Dow -357.91 at 16990.82, Nasdaq -141.56 at 4877.49, S&P -43.85 at 2035.76
The bearish train just took off without stopping. Market was literally down for the whole session and given all 3 indices went under their 200MAs today, we are technically in a bearish market now.
No exception to Europe and Asia markets as the global markets were in the sea of red.
Market seems to be looking gloomy at the moment? I think this is just the beginning...
Market Summary
Industry Watch
Strong: Utilities
Weak: Consumer Discretionary, Financials, Industrials, Technology
Other Market Moving Factor:
- Continued volatility in China weighs on investor sentiment
- S&P 500 returns below 200-day moving average (2,078)
[BRIEFING.COM] The stock market registered its third consecutive decline on Thursday with the S&P 500 (-2.1%) slashing below its 200-day moving average (2,078). The benchmark index slid to levels not seen since early February while the Nasdaq Composite (-2.8%) displayed relative weakness throughout the day.
The daylong selloff was brought on by a heightened sense of uncertainty among investors, pulling the S&P 500 into the red for 2015 (-1.1%). To be sure, some of the uncertainty (rate-hike speculation, concerns about the global economy, plunging commodity prices) had been brewing for a while, whereas today's session reminded investors about ongoing concerns related to China and Greece.
Overnight, China's Shanghai Composite tumbled 3.4% amid reports the country's official GDP target could be lowered to 6.5% from 7.0%. Sellers maintained control despite a CNY120 billion injection from the People's Bank of China into capital markets.
As for Greece, Prime Minister Alexis Tsipras resigned from his post and called for a snap election, set for September 20, just three days after the FOMC concludes its September meeting. It is worth noting that there are indications Greece's minority parties could try to form a coalition government, which would block the September 20 vote.
All ten sectors ended the day in negative territory with cyclical sectors pacing the retreat while two of four countercyclical groups (consumer staples and utilities) posted losses slimmer than 1.0% apiece. The rate-sensitive utilities sector (-0.6%) ended ahead of its peers thanks to lower Treasury yields (10-yr yield -4 bps to 2.08%). The utilities sector is the only group that will enter the Friday session with a razor-thin week-to-date gain (+0.02%) while the remaining nine groups hold weekly losses between 0.9% (telecom services) and 5.4% (energy).
The energy sector has paced this week's retreat, but the growth-sensitive group finished today's session just behind the broader market after showing some relative strength in the early going. That brief strength coincided with an intraday gain in crude oil, but the energy component retreated during the afternoon to end the pit session little changed at $41.26/bbl.
Elsewhere among cyclical sectors, heavily-weighted consumer discretionary (-2.8%) and technology (-2.5%) underperformed throughout the day, which prevented the market from stringing together a rebound, considering the two groups represent more than 30% of the entire market.
The top-weighted technology sector suffered from broad weakness with large cap names like Apple (AAPL 112.65, -2.36), Google (GOOGL 679.48, -14.56), Facebook (FB 90.56, -4.75), and Microsoft (MSFT 45.75, -0.86) losing between 1.9% and 5.0%. High-beta chipmakers also registered sharp losses with the PHLX Semiconductor Index diving 3.8% with all 30 components ending in the red.
Today's selloff invited above-average participation with more than 900 million shares changing hands at the NYSE floor.
Economic data included Initial Claims, Existing Home Sales, Leading Indicators, and Philadelphia Fed Survey:
- Initial claims for the week ending August 15 were 277,000, up from the prior week's downwardly revised level of 273,000 (from 274,000) while the Briefing.com consensus estimate expected a reading of 272,000
- The four-week moving average for claims increased by 5,500 to 271,500, but remains near multi-decade lows
- Existing Home Sales for July increased 2.0% from June to an annualized rate of 5.59 million units while the Briefing.com consensus expected a reading of 5.42 million
- Sales in July were at their highest level since February 2007 and were up 10.3% from the year-ago period, which marked the tenth consecutive month in which existing home sales increased year-over-year
- The Leading Indicators report for July was down 0.2% while the Briefing.com consensus expected an increase of 0.2%
- The Philadelphia Fed Survey for August rose to 8.3 from 5.7 while economists polled by Briefing.com had expected an improvement to 7.0
There is no economic data on tomorrow's schedule.
