Dow -46.53 at 17683.58, Nasdaq -17.27 at 4991.94, S&P -8.02 at 2068.76
Market opened with a heavy selling interest in the first 5 mins but it quickly recovered thereafter with some covering. The market was rather filled with uncertainty on Monday after the Greece rejected the bailout package. As such the session was pivot more to a defensive play.As of Monday this morning, it is confirmed that Greece's referendum result turned out to be "No" vote to the bailout package. This is perceived as a rather hawkish news as the futures take a big hit with a huge gap down and Asia markets are mostly in red too. Meanwhile in China, we have seen quite some downside in the Shanghai Composite. As a result, the PBOC is going to inject more emergency funds to boost the depressing market.
Market was pretty much in a neutral state when it closed on Thursday last week. I reckon the Grexit is likely to give the market some downside catalyst. After all the bears are somewhat having the leadership. On Wednesday, we are going to see the FOMC minutes. That will give us another look on the Fed's decision to raise rates by end of this year.Direction for Monday 6 July, 2015: Down
Market Summary
Industry Watch
Strong: Consumer Staples, Utilities
Weak: Energy, Financials, Materials, Technology, Telecom Services
Other Market Moving Factor:
- Greek referendum on austerity produces 60%+ 'no' votes
- People's Bank of China takes steps to stem recent market decline
- Biotechnology outperforms
With the referendum in the rear-view mirror, the focus now shifts to July 20, when Greece will have to make a EUR3.50 billion payment to the European Central Bank. Meanwhile, the European Central Bank adjusted haircuts on Greek collateral for Emergency Liquidity Assistance, but the details were not revealed in the press release. 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.
Nine of ten sectors ended the day in negative territory with the energy sector (-1.3%) spending the day behind other cyclical groups. The growth-sensitive group finished among the laggards while crude oil plunged into the pit close, settling lower by 7.8% at $52.48/bbl.
Elsewhere among cyclical sectors, financials (-0.4%) and technology (-0.4%) spent the day in negative territory, which kept the market under pressure. High-beta chipmakers contributed to the losses in technology with the PHLX Semiconductor Index falling 1.6% as 28 of its 30 components registered losses while Altera (ALTR 51.40, +0.06) eked out a slight gain while Qualcomm (QCOM 63.11, 0.00) ended flat.
Things looked a bit better on the countercyclical side with consumer staples (-0.1%) and utilities (+0.4%) ending ahead of the broader market while the telecom services sector (-1.1%) struggled. For its part, health care (unch) finished ahead of the broader market after biotechnology displayed some intraday strength. The iShares Nasdaq Biotechnology ETF (IBB 372.36, +2.01) advanced 0.5% after being up 1.5%.
Today's session was relatively quiet on the corporate front, but Humana (HUM 188.96, +1.46) rose 0.8% after agreeing to be acquired by Aetna (AET 117.43, -8.08) as part of a transaction valued at $230/share.
Treasuries held gains throughout the day, settling not far below their overnight highs with the 10-yr yield down nine basis points at 2.29%.
Monday's trading volume surpassed recent averages with more than 910 million shares changing hands at the NYSE floor.
Although today's main focus was on Greece, it is also worth noting that China's Shanghai Composite gained 2.4%, but that was after the index opened with an 8.0% advance in reaction to news that the People's Bank of China extended a lifeline to equity brokers through China Finance Securities in an attempt to stem the recent slide.
Economic data was limited to the June ISM Services Index, which increased to 56.0 in June from 55.7 in May while the Briefing.com consensus expected the index an increase to 56.3. Business activities accelerated as the related index increased to 61.5 in June from 59.5 in May.
Tomorrow, May Trade Balance (Briefing.com consensus -$42.00 billion) will be released at 8:30 ET while the May Job Openings and Labor Turnover Survey will cross the wires at 10:00 ET. The day's data will be topped off with the 15:00 ET release of the Consumer Credit report for May (consensus $17.60 billion).
