Dow -119.09 at 17731.95, Nasdaq -25.36 at 5146.41, S&P -12.00 at 2102.15
The opening was rather testing on the buying interest. However it quickly reverts back to more selling after. I would say market is most probably still heading for some more correction.Market is kinda tricky at the moment. I would say it is rather uncertain. I am not sure if the market is done over with the correction as we saw the indices finding good support to hold and there is still underlying optimism in the market or there are more selling to come. I guess chances are it would be more or less influenced by the earnings performance, especially with technology sector remains the front runner in the market. Plus we are in the midst of earnings season, the volatility is going to be around.
Anyway I think I will stick to the technical first.Direction for Thursday 23 July, 2015: Down
Selling pressure continues in crude oil on Thursday as traders believe there is an oversupply in the oil market. As such we saw the oil prices tank to as low as $48.20. I believe the pressure is still remaining as the negotiation on Iran nuclear deal is undergoing. Overall Europe saw all the market ended in relatively flat-ish and Asia was also in red, except China which is showing good recovery.
Market Summary
Industry Watch
Strong: Technology
Weak: Energy, Financials, Industrials, Materials, Utilities
Other Market Moving Factor:
- Potential M&A in the health care sector: Cigna (CI) close to being acquired by Anthem (ANTM), according to the Wall Street Journal
- Initial claims decline to 255,000, lowest level since November 1973
Equities spent the first two hours of action near their flat lines before sliding to session lows amid selling pressure in heavily-weighted sectors like consumer discretionary (-0.6%), financials (-0.8%), and industrials (-0.9%). That being said, all ten sectors ended the day with losses, but relative strength in the top-weighted technology sector (-0.3%) prevented the market from ending deeper in the red. Taking a look at the bigger picture, the S&P 500 settled below its 50-day moving average (2,103) for the first time in nearly two weeks.
Quarterly earnings were in focus on Thursday after more than 175 companies reported their results since Wednesday's closing bell. Broadly speaking, bottom-line beats were commonplace, but many companies failed to show year-over-year revenue growth.
Four Dow components were among those reporting and all four ended the day with losses. American Express (AXP 77.01, -1.98) and 3M (MMM 149.50, -5.91) lost 2.5% and 3.8%, respectively, after reporting bottom-line beats on below-consensus revenue while Caterpillar (CAT 76.88, -2.88) fell 3.6% in reaction to an in-line report and lowered guidance. For its part, McDonald's (MCD 97.09, -0.49) lost 0.5% despite reporting a three-cent beat.
The four Dow members pressured their respective sectors while technology (-0.3%) settled ahead of the broader market thanks to gains among chipmakers. The PHLX Semiconductor Index gained 1.5% after being up as much as 2.7% in the early going. Only five index members ended in the red while SanDisk (SNDK 63.70, +9.52) soared 17.6% after beating earnings and revenue expectations. As for large cap tech components, Apple (AAPL 125.16, -0.06) and Microsoft (MSFT 46.11, +0.57) registered gains while Qualcomm (QCOM 61.75, -2.44) dropped 3.8% after its cautious guidance overshadowed a bottom-line beat. Also of note, the company announced plans to reduce its semiconductor division by about 15%.
Similar to technology, the energy sector (-0.3%) finished ahead of the broader market even though crude oil lost 1.8%, ending the pit session at $48.39/bbl. Including today's decline, the energy sector is down 2.1% for the week and lower by 5.5% since the end of June.
Over on the countercyclical side, utilities (-1.5%) underperformed throughout the day while consumer staples (-0.4%), health care (-0.3%), and telecom services (-0.6%) settled closer to the broader market.
The modest loss in the health care sector masked a 2.2% spike in the shares of Cigna (CI 154.36, +3.29) after the Wall Street Journal reported the company is close to being acquired by Anthem (ANTM 155.21, +0.11) for about $188/share.
Treasuries maintained narrow ranges overnight, but climbed during the session with the 10-yr yield falling five basis points to 2.27%.
