Dow -5.41 at 17745.98, Nasdaq +17.05 at 5128.78, S&P +0.06 at 2108.63
Speak about volatility. Market went lower at the opening which I suppose to be some profit taking and it picked up shortly after. However market did not really break above Wednesday's close and this leads me to question on the strength of pullback.Despite market went higher on Wednesday, I think most traders are still waiting for the release of GDP number tomorrow. Nothing much was inferred from the FOMC statement as the Fed remains patient in raising rate. Therefore I suppose many will look into the GDP and we should see more reaction in the market on Thursday instead. Market can go anywhere from here and it is better to stay off first.
By the way, we are in the tobacco season and we have seen some tobacco companies posting a better than expected earnings reports. I will also be monitoring Altria and Reynolds closely for any opportunity.
Direction for Thursday 30 July, 2015: Abstain
GDP number is slightly disappointing, despite showing a positive growth. I think this aligns with what the Fed probably wants, a steady growth. And so, maybe we ought to see a rise in interest rate by end of this year.
China market remains volatile and the Asian market was mostly in mixed. Europe was simply flat.
Market Summary
Industry Watch
Strong: Consumer Discretionary, Financials, Materials, Technology, Telecom Services, Utilities
Weak: Consumer Staples, Health Care, Energy, Industrials
Other Market Moving Factor:
- Renewed selling in China weighs on overall risk tolerance
- Dow component Procter & Gamble (PG) retreats despite reporting a bottom-line beat
Equity indices faced some early weakness after the overnight session saw renewed selling in China that sent the Shanghai Composite lower by 2.2%. Furthermore, equity futures dropped to new lows ahead of the opening bell after the advance reading of Q2 GDP pointed to an expansion of 2.3%, while the Briefing.com consensus expected a reading of 2.5%. Meanwhile, the first quarter reading was revised up to 0.6% from -0.2%.
This morning's GDP report was met with a rally in the Treasury market as the 10-yr note spiked off its low and continued advancing into the afternoon, dropping its yield three basis points to 2.26%.
Six sectors registered gains with the rate-sensitive utilities sector (+0.7%) holding the lead throughout the day. The sector extended its weekly gain to 2.9%, benefiting from today's decline in yields. Elsewhere among countercyclical groups, telecom services (+0.3%) settled in the green while health care (-0.2%) and consumer staples (-0.3%) registered modest losses.
Notably, the staples sector was pressured by Procter & Gamble (PG 77.44, -3.18) as the Dow component retreated 3.9% despite reporting better than expected results. For its part, the health care sector registered a slim loss after 50 sector components reported earnings. AstraZeneca (AZN 33.74, +0.73) climbed 2.2% in reaction to a bottom-line beat while Cigna (CI 143.90, -1.51) lost 1.0% despite beating earnings expectations. As for biotechnology, the high-beta industry group struggled early, but iShares Nasdaq Biotechnology ETF (IBB 378.96, +1.53) ended higher by 0.4%.
Staying on the high-beta theme, chipmakers helped the technology sector (+0.1%) erase its early loss, which also lifted the Nasdaq Composite. NXP Semiconductor (97.87, +6.07) was a standout performer, surging 6.6% in reaction to a bottom-line beat on cautious guidance. Meanwhile, the broader PHLX Semiconductor Index climbed 0.4%.
Similar to technology, consumer discretionary (+0.3%), financials (+0.1%), and materials (+0.5%) posted gains while other growth-sensitive groups ended in the red. The energy sector (-0.6%) finished at the bottom of the leaderboard after several sector components reported earnings. Marathon Petroleum (MPC 53.94, -1.87) gave up 3.4% in reaction to disappointing results while ConocoPhillips (COP 52.07, -0.83) lost 1.6% despite delivering a bottom-line beat. On the upside, Royal Dutch Shell (RDS.A 57.37, +1.97) jumped 3.6% after reporting better than expected results and announcing plans to cut costs.
Today's participation was a bit below totals registered earlier in the week as 770 million shares changed hands at the NYSE floor.
