Dow -68.25 at 17851.04, Nasdaq -36.35 at 5171.77, S&P -5.06 at 2114.15
I don't think Wednesday was bearish, maybe a little. DOW remained under pressure as it could not break above yesterday's close and stay in red for the whole session. But it has managed to find a support at around 17,820. NASDAQ found a good support at around 5,160 despite it remains in red as well.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
Crude oil broke below the support at $50 as there is a rise in oil inventories. Perhaps the strong supply is overwhelming the lack of demand. And the stronger Dollar Index just make commodities more expensive.
Market Summary
Industry Watch
Strong: Consumer Discretionary, Consumer Staples, Financials, Health Care, Utilities
Weak: Energy, Industrials, Technology, Telecom Services
Other Market Moving Factor:
- Apple (AAPL) beats earnings estimates, but below-consensus iPhone sales and guidance send stock lower
- St Jude Medical (STJ) to acquire Thoratec (THOR) for $3.4 billion
Equities faced selling pressure at the open as investors reacted to earnings from a few large companies. Most notably, Apple (AAPL 125.14, -5.61) surrendered 4.3% after below-consensus iPhone sales growth and cautious guidance for Q4 overshadowed a bottom-line beat. The largest stock by market cap kept the technology sector (-1.7%) pressured throughout the day while four other sectors registered losses.
To be fair, the tech sector was also weighed down by a 3.7% decline in Microsoft (MSFT 45.51, -1.77) after the company reported a loss, which resulted from $8.4 billion in charges related to the phone unit acquisition from Nokia. Furthermore, high-beta chipmakers also struggled with the PHLX Semiconductor Index falling 2.5% amid losses in all 30 components. Linear Technology (LLTC 40.40, -2.72) had the worst showing, ending lower by 6.3% in reaction to disappointing results and below-consensus guidance.
Elsewhere among cyclical sectors, industrials (-0.5%) retreated with Dow component Caterpillar (CAT 79.76, -2.46) dropping 3.0% ahead of its earnings report. Meanwhile, another Dow member—Boeing (BA 146.47, +1.47)—advanced 1.0% after beating estimates and guiding in-line with analyst expectations.
Similar to industrials, the energy sector (-0.7%) ended among the laggards with Baker Hughes (BHI 58.25, -2.39) tumbling 3.9% amid reports Halliburton's (HAL 41.54, -0.32) acquisition of BHI is facing an antitrust probe. On a related note, crude oil settled lower by 3.2% at $49.25/bbl.
On the upside, the financial sector (+0.7%) rallied into the afternoon while the consumer discretionary space (+0.4%) was boosted by a 7.7% surge in Chipotle (CMG 725.82, +52.75) after the company reported a one-cent beat on below-consensus revenue. Homebuilders also contributed to the strength in the discretionary space, evidenced by a 2.1% increase in iShares Dow Jones US Home Construction ETF (ITB 27.99, +0.58) following a better than expected Existing Home Sales report for June.
Also of note, most countercyclical sectors outperformed with health care (+0.2%), consumer staples (+0.2%), and utilities (+0.5%) ending ahead of the broader market while the telecom services sector (-1.0%) lagged.
Treasuries advanced during morning action, but an afternoon retreat narrowed the gain in the 10-yr note to just two ticks with its yield slipping one basis point to 2.32%.
Today's participation was ahead of recent averages as more than 820 million shares changed hands at the NYSE floor.
Economic data included FHFA Housing Price Index, Existing Home Sales, and the MBA Mortgage Index:
- The FHFA Housing Price Index rose 0.4% in May after increasing 0.4% in April
- Existing Home Sales for June increased 3.2% from May to an annualized rate of 5.49 million units while the Briefing.com consensus expected a reading of 5.40 million
- The weekly MBA Mortgage Index ticked up 0.1% to follow last week's 1.9% decline
Global Market
Asian Markets Close: Japan’s Nikkei -1.2%; Hong Kong’s Hang Seng -1.0%; China’s Shanghai Composite +0.2%
Many of the largest markets in the Asia-Pacific region fell prone to selling pressure on Wednesday, following the weak lead from Wall Street on Tuesday and the negative responses to the earnings results and/or guidance after the close from major technology companies in the U.S., namely Apple and Microsoft. China’s Shanghai Composite (+0.2%) and India’s Sensex (+1.2%) were among the few exceptions.
