Dow +211.79 at 17760.41, Nasdaq +75.30 at 4997.70, S&P +25.31 at 2076.62
Market has been rather funky lately as we saw a lot of gap up/down at the opening. No exception on Friday as well. We saw the market opened with a spike up but remained in a tight range for most of the session. Somehow the openings have a lot to do with China's side as Shanghai Composite managed to bounce back after the massive sell off early last week, of course with the government intervention.Market is at the verge of break lower of the trading range since March. I suppose we are going to see more volatility coming in as the bulls will do what they can to defend the price. However I am seeing a downtrend in the market with lower highs, I think it will be hard to win over the bears.
Fed Chairperson Yellen will be speaking on Friday noon 12.30pm ET. Most likely traders will be still looking at whether the Fed is raising the interest rate this September. This might give the market the catalyst to break out.
China bounce back after the government intervention and limit short-selling in the market. Greece is going to have the EU meeting this weekend and the government also submitted an economic reform plan. Both China and Greece are not out of the woods yet and that is another key to watch out next week.Direction for Friday 10 July, 2015: Down
Market Summary
Industry Watch
Strong: Consumer Discretionary, Financials, Industrials, Technology, Telecom Services
Weak: Energy
Other Market Moving Factor:
- Greek officials send request for EUR53.50 billion in bailout funds to cover loan obligations until June 2018
Equities surged out of the gate after reports from last evening indicated that Greek officials sent a bailout request to the country's creditors, seeking EUR53.50 billion to cover loan obligations until June 2018. Interestingly, the proposal was very similar to the one that was rejected by 61.3% of voters in the Greek referendum on July 5. According to reports from Athens, the Greek parliament is expected to ratify the offer, but there was no official statement from the Eurogroup before the closing bell.
Furthermore, the Greek proposal includes a requirement for the creditors' commitment to restructure long-term debt; however, securing that commitment will be very difficult considering Germany's Finance Minister Wolfgang Schaeuble was quoted yesterday by Reuters as saying debt restructuring is not possible because it would "infringe the system of the European Union."
The lack of a response from the creditor side did not stop global equities from rallying with France's CAC leading European markets higher with a 3.3% advance. Meanwhile, selling in Germany's 10-yr bund sent its yield higher by 17 basis points to 0.89% while U.S. Treasuries also retreated with the 10-yr yield rising ten basis points to 2.42%.
Treasuries extended their losses during the early afternoon after Federal Reserve Chair Janet Yellen spoke in Cleveland, reiterating that the Fed still believes it will be appropriate to raise rates later this year. That being said, the Fed Chair said the outlook for the economy and inflation remains uncertain with unanticipated events having the potential to delay or accelerate the first rate hike.
All ten sectors posted gains with eight groups adding more than 1.0%. Most notably, the top-weighted technology sector (+1.6%) held the lead throughout the session while the second-largest group by market cap—financials (+1.2%)—followed not far behind.
The technology sector rallied behind its largest components like Apple (AAPL 123.30, +3.23), Google (GOOGL 556.11, +11.46), and Facebook (FB 87.95, +2.07) while high-beta chipmakers also displayed relative strength with the PHLX Semiconductor Index spiking 1.9%. To be fair, the index ended the week lower by 3.9% after both Advanced Micro Devices (AMD 1.96, -0.02) and QLogic (QLGC 11.48, +0.48) issued cautious guidance.
Elsewhere, the industrial sector (+1.0%) settled a bit behind the broader market, but that masked broad strength among transport stocks. The Dow Jones Transportation Average gained 1.9% to end the week higher by 1.0%. Airlines led today's advance with Alaska Air (ALK 70.55, +4.01) spiking 6.0% in reaction to upbeat traffic flow data.
For the week, four sectors registered gains with countercyclical consumer staples (+1.1%) and utilities (+0.5%) logging respective weekly gains of 2.0% and 1.7%. On the flip side, growth-sensitive energy (+0.6%) and materials (+1.5%) both lost near 1.5% for the week.
Today's participation was roughly in-line with recent totals as 720 million shares changed hands at the NYSE floor.
Monday's data will be limited to the 14:00 ET release of the Treasury Budget for June.
