Dow -33.84 at 17511.34, Nasdaq -32.35 at 5059.35, S&P -5.52 at 2096.92
Market did not really pick up Monday's momentum as we saw some downside in today session. The 3 indices was rejected by yesterday close during the open and remained in the red for the rest of the session.
Europe markets were mostly in red. Meanwhile Asia markets were mixed with Shanghai Composite is back with a rout as it shockingly went down more than 6% on Tuesday. Somehow that put China market into the limelight again.
Market Summary
Industry Watch
Strong: Consumer Discretionary
Weak: Consumer Staples, Energy, Materials, Technology, Utilities
Other Market Moving Factor:
- Continued turmoil in Asia: China's Shanghai Composite plunges 6.2%, surrendering last week's gain
- S&P 500 slips below 100-day moving average (2,098)
Although the Tuesday session produced a different outcome than Monday's affair, investor participation remained below-average with fewer than 700 million shares changing hands at the NYSE floor.
Equities began the day with modest losses after the overnight session featured a resumption of heavy selling in China that sent the Shanghai Composite lower by 6.2%. There was no clear-cut reason for the plunge, but some pointed to a better than feared Housing Starts report, which could keep the People's Bank of China from implementing additional stimulus measures.
The overnight weakness was followed by a shaky session in Europe while U.S. indices made a brief appearance in the green before revisiting their morning lows. The S&P 500 slid below its 100-day moving average (2,098) during midday action and hit its session low just a point below the 50-day average (2,095) before settling just above that level.
Nine of ten sectors ended the day in negative territory with losses ranging from 0.01% (telecom services) and 0.7% (materials). The materials sector underperformed throughout the day with steelmakers showing notable weakness, evidenced by a 1.6% decline in Market Vectors Steel ETF (SLX 26.38, -0.44). Meanwhile, the other commodity-related sector—energy (-0.4%)—ended among the laggards even as crude oil spiked 1.8% to $42.62/bbl.
Elsewhere among cyclical groups, the consumer discretionary sector (+0.1%) stayed ahead of the broader market throughout the trading day thanks to a few pockets of strength. Homebuilders were propelled higher by a better than expected earnings report from Home Depot (HD 122.80, +3.10). The Dow component rallied 2.6% while apparel names were mixed after Urban Outfitters (URBN 31.55, -0.68) and TJX (TJX 76.46, +4.85) reported earnings. Urban Outfitters retreated 2.1% after below-consensus revenue and comparable store sales overshadowed a bottom-line beat while TJX spiked 6.8% after beating earnings estimates.
Staying on the earnings theme, Wal-Mart (WMT 69.48, -2.43) fell 3.4% in reaction to a bottom-line miss and lower earnings guidance for Q3 and fiscal year 2016.
Switching gears, Treasuries climbed during overnight action, but the 10-yr note reversed from its overnight high, falling to lows after the release of today's economic data. The 10-yr note slipped to a new low just ahead of the close, pushing the benchmark yield up three basis points to 2.20%.
Economic data was limited to Housing Starts and Building Permits:
- Housing starts in July ran at a seasonally adjusted annual rate of 1.206 million, up 0.2% from an upwardly revised 1.204 million rate (from 1.174 mln) in June
- The July figure was pretty much in-line with the Briefing.com consensus estimate, which stood at 1.200 million
- The upshot of this report is that the increase was powered by starts of single-family homes as they jumped 12.8% to 782,000, with increases seen in all regions
- Building permits in July were at a seasonally adjusted annual rate of 1.119 million, which was 16.3% below the revised June rate of 1.337 million (from 1.343 mln) and well below the Briefing.com consensus estimate of 1.257 million
- Single-family permits dipped 1.9% to 679,000
Global Market
Asian Markets Close: Japan’s Nikkei -0.3%; Hong Kong’s Hang Seng -1.4%; China’s Shanghai Composite -6.2%
Tuesday produced broad-based losses for equity markets in the Asia-Pacific region, none greater than the one seen in China’s Shanghai Composite (-6.2%). The weakness there was attributed primarily to concerns about further yuan devaluation, although it stands to reason that worries about weakening end demand in the region also played a part in the selling. Separately, Thailand’s market (-2.8%) was also hit hard following Monday’s bomb attack, which is being investigated as a possible organized act of terrorism.
