Dow -2.51 at 17764.04, Nasdaq -7.76 at 5013.87, S&P +0.87 at 2080.15
We saw a pullback as market went to test its support level but it reverts to the flat line eventually. Not a big surprise for some short covering there after the downslide for the past few sessions. Crude oil climbed higher as the seasonal demand for gasoline picks up despite oil production remains high.Maybe I have called for a rebound too soon. With no economic data on Monday, the bears somewhat took control of the market. There seems to be some short-covering before market closed. I suppose we should still see some dip buyers coming in for a technical rebound. But that doesn't mean the market is turning around. China's weak economic data is also likely to take a toll on the crude oil prices as the world's second largest economy is showing a low trade balance and slow growth.
Direction for Tuesday 9 June, 2015; Up
Market Summary
Industry Watch
Strong: Consumer Staples, Financials, Materials, Utilities
Weak: Consumer Discretionary, Health Care, Technology
Other Market Moving Factor:
- Back-and-forth between Greece and creditors continues
- Technology sector underperforms once again
Equity indices slumped at the start with investor sentiment pressured by the continued lack of progress between Greece and its creditors. The ongoing uncertainty weighed on European markets, but they were able to climb off their lows into the close. Meanwhile, U.S. stocks hit their lows not long before Europe closed for the day before returning to their flat lines.
The ensuing rebound helped stocks turn positive during afternoon action, but the S&P 500 could not overtake its 100-day moving average (2,085), settling below that mark for the second consecutive day. Interestingly, this was the first time that the benchmark index registered back-to-back settlements below the 100-day average since late October.
Seven sectors registered losses, but only telecom services (-0.5%) surrendered more than 0.2%. Meanwhile, the top-weighted technology sector (-0.2%) struggled throughout the day and contributed to the underperformance of the Nasdaq. The tech sector suffered from losses among influential components like Apple (AAPL 127.42, -0.38), Google (GOOGL 542.16, -1.32), and Qualcomm (QCOM 66.84, -0.44) while high-beta chipmakers traded in mixed fashion, which was masked by a 0.1% decline in the PHLX Semiconductor Index. Micron (MU 25.19, -0.73) was a notable laggard, falling 2.8%, after Drexel Hamilton downgraded the stock to ‘Sell' from ‘Hold.'
Elsewhere among cyclical sectors, the consumer discretionary space (-0.1%) underperformed throughout the day with most homebuilders registering losses after Hovnanian (HOV 2.86, -0.31) reported disappointing results with its Chief Executive Officer saying the company had overestimated buyer demand. Shares of HOV fell 9.8% while iShares Dow Jones US Home Construction ETF (ITB 26.27, -0.11) surrendered 0.3%.
Staying on the earnings front, another discretionary component—Lululemon (LULU 68.27, +6.75)—spiked 11.0% after its one-cent beat overshadowed below-consensus guidance.
On the upside, consumer staples (+0.5%) and financials (+0.2%) ended in the lead after overtaking the energy sector (unch), which retreated from its opening high even as crude oil spiked 3.4% to $60.12/bbl. Greenback strength was not a factor as the Dollar Index ended flat.
Treasuries retreated throughout the day with the 10-yr note ending near its low to send its yield higher by two basis points to 2.41%.
Once again, today's participation was below average with roughly 700 million shares changing hands at the NYSE floor.
Economic data included Wholesale Inventories and JOLTS:
- Wholesale inventories increased 0.4% in April following an upwardly revised 0.2% gain (from 0.1%) in March while the Briefing.com consensus expected an increase of 0.2%
- Durable goods inventories increased 0.1% in April, down from a 0.5% increase in March
- Gains in automotive (1.8%) and machinery inventories (0.7%) offset declines in professional equipment (-2.1%) and metals (-1.2%) inventories
- Nondurable goods inventories increased 0.8% in April after declining 0.3% in March with much of the increase resulting from higher petroleum and gasoline prices, which helped boost petroleum inventories by 2.3% in April
- Durable goods inventories increased 0.1% in April, down from a 0.5% increase in March
- The April Job Openings and Labor Turnover Survey showed that job openings increased to 5.376 million from a revised rate of 5.109 million (from 4.994 million)
Global Market
Asian Markets Close: Japan’s Nikkei -1.8%; Hong Kong’s Hang Seng -1.2%; China’s Shanghai Composite -0.4%
Markets in the Asia-Pacific region were down across the board in reaction to Wall Street’s weak showing on Monday and some disappointing inflation data out of China. Japan’s Nikkei (-1.8%) led the majors lower with a stronger yen pressuring matters. The hardest hit regional markets were Indonesia and Philippines, which lost 2.3% and 2.2%, respectively.
