Dow -261.49 at 17515.42, Nasdaq -87.70 at 4909.76, S&P -34.65 at 2046.69
We are seeing more sell-off at the opening after the resistance got rejected. However we saw some sideway movement prior to FOMC minutes at 2pm ET. Now that the DOW and S&P have broke below their respective 200MA, market is certainly technically bearish now.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
Crude oil slides lower as the EIA inventories reported a slight rise, and that is the second consecutive increment.
For an update, trading was halted in NYSE for more than 3 hours due to a technical issue. Trading stopped around 11.30am ET and lasted till 3.10pm ET. Is it signalling a bad sign? Just kidding...
Market Summary
Industry Watch
Strong: Utilities
Weak: Financials, Industrials, Materials, Technology, Telecom Services
Other Market Moving Factor:
- Wall Street Journal reports Greece has submitted a three-year bailout request that includes tax reforms
- Continued tailspin in Chinese equities has more than 50% of A-share listings halted for volatility, according to reports
Equities slumped at the start of the session in response to the overnight weakness in the futures market that could be traced back to the continued selling efforts in China. The Shanghai Composite lost 5.9% on Wednesday and it was reported that more than 50% of A-share listings have now been halted due to volatility.
Futures on the S&P 500 held a 30-point decline during the overnight session, but cut their losses in half ahead of the New York open. The rebound took place amid a rally in Europe, following reports that Greek officials have requested a three-year bailout program that includes tax reforms; however, it remains to be seen whether this proposal differs from the one that was rejected by Greek voters during Sunday's referendum.
Once the U.S. session began, stocks retreated through the opening hour, hovering near their lows until 10:30 ET when trading at the floor of the New York Stock Exchange was halted for nearly four hours due to technical issues. Electronic trading venues were not affected by the halt, but the lack of participation from floor traders kept the market inside a narrow range until an afternoon resumption, which was followed by a drop to new lows.
All ten sectors registered losses with cyclical sectors showing relative weakness throughout the day. The materials sector (-2.2%) ended at the bottom of the leaderboard while top-weighted technology (-1.7%) and financials (-1.8%) also struggled to keep pace with the market.
For the second day in a row, chipmakers led the retreat in the technology sector with the PHLX Semiconductor Index tumbling 2.6%. The index extended its weekly decline to 4.4% with all 30 components ending the day in negative territory. Meanwhile, most large cap tech components did not fare much better while Microsoft (MSFT 44.24, -0.06) outperformed, shedding 0.1% after confirming plans to reduce its workforce by about 7,800 employees. The company said most of the job cuts will take place in its phone hardware division.
Elsewhere, the industrial sector was one of the leaders during yesterday's intraday turnaround, but the group finished today among the laggards. Similarly, transport stocks underperformed with the Dow Jones Transportation Average (-2.2%) ending beneath yesterday's session low. All 20 index components finished in the red with United Continental (UAL 52.82, -1.49) surrendering 2.7%. This morning, all United Continental flights were grounded for more than an hour with the company blaming a router issue for the outage.
Over on the countercyclical side, the utilities sector (-0.5%) outperformed while health care (-1.6%) finished just ahead of the broader market even as biotechnology struggled. The iShares Nasdaq Biotechnology ETF (IBB 362.78, -10.64) lost 2.9%.
Treasuries spent the entire day in positive territory with the 10-yr yield falling five basis points to 2.21%.
Today's participation was below average with fewer than 450 million shares changing hands at the NYSE floor.
