Dow +93.33 at 17776.91, Nasdaq +5.52 at 4997.46, S&P +12.58 at 2081.34
That was a great comeback in the market. And again, volatile. Market was purely selling off in the first 2 hours before we see a strong pullback that brought the market back up to the positive region. One question for the comeback is what factor/news triggered that rally? Also do not get to optimistic about the market yet as I think the market is still getting defensive. Nonetheless, that was really some recovery there.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
Crude oil suffered similar pattern as we saw a V shape in Tuesday session. Copper remains bearish due to the lack of growth from China and the sell-off in Shanghai Composite lately just make it worse. Greece remains a wild card in the market and watch out for the "Buy the rumours, Sell the news" prophecy.
Market Summary
Industry Watch
Strong: Consumer Staples, Energy, Industrials, Telecom Services, Utilities
Weak: Financials, Materials, Technology
Other Market Moving Factor:
- Euro slides to one-month low against the dollar amid uncertainty surrounding Greece
- Selling in China continues with roughly 23% of A-share listings halted over the past seven days
Equity indices struggled at the start amid rising macroeconomic uncertainty overseas. Greece was in the headlines this morning, but today's Eurogroup meeting ended rather quickly with Chief Jeroen Dijsselbloem saying the Eurogroup expects Greece to submit a formal request for access to the European Stability Mechanism tomorrow. To that point, the Financial Times reported during the afternoon that Greece has indeed sent an ESM access request to the European Central Bank.
As for China, the Shanghai Composite lost 1.3% in the Tuesday session despite Monday's CNY1.80 trillion liquidity injection from the People's Bank of China and other emergency measures undertaken by the government. As a result nearly 25% of A-share listings have been halted over the past seven days as companies scramble to protect their market values.
Investors appeared to be concerned with the overseas uncertainty at the start of the session, but the heavy selling abated just as markets across Europe closed for the day. The S&P 500 then returned above its 200-day moving average (2,055) and continued its charge into positive territory. It is worth noting that afternoon action featured a report suggesting a short-term debt deal could be offered to Greece, but the report was attributed to an unnamed official, which should be met with caution.
Cyclical sectors displayed relative weakness at the start, but just about every growth-sensitive group erased its decline by the close. Top-weighted financials (+0.2%) and technology (+0.2%) spent the bulk of the session at the bottom of the leaderboard, but dip-buyers helped the two sectors erase their losses. That being said, high-beta chipmakers finished among the laggards with the PHLX Semiconductor Index shedding 0.3% after Advanced Micro Devices (AMD 2.09, -0.38) lowered its Q2 revenue guidance due to weaker than expected PC demand. For its part, AMD surrendered 15.4%.
Elsewhere among cyclical groups, the materials sector (-0.3%) spent the day behind other sectors while another commodity-related group—energy (+0.9%)—settled among the leaders. The energy sector outperformed while crude oil struggled to stay near its flat line after yesterday's 7.8% dive. WTI crude settled lower by 0.4% at $52.33/bbl, but climbed into the green in electronic trading.
Also of note, industrials (+0.8%) played a significant role in the turnaround with transport stocks leading the way. The Dow Jones Transportation Average jumped 1.1% with all but three names ending in the green. Kansas City Southern (KSU 94.40, +2.75) spiked 3.0% after being upgraded to ‘Buy' at UBS while Con-way (CNW 36.87, -0.16) was the weakest DJTA component, falling 0.4%.
Over on the countercyclical side, health care (+0.4%) and telecom services (+0.5%) ended with modest gains while consumer staples (+2.0%) and utilities (+2.5%) outperformed throughout the session.
Interestingly, the rate-sensitive utilities sector climbed into the afternoon even as selling in the Treasury market pressured the 10-yr note from its morning high. Still, the benchmark note ended in the green with its yield down three basis points at 2.26%.
Today's trading volume was heavier than usual with more than 950 million shares changing hands at the NYSE floor.
