Dow +75.90 at 18053.58, Nasdaq +33.38 at 5104.89, S&P +9.35 at 2108.95
During the pre-market, market was literally flat. Maybe the strong bullish momentum has started to run out of steam. Even so when market opens, it continues the rallies for the past 2 sessions and remains in upside. There seems to be some profit taking before market close. NASDAQ continues to lead the market as the biotech and technology sector perform better.Market is pulling back after hitting the 200MA previously. And the settlement of the on-going a-greek-ment on Sunday just gave the market more buying strength. Judging from the gap up at the opening from the last two trading session, I am seeing more confidence in the market. Despite so, I am still holding a slight skeptical towards the bullishness as I didn't see much movement in the market besides the opening 30 minutes. Looking at the internals and technicals, I suppose we should see more upside in the market.
Q3 earnings season are here and this week we will have more from the financial sector. Watch out for those big banks as they are likely to affect the market as well. For example we are seeing from JP Morgan and Wells Fargo before the market opens tomorrow.
Anyway I think the bulls have recovered and flexing their muscles now...Direction for Tuesday 14 July, 2015: Up
Numbers from the retail sales has been disappointing and I think that somehow caused some drag in the market.
Iran has also settled an agreement to lift sanction on oil export in order to limit its nuclear program. This caused a little downside for crude oil price but at the end of the day, crude oil still ended higher. Maybe traders are thinking the impact on the global oil production from the deal would not be immediate.
Market Summary
Industry Watch
Strong: Energy, Health Care, Materials, Technology
Weak: Consumer Discretionary, Consumer Staples, Telecom Services, Utilities
Other Market Moving Factor:
- P5+1 negotiations with Iran result in a nuclear deal: crude oil retreats overnight
- Retail sales miss expectations in June (-0.3%; Briefing.com consensus 0.3%)
- Biotechnology outperforms
Equity indices began near their flat lines after overnight reports from Vienna revealed that P5+1 negotiators agreed to a nuclear deal with Iranian representatives. The news had little impact on the market, but crude oil was down about 2.0% overnight amid expectations that global oil supplies will increase once Iran begins selling its oil on the open market. However, an intraday rebound resulted in crude oil climbing 1.7% to $53.06/bbl. Accordingly, the energy sector (+0.8%) climbed alongside crude oil to end the day among the leaders, while only the health care sector (+1.0%) had a better showing.
The influential health care space finished the day well ahead of other countercyclical groups even though Johnson & Johnson (JNJ 99.78, -0.49) slumped 0.5% despite reporting a two-cent beat. However, biotechnology filled the void with iShares Nasdaq Biotechnology ETF (IBB 387.94, +8.79) spiking 2.3%, which contributed to the relative strength in the Nasdaq.
Furthermore, high-beta chipmakers also helped the Nasdaq stay ahead of the broader market with the PHLX Semiconductor Index rallying 1.1%. Micron (MU 19.61, +2.00) was the standout performer, soaring 11.4% after the Wall Street Journal reported Micron may have received a $21.00/share takeover offer from Tsinghua Unigroup. As for large cap tech names, Apple (AAPL 125.61, -0.05), Microsoft (MSFT 45.62, +0.08), and Oracle (ORCL 40.78, -0.02) ended near their flat lines while Google (GOOGL 584.18, +12.45) outperformed, climbing 2.2%.
Elsewhere among cyclical sectors, financials (+0.4%) spent the day behind the broader market even though JPMorgan Chase (JPM 69.04, +0.95) and Wells Fargo (WFC 57.25, +0.51) posted respective gains of 1.4% and 0.9% in reaction to earnings. JPMorgan Chase delivered a bottom-line beat on below-consensus revenue while Wells Fargo matched earnings expectations on revenue that missed estimates.
On the downside, the utilities sector (-0.1%) was the lone decliner, narrowing its July gain to 3.6%.
Treasuries spiked in the morning following a disappointing Retail Sales report. The 10-yr note settled just below its high with the benchmark yield falling five basis points to 2.40%.
Today's participation was in-line with recent totals as 680 million shares changed hands at the NYSE floor.
