Dow -181.12 at 17919.29, Nasdaq -10.74 at 5208.12, S&P -9.07 at 2119.21
Nothing much significant in the market besides the volatility notably in the NASDAQ. Market went into more profit taking and I saw the DOW tank mainly due to the downward pressure from IBM and United Technologies. Without the influence from the economic data, it is likely to see more correction in the market after the strong rally last week.The bulls are running out of breath as we saw limited upside and more on profit taking. I suppose we should see more selling as the bullish momentum diminishes. Technology stock remains upbeat and we are going to see earnings release from Apple and Microsoft tomorrow. That could affect the market with the volatility as well.
I still hold my stance that we should see some downside or a temporary correction in the market for the short term before the market decides on where to go next, maybe another rally to the upside?Direction for Tuesday 21 July, 2015: Down
Asia and Europe remain weak and that is likely to drag on the US market as well.
Market Summary
Industry Watch
Strong: Energy
Weak: Health Care, Industrials, Technology, Telecom Services, Utilities
Other Market Moving Factor:
- IBM (IBM) reports better than expected earnings, but shows 13th consecutive quarterly decline in revenue
- Apple (AAPL) set to report earnings after the closing bell
- Overseas markets subdued
The price-weighted Dow Jones Industrial Average paced the retreat with IBM (IBM 163.07, -10.15) and United Technologies (UTX 102.67, -7.81) largely responsible for the underperformance. The second largest index member—IBM—lost 5.9% following its bottom-line beat that was aided by a lower tax rate while the company's year-over-year revenue showed the 13th consecutive quarterly decline.
Separately, United Technologies fell 7.1% after below-consensus revenue and lowered earnings guidance for the year overshadowed an earnings beat. In addition to pressuring the Dow, shares of UTX weighed on the industrial sector (-1.1%), which ended behind the remaining cyclical groups. Interestingly, the sector finished among the laggards even though transport stocks displayed relative strength, sending the Dow Jones Transportation Average higher by 0.7%.
Elsewhere among cyclical groups, the energy sector (+0.1%) tried to resist the market-wide pressure, but could only eke out a slim gain while crude oil rose 0.9% to $50.87/bbl. Also of note, the top-weighted technology sector (-0.5%) settled just behind the broader market.
Just like the energy sector, high-beta chipmakers surrendered the bulk of their gains during afternoon action with the PHLX Semiconductor Index narrowing its advance to 0.1%. As for large cap tech components, Apple (AAPL 130.71, -1.36) lost 1.0% ahead of its earnings report. Investors will be most interested in iPhone sales and the pace of sales growth, but the report should also provide an early look at Apple Watch sales. Apple is the top-weighted stock in the market-cap weighted S&P 500 (3.98%), the top-weighted stock in the market-cap weighted Nasdaq 100 (13.9%), and the fifth highest-priced stock in the price-weighted Dow Jones Industrial Average.
Over on the countercyclical side, health care (-0.4%) and consumer staples (-0.3%) settled near the broader market while telecom services (-1.7%) and utilities (-1.0%) underperformed throughout the session. The telecom sector ended at the bottom of the leaderboard as Verizon (VZ 46.97, -1.13) tumbled 2.4% despite reporting a bottom-line beat.
Treasuries made a brief appearance in the red this morning, but they rallied as stocks declined with the 10-yr yield falling three basis points to 2.34%.
Investors did not receive any economic data today, but tomorrow will include the release of the weekly MBA Mortgage Index at 7:00 ET, followed by the FHFA Housing Price Index for May, which will be reported at 9:00 ET. The day's data will be topped off with the Existing Home Sales report for June, which will cross at 10:00 ET (Briefing.com consensus 5.40 million).
Global Market
Asian Markets Close: Japan’s Nikkei +0.9%; Hong Kong’s Hang Seng +0.5%; China’s Shanghai Composite +0.6%
Most of the widely-followed markets in the Asia-Pacific region registered modest gains on Tuesday, drawing support from Wall Street’s steady climb and some relative calm in the Chinese stock market. The Nikkei (+0.9%) led all gainers, jumping smartly after re-opening from Monday’s holiday.
