Dow -178.00 at 17966.07, Nasdaq -37.68 at 5122.41, S&P -15.62 at 2108.58
Market didn't started off that well and we went into more selling after an early struggle. GDP estimate despite showing an improvement, it is still in the negative region. I suppose that partly triggered off the selling. Another trigger would be the Greece's proposal that was being rejected by the creditors. EIA inventory data reported a larger than expected fall but there was a larger than expected build in gasoline inventories. That somewhat pressure the oil prices as it went down to around $60.As far as I concern, market is still moving in the range with NASDAQ being the exception. The bullish momentum seems to have quiet down as we are expecting GDP number the next day. With that being a market mover, I am thinking there should be some profit-taking ahead. While for the Greece's deal, as soon as it is settled I believe we might see some wild move in the market too. Meantime stay cautious.
Direction for Wednesday 24 June, 2015: Down
Market Summary
Industry Watch
Strong: Consumer Discretionary, Energy, Technology
Weak: Financials, Health Care, Industrials, Materials, Telecom Services
Other Market Moving Factor:
- Eurozone creditors reject Greece's debt restructuring proposal
- Homebuilders outperform after better than expected results from Lennar (LEN)
Equity indices began the day with slim losses after the International Monetary Fund rejected Greece's restructuring proposal, putting the two sides back at square one. According to Greek Prime Minister Alexis Tsipras, this was the first time the IMF did not accept equivalent fiscal measures proposed by Greek officials.
Interestingly, the market appeared to be on the comeback trail during the opening hour with the S&P 500 making a brief appearance in the green; however, the index reversed into the red shortly after activist investor Carl Icahn shared his thoughts on the market as part of an appearance on CNBC. During his interview, Mr. Icahn said he believes the market is "extremely overheated," pointing to high-yield bonds in particular.
Mr. Icahn wasn't done there, adding that he liquidated his entire stake in Netflix (NFLX 678.61, -2.58) today. Coincidentally, Netflix announced a 7:1 stock split yesterday evening with Mr. Icahn's comments causing the stock to slide more than 25 points from today's opening high. Meanwhile, the consumer discretionary sector (-0.7%) settled in-line with the S&P 500, but that masked relative strength among homebuilders. Lennar (LEN 51.05, +2.05) spiked 4.2% after reporting better than expected results while iShares Dow Jones US Home Construction ETF (ITB 27.92, +0.24) climbed 0.9%.
Elsewhere among cyclical sectors, only energy (-0.6%) and technology (-0.4%) ended ahead of the S&P 500 while the remaining growth-sensitive groups displayed relative weakness. For its part, the technology sector owed its outperformance to shares of Apple (AAPL 128.18, +1.15), which climbed 0.9%. It is worth noting Carl Icahn said during his CNBC appearance that he believes Apple offers the same opportunity that he saw in Netflix several years ago.
Unlike technology, the financial sector (-0.9%) underperformed throughout the day with Citigroup (C 56.66, -0.73) and Dow component, Goldman Sachs (GS 214.43, -3.97), losing 1.3% and 1.8%, respectively after both names were downgraded to ‘Hold' at Deutsche Bank.
Similar to financials, the industrial sector (-0.9%) spent the day among the laggards as transport stocks struggled. The Dow Jones Transportation Average lost 1.9%, narrowing its June gain to 0.1%.
The countercyclical side did not look much better with health care (-1.0%), telecom services (-0.8%), and utilities (-0.8%) ending behind the broader market while consumer staples (-0.4%) outperformed.
Treasuries held gains throughout the day, climbing to highs during the afternoon to send the 10-yr yield lower by four basis points to 2.37%.
Today's trading volume represented the highest level of activity this week with more than 720 million shares changing hands at the NYSE floor.
Economic data was limited to Q1 GDP and MBA Mortgage Index:
- First quarter GDP declined 0.2% in the third estimate, up from a previously reported 0.7% decline in the second estimate, which is what the Briefing.com consensus expected
- The upward revisions had a positive effect on real final sales, but it wasn't enough to change the overall outlook as real final sales were revised up to -0.6% from -1.1%
- The weekly MBA Mortgage Index rose 1.6% to follow last week's 5.5% decline
Global Market
Asian Markets Close: Japan’s Nikkei +0.3%; Hong Kong’s Hang Seng +0.3%; China’s Shanghai Composite +2.5%
Most markets in the Asia-Pacific region ended higher on Wednesday, including China’s Shanghai Composite, which jumped 2.5%. Japan’s Nikkei scored a more modest 0.3% advance, yet it logged an 18-year high in the process.