Economic data included Retail Sales, Import/Export Prices, and Business Inventories:
- Retail sales declined 0.3% in June after increasing a downwardly revised 1.0% (from 1.2%) in May while the Briefing.com consensus expected an increase of 0.3%
- The motor vehicle manufacturers reported that unit sales declined to 17.2 million SAAR in June from 17.8 million SAAR in May, which translated into a sizable 1.1% decline in sales at motor vehicles and parts dealers
- Excluding motor vehicles, retail sales declined 0.1% in June after increasing a downwardly revised 0.8% (from 1.0%) in May while the consensus expected an increase of 0.5%
- Core sales, which exclude motor vehicle dealers, gasoline stations, and building material and supply stores, declined 0.1% in June after increasing 0.6% in May
- Export prices, excluding agriculture, decreased 0.1% in June after increasing 0.7% in the prior reading
- Excluding oil, import prices decreased 0.2%, which followed last month's unchanged reading
- Business inventories increased 0.3% in May after increasing an unrevised 0.4% in April while the Briefing.com consensus expected an increase of 0.2%
- The inventory changes from manufacturers (0.0%) and merchant wholesalers (0.8%) were known prior to the release. The only new information was that retailer inventories were flat in May after increasing 0.6% in April.
- Inventory declines from motor vehicle and parts retailers (-0.2%) and furniture and appliances retailers (-0.3%) were offset by increases from general merchandise stores (0.5%) and building material and supply stores (0.2%)
Global Market
Asian Markets Close: Japan’s Nikkei +1.5%; Hong Kong’s Hang Seng -0.4%; China’s Shanghai Composite -1.2%
There was some mixed trading action in Asian-Pacific markets on Tuesday. China’s Shanghai Composite (-1.2%) cooled down after a 13.2% gain in the preceding three sessions. Japan’s Nikkei (+1.5%), however, continued its rally on the heels of Wall Street’s strong showing on Monday and reports of a nuclear deal being reached with Iran.
Economic data
- China
- New Loans CNY 1,280.0 bln (expected CNY 1050.0 bln; prior CNY 900.8 bln)
- M2 Money Stock +11.8% year-over-year (expected 11.0%; prior 10.8%)
- Australia
- June NAB Business Confidence 10.0 (prior 8.0)
- Singapore
- Q2 GDP -4.6% quarter-over-quarter (expected +0.8%; prior +4.2%); +1.7% year-over-year (expected +2.4%; prior +2.8%)
- India
- June WPI Inflation -2.40% year-over-year (expected -2.20%; prior -2.36%)
- WPI Food +2.88% year-over-year (prior +3.80%)
- WPI Fuel -10.03% year-over-year (prior -10.50%)
Equity Markets
- Japan’s Nikkei increased 1.5% and is now up 3.1% for the week after declining 3.7% last week. Tuesday’s gains were led by the energy (+2.0%), technology (+1.9%), and basic materials (+1.8%) sectors. Individual standouts included Mitsumi Electric (+5.6%), Nomura Holdings (+4.7%), and Tokyo Electron (+4.5%). The worst-performing issues were Kikkoman Corp (-3.3%), Nichirei (-2.8%) and Sony (-1.2%). Out of the 225 index members, 205 ended higher, 16 finished lower, and 4 were unchanged.
- Hong Kong’s Hang Seng declined 0.4%, weighed down by a relatively weak showing from the technology (-3.3%), energy (-1.5%), and financial (-0.9%) sectors. Sands China (+4.9%) and Galaxy Entertainment (+3.8%) topped all stocks while Lenovo Group (-3.3%) and Hong Kong Exchanges and Clearing (-2.5%) paced declining issues. Out of the 50 index members, 16 ended higher, 31 finished lower, and 3 were unchanged.
- China’s Shanghai Composite dropped 1.2%. The Composite was up 1.6% in early trading, but surrendered all of that gain and was eventually down as much as 2.9% at its low for the day, which was reached with about an hour left in the trading session. Within the CSI 300 Index (-2.4%), the energy (-4.0%) and financial (-3.4%) sectors were the main pockets of weakness.
- India’s Sensex declined 0.1% in a choppy day of trading within a narrow price band. Coal India (+3.4%), Infosys (+2.2%), and Hindustan Unilever (+1.8%) were the best-performing issues while Tata Motors (-4.0%), State Bank of India (-2.0%), and Hindalco Industries (-1.9%) brought up the rear. Out of the 30 index members, 15 ended higher, 14 finished lower, and 1 was unchanged.
- Australia’s S&P/ASX 200 bounced back from Monday’s disappointing showing and gained 1.9%, riding the strength of the mining stocks. The metals & mining (+2.7%) sector was the best-performing sector followed by materials (+2.6%), and information technology (+2.6%).
