Dow +70.08 at 18120.25, Nasdaq +64.24 at 5163.18, S&P +16.89 at 2124.29
Market try to push higher after taking a break on Wednesday. At the opening we saw a huge rise due to the agreement of the bailout package from Greece. NASDAQ and S&P were leading the market while the big caps were laggards. Even so the market was still quite flat-ish to me. On top of that, poor earnings report from GS kept the pressure on DOW. While the technology and biotech sectors remain strong as we saw some big names such as Apple, Google, Microsoft, Intel and Netflix outperform.I am not surprised we saw the slight drawback in the market after market rallied since the start of the week. Also that was the third candle reversal. It does look like the confidence is back to the market but there is still a factor of uncertainty. And right now the market is looking to be cautious.
We are seeing the ECB press conference on Thursday which is going to conclude the Greece's bailout package. With the volatility around, I think the market is likely to stay sideway for the time being.
I suppose we might see the bulls to push the market further but it is most probably going to be limited. And the upper bound of the trading range is a crucial resistance.Direction for Thursday 16 July, 2015: Down
Market Summary
Industry Watch
Strong: Consumer Staples, Financials, Technology, Utilities, Telecom Services
Weak: Consumer Discretionary, Energy, Industrials, Health Care, Materials
Other Market Moving Factor:
- Greek parliament passes reforms required to negotiate the third bailout package
- Better than expected earnings from Citigroup (C), Intel (INTC), Netflix (NFLX)
- Biotechnology outperforms
Equity indices spiked at the start, responding to overnight strength in the futures market. Shortly after yesterday's close, Intel (INTC 29.90, +0.21) and Netflix (NFLX 115.81, +17.68) reported better than expected results, which led to a surge in Nasdaq futures in particular.
Earnings notwithstanding, Nasdaq and S&P 500 futures received a second boost after the Greek parliament voted 229-64-6 in favor of austerity measures that will allow bailout negotiations to continue with the country expected to receive EUR86 billion in rescue funds. Furthermore, the European Central Bank, which held a policy meeting today, raised the country's allowance to Emergency Liquidity Assistance by EUR900 million, which will pave the way for Greek banks to open as soon as Monday.
As the U.S. opening bell approached, the focus shifted back to earnings with Citigroup (C 58.59, +2.13) and Goldman Sachs (GS 211.18, -1.78) reporting better than expected results. However, Goldman Sachs spent the day in negative territory, snapping its five-day streak. Still, the financial sector (+1.0%) ended among today's leaders, but Goldman's relative weakness kept the Dow under pressure.
Likewise, UnitedHealth (UNH 124.93, -0.93) also pressured the Dow despite reporting better than expected results. The stock narrowed its loss to 0.7% by day's end after being down as much as 3.1% following yesterday's record close. Furthermore, UnitedHealth pressured the health care sector (+0.5%), but hospital names also weighed. For instance, Community Health (CYH 60.99, -1.42) and Universal Health (UHS 141.25, -1.18) lost 2.3% and 0.8%, respectively, after Keybanc Capital Markets downgraded both listings to ‘Sector Weight' from ‘Overweight.' Biotechnology, however, picked up the slack with iShares Nasdaq Biotechnology ETF (IBB 395.67, +4.91) climbing 1.3%. That strength, combined with a solid showing from the technology sector (+1.3%) kept the Nasaq ahead of the broader market throughout the day.
Large cap technology components like Apple (AAPL 128.51, +1.69), Google (GOOGL 601.78, +17.82) and Microsoft (MSFT 46.66, +0.90) climbed between 1.3% and 3.1% while Intel alternated between gains and losses before settling higher by 0.7%. Other chipmakers struggled, evidenced by the PHLX Semiconductor Index, which eked out a modest gain (+0.2%).
Overall five sectors ended ahead of the broader market, but only two cyclical groups displayed relative strength while consumer staples (+1.0%), telecom services (+1.4%), and utilities (+1.5%) outperformed on the countercyclical side.
On the downside, the materials sector (-0.3%) spent the day in negative territory amid broad weakness while the energy sector (+0.1%) was able to stay in the green even though crude oil fell 1.0% to $50.91/bbl.