Economic data released this morning included Trade Balance and JOLTS:
- The U.S. trade deficit increased by $1.20 billion in May from April's downwardly revised $40.70 billion (from $40.90 billion) to $41.90 billion while the Briefing.com consensus expected an increase to $42.50 billion
- The goods deficit increased $1.20 billion in May from April's $60.30 billion to $61.50 billion while the services surplus was virtually unchanged at $19.60 billion
- The May Job Openings and Labor Turnover Survey showed that job openings increased to 5.376 million from a revised rate of 5.109 million (from 5.367 million)
Global Market
Asian Markets Close: Japan’s Nikkei +1.3%; Hong Kong’s Hang Seng -1.0%; China’s Shanghai Composite -1.3%
The Asian markets finished Tuesday mixed. Chinese markets reverted back into sell mode, with the Shanghai composite dropping a little over 1% last night. Sellers took charge from the opening bell, and even some late day buying could not pull the index out from under water. This comes after a PBOC CNY1.8 trln liquidity injection. With the recent slide, there are reports that over 20% of the A-share listed equities have had trading halted in an effort to protect the market cap of the companies. The Nikkei was 1% better on the day, taking the baton from the late day strength on Wall Street. The yen was stable overnight, staying within a tight 39 pip range against the dollar. In Australia, the RBA left its benchmark rates unchanged at 2.0%
Economic Data
- Australia
- Jun AIG Performance of Construction Index: 46.4 vs 47.8 in May
- ANZ Roy Morgan Weekly Consumer Confidence Index: 111.0 vs 116.3 last week
Equity Markets
- Japan’s Nikkei rose 1.3% on broad-based strength, notably in yesterday’s laggards with IT and Financials outpacing the market to the tune of 1.5% each. Utilities were among the notable weak sectors, down ~1%.
- Hong Kong’s Hang Seng fell 1.0% today. Galaxy Entertainment continued to give back some of last week’s gains seen late last week, falling another 2.3% today. China Unicom was also among the notable losers, shedding 2.8%.
- China’s Shanghai Composite could not sustain yesterday’s positive day, falling 1.3% for the session. Financials continued to see positive gains, with of China Constr Bank gaining 10%, China Everbright Bank adding 9.4% and China Minsheng Banking rising another 8.8% after its 6.4% gain yesterday.
- India’s Sensex settled down 0.1% on the day. Out of the 30 stocks in the index, 21 closed in the red. Coal India was one of the top gainers, finishing +2.2%. On the flip side, Vedanta and NTPC both lagged the index, trading down ~3% each.
FX
- USD/CNY Unch at 6.2099
- USD/INR -0.1% at 63.459
- USD/JPY -0.1% at 122.40
EUROPE
Major European indices trade lower across the board with France’s CAC (-0.7%) trailing its peers. Also of note, the euro has dropped to a fresh one-month low amid the lack of new developments between Greece and its European creditors. The single currency is lower by 1.2% against the dollar, trading near 1.0930. On a related note, safe-haven demand has sent Germany’s 10-yr bund to a session high with its yield down nine basis points at 0.67%.
- Germany’s May Industrial Production 0.0% month-over-month (expected 0.1%; prior 0.6%)
- France’s trade deficit widened to EUR4.00 billion from EUR3.30 billion (expected deficit of EUR3.60 billion)
- UK’s May Industrial Production +0.4% month-over-month (consensus -0.2%; last 0.3%); +2.1% year-over-year (expected 1.6%; previous 1.2%)
- Swiss June Unemployment Rate held at 3.3%, as expected
Closing Prices
- UK’s FTSE: -1.6%
- Germany’s DAX: -2.0%
- France’s CAC: -2.3%
- Spain’s IBEX: -2.0%
- Portugal’s PSI: -2.2%
- Italy’s MIB Index: -3.0%
- Irish Ovrl Index: -0.9%
- Greece ASE General Index: CLOSED
Macroeconomic Data
Economic Data
from Briefing.com
- Trade Balance : -$41.9B vs -$42.0B (Prior -$40.7B - Down)
- JOLTS - Jobs Openings : 5.363M (Prior 5.334M - Down)
TRADE BALANCE
Highlights
- The U.S. trade deficit increased by $1.2 bln in May, from a downwardly revised $40.7 bln (from $40.9 bln) in April to $41.9 bln. The Briefing.com Consensus expected the trade deficit to increase to $42.5 bln.
Key Factors
- There wasn't anything unusual in the data. A port strike on the west coast temporarily caused a large bout of volatility, and the trade deficit swung up from $37.2 bln in February to $50.6 bln in March and then came back down to $40.7 bln in the April. The trade deficit in May was more in-line with trends prior to the strike, when the deficit averaged a little more than $42.0 bln during the 12 months ending in January.