- Regional advancers: Taiwan +0.1%, Singapore +0.2%, Philippines +0.6%, Indonesia +0.2%, Vietnam +0.7%
- Regional decliners: South Korea -0.1%, Thailand -0.2%
FX
- USD/CNY +0.01% at 6.2089
- USD/INR +0.04% at 63.480
- USD/JPY -0.03% at 123.41
EUROPE
Major European indices trade lower across the board with Italy’s MIB (-0.8%) showing the largest decline. Elsewhere, reports from Athens suggest the Greek Parliament will back the creditor agreement that was signed by Prime Minister Alexis Tsipras, but some members of Syriza are expected to vote against the agreement
- Eurozone May Industrial Production -0.4% month-over-month (expected 0.2%; prior 0.1%); +1.6% year-over-year (consensus 1.9%; last 0.9%). Separately, ZEW Economic Sentiment fell to 42.7 from 53.7 (expected 51.1)
- Germany’s July ZEW Economic Sentiment declined to 29.7 from 31.5 (expected 29.0) while June CPI -0.1% month-over-month, as expected
- UK’s June CPI 0.0% month-over-month (consensus 0.1%; prior 0.2%); 0.0% year-over-year (consensus 0.1%; previous 0.1%). Separately, June Core CPI +0.8% year-over-year (consensus 0.9%; last 0.9%) and June Input PPI -12.6% year-over-year (expected -11.8%; prior -12.3%)
- Italy’s June CPI +0.2% month-over-month (expected 0.1%; prior 0.2%); +0.2% year-over-year (consensus 0.1%; last 0.2%)
- Spain’s June CPI +0.3% month-over-month, as expected; +0.1% year-over-year, as expected
Closing Prices
- UK’s FTSE: + 0.2%
- Germany’s DAX: + 0.3%
- France’s CAC: + 0.7%
- Spain’s IBEX: + 0.3%
- Portugal’s PSI: -0.6%
- Italy’s MIB Index: -0.3%
- Irish Ovrl Index: + 0.5%
- Greece ASE General Index: CLOSED
Macroeconomic Data
Economic Data
from Briefing.com
- Retail Sales : -0.3% vs 0.3% (Prior 1.0% - Down)
- Retail Sales ex-auto : -0.1% vs 0.5% (Prior 1.1% - Up)
- Export Prices ex-agri : -0.1% (Prior 0.7%)
- Import Prices ex-oil : -0.2% (Prior 0.0%)
- Business Inventories : 0.3% vs 0.2% (Prior 0.4%)
RETAIL SALES
Highlights
- Retail sales declined 0.3% in June after increasing a downwardly revised 1.0% (from 1.2%) in May. The Briefing.com Consensus expected retail sales to increase 0.3%.
- Excluding motor vehicles, retail sales declined 0.1% in June after increasing a downwardly revised 0.8% (from 1.0%) in May. The consensus expected these sales to increase 0.5%.
Key Factors
- The motor vehicle manufacturers reported that unit sales declined to 17.2 mln SAAR in June from 17.8 mln SAAR in May. As expected, that translated into a sizable 1.1% decline in sales at motor vehicles and parts dealers.
- The strong retail sales gains from May came from a combination of accelerated income growth and a reduction in the personal savings rate.
- The June employment report was weak. Nonfarm payroll growth was modest, but wages and hours worked were flat. That left aggregate income levels up only 0.2%.
- That gain should have been enough to keep sales, excluding autos, in positive territory, assuming consumers were willing to keep their personal savings rate at May’s reduced levels.
- Unfortunately, that didn’t happen. Consumers cut back on spending in June, which likely boosted their savings rate back toward April levels.
- The details of the report were extremely weak.
- Core sales, which exclude the motor vehicle dealers, gasoline stations, and building material and supply stores, declined 0.1% in June after increasing 0.6% in May. These sales closely follow the goods component in GDP, and imply weaker-than-anticipated second quarter consumption growth.
- Sales declined at restaurants (-0.2%), grocery stores (-0.2%), nonstore retailers (-0.4%), department stores (-0.6%), clothing stores (-1.5%), and furniture stores (-1.6%).
- The one bright spot was electronics and appliance stores, where sales increased 1.0% in June after increasing 0.2% in May.
Big Picture
- The May decline in the personal savings rate looks more like a one time event than a change in trends.
BUSINESS INVENTORIES
Highlights
- Business inventories increased 0.3% in May after increasing an unrevised 0.4% in April. The Briefing.com Consensus expected business inventories to increase 0.2%.
Key Factors
- The inventory changes from manufacturers (0.0%) and merchant wholesalers (0.8%) were known prior to the release. The only new information was that retailer inventories were flat in May after increasing 0.6% in April.
