Dow +64.33 at 18076.27, Nasdaq +22.71 at 5099.24, S&P +4.47 at 2114.07
Doesn't seem like a strong bullish stance on Wednesday. Market managed to pullback at the start but eventually dies off with some profit taking. Bonds market across the world are in red which might reflect investors are hedging their portfolio. Certainly not that optimism to the stock market...Perhaps one good reason to explain why the market has been reacting rather weird is the Fed's Beige book tomorrow. That might give the traders or investors some hints on when the Fed is raising the interest rate. With Greece's debt situation looming in the euro area, market is looking more fragile.
Together with the ADP employment number, we should see a volatile session on Wednesday.
Direction for Wednesday 3 June, 2015; Up
Market Summary
Industry Watch
Strong: Consumer Discretionary, Financials, Technology, Telecom Services
Weak: Energy, Utilities
Other Market Moving Factor:
- Greece remains at odds with creditors: Syriza spokesman says no Friday payment to IMF if no deal in sight
- ECB makes no changes to its policy stance/asset purchase program: Mario Draghi says inflation bottomed out early in the year
- ADP Employment Survey roughly in-line with expectations (201K; Briefing.com consensus 200K)
Equity indices began the day on a modestly higher note and extended their gains in the early going; however, a return to their opening levels followed once selling pressure appeared in the neighborhood of this week's highs.
Meanwhile, another day went by without an agreement between Greece and its creditors. Earlier, the spokesman for Greece's Syriza party said Greece will not make the June 5 debt payment to the International Monetary Fund if there is no prospect of a deal within the next few days, according to Kathimerini. The lack of progress did not stop the euro from rallying 1.1% against the dollar to 1.1270. To be fair, today's euro strength followed a set of better than expected Services PMI readings with the Eurozone Services PMI climbing to 53.8 from 53.3 (expected 53.3). Also of note, the European Central Bank made no changes to its policy stance, but ECB President Mario Draghi warned that low rates invite high volatility.
Fittingly, Germany's 10-yr bund continued this week's plunge, sending its yield higher by 17 basis points to 0.89%. This week alone, the bund yield has soared 40 basis points. Similarly, U.S. Treasuries also sold off with the 10-yr yield rising 11 basis points to 2.37%.
Six of ten sectors registered gains with a few cyclical groups holding the lead throughout the day. Specifically, consumer discretionary (+0.7%), financials (+0.7%), and industrials (+0.5%) kept the market afloat with the industrial sector receiving support from transport stocks.
The Dow Jones Transportation Average gained 1.2%, extending its June advance to 2.5% after falling 3.4% in May. The bellwether complex enjoyed gains among 15 of its 20 components with CH Robinson (CHRW 64.62, +3.36) spiking 5.5% to lead the group higher.
Elsewhere, the financial sector rallied in response to the steepening yield curve while the discretionary space received broad support. For its part, the top-weighted technology sector (+0.2%) finished just behind the broader market as chipmakers lagged. The PHLX Semiconductor Index lost 0.6%, narrowing its Q2 gain to 5.4%.
Five of six cyclical groups ended the day in the green while energy (-0.7%) struggled throughout the session as crude oil dropped 2.6% to $59.69/bbl. The energy component got no respite from the second consecutive decline in the greenback that sent the Dollar Index (95.33, -0.51) lower by 0.5%.
Moving to the countercyclical side, consumer staples (-0.1%) and utilities (-1.4%) ended in the red with the utilities sector responding to an increase in Treasury yields. On the flip side, telecom services (+0.8%) and health care (+0.1%) ended higher.