Economic data
- China
- May CPI -0.2% month-over-month (expected 0.0%; prior -0.2%); +1.2% year-over-year (expected +1.3%; prior +1.5%)
- May PPI -4.6% year-over-year (expected -4.5%; prior -4.6%)
- Japan
- M2 Money Stock +4.0% year-over-year (expected +3.6%; prior +3.6%)
- May Household Confidence 41.4 (expected 41.9; prior 41.5)
- Machine Tool Orders +15.0% year-over-year (prior +10.5%)
- Australia
- May NAB Business Confidence 7.0 (prior 3.0)
- April Home Loans +1.0% month-over-month (expected -2.0%; prior +1.5%)
Equity Markets
- Japan’s Nikkei declined 1.8%, dropping nearly 1.0% in its final hour of trading and finishing at its lows for the day. The technology (-2.7%), financial (-2.3%), and consumer cyclical (-2.1%) sectors were the biggest drags. Leading laggards included Sumco Corp (-4.2%), Dia-Ichi Life Insurance (-4.1%), and T&D Holdings (-4.1%). Osaka Gas Co (+1.7%) topped the list of winners. Out of the 225 index members, 11 ended higher and 214 finished lower.
- Hong Kong’s Hang Seng declined 1.2%, following mainland shares lower and also finishing near its lows for the session. The financial sector (-1.3%) was the most influential weight on the index, although it had plenty of company. The only sector to end higher was the energy sector (+0.6%). China Merchants Holdings International (-4.3%) and Galaxy Entertainment (-3.7%) led the losers while China Shenhua Energy (+3.6%) was the only stock to gain more than 1.0%. Out of the 50 index members, 7 ended higher, 42 finished lower, and 1 was unchanged.
- China’s Shanghai Composite declined 0.4%, but recouped a significant portion of earlier losses with a 1.1% gain in its final hour of trading. The weakness followed the May CPI report, which was weaker than expected and showed a deceleration from the prior month. That news triggered some profit taking in the Shanghai Composite, which had risen 11.3% this month alone prior to Tuesday’s session. The financial sector (-1.7%) was the weak link in the Chinese market on Tuesday.
- India’s Sensex declined 0.2%, held back by a weak showing from the consumer non-cyclical (-2.1%) sector. Cipla Ltd (-3.7%), Dr Reddy’s Laboratories (-2.5%), and Sun Pharmaceutical (-2.3%) led all decliners. Vedanta (+3.1%) and Hindalco Industries (+1.6%) topped the list of winners. Out of the 30 index members, 13 ended higher and 17 finished lower.
- Australia’s S&P/ASX 200 declined 0.5% and ended near its lows for the day after returning from a three-day weekend. The losses were paced by the consumer discretionary (-1.4%), metals & mining (-1.2%), and materials (-1.0%) sectors. Out of the 200 index members, 43 ended higher, 147 finished lower, and 20 were unchanged.
- Regional advancers: none
- Regional decliners: South Korea -0.1%, Taiwan -1.9%, Malaysia -0.6%, Indonesia -2.3%, Singapore -0.8%, Thailand -1.2%, Vietnam -0.9%, Philippines -2.2%
FX
- USD/CNY unch at 6.2057
- USD/INR -0.04% at 63.920
- USD/JPY -0.5% at 123.92
EUROPE
Major European indices trade in the red, but they have climbed off their lows. Germany’s DAX trails the region, trading lower by 0.6%. Elsewhere, Greece has reportedly submitted a revised proposal to its creditors, but it does not appear that the plan will be approved as it rehashes prior plans.
Eurozone Q1 GDP rose 0.4% quarter-over-quarter, as expected
- UK’s April trade deficit narrowed to GBP8.56 billion from GBP10.70 billion (expected deficit of GBP9.90 billion)
- Swiss May CPI +0.2% month-over-month (expected 0.1%; prior -0.2%) while May Unemployment Rate held at 3.3%, as expected
Closing Prices
- UK’s FTSE: -0.5%
- Germany’s DAX: -0.6%
- France’s CAC: -0.2%
- Spain’s IBEX: + 0.2%
- Portugal’s PSI: 0.0%
- Italy’s MIB Index: -0.5%
- Irish Ovrl Index: -0.4%
- Greece ASE General Index: + 0.6%
Macroeconomic Data
Economic Data
from Briefing.com
- Wholesale Inventories : 0.4% vs 0.2% (Prior 0.2% - Up)
- JOLTS - Job Openings : 5.367M (Prior 5.109M - Up)
Highlights
- Wholesale inventories increased 0.4% in April following an upwardly revised 0.2% gain (from 0.1%) in March. The Briefing.com Consensus expected wholesale inventories to increase 0.2%.