- Nasdaq Composite +5.5% YTD
- Russell 2000 +3.9% YTD
- S&P 500 +0.9% YTD
- Dow Jones Industrial Average -0.4% YTD
Monday was a busy day for equities across the globe, beginning with an overnight slide in the futures market after the Greek referendum produced 61.3% ‘no' vote, rejecting the bailout terms previously proposed by eurozone creditors. The results of the referendum allowed Greece's Syriza party to stay in power, but Finance Minister Yanis Varoufakis stepped down with Oxford-educated Euclid Tsakalotos assuming Mr. Varoufakis' place. The continued uncertainty about Greece's future in the eurozone pressured European markets with Germany's DAX and Italy's MIB losing 1.5% and 4.0%, respectively. Domestically, the S&P 500 (-0.4%) began the session just above its 200-day moving average (2,055), but an aggressive bid lifted the index back to its flat line about an hour after the opening bell. However, that rebound was short-lived, fading into the afternoon.
On Tuesday, the stock market was on track for a sharp decline in the early going, but the opening weakness became a distant memory by the end of the trading day. The S&P 500 gained 0.6% after being down 1.2% at the start while the Nasdaq Composite (+0.1%) underperformed throughout the day. Equity indices struggled at the start amid rising macroeconomic uncertainty overseas. Greece was in the headlines, but the day's Eurogroup meeting ended rather quickly with Chief Jeroen Dijsselbloem saying the Eurogroup expects Greece to submit a formal request for access to the European Stability Mechanism the following day. As for China, the Shanghai Composite lost 1.3% in the Tuesday session despite Monday's CNY1.80 trillion liquidity injection from the People's Bank of China and other emergency measures undertaken by the government. As a result nearly 25% of A-share listings were halted over the past seven days as companies scrambled to protect their market values. Investors appeared to be concerned with the overseas uncertainty at the start of the session, but the heavy selling abated just as markets across Europe closed for the day. The S&P 500 then returned above its 200-day moving average (2,055) and continued its charge into positive territory.
The major averages ended the midweek session on a lower note following a trading day that featured numerous trading halts at home and abroad. The S&P 500 fell below its 200-day moving average (2,056), ending lower by 1.7% while the Nasdaq Composite (-1.8%) underperformed. Equities slumped at the start of the session in response to the overnight weakness in the futures market that could be traced back to the continued selling efforts in China. The Shanghai Composite lost 5.9% on Wednesday, which resulted in the number of companies suspended from trading for volatility increasing to 50%+. Futures on the S&P 500 held a 30-point decline during the overnight session, but cut their losses in half ahead of the New York open. The rebound took place amid a rally in Europe, following reports that Greek officials have requested a three-year bailout program that includes tax reforms; but the offer was very similar to the one that was rejected by Greek voters during Sunday's referendum.
The market ended Thursday in the green, but not before enduring a daylong retreat from its opening high. The S&P 500 was up more than 1.3% at the start, but narrowed its advance to 0.2% by the closing bell. Equity indices charged out of the gate after the overnight session featured a rebound in China's Shanghai Composite, which climbed 5.8%. The advance occurred as officials in China continued introducing measures aimed at halting the recent market plunge with reports indicating a special taskforce targeting "hostile short-sellers" will be established by China's Public Security Ministry and China Securities Regulatory Commission. Elsewhere, optimistic-sounding remarks from top Eurozone officials also contributed to the opening strength as European Council President Donald Tusk said he expects Greece to submit concrete, realistic reform proposals. The opening spike sent the S&P 500 above its 200-day moving average (2,056), but the index returned below that mark during the afternoon. Cyclical sectors displayed broad strength in the early going, but the top-weighed technology sector (-0.3%) faded from its high during the afternoon, ending among the laggards.