Treasuries displayed losses during overnight action, but a morning recovery returned the benchmark 10-yr yield to unchanged by the close (2.35%).
Today's participation was a bit lighter than yesterday with 723 million shares changing hands at the NYSE floor.
Economic data included Initial Claims, NAHB Housing Market Index, and Philadelphia Fed Survey:
- The initial claims level declined to 281,000 for the week ending July 11 from a downwardly revised 296,000 (from 297,000) while the Briefing.com consensus expected a decline to 283,000
- The four-week moving average increased to 282,500 from 279,250, which is the first time that the four-week moving has surpassed 280,000 since the end of April
- The continuing claims level decreased to 2.215 mln for the week ending July 4 from a downwardly revised 2.327 mln (from 2.334 mln) while the consensus expected a decrease to 2.285 mln
- The NAHB Housing Market Index for July rose to 60 from 59 while the Briefing.com consensus expected the index to hold at 59
- The Philadelphia Fed's Business Outlook Survey declined to 5.7 in July from 15.2 in June while the Briefing.com consensus expected a drop to 12.5
- There was a general softening in manufacturing conditions across all areas with four out of the nine survey subcomponents contracting in July
- The Shipments Index declined to 4.4 in July from 14.3 while Employment conditions were notably weak
- The Number of Employees Index turned negative, falling from 3.8 in June to -0.4 in July
- The Average Employee Workweek Index dropped to 4.0 from 4.7
Global Market
Asian Markets Close: Japan’s Nikkei +0.7%; Hing Kong’s Hang Seng +0.4%; China’s Shanghai Composite +0.5%
Major markets in the Asia-Pacific region ended higher Thursday, aided by the news that Greece’s parliament passed the austerity program desired by its creditors. The 0.5% gain in China’s Shanghai Composite belies another volatile day of action for that market, which traded in a 5.1% range between its lows and highs of the session.
Economic data
- Australia
- MI Inflation Expectations 3.4% (prior 3.0%)
- Singapore
- June Trade Balance SGD 4.93 bln (expected SGD 7.10 bln; prior SGD 6.61 bln)
- Non-Oil Exports -2.4% month-over-month (expected -1.2%; prior -3.3%); +4.7% year-over-year (expected +2.0%; prior -0.3%)
Equity Markets
- Japan’s Nikkei increased 0.7%, scoring its fourth straight gain this week and drawing support from a weaker yen. The gains were paced by the consumer discretionary (+1.3%), consumer staples (+1.0%), and financial (+0.7%) sectors. Alps Electric (+6.5%), Mitsubishi Chemical Holdings (+5.3%), and Sony Financial Holdings (+3.9%) were individual standouts. SCREEN Holdings (-4.5%), Mitsumi Electric (-4.5%), and Tokyo Electron (-3.2%) led the laggards. Out of the 225 index members, 146 ended higher, 71 finished lower, and 8 were unchanged.
- Hong Kong’s Hang Seng added 0.4% and ended near its high for the day with the help of the influential financial sector (+1.0%). China Overseas Land & Investment (+4.3%), China Resources Land (+4.3%), and Sino Land Co (+2.0% were the top-performing issues. Galaxy Entertainment Group (-2.0%) and China Unicom Hong Kong (-1.8%) were the worst-performing issues. Out of the 50 index members, 29 ended higher, 14 finished lower, and 7 were unchanged.
- China’s Shanghai Composite increased 0.5%, overcoming an early 3.1% decline. The CSI 300 Index for its part gained 0.8%, bolstered by strength in the communication (+2.9%), industrial (+2.6%), and consumer non-cyclical (+2.2%) sectors.
- India’s Sensex added 0.9% and closed near its highs for the day. It was supported by gains in the financial (+1.9%), consumer non-cyclical (+1.1%), and energy (+0.8%) sectors. Sitting atop the list of winners were Axis Bank (+4.2%), Bharat Heavy Electricals (+2.4%), and HDFC Bank (+1.6%). Vedanta (-1.3%) led a small group of losers. Out of the 30 index members, 23 ended higher and 7 finished lower.