Global Market
Asian Markets Close: Japan’s Nikkei -2.1%; Hong Kong’s Hang Seng -3.2%; China’s Shanghai Composite +2.4%
The Asian equity markets were mostly lower in Monday’s trade. Chinese equities rocked and rolled to over a 2% gain, after the Securities Association of China to introduce $19 bln plan to stabilize financial markets. This unprecedented stimulus was well received, with the Shanghai opening up ~8% higher. But gains eroded as the session wore on, and the index found itself in negative territory. Buyers stepped in just before the close to help the index to pull out of the red. The Nikkei was lower all night, with the Yen serving as a safe-haven play during the Asian session. The USDJPY traded to an overnight low of 121.83, but currently near session highs.
Economic Data
- Japan
- May Prelim Leading Index: 106.2 vs 106.2e
- May Prelim Coincident Index: 109.2 vs 109.1e
- Hong Kong
- Jun HSBC PMI: 49.2 vs 47.6 in May
- Australia
- Jun ANZ Job Advertisements: 1.3% vs 0% in May
Equity Markets
- Japan’s Nikkei declined 2.1% on broad-based weakness seen in all sectors. IT, Financials and Materials led the index lower, all down 3%. Utilities outperformed the broader market today, only down a little over 1%.
- Hong Kong’s Hang Seng fell 3.2% today, putting the composite into correction territory. Galaxy Entertainment gave back some of the robust gains seen late last week, falling 3.3%. Tencent had a miserable day, outpacing losses to the tune of 5.5%.
- China’s Shanghai Composite managed to close up 2.4% on a day that saw an 8% range. Financials highlighted the session on the positive side, with the likes of Bank of Comm gaining 9.7% and China Minsheng Banking rising 6.4%.
- India’s Sensex bucked the trend of most of the region, settling up 0.4% on the day. Cipla and Dr Reddy were among the top gainers, finishing up ~ 4% each. Vedanta was among the notable losers, dropping 5%.
FX
- USD/CNY +0.1 at 6.2092
- USD/INR Unch at 63.40
- USD/JPY Unch at 122.81
Major European indices trade lower across the board with Italy’s MIB (-3.0%) showing the largest decline. Despite early reports suggesting very close results in the Greek referendum, the ‘no’ camp came away with 61.3% of the vote. The rejection of previously offered bailout conditions allows Greece’s Syriza party to remain in power, but Finance Minister Yanis Varoufakis has resigned from his position in hopes of introducing a fresh voice into the negotiations. The short-term focus now shifts to July 20, when Greece will have to make a EUR3.50 billion payment to the European Central Bank.
- Eurozone July Sentix Investor Confidence rose to 18.5 from 17.1 (consensus 15.0) while Retail PMI ticked down to 50.4 from 51.4
- Germany’s May Factory Orders +0.2% month-over-month (expected -0.4%; prior 2.2%)
- Spain’s May Industrial Production +3.4% year-over-year (consensus 2.6%; last 1.7%)
- Swiss June CPI +0.1% month-over-month (expected -0.1%; prior 0.2%)
Closing Prices
- UK’s FTSE: -0.8%
- Germany’s DAX: -1.5%
- France’s CAC: -2.0%
- Spain’s IBEX: -2.3%
- Portugal’s PSI: -3.8%
- Italy’s MIB Index: -4.0%
- Irish Ovrl Index: -1.3%
- Greece ASE General Index: CLOSED
Macroeconomic Data
Economic Data
from Briefing.com
- ISM Services : 56.0 vs 56.3 (Prior 55.7)
ISM SERVICES
Highlights
- The ISM Non-manufacturing Index increased to 56.0 in June from 55.7 in May. The Briefing.com Consensus expected the index to increase to 56.3.
Key Factors
- Business activities accelerated as the related index increased to 61.5 in June from 59.5 in May.
- The orders data were strong, which should help keep production growth moving in the positive direction. The New Orders Index increased to 58.3 in June from 57.9 in May. The Backlog of Orders Index exited a contraction and increased to 50.5 from 48.5 in May.
- The Employment Index fell to 52.7 in June from 55.3 in May.
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, June marked the 65th consecutive month in which economic activity in the non-manufacturing sector has expanded.