Economic data included ADP Employment Change, Trade Balance, ISM Services, and the MBA Mortgage Index:
- The ADP National Employment Report revealed that employment in the nonfarm private business sector rose by 201K in May while the Briefing.com consensus expected an increase of 200K
- The April reading was revised down to 165,000 from 169,000
- The trade deficit fell to $40.90 billion in April from a downwardly revised $50.60 billion (from $51.40 billion) while the Briefing.com consensus expected a decline to $44.00 billion
- The large March trade deficit largely resulted from the end of the port strike on the west coast. As dockworkers returned, they were able to offload the backlog of containerships
- The ISM Non-manufacturing Index fell to 55.7 in May from 57.8 in April while the Briefing.com consensus expected a drop to 57.1
- Despite the decline, most of the underlying indices still showed strong growth trends
- The Production Index fell from 61.6 in April to a still healthy 59.5 in May. New orders softened as the related index declined to 57.9 in May from 59.2 in April
- The weekly MBA Mortgage Index fell 7.6% to follow last week's 1.6% decline
Global Market
Asian Markets Close: Japan’s Nikkei -0.3%; Hong Kong’s Hang Seng +0.7%; China’s Shanghai Composite -0.01%
Major markets in the Asia-Pacific region were mostly lower on Wednesday as buyers lacked conviction. China’s Shanghai Composite cooled off and ended with a fractional loss. Meanwhile, Australia S&P/ASX 200 dropped 0.9% after a stronger than expected Q1 GDP report.
Economic data
- China
- May HSBC Services PMI 53.5 (expected 53.3; prior 52.9)
- Australia
- Q1 GDP +0.9% quarter-over-quarter (expected +0.7%; prior +0.5%); +2.3% year-over-year (expected +2.1%; prior +2.5%)
- Q1 GDP Chain Price Index 0.0% (prior -0.2%)
- Hong Kong
- May Manufacturing PMI 47.6 (prior 48.6)
- India
- May HSBC Services PMI 49.6 (prior 52.4)
Equity Markets
- Japan’s Nikkei declined 0.3%, led by weakness in the utilities (-1.5%), technology (-0.9%), and consumer non-cyclical (-0.7%) sectors. Chubu Electric Power (-3.5%), Screen Holdings Co (-2.9%), and Nitto Denko Corp (-2.8%) paced declining issues while Nisshin Seifun Group (+5.0%), Nippon Sheet Glass (+4.5%), and Fujitsu (+4.4%) led advancing shares. Out of the 225 index members, 98 ended higher, 119 finished lower, and 8 were unchanged.
- Hong Kong’s Hang Seng increased 0.7% behind the strength of the energy (+1.3%) and communications (+1.0%) sectors. Individual standouts included China Shenhua Energy (+2.8%), CNOOC (+1.8%), and China Mobile (+1.8%). Hong Kong & China Gas Co (-10.1%) was the worst-performing issue. Out of the 49 index members, 23 ended higher, 25 finished lower, and 1 was unchanged.
- China’s Shanghai Composite had a roller coaster session, ending basically flat after a late burst of buying interest. An influx of new listings reportedly acted as a drag on the market, which also digested a better than expected HSBC Services PMI reading for May. Strength in the financial (+0.5%) and basic materials (+0.2%) sectors helped offset weakness in most other areas. The utilities (-1.3%) and technology (-1.2%) sectors were the weakest sectors in the Chinese market on Wednesday.
- India’s Sensex declined 1.3% and finished near its lows for the day. The weakest links were the utilities (-3.0%), basic materials (-2.1%), and consumer non-cyclical (-1.7%) sectors. Tata Power (-5.6%), ITC Ltd (-4.5%), and Oil & Natural Gas Corp (-3.9%) led declining issues. Coal India (+1.0%) led a small group of just five listings that ended higher for the day.
- Australia’s S&P/ASX 200 declined 0.9% following a stronger than expected Q1 GDP report, which presumably lessened the chances of further easing activity on the part of the Reserve Bank of Australia. Losses were led by the gold (2.0%), health care (-1.5%), and consumer discretionary (-1.5%) sectors. Virtus Health (-6.9%), Retail Food Group (-6.5%), and Syrah Resources (-5.8%) were the worst-performing issues. Bradken (+4.8%) led all gainers. Out of the 200 index members, 39 ended higher, 149 finished lower, and 12 were unchanged.