Economic data
- Japan
- Corporate Services Price Index +0.6% year-over-year (expected +0.4%; prior +0.7%)
Equity Markets
- Japan’s Nikkei increased 0.3%, hitting an 18-year high in Wednesday’s session. The modest gain was paced by the communications (+0.6%) and consumer non-cyclical (+0.6%) sectors. Individual standouts included Nippon Soda Co (+5.5%), Shiseido Co (+4.7%), and Sojitz Corp (+4.1%). Konica Minolta (-3.8%) and FUJIFILM Holdings (-3.5%) led the decliners. Out of the 225 index members, 126 ended higher, 84 finished lower, and 15 were unchanged.
- Hong Kong’s Hang Seng increased 0.3%, led by strength in the energy (+1.6%) and communications (+1.5%) sectors. Tencent Holdings (+3.5%), China Resources Power Holdings (+3.0%), and PetroChina (+2.7%) paced the winners. China Mengniu Dairy (-5.8%) and Power Assets Holdings (-2.1%) were the biggest losers. Out of the 50 index members, 23 ended higher, 23 finished lower, and 4 were unchanged.
- China’s Shanghai Composite increased 2.5% after rallying 3.0% in the final two hours of trading. There wasn’t a specific news catalyst for the late action. After falling 13.3% last week, the Shanghai Composite is up 4.8% in two days of trading this week. The basic materials (+2.9%), industrial (+2.4%), and consumer cyclical (+2.3%) sectors were among the best-performing areas in the Chinese market on Wednesday.
- India’s Sensex declined 0.3%, held back by a weak showing from the basic materials (-2.2%), utilities (-1.3%), and communications (-1.2%) sectors. The Sensex had been positive for most of the day, but rolled over with a 0.8% decline in the final hour. Out of the 30 index members, 10 ended higher and 20 finished lower.
- Australia’s S&P/ASX 200 ended the day up less than 0.1%. The telecom services (+0.9%), information technology (+0.6%), and energy (+0.3%) sectors were pockets of relative strength. Liquified Natural Gas Co (+9.0%) and Skilled Group Ltd (+7.1%) topped the list of winners while Flight Centre (-8.8%) led the losers. Out of the 200 index members, 79 ended higher, 110 finished lower, and 11 were unchanged.
- Regional advancers: South Korea +0.2%, Taiwan +0.1%, Malaysia +0.3%, Indonesia +0.3%, Singapore +0.4%, Thailand +1.2%, Philippines +1.2%
- Regional decliners: Vietnam -0.5%
FX
- USD/CNY unch at 6.2071
- USD/INR +0.04% at 63.631
- USD/JPY -0.02% at 123.91
EUROPE
Major European indices trade mostly lower with Germany’s DAX (-1.1%) showing the largest decline while UK’s FTSE (+0.4%) bucks the trend. The regional equity weakness comes after Eurozone creditors rejected Greece’s latest proposal. According to Greek Prime Minister Alexis Tsipras, this was the first time the International Monetary Fund did not accept equivalent fiscal measures.
- Germany’s June Ifo Business Climate slipped to 107.4 from 108.5 (consensus 108.1) as Current Assessment declined to 113.1 from 114.3 (expected 114.1) and Business Expectations ticked down to 102.0 from 103.0 (consensus 102.5)
- UK’s BBA Mortgage Approvals 42,500 (consensus 43,100; prior 42,000)
- France’s Q1 GDP was left unrevised at 0.6% quarter-over-quarter, as expected
- Italy’s May Wage Inflation 0.0% month-over-month (prior 0.2%) while the year-over-year reading increased 1.1% (last 1.2%)
Closing Prices
- UK’s FTSE: + 0.2%
- Germany’s DAX: -0.6%
- France’s CAC: -0.2%
- Spain’s IBEX: -0.7%
- Portugal’s PSI: -1.3%
- Italy’s MIB Index: -0.5%
- Irish Ovrl Index: -0.4%
- Greece ASE General Index: -1.7%
Macroeconomic Data
Economic Data
from Briefing.com
- MBA Mortgage Index : 1.6% (Prior -5.5%)
- GDP - Third Estimate : -0.2% vs -0.2% (Prior -0.7%)
- GDP Deflator - Third Estimate : 0.0% vs -0.1% (Prior -0.1%)
- Crude Inventories : -4.934M (Prior -6.812M)
GDP
Highlights
- First quarter GDP declined 0.2% in the third estimate. That is up from a previously reported 0.7% decline in the second estimate. GDP increased 2.2% in Q4 2014. The Briefing.com Consensus expected GDP to be revised down to -0.2%.