Global Market
Asian Markets Close: Japan’s Nikkei +0.6%; Hong Kong’s Hang Seng 3.7%; China’s Shanghai Composite +5.8%
The Asian equity markets were mostly higher in Thursday’s trade. The highlight of the night was China, which after halting half of its stocks, disallowing major stakeholders (5% holding or more) from selling shares for 6 months, and threatening to arrest short sellers, the Shanghai Composite managed to gain nearly 6% on the day. What might be most impressive is that the index was down over 3% in the first hour, before reversing off the lows for the largest 1 day gain since 2009. Helping the cause was the release of the June CPI figure, which came in at +1.4% (vs +1.3%e). This was seen as a positive for the economy (and the “market”) for not only did inflation pick up, but it leaves room for the PBOC to adjust policy. The Nikkei also rebounded 0.6% today. The June M3 data came in below expectations at +3.1% (vs 3.3%e), which also gives the BOJ some scope to continue with its currently policies.
Economic Data
- China
- Jun CPI: +1.4% vs +1.3%e
- Jun PPI: -4.8% vs -4.6%e
- Japan
- Jun Prelim Machine Tool Orders: +6.6 vs +15.0% in Jun 2014
- Australia
- JUN Employment change: +7.3K vs flat est
- Jun Unemployment rate: 6.0% vs 6.1%e
Equity Markets
- Japan’s Nikkei rose 0.6% on the day. Consumer Discretionary (+0.8%) and IT (¬+0.5%) were among the best sectors of the day. On the flip side, there was a shift out of the havens with Telecom down 1.2% and Consumer Staples losing 0.8%.
- China’s Shanghai Composite finished the wild day up 5.8% following the aforementioned measures and econ data. Among the heavy weights, CNOOC posted a gain of 3.2%, while China Mobile tacked on 1.8%.
- Hong Kong’s Hang Seng piggy-backed the Shanghai today, gaining 3.7% today. Among the notable movers, Tencent, Lenovo, and China Unicom all rose around 8% on the day.
- India’s Sensex was one of the lone losers of the region, settling down 0.4% on the day. The index was hurt most by pressure on some of the major components such as Tata Motors (-1.7%), Infosys (1.6%) and TCS (-1.5%)
FX
- USD/CNY Unch at 6.2088
- USD/INR -0.3% at 63.39
- USD/JPY +0.7% at 121.51
EUROPE
Major European indices trade higher across the board following optimistic comments from regional officials. Specifically, European Council President Donald Tusk said he expects Greece to submit concrete, realistic reform proposals today. Mr. Tusk continued, saying the proposals must be matched by a realistic offer from creditors on debt sustainability. Mr. Tusk is the latest official to signal a shift in favor of debt restructuring after the International Monetary Fund did the same last week. Separately, the Bank of England made no changes to its policy stance, keeping the key interest rate and the purchasing program unchanged at 0.5% and GBP375 billion, respectively.
- Germany’s May Trade Balance EUR22.80 billion (expected EUR21.00 billion; prior EUR21.50 billion) as Imports +0.4% month-over-month (consensus 0.9%; last -0.8%) and Exports +1.7% month-over-month (expected -0.8%; last 1.6%)
Closing Prices
- UK’s FTSE: + 1.4%
- Germany’s DAX: + 2.3%
- France’s CAC: + 2.6%
- Spain’s IBEX: + 2.7%
- Portugal’s PSI: + 4.0%
- Italy’s MIB Index: + 3.5%
- Irish Ovrl Index: + 2.0%
- Greece ASE General Index: CLOSED
Macroeconomic Data
Economic Data
from Briefing.com
- Wholesale Inventories : 0.8% vs 0.3% (Prior 0.4%)
WHOLESALE INVENTORIES
Highlights
- Wholesale inventories increased 0.8% in May after increasing an unrevised 0.4% in April. The Briefing.com Consensus expected wholesale inventories to increase 0.3%.
Key Factors
- Durable goods inventories increased 0.6%, up from a 0.1% increase in April. Inventories rose in every durable goods sector except for a 0.4% decline from the miscellaneous category. Strong growth was recorded in computer equipment (2.5%) and automotive (2.0%).
- Nondurable goods inventories increased 1.2% in May after increasing 1.0% in April. Much of the gain was the result of higher prices, which helped drive up petroleum inventories by 4.4%. Drug inventories increased 2.7%.
- Wholesale sales increased 0.3% in May, down from a 1.7% increase in April. Durable goods sales declined 0.1% in May and nondurable goods sales increased 0.7%.
- The inventory-to-sales ratio remained at 1.29 for a second consecutive month.
