Dow -3.41 at 18050.17, Nasdaq -5.95 at 5098.94, S&P -1.55 at 2107.40
Market finished flat for the day after 3 days of rallies. Certainly the bulls are pretty much tired after pushing the market back up from the 200MA. The Fed is still keeping their eyes on raising interest rate by the end of the year, provided we see more growth in the US economy.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
Greece has finally agreed on the bailout terms in the parliament and China remains volatile after announcing a growth in Q2.
Market Summary
Industry Watch
Strong: Financials, Health Care, Technology
Weak: Consumer Discretionary, Energy, Materials, Telecom Services
Other Market Moving Factor:
- Fed Chair Janet Yellen testifies before House Financial Services Committee: reiterates the Fed’s intention to begin hiking rates in 2015 if economic conditions hold up
Equity indices started the day near their flat lines, seeing little reaction to a busy overnight session that featured the release of China's Q2 GDP (+7.0% year-over-year; consensus 6.9%) and news that the Bank of Japan lowered its GDP forecast for the fiscal year to 1.7% from 2.0%.
Stocks climbed out of the gate, but the S&P 500 could not extend too far above its flat line as most sectors displayed early losses; however, relative strength in financials (+0.8%), health care (+0.1%), and technology (+0.1%) kept the market in positive territory into the afternoon.
The financial sector held the lead throughout the session thanks to support from three large components. Specifically, Bank of America (BAC 17.68, +0.55) PNC (PNC 98.32, +0.82), and U.S. Bancorp (USB 45.53, +1.65) gained between 0.8% and 3.8% after reporting earnings. Bank of America and PNC reported better than expected results while U.S. Bancorp's report was in-line with estimates.
Unlike financials, the other two pockets of early strength could not hold gains into the afternoon. The health care sector ended right below its flat line, which masked relative strength in biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 390.76, +2.82) added 0.7% after being up as much as 2.3% in the early going. Still, the industry group finished ahead of the broader market thanks to a 7.0% spike in Celgene (CELG 131.39, +8.54) after the company raised its guidance and announced the acquisition of Receptos (RCPT 230.08, +22.90) for $232/share in cash.
The intraday strength in biotechnology kept the Nasdaq Composite in the lead, but the index slipped behind the S&P 500 during afternoon action. The top-weighted tech sector (+0.1%) held up relatively well thanks to a 1.0% gain in the shares of Apple (AAPL 126.82, +1.21), but high-beta chipmakers struggled with the PHLX Semiconductor Index falling 0.6%. Industry heavyweight—Intel (INTC 29.70, +0.05)—fared better than its counterparts, adding 0.2% ahead of its quarterly report.
Elsewhere, the energy sector (-1.6%) spent the day behind the remaining groups, dropping to lows in late afternoon action. The growth-sensitive group was pressured by crude oil, which fell 3.1% to $51.40/bbl.
In all likelihood, greenback strength was a headwind for oil as the Dollar Index (97.15, +0.50) climbed 0.5%. The index spiked above its overnight high after the release of Federal Reserve Chair Janet Yellen's prepared remarks to the House Financial Services Committee. The testimony was largely uneventful with Ms. Yellen reiterating the Fed's intention to begin raising the fed funds rate in 2015 if economic conditions hold up.
Treasuries set their lows after the release of Chair Yellen's prepared remarks before advancing into the afternoon with the 10-yr yield falling five basis points to 2.35%.
Today's trading volume was ahead of totals observed earlier in the week as more than 750 million shares changed hands at the NYSE floor.