- Inventory declines from motor vehicle and parts retailers (-0.2%) and furniture and appliances retailers (-0.3%) were offset by increases from general merchandise stores (0.5%) and building material and supply stores (0.2%).
- Total business sales increased 0.4% in May after increasing 0.5% in April. Most of the gain was the result of a 1.1% increase in retailer sales.
- The inventory-to-sales ratio remained at 1.36 in May for a third consecutive month.
Big Picture
- Business inventories include wholesale inventories, manufacturing inventories, and retail inventories. Inventories are a component of GDP, and thus are of interest to economists, but the financial markets don't pay much attention to this release. Over the long term, the inventory-to-sales ratio has been declining, due to improving techniques for inventory management.
Market Internals
NYSE:
Lower Volumes than the day before – 696.4M vs 753.3M
Advancers outpaced Decliners (adv/dec): 1951 / 1090
New Highs outpaced New Lows (highs/lows): 109 / 43
NASDAQ:
Higher Volumes than the day before – 1673.6M vs 1660.5M
Advancers outpaced Decliners (adv/dec): 1782 / 1041
New Highs outpaced New Lows (highs/lows): 134 / 39
VOLATILITY S&P500 (VIX)
13.37 -0.53 (-3.81%)
Technical Updates
18,053.58 +75.90 (+0.42%)
Volume: 76,744,768 (below average of 95,134,378)
Range: 17,956.17 - 18,072.82
Range: 17,956.17 - 18,072.82
5,104.89 +33.38 (+0.66%)
Volume: 384.1M (below average of 435,911,547)
Volume: 384.1M (below average of 435,911,547)
Range: 5,075.12 - 5,116.52
2,108.95 +9.35 (+0.45%)
Volume: 501,243,000 (below average of 520,772,569)
Range: 2,098.18 - 2,111.98
DOW met a resistance at 18,060 level while it is sitting above the 50MA. NASDAQ tried to break above its resistance at around 5,100 level and close slightly under for the day. S&P is approaching its previous ascending channel and I reckon there is a resistance at 2114.50 region. Likewise for S&P, it is also sitting above its 50MA. MACD indicator is reflecting a rise in bullish momentum for all 3 indices but I think they are likely to face more resistance going forward. The upper bound of the trading range would be a key level to look at.
Commodities
Closing Commodities: WTI Oil Recovers Losses, Closes Above $53/BarrelCommodities
- Crude oil prices were volatile following the Iran nuclear agreement deal
- Ultimately, Aug crude oil closed +$0.88 to $53.06/barrel.
- Natural gas futures rallied this morning, it appeared on hot weather forecasts
- Aug nat gas finished the day -$0.02 at $2.84/MMBtu
- AUg gold fell $2.20 today to $1153.40/oz, while Sept silver lost $0.13 to $15.32/oz
- Copper ended unchanged at $2.54/lb
Energy
- August crude oil futures rose $0.88 to $53.06/barrel
- August natural gas closed $0.02 lower at $2.84/MMBtu
- RBOB Gasoline closed $0.01 lower at $1.93/gallon
- Heating oil futures closed $0.01 higher at $1.73/gallon
Agriculture
- September corn closed $0.13 lower at $4.28/bushel
- September wheat closed $0.05 lower at $5.71/bushel
- November soybeans closed $0.03 lower to $10.25/bushel
- Sugar #11 closed 0.08 cents higher to 12.64 cents/lb
Metals
- August gold ended today’s session $2.20 lower at $1153.40/oz
- September silver closed $0.13 lower at $15.32/oz
- September copper closed flat at $2.54/lb
Currencies
- Bank of England Governor Mark Carney said that "The point at which interest rates may begin to rise is moving closer given the performance of the economy", and this has appeared to put a bid in the pound as investors move forward their liftoff date estimates
- GBP/USD: +0.91% to $1.5629
- The greenback declined against all of the majors. While the initial reaction to the negative June Retail Sales report was to drop the U.S. Dollar Index 40 ticks, the index rallied back over the next 90 minutes and is currently seeing only a modest loss
- U.S. Dollar Index: -0.20% to 96.66
- EUR/USD: +0.05% to $1.1008
- The single currency has had a surprisingly muted reaction in response to Sunday's deal between Greece and its official creditors
- USD/JPY: -0.16% to 123.34
Bonds
- U.S. Treasuries of all maturities rallied today, bolstered by a surprise decline in Retail Sales for June. The Greek Parliament will vote tomorrow on the measures that Greek Prime Minister Alexis Tsipras agreed to implement on Sunday
- Yield Check:
- 2-yr: -4 bps to 0.64%
- 5-yr: -6 bps to 1.66%