- Australia’s S&P/ASX 200 increased 0.6%, leaving it up 3.2% for the week. Thursday’s advance was led by the telecom services (+1.3%), financial (+1.1%), and REIT (+0.9%) sectors. Greencross (+6.5%) led individual winners while Primary Health (-8.1%) led all losers. Out of the 200 index members, 110 ended higher, 74 finished lower, and 16 were unchanged.
- Regional advancers: South Korea +0.7%, Singapore +0.4%
- Regional decliners: Malaysia -0.03%, Taiwan -0.1%, Thailand -0.3%, Vietnam -0.6%
- Closed for holiday: Indonesia (National Leave Day)
FX
- USD/CNY unch at 6.2095
- USD/INR +0.2% at 63.520
- USD/JPY +0.2% at 124.05
EUROPE
Major European indices trade higher across the board with France’s CAC (+1.8%) and Germany’s DAX (+1.7%) jockeying for the lead. Last evening, the Greek parliament voted 229-64-6 in favor of austerity measures that will allow bailout negotiations to continue with the country expected to receive EUR86 billion in rescue funds. Separately, the European Central Bank made no changes to its policy, keeping its main refinancing rate at 0.05%, as expected.
- Eurozone June CPI 0.0% month-over-month, as expected; +0.2% year-over-year, as expected. Separately, May trade surplus narrowed to EUR18.80 billion from EUR24.90 billion (expected surplus of EUR22.30 billion) while June Core CPI +0.8% year-over-year, as expected
- Italy’s May trade surplus expanded to EUR4.18 billion from EUR3.73 billion (expected surplus of EUR2.83 billion)
- Swiss Retail Sales -1.8% year-over-year (consensus 1.9%; prior 1.6%)
Closing Prices
- UK’s FTSE: + 0.6%
- Germany’s DAX: + 1.5%
- France’s CAC: + 1.5%
- Spain’s IBEX: + 1.6%
- Portugal’s PSI: + 1.3%
- Italy’s MIB Index: + 1.7%
- Irish Ovrl Index: + 0.5%
- Greece ASE General Index: CLOSED
Macroeconomic Data
Economic Data
from Briefing.com
- Initial Claims : 281K vs 283K (Prior 296K - Down)
- Continuing Claims : 2215K vs 2275K (Prior 2327K - Down)
- Philadelphia Fed : 5.7 vs 12.0 (Prior 15.2)
- NAHB Housing Market Index : 60 vs 59 (Prior 60 - Up)
- Natural Gas Inventories : 99 bcf (Prior 91 bcf)
- Net Long-Term TIC Flows : $93.0B (Prior $54.4B - Up)
UNEMPLOYMENT CLAIMS
Highlights
- The initial claims level declined to 281,000 for the week ending July 11 from a downwardly revised 296,000 (from 297,000) for the week ending July 4. The Briefing.com Consensus expected the initial claims level to decline to 283,000.
- The continuing claims level decreased to 2.215 mln for the week ending July 4 from a downwardly revised 2.327 mln (from 2.334 mln) for the week ending June 27. The consensus expected the continuing claims level to decrease to 2.285 mln.
Key Factors
- The four-week moving average increased to 282,500 from 279,250. That is the first time that the four-week moving has surpassed 280,000 since the end of April.
- While a general upward move in the initial claims trends would normally indicate worsening labor market conditions, this move is not something to worry about. The four-week moving average bottomed at 267,000, which was so low and unsustainable in the medium-term that an upward move was bound to happen.
- The reality is that any claims result below 300,000 is considered strong.
Big Picture
- Labor market conditions remain strong despite the recent upward move in the initial claims level.
PHILADELPHIA FED
Highlights
- The Philadelphia Fed's Business Outlook Survey declined to 5.7 in July from 15.2 in June. The Briefing.com Consensus expected the index to fall to 12.5.
Key Factors
- There was a general softening in manufacturing conditions across all areas. Four out of the nine sub-components in the Business Outlook Survey contracted in July.
- The Shipments Index declined to 4.4 in July from 14.3 in June. The drop in production came about as new orders growth slowed (7.1 from 15.2) and unfilled orders contracted (-6.3 from 3.7) in July. Without a steady supply of unfilled orders, production will likely continue to weaken unless new orders growth accelerates.
- Employment conditions were notably weak.