Global Market
Asian Markets Close: Japan’s Nikkei -0.9%; Hong Kong’s Hang Seng -1.8%; China’s Shanghai Composite -3.4%
It was a sea of red across equity markets in the Asia-Pacific region. There wasn’t any specific news catalyst to account for the broad-based weakness, which had the markings of being rooted in concerns about the economic growth outlook. China’s Shanghai Composite declined 3.4% with most of that loss happening in the final two hours of its session. The quickened pace of selling at the end of the day there weighed on investor sentiment elsewhere.
Economic Data
- Japan
- August Reuters Tankan Index 17.0 (prior 14.0)
- Hong Kong
- July CPI +2.50% year-over-year (expected +2.90%; prior +3.10%)
Equity Markets
- Japan’s Nikkei declined 0.9% and ended at its low for the day following a persistent selloff in the latter half of its trading session. Losses were led by the financials (-2.1%), consumer staples (-1.7%), and industrials (-1.4%) sectors. Shiseido (-5.7%), Sompo Japan Nipponkoa Holdings (-4.8%), and Denso (-4.7%) were the worst performers while Unitika (+2.8%), Softbank Group (+2.2%), and Tokyo Tatemono (+2.0%) were the best performers. Out of the 225 index members, 35 ended higher, 185 finished lower, and 5 were unchanged.
- Hong Kong’s Hang Seng declined 1.8%, tracking the mainland market lower and trailing on investor concerns about an economic slowdown in the region. Selling interest was broad based. Kunlun Energy (-6.1%), Galaxy Entertainment (-6.1%), and Tingyi Cayman Islands Holding Corp (-4.3%) were the biggest laggards. China Unicom Hong Kong (+1.6%) was the only stock to gain more than 1.0%. Out of the 50 index members, 3 ended higher and 47 finished lower.
- China’s Shanghai Composite dropped 3.4% with the bulk of its loss being logged in the final two hours of trading. There was no specific news catalyst for the late selloff, which invited concerns about forced selling to meet margin calls and panic selling by investors unnerved by the market’s volatility and signs of slowing growth. The CSI 300 Index declined 3.2%.
- India’s Sensex declined 1.2%, paced by weakness in the energy (-3.2%), materials (-3.1%), technology (-2.2%), and industrials (-2.1%) sectors. Vedanta (-3.8%), Axis Bank (-3.7%), and Bharat Heavy Electricals (-3.6%) topped the list of losers. Lupin (+5.3%), ITC Ltd (+3.9%), and Dr Reddy’s Laboratories (+1.5%) were upside leaders. Out of the 30 index members, 4 ended higher and 26 finished lower.
- Australia’s S&P/ASX 200 declined 1.7%, falling to its lowest level since January. The weakness was driven by heavy losses in the energy (-5.8%), resources (-3.3%), and materials (-2.1%) sectors. Out of the 200 index members, 39 ended higher, 154 finished lower, and 7 were unchanged.
- Regional advancers: Taiwan +0.1%
- Regional decliners: South Korea -1.3%, Malaysia -0.3%, Indonesia -0.9%, Singapore -1.0%, Thailand -0.8%, Vietnam -1.9%, Philippines -0.9%
FX
- USD/CNY -0.1% at 6.3891
- USD/INR +0.4%% at 65.5363
- USD/JPY +0.2% at 123.98
EUROPE
Major European indices trade lower across the board with Italy’s MIB (-1.6%) showing the largest decline. On a separate note, the third Greek bailout remains on track as the European Stability Mechanism board approved the first tranche of funds for the country. Furthermore, Greece has reportedly made a EUR3.40 billion payment to the European Central Bank that was due today.