Economic Data
- China
- July House Prices +0.3% month-over-month (prior +0.4%); -3.7% year-over-year (prior -4.9%)
- Hong Kong
- July Unemployment Rate 3.3% (expected 3.2%; prior 3.2%)
- Australia
- July New Motor Vehicle Sales -1.3% month-over-month (prior +3.9%)
Equity Markets
- Japan’s Nikkei declined 0.3% and ended near its lows for the day. The modest loss was driven by weakness in the consumer discretionary (-0.8%) and consumer staples (-0.6%) sectors; however, relative strength in the financials (+0.4%) and industrials (+0.4%) sectors helped limit the losses. JX Holdings (-3.6%), Minebea (-3.5%), and Olympus (-3.4%) were the weakest issues. Alps Electric (+4.8%), Unitika (+4.5%), and GS Yuasa (+4.2%) led the gainers. Out of the 225 index members, 104 ended higher, 116 finished lower, and 5 were unchanged.
- Hong Kong’s Hang Seng declined 1.4% in a trend-down day that saw the index close pretty much on its lows for the session. The Hang Seng took its cue from mainland markets, which were decidedly weak. Lenovo Group (-5.8%), Belle International Holdings (-4.2%), and Ping An Insurance (-3.0%) were the weakest links. China Resources Power Holdings (+4.1%) was the only stock to gain in excess of 1.0%. Out of the 50 index members, 3 ended higher and 47 finished lower.
- China’s Shanghai Composite unraveled, falling 6.2% in a trend-down day that saw selling efforts accelerate in the afternoon session. The move came despite a report that nationwide home prices increased month-over-month for the third straight month. News outlets attributed the selloff to worries about further yuan devaluation, although concerns about weakening end demand in the region probably factored into the selling as well.
- India’s Sensex declined 0.2% with weakness in the utilities (-3.5%), energy (-1.6%), health care (-1.0%), and financials (-0.4%) sectors acting as a drag. GAIL India (-4.4%), Coal India (-4.1%), and Cipla Ltd (-2.8%) were the worst-performing issues while Tata Steel (+2.3%), Tata Consultancy Services (+2.1%), and Infosys (+1.9%) topped the list of winners. Out of the 30 index members, 9 ended higher and 21 finished lower.
- Australia’s S&P/ASX 200 declined 1.2% and closed at its low for the session, feeling the drag of China’s rout and weakness elsewhere in the region. The gold (-3.2%), financials (-2.0%), and energy (-1.8%) sectors led the way lower. Out of the 200 index members, 52 ended higher, 138 finished lower, and 10 were unchanged.
- Regional advancers: Malaysia +0.5%, Vietnam +1.2%
- Regional decliners: South Korea -0.6%, Taiwan -0.4%, Indonesia -1.6%, Singapore -0.6%, Thailand -2.8%, Philippines -0.1%
FX
- USD/CNY -0.01% at 6.3942
- USD/INR -0.1% at 65.380
- USD/JPY -0.1% at 124.27
EUROPE
Major European indices trade in the red with UK’s FTSE (-0.6%) showing the largest decline. With many market participants away for vacation, those who remained have been focusing on UK’s latest inflation data that showed the fastest increase in core CPI since February. The pound rallied against the dollar in reaction to the data, climbing about 0.7% to 1.5695.