Market Internals
NYSE:
Higher Volumes than the day before – 936.4M vs 718.0M
Decliners outpaced Advancers (adv/dec): 1139 / 1963
New Lows outpaced New Highs (highs/lows): 37 / 210
NASDAQ:
Higher Volumes than the day before – 1737.9M vs 1479.6M
Decliners outpaced Advancers (adv/dec): 1202 / 1628
New Lows outpaced New Highs (highs/lows): 40 / 140
VOLATILITY S&P500 (VIX)
17.01 +0.22 (+1.31%)
Technical Updates
17,683.58 -46.53 (-0.26%)
Volume: 90,130,260 (below average of 95,311,672)
Range: 17,564.36 - 17,734.36
Range: 17,564.36 - 17,734.36
4,991.94 -17.27 (-0.34%)
Volume: 489,029,501 (above average of 431,075,528)
Volume: 489,029,501 (above average of 431,075,528)
Range: 4,960.93 - 5,020.71
2,068.76 -8.02 (-0.39%)
Volume: 586,209,000 (above average of 516,038,594)
Range: 2,058.40 - 2,078.61
DOW managed to hold above the 200MA and formed a hammer candlestick. NASDAQ also did not break out of the channel which serves as a good support level. S&P continues to stay above its support level at 2,070 and the 200MA is forming another good support level. It looks to me that the 3 indices are sitting on a strong support level and are reluctant to break lower, that could mean some consolidation in the next few sessions with the possibility of a bounce back.
Commodities
Closing Commodities: WTI Oil, Heating and RBOB Futures Collapse Following Greece/China ConcernsCommodities
- WTI crude oil, heating oil and RBOB futures all collapse following Greece/China concerns and ahead of the Iran nuclear deadline tomorrow
- Aug crude oil futures shed 7.8% today to $52.48/barrel, heating oil futures dropped -7.1% and RBOB fell -5.1%
- Aug natural gas futures, meanwhile, lost $0.06 to $2.76/MMBtu
- Copper futures lost 3.4% today (or 9 cents) to $2.54/lb, which also got hit on Greece/China concerns
- Precious metals gained today with Aug gold rising +$9.80 to $1173.20/oz and Sept silver climbing +$0.21 to $15.77/oz
Energy
- August crude oil futures fell -$4.45 (or -7.8%) to $52.48/barrel
- August natural gas closed $0.06 lower at $2.76/MMBtu
- RBOB Gasoline closed -5.4% at $1.92/gallon
- Heating oil futures closed -7.1% $1.71/gallon
Agriculture
- September corn closed unchanged at $4.28/bushel
- September wheat closed $0.07 higher at $5.95/bushel
- November soybeans closed $0.13 lower to $10.15/bushel
- Sugar #11 closed 0.18 cents higher to 12.48 cents/lb
Metals
- August gold ended today’s session $9.80 higher at $1173.20/oz
- September silver closed $0.21 higher at $15.77/oz
- September copper closed $0.09 lower at $2.54/lb
Currencies
- The U.S. Dollar Index added 0.16% to 96.27 as crude prices fell and financial assets sought direction after Greek voters elected not to agree to the latest proposal from Greece's official creditors
- The ISM Services Index rose to 56.0 in June, short of the Briefing.com consensus for 56.3, but ahead of May's reading of 55.7
- EUR/USD: -0.63% to $1.1044
- Greece voted no in its July 5th referendum on the creditors' latest proposal
- German Factory Orders fell less than expected in May, declining 0.2% m/m versus a 2.2% rise in April
- GBP/USD: +0.21% to $1.5604
- USD/JPY: -0.40% to 122.39
- Japan's Leading Index fell 0.2% m/m in May after a 1.2% gain in April
- USD/CHF: +0.28% to 0.9428
- The Swiss CPI rose 0.1% m/m in June versus a 0.2% jump in May. Market consensus had been for a decline
- USD/CAD: +0.68% to 1.2658
- The loonie fell sharply on a 7.68% decline in WTI crude
- AUD/USD: -0.29% to $0.7496
- Iron ore fell 5.20% to $51.21/metric ton
- NZD/USD: -0.06% to $0.6688
Bonds
- The U.S. Treasury complex gapped higher on Sunday night after Greece voters rejected the latest proposal from their government's official creditors. The initial panic faded quickly and governments sold off into mid-morning but found renewed buying interest and ended the session significantly higher in a curve-flattening trade
- Yield Check:
- 2-yr: -4 bps to 0.59%
- 5-yr: -7 bps to 1.56%
- 10-yr: -9 bps to 2.29%