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:
Lower Volumes than the day before – 738.6M vs 827.4M
Advancers outpaced Decliners (adv/dec): 2474 / 618
New Lows outpaced New Highs (highs/lows): 52 / 67
NASDAQ:
Lower Volumes than the day before – 1581.3M vs 1852.9M
Advancers outpaced Decliners (adv/dec): 2207 / 617
New Highs outpaced New Lows (highs/lows): 72 / 61
VOLATILITY S&P500 (VIX)
16.83 -3.14 (-15.72%)
Technical Updates
17,760.41 +211.79 (+1.21%)
Volume: 85,798,190 (below average of 95,463,586)
Range: 17,561.12 - 17,797.49
Range: 17,561.12 - 17,797.49
4,997.70 +75.30 (+1.53%)
Volume: 369,464,238 (below average of 434,581,790)
Volume: 369,464,238 (below average of 434,581,790)
Range: 4,966.51 - 5,008.05
2,076.62 +25.31 (+1.23%)
Volume: 487,492,000 (below average of 519,763,708)
Range: 2,052.74 - 2,081.31
DOW went back to test its resistance at 17,750 level and close above its 200MA. However it looks like there is a head and shoulder pattern forming in DOW if it does not break above its trend line, which could mean a continuation in the downtrend. NASDAQ broke above its downtrend line and sit on its previous uptrend channel as support. S&P was held below by its downtrend line and I think S&P is also forming a similar head and shoulder pattern. Unless they manage to break above the trend line which is likely to be their resistance, I think market would continue going lower.
Commodities
Closing Commodities: Nat Gas Lifts On Warm Weather, As A Weak Dollar Gives Broad SupportCommodities
- The dollar traded weak all day, despite gradually erasing some of the morning’s losses later in the afternoon
- The indexes weakness gave broad, modest support to oil and precious metals throughout the day, and is currently -0.6% to 96.00
- Crude was positive on the session until a mid-morning sell-off caused the commodity to fall back near the unchanged mark
- Oil trading was driven by several catalysts during the session. These included over-supply concerns on data from the EIA and decreased 2016 demand forecasts (out of the IEA)
- A weakened dollar did give the August contract some support however, and oil closed near flat at $52.77/barrel
- Natural gas closed strong, up 1.8% at $2.77/MMBtu, largely on near-term forecasts for warmer national weather patterns
- Copper traded red all session, as concern for industrial demand out of China continued to put selling pressure on the September contract, which closed slightly down at $2.54/lb
- Precious metals were mixed on the day, with August gold down 0.1% at $1158.40/oz and September silver up 1% at $15.49/oz
Energy
- August crude oil futures fell $0.01 to $52.77/barrel
- August natural gas closed $0.05 higher at $2.77/MMBtu
- RBOB Gasoline closed $0.02 lower at $2.02/gallon
- Heating oil futures closed flat at $1.74/gallon
Agriculture
- September corn closed $0.06 higher at $4.34/bushel
- September wheat closed $0.02 lower at $5.76/bushel
- November soybeans closed $0.06 higher to $10.21/bushel
- Sugar #11 closed 0.51 cents higher to 12.41 cents/lb
Metals
- August gold ended today’s session $1.20 lower at $1158.40/oz
- September silver closed $0.14 higher at $15.49/oz
- September copper closed flat at $2.54/lb
Currencies
- U.S. Dollar Index: -0.57% to 96.05
- The dollar declined today as optimism for a weekend conclusion of Greece's debt crisis permeated financial markets. Most of the dollar's fall came against the euro and pound sterling
- Wholesale Inventories rose 0.8% in May, ahead of expectations and the prior reading. The beat will cause upward revisions to Q2 GDP estimates
- EUR/USD: +0.62% to $1.1132
- Greece submitted a proposal to its official creditors on Thursday evening that almost replicated the proposal that Greek voters turned down in the July 5th referendum