- The Number of Employees Index turned negative, falling from 3.8 in June to -0.4 in July. The Average Employee Workweek Index dropped to 4.0 from 4.7.
- Contractions were also reported in the Delivery Times Index (-4.5) and Inventories Index (-5.7).
Big Picture
- Four of the nine components of the Philadelphia Fed's Business Outlook contracted in July.
Market Internals
NYSE:
Lower Volumes than the day before – 744.2M vs 769.1M
Advancers outpaced Decliners (adv/dec): 2169 / 956
New Highs outpaced New Lows (highs/lows): 137 / 117
NASDAQ:
Higher Volumes than the day before – 1814.2M vs 1673.2M
Advancers outpaced Decliners (adv/dec): 1879 / 962
New Highs outpaced New Lows (highs/lows): 189 / 72
VOLATILITY S&P500 (VIX)
12.11 -1.12 (-8.47%)
Technical Updates
18,120.25 +70.08 (+0.39%)
Volume: 85,029,365 (below average of 94,272,309)
Range: 18,065.33 - 18,131.61
Range: 18,065.33 - 18,131.61
5,163.18 +64.24 (+1.26%)
Volume: 382,622,746 (below average of 434,494,417)
Volume: 382,622,746 (below average of 434,494,417)
Range: 5,128.56 - 5,163.18
2,124.29 +16.89 (+0.80%)
Volume: 531.4M (above average of 520,849,323)
Range: 2,110.55 - 2,124.42
DOW broke to the upside, out of the descending trend line. With the support of volume I think we should see DOW continues to go higher until the resistance at around 18,210. NASDAQ met a resistance at around 5,160 and the ascending trend line is likely to form another resistance level. Also NASDAQ is at its 52-week high. S&P is approaching its descending trend line to break out and meanwhile broke above its resistance at around 2,120 level. It looks like there is a major resistance level for the market on going higher. Maybe we should see some profit taking here.
Commodities
- The dollar index continued to trade higher today, which weighed on commodities
- Both oil and natural gas futures both remain near today’s lows in electronic trade and also had separate catalysts weighing on prices
- WTI crude has been weak following a number of variables, including the Iran nuclear agreement, which raises future oil exports, the OPEC report and the IEA oil report
- Natural gas futures felt additional pressure today from the weekly nat gas storage data
- Ultimately, Aug crude closed $0.49 lower to $50.91/barrel, while Aug nat gas lost $0.06 to $2.86/MMBtu
- Aug gold fell $3.60 today to $1143.70/oz, while Sept silver lost $0.07 to $14.98/oz
- Sept copper ended the session unchanged at $2.52./lb
Energy
- August crude oil futures fell $0.49 to $50.91/barrel
- August natural gas closed $0.06 lower at $2.86/MMBtu
- RBOB Gasoline closed $0.04 higher at $1.90/gallon
- Heating oil futures closed flat at $1.67/gallon
Agriculture
- September corn closed flat at $4.30/bushel
- September wheat closed $0.04 lower at $5.63/bushel
- November soybeans closed $0.07 lower to $10.10/bushel
- Sugar #11 closed 0.19 cents lower to 12.27 cents/lb
Metals
- August gold ended today’s session $3.60 lower at $1143.70/oz
- September silver closed $0.07 lower at $14.98/oz
- September copper closed flat at $2.52/lb
Currencies
- The U.S. Dollar Index gained 0.48% today to 97.63 in a volatile trade
- EUR/USD: -0.68% to $1.0880
- The market responded to ECB President Mario Draghi's 08:30 ET press conference by taking the pair to a 6-week low, but the selling abated and the market quickly jumped back up into its range for the session
- Draghi announced that the ECB would expand Emergency Liquidity Assistance (ELA) to Greece by 900 mln euro, which may mean that Greece's banks open up on Monday
- Eurozone CPI was flat m/m in June, in line with estimates but less than the 0.2% jump in May
- GBP/USD: -0.17% to $1.5608
- George Osborne spoke publicly, saying that the U.K.'s contribution to the EFSM would be protected from Greek risk
- USD/JPY: +0.16% to 124.12
- Foreign investment in Japanese equities fell by 851.2 bln yen last week
- USD/CHF: +0.61% to 0.9576
- Swiss Retail Sales unexpectedly fell 1.8% y/y in June versus a jump of 1.6% in May