- The goods deficit increased $1.2 bln in May, from $60.3 bln in April to $61.5 bln. The services surplus was virtually unchanged at $19.6 bln.
- Exports declined by $1.5 bln to $188.6 bln in May from $190.1 bln in April. Strong sales of fuel oil ($0.5 bln) and other petroleum products ($0.5 bln) helped drive a $0.8 bln increase in industrial supplies and materials exports. Those gains, however, were more than offset by a $2.4 bln decline in capital goods excluding autos. Big drops in civilian aircraft (-$1.2 bln), industrial machines (-$0.4 bln), and industrial engines (-$0.4 bln) led the decline.
- Imports declined by $0.3 bln, from $230.8 bln in April to $230.5 bln in May. A large portion of the decline was the result of reduced fracking activities as drilling and oilfield equipment imports fell by $0.8 bln. Declines were also reported in industrial supplies and materials (-$0.6 bln) and foodstuffs (-$0.4 bln). Motor vehicle imports increased by $0.9 bln.
- The net petroleum trade deficit continued to decline. It fell from $6.8 bln in April to $5.8 bln in May. That deficit was more than two-and-a-half times its current level ($15.2 bln) just one year ago.
Big Picture
- So far the stronger dollar does not seem to have played a major role in boosting import demand.
Market Internals
NYSE:
Higher Volumes than the day before – 992.3M vs 936.4M
Advancers outpaced Decliners (adv/dec): 1851 / 1251
New Lows outpaced New Highs (highs/lows): 44 / 296
NASDAQ:
Higher Volumes than the day before – 2129.2M vs 1737.9M
Decliners outpaced Advancers (adv/dec): 1167 / 1656
New Lows outpaced New Highs (highs/lows): 50 / 192
VOLATILITY S&P500 (VIX)
16.09 -0.92 (-5.41%)
Technical Updates
17,776.91 +93.33 (+0.53%)
Volume: 105,838,256 (above average of 95,830,028)
Range: 17,465.68 - 17,793.45
Range: 17,465.68 - 17,793.45
4,997.46 +5.52 (+0.11%)
Volume: 495,437,406 (above average of 432,944,348)
Volume: 495,437,406 (above average of 432,944,348)
Range: 4,902.21 - 5,002.00
2,081.34 +12.58 (+0.61%)
Volume: 624,382,000 (above average of 520,009,015)
Range: 2,044.02 - 2,083.74
DOW is able to close above its 200MA and formed another hammer candlestick. However it has a resistance at around 17,780 level. NASDAQ also did not break out of the channel and met a resistance at 5,000 region. S&P still continues to stay above its support level at 2,070 and likewise it is facing a resistance from the previous ascending trend line. The indices are still testing whether they are able to overcome their respective resistance levels. Next resistance for DOW is likely to be at 17,884 region, 5,010 for NASDAQ and 2,095 for S&P.
Commodities
Closing Commodities: WTI Crude Oil Climbs Into Positive Territory In After Hours TradeCommodities
- In afternoon trade, the dollar index sold off sharply, which gave a boost to commodities
- WTI oil futures was a big mover and erased all of its gains. It pit trading, Aug crude oil closed $0.13 lower to $52.35/barrel
- However, in electronic trade, WTI oil continued to extend higher and its now at $52.92/barrel, up 0.7%
- Aug natural gas lost $0.04 to $2.72/MMBtu
- Copper recovered some, but still closed $0.09 lower at $2.45/lb
- Aug gold ended $21.30 lower to $1151.90/oz, while Sept silver fell a sharp $0.81 (or -5.1%) to $14.96/oz.