Economic data
- Japan
- All Industries Activity Index -0.5% (expected -0.5%; prior +0.1%)
- Australia
- Q2 CPI +0.7% quarter-over-quarter (expected +0.8%; prior +0.2%); +1.5% year-over-year (expected +1.7%; prior +1.3%)
Equity Markets
- Japan’s Nikkei declined 1.2%, closing near its low for the session. Losses were paced by the technology (-1.8%), communications (-1.8%), financial (-1.5%), and industrial (-1.5%) sectors. Nippon Suisan Kaisha (-3.5%), Marui Group (-3.3%), and Kyocera (-3.3%) were the worst-performing issues. Mitsui Chemicals (+12.4%), Asahi Glass (+4.8%), and Fujitsu (+2.8%) sat atop the short list of winners. Out of the 225 index members, 39 ended higher, 178 finished lower, and 8 were unchanged.
- Hong Kong’s Hang Seng declined 1.0% and spent the entirety of its day in negative territory. The technology (-2.6%), consumer cyclical (-1.6%), communications (-1.3%), and financial (-0.9%) sectors were influential weights on the market. Laggards of note included China Resources Land (-4.2%), Cathay Pacific Airways (-2.9%), and Hong Kong Exchanges and Clearing (-2.7%). Sino Land (+1.1%) was one of a handful of stocks to trade higher and the only one that gained at least 1.0%. Out of the 50 index members, 7 ended higher, 42 finished lower, and 1 was unchanged.
- China’s Shanghai Composite increased 0.2%, aided by a late rally that saw the Composite rally 1.7% off its low for the session. The buy-the-dip action was attributed to the pervasive expectation that the government will keep doing what it can to prevent another major selloff in the market. The CSI 300 Index for its part declined 0.2% on the back of a weak showing from the financial (-1.2%) sector.
- India’s Sensex jumped 1.2% and finished near its highs for the day. The market was led by energy (+2.9%), consumer staples (+2.3%), and financial (+1.8%) sectors. Reliance Industries (+4.4%), Sun Pharmaceuticals (+3.5%), and Mahindra & Mahindra (+3.3%) sat atop a lengthy list of winners while Lupin (-3.4%), Bharti Airtel (-1.2%), and Tata Consultancy Services (-1.2%) brought up the rear. Out of the 30 index members, 22 ended higher and 8 finished lower.
- Australia’s S&P/ASX 200 slumped 1.6%. The weakness followed a speech from RBA Governor Stevens, who reportedly said there is additional room for rate cuts but that the central bank is also focused on maintaining financial stability and that rate cuts beyond a certain point can be dangerous. The assumption by participants was that there will be a high bar for further rate cuts. Banking and resource stocks weighed on the broader market. Out of the 200 index members, 30 ended higher, 158 finished lower, and 12 were unchanged.
- Regional advancers: Indonesia +0.8%, Thailand +0.1%, Vietnam +2.2%, Philippines +0.1%
- Regional decliners: South Korea -0.9%, Taiwan -1.0%, Malaysia -0.4%, Singapore -0.4%
FX
- USD/CNY unch at 6.2094
- USD/INR +0.1% at 63.5975
- USD/JPY -0.1% at 123.83
EUROPE
Major European indices trade mostly lower while Spain’s IBEX (+0.1%) outperforms.