Economic data included PPI, Empire Manufacturing survey, Industrial Production, and the MBA Mortgage Index:
- Producer prices increased 0.4% in June after increasing 0.5% in May while the Briefing.com Consensus expected an increase of 0.3%
- Gasoline prices increased 4.3% in June after a 17.0% gain in May
- Food prices rose 0.6% in June, down from a 0.8% increase in May
- Excluding food and energy, core PPI increased 0.3% in June after increasing 0.1% in May while the consensus expected an increase of 0.1%
- The Empire Manufacturing Survey for July registered a reading of 3.9, which was above the prior month's reading of -2.0 and above the Briefing.com consensus estimate, which was pegged at 3.0
- Industrial production increased 0.3% in June after declining 0.2% in May while the Briefing.com consensus expected an increase of 0.2%
- That was the first increase since a 0.2% gain in March, and the largest increase since a 1.1% gain in November 2014
- The increase in industrial production came from a combination of warmer temperatures and higher energy prices, not a pickup in demand from the manufacturing sector
- That was the first increase since a 0.2% gain in March, and the largest increase since a 1.1% gain in November 2014
- The weekly MBA Mortgage Index fell 1.9% to follow last week's 4.6% increase
Global Market
Asian Markets Close: Japan’s Nikkei +0.4%; Hong Kong’s Hang Seng -0.3%; China’s Shanghai Composite -3.0%
There was some mixed trading action on Wednesday in Asian-Pacific markets. Once again, China’s Shanghai Composite grabbed the spotlight as it fell 3.0% despite a round of better than expected economic data that included the Q2 GDP report. Separately, the Bank of Japan decided to leave its key lending rate unchanged at 0.10% as expected, but it cut the growth outlook for this fiscal year to 1.7% from 2.0%. The Nikkei added 0.4% and is now up 3.5% for the week.
Economic data
- China
- Q2 GDP +7.0% year-over-year (expected +6.9%; prior +7.0%)
- June Retail Sales +10.6% year-over-year (expected +10.2%; prior +10.1%)
- June Industrial Production +6.8% year-over-year (expected +6.0%; prior +6.1%)
- June Fixed Asset Investment +11.4% year-over-year (expected +11.2%; prior +11.4%)
- Australia
- July Westpac Consumer Sentiment -3.2% (prior -6.9%)
- June New Motor Vehicle Sales +3.8% month-over-month (prior -0.8%)
- Singapore
- May Retail Sales +2.4% month-over-month (expected -0.2%; prior +0.5%); +6.1% year-over-year (expected +3.0%; prior +5.0%)
- South Korea
- June Unemployment Rate 3.9% (expected 4.0%; prior 3.9%)
- June Trade Balance KRW 10.0 bln (expected KRW 10.2 bln; prior KRW 10.2 bln)
- Exports -2.4% year-over-year (expected -1.8%; prior -1.8%)
- Imports -13.6% year-over-year (expected -13.6%; prior -13.6%)
Equity Markets
- Japan’s Nikkei increased 0.4% following the Bank of Japan’s decision to keep its key lending rate unchanged at 0.10% despite trimming its economic growth outlook for this fiscal year to 1.7% from 2.0%. The consumer non-cyclical (+1.4%) and technology (+0.6%) sectors were the best-performing areas. Individual standouts included Takashimaya Co. (+4.2%), Toho Co. (+3.6%), and Mitsumi Electric (+3.3%). NTN Corp (-3.5%), NSK Ltd (-2.6%), and ITOCHU Corp (-2.4%) paced the decliners. Out of the 225 index members, 122 ended higher, 93 finished lower, and 10 were unchanged.
- Hong Kong’s Hang Seng declined 0.3%, following mainland shares lower. Leading laggards included the consumer cyclical (-2.1%), technology (-1.9%), and industrial (-1.7%) sectors. Galaxy Entertainment (-3.7%), New World Development (-3.3%), and China Life Insurance Co (-2.7%) led decliners. BOC Hong Kong Holdings (+2.3%) topped the list of advancing issues. Out of the 50 index members, 17 ended higher, 31 finished lower, and 2 were unchanged.
- China’s Shanghai Composite declined 3.0% following a spate of better than expected economic data that included Q2 GDP, June Retail Sales, June Industrial Production, and June Fixed Asset Investment. Some economists are questioning the veracity of the data, yet there is also some thinking that the stock market acted on its own volatile accord and did not sell off on the premise that stronger data could potentially mean less policy stimulus. The CSI 300 Index, which dropped 3.5%, was led lower by the technology (-8.0%) and industrial (-6.4%) sectors.
- India’s Sensex added 1.0% and finished near its highs for the day. The technology (+1.8%) and consumer cyclical (+1.7%) sectors paced the broad-based advance. Out of the 30 index members, 28 ended higher, and only two — Tata Steel (-0.3%) and State Bank India (-0.1%) — finished lower. Maruti Suzuki (+2.5%) led all gainers.