- Regional advancers: Singapore +0.3%, Malaysia +0.5%, Thailand +0.4%, Philippines +0.1%
- Regional decliners: South Korea -0.7%, Taiwan -0.6%, Indonesia -1.6%, Vietnam -0.4%
FX
- USD/CNY -0.01% at 6.1978
- USD/INR +0.4% at 63.921
- USD/JPY +0.3% at 124.48
EUROPE
Major European indices trade higher across the board with France’s CAC (+1.4%) in the lead. The European Central Bank made no changes to its monetary policy following today’s meeting. Elsewhere, the spokesman for Greece’s Syriza party said Greece will not make the June 5 debt payment to the International Monetary Fund if there is no prospect of a deal within the next few days, according to Kathimerini.
- Eurozone May Services PMI 53.8 (expected 53.3; prior 53.3), April Retail Sales +0.7% month-over-month (expected 0.7%; prior -0.6%), and April Unemployment Rate 11.1% (consensus 11.2%; last 11.2%)
- Germany’s May Services PMI 53.0 (expected 52.9; prior 52.9)
- UK’s May Services PMI 56.5 (expected 59.2; previous 59.5) while May Nationwide HPI +0.3% month-over-month, as expected (prior 1.0%)
- France’s May Services PMI 52.8 (consensus 51.6; last 51.6)
- Spain’s May Services PMI 58.4 (expected 59.3; last 60.3)
- Italy’s May Services PMI 52.5 (consensus 52.7; prior 53.1)
Closing Prices
- UK’s FTSE: + 0.3%
- Germany’s DAX: + 0.8%
- France’s CAC: + 0.6%
- Spain’s IBEX: -0.1%
- Portugal’s PSI: + 1.0%
- Italy’s MIB Index: + 0.1%
- Irish Ovrl Index: + 0.1%
- Greece ASE General Index: + 4.1%
Macroeconomic Data
Economic Data
from Briefing.com
- MBA Mortgage Index : -7.6% (Prior -1.6%)
- ADP Employment Change : 201K vs 200K (Prior 169K)
- Trade Balance : -$40.9B vs -$44.0B (Prior -$51.4B)
- ISM Services : 55.7 vs 57.1 (Prior 57.8)
- Crude Inventories : -1.948M (Prior -2.802M)
- Fed's Beige Book
TRADE BALANCE
Highlights
- The trade deficit fell to $40.9 bln in April from a downwardly revised $50.6 bln (from $51.4 bln) in March. The Briefing.com Consensus expected the trade deficit to decline to $44.0 bln.
Key Factors
- The large March trade deficit was primarily the result of the end of the port strike on the west coast. As dockworkers returned, they were able to offload the containerships that were waiting off the coast.
- It seems that the temporary problems on the docks are gone as the trade deficit returned to its pre-strike trends.
- Now the focus on trade volatility will shift to the effects from the vast appreciation of the dollar that began in September 2014.
- The impact on exports is clearly being felt. Total exports increased $1.9 bln in April to $189.9 bln from $188.0 bln in March. Yet, that is still $5.4 bln below the 2014 monthly average.
- Export gains came primarily from industrial supplies ($0.6 bln) and capital goods ($2.1 bln), of which nearly half came from civilian aircraft exports ($1.0 bln), and automotive vehicles and parts ($0.2 bln).Total imports declined by $7.8 bln in April to $230.8 bln from $238.6 bln in March.
- Surprisingly, the stronger dollar has not played much of a role in boosting import demand. Total imports in April were well below the 2014 monthly average of $237.7 bln.
- Most of the decline in April imports came from a $4.9 bln decline in consumer goods imports. That can be attributed to the surge in containerships that were unloaded in March following the port strike. Declines were also registered in capital goods (-$0.6 bln), automotive (-$0.4 bln), and industrial supplies (-$0.6 bln).
- The petroleum-based trade deficit continued to decline. It dropped to $6.8 bln in April from $7.5 bln in March. That is almost a third of what the deficit was in April (-$17.9 bln) 2014.
Big Picture
- So far the stronger dollar does not seem to have played a major role in boosting import demand.
ISM SERVICES
Highlights
- The ISM Non-manufacturing Index fell to 55.7 in May from 57.8 in April. The Briefing.com Consensus expected the index to fall to 57.1.
Key Factors
- Despite the decline, most of the underlying indices still showed strong growth trends.