Economic data
- Japan
- July Tankan Index 14 (prior 14) o Leading Index 106.2 (expected 106.2; prior 106.2)
- Hong Kong
- June CPI +3.1% year-over-year (expected +3.10%; prior +3.00%)
Equity Markets
- Japan’s Nikkei increased 0.9% and ended close to its high for the session. Gains were paced by the consumer cyclical (+1.8%) and consumer non-cyclical (+1.0%) sectors. Individual standouts included Toshiba (+6.1%), which rose sharply despite being found to have overstated its profit over several years, Sharp Corp (+6.0%), and Mitsui OSK Lines (+4.4%). JFE Holdings (-2.6%) and JX Holdings (-2.6%) led decliners. Out of the 225 index members, 157 ended higher, 63 finished lower, and 5 were unchanged.
- Hong Kong’s Hang Seng increased 0.5%, aided by a jump in the communications (+2.2%) and consumer non-cyclical (+1.0%) sectors. China Unicom Hong Kong (+5.9%), China Mobile (+4.1%), and China Resources Land (+3.2%) led advancing stocks while Cheung Kong Property Holdings (-1.9%), China Shenhua Energy (-1.8%), and Galaxy Entertainment Group (-1.7%) paced the decliners. Out of the 50 index members, 28 ended higher, 20 finished lower, and 2 were unchanged.
- China’s Shanghai Composite increased 0.6% in a relatively steady manner that resulted in the Composite scoring its fourth consecutive gain. It has climbed 5.6% during that winning streak. The CSI 300 Index, which rose 0.1%, was led by the basic materials (+2.1%) and communications (+1.3%) sectors.
- India’s Sensex declined 0.8% and ended near its lows for the day as selling interest picked up in the last 90 minutes of trading. The losses were led by the consumer non-cyclical (-4.1%) and basic materials (-3.2%) sectors. Sun Pharmaceutical (-15.1%), Vedanta (-4.8%), and Lupin (-4.7%) were the worst-performing issues while Infosys (+11.1%), Bharti Airtel (+3.7%), and Wipro (+1.4%) topped the small list of winners. Out of the 30 index members, 7 ended higher and 23 finished lower.
- Australia’s S&P/ASX 200 increased 0.4%, led by strength in the information technology (+1.2%), health care (+0.8%), and consumer staples (+0.7%) sectors, which offset weakness in some of the gold producers. Minutes from the RBA meeting divulged the appropriate ness of keeping rates at a record low and pointed to the likelihood of steady policy for the time being. Out of the 200 index members, 127 ended higher, 63 finished lower, and 10 were unchanged.
- Regional advancers: South Korea +0.5%, Taiwan +0.3%, Malaysia +0.7%, Philippines +1.2%
- Regional decliners: Indonesia -0.7%, Singapore -0.1%, Thailand -1.2%, Vietnam -0.6%
FX
- USD/CNY unch at 6.2095
- USD/INR -0.1% at 63.5775
- USD/JPY +0.1% at 124.37
EUROPE
Major European indices trade near their flat lines as the sleepy session enters its second half. The Greek parliament is expected to vote on the second omnibus reform bill tomorrow with bailout negotiations expected to begin after the successful passage of the reform package.