- Australia’s S&P/ASX 200 jumped 1.1% and ended near its best levels of the session, led by the energy (+2.5%), consumer staples (+2.1%), and gold (+1.9%) sectors. Bradken (+16.8%) was the best-performing stock while Perpetual Ltd (-6.6%) brought up the rear. Out of the 200 index members, 148 ended higher, 41 finished lower, and 11 were unchanged.
- Regional advancers: South Korea +0.7%, Taiwan +0.1%, Malaysia +0.4%, Singapore +0.7%
- Regional decliners: Indonesia -0.7%, Thailand -0.1%, Vietnam -1.2%
FX
- USD/CNY unch at 6.2092
- USD/INR +0.2% at 63.420
- USD/JPY +0.2% at 123.58
EUROPE
Major European indices trade higher across the board with Italy’s MIB (+0.8%) setting the pace. In news, the International Monetary Fund released its debt sustainability analysis for Greece, which showed that the troubled sovereign will need significant relief and restructuring in order to make its debt sustainable. This sentiment was echoed by the European Commission this morning.
- UK’s May Average Earnings Index + Bonus +3.2% (consensus 3.3%; last 2.7%). Separately, Claimant Count increased by 7,000 (expected -8,800; prior -1,100) while the Unemployment Rate ticked up to 5.6% from 5.5% (consensus 5.5%)
- France’s June CPI -0.1% month-over-month (expected 0.1%; prior 0.2%)
- Swiss July ZEW Expectations -5.4 (prior 0.1)
Closing Prices
- UK’s FTSE: flat
- Germany’s DAX: + 0.2%
- France’s CAC: + 0.3%
- Spain’s IBEX: + 0.7%
- Portugal’s PSI: + 0.8%
- Italy’s MIB Index: + 1.3%
- Irish Ovrl Index: + 0.2%
- Greece ASE General Index: CLOSED
Macroeconomic Data
Economic Data
from Briefing.com
- MBA Mortgage Index : -1.9% (Prior 4.6%)
- PPI : 0.4% vs 0.3% (Prior 0.5%)
- Core PPI : 0.3% vs 0.1% (Prior 0.1%)
- Empire Manufacturing : 3.9 vs 3.5 (Prior -2.0)
- Industrial Production : 0.3% vs 0.2% (Prior -0.2%)
- Capacity Utilization : 78.4% vs 78.1% (Prior 78.2%)
- Crude Inventories : -4.346M (Prior 0.384M)
- Fed's Beige Book
PRODUCER PRICE INDEX
Highlights
- Producer prices increased 0.4% in June after increasing 0.5% in May. The Briefing.com Consensus expected the PPI index to increase 0.3%.
- Excluding food and energy, core PPI increased 0.3% in June after increasing 0.1% in May. The consensus expected these prices to increase 0.1% for a second consecutive month.
Key Factors
- Gasoline prices increased 4.3% in June after a 17.0% gain in May. That increase helped drive total energy prices up 2.4% in June.
- Food prices rose 0.6% in June, down from a 0.8% increase in May.
- That was the largest monthly increase in core PPI since a 0.5% increase in October 2014.
- The acceleration in core prices was very unusual. Typically a big move in services prices would be a main contributing factor to a large move in core prices. In this case, however, services price growth was relatively mild at 0.3%.
- Instead, the increase in core prices came from a general upward price trend that developed across a wide spectrum of different sectors.
- The underlying trends do not point to further core price growth.
- Pipeline pressures remain weak. Core intermediate processed goods prices increased only 0.2% in June after declining 0.2% in May. Core unprocessed intermediate goods prices increased 0.3% after a 0.1% decline.
- Intermediate services prices rose 0.4% in June after a 0.5% decline in May.
Big Picture
- There are no pricing pressures down the producer pipeline. This should keep both consumer and producer price growth in check.
INDUSTRIAL PRODUCTION
Highlights
- Industrial production increased 0.3% in June after declining 0.2% in May. The Briefing.com Consensus expected industrial production to increase 0.2%.
Key Factors
- That was the first increase in industrial production since a 0.2% gain in March. It was the largest increase in industrial production since a 1.1% gain in November 2014.
- The increase in industrial production came from a combination of warmer temperatures and higher energy prices, not a pickup in demand from the manufacturing sector.
- Manufacturing production was flat for a second consecutive month in June. That was in-line with the weak regional and national manufacturing surveys.