Economic data reported today included Q2 GDP and Initial Claims:
- GDP increased 2.3% in the advance estimate of for the second quarter, up from an upwardly revised 0.6% (from -0.2%) increase in Q1 2015 while the Briefing.com consensus expected an increase of 2.5%
- Real final sales, which exclude inventories, rose 2.4% in the second quarter, up a 0.2% decline in the first quarter
- Almost the entire increase in GDP was the result of a 2.9% increase in real personal consumption spending, which contributed 2.0 percentage points to second quarter growth
- Goods spending increased 4.8% after increasing 1.1% in the first quarter. That was the strongest increase in goods spending since a 6.7% gain in Q2 2014
- Services spending increased 2.1% for a second consecutive quarter
- The weekly initial claims level increased to 267,000 from an unrevised 255,000 while the Briefing.com consensus expected an increase to 272,000
- The four-week moving average dropped to 275,000 from 278,000, signaling a labor market that is nearing full employment
- The continuing claims level increased to 2.262 mln for the week ending July 18 from an upwardly revised 2.216 mln (from 2.207 mln) for the week ending July 11 while the consensus expected a decrease to 2.200 mln
Global Market
Asian Markets Close: Japan’s Nikkei +1.1%; Hong Kong’s Hang Seng -0.5%; China’s Shanghai Composite -2.2%
It was a mixed day of action in the Asian-Pacific markets, featuring a 1.1% increase in Japan’s Nikkei on the back of better than expected economic and earnings news and a 2.2% decline in China’s Shanghai Composite, which buckled in a final hour selloff tied to concerns about banks reportedly looking at their exposure to the stock market.
Economic data
- Japan
- June Industrial Production +0.8% month-over-month (expected +0.3%; prior -2.1%)
- Australia
- June Building Approvals -8.2% month-over-month (expected -0.8%; prior +2.3%)
- June Private House Approvals +4.3% (prior -8.9%)
- Q2 Export Price Index -4.4% quarter-over-quarter (expected -4.0%; prior -0.8%)
- Q2 Import Price Index +1.4% (expected +1.5%; prior -0.2%)
- Singapore
- Q2 Unemployment Rate 2.0% (expected 1.9%; prior 1.8%)
Equity Markets
- Japan’s Nikkei increased 1.1%, bolstered by better than expected earnings results from a number of leading companies. Leading sectors included the materials (+1.9%), financials (+1.8%), and industrials (+1.4%) sectors. Hino Motors (+6.9%), Hitachi (+6.5%), and Sumitomo Corp (+6.5%) sat atop the list of winners. Panasonic (-5.8%), Nichirei (-5.7%), and Mitsubishi Electric (-5.7%) were the worst-performing issues. Out of the 225 index members, 181 ended higher, 38 finished lower, and 6 were unchanged.
- Hong Kong’s Hang Seng declined 0.5%, surrendering early gains as the trading session progressed and closing near its lows for the day with weakness in mainland markets weighing. China Life Insurance (-2.5%), China Shenhua Energy (-2.3%), and BOC Hong Kong Holdings (-1.9%) led the laggards while Kunlun Energy (+2.7%), China Resources Power Holdings (+1.6%), and China Mobile (+1.1%) paced the winners. Out of the 50 index members, 18 ended higher, 31 finished lower, and 1 was unchanged.
- China’s Shanghai Composite declined 2.2%, losing all of that ground in the final hour of trading. The late-day slide was attributed to investor angst following media reports suggesting banks are going to be looking more closely at their stock market exposure, including the loans they have made where stock has been used as collateral. With today’s loss and Monday’s massive drop, the Shanghai Composite is down 9.0% for the week.
- India’s Sensex closed up 0.6%, having maintained a position in positive territory from the start of trading. Leading sectors included the industrials (+1.7%), consumer discretionary (+1.2%), and materials (+0.8%) sectors. Dr Reddy’s Laboratories (+5.4%), Cipla Ltd (+4.6%), and ITC Ltd (+3.9%) were the best-performing issues. Sun Pharmaceuticals (-1.9%), Hindalco Industries (-1.7%), and Infosys (-1.4%) brought up the rear. Out of the 30 index members, 19 ended higher and 11 finished lower.
- Australia’s S&P/ASX 200 increased 0.8%, riding the strength of its energy (+2.3%), consumer staples (+2.0%), and resources (+1.9%) sectors. Out of the 22 index members, 132 ended higher, 55 finished lower, and 13 were unchanged.
- Regional advancers: Taiwan +1.0%, Malaysia +0.1%, Vietnam +0.3%, Philippines +0.4%
- Regional decliners: South Korea -1.0%, Indonesia -0.2%, Singapore -1.1% · Closed for holiday: Thailand (Asarnha Bucha Day)
FX
- USD/CNY +0.01% at 6.2097
- USD/INR +0.2% at 64.0225
- USD/JPY +0.3% at 124.30
EUROPE
Major European indices trade mostly higher while Spain’s IBEX (-0.9%) underperforms amid disappointing earnings.