- France’s July Business Survey rose to 102 from 100 (expected 100)
- Italy’s May Industrial New Orders -2.5% month-over-month (prior 5.5%); -0.5% year-over-year (consensus 5.5%; last 7.9%). Separately, Industrial Sales +1.2% month-over-month (last -0.5%); +2.4% year-over-year (last -0.2%). Also of note, May Retail Sales -0.1% month-over-month (consensus 0.2%; prior 0.7%); +0.3% year-over-year (expected 0.2%; last 0.0%)
Closing Prices
- UK’s FTSE: -1.5%
- Germany’s DAX: -0.7%
- France’s CAC: -0.5%
- Spain’s IBEX: + 0.2%
- Portugal’s PSI: -0.3%
- Italy’s MIB Index: -0.1%
- Irish Ovrl Index: + 0.9%
- Greece ASE General Index: CLOSED
Macroeconomic Data
Economic Data
from Briefing.com
- MBA Mortgage Index : 0.1% (Prior -1.9%)
- FHFA Housing Price Index : 0.4% (Prior 0.4% - Up)
- Existing Home Sales : 5.49M vs 5.40M (Prior 5.32M - Down)
- Crude Inventories : 2.468M (Prior -4.346M)
EXISTING HOME SALES
Highlights
- Existing home sales increased 3.2% in June to 5.49 mln SAAR from a downwardly revised 5.32 mln SAAR (from 5.35 mln) in May. The Briefing.com Consensus expected existing home sales to increase to 5.40 mln.
Key Factors
- That was the most existing homes sold in one month since 5.79 mln SAAR were sold in February 2007.
- The strong increase in home sales over the last couple of months comes as the realization that the Fed is going to lift the fed funds rate off the zero bound in the near future. It seems that the potential rise in mortgage rates that would inevitably come with a higher fed funds rate pulled buyers into the market.
- If these buyers had been planning on coming into the marketplace at a later date, the spike in sales will likely be temporary as purchases that would have taken place in September or later were pulled into the early part of summer. That will leave a smaller pool of potential buyers as the calendar moves into the latter half of the year.
- There are more concerns in the marketplace that the increase in sales may be short-lived.
- Investor demand was down in June, which is normally a good sign. All-cash sales accounted for 22% of sales, down from 24% in May. Individual investors purchased 12% of homes compared to 14% in May. That was the lowest level of investor demand since August 2014.
- Yet, the increase in sales did not come from first-time home buyers, which support longer-term normal market functions. Only 30% of purchases came from these first-time buyers, down from 32% in May. Without a strong base of first-time buyers, which average nearly 40% during normal times, existing home sales cannot grow.
- Distressed sales accounted for 8% of all sales in June.
- Median home prices rose 6.5% y/y to $236,400. Prices surpassed their peak during the housing bubble from June 2006 ($230,400).
- The combination of higher prices and higher mortgage rates will act as a big headwind on affordability conditions, which could hamper possible sales growth.
Big Picture
- Existing home sales surged in June, but the longer-term outlook remains cautious.
Market Internals
NYSE:
Higher Volumes than the day before – 840.4M vs 780.6M
Decliners outpaced Advancers (adv/dec): 1297 / 1796
New Lows outpaced New Highs (highs/lows): 70 / 321
NASDAQ:
Higher Volumes than the day before – 2019.4M vs 1741.8M
Decliners outpaced Advancers (adv/dec): 1355 / 1456
New Lows outpaced New Highs (highs/lows): 103 / 164
VOLATILITY S&P500 (VIX)
12.12 -0.10 (-0.82%)
Technical Updates
17,851.04 -68.25 (-0.38%)
Volume: 112,374,843 (above average of 93,743,955)
Range: 17,807.41 - 17,919.35
Range: 17,807.41 - 17,919.35
5,171.77 -36.35 (-0.70%)
Volume: 444.9M (above average of 434,397,038)
Volume: 444.9M (above average of 434,397,038)
Range: 5,145.78 - 5,184.74
2,114.15 -5.06 (-0.24%)
Volume: 604,850,000 (above average of 523,197,923)
Range: 2,110.00 - 2,118.51
DOW sits on the support level and looking to break below its 20MA. It is approaching its 200MA but I think there is going to be a support at 17,800 area. NASDAQ opened lower but went up to test its resistance at around 5,180. I would say NASDAQ is the least bearish out of the 3 indices. If it gets rejected by the resistance, I think it should be heading down to 5,100 for support. S&P broke out of its channel and broke below its support at 2,120. I think it is likely go down and find a support at its 50MA. Overall the MACD is also indicating a slowdown in bullish momentum.