- Overall production would have been much stronger if not for a pullback in motor vehicle and parts production. Motor vehicles and parts production declined 3.7% in June after increasing 2.3% in May. Excluding autos, total industrial production increased 0.5% and manufacturing production, specifically, increased 0.3%.
- Total motor vehicle assemblies dropped to 11.85 mln SAAR in June from 12.56 mln SAAR in May. Most of the decline came from the auto sector, where assemblies dropped to 4.08 mln SAAR from 4.59 mln SAAR. That was the smallest number of assemblies since 3.92 mln SAAR were put together in February. Truck assemblies fell to 7.77 mln SAAR from 7.97 mln SAAR.
- June 2015 was the second warmest month of June since data started being recorded 121 years ago. The warmer-than-normal temperatures helped boost utilities usage by 1.5%.
- Increased profitability in the oil industry helped boost mining output by 1.0%.
Big Picture
- The industrial production gains in June were the result of changes in prices and unusual temperature trends, not a change in demand for U.S. manufacturing goods.
Market Internals
NYSE:
Higher Volumes than the day before – 769.1M vs 696.4M
Decliners outpaced Advancers (adv/dec): 1236 / 1851
New Highs outpaced New Lows (highs/lows): 101 / 98
NASDAQ:
Lower Volumes than the day before – 1673.2M vs 1673.6M
Decliners outpaced Advancers (adv/dec): 1017 / 1839
New Highs outpaced New Lows (highs/lows): 149 / 68
VOLATILITY S&P500 (VIX)
13.23 -0.14 (-1.05%)
Technical Updates
18,050.17 -3.41 (-0.02%)
Volume: 80,455,694 (below average of 94,341,334)
Range: 18,010.15 - 18,090.39
Range: 18,010.15 - 18,090.39
5,098.94 -5.95 (-0.12%)
Volume: 384,201,034 (below average of 434,515,087)
Volume: 384,201,034 (below average of 434,515,087)
Range: 5,088.12 - 5,125.32
2,107.40 -1.55 (-0.07%)
Volume: 538,810,000 (above average of 520,421,615)
Range: 2,102.49 - 2,114.14
All 3 indices formed the doji pattern. This is either saying there is going to be a change in trend or just a break. As I mentioned yesterday that the market is approaching the higher bound of the trading range, I suppose we are getting more uncertainty here. I am going to see how the market react in the next session. The lows from Wednesday is going to form a support and if the support holds, we should see the market heading more upside.
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
- The dollar gained against all the majors today as traders bet that a stronger June Producer Price Index foreshadows stronger price pressures that suggest the U.S. economy is improving and returns on dollar assets will rise as well
- U.S. Dollar Index: +0.53% to 97.16
- EUR/USD: -0.55% to $1.0948
- Both France's CPI and its Harmonized Index of Consumer Prices (HICP) fell by 0.1% m/m in June, worse than the +0.1% that was expected
- GBP/USD: -0.03% to $1.5629
- The U.K.'s unemployment rate unexpectedly jumped to 5.6% in May from 5.5% in April
- Average earnings growth missed expectations at 3.2% and the number of unemployment claims jumped by 7K versus forecasts for a decline
- USD/JPY: +0.27% to 123.68
- The Bank of Japan met and held rates steady, as expected, but cut its growth and inflation forecasts to 1.7% and 0.7%, respectively, in the year to March 2016
- USD/CHF: +0.69% to 0.9515
- The ZEW Institute's Expectations Survey for Switzerland read -5.4 in July. Readings below 0 indicate pessimism
- USD/CAD: +1.52% to 1.2928
- The Bank of Canada unexpectedly cut its main policy rate by 25 bps to 0.50%, sending the loonie down sharply
- AUD/USD: -1.03% to $0.7371
- NZD/USD: -1.68% to $0.6593
- New Zealand's CPI will be reported at 18:45 ET
Bonds