- UK’S July CPI -0.2% month-over-month (expected -0.3%; prior 0.0%); +0.1% year-over-year (consensus 0.0%; last 0.0%). Separately, Core CPI +1.2% year-over-year (consensus 0.8%; last 0.8%), Input PPI -0.9% month-over-month (expected -1.9%; prior -1.8%), and Output PPI -0.1% month-over-month, as expected (prior -0.1%). Also of note, House Price Index +5.7% year-over-year (consensus 5.9%; last 5.6%)
Closing Prices
- UK’s FTSE: -0.4%
- Germany’s DAX: -0.2%
- France’s CAC: -0.3%
- Spain’s IBEX: + 0.0%
- Portugal’s PSI: -0.2%
- Italy’s MIB Index: -0.1%
- Irish Ovrl Index: + 0.8%
- Greece ASE General Index: -1.1%
Macroeconomic Data
Economic Data
from Briefing.com
- Housing Starts : 1206K vs 1200K (Prior 1204K - Up)
- Building Permits : 1119K vs 1257K (Prior 1337K - Down)
HOUSING STARTS & BUILDING PERMITS
Highlights
- Housing starts in July ran at a seasonally adjusted annual rate of 1.206 million, up 0.2% from an upwardly revised 1.204 million rate (from 1.174 mln) in June. The July figure was pretty much in-line with the Briefing.com consensus estimate, which stood at 1.200 million.
- Building permits in July were at a seasonally adjusted annual rate of 1.119 million, which was 16.3% below the revised June rate of 1.337 million (from 1.343 mln) and well below the Briefing.com consensus estimate of 1.257 million. Single-family permits dipped 1.9% to 679,000.
Key Factors
- The upshot of this report is that the increase was powered by starts of single-family homes. They jumped 12.8% to 782,000, with increases seen in all regions. The Northeast was by far the strongest with a 66.7% increase in single-family starts, followed by the Midwest (+20.0%), the West (+16.6%), and the South (+3.8%).
- The big drop in permits is being attributed mainly to the expiration of a tax break for multi-family developers in New York, which put a serious drag on permit applications. That was evident in the fact that total permits in the Northeast were down 60.2% from June.
- The number of homes under construction jumped to 908,000 in July from 890,000 in June. Most of the month-over-month increase was led by single-family units, which is a positive consideration for Q3 GDP estimates since construction spending is higher on a per unit basis for single-family homes than it is in the multi-family sector.
Multifamily starts (i.e. 2 or more units) declined 17% to 424,000. That pullback was not entirely surprising considering the increase in June was the strongest since April 1988.
Big Picture
- Construction trends have recovered following the unusually cold winter and are back on their late 2014 accelerated pace.
Market Internals
NYSE:
Lower Volumes than the day before – 689.3M vs 701.4M
Decliners outpaced Advancers (adv/dec): 1080 / 1974
New Lows outpaced New Highs (highs/lows): 87 / 164
NASDAQ:
Lower Volumes than the day before – 1496.5M vs 1504.4M
Decliners outpaced Advancers (adv/dec): 909 / 1930
New Lows outpaced New Highs (highs/lows): 71 / 104
VOLATILITY S&P500 (VIX)
13.79 +0.77 (+5.91%)
Technical Updates
17,511.34 -33.84 (-0.19%)
Volume: 79,897,088 (below average of 92,769,277)
Range: 17,486.42 - 17,568.40
Range: 17,486.42 - 17,568.40
5,059.35 -32.35 (-0.64%)
Volume: 347.5M (below average of 430,737,661)
Volume: 347.5M (below average of 430,737,661)
Range: 5,054.97 - 5,085.14
2,096.92 -5.52 (-0.26%)
Volume: 444.2M (below average of 531,243,400)
Range: 2,094.14 - 2,103.47
DOW could not break above its ascending trend line and it was rejected by the resistance at 17,570. NASDAQ went down to the lower bound of its channel while the 20MA is about to cross lower the 50MA. S&P managed to close above its support at 61.8% Fib level but could not break above its yesterday high. The 3 indices have somewhat formed a lower highs which could indicate the market is still in a downtrend. If the indices were to go down, this is saying the market is more or less done with the pullback...