- USD/CAD: +0.34% to 1.2962
- This was a fresh 6-year low, driven by the surprise rate cut by the Bank of Canada on Wednesday. The monetary easing has been driven by lower energy prices -- a major export for Canada
- AUD/USD: +0.35% to $0.7435
- NZD/USD: +0.36% to $0.7405
Bonds
- Today, we received data showing a steady employment picture, strong homebuilder sentiment, and economic weakness in the region covered by the Philadelphia Federal Reserve. 2 and 5-year notes sold off while the 30-year bond rallied, implying that the market believes that the data will induce the Fed to raise rates sooner than it should and thereby limit long-term real GDP growth or inflation. Had stocks fallen, perhaps a flight to quality may have caused buying on the long end of the curve, but given that the Greek crisis continues to subside (for now at least), and equities rallied, that explanation seems unlikely. The alternate hypothesis is that factors other than fundamentals were driving the trade
- Yield Check:
- 2-yr: +2 bps to 0.67%
- 5-yr: +3 bps to 1.65%
- 10-yr: -1 bp to 2.35%
- 30-yr: -3 bps to 3.11%
- News:
- The Greek parliament approved the austerity measures agreed to on Sunday between Prime Minister Alexis Tsipras and Greece's official creditors
- Initial Jobless Claims came out better than expected at 281K versus the Briefing.com consensus of 283K and 297K in the prior week
- Continuing Jobless Claims were reported at 2215K, much less than the Briefing.com consensus of 2285K and the prior (downwardly-revised) reading of 2327K
- The Eurogroup agreed "in principle" to begin discussions with Greece to extend a new 3-year bailout to the country
- The ECB increased the Emergency Liquidity Assistance (ELA) to Bank of Greece by 900 mln euro, leading to speculation that the banks will open on Monday
- The Philadelphia Fed's Business Outlook Survey declined to 5.7 in July from 15.2 in June. The Briefing.com consensus expected the index to fall to 12.5
- The NAHB Housing Market Index rose to 60 in July versus the Briefing.com consensus of 59 and the prior reading of 60
- Commodities:
- WTI crude: -0.74% to $51.03/bbl.
- Gold: -0.26% to $1,144.40/troy oz.
- Copper: -0.06% to $2.52/lb.
- Currencies:
- EUR/USD: -0.70% to $1.0877
- USD/JPY: +0.17% to 124.13
- Data out Friday:
- June CPI and Core CPI (08:30 ET)
- June Housing Starts and Building Permits (08:30ET)
- July Michigan Sentiment (10:00 ET)
Treasury Yields:
- 2 Year Note 0.67% +0.03
- 5 Year Note 1.66% +0.03
- 10 Year Note 2.36% UNCH
- 30 Year Bond 3.11% -0.02
2/30 Spread: 244 bps ( -5 ) … 2/10 Spread: 169 bps ( -3 )
Preview for Friday 17 July, 2015
Economic Data
Friday (17 July) :
- 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
Friday (17 July) :
BMO - ALV CMA FHN GE HON JBHT KSU KNL ERIC PGR STI SYF GWW
AMC - None
BMO - ALV CMA FHN GE HON JBHT KSU KNL ERIC PGR STI SYF GWW
AMC - None
Summary
Market is still fairly bullish but it seems like it is losing the momentum. From the technical above, I think we should see more profit taking on Friday after a strong week of upside. Besides that there are some market moving economic data releasing tomorrow, so I reckon a reversal should be more probable.
Also with Greece's bailout finally settled, it is also possible to see the market "Sell the news" as well.
Market is still fairly bullish but it seems like it is losing the momentum. From the technical above, I think we should see more profit taking on Friday after a strong week of upside. Besides that there are some market moving economic data releasing tomorrow, so I reckon a reversal should be more probable.
Also with Greece's bailout finally settled, it is also possible to see the market "Sell the news" as well.
Direction for Friday 17 July, 2015: Down
2015 Daily Directional Accuracy: 66/110 (60.00%)
2015 Weekly Directional Accuracy: 16/25 (64.00%)
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