- If it is approved by the Greek Parliament today, it will be discussed by the Eurogroup and the entire European Union on Sunday
- GBP/USD: +0.75% to $1.5490
- USD/JPY: +0.93% to 122.84
- USD/CHF: -0.60% to 0.9418
- USD/CAD: +0.08% to 1.2722
- Canada's economy lost 6.4K jobs in June, better than expected but much worse than the 58.9K added in May
- AUD/USD: -0.50% to $0.7420
- NZD/USD: -0.71% to $0.6702
- Home Loans fell 6.1% m/m in May, more than expected and worse than the 0.7% gain in April
Bonds
- U.S. Treasuries dropped today as Greek Minister Alexis Tsipras submitted a proposal to Greece's official creditors that accedes to all of their demands except that the proposal includes debt restructuring and a fiscal stimulus package. Fed Chair Yellen spoke and said that the Fed will likely raise interest rates this year. She said that Greece's debt crisis remains "unresolved"
- Yield Check:
- 2-yr: +6 bps to 0.65%
- 5-yr: +8 bps to 1.67%
- 10-yr: +9 bps to 2.41%
- 30-yr: +9 bps to 3.21%
- News:
- Wholesale Inventories rose 0.8% in May, more than the Briefing.com consensus which called for an increase of 0.3%. The reading from April was +0.4%
- Durable goods inventories increased 0.6%, up from a 0.1% increase in April. Inventories rose in every durable goods sector except for a 0.4% decline from the miscellaneous category. Strong growth was recorded in computer equipment (2.5%) and automotive (2.0%)
- Nondurable goods inventories increased 1.2% in May after increasing 1.0% in April. Much of the gain was the result of higher prices, which helped drive up petroleum inventories by 4.4%. Drug inventories increased 2.7%
- Boston Fed President Rosengren (dove and non-FOMC voter) said that the Fed should wait to see how Greece's crisis develops before beginning to hike rates
- Fed Chair Yellen (FOMC voter) spoke in Cleveland and said that she expects that a rate hike will be appropriate later in 2015
- Over the weekend, the Eurogroup of 19 eurozone finance ministers will meet to discuss Greece's latest proposal
- There will also be a meeting of the 28 members of the European Union
- Wholesale Inventories rose 0.8% in May, more than the Briefing.com consensus which called for an increase of 0.3%. The reading from April was +0.4%
- Commodities:
- WTI crude: -0.21% to $52.67/bbl.
- Gold: +0.15% to $1,160.90/troy oz.
- Copper: -0.43% to $2.5405/lb.
- Currencies:
- EUR/USD: +0.64% to $1.1135
- USD/JPY: +0.94% to 122.85
- Week Ahead:
- Monday: June Treasury Budget (13:00 ET); U.S. Representative Neugebauer (Republican from Texas) has scheduled an event to review bond market trading challenges
- Tuesday: June Retail Sales and Retail Sales ex-auto (08:30 ET); June Export Prices ex-ag and Import Prices ex-oil (08:30 ET); May Business Inventories (10:00 ET)
- Wednesday: MBA Mortgage Index for the week ending 7/11 (07:00 ET); June PPI and Core PPI (08:30 ET); July Empire Manufacturing (08:30 ET); June Industrial Production and Capacity Utilization (09:15 ET); Fed Chair Yellen (FOMC voter) delivers semi-annual testimony before the House Financial Services Committee (10:00 ET); Crude Inventories for the week ending 7/11 (10:30 ET); July Beige Book (14:00 ET); San Francisco Fed President Williams (FOMC voter) speaks on the economic outlook (15:00 ET and 18:00 ET)
- Thursday: Initial Jobless Claims for the week ending 7/11 and Continuing Jobless Claims for the week ending 7/4 (08:30 ET); July Philadelphia Fed (10:00 ET); July NAHB Housing Market Index (10:00 ET); Fed Chair Yellen (FOMC voter) delivers semi-annual testimony on monetary policy before the Senate Banking Committee (10:00 ET); Natural Gas Inventories for the week ending 7/11 (10:30 ET); May Net Long-Term TIC Flows (16:00 ET)