Commodities
- The dollar index held its gains today, which helped weigh on commodities today
- WTI crude oil, however, displayed a late-day rally, rising back above $42/barrel and as high as $42.90/barrel
- Sept crude ended today’s session +1.8% at $42.58/barrel
- In other energy, Sept nat gas -1.1% at $2.70/MMBtu
- Silver held deep losses today and remains near today’s low
- Gold held modest losses following in post-morning rally
- Dec gold ended -0.1% at $1117.00/oz, while Sept silver finished -3.2% at $14.81/oz
Energy
- September crude oil futures rose $0.77 (+1.8%) to $42.58/barrel
- September natural gas closed $0.03 lower (-1.1%) at $2.70/MMBtu
- RBOB Gasoline closed flat at $1.65/gallon
- Heating oil futures closed $0.01 higher at $1.56/gallon
Agriculture
- December corn closed $0.03 higher at $3.77/bushel
- September wheat closed $0.06 lower at $4.94/bushel
- November soybeans closed $0.14 lower to $9.03/bushel
- Sugar #11 closed $0.10 cents higher at 10.73 cents/lb
Metals
- December gold ended today’s session $1.20 lower (-0.1%) at $1117.00/oz
- September silver closed today’s session $0.49 lower (-3.2%) at $14.81/oz
- September copper closed $0.04 lower (-1.7%) at $2.29/lb
Currencies
- The pound sterling soared this morning after U.K. inflation figures surprised on the upside, leading investors to speculate that the BoE's path of tightening will be sooner and steeper
- The headline CPI rose 0.1% in the year to July and the Core CPI increased by 1.2% y/y in July
- PPI Input prices dropped 0.9% m/m
- GBP/USD: +0.49% to $1.5659
- The U.S. Dollar Index gained 0.22% to 97.02 after Housing Starts rose to an 8-year high in July
- Housing Starts rose to a seasonally-adjusted annualized rate of 1206K in July from 1204K in June (revised up from 1174K). The Briefing.com consensus was 1200K
- EUR/USD: -0.46% to $1.1026
- The Spanish trade deficit widened in July to 2.05 bln euro from 1.66 bln euro in June
- USD/RUB: +0.62% to 65.71
- Russia's PPI grew at a faster-than-expected 1.5% m/m
- USD/JPY: -0.03% to 124.41
- July trade balance data comes out for Japan tonight
- USD/CHF: -0.11% to 0.9776
- USD/CAD: -0.29% to 1.3058
- AUD/USD: -0.45% to $0.7341
- The Reserve Bank of Australia released the minutes from its August 4th meeting, at which the RBA left its main policy rate at 2.00%. The central bank said that the weaker Aussie dollar was aiding the economy's transition away from mining investment
- NZD/USD: +0.16% to 0.6587
Bonds
- U.S. Treasuries moved lower today in a curve-steepening trade. In the morning, housing data was released for the month of July. While building permits missed estimates, there was an expiring tax break for multi-family construction that expired in New York, possibly skewing the data. Oil seemed to find buying interest around $42/bbl., and that may have caused some Treasury investors who had curve-flattening positions on to take some profits later in the session
- Yield Check:
- 2-yr: unch at 0.71%
- 5-yr: +1 bp to 1.58%
- 10-yr: +3 bps to 2.20%
- 30-yr: +4 bps to 2.86%
- News:
- Housing Starts rose to a seasonally-adjusted annualized rate of 1206K in July from 1204K in June (revised up from 1174K). The Briefing.com consensus was 1200K
- Building Permits dropped to 1119K in July from a downwardly-revised 1337K in June. The Briefing.com consensus was for 1257K
- The miss may have been due to an expiring tax break for multi-family developers in New York, according to Ian Sheperdson, the chief economist at Pantheon Macroeconomics
- Outgoing Dallas Fed President Richard Fisher will be replaced by Robert Steven Kaplan, who led both Goldman Sachs' investment banking and investment management units before leaving for Harvard Business School in 2006
- The president of the Dallas Fed is not scheduled to have a vote at FOMC meetings until 2017
- The Shanghai Composite dropped 6.2% overnight after the release of strong housing data gave the PBoC less latitude for monetary easing
- Commodities:
- WTI crude: +1.29% to $42.41/bbl
- Gold: -0.19% to $1,116.30/troy oz.