- UK’s July Retail Sales +0.1% month-over-month (expected 0.4%; prior -0.1%); +4.2% year-over-year (consensus 4.4%; last 4.2%). Also of note, Core Retail Sales +0.4% month-over-month, as expected (prior -0.3%); +4.3% year-over-year, as expected (last 4.1%). Lastly, August CBI Industrial Trends Orders improved to -1 from -10 (expected -10)
- Germany’s July PPI 0.0% month-over-month (consensus -0.1%; prior -0.1%); -1.3% year-over-year (expected -1.4%; last -1.4%)
- Swiss July trade surplus expanded to EUR3.74 billion from EUR3.51 billion (expected surplus of EUR2.60 billion)
Closing Prices
- UK’s FTSE: -0.6%
- Germany’s DAX: -2.3%
- France’s CAC: -2.1%
- Spain’s IBEX: -1.8%
- Portugal’s PSI: -1.1%
- Italy’s MIB Index: -2.6%
- Irish Ovrl Index: -2.2%
- Greece ASE General Index: -3.5%
Macroeconomic Data
Economic Data
from Briefing.com
- Initial Claims : 277K vs 272K (Prior 273K - Down)
- Continuing Claims : 2254K vs 2265K (Prior 2278K - Up)
- Existing Home Sales : 5.59M vs 5.42M (Prior 5.48M - Down)
- Philadelphia Fed : 8.3 vs 7.0 (Prior 5.7)
- Leading Indicators : -0.2% vs 0.2% (Prior 0.6%)
- Natural Gas Inventories : 53 bcf (Prior 65 bcf)
UNEMPLOYMENT CLAIMS
Highlights
- Initial claims for the week ending August 15 were 277,000, up from the prior week's downwardly revised level of 273,000 (from 274,000). The Briefing.com consensus estimate expected initial claims to be 272,000.
- Continuing claims for the week ending August 8 decreased by 24,000 to 2.254 million (Briefing.com consensus 2.265 mln).
Key Factors
- There were no special factors influencing initial claims.
- With the latest week's data, the four-week moving average for initial claims increased by 5,500 to 271,500, which is near multi-decade lows.
- The four-week moving average for continuing claims edged up by 9,500 to 2.265 million.
Big Picture
- Initial claims have been bounded between 250,000 and 300,000 for the better part of the last year. The latest report, which covers the week in which the household survey for the August Employment Situation report was conducted, fit that trend and suggests nonfarm payroll gains should again exceed 200,000.
Highlights
- Existing home sales increased to a seasonally adjusted annual rate (SAAR) of 5.59 million units in July, up 2.0% from the prior month's downwardly revised level of 5.48 mln SAAR (from 5.49 mln). That was stronger than expected. The Briefing.com consensus estimate was 5.42 million.
Key Factors
- Sales in July were at their highest level since February 2007 and were up 10.3% from the year-ago period. That marked the tenth consecutive month in which existing home sales increased year-over-year.
- By region, sales decreased 2.8% in the Northeast, were flat in the Midwest, rose 4.1% in the South, and jumped 3.2% in the West.
- The share of first-time buyers fell from 30% in June to 28% in July, which is the lowest share since January. That lackluster participation reflects the challenging conditions (qualifying for a mortgage, saving for a down payment, flat wage growth, and affordability) confronting first-time buyers, who are essential cogs in the housing market since they enable move-up/move-out opportunities for existing homeowners.
- The median existing home price for all housing types increased 5.6% year-over-year to $234,000. That was down slightly from $236,300 in June. Given limited inventory levels, notable price declines are unlikely in the near term.
- Total inventory declined 0.4% to 2.24 million existing homes for sale, which translates to a 4.8-month supply at the current sales pace versus 4.9 months in June.
Big Picture
- Weak affordability conditions have the potential to lead to a slowdown in sales in coming months, particularly if mortgage rates rise. On the latter note, the National Association of Realtors suggested the prospect of higher mortgage rates and home prices have likely been factors in the recent strength, implying that some demand has been pulled forward.