- 30-yr: -10 bps to 3.09%
- News:
- The ISM Non-manufacturing Index increased to 56.0 in June from 55.7 in May. The Briefing.com consensus was for 56.3
- Business activities accelerated as the related index increased to 61.5 in June from 59.5 in May
- The orders data were strong, which should help keep production growth moving in a positive direction. The New Orders Index rose to 58.3 in June from 57.9 in May. The Backlog of Orders Index exited a contraction and increased to 50.5 from 48.5 in May
- The Employment Index fell to 52.7 in June from 55.3 in May
- The ECB will continue the ELA (Emergency Liquidity Assistance) for Greek banks but will alter the haircuts on collateral
- Greece's finance minister, Yanis Varoufakis, resigned his position after the results were released, saying that Prime Minister Tsipras had judged his departure "to be potentially helpful to him in reaching an agreement"
- The Greek government will present a new proposal to the Eurogroup on Tuesday
- Three opposition parties have declared their support for the current government in its negotiations with creditors
- The ISM Non-manufacturing Index increased to 56.0 in June from 55.7 in May. The Briefing.com consensus was for 56.3
- Commodities:
- WTI crude: -7.40% to $52.72/bbl.
- Gold: +0.34% to $1,167.40/troy oz.
- Copper: -3.93% to $2.5275/lb.
- Currencies:
- EUR/USD: -0.56% to $1.1053
- USD/JPY: -0.35% to 122.45
- Data out Tuesday:
- May Trade Balance (08:30 ET)
- May JOLTS – Job Openings (10:00 ET)
- May Consumer Credit (15:00 ET)
- Treasury Auction:
- $24 bln 3-year note auction (results at 13:00 ET)
Treasury Yields:
- 2 Year Note 0.60% -0.04
- 5 Year Note 1.56% -0.08
- 10 Year Note 2.30% -0.10
- 30 Year Bond 3.08% -0.11
2/30 Spread: 248 bps ( -7 ) … 2/10 Spread: 170 bps ( -6 )
Preview for Tuesday 7 July, 2015
Economic Data
Tuesday (7 July) :
- Trade Balance : -$42.0B (Prior -$40.9B)
- JOLTS - Jobs Openings : (Prior 5.367M)
- Consumer Credit : $17.6B (Prior $20.5B)
Earnings Highlights
Tuesday (7 July) :
BMO - MSM
AMC - TCS HCSG
BMO - MSM
AMC - TCS HCSG
Summary
There wasn't exactly any major movement in the market besides the strong covering at the opening. I suppose that was traders who are closing their selling positions across the weekend in particular to Greece's referendum. In fact, I think most traders are still feeling uncertain in the market. It looks like there are some money flow into the bonds market as the yield curve flattens.
Meanwhile in China, there was some pullback in the Shanghai Composite after the government decided to step in and intervene to prevent market from falling even more. Crude oil was largely affected as it went into a downslide on Monday.
Nonetheless, more volatility in the market is certain. I am going to look at the strength of recovery to determine if the market is reversing. The 200MA would be crucial. Otherwise market is likely to get more downside.
There wasn't exactly any major movement in the market besides the strong covering at the opening. I suppose that was traders who are closing their selling positions across the weekend in particular to Greece's referendum. In fact, I think most traders are still feeling uncertain in the market. It looks like there are some money flow into the bonds market as the yield curve flattens.
Meanwhile in China, there was some pullback in the Shanghai Composite after the government decided to step in and intervene to prevent market from falling even more. Crude oil was largely affected as it went into a downslide on Monday.
Nonetheless, more volatility in the market is certain. I am going to look at the strength of recovery to determine if the market is reversing. The 200MA would be crucial. Otherwise market is likely to get more downside.
Direction for Tuesday 7 July, 2015: Up
2015 Daily Directional Accuracy: 61/102 (59.80%)
2015 Weekly Directional Accuracy: 15/24 (62.50%)
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