- UK’s June Public Sector Net Borrowing GBP8.58 billion (expected GBP8.60 billion; prior GBP8.35 billion)
- Swiss trade surplus expanded to CHF3.58 billion from CHF3.41 billion (expected surplus of CHF2.78 billion)
Closing Prices
- UK’s FTSE: -0.3%
- Germany’s DAX: -1.1%
- France’s CAC: -0.7%
- Spain’s IBEX: -0.8%
- Portugal’s PSI: -0.6%
- Italy’s MIB Index: -1.3%
- Irish Ovrl Index: -0.7%
- Greece ASE General Index: CLOSED
Macroeconomic Data
Economic Data
from Briefing.com
- No Economic Data
Market Internals
NYSE:
Higher Volumes than the day before – 780.6M vs 740.0M
Decliners outpaced Advancers (adv/dec): 1223 / 1856
New Lows outpaced New Highs (highs/lows): 69 / 202
NASDAQ:
Lower Volumes than the day before – 1741.8M vs 1787.4M
Decliners outpaced Advancers (adv/dec): 1153 / 1650
New Lows outpaced New Highs (highs/lows): 92 / 129
VOLATILITY S&P500 (VIX)
12.22 -0.03 (-0.24%)
Technical Updates
17,919.29 -181.12 (-1.00%)
Volume: 100,172,053 (above average of 93,313,539)
Range: 17,868.34 - 18,096.67
Range: 17,868.34 - 18,096.67
5,208.12 -10.74 (-0.21%)
Volume: 399.8M (below average of 434,399,208)
Volume: 399.8M (below average of 434,399,208)
Range: 5,196.30 - 5,229.00
2,119.21 -9.07 (-0.43%)
Volume: 541.9M (above average of 521,243,516)
Range: 2,115.40 - 2,128.49
DOW went down to its 20MA after rejected by the descending trend line. Next support level is likely to be 17,780 and the 200MA is not far away. NASDAQ seems to form a reversal pattern as it is on its way lower after it could not break higher from its ascending trend line the day before. It is possible for NASDAQ to test its support at maybe 5,180 and 5,165. Likewise for S&P, it is forming a reversal pattern and it is about to break lower of the lower bound of its channel and support level at around 2,120. Next support level for S&P is likely to be 2100-2110. I suppose we should see more downside this week.
Commodities
- The dollar index continued to remain weak today, which helped select commodities
- Gold was not one of them. The precious metals slid lower today and finished the day with a modest loss of $3.50, closing at $1103.30/oz
- However, in electronic trade, Aug gold fell below the $1100/oz
- Sept silver ended the day unchanged at $14.78/oz
- In other commodities, energy futures rose today, including oil, natural gas, heating oil and RBOB gasoline futures.
- Natural gas closed pit trading $0.05 higher at $2.88/MMBtu and remains near today’s high
- WTI crude oil, however, pulled back from today’s high, but finished $0.47 higher at $50.87/barrel
Energy
- September crude oil futures rose $0.47 to $50.87/barrel
- August natural gas closed $0.05 higher at $2.88/MMBtu
- RBOB Gasoline closed $0.01 lower at $1.92/gallon
- Heating oil futures closed $0.02 higher at $1.69/gallon
Agriculture
- September corn closed flat at $4.06/bushel
- September wheat closed $0.09 lower at $5.25/bushel
- November soybeans closed $0.03 higher to $10.05/bushel
- Sugar #11 closed 0.02 cents lower to 11.42 cents/lb
Metals
- August gold ended today’s session $3.50 lower at $1103.30/oz
- September silver closed flat at $14.78/oz
- September copper closed flat at $2.48/lb
Currencies
- The U.S. dollar lost ground against all major currencies but the pound today as Treasury yields declined, reducing the attraction of the greenback to currency traders
- U.S. Dollar Index: -0.73% to 97.31
- EUR/USD: +10.3% to $1.0943
- GBP/USD: -0.04% to $1.5561
- In the U.K., Public Sector Net Borrowing grew to a lower-than-expected 8.58 bln pounds in June from 8.35 bln in May
- USD/JPY: -0.32% to 123.90
- The Bank of Japan released the minutes of its June meeting but $/Yen hardly moved. The members of the board largely agreed that prices will rise in the long run although some members thought the central bank's QE program has already begun to generate inflation. Kiuchi continues to dissent and advocate a reduction in QE
- USD/CHF: -0.58% to 0.9579
- The Swiss Trade Surplus unexpectedly widened to 3.578 bln francs in June from 3.409 bln francs in May
- USD/CAD: -0.30% to 1.2960
- AUD/USD: +0.70% to 0.7424
- The Reserve Bank of Australia released the minutes from its most recent meeting:
- The members attributed the stability in the unemployment rate to slower population growth
- Further easing is dependent upon data
- The central bank said that the Aussie was likely to weaken further and this would be welcomed to enhance export growth
- The Reserve Bank of Australia released the minutes from its most recent meeting:
- NZD/USD: +$0.98% to 0.6639
Bonds
- U.S. government notes and bonds made meaningful gains today with the 5-year note leading the way higher
- Yield Check:
- 2-yr: -2 bps to 0.69%
- 5-yr: -3 bps to 1.67%
- 10-yr: -3 bps to 2.34%
- 30-yr: -2 bps to 3.08%
- News:
- After Monday's close, President Obama announced that he would nominate Kathryn Dominguez, an international economist at the University of Michigan, to be a governor on the Federal Reserve Board
- She will await a hearing before the Senate Banking Committee
- The Greek government left out a measure from a bill that will go to parliament tomorrow that would have increased incomes taxes on Greek farmers from 13% to 25%
- The increase is opposed by parties on both the right and the left, and passage could have resulted in a collapse of Prime Minister Alexis Tsipras's government
- The tax hike was part of Greek Prime Minister Alexis Tsipras's agreement with creditors and it unclear how they will respond
- After Monday's close, President Obama announced that he would nominate Kathryn Dominguez, an international economist at the University of Michigan, to be a governor on the Federal Reserve Board
- Commodities:
- WTI Crude: +0.71% to $50.80/bbl.