- The upward revisions had a positive effect on real final sales, but it wasn't enough to change the overall outlook. Real final sales were revised up to -0.6% from -1.1%.
Key Factors
- The revisions were in-line with expectations following the release of the Quarterly Services Survey. That report showed that both household spending on services and intellectual property product investment were better than what the BEA previously reported. Several other monthly reports from April and May, such as the new residential construction release, also showed upward revisions to March data.
- To that end, consumption spending was revised up from a 1.8% gain in the second estimate to 2.1% in the third estimate. Goods spending was revised up to 1.0% from 0.5% on an upward revision to nondurable goods spending (to 0.8% from 0.1%). Services spending was revised to a 2.7% gain from a previously reported 2.5% increase.
- Despite the upward revision, that was still the smallest increase in consumption since a 1.2% gain in Q1 2014.
- Total fixed investment was revised up to -0.3% from -2.8%.
- Nonresidential investment declined 2.0% in the third estimate, which was up from a previously reported 2.8% decline in the second estimate. Intellectual property product investment was revised up to 4.9% from 3.6%.
- Residential investment was revised up and increased 6.5% from an originally reported 5.0% gain. That was the fourth consecutive quarterly increase and the largest gain since an 8.8% increase in Q2 2014.
- The change in inventories was revised up from $95 bln to $99.5 bln.
- The export deficit was virtually unchanged at $548.0 bln.
Big Picture
- Several upward revisions made GDP growth look better in the third estimate for Q1 2015. However, GDP still declined for the first time since Q1 2014.
Market Internals
NYSE:
Higher Volumes than the day before – 740.3M vs 690.4M
Decliners outpaced Advancers (adv/dec): 879 / 2173
New Highs outpaced New Lows (highs/lows): 70 / 42
NASDAQ:
Higher Volumes than the day before – 1608.5M vs 1605.0M
Decliners outpaced Advancers (adv/dec): 803 / 2005
New Highs outpaced New Highs (highs/lows): 128 / 31
VOLATILITY S&P500 (VIX)
13.26 +1.15 (+9.50%)
Technical Updates
17,966.07 -178.00 (-0.98%)
Volume: 104,979,517 (above average of 95,248,690)
Range: 17,966.07 - 18,139.10
Range: 17,966.07 - 18,139.10
5,122.41 -37.69 (-0.73%)
Volume: 396.8M (below average of 419,126,077)
Volume: 396.8M (below average of 419,126,077)
Range: 5,121.64 - 5,164.36
2,108.58 -15.62 (-0.74%)
Volume: 534.0M (above average of 511,224,141)
Range: 2,108.58 - 2,125.10
To be honest I have been waiting for this bearish candlestick since the market did a break out. I believe that was more to a profit taking as the market hit a resistance. DOW is sitting on its 20 and 100 MA and trendline as a support level. Pretty much a significant support there I think. NASDAQ could not break above its new high and retrace to its support level, maybe around 5,100 level. While S&P broke below its support level and back to another support level from its 20 and 50 MAs. All 3 indices are still sitting above their 100 MAs and so it is not technically bearish yet.
Commodities
Closing Commodities: WTI Ends Above $60/Barrel With Modest GainCommodities
- Dollar index remains modestly lower, which is helping commodities
- After oil sold off post-inventory data, Aug WTI crude dropped below the $60/barrel level
- However, Aug crude oil ultimately ended the day $0.79 higher at $60.23/barrel
- July natural gas rose $0.04 to $2.76/MMBtu. Meanwhile, gasoline and heating oil futures lost out today
- Metals were mixed today with gold lower and silver and copper closing with gains
- Aug gold lost $4.10/oz in floor trading today to $1172.60/oz, while July silver rose $0.11 to $15.86/oz
- July copper rose $0.01 to $2.62/lb
Energy
- August crude oil futures fell $0.79 to $60.23/barrel
- July natural gas closed $0.04 higher at $2.76/MMBtu
- RBOB Gasoline closed $0.03 lower at $2.02/gallon
- Heating oil futures closed $0.04 lower to $1.88/gallon
Agriculture
- July corn closed $0.01 lower at $3.66/bushel
- September wheat closed $0.05 lower at $5.23/bushel
- November soybeans closed $0.04 lower to $9.56/bushel
- Ethanol closed $0.01 lower at $1.54/gallon