Energy
- August crude oil futures fell -$0.13 to $52.35/barrel
- August natural gas closed $0.04 lower at $2.72/MMBtu
- RBOB Gasoline closed $0.03 higher at $1.95/gallon
- Heating oil futures closed unchanged at $1.71/gallon
Agriculture
- September corn closed $0.04 lower at $4.24/bushel
- September wheat closed $0.11 lower at $5.84/bushel
- November soybeans closed $0.29 lower to $9.86/bushel
- Sugar #11 closed 0.15 cents lower to 12.33 cents/lb
Metals
- August gold ended today’s session $21.30 lower at $1151.90/oz
- September silver closed $0.81 lower at $14.96/oz
- September copper closed $0.09 lower at $2.45/lb
Currencies
- The U.S. Dollar Index jumped 0.62% to 96.90 today after the euro (which makes up about 60% of the index) sold off on sharply lower European yields
- Fears of Grexit have increased as the official creditors seem highly opposed to debt forgiveness for Greece
- Greece owes the ECB 3.5 bln euro on July 20th
- German Industrial Production was flat m/m in May versus expectations for growth and a 0.6% jump in April
- GBP/USD: -1.00% to 1.5448
- Manufacturing Production in the U.K. fell 0.6% m/m in May versus a 0.4% decline April. The report missed expectations and sent the 10-year Gilt yield down a quick 5 bps
- USD/JPY: -0.22% to 122.36
- USD/CHF: +0.55% to 0.9476
- The Swiss unemployment rate for June matched expectations and the prior reading at 3.3%
- USD/CAD: +0.70% to 1.2741
- AUD/USD: -0.79% to 0.7430
- The Reserve Bank of Australia held its cash rate steady at 2.00%
- Governor Stevens said that the Aussie had more room to fall against a broad basket of currencies, despite its depreciation against the greenback
- NZD/USD: -0.34% to 0.6651
Bonds
- Treasury coupon securities finished the session in positive territory despite equities reversing early losses to end green
- Yield Check:
- 2-yr: -2 bps to 0.57%
- 5-yr: -2 bps to 1.54%
- 10-yr: -3 bps to 2.26%
- 30-yr: -4 bps to 3.04%
- News:
- The U.S. trade deficit widened less than expected to 41.9 bln in May from a downwardly revised $40.7 bln in April. The Briefing.com consensus estimate was -$42.5 bln
- JOLTS rose to 5.363M in May from a downwardly revised 5.334M in April
- The $24 billion 3-year note auction was met with soft demand:
- High yield: 0.932%
- Bid-to-cover: 3.16
- Indirect bid: 47.7%
- Direct bid: 13.9%
- Greece is due to submit a proposal to the Eurogroup tomorrow
- The package is said to include a short-term funding agreement and a longer-term package
- According to Kathimerini, 16 out of 18 eurozone finance ministers do not want Greece in the bloc
- Data out Wednesday:
- MBA Mortgage Index for the week ending 7/4 (07:00 ET)
- Crude Inventories for the week ending 7/4 (10:30 ET)
- FOMC Minutes for the June 17th meeting (14:00 ET)
- Treasury Auction:
- $21 billion 10-year note auction (reopening) (results at 13:00 ET)
- Fed Speaker:
- San Francisco Fed President John Williams (FOMC voter) speaks on the economic outlook (14:00 ET)
Treasury Yields:
- 2 Year Note 0.58% -0.02
- 5 Year Note 1.55% -0.01
- 10 Year Note 2.27% -0.03
- 30 Year Bond 3.04% -0.04
2/30 Spread: 246 bps ( -2 ) … 2/10 Spread: 169 bps ( -1 )
Preview for Wednesday 8 July, 2015
Economic Data
Wednesday (8 July) :
- MBA Mortgage Index : (Prior -4.7%)
- Crude Inventories : (Prior 2.386M)
- FOMC Minutes
Earnings Highlights
Wednesday (8 July) :
BMO - None
AMC - AA HGR WDFC
BMO - None
AMC - AA HGR WDFC
Summary
I think the market is back to the neutral state akin to last Thursday. This is reflecting the uncertainty in the market and as the market remains defensive, I am not being too optimistic.
Next we are going to see the FOMC minutes releasing on Wednesday. Most probably the traders were taking positions off ahead of the minutes and so we saw the strong bounce in the market. Being a market moving factor, this is going to give the market a catalyst.
As China and Greece remains to be unknown factors, upside is more likely to be limited.
I think the market is back to the neutral state akin to last Thursday. This is reflecting the uncertainty in the market and as the market remains defensive, I am not being too optimistic.
Next we are going to see the FOMC minutes releasing on Wednesday. Most probably the traders were taking positions off ahead of the minutes and so we saw the strong bounce in the market. Being a market moving factor, this is going to give the market a catalyst.
As China and Greece remains to be unknown factors, upside is more likely to be limited.
Direction for Wednesday 8 July, 2015: Down
2015 Daily Directional Accuracy: 62/103 (60.19%)
2015 Weekly Directional Accuracy: 15/24 (62.50%)
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