- Gold: -0.65% to $1,099.60/troy oz.
- Copper: -0.18% to $2.477/lb.
- Currencies:
- EUR/USD: +0.97% to $1.0936
- USD/JPY: -0.26% to 123.98
- Data out Wednesday:
- MBA Mortgage Index for the week ending 7/18 (07:00 ET)
- May FHFA Housing Price Index (09:00 ET)
- June Existing Home Sales (10:00 ET)
- Crude Inventories for the week ending 7/18 (10:30 ET)
Treasury Yields:
- 2 Year Note 0.71% UNCH
- 5 Year Note 1.69% -0.03
- 10 Year Note 2.35% -0.03
- 30 Year Bond 3.08% -0.02
2/30 Spread: 237 bps ( -2 ) … 2/10 Spread: 164 bps ( -3 )
Preview for Wednesday 22 July, 2015
Economic Data
Wednesday (22 July) :
- MBA Mortgage Index : (Prior -1.9%)
- FHFA Housing Price Index : (Prior 0.3%)
- Existing Home Sales : 5.40M (Prior 5.35M)
- Crude Inventories : (Prior -4.346M)
Earnings Highlights
Wednesday (22 July) :
BMO - ABT APH ANGI ACAT ARMH AN BEAV BA CHKP CKSW KO EMC EVR HTLD ITW IPG JAKK KNX LAD CLI HZO MKTX BABY NYCB NOR NTRS OC PII RDN SEIC SLGN SILC SIX STJ TEL TMO TUP UCBI WHR
AMC - EGHT AFOP AWH AXP AMP AF BGS BDN BRKL CAKE CRUS CLB CVA CVTI CCI CVBF CYS DFS DLB EGBN EFX FFIV FTK FTNT FBHS GGG GLF HGR HNI IBKC IEX INFN LVS LHO LOGI MLNX MKSI MOSY MSA NEM NFBK OII PLXS PLCM QCOM QDEL RJF SLM SNDK SGMO SCSS SLG SFS TCBI TXN TSCO TBI TYL UCTT URI VMI WFT XLNX
Summary
I don't think the selling is going to stop here, most probably we might continue to see more downside. Unless we have a catalyst that could bring the market back to rally mode, I believe market is more likely to correct for the time being.
On top of that, weak earnings report from Apple in the after-hour might set the tone for tomorrow market. Moving to crude oil, we have been seeing the oil price went down lately and hitting $50 level again which is a significant support. Tomorrow inventories report is quite likely to make or break the oil prices.
I don't think the selling is going to stop here, most probably we might continue to see more downside. Unless we have a catalyst that could bring the market back to rally mode, I believe market is more likely to correct for the time being.
On top of that, weak earnings report from Apple in the after-hour might set the tone for tomorrow market. Moving to crude oil, we have been seeing the oil price went down lately and hitting $50 level again which is a significant support. Tomorrow inventories report is quite likely to make or break the oil prices.
Direction for Wednesday 22 July, 2015: Down
2015 Daily Directional Accuracy: 69/113 (61.06%)
2015 Weekly Directional Accuracy: 16/26 (61.54%)
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