- Eurozone Business and Consumer Survey rose to 104.0 from 103.5 (expected 103.3)
- Germany’s Unemployment Change +9,000 (expected -5,000; prior +1,000) while the Unemployment Rate held at 6.4%.
- Spain’s Q2 GDP rose 1.0% quarter-over-quarter, as expected (prior 0.9%); +3.1% year-over-year, as expected (prior 2.7%). Separately July CPI 0.0% year-over-year (expected 0.1%; prior 0.1%); -1.0% month-over-month (consensus 0.0%; last 0.3%)
- Swiss July KOF Leading Indicators improved to 99.8 from 89.8 (expected 90.3)
Closing Prices
- UK’s FTSE: + 0.7%
- Germany’s DAX: + 0.4%
- France’s CAC: + 0.6%
- Spain’s IBEX: -1.2%
- Portugal’s PSI: + 0.7%
- Italy’s MIB Index: + 0.6%
- Irish Ovrl Index: + 0.2%
- Greece ASE General Index: CLOSED
Macroeconomic Data
Economic Data
from Briefing.com
- Initial Claims : 267K vs 271K (Prior 255K)
- Continuing Claims : 2262K vs 2200K (Prior 2216K - Up)
- GDP - Adv : 2.3% vs 2.6% (Prior 0.6% - Up)
- Chain Deflator - Adv : 2.0% vs 1.5% (Prior 0.1% - Up)
- Natural Gas Inventories : 52 bcf (Prior 61 bcf)
UNEMPLOYMENT CLAIMS
Highlights
- The initial claims level increased to 267,000 for the week ending July 25 from an unrevised 255,000 for the week ending July 18. The Briefing.com Consensus expected the initial claims level to increase to 272,000.
- The continuing claims level increased to 2.262 mln for the week ending July 18 from an upwardly revised 2.216 mln (from 2.207 mln) for the week ending July 11. The consensus expected the continuing claims level to decrease to 2.200 mln.
Key Factors
- The four-week moving average dropped to 275,000 from 278,000, and signal a labor market that is nearing full employment.
Big Picture
- The initial claims level stays low after the historic drop.
GROSS DOMESTIC PRODUCT
Highlights
- GDP increased 2.3% in the advance estimate of Q2 2015 GDP, up from an upwardly revised 0.6% (from -0.2%) increase in Q1 2015. The Briefing.com Consensus expected GDP to increase 2.5%.
- Real final sales, which exclude inventories, rose 2.4% in the second quarter, up a 0.2% decline in the first quarter. That was the strongest increase in real final sales since a 4.3% gain in Q3 2014.
Key Factors
- Almost the entire increase in GDP was the result of a 2.9% increase in real personal consumption spending, which contributed 2.0 percentage points to second quarter growth. Spending increased only 1.8% in the first quarter.
- Goods spending increased 4.8% after increasing 1.1% in the first quarter. That was the strongest increase in goods spending since a 6.7% gain in Q2 2014. Services spending increased 2.1% for a second consecutive quarter.
- Total investment spending increased 0.3% in the Q2 2015, down from an 8.6% increase in Q1 2015. That was the smallest increase in investment spending since a 2.5% decline in Q1 2014.
- Nonresidential investment spending declined 0.6%, which was the first decline from business investment since a 2.1% drop in Q3 2012.
- Spending on nonresidential structures declined for a second consecutive month (-1.6% from -7.4% in Q1). Equipment spending declined 4.1% after increasing 2.3% in the first quarter. Intellectual property products spending increased 5.5%.
- Despite what was expected to be a strong acceleration after the extreme winter, residential investment spending slowed in the second quarter. Spending rose only 5.5% after increasing 10.1% in Q1 2015. That was the smallest increase since a 4.8% gain in Q2 2014.
- The U.S. trade deficit narrowed to $536.3 bln in Q2 2015 from $541.2 bln in Q1 2015. The smaller trade deficit added 0.1 percentage points to second quarter GDP growth.
- The BEA included revisions to their seasonal adjustment factors in this release along with the normal annual revisions. Residual seasonal effects were blamed for unusually low first quarter growth rates in years past and, subsequently, unusually strong second quarter growth rates.
- As expected, revisions to past first quarters generally were upgraded. That included revisions to 2012 (2.7% from 2.3%), 2014 (-0.9% from -2.1%), and 2015 (0.6% from -0.2%). The only downward revision came in 2013, where GDP was revised to 1.9% from 2.7%.