Today's participation was ahead of recent averages with more than 835 million shares changing hands at the NYSE floor.
Economic data was limited to Initial Claims and Leading Indicators:
- The initial claims level plummeted to 255,000 for the week ending July 18 from an unrevised 281,000 while the Briefing.com consensus expected a decline to 279,000
- That was the lowest initial claims reading since November 1973 when claims dropped to 233,000
- The BLS reported that there were no special factors that impacted this week's claims reading
- The continuing claims level declined to 2.207 million for the week ending July 11 from an upwardly revised 2.216 million (from 2.215 million) while the consensus expected a decrease to 2.213 million
- The Leading Indicators report for June was up 0.6% while the Briefing.com consensus expected an increase of 0.2%
Global Market
Asian Markets Close: Japan’s Nikkei +0.4%; Hong Kong’s Hang Seng +0.5%; China’s Shanghai Composite +2.4%
There were plenty of losers in the Asia-Pacific region on Thursday, which flowed from the weak showing from technology stocks in the U.S. The region’s three most closely followed markets, however — the Nikkei, the Hang Seng, and the Shanghai Composite — all advanced. The latter was the big winner, jumping 2.4%. Since bottoming on July 9, the Shanghai Composite has risen 22.2%.
Economic data
- Japan
- June Trade Balance JPY -69.0 bln (expected JPY 5.0 bln; prior JPY -216.0 bln)
- Exports +9.5% year-over-year (expected +10.0%; prior +2.4%)
- Imports -2.9% (expected -4.0%; prior -8.7%)
- South Korea
- Q2 GDP +0.3% quarter-over-quarter (expected +0.4%; prior +0.8%); +2.2% year-over-year (expected +2.3%; prior +2.5%)
- Australia
- NAB Quarterly Business Confidence 4.0 (prior 0.0)
- New Zealand
- Central bank cuts main lending rate 25 basis points to 3.00%, as expected
- Singapore
- June CPI -0.3% year-over-year (expected -0.3%; prior -0.4%)
Equity Markets
- Japan’s Nikkei increased 0.4% and closed near its highs for the session following better than expected import data for June. Leading sectors included consumer staples (+2.0%), consumer discretionary (+0.9%), communications (+0.9%), and financial (+0.6%). Oji Holdings (+3.9%), UNY Group Holdings (+3.8%), and Kao Corp (+3.7%) were the best-performing issues. Eisai Co (-5.9%), Sumco Corp (-5.5%), and Sharp Corp (-4.0%) were the biggest losers. Out of the 225 index members, 123 ended higher, 95 finished lower, and 7 were unchanged.
- Hong Kong’s Hang Seng increased 0.5%. Individual standouts included Sands China (+7.9%), which rallied strongly in the wake of the earnings report from las Vegas Sands, Galaxy Entertainment (+4.5%), which also rode the coattails of that report, and AIA Group (+2.2%). The biggest laggards were Cheung Kong Property Holdings (-1.1%) and China Unicom Hong Kong (-1.1%). Out of the 50 index members, 31 ended higher, 15 finished lower, and 4 were unchanged.
- China’s Shanghai Composite surged 2.4% and closed near its highs for the session in a trend-up day. Steady buying efforts were supported by continued confidence in the government’s measures to prop up stock prices. Thursday marked the sixth straight day of gains for the Composite, which has climbed 8.4% in that period. Since hitting an interim low on July 9, the Composite has risen 22.2%. The CSI 300 Index increased 2.3% on Thursday.
- India’s Sensex declined 0.5% on the heels of Wednesday’s strong showing. Losses were paced by the materials (-2.0%), consumer staples (-1.3%), and industrials (-1.1%) sectors. Lupin (-5.3%), Bajaj Auto (-5.0%), and Tata Steel (-3.7%) topped the list of losers. Tata Motors (+3.0%), Dr Reddy’s Laboratories (+1.7%), and Mahindra & Mahindra (+1.2%) led the gainers. Out of the 30 index members, 12 ended higher and 18 finished lower.