- Sugar #11 closed 0.26 cents lower to 11.51 cents/lb
Metals
- August gold ended today’s session $4.10 lower at $1172.60/oz
- July silver closed $0.11 higher at $15.86/oz
- July copper closed $0.01 higher at $2.62/lb
Currencies
- EUR/USD: +0.36% to $1.1210
- French GDP grew 0.6% q/q in Q1 2015, in line with estimates and the prior reading
- The German Ifo Business Climate Index fell to 107.4 in June from 108.5 in May
- GBP/USD: -0.24% to $1.5695
- The British Bankers Association reported 42,500 mortgage approvals in May, up from the 42,000 in April but short of expectations
- USD/JPY: -0.05% to 123.82
- Overnight, the Bank of Japan released the minutes from its May meeting. The members were concerned about the weak CPI in the Tokyo region, but generally believed that inflation would hit its 2% target in the first half of 2016
- The pair had traded as high as 124.37 before fading as equity markets slipped
- USD/CAD: +0.54% to 1.2396
- USD/CHF: +0.06% to 0.9346
- AUD/USD: -0.37% to $0.7709
- NZD/USD: +0.36% to 0.6888
Bonds
Treasuries Finish Green on Safe-Haven Buying
- Treasury coupon securities finished higher today in a curve-flattening trade as uncertainty over Greece's debt crisis (particularly, a new rift appearing between the IMF's demands and Greece's current proposal) outweighed tepid demand for the 5-year note auction and a bearish technical picture
- Yield Check:
- 2-yr: +1 bp to 0.68%
- 5-yr: -3 bps to 1.67%
- 10-yr: -4 bps to 2.37%
- 30-yr: -5 bps to 3.15%
- News:
- The MBA Mortgage Index for the week ending 6/20 rose 1.6% versus a 5.5% fall for the prior week
- Q1 GDP growth was -0.2%, in line with the Briefing.com consensus but much better than the 2nd revision of -0.7%
- The revisions were in line with expectations following the release of the Quarterly Services Survey. That report showed that both household spending on services and intellectual property product investment were better than what the BEA previously reported. Several other monthly reports from April and May, such as the new residential construction release, also showed upward revisions to March data
- Several upward revisions made GDP growth look better in the 3rd estimate for Q1 2015, but GDP still declined for the first time since Q1 2014
- The GDP Deflator for Q1 2015 was 0.0%, higher than the Briefing.com consensus of -0.1% which was also the 2nd estimate
- Crude Oil Inventories for the week ending 6/20 fell 4.934 mln barrels versus a decline of 2.676 mln barrels in the prior week
- The $35 billion 5-year note auction was met with lackluster demand. The auction tailed 1.1 bp
- High yield: 1.710%
- Bid-to-cover: 2.39
- Indirect bid: 56.6%
- Direct bid: 5.6%
- Commodities:
- WTI crude: -1.20% to $60.28/bbl
- Gold: -0.26% to $1,173.50/troy oz.
- Copper: +0.36% to $2.623/lb.
- Currencies:
- EUR/USD: +0.36% to $1.1209
- USD/JPY: -0.04% to 123.84
- Data out Thursday:
- Initial Jobless Claims for the week ending 6/20 and Continuing Jobless Claims for the week ending 6/13 (08:30 ET)
- May Personal Income and Personal Spending (08:30 ET)
- May PCE Prices – Core (08:30 ET)
- Fed Governor Powell (FOMC voter) speaks on “Building a Safer Payment System” (09:45 ET)
- Natural Gas Inventories for the week ending 6/20 (10:30 ET)
- New Issuance:
- $29 billion 7-year note auction (13:00 ET)
Treasury Yields:
- 2 Year Note 0.68% -0.02
- 5 Year Note 1.69% -0.02
- 10 Year Note 2.38% -0.04
- 30 Year Bond 3.16% -0.04
2/30 Spread: 248 bps ( -2 ) … 2/10 Spread: 170 bps ( -2 )
Preview for Thursday 25 June, 2015
Economic Data
Thursday (25 June) :
- Initial Claims : 271K (Prior 267K)
- Continuing Claims : 2210K (Prior 2222K)
- Personal Income : 0.5% (Prior 0.4%)
- Personal Spending : 0.7% (Prior 0.0%)
- PCE Prices - Core : 0.1% (Prior 0.1%)
- Natural Gas Inventories : (Prior 89 bcf)
Earnings Highlights
Thursday (25 June) :
BMO - ACN BKS CMC LNN MEI SJR WGO
AMC - DRC MU NKE PRGS SNX
BMO - ACN BKS CMC LNN MEI SJR WGO
AMC - DRC MU NKE PRGS SNX
Summary
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.
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
2015 Daily Directional Accuracy: 55/95 (57.89%)
2015 Daily Directional Accuracy: 55/95 (57.89%)
2015 Weekly Directional Accuracy: 13/22 (59.09%)
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