Highlights
- The Philadelphia Fed Index showed the pace of manufacturing activity in the region quickened in August, evidenced by the diffusion index for current activity rising to 8.3 from 5.7 in July. That was stronger than the Briefing.com consensus estimate of 7.0 and a welcome signal after the very disappointing Empire Manufacturing Survey for August.
Key Factors
- The demarcation line between expansion and contraction is 0.0.
- The details of the survey showed a deceleration in the pace of expansion for the new orders index (to 5.8 from 7.1), but a strong acceleration in shipments (to 16.7 from 4.4), the number of employees (to 5.3 from -0.4), inventories (to 0.2 from -5.7), and the average employee workweek (to 8.5 from 4.0) indexes.
- The pace of contraction slowed for unfilled orders (to -0.1 from -6.3) and delivery times (to -0.4 from -4.5) while the prices received index dropped to -4.9 from +1.7, denoting more firms reported price decreases for their own products than price increases (not what the Fed wants to hear as it attempts to stoke inflation with its monetary policy).
- The diffusion index for future activity increased to 43.1 from 41.5 in June, reflecting an outlook for continued growth.
Big Picture
- The August reading is the second-highest level this year, trailing behind only June (15.20). Still, both of those months are well off the high of 40.2 seen last November.
Highlights
- The Conference Board's Leading Economic Index (LEI) declined 0.2% in July after increasing 0.6% in June. The Briefing.com consensus estimate called for a 0.2% increase in July.
Key Factors
- The much weaker-than-expected level of building permits seen in the July Housing Starts report accounted for the sharp difference between the actual number and what was expected by economists as it subtracted 0.54 percentage points from the LEI. (Note: the consensus estimate was not redone between the time of the Housing Starts report and the release of the LEI.)
- Aside from building permits, stock prices (-0.01 percentage points) was the only other component that made a negative contribution to the LEI.
- The biggest contributor was the interest rate spread (0.24 percentage points).
- Separately, the Coincident Economic Index increased 0.2% in July while the Lagging Economic Index increased 0.3%.
Big Picture
- The decline in July was only the second decline since January 2014.
Market Internals
NYSE:
Higher Volumes than the day before – 927.4M vs 843.9M
Decliners outpaced Advancers (adv/dec): 461 / 2630
New Lows outpaced New Highs (highs/lows): 7 / 351
NASDAQ:
Higher Volumes than the day before – 2069.7M vs 1776.2M
Decliners outpaced Advancers (adv/dec): 455 / 2419
New Lows outpaced New Highs (highs/lows): 16 / 249
VOLATILITY S&P500 (VIX)
19.14 +3.89 (+25.51%)
Technical Updates
16,990.69 -358.04 (-2.06%)
Volume: 128,534,950 (above average of 93,629,702)
Range: 16,990.69 - 17,345.32
Range: 16,990.69 - 17,345.32
4,877.49 -141.56 (-2.82%)
Volume: 477,701,056 (above average of 432,186,662)
Volume: 477,701,056 (above average of 432,186,662)
Range: 4,877.49 - 4,986.51
2,035.73 -43.88 (-2.11%)
Volume: 674,625,000 (above average of 533,683,938)
Range: 2,035.73 - 2,076.61
Now all 3 indices have broken lower their respective 200MAs with the overwhelming bearish candle, I suppose that is going to be significant. DOW broke below its support at 17,360 and went straight down to the next support at around 16,985. NASDAQ had a gap down while could not hold its support at 5,010 and went down to break another support at 4,920 and its 200MA. S&P broke below both its ascending trend line and 200MAs then closed slightly below its next support at around 2,040. Now that we have seen the indices are about to break out of their consolidation range, I suppose we should see some more downside along the way.