- Friday: June CPI and Core CPI (08:30 ET); June Housing Starts and Building Permits (08:30 ET); July Michigan Sentiment (10:00 ET)
Treasury Yields:
- 2 Year Note 0.65% +0.05
- 5 Year Note 1.68% +0.10
- 10 Year Note 2.42% +0.10
- 30 Year Bond 3.20% +0.09
2/30 Spread: 255 bps ( +4 ) … 2/10 Spread: 177 bps ( +5 )
Preview for the week Monday 13 July to Friday 17 July, 2015
Economic Data
Monday (13 July) :
- Treasury Budget : $51.0B (Prior $70.5B)
- Retail Sales : 0.3% (Prior 1.2%)
- Retail Sales ex-auto : 0.5% (Prior 1.0%)
- Export Prices ex-agri : (Prior 0.7%)
- Import Prices ex-oil : (Prior 0.0%)
- Business Inventories : 0.2% (Prior 0.4%)
- MBA Mortgage Index : (Prior 4.6%)
- PPI : 0.3% (Prior 0.5%)
- Core PPI : 0.1% (Prior 0.1%)
- Empire Manufacturing : 3.5 (Prior -2.0)
- Industrial Production : 0.2% (Prior -0.2%)
- Capacity Utilization : 78.1% (Prior 78.1%)
- Crude Inventories : (Prior 0.384M)
- Fed's Beige Book
- Initial Claims : 283K (Prior 297K)
- Continuing Claims : 2275K (Prior 2334K)
- Philadelphia Fed : 12.0 (Prior 15.2)
- NAHB Housing Market Index : 59 (Prior 59)
- Natural Gas Inventories : (Prior 91 bcf)
- Net Long-Term TIC Flows : (Prior $53.9B)
- CPI : 0.3% (Prior 0.4%)
- Core CPI : 0.2% (Prior 0.1%)
- Housing Starts : 1123K (Prior 1036K)
- Building Permits : 1150K (Prior 1275K)
- Michigan Sentiment : 96.5 (Prior 96.1)
Earnings Highlights
Monday (13 July) :
BMO - None
AMC - OZRK PSG
BMO - None
AMC - OZRK PSG
Tuesday (14 July) :
BMO - AIR CBSH FAST JNJ JPM NORD SKIS WFC
AMC - ADTN CSX HCSG MRTN PPHM RNST YUM
Wednesday (15 July) :
BMO - ASML BAC BLK DAL PNC USB
During Mkt Hours - WABC
AMC - CNS EWBC HGR INTC KMI LVS NFLX UMPQ WFPI WTFC
Thursday (16 July) :
BMO - ANFI BBT BX SCHW C DPZ EBAY FCS FCFS FRC GS HOMB IIIN KEY MTB MTG NTCT PM PPG PVTB SASR SHW SON TSM TZOO UNH WBS WNS
AMC - AMD ANGO ASB CE CTAS COBZ CYT EGP FFIN GOOG MAT MBFI PBCT PGI RECN SLB SWI
Friday (17 July) :
BMO - ALV CMA FHN GE HON JBHT KSU KNL ERIC PGR STI SYF GWW
AMC - None
Summary
I am seeing more volatility in July for sure. I suppose last week was more to the speculation from the China's market and Greece bailout deal. For the first 30 minutes of trading session across last week were either gaping up or gapping down. And the week ended literally flat to some upside.
As I am writing this right now, it looks like the Eurozone leaders have reached an agreement with Greece. I suppose market was still feeling the "Buying the rumours, Sell the news" prophecy and maybe we might see some profit taking after the deal is done.
Next week we will see more earnings release and quite a number of economic data that are market movers. I reckon the volatility is here to stay for the meantime and do watch the stops for your positions.
I am seeing more volatility in July for sure. I suppose last week was more to the speculation from the China's market and Greece bailout deal. For the first 30 minutes of trading session across last week were either gaping up or gapping down. And the week ended literally flat to some upside.
As I am writing this right now, it looks like the Eurozone leaders have reached an agreement with Greece. I suppose market was still feeling the "Buying the rumours, Sell the news" prophecy and maybe we might see some profit taking after the deal is done.
Next week we will see more earnings release and quite a number of economic data that are market movers. I reckon the volatility is here to stay for the meantime and do watch the stops for your positions.
Direction for Monday 13 July, 2015: Down
Direction for the week Monday 13 July to Friday 17 July, 2015: Down
Direction for the week Monday 13 July to Friday 17 July, 2015: Down
2015 Daily Directional Accuracy: 64/106 (60.38%)
2015 Weekly Directional Accuracy: 16/25 (64.00%)
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