Key Factors
- Durable goods inventories increased 0.1% in April, down from a 0.5% increase in March. Gains in automotive (1.8%) and machinery inventories (0.7%) offset declines in professional equipment (-2.1%) and metals (-1.2%) inventories.
- Nondurable goods inventories increased 0.8% in April after declining 0.3% in March. Much of the increase was the result of higher petroleum and gasoline prices, which helped boost petroleum inventories by 2.3% in April.
- Wholesale sales increased 1.6% in April after declining 0.3% in March. Large gains were recorded in farm products (7.4%), petroleum (4.9%), and automotive (3.2%) goods.
- The inventory-to-sales ratio fell to 1.29 in April from 1.30 in March.
Big Picture
- Wholesale inventories are just one component of total business inventories. Manufacturing and retail inventories make up the rest of total business inventories. The market ignores this release and doesn't pay much attention to the full business inventory release that comes a few days later. Improved inventory management in recent years has reduced the economic swings associated with inventories and has helped produce a long-term downtrend in the inventory-to-sales ratio.
Market Internals
NYSE:
Higher Volumes than the day before – 718.0M vs 698.0M
Decliners outpaced Advancers (adv/dec): 1084 / 1978
New Lows outpaced New Highs (highs/lows): 49 / 149
NASDAQ:
Higher Volumes than the day before – 1744.6M vs 1700.6M
Decliners outpaced Advancers (adv/dec): 1116 / 1670
New Highs outpaced New Highs (highs/lows): 93 / 54
VOLATILITY S&P500 (VIX)
14.47 -0.82 (-5.36%)
Internals remain bearish which leads me to assume that the pullback is more or less temporary. New Lows are still comparably higher than New Highs. But the movement from VIX gets me kind of confused as it was reluctant to break above the 200 MA. I suppose we should see the VIX in the range between 13-15 before it breaks above.
Technical Updates
17,764.04 -2.51 (-0.01%)
Volume: 90,552,933 (below average of 96,110,926)
Range: 17,714.97 - 17,817.83
Range: 17,714.97 - 17,817.83
5,013.87 -7.76 (-0.15%)
Volume: 394.9M (below average of 413,596,276)
Volume: 394.9M (below average of 413,596,276)
Range: 4,974.62 - 5,027.02
2,080.15 +0.87 (+0.04%)
Volume: 488.8M (below average of 509,263,800)
Range: 2,072.14 - 2,085.62
All 3 indices are sitting on their respective support level. And the 3 indices are at the lower bound of their Bollinger band. Seems like we should see a pullback from here. However we still need some confirmation for that.
Commodities
Closing Commodities: Nat Gas Holds Gains on Demand Cues, WTI Back Above $60/BarrelCommodities
- The dollar index closed moderately lower, after trading in a narrow range around the unchanged mark for most of the session.
- The index offered inconsistent and slight pressure/support for commodities, finishing down 0.1% to 95.19
- Crude traded flat overnight, but finished positive on a strong, all-day rally driven by EIA US production forecasts
- July WTI closed at +3.4% to $60.12/barrel
- Natural gas held its earlier gains into the close, after lifting in early morning price action on intermediate term forecasts for warm national weather
- Nat gas futures closed up 4.8% to $2.84/MMBtu
- Precious metals saw a mixed close, as movements in the dollar failed to provide a definitive price trend for both gold or silver. August gold was +0.4% to $1177.60/oz and July silver was flat at $15.96/oz
- Copper closed modestly positive at +0.4% to $2.71/lb
Energy
- July crude oil futures rose $1.96 to $60.12/barrel
- July natural gas closed $0.13 higher at $2.84/MMBtu
- RBOB Gasoline closed $0.07 higher to $2.08/gallon
- Heating oil futures closed $0.07 higher at $1.92/gallon
Agriculture
- July corn closed flat at $3.65/bushel
- July wheat closed $0.05 higher to $5.33/bushel
- July soybeans closed $0.05 higher to $9.50/bushel
- Ethanol closed flat at $1.55/gallon
- Sugar #11 closed 0.09 cents lower to 12.07 cents/lb
- Note: Tomorrow the USDA releases the monthly WASDE report at noon ET, which will likely drive mid-day price action in corn, wheat and soybeans
- August gold ended today’s session $04.30 higher at $1177.60/oz
- July silver closed $0.01 higher at $15.96/oz
- July copper closed $0.01 higher at $2.71/lb
Currencies
- Strong Wholesale Inventories for April and a higher-than-expected April JOLTS failed to keep the U.S. Dollar Index in the green today. The gravitational force of normalizing European sovereign debt yields is pulling money east across the Atlantic and even a stellar May employment report and two positive economic surprises from the U.S. today failed to keep the greenback up