- U.S. Treasury coupon securities rallied today despite a greater-than-expected increase in both the PPI and Core PPI for June. While Industrial Production and Capacity Utilization also beat estimates in June, that was mostly due to warmer weather inducing higher energy demand. Greece's situation remains in flux, with the Greek Parliament set to vote on new austerity measures tonight. The Eurogroup will meet tomorrow and then the matter will be up for a vote in many national parliaments of the eurozone (not all countries require parliamentary approval for a new deal)
- Yield Check:
- 2-yr: -2 bps to 0.63%
- 5-yr: -3 bps to 1.62%
- 10-yr: -5 bps to 2.35%
- 30-yr: -6 bps to 3.13%
- News:
- Prices in the U.S. rose more than expected in June, with both the headline and core PPI's beating estimates
- Core PPI rose 0.3% versus the Briefing.com consensus for 0.1% and the May reading of 0.1%
- Headline PPI grew 0.4% versus the consensus of 0.3% and prior reading of 0.5%
- Fed Chair Yellen said that the FOMC is on track to raise rates later this year, but did not give any details as to which meeting
- Industrial Production rose 0.3% in June after falling 0.2% in May. The Briefing.com consensus expected industrial production to increase by 0.2%
- Capacity Utilization rose to 78.4% in June. The Briefing.com consensus was for 78.1% and the reading for May was revised up to 78.2% from an initial estimate of 78.1%
- The gains in both Industrial Production and Capacity Utilization were related to higher energy consumption due to warmer weather
- The MBA Mortgage Index for the week ending 7/11 fell 1.9% versus the prior week's gain of 4.6%
- Cleveland Fed President Loretta Mester (hawk and non-FOMC voter) spoke today in Columbus, OH, saying that the Fed can begin to remove its emergency accommodation
- The Fed's Beige Book for July showed improving growth in most regions
- In Greece, Parliament will vote tonight on austerity measures to obtain the third round of bailout funding
- The 28-member European Union is debating whether or not to use the EFSM for a bridge loan to Greece
- The European Commission is warming to the idea of maturity extensions for Greek debt, although it is still rejecting the idea of outright debt writedowns
- Prices in the U.S. rose more than expected in June, with both the headline and core PPI's beating estimates
- Commodities:
- WTI crude: -3.28% to $51.31/bbl.
- Gold: -0.52% to $1,147.50/troy oz.
- Copper: -0.97% to $2.1505/lb.
- Currencies:
- EUR/USD: -0.57% to 1.0945
- USD/JPY: +0.30% to 123.71
- Data out Thursday:
- Initial Jobless Claims for the week ending 7/11 and Continuing Jobless Claims for the week ending 7/4 (08:30 ET)
- July Philadelphia Fed (10:00 ET)
- July NAHB Housing Market Index (10:00 ET)
- Natural Gas Inventories for the week ending 7/11 (10:30 ET)
- May Net Long-Term TIC Flows (16:00 ET)
- Fed Speaker:
- Fed Chair Yellen (FOMC voter) delivers semi-annual testimony on monetary policy before the Senate Banking Committee (10:00 ET)
Treasury Yields:
- 2 Year Note 0.64% -0.02
- 5 Year Note 1.63% -0.04
- 10 Year Note 2.36% -0.05
- 30 Year Bond 3.13% -0.07
2/30 Spread: 249 bps ( -5 ) … 2/10 Spread: 172 bps ( -3 )
Preview for Thursday 16 July, 2015
Economic Data
Thursday (16 July) :
- Initial Claims : 283K (Prior 297K)
- Continuing Claims : 2275K (Prior 2334K)
- Philadelphia Fed : 12.0 (Prior 15.2)
- NAHB Housing Market Index : 59 (Prior 59)
- Natural Gas Inventories : (Prior 91 bcf)
- Net Long-Term TIC Flows : (Prior $53.9B)
Earnings Highlights
Thursday (16 July) :
BMO - ANFI BBT BX SCHW C DPZ EBAY FCS FCFS FRC GS HOMB IIIN KEY MTB MTG NTCT PM PPG PVTB SASR SHW SON TSM TZOO UNH WBS WNS
AMC - AMD ANGO ASB CE CTAS COBZ CYT EGP FFIN GOOG MAT MBFI PBCT PGI RECN SLB SWI
BMO - ANFI BBT BX SCHW C DPZ EBAY FCS FCFS FRC GS HOMB IIIN KEY MTB MTG NTCT PM PPG PVTB SASR SHW SON TSM TZOO UNH WBS WNS
AMC - AMD ANGO ASB CE CTAS COBZ CYT EGP FFIN GOOG MAT MBFI PBCT PGI RECN SLB SWI
Summary
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.
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
2015 Daily Directional Accuracy: 66/109 (60.55%)
2015 Weekly Directional Accuracy: 16/25 (64.00%)
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