
DOW broke below the support while NASDAQ and S&P are still held on to their respective support level. NASDAQ is forming a double top and on the verge of a correction. S&P could not overcome its resistance and went below its 20 MA. From the looks of it, market is likely to face more downside.
Commodities
Closing Commodities: WTI Crude Oil Falls Ahead Of OPEC Meeting In Vienna TomorrowCommodities
- WTI crude oil futures ended today’s pit trading session lower, ahead of tomorrow OPEC meeting in Vienna
- July crude ended $1.69 lower at $58.00/barrel
- Natural gas futures ended the day flat at $2.63/MMBtu
- Metals ended lower today
- Aug gold fell $9.30 to $1175.20/oz, while July silver lost $0.36 to $16.11/oz
- Copper fell $0.04 to $2.69/lb today
Energy
- July crude oil futures fell $1.69 to $58.00/barrel
- July natural gas closed flat at $2.63/MMBtu
- RBOB Gasoline closed $0.07 lower to $1.98/gallon
- Heating oil futures closed $0.05 lower at $1.84/gallon
- Note: OPEC is meeting in Vienna, Austria (Overnight for US residents) which will likely be a catalyst for tomorrow’s trading session
Agriculture
- July corn closed $0.04 higher at $3.63/bushel
- July wheat closed $0.14 higher to $5.23/bushel
- July soybeans closed $0.12 higher to $9.47/bushel
- Ethanol closed $0.02 higher at $1.55/gallon
- Sugar #11 closed 0.07 cents higher to 12.12 cents/lb
- August gold ended today’s session $09.30 lower to $1175.20/oz
- July silver closed $0.36 lower at $16.11/oz
- July copper closed $0.04 lower at $2.69/lb
Currencies
- The Australian dollar fell sharply today after Australia's trade deficit widened to $3.9 bln in April. That was the largest deficit on record. Economists were looking for a deficit of $2 bln
- AUD/USD: -0.98% to $0.7694
- The U.S. Dollar Index recovered early losses to decline only 0.04% to 95.43
- Initial Jobless Claims for the week of 5/30 were 276,000, just slightly better than the Briefing.com consensus of 280K. There were 282,000 in the prior week
- EUR/USD: -0.11% to $1.1249
- Greece has decided not to pay the IMF the 305 mln euro payment on Friday and instead to bundle all of Greece's 1.6 bln euro in IMF payments into 1 at the end of June
- GBP/USD: +0.35% to $1.5379
- The Bank of England's Monetary Policy Committee left its main policy rate unchanged at 0.5%, where it has remained since 2009
- The Halifax House Price Index fell a worse-than-expected 0.1% in May. The change in April was +1.6%
- USD/JPY: -0.06% to 124.28
- Overnight, the Bank of Japan's Harada said that the yen is "in a pretty good place", potentially signalling that the BoJ would not like to see further weakening
- USD/CAD: +0.25% to 1.2490
- USD/CHF: -0.22% to 0.9326
- NZD/USD: -0.36% to $0.7124
Bonds
Governments Rally Back from Deep Losses
- Treasuries began the session deep in the red, having fallen in sympathy with European sovereign debt, but made their way back throughout the session to end near highs. The yield curve flattened, with 2's/10's narrowing 5 bps to 165 bps and 5's/30's coming in 2 bps to 139 bps
- Yield Check:
- 2-yr: -1 bp to 0.66%
- 5-yr: -5 bps to 1.64%
- 10-yr: -6 bps to 2.31%
- 30-yr: -7 bps to 3.03%
- News:
- European sovereign debt took heavy losses overnight and that helped to start the Tplex in the red. The German 10-year Bund touched a high yield of 0.99% from a low of 0.47% on Monday
- Initial Jobless Claims declined to 276,000 for the week ending May 30 from an upwardly revised 284,000 (from 282,000) for the week ending May 23. The Briefing.com consensus expected the initial claims level to fall to 280,000
- Continuing Jobless Claims fell to 2.196 mln for the week ending May 23 from an upwardly revised 2.226 mln (from 2.222 mln) for the week ending May 16. The consensus expected the continuing claims level to fall to 2.215 mln
- Nonfarm Productivity was revised down to -3.1% for the first quarter from an initial reading of -1.9%. The Briefing.com consensus called for a revision to -2.9%
- Fed Governor Tarullo spoke in N.Y.C., saying that U.S. economic growth has lost some momentum and that wage growth has not materialized alongside job creation
- He is an FOMC voter and a moderate dove
- Commodities:
- WTI Crude: -2.63% to $58.07/bbl
- Gold: -0.64% to $1,177.30/troy oz.
- Copper: -1.43% to $2.6875/lb.
- Currencies:
- EUR/USD: -0.13% to $1.1247
- USD/JPY: -0.02% to 124.32
- Data out Friday:
- May Employment Situation Report (08:30 ET)
- New York Fed President Dudley (FOMC voter) speaks before the Economic Club of Minnesota (12:30 ET)
- April Consumer Credit (14:00 ET)
Treasury Yields:
- 2 Year Note 0.66% -0.03
- 5 Year Note 1.65% -0.04
- 10 Year Note 2.31% -0.07
- 30 Year Bond 3.03% -0.08
2/30 Spread: 237 bps ( -5 ) … 2/10 Spread: 165 bps ( -4 )
Preview for Friday 5 June, 2015
Economic Data
Friday (5 June) :
- Nonfarm Payrolls : 225K (Prior 223K)
- Nonfarm Private Payrolls : 225K (Prior 213K)
- Unemployment Rate : 5.4% (Prior 5.4%)
- Hourly Earnings : 0.2% (Prior 0.1%)
- Average Workweek : 34.5 (Prior 34.5)
- Consumer Credit : $17.0B (Prior $20.5B)
Earnings Highlights
Friday (5 June) :
BMO - IXYS LITB YGE
AMC - None Scheduled
BMO - IXYS LITB YGE
AMC - None Scheduled
Summary
I think market was profit taking ahead to tomorrow employment numbers and data. Given Friday is the due date for Greece's debt payment and even with the delay the situation does not seem to be optimistic, I reckon we should see the volatility in the market. In addition, OPEC meeting on the same day and that is going to impact the oil market depending on the production set.
Direction for Friday 5 June, 2015; Abstain
2015 Daily Directional Accuracy: 45/83 (54.22%)
2015 Daily Directional Accuracy: 45/83 (54.22%)
2015 Weekly Directional Accuracy: 11/19 (57.89%)
No comments:
Post a Comment