Commodities
- The dollar index remained in the red today, which helped give commodities a boost
- In electronic trade, metals such as gold, silver and copper are all holding gains
- Dec gold closed pit trading today +2.2% at $1153.30/oz, while Sept silver +2.1% at $15.52/oz
- Sept copper gained 1.8% to $2.32/lb, but is up +2.0% here in electronic trade
- WTI crude oil sold off heading into the close of floor trading, finishing the day $0.01 higher at $41.26/barrel
- Sept nat gas rose +1.5% to $2.75/MMBtu
Energy
- October crude oil futures rose $0.01 to $41.26/barrel
- September natural gas closed $0.04 higher (+1.5%) at $2.75/MMBtu
- RBOB Gasoline closed $0.02 lower at $1.53/gallon
- Heating oil futures closed $0.01 lower at $1.51/gallon
Agriculture
- December corn closed $0.04 higher at $3.83/bushel
- December wheat closed $0.10 higher at $5.10/bushel
- November soybeans closed $0.12 higher to $9.06/bushel
- Sugar #11 closed $0.03 cents higher at 10.62 cents/lb
Metals
- December gold ended today’s session $25.30 higher (+2.2%) at $1153.30/oz
- September silver closed today’s session $0.33 higher (+2.1%) at $15.52/oz
- September copper closed $0.04 higher (+1.8%) at $2.32/lb
Currencies
Dollar Drops Against Safe Havens
- The U.S. Dollar Index fell 0.36% to 96.02 today in response to lower Treasury yields which reduced the rate of return on long-dollar carry trades. The Treasuries had not declined on the basis of U.S. economic data, which was better than expected on balance, but in response to declining U.S. equities which are finally reacting to developments abroad
- Existing Homes Sales rose to their highest level since February 2007. For July, sales were 5.59 mln versus the Briefing.com consensus of 5.42 mln and 5.49 mln in June
- The Philadelphia Fed surpassed expectations, rising to 8.3 in August from 7.0 in July. The Briefing.com consensus was for 5.7
- July Leading Indicators fell 0.2% in July, below the Briefing.com consensus for a gain of 0.2% and the prior reading of 0.6%
- EUR/USD: +0.69% to $1.1198
- Germany's Producer Price Index showed no change in July after a 0.1% fall in June. The market had been expecting another decline
- Greek Prime Minister Alexis Tsipras resigned following the lack of Syriza support for the austerity measures he had agreed to with Greece's creditors
- The elections are to be on September 20th. The election, no matter the result, may create concern about implementation of the bailout agreement and, consequently, further money from the European Stability Mechanism
- GBP/USD: -0.06% to $1.5673
- In the U.K., Retail Sales rose 0.1% m/m in July, worse than expected but better than the 0.1% decline in June
- USD/CHF: -0.40% to 0.9617
- The Swiss trade surplus rose to a better-than-expected 3.741 bln francs in July from 3.509 bln francs in June
- USD/JPY: -0.39% to 123.44
- In Japan, the Reuters Tankan Index rose to 17 in August from 14 in July
- USD/CAD: -0.15% to 1.3100
- Canadian Wholesale Sales jumped 1.3% m/m in June, better than both expectations and the 0.9% fall in May
- AUD/USD: -0.23% to $0.7339
- NZD/USD: +0.35% to $0.6623
Bonds
Treasuries Rally on Global Risk Aversion
- The Treasury complex rallied hard for a second straight day after global equities were repriced lower on falling commodity prices and Asian growth worries. The yield curve flattened sharply with 10's and 30's making the big gains
- Yield Check:
- 2-yr: +1 bp to 0.67%
- 5-yr: -2 bps to 1.49%
- 10-yr: -5 bps to 2.08%
- 30-yr: -6 bps to 2.75%
- News:
- Initial Jobless Claims for the week ended 8/15 edged higher to 277K from 274K in the prior week. The Briefing.com consensus estimate was 272K
- Continuing Jobless Claims for the week ended 8/8 fell to 2254K from 2273K. The Briefing.com consensus was 2265K
- Existing Homes Sales rose to their highest level since February 2007. For July, sales were 5.59 mln versus the Briefing.com consensus of 5.42 mln and 5.49 mln in June
- The Philadelphia Fed also surpassed expectations, rising to 8.3 in August from 7.0 in July. The Briefing.com consensus was for 5.7
- After the Empire State index, released on Monday, cratered to its lowest level since the recession, market analysts speculated that the same weakness might show up in the Philly Fed. It did not
- The details of the survey showed a deceleration in the pace of expansion for the new orders index (to 5.8 from 7.1), but a strong acceleration in shipments (to 16.7 from 4.4), the number of employees (to 5.3 from -0.4), inventories (to 0.2 from -5.7), and the average employee workweek (to 8.5 from 4.0) indexes
- July Leading Indicators fell 0.2% in July, below the Briefing.com consensus for a gain of 0.2% and the prior reading of 0.6%
- The much weaker-than-expected level of building permits seen in the July Housing Starts report accounted for the sharp difference between the actual number and what was expected by economists as it subtracted 0.54 percentage points from the LEI. (Note: the consensus estimate was not redone between the time of the Housing Starts report and the release of the LEI.)