- Copper: -1.59% to $2.284/lb.
- Currencies:
- EUR/USD: -0.38% to $1.1034
- USD/JPY: -0.06% to 124.37
- Data Out Wednesday:
- MBA Mortgage Index for the week ended 8/15 (07:00 ET)
- July CPI and Core CPI (08:30 ET)
- Crude Inventories for the week ended 8/15 (10:30 ET)
- FOMC Minutes for the July meeting (14:00 ET)
- Fed Speaker:
- Minneapolis Fed President Kocherlakota (non-FOMC voter) (20:20 ET)
Treasury Yields:
- 2 Year Note 0.74% +0.02
- 5 Year Note 1.60% +0.02
- 10 Year Note 2.20% +0.04
- 30 Year Bond 2.87% +0.06
2/30 Spread: 213 bps ( +4 ) … 2/10 Spread: 146 bps ( +2 )
Preview for Wednesday 19 August, 2015
Economic Data
Wednesday (19 Aug) :
- MBA Mortgage Index : (Prior 0.1%)
- CPI : 0.2% (Prior 0.3%)
- Core CPI : 0.2% (Prior 0.2%)
- Crude Inventories : (Prior -1.682M)
- FOMC Minutes
Earnings Highlights
Wednesday (19 Aug) :
BMO - AEO EARS BZUN CTRN EV HRL IDRA LOW MBUU SOL SPLS TGT
AMC - ARCW GLPW GLYC HGR JMEI KEYS LB MOMO NTAP PLKI SMTC SPTN SNPS YOKU
Summary
Market doesn't really look that bullish after all. From what we have seen above, it looks as if market is more or less finished with the pullback. Tomorrow we are going to see the release of FOMC minutes, traders are going to find any signs from the Fed towards the decision on when to raise interest rate and their views on the US economy. A market mover catalyst here.
Crude oil seems to bounce back from its low at $41.35 and broke above the previous support at $42.50 on Tuesday. The EIA inventory report on Wednesday is going to be determine the movement of oil price from here. A bullish report might push the crude oil to break above the down trend since June this year.
After Hours Report (Briefing)
Futures are higher after hours: S&P 500 futures are +0.64 from fair value of 2,093.31 and Nasdaq100 futures are +3.88 from fair value of 4,539.82.
Tomorrow morning before the open three economic reports are scheduled to be released: 1) MBA Mortgage Index, 2) CPI (Consensus 0.2%), and 3) Core CPI (Consensus 0.2%)
Tomorrow before the open the following companies are scheduled to report earnings: TGT, LOW, SPLS, HRL, AEO, EV, CTRN, EARS, BZUN
Market doesn't really look that bullish after all. From what we have seen above, it looks as if market is more or less finished with the pullback. Tomorrow we are going to see the release of FOMC minutes, traders are going to find any signs from the Fed towards the decision on when to raise interest rate and their views on the US economy. A market mover catalyst here.
Crude oil seems to bounce back from its low at $41.35 and broke above the previous support at $42.50 on Tuesday. The EIA inventory report on Wednesday is going to be determine the movement of oil price from here. A bullish report might push the crude oil to break above the down trend since June this year.
After Hours Report (Briefing)
Futures are higher after hours: S&P 500 futures are +0.64 from fair value of 2,093.31 and Nasdaq100 futures are +3.88 from fair value of 4,539.82.
Tomorrow morning before the open three economic reports are scheduled to be released: 1) MBA Mortgage Index, 2) CPI (Consensus 0.2%), and 3) Core CPI (Consensus 0.2%)
Tomorrow before the open the following companies are scheduled to report earnings: TGT, LOW, SPLS, HRL, AEO, EV, CTRN, EARS, BZUN
Direction for Wednesday 19 Aug, 2015: Down
2015 Daily Directional Accuracy: 81/129 (62.79%)
2015 Weekly Directional Accuracy: 18/30 (60.00%)
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