- The Production Index fell from 61.6 in April to a still healthy 59.5 in May. New orders softened as the related index declined to 57.9 in May from 59.2 in April.
- One bit of discouraging news, order backlogs contracted as the related index fell to 48.5 in May from 54.5 in April. Without a steady supply of backlogs, production growth could soften even further.
- The Employment Index declined to 55.3 in May from 56.7 in April.
Big Picture
- The market generally doesn't pay much attention to the services index because the services sector is less cyclical than the manufacturing sector. To that end, May marked the 64th consecutive month in which economic activity in the non-manufacturing sector has expanded.
Market Internals
NYSE:
Lower Volumes than the day before – 684.3M vs 727.7M
Advancers outpaced Decliners (adv/dec): 1565 / 1503
New Highs outpaced New Lows (highs/lows): 100 / 53
NASDAQ:
Higher Volumes than the day before – 1841.7M vs 1716.0M
Advancers outpaced Decliners (adv/dec): 1925 / 881
New Highs outpaced New Highs (highs/lows): 153 / 29
VOLATILITY S&P500 (VIX)
13.66 -0.58 (-4.07%)
Internals are showing some slight bullishness, not much from the Advancers but rather the New Highs. VIX went below to test its support at the 20 and 50 MAs. It is not that bullish but it is not getting any bearish at the moment too.
Technical Updates
18,076.27 +64.33 (+0.36%)
Volume: 73,118,298 (below average of 99,385,639)
Range: 18,010.42 - 18,168.09
Range: 18,010.42 - 18,168.09
5,099.23 +22.71 (+0.45%)
Volume: 411,408,036 (below average of 427,636,595)
Volume: 411,408,036 (below average of 427,636,595)
Range: 5,084.99 - 5,114.60
2,114.07 +4.47 (+0.21%)
Volume: 464,527,000 (below average of 527,154,108)
Range: 2,109.61 - 2,121.92
Looking at the candlestick pattern as it reflects more consolidation, it seems that the market is finding it harder to get bullish. NASDAQ forms a doji and it doesn't look like breaking above the resistance level and I am seeing possibly a double top. While DOW is still held up by its channel and support level.
Commodities
Closing Commodities: WTI Oil Sells Off Following Storage Data, Ahead Of OPEC’s Friday MeetingCommodities
- The dollar index continued to remain in the red today, but this offered little strength to commodities today
- Outside of the dollar, oil futures were trading on the weekly API and EIA storage data and on speculation of OPEC’s meeting on Friday
- In pit trading today, front-month crude oil lost $1.59 to $59.69/barrel
- July nat gas sold off today, losing 2.6% to $2.63/MMBtu
- Metals closed lower as well
- Aug gold fell $10.20 to $1184.50/oz, while July silver lost $0.34 (or -2%) to $16.47/oz
- Copper lost one cent to $2.73/lb
Energy
- July crude oil futures fell $1.59 to $59.69/barrel
- July natural gas closed $0.07 lower (-2.6%) at $2.63/MMBtu
- RBOB Gasoline closed $0.01 lower to $2.05/gallon
- Heating oil futures closed $0.06 lower at $1.89/gallon
Agriculture
- July corn closed flat at $3.59/bushel
- July wheat closed $0.04 lower to $5.09/bushel
- July soybeans closed $0.05 higher to $9.35/bushel
- Ethanol closed flat at $1.53/gallon
- Sugar #11 closed 0.27 cents lower to 12.05 cents/lb
Metals
- August gold ended today’s session $10.20 lower to $1184.50/oz
- July silver closed $0.34 lower (-2%) at $16.47/oz
- July copper closed $0.01 lower at $2.73/lb
Currencies
- The U.S. Dollar Index fell today despite the dollar gaining against all majors but the euro. The euro makes up roughly 60% of the index