- The $16 bln 5-year TIPS auction (reopening) was met with solid demand:
- High yield: 0.305%
- Bid-to-cover: 2.58
- Indirect bid: 76.4% (largest on record)
- Direct bid: 0.5%
- Greek Prime Minister Alexis Tsipras resigned to set off an election on September 20th. Greek law says that the largest opposition party, New Democracy, gets three days to try to form a government. Evangelos Meimarakis, New Democracy's leader, may try to do so and thereby avoid an election
- Initial Jobless Claims for the week ended 8/15 edged higher to 277K from 274K in the prior week. The Briefing.com consensus estimate was 272K
- Commodities:
- WTI crude: -0.48% to $41.07/bbl
- Gold: +2.07% to 1,151.30/troy oz.
- Copper: +2.00% to $2.3215/lb.
- Currencies:
- EUR/USD: +0.72% to $1.1202
- USD/JPY: -0.34% to 123.51
- Data Out Friday:
- There are no market-moving events scheduled
Treasury Yields:
- 2 Year Note 0.69% +0.02
- 5 Year Note 1.50% UNCH
- 10 Year Note 2.09% -0.03
- 30 Year Bond 2.76% -0.05
2/30 Spread: 207 bps ( -7 ) … 2/10 Spread: 140 bps ( -5 )
Preview for Friday 21 August, 2015
Economic Data
Friday (21 Aug) :
- No Economic Data
Earnings Highlights
Friday (21 Aug) :
BMO - DE FL HIBB DSKY
AMC - None
Summary
Thursday seems to be a bearish statement to the market. We have been seeing market went down to the support but to see a bounce back later on but this time market finally broke lower. This indicates a conviction from the bears.
With no economic data tomorrow, I think we might see a some short-covering to finish off the week. However this is probably the beginning of a bearish market we are experiencing, I reckon we should see more downside in the short term.
After Hours Report (Briefing)
Futures are lower after hours: S&P 500 futures are -5.68 from fair value of 2,032.23 and Nasdaq100 futures are -17.99 from fair value of 4,382.89.
Tomorrow morning before the open no economic reports are scheduled to be released.
Tomorrow before the open the following companies are scheduled to report earnings: DE, FL, HIBB, GMAN, DSKY
Thursday seems to be a bearish statement to the market. We have been seeing market went down to the support but to see a bounce back later on but this time market finally broke lower. This indicates a conviction from the bears.
With no economic data tomorrow, I think we might see a some short-covering to finish off the week. However this is probably the beginning of a bearish market we are experiencing, I reckon we should see more downside in the short term.
After Hours Report (Briefing)
Futures are lower after hours: S&P 500 futures are -5.68 from fair value of 2,032.23 and Nasdaq100 futures are -17.99 from fair value of 4,382.89.
Tomorrow morning before the open no economic reports are scheduled to be released.
Tomorrow before the open the following companies are scheduled to report earnings: DE, FL, HIBB, GMAN, DSKY
Direction for Friday 21 Aug, 2015: Up
2015 Daily Directional Accuracy: 83/131 (63.36%)
2015 Weekly Directional Accuracy: 18/30 (60.00%)
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