- 10-yr: -5 bps to 2.40%
- 30-yr: -4 bps to 3.20%
- News:
- June Retail Sales declined 0.3% versus the Briefing.com consensus of +0.3%. The reading for May was +1.2%
- Retail Sales excluding automobile sales fell 0.1% versus the Briefing.com consensus of +0.5%
- Core sales, which exclude the motor vehicle dealers, gasoline stations, and building material and supply stores, declined 0.1% in June after increasing 0.6% in May. These sales closely follow the goods component in GDP, and imply weaker-than-anticipated second quarter consumption growth
- June Export Prices excluding agricultural products fell 0.1% versus 0.7% growth in May
- June Import Prices excluding oil dropped 0.2% versus no change in May
- Business Inventories grew 0.3% in May, more than the Briefing.com consensus of +0.2% but less than the 0.4% growth in April
- A poll of Greek voters showed that 70% of them wanted Parliament to approve Sunday's agreement between their president, Alexis Tsipras, and Greece's creditors
- An IMF report leaked to the press showed that the institution believes that Greece's debt burden is unsustainable, calling into question its ability to participate in a third bailout
- June Retail Sales declined 0.3% versus the Briefing.com consensus of +0.3%. The reading for May was +1.2%
- Commodities:
- WTI crude: +1.26% to $52.86/bbl.
- Crude oil rallied despite a landmark deal between Iran and the United States which could result in more global supply
- Gold: -0.09% to $1,154.40/troy oz.
- Copper: -0.14% to $2.541/lb.
- WTI crude: +1.26% to $52.86/bbl.
- Currencies:
- EUR/USD: +0.02% to $1.1005
- USD/JPY: -0.13% to 123.38
- Data out Wednesday:
- MBA Mortgage Index for the week ending 7/11 (07:00 ET)
- June PPI and Core PPI (08:30 ET)
- July Empire Manufacturing (08:30ET)
- June Industrial Production and Capacity Utilization (09:15 ET)
- Crude Inventories for the week ending 7/11 (10:30 ET)
- July Beige Book (14:00 ET)
- Fed Speakers:
- Fed Chair Yellen (FOMC voter) delivers semi-annual testimony before the House Financial Services Committee (10:00 ET)
- San Francisco Fed President Williams (FOMC voter) speaks on the economic outlook (15:00 ET)
Treasury Yields:
- 2 Year Note 0.66% -0.03
- 5 Year Note 1.67% -0.04
- 10 Year Note 2.41% -0.03
- 30 Year Bond 3.20% -0.01
2/30 Spread: 254 bps ( +2 ) … 2/10 Spread: 175 bps ( UNCH )
Preview for Wednesday 15 July, 2015
Economic Data
Wednesday (15 July) :
- 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
Earnings Highlights
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
BMO - ASML BAC BLK DAL PNC USB
During Mkt Hours - WABC
AMC - CNS EWBC HGR INTC KMI LVS NFLX UMPQ WFPI WTFC
Summary
Market is slowing down its bullish pace, and I think uncertainty is creeping back as we are seeing quite a number of economic data and Fed's Beige Book tomorrow. I think we might still see some upside but it is likely to be limited. As I mentioned above in technical, market is approaching the upper bound of the trading range and that is likely to pose some resistance to the market. I suppose we are going to see more profit taking along the way.
At this point of time I am writing this, China's Q2 GDP YoY growth is reported to be 7% beating estimate and grew by 1.7% QoQ. I believe that is going to receive attention from the market but I remain skeptical about the growth in China. Meanwhile watch out for the volatility on Wednesday.
Market is slowing down its bullish pace, and I think uncertainty is creeping back as we are seeing quite a number of economic data and Fed's Beige Book tomorrow. I think we might still see some upside but it is likely to be limited. As I mentioned above in technical, market is approaching the upper bound of the trading range and that is likely to pose some resistance to the market. I suppose we are going to see more profit taking along the way.
At this point of time I am writing this, China's Q2 GDP YoY growth is reported to be 7% beating estimate and grew by 1.7% QoQ. I believe that is going to receive attention from the market but I remain skeptical about the growth in China. Meanwhile watch out for the volatility on Wednesday.
Direction for Wednesday 15 July, 2015: Down
2015 Daily Directional Accuracy: 65/108 (60.19%)
2015 Weekly Directional Accuracy: 16/25 (64.00%)
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