Commodities
- WTI crude oil futures sold off today, which followed the weekly API storage data late yesterday and this morning’s EIA storage data
- Sept crude finished floor trading -3.2% at $49.25/barrel, but extended losses a bit in electronic trading
- The dollar index was trading higher today, and despite some pullback in afternoon activity, the strength weighed on commodities today
- Sept copper futures were weak again and closed up today’s session -5% at $2.43/lb
- In the precious metals space, Aug gold lost 1.1% to $1091.40/oz, while Sept silver fell -0.3% at $14.73/oz
Energy
- September crude oil futures fell $1.62 (-3.2%) to $49.25/barrel
- August natural gas closed $0.02 higher (+0.7%) at $2.90/MMBtu
- RBOB Gasoline closed $0.06 lower at $1.86/gallon
- Heating oil futures closed $0.01 lower at $1.68/gallon
- The September WTI contract set an all-time low this afternoon, dipping as low as $49.06/barrel in post pit-close trade
Agriculture
- September corn closed $0.03 lower (-0.7%) at $4.03/bushel
- September wheat closed $0.09 lower (-1.7%) at $5.16/bushel
- November soybeans closed $0.09 lower (-0.9%) to $9.96/bushel
- Sugar #11 closed 0.04 cents lower to 11.38 cents/lb
Metals
- August gold ended today’s session $11.90 lower (-1.1%) at $1091.40/oz
- September silver closed today’s session $0.05 lower (-0.3%) at $14.73/oz
- September copper closed $0.05 lower (-2%) at $2.43/lb
Currencies
- The Intercontinental Exchange's U.S. Dollar Index gained 0.29% to 97.62 today, following through on a general trend of dollar strength and commodity weakness that has been dominating markets since mid-June
- EUR/USD: -0.29% to $1.0905
- The Greek parliament is set to vote on a bill later today containing economic reforms (part of Prime Minister Alexis Tsipras's July 12th agreement with creditors) to unlock a third bailout
- The French Business survey increased to a better-than-expected 102 in July from 100 in June
- GBP/USD: +0.28% to $1.5599
- The Bank of England released the minutes from the Monetary Policy Committee's July meeting. While there were no dissenters to the MPC's decision to hold rates steady at that meeting, a number of BoE observers are saying that the next meeting will have two or three dissenting members as the downside risks from Greece abate
- USD/JPY: +0.21% to 124.13
- In Japan, the Ministry of Economy, Trade, and Industry reported that the All Industries Activity Index declined 0.5% m/m. That was in line with expectations
- USD/CHF: +0.33% to 0.9614
- USD/CAD: +0.68% to 1.3035
- Later today, Canada will release its Budget Balance for April
- AUD/USD: -0.69% to $0.7369
- Australia's Consumer Price Index grew 0.7% q/q in Q2, less than expected but more than the 0.2% growth seen in Q1
- NZD/USD: -0.64% to 0.6584
Bonds
- The 2-year and 5-year Treasury notes sold off today while 10-year notes and the 30-year bond rallied. In the past 5 trading days, 2's/30's has narrowed by 22 basis points with the 2-year yield gaining 6 bps and the bond yield losing 16 bps. The economic data continues to reflect a somewhat steady recovery and the relative weakness in 2-yr and 5-yr notes shows investor confidence that the Fed will raise interest rates in response to that data. The relative strength in 10's and 30's may be resulting from a stronger dollar (meaning imported disinflationary pressure) and lower commodity prices as well as confidence that the Fed is minding the inflation threat
- Yield Check:
- 2-yr: +3 bps to 0.71%
- 5-yr: +1 bp to 1.67%
- 10-yr: -1 bp to 2.32%
- 30-yr: -2 bps to 3.04%
- News:
- The Mortgage Bankers Association Mortgage Index for the week ending 7/18 rose 0.1% versus a decline of 1.9% in the prior week
- The FHFA Housing Price Index increased by 0.4% in May after rising by an upwardly-revised 0.4% in April
- Existing home sales surged 3.2% in June to 5.49 mln SAAR from a downwardly revised 5.32 mln SAAR (from 5.35 mln) in May. The Briefing.com consensus expected existing home sales to increase to 5.40 mln
- That was the most existing homes sold in one month since 5.79 mln SAAR were sold in February 2007
- Median home prices rose 6.5% y/y to $236,400. Prices surpassed their peak during the housing bubble from June 2006 ($230,400)
- Commodities:
- WTI crude: -3.40% to $49.13/bbl.