- EUR/USD: +0.85% to $1.1248
- Eurozone unemployment fell by 130K in April and the unemployment rate declined to 11.1% from 11.2% in March. The market had been looking for the UE rate to remain at 11.1%
- Eurozone Retail Sales grew 0.7% m/m in April, in line with expectations but much better than the 0.6% decline in March
- GBP/USD: -0.18%
- In the U.K., the Services PMI for May badly missed market expectations for a reading in the high 50's, instead showing 56.5 versus 59.5 in April
- The Bank of England is set to leave interest rates unchanged at its Monetary Policy Committee meeting Thursday
- USD/JPY: +0.28% to 124.38
- USD/CHF: +0.27% to 0.9357
- USD/CAD: +0.44% to 1.2465
- AUD/USD: +0.06% to 0.7771
- NZD/USD: -0.39% to 0.7136
Bonds
Treasuries Sell off Sharply
- The U.S. Treasury complex lost ground for the third straight day as European sovereign debt led government bonds of all countries lower. The 2-year note was spared most of the losses, but 10 and 30-year yields made fresh 6-month highs
- Yield Check:
- 2-yr: +2 bps to 0.68%
- 5-yr: +8 bps to 1.69%
- 10-yr: +11 bps to 2.37%
- 30-yr: +10 bps to 3.11%
- News:
- The MBA Mortgage Index rose 7.6% for the week of 5/30 vs. a fall of 1.6% for the prior week
- The trade deficit fell to $40.9 bln in April from a downwardly revised $50.6 bln (from $51.4 bln) in March. The Briefing.com Consensus expected the trade deficit to decline to $44.0 bln
- The May ADP Employment Change was 201K, in line with the Briefing.com Consensus of 200K and better than the prior reading of 165K (revised from 169K)
- The ISM Non-manufacturing Index fell to 55.7 in May from 57.8 in April. The Briefing.com Consensus expected the index to fall to 57.1
- Despite the decline, most of the underlying indices still showed strong growth trends
- Crude oil inventories fell 1.948 mln barrels in the week ending 5/30 versus a fall of 2.802 mln in the prior week
- The Fed's Beige Book showed that the U.S. economy expanded at a modest pace between early April and late May
- Commodities:
- Oil: -2.69% to $59.61/bbl
- Gold: -0.64% to $1,186.70/troy oz.
- Copper: -0.35% $2.7265/lb.
- Currencies:
- EUR/USD: +1.04% to $1.1267
- USD/JPY: +0.21% to 124.28
- Data out Thursday:
- May Challenger Job Cuts (07:30 ET)
- Initial Jobless Claims for the week of 5/30 and Continuing Jobless Claims for the week of 5/23 (08:30 ET)
- Q1 Productivity – Revised and Unit Labor Costs – Revised (08:30 ET)
- Natural Gas Inventories for the week of 5/30 (10:30 ET)
Treasury Yields:
- 2 Year Note 0.69% +0.05
- 5 Year Note 1.69% +0.08
- 10 Year Note 2.38% +0.11
- 30 Year Bond 3.11% +0.09
2/30 Spread: 242 bps ( +4 ) … 2/10 Spread: 169 bps ( +6 )
Preview for Thursday 4 June, 2015
Economic Data
Thursday (4 June) :
- Challenger Job Cuts : (Prior 52.8%)
- Initial Claims : 280K (Prior 282K)
- Continuing Claims : 2215K (Prior 2222K)
- Productivity-Rev : -2.9% (Prior -1.9%)
- Unit Labour Cost-Rev : 5.9% (Prior 5.0%)
- Natural Gas Inventories : (Prior 112 bcf)
Earnings Highlights
Thursday (4 June) :
BMO - BRLI CIEN CYBX SJM JOY LE MIK NAV SHLD
AMC - ALOG CMTL COO DMND ESL GLPW IDT RALY SEAC THO UTIW PAY VNCE ZOES ZUMZ
BMO - BRLI CIEN CYBX SJM JOY LE MIK NAV SHLD
AMC - ALOG CMTL COO DMND ESL GLPW IDT RALY SEAC THO UTIW PAY VNCE ZOES ZUMZ
Summary
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
2015 Daily Directional Accuracy: 44/82 (53.66%)
2015 Daily Directional Accuracy: 44/82 (53.66%)
2015 Weekly Directional Accuracy: 11/19 (57.89%)
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