- Australia’s S&P/ASX 200 declined 0.4%, weighed down by losses in the metals & mining (-2.2%), resources (-1.8%), and materials (-1.6%) sectors. Out of the 200 index members, 97 ended higher, 84 finished lower, and 19 were unchanged.
- Regional advancers: South Korea +0.02%, Vietnam +0.3%, Philippines +0.2%
- Regional decliners: Taiwan -1.4%, Malaysia -0.4%, Indonesia -0.1%, Singapore -0.1%, Thailand -0.5%
FX
- USD/CNY unch at 6.2096
- USD/INR +0.3% at 63.7588
- USD/JPY -0.1% at 123.80
EUROPE
Major European indices trade near their flat lines after the Greek Parliament voted 230-63-5 in favor of the second set of reforms required to begin bailout talks with eurozone creditors.
- Spain’s Q2 Unemployment Rate declined to 22.37% from 23.78% (expected 23.10%)
- Italy’s June non-EU trade surplus narrowed to EUR2.27 billion from EUR2.87 billion
- UK’s June Retail Sales -0.2% month-over-month (expected 0.3%; prior 0.3%); +4.0% year-over-year (consensus 4.9%; last 4.7%). Separately, June Core Retail Sales -0.2% month-over-month (expected 0.3%; last 0.4%); +4.2% year-over-year (consensus 5.0%; last 4.5%)
Closing Prices
- UK’s FTSE: -0.2%
- Germany’s DAX: -0.1%
- France’s CAC: + 0.1%
- Spain’s IBEX: -0.4%
- Portugal’s PSI: + 0.2%
- Italy’s MIB Index: -0.2%
- Irish Ovrl Index: 0.0%
- Greece ASE General Index: CLOSED
Macroeconomic Data
Economic Data
from Briefing.com
- Initial Claims : 255K vs 278K (Prior 281K)
- Continuing Claims : 2207K vs 2218K (Prior 2216K - Up)
- Leading Indicators : 0.6% vs 0.2% (Prior 0.8% - Up)
- Natural Gas Inventories : 61 bcf (Prior 99 bcf)
UNEMPLOYMENT CLAIMS
Highlights
- After a few weeks of persistently climbing initial claims, the initial claims level plummeted to 255,000 for the week ending July 18 from an unrevised 281,000 for the week ending July 11. The Briefing.com Consensus expected the initial claims level to decline to 279,000.
- The continuing claims level declined to 2.207 mln for the week ending July 11 from an upwardly revised 2.216 mln (from 2.215 mln) for the week ending July 4. The consensus expected the continuing claims level to decrease to 2.213 mln.
Key Factors
- That is the lowest initial claims reading since November 1973 when the initial claims level dipped to 233,000.
- The BLS reported that there were no special factors that impacted this week’s claims reading. There weren’t any economic or business reports that would explain the big decline either.
- Given the historical nature of the decline, it is likely that the initial claims level will spike back up next week as a result of normal volatility before settling back into the 275,000 – 290,000 range.
Big Picture
- There was no underlying factor for the big decline in the initial claims, which leads us to believe the drop will be extremely temporary.
LEADING INDICATORS
Highlights
- The Conference Board's Leading Economic Index increased 0.6% in June after increasing an upwardly revised 0.8% (from 0.7%) in May. The Briefing.com Consensus expected the index to increase 0.2%.
Key Factors
- Since 8 of the 10 components of the index are known prior to the release, the difference between the consensus forecast and the actual result is typically minor.
- In this case, the big positive surprise in building permits was announced after many economists submitted their leading indicators forecast. While the consensus expected building permits to decline to 1.150 mln in June from 1.250 mln in May, permits actually increased to 1.343 mln.