Economic data was limited to the MBA Mortgage Index and Consumer Credit:
- The weekly MBA Mortgage Index rose 4.6% to follow last week's 4.7% decline
- Consumer credit increased by $16.10 billion in May after increasing an upwardly revised $21.40 billion (from $20.50 billion) in April while the Briefing.com consensus expected an increase of $18.20 billion
Global Market
Asian Markets Close: Japan’s Nikkei -3.1%; Hong Kong’s Hang Seng -5.8%; China’s Shanghai Composite -5.9%
The Asian equity markets generally closed lower on Wednesday The drubbing in China continued last night, with both the Shanghai and Hang Seng finishing down ~6%. Regulators stepped up efforts to try to slow down the decline by halting another 500+ stocks (now over half of the Shanghai Composite. The sell-off dominated the attention overnight, nearly putting Greece aside for brief stint. The Nikkei tumbled as well, taking out a 2-month low, and finishing over 3% lower. The negative vibes coming out of China, as well as the EU leaders, took its toll on Japanese shares. Money flowed into the yen in a flight to safety move, also lending to the breakdown in equities.
Economic Data
- Japan
- Jun Bank lending: +2.5% vs 2.6% in May
- May BOP Current Account: JPY1.9 trln vs JPY1.6 trln est
- South Korea
- Jun Bank Lending to Households: KRW526.7 trln vs KRW537.2 trln in May
- May M2 Money Supply: +1.0% vs +1.0% in Apr
Equity Markets
- Japan’s Nikkei declined 3.1% on broad-based weakness seen in all sectors. The worst performing sectors were Materials, Financials, and IT, all down roughly 3%. On the flip side, Consumer Staples and Utilities outperformed the benchmark average today, dropping 1.3% and 1.5%, respectively
- Hong Kong’s Hang Seng fell 5.8% today, witnessing some spill over from the Mainland. Every stock in the index closed lower on the day. Consumer name Tencent dropped 6.8% today, while PetroChina fell 5.2%.
- China’s Shanghai Composite managed to close down 5.9% on a day that saw another 8% range. Financials were hammered today, with Bank of Comm closing 10% lower, while China Construction Bank shed 8.4%.
- India’s Sensex dove nearly 500 pts, to finish -1.7% today. The day met was a flurry of selling pressure with 29 of the 30 stocks settling in negative territory. Vedanta was the among top losers, finishing 9% lower.
FX
- USD/CNY Unch at 6.2010
- USD/INR -0.1% at 63.52
- USD/JPY -0.8% at 121.55
EUROPE
Major European indices trade higher across the board with Italy’s MIB (+2.3%) trading well ahead of other indices. Regional equities have rallied amid hope that a deal will be struck between Greece and its creditors after the country reportedly requested a three-year bailout program that includes tax reforms, according to the Wall Street Journal.
- UK’s Halifax House Price Index +1.7% month-over-month (consensus 0.3%; prior 0.3%); +9.6% year-over-year (expected 8.3%; last 8.6%)
Closing Prices
- UK’s FTSE: + 0.9%
- Germany’s DAX: + 0.7%
- France’s CAC: + 0.8%
- Spain’s IBEX: + 0.8%
- Portugal’s PSI: + 1.4%
- Italy’s MIB Index: + 2.6%
- Irish Ovrl Index: -0.5%
- Greece ASE General Index: CLOSED
Macroeconomic Data
Economic Data
from Briefing.com
- MBA Mortgage Index : 4.6% (Prior -4.7%)
- Crude Inventories : 0.384M (Prior 2.386M)
- FOMC Minutes
Market Internals
NYSE:
Lower Volumes than the day before – 444.3M vs 992.3M
Decliners outpaced Advancers (adv/dec): 491 / 2524
New Lows outpaced New Highs (highs/lows): 10 / 170
NASDAQ:
Lower Volumes than the day before – 1894.2M vs 2129.2M
Decliners outpaced Advancers (adv/dec): 475 / 2372
New Lows outpaced New Highs (highs/lows): 28 / 166
VOLATILITY S&P500 (VIX)
19.66 +3.57 (+22.19%)
Technical Updates
17,515.42 -261.49 (-1.47%)
Volume: 69,825,587 (below average of 96,127,043)
Range: 17,496.22 - 17,759.01
Range: 17,496.22 - 17,759.01
4,909.76 -87.70 (-1.75%)
Volume: 450,166,799 (above average of 433,312,014)
Volume: 450,166,799 (above average of 433,312,014)
Range: 4,901.51 - 4,965.45
2,046.68 -34.66 (-1.67%)
Volume: 372,276,000 (below average of 520,505,266)
Range: 2,044.66 - 2,077.66
DOW eventually broke below its 200MA and also went under another support at around 17,550 level. NASDAQ broke out of its channel and found a support at 4,900 level. S&P got rejected by the trend line and finally went lower to break below its 200MA. Tuesday's low is likely to form another support for DOW and S&P. I reckon it wouldn't be long before NASDAQ meet its 200MA as well. Market is looking more bearish now.