- The downward revision to 2013 cannot be faulted on incorrect seasonal adjustments. New included data from used in the normal annual revisions resulted in downward revisions in growth rates across the entire year. The end result was GDP growth in 2013 being downgraded to a 1.5% gain from a previously reported 2.2% increase.
- Surprisingly, second quarter GDP growth rates did not follow the expected pattern. While 2013 growth was revised down (1.1% from 1.8%), that was likely the result of the aforementioned negative revisions and not from seasonal adjustments. The growth rates in 2012 were revised higher (1.9% from 1.6%) and were left unchanged (4.6%) in 2014.
Big Picture
- GDP showed some mild improvements after the weak first quarter. Growth trends are still below the 2.7% - 3.0% potential rate.
Market Internals
NYSE:
Lower Volumes than the day before – 795.6M vs 880.8M
Advancers outpaced Decliners (adv/dec): 1567 / 1503
New Highs outpaced New Lows (highs/lows): 80 / 71
NASDAQ:
Higher Volumes than the day before – 1897.3M vs 1875.5M
Advancers outpaced Decliners (adv/dec): 1502 / 1355
New Lows outpaced New Highs (highs/lows): 63 / 83
VOLATILITY S&P500 (VIX)
12.13 -0.37 (-2.96%)
Technical Updates
17,745.98 -5.41 (-0.03%)
Volume: 76,646,141 (below average of 91,997,395)
Range: 17,640.85 - 17,761.25
Range: 17,640.85 - 17,761.25
5,128.79 +17.05 (+0.33%)
Volume: 432,341,828 (above average of 431,432,767)
Volume: 432,341,828 (above average of 431,432,767)
Range: 5,070.62 - 5,135.65
2,108.63 +0.06 (+0.00%)
Volume: 505,302,000 (below average of 523,981,292)
Range: 2,094.97 - 2,110.48
DOW could not break above its 200MA and forming a crucifix doji. The next resistance is around 17,783 and support is around 17,640 then 17,580. On top of that, it seems that DOW is forming the head and shoulder pattern. Does this refers to more downside in the short term? NASDAQ remains strong on its pullback as the ascending trend line forms a good support and continues to head higher. Next resistance is around 5,164 and 5,100 for support. S&P did show some strength but it did not break higher of its close on Wednesday and that should pose as a resistance going forward. The 3 indices are getting divergence in their movement and that is bringing a lot of doubt to the market.
Commodities
- The dollar index traded higher all day, which helped weigh on commodities.
- WTI crude oil is trading lower today as well as natural gas futures.
- WTI crude oil finished today’s session -0.5% to $48.52/barrel, while natural gas lost -3.3% at $2.77/MMBtu (both Sept contracts)
- Sept copper fell 1.2% today to $2.38/lb, while in the precious metals space, Aug gold declined 0.4% to $1088.30/oz and Sept silver fell 0.1% to $14.70/oz
Energy
- September crude oil futures fell $0.25 (-0.5%) to $48.52/barrel
- September natural gas closed $0.09 lower (-3.3%) at $2.77/MMBtu
- RBOB Gasoline closed $0.01 higher at $1.77/gallon
- Heating oil futures closed flat at $1.61/gallon
Agriculture
- December corn closed $0.06 higher at $3.84/bushel
- September wheat closed flat at $4.96/bushel
- November soybeans closed $0.07 higher to $9.50/bushel
- Sugar #11 closed $0.19 lower at 11.27 cents/lb
Metals
- August gold ended today’s session $4.40 lower (-0.4%) at $1088.30/oz
- September silver closed today’s session $0.01 lower (-0.1%) at $14.70/oz
- September copper closed $0.03 lower (-1.2%) at $2.38/lb
Currencies
- The U.S. Dollar Index gained 0.64% to 97.60 after a positive upward revision to U.S. Q1 GDP from -0.2% to +0.6%
- EUR/USD: -0.62% to 1.0917
- German unemployment rose by 9K workers in July, worse than the 1K-worker increase in June and worse than expected
- Spanish GDP growth for the second quarter was in line with expectations at 1.0% q/q. The economy grew by 0.9% in Q1 2015
- GBP/USD: -0.09% to 1.5592