- In technical terms, the consensus expected building permits to reduce the leading indicators growth rate by roughly 0.2 percentage points. In reality, building permits added 0.22 percentage points to the 0.6% gain. The 0.4 percentage difference between the consensus’ building permits forecast and the actual permits contribution equaled the entire difference between the consensus’ forecast of the leading indicators (0.2%) and the actual (0.6%) gain.
- The Conference Board expects a minor increase in June orders of nondefense capital goods excluding aircraft.
Big Picture
- The Leading Economic Index maintains steady growth.
Market Internals
NYSE:
Higher Volumes than the day before – 858.1M vs 840.4M
Decliners outpaced Advancers (adv/dec): 972 / 2117
New Lows outpaced New Highs (highs/lows): 89 / 314
NASDAQ:
Lower Volumes than the day before – 1985.2M vs 2019.4M
Decliners outpaced Advancers (adv/dec): 887 / 1931
New Lows outpaced New Highs (highs/lows): 109 / 169
VOLATILITY S&P500 (VIX)
12.64 +0.52 (+4.29%)
Technical Updates
17,731.92 -119.12 (-0.67%)
Volume: 88,602,277 (above average of 93,564,838)
Range: 17,705.03 - 17,860.95
Range: 17,705.03 - 17,860.95
5,146.41 -25.36 (-0.49%)
Volume: 439,503,247 (above average of 434,530,280)
Volume: 439,503,247 (above average of 434,530,280)
Range: 5,137.64 - 5,197.00
2,102.15 -12.00 (-0.57%)
Volume: 583,756,000 (above average of 522,515,969)
Range: 2,098.63 - 2,116.87
DOW broke below its support at around 17,780 and went to test its 200MA. Next support is likely to be around 17,580. NASDAQ formed a bearish engulfing pattern and closed below its resistance level at around 5,160. Most probably we would see NASDAQ continue to go down to 5,100. S&P went lower and sit above its 50MA. I reckon the 20MA is going to form the next support for S&P. To sum it up, I think market is still heading downside but only to some extent.
Commodities
- WTI crude oil futures sold off today
- Front-month crude finished the day 2% lower at $48.39/barrel
- In other energy, Aug natural gas dropped 3.1% today to $2.81/MMBtu
- Metals showed a mixed day
- Aug gold rose 0.2% to $1094.10/oz, while Sept silver fell -0.1% to $14.71/oz
- Copper extends recent losses. Front-month Sept copper closed 2% lower today to $2.39/lb
Energy
- September crude oil futures fell $0.87 (-1.8%) to $48.39/barrel
- August natural gas closed $0.09 lower (-3.1%) at $2.81/MMBtu
- RBOB Gasoline closed $0.01 lower at $1.85/gallon
- Heating oil futures closed $0.02 lower at $1.66/gallon
Agriculture
- December corn closed flat at $4.14/bushel
- September wheat closed $0.06 higher (+1.2%) at $5.22/bushel
- November soybeans closed $0.16 lower (-1.6%) to $9.80/bushel
- Sugar #11 closed 0.13 cents higher to 11.51 cents/lb
Metals
- August gold ended today’s session $2.70 higher (+0.2%) at $1094.10/oz
- September silver closed today’s session $0.02 lower (-0.1%) at $14.71/oz
- September copper closed $0.04 lower (-1.6%) at $2.39/lb
Currencies
- The U.S. Dollar Index gave back 0.47% today to trade 97.14, despite better-than-expected economic data
- Initial Jobless Claims hit a 42-year low, although the significance of that could be overestimated because jobless claims data are very volatile
- GBP/USD: -0.65% to $1.5516
- In the U.K., Retail Sales unexpectedly fell 0.2% m/m in June. Sales rose 0.3% in May
- Core Retail Sales, which excludes automobiles and fuel, also fell 0.2%. They had grown 0.4% in May
- In the U.K., Retail Sales unexpectedly fell 0.2% m/m in June. Sales rose 0.3% in May
- EUR/USD: +0.70% to $1.1002
- The Greek parliament approved a bill with the economic reforms to which Prime Minister Alexis Tsipras and Greece's official creditors agreed on July 12th