- Gold: -1.09% to $1,091.50/troy oz.
- Copper: -1.82% to $2.423/lb.
- Currencies:
- EUR/USD: -0.22% to $1.0912
- USD/JPY: +0.14% to 124.03
- Data out Thursday:
- Initial Jobless Claims for the week ending 7/18 and Continuing Jobless Claims for the week ending 7/11 (08:30 ET)
- June Leading Indicators (10:00 ET)
- Natural Gas Inventories for the week ending 7/18 (10:30 ET)
- Treasury Auction:
- $15 billion 10-Year TIPS auction (results at 13:00 ET)
Treasury Yields:
- 2 Year Note 0.75% +0.04
- 5 Year Note 1.69% UNCH
- 10 Year Note 2.33% -0.02
- 30 Year Bond 3.04% -0.04
2/30 Spread: 229 bps ( -8 ) … 2/10 Spread: 158 bps ( -6 )
Preview for Thursday 23 July, 2015
Economic Data
Thursday (23 July) :
- Initial Claims : 278K (Prior 281K)
- Continuing Claims : 2218K (Prior 2215K)
- Leading Indicators : 0.2% (Prior 0.7%)
- Natural Gas Inventories : (Prior 99 bcf)
Earnings Highlights
Thursday (23 July) :
BMO - MMM AOS ABB ADPT ALK ADS ASPS AIMC AMAG AEP ABC BKU BMS BHE BCC BSX BMY BBW CAB CAM CSL CAT CELG CLFD CMS CFX CMCSA COR CS CTCM CUBI CY DAN DHR DFRG DLX DOW DPS DST DNKN LLY EQT EQM FNB FIS FAF FCX GMT GM GNTX GPK GPI HERO HUB.B HBAN IMAX IMS ISSI IQNT IVC JNS KMB KKR LAZ MHO MAC MCS VAC MCD MJN MRGE VIVO MINI MNRO NDAQ NPBC NEO NWE NUE ORI OSTK PSTB PTEN PENN PNK PJC POOL PDS PRLB PHM QSII DGX RTN RS RCI RCL RTIX R SFE SCHL SQNS SHPG SNA LUV STC STM SXC SXCP SYNT TROW XRS TCB TNC UTEK UA UNP UAL UTL USG VRX WAB WM WCC WIT WRLD
AMC - ABAX ACTG ALGN ALTR AMZN T ATHN BJRI BYD BMTC BLDR BCR CA COF CBI CLS CPHD CHE CB CYN CTCT CLGX DECK DGII ETFC WIRE FII FLEX FLS FET FSL GIMO GHL HBHC HBI HWAY IG INFA JNPR LSTR LSCC LOGM MKTO MXIM MDCA MMSI MCRL MSCC MITK NANO NBHC NTGR N OHI P PEB PMCS PFG PFPT QLIK RGA RSG RHI RT SBCF SHBI SSD SWKS SPNC SPSC STAG SBUX SRCL SYK SIVB TRN TRIP UIS VRSN V WRE WSFS
Summary
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.
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
2015 Daily Directional Accuracy: 70/114 (61.40%)
2015 Weekly Directional Accuracy: 16/26 (61.54%)
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