- USD/JPY: +0.33% to 124.31
- In Japan, Industrial Production rose a better-than-expected 0.8% m/m in June. IP fell by 2.1% in May
- USD/CHF: +0.27% to 0.9700
- KOF Leading Indicators jumped to a better-than-expected 99.8 for July from 89.8 in June
- USD/CAD: +0.47% to 1.3008
- AUD/USD: -0.23% to 0.7285
- NZD/USD: -0.95% to 0.6595
- In New Zealand, Building Approvals fell a worse-than-expected 8.2% m/m in June from +2.3% in May
Bonds
- The Treasury complex rallied today in a curve-flattening trade after Q1 GDP growth was revised upward from -0.2% to +0.6%
- Yield Check:
- 2-yr: +1 bp to 0.72%
- 5-yr: unch at 1.62%
- 10-yr: -2 bps to 2.27%
- 30-yr: -5 bps to 2.95%
- News:
- Initial Jobless Claims for the week ending July 25th rose to 267K from the prior reading of 255K. The Briefing.com consensus was for 272K
- Continuing Jobless Claims rose to 2262K, higher than the 2200K Briefing.com consensus. The prior reading was 2216K
- The U.S. economy grew at a 2.3% annualized rate in the second quarter, slower than the Briefing.com consensus of 2.5% but a significant improvement upon the 0.6% growth in Q1. The previous estimate for Q1 growth was -0.2%
- The GDP Chain Deflator rose 2.0%, more than the Briefing.com consensus of 1.5%. The Chain Deflator increased 0.1% in Q1
- From Q4 2011 to Q4 2014, U.S. GDP grew at an average annual rate of 2.1%, 0.3 percentage points slower than previous estimates
- The $29 bln 7-year note auction was met with tepid demand, tailing 0.7 basis points:
- High yield: 2.021%
- Bid-to-cover: 2.47
- Indirect bid: 49.14%
- Direct bid: 12.01%
- Initial Jobless Claims for the week ending July 25th rose to 267K from the prior reading of 255K. The Briefing.com consensus was for 272K
- Commodities:
- WTI Crude: -0.47% to $48.56/bbl.
- Gold: -0.46% to $1,087.60/troy oz.
- Copper: -1.23% to $2.378/lb.
- Currencies:
- EUR/USD: -0.52% to $1.0930
- USD/JPY:+0.17% to 124.12
- Data out Friday:
- Q2 Employment Cost Index (08:30 ET)
- July Chicago PMI (09:45 ET)
- July Michigan Sentiment – Final Estimate (10:00 ET)
Treasury Yields:
- 2 Year Note 0.72% +0.02
- 5 Year Note 1.62% UNCH
- 10 Year Note 2.28% -0.01
- 30 Year Bond 2.96% -0.03
2/30 Spread: 224 bps ( -5 ) … 2/10 Spread: 156 bps ( -3 )
Preview for Friday 31 July, 2015
Economic Data
Friday (31 July) :
- Employment Cost Index : 0.6% (Prior 0.7%)
- Chicago PMI : 50.5 (Prior 49.4)
- Michigan Sentiment - Final : 94.0 (Prior 93.3)
Earnings Highlights
Friday (31 July) :
BMO - AEE AXL AON MT BERY BPL CBM CBOE CVX CMCO DSX ENB XOM GIL HPY HMC IMGN IMS ITT KCG LM LPNT MOD MGI MOG.A NWL NJR POM PSX PSXP PNM PFS PEG RLGY RCL RUTH STX SWC TDS TRP TNP TYC USM WY WETF
AMC - None
BMO - AEE AXL AON MT BERY BPL CBM CBOE CVX CMCO DSX ENB XOM GIL HPY HMC IMGN IMS ITT KCG LM LPNT MOD MGI MOG.A NWL NJR POM PSX PSXP PNM PFS PEG RLGY RCL RUTH STX SWC TDS TRP TNP TYC USM WY WETF
AMC - None
Summary
It looks like market is almost done with the pullback and it is getting uncertain on whether we are going to see some downside or market could continue higher. I feel the market at the moment is neither here or there. Looking at the divergence in the market, I reckon the upside is rather unlikely.
We have saw the market bounced back this week and traders might want to profit take as we head into the weekend.
It looks like market is almost done with the pullback and it is getting uncertain on whether we are going to see some downside or market could continue higher. I feel the market at the moment is neither here or there. Looking at the divergence in the market, I reckon the upside is rather unlikely.
We have saw the market bounced back this week and traders might want to profit take as we head into the weekend.
Direction for Friday 31 July, 2015: Down
2015 Daily Directional Accuracy: 72/118 (61.02%)
2015 Weekly Directional Accuracy: 17/27 (62.96%)