Commodities
Closing Commodities: WTI Crude Oil Closes Below $52/BarrelCommodities
- The dollar index remained in negative territory today, which helped give commodities a boost
- By the end of pit trading, Aug gold finished $11.60 higher at $1163.50/oz, while Sept silver gained $0.24 to $15.20/oz
- Both are near today’s high
- Sept copper rose $0.05 today to finish at $2.50/lb
- Aug crude oil finished the day $0.73 lower at $51.62/barrel following the weekly storage data
- Aug natural gas lost $0.04 to $2.68/MMBtu
Energy
- August crude oil futures fell $0.73 to $51.62/barrel
- August natural gas closed $0.04 lower at $2.68/MMBtu
- RBOB Gasoline closed $0.05 higher at $2.00/gallon
- Heating oil futures closed unchanged at $1.71/gallon
Agriculture
- September corn closed $0.01 higher at $4.25/bushel
- September wheat closed $0.06 lower at $5.78/bushel
- November soybeans closed $0.03 higher to $9.89/bushel
- Sugar #11 closed 0.02 cents lower to 12.31 cents/lb
Metals
- August gold ended today’s session $11.60 higher at $1163.50/oz
- September silver closed $0.24 higher at $15.20/oz
- September copper closed $0.05 higher at $2.50/lb
Currencies
- The U.S. Dollar Index fell 0.57% today to 96.31, making losses against the euro, yen, and Kiwi. While European equities held steady, U.S., Japanese, and Chinese stocks dropped sharply
- The index sank further after the minutes from the June FOMC meeting were released and perceived as more dovish than expected
- EUR/USD: +0.46% to 1.1059
- GBP/USD: -0.68% to 1.5356
- The Halifax House Price Index rose 1.7% m/m in June, better than expected and more than the 0.3% increase in May
- USD/JPY: -1.52% to 120.66
- Since the open last night, Nikkei 225 futures are down 1,145 points of 5.59%
- Japan's trade deficit unexpectedly fell to $0.39 bln in May from $1.2 bln in April
- The current account surplus grew to $15.5 bln in May from $10.9 bln in April
- USD/CHF: -0.06% to 0.9459
- With the euro stable and the Swiss National Bank intervening to prevent flight-to-quality trades into the franc, this pair was almost unchanged
- USD/CAD: +0.13% to 1.2739
- Canadian Building Permits fell 14.5% m/m in May versus a 12.1% jump in April. The May reading missed the consensus estimate
- AUD/USD: -0.41% to 0.7423
- NZD/USD: +0.95% to 0.6728
Bonds
- Treasury coupon securities traded higher today with broadly-based gains as investors pared risk due to fear of contagion from Greece's debt crisis and China's collapsing stock market
- Yield Check:
- 2-yr: -4 bps to 0.55%
- 5-yr: -5 bps to 1.50%
- 10-yr: -5 bps to 2.21%
- 30-yr:-5 bps to 2.99%
- News:
- The Greek government is set to send concrete proposals to its official creditors on Thursday
- The MBA Mortgage Index for the week ending 7/4 rose 4.6% versus a 4.7% decline in the week prior
- The $21 billion 10-year note auction was well-received, with a better-than-average bid-to-cover ratio and indirect bid
- High yield: 2.225%
- Bid-to-cover: 2.72
- Indirect bid: 58.1%
- Direct bid: 12.1%
- The FOMC minutes of the June meeting showed that economic conditions are trending in a direction that would cause the FOMC to hike rates
- Only one member already saw sufficient evidence that employment and inflation metrics were heading towards the Fed's targets
- Members cited global developments (Greece and China) as negative risks to their economic forecasts
- San Francisco Fed President Williams (FOMC voter) said that the economy remains on a good path
- The Nikkei 225 is set to open this evening down 1175 points (5.74%) from last night's open
- $/Yen also got hit for 1.59% to 120.58. That is the biggest loss for the pair in 2015 and is evidence of the de-risking that is occurring because of China and Greece
- Commodities:
- WTI crude: -0.90% to $51.86/bbl.