- U.S. Dollar Index: -0.19% to 95.12
- EUR/USD: +0.09% to $1.1288
- Eurozone GDP for Q1 2015 was +0.4% q/q, which was good enough to beat both the United States and the U.K. for that quarter
- Industrial Production for France, Italy, and the U.K. will be reported overnight
- USD/JPY: -0.21% to 124.36
- Household Confidence fell to 41.4 in May, lower than expectations and the prior reading of 41.5
- USD/CHF: +0.33% to 93.07
- The Swiss CPI rose 0.2% m/m in May which was a larger rise than expected. Swiss unemployment beat expectations, falling to 3.2% in May
- USD/CAD: -0.68% to 1.2329
- GBP/USD: +0.26% to $1.5381
- The U.K.'s trade deficit narrowed more than expected in April to 8.56 bln versus 10.7 bln in March
- AUD/USD: -0.07% to $0.7679
- NZD/USD: +0.03% to $0.7136
Bonds
Government Debt Falls in Broad-Based Decline
- Treasuries traded down today both before and after the release of economic data at 10:00 ET that surprised on the upside (Wholesale Inventories and JOLTS). European sovereigns were also weak, failing to produce a meaningful bounce despite continued uncertainty surrounding Greece's membership in the eurozone
- Yield Check:
- 2-yr: +3 bps to 0.71%
- 5-yr: +3 bps to 1.74%
- 10-yr: +2 bps to 2.41%
- 30-yr: +3 bps to 3.15%
- News:
- Eurozone GDP grew 0.4% q/q in Q1 2015
- China's Consumer Price Index grew only 1.2% y/y for the month of May, falling short of expectations and the 1.5% increase in April
- Wholesale Inventories rose 0.4% in April after an upwardly revised 0.2% gain (from 0.1%) in March. The Briefing.com consensus called for wholesale inventories to increase 0.2%
- Wholesale sales increased 1.6% in April after declining 0.3% in March
- JOLTS - Job Openings were at 5.367 in April, increasing from an upwardly revised 5.109M in March
- This data point adds to the strong picture of the job market that we saw in May's Employment Situation Report
- The $24 billion 3-year note auction was met with solid demand. The auction neither tailed nor stopped-through, suggesting demand relatively balanced with supply
- High yield: 1.125%
- Bid-to-cover: 3.33
- Indirect bid: 50.7%
- Direct bid: 9.67%
- The mood between Greece and its creditors is deteriorating. Jean-Claude Juncker, president of the European Commission, is said to have told colleagues that meeting with Greek Prime Minister Alexis Tsipras would be a "waste of time" and that it would be "better to meet with the Latin Americans", according Yahoo Finance U.K.
- Commodities:
- WTI crude rallied 3.11% to $59.95/bbl.
- Gold: +0.28% to $1,176.90/troy oz.
- Copper: +0.56% to $2.7135/lb.
- Natural gas: +5.03% to $2.84/million BTU's
- Currencies:
- EUR/USD: +0.05% to $1.1284
- USD/JPY: -0.21% to 124.35
- Data out Wednesday:
- MBA Mortgage Index for the week ending 6/6 (07:00 ET)
- Crude Oil Inventories for the week ending 6/6 (10:30 ET)
- May Treasury Budget (14:00 ET)
- New Supply:
- $21 billion 10-year note auction (reopening) (results at 13:00 ET)
Treasury Yields:
- 2 Year Note 0.72% +0.02
- 5 Year Note 1.74% +0.02
- 10 Year Note 2.42% +0.03
- 30 Year Bond 3.15% +0.04
2/30 Spread: 243 bps ( +2 ) … 2/10 Spread: 170 bps ( +1 )
Preview for Wednesday 10 June, 2015
Economic Data
Wednesday (10 June) :
- MBA Mortgage Index : (Prior -7.6%)
- Crude Inventories : (Prior -1.948M)
- Treasury Budget : (Prior -$130.0B)
Earnings Highlights
Wednesday (10 June) :
BMO - FRAN
AMC - BV BOX DDC KKD MW
BMO - FRAN
AMC - BV BOX DDC KKD MW
Summary
I suppose we should see a pullback before a break out below the support level. That support level is rather an important one so I think there are some dip buyers coming in that would push the market back up slightly. However I am not overly bullish on that as overall sentiment is still quite bearish.
Meanwhile keep an eye for tomorrow's crude oil inventories. After the OPEC meeting and API data, this is going to be crucial to determine where the oil market is heading.
Meanwhile keep an eye for tomorrow's crude oil inventories. After the OPEC meeting and API data, this is going to be crucial to determine where the oil market is heading.
Direction for Wednesday 10 June, 2015; Up
2015 Daily Directional Accuracy: 46/85 (54.12%)
2015 Daily Directional Accuracy: 46/85 (54.12%)
2015 Weekly Directional Accuracy: 12/20 (60.00%)
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