- Spain's unemployment rate dropped to 22.4% in the second quarter from 23.8% in Q1
- USD/JPY: -0.17% to 123.82
- Japan's goods trade deficit shrunk in June to $13.9 bln. That was 77% lower than the deficit one year earlier and largely resulted from lower oil prices and yen depreciation
- USD/CHF: -0.30% to 0.9573
- USD/CAD: +0.02% to 1.3040
- AUD/USD: -0.24% to $0.7361
- NZD/USD: -0.21% to $0.6616
- The Reserve Bank of New Zealand cut its benchmark interest rate by 25 bps to 3.00%
Bonds
- The Treasury complex took early losses after the Initial Jobless Claims report that showed that claims hit a 42-year low, but the market recovered to session highs as equities came under pressure
- Yield Check:
- 2-yr: -1 bp to 0.69%
- 5-yr: -4 bps to 1.63%
- 10-yr: -5 bps to 2.27%
- 30-yr: -7 bps to 2.97%
- News:
- Overnight, the Greek parliament passed a second round of economic reforms to clear the way for negotiations with its official creditors for a third, 86 bln euro bailout
- Initial Jobless Claims plunged to 255,000 for the week ending July 18 from an unrevised 281,000 for the week ending July 11. The Briefing.com consensus expected the initial claims level to decline to 279,000
- Continuing Jobless Claims declined to 2.207 mln for the week ending July 11 from an upwardly revised 2.216 mln (from 2.215 mln) for the week ending July 4. The consensus expected the continuing claims level to decrease to 2.213 mln
- Leading Indicators for June rose 0.6%, surpassing the Briefing.com consensus of +0.2%. The reading for May was revised up to +0.8% from +0.7%
- "Housing permits and the interest rate spread drove the latest gain in the LEI, while labor market indicators such as average workweek and initial claims remained unchanged" - Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board
- Eurozone Consumer Confidence fell to -7.1 in July from -5.6 in June
- $15 bln 10-year TIPS auction:
- High yield: 0.491%
- Bid-to-cover ratio: 2.31%
- Indirect bid: 64.5%
- Commodities:
- WTI crude: -0.91% to $48.74/bbl
- Gold: -0.40% to $1,087.00/troy oz.
- Copper: -2.24% to $2.3735/lb.
- Currencies:
- EUR/USD: +0.65% to $1.0997
- USD/JPY: -0.19% to 123.79
- Data out Friday:
- June New Home Sales (10:00 ET)
Treasury Yields:
- 2 Year Note 0.71% -0.04
- 5 Year Note 1.65% -0.04
- 10 Year Note 2.28% -0.05
- 30 Year Bond 2.98% -0.06
2/30 Spread: 227 bps ( -2 ) … 2/10 Spread: 157 bps ( -1 )
Preview for Friday 24 July, 2015
Economic Data
Friday (24 July) :
- New Home Sales : 550K (Prior 546K)
Earnings Highlights
Friday (24 July) :
BMO - ABBV AAL B BIIB COG DTE ECA FNFG FLIR GRC JCI LEA MCO MOG.A NS OFG OCR BPOP PB COL SPG SAVE STT TEN VFC VTR WBC XRX
AMC - None
Summary
I think the market is showing more downside for now but I am not sure how low can it go. We have seen quite a correction this week and maybe we might see some short-covering on Friday.
Furthermore there has been more buying in the longer term treasuries and as a result the yield curve is flattening. This does bring attention to the long term outlook.
I think the market is showing more downside for now but I am not sure how low can it go. We have seen quite a correction this week and maybe we might see some short-covering on Friday.
Furthermore there has been more buying in the longer term treasuries and as a result the yield curve is flattening. This does bring attention to the long term outlook.
Direction for Friday 24 July, 2015: Down
2015 Daily Directional Accuracy: 71/115 (61.74%)
2015 Weekly Directional Accuracy: 16/26 (61.54%)
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