- Gold:+0.54% to 1,158.80/troy oz.
- Copper: +1.43% to $2.4815/lb.
- Currencies:
- EUR/USD: +0.60% to $1.1074
- USD/JPY: -1.60% to 120.56
- Data out Thursday:
- Initial Jobless Claims for the week ending 7/4 and Continuing Jobless Claims for the week ending 6/27 (08:30 ET)
- Natural Gas Inventories for the week ending 7/4 (10:30 ET)
- Fed Speakers:
- Minneapolis Fed President Kocherlakota (non-FOMC voter) participates in panel discussion "Central Banks and Fiscal Authorities” (05:45 ET)
- Fed Governor Brainard (FOMC voter) speaks on regulatory reform and implementation (10:00 ET)
- Kansas City Fed President George (non-FOMC voter) (12:30 ET)
- Treasury Auction:
- $13 bln 30-year bond auction(reopening) (results at 13:00 ET)
Treasury Yields:
- 2 Year Note 0.55% -0.03
- 5 Year Note 1.50% -0.05
- 10 Year Note 2.22% -0.05
- 30 Year Bond 2.99% -0.05
2/30 Spread: 244 bps ( -2 ) … 2/10 Spread: 167 bps ( -2 )
Preview for Thursday 9 July, 2015
Economic Data
Thursday (9 July) :
- Initial Claims : 271K (Prior 281K)
- Continuing Claims : 2210K (Prior 2264K)
- Natural Gas Inventories : (Prior 69 bcf)
Earnings Highlights
Thursday (9 July) :
BMO - PEP SYRG WBA
AMC - CUDA HELE PSMT VOXX ZEP
BMO - PEP SYRG WBA
AMC - CUDA HELE PSMT VOXX ZEP
Summary
It is possible that we have not seen the true colour of the market due to the temporary shutdown in NYSE. Let's see what the traders would do tomorrow when market opens. But I don't think there is anything optimistic to bring the market up higher. Yield curve continues to flatten as I believe investors are parking their money in the bonds market instead.
China's market is also experiencing a huge volatility in the Shanghai Composite. Even with government intervention and limited trading, the market is surely looking weak. In addition, the production index in China remains slow and that is something to be concerned.
As we are starting the Q3 earnings season, don't be surprised if the market is hit by the volatility swing.
It is possible that we have not seen the true colour of the market due to the temporary shutdown in NYSE. Let's see what the traders would do tomorrow when market opens. But I don't think there is anything optimistic to bring the market up higher. Yield curve continues to flatten as I believe investors are parking their money in the bonds market instead.
China's market is also experiencing a huge volatility in the Shanghai Composite. Even with government intervention and limited trading, the market is surely looking weak. In addition, the production index in China remains slow and that is something to be concerned.
As we are starting the Q3 earnings season, don't be surprised if the market is hit by the volatility swing.
Direction for Thursday 9 July, 2015: Down
2015 Daily Directional Accuracy: 63/104 (60.58%)
2015 Weekly Directional Accuracy: 15/24 (62.50%)
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