Dow -0.33 at 17402.51, Nasdaq +7.60 at 5044.38, S&P +1.98 at 2086.06
Market doesn't look that bearish as I thought it would. During the pre-market, both futures and market were down. Market saw some selling at the opening but bounced back strongly afterwards. The strength of the pullback was rather strong as we saw the indices returned to the flat line at the end of the day.
Asia markets was showing a mixed performance but mostly were down while Europe continues to stay in the red amid Yuan devaluation from PBoC.
Market Summary
Industry Watch
Strong: Energy, Technology, Utilities
Weak: Consumer Discretionary, Financials, Telecom Services
Other Market Moving Factor:
- China's yuan slides for second consecutive day, retreat stopped by People's Bank of China intervention: USDCNY jumps 1.0% to 6.3870
- S&P 500 slides below 200-day moving average (2,075)
Equity indices faced selling pressure at the start after the overnight session featured another move to devalue China's yuan. Specifically, the People's Bank of China fixed the yuan 1.6% lower and then stepped in to support the currency late in the session. Following the intervention, the USD/CNY pair ended higher by 1.0% at 6.3870 while the continued tinkering with the exchange rate by the PBoC fueled a continuation of Tuesday's risk-off move across global markets.
The selling pressure persisted until the end of the European session with major equity indices across the old continent losing between 1.4% and 3.4%. Regional markets notched their session lows not long before the close, after Germany's Bild reported that the German government views the third Greek bailout package as insufficient. This was a noteworthy shift, considering just yesterday the market had believed the bailout agreement was all but complete. The eurogroup will attempt to extinguish the latest fire during a Friday meeting in Brussels.
Once equity markets in Europe closed, U.S. indices rallied steadily off their lows with the S&P 500 swiftly returning above its 200-day moving average (2,075). Thanks to the intraday recovery, seven sectors registered gains while three groups finished in the red, but above their early lows.
Most notably, the financial sector (-0.9%) finished well behind the broader market amid growing expectations the Fed may be inclined to delay its first rate hike past September due to the recent actions undertaken by the People's Bank of China. Sector heavyweights like Bank of America (BAC 17.52, -0.27), Citigroup (C 56.91, -0.73), and JPMorgan Chase (JPM 67.24, -0.99) narrowed their losses by the close, but still surrendered between 1.3% and 1.5%.
Another clue that suggested the market may be shifting its rate-hike expectations was the weakness in the Dollar Index (96.24, -0.99), which fell 1.0%, returning to levels last seen in mid-July. On a related note, Treasuries surged overnight, but retreated throughout the day, ending with slight gains. As a result, the benchmark 10-yr yield slipped one basis point to 2.13% after testing the 2.05% level in early morning action.
Outside of financials, consumer discretionary (-0.4%) and telecom services (-0.5%) ended in the red with retailers pressuring the discretionary sector, evidenced by a 0.5% slide in SPDR S&P Retail ETF (XRT 96.35, -0.51). On the earnings front, Fossil (FOSL 60.67, -1.44) lost 2.3% after missing revenue estimates and guiding fiscal-year 2015 earnings below analyst expectations.
On the upside, the energy sector (+1.9%) led the rebound while crude oil endured a volatile session, but settled higher by 0.3% at $43.23/bbl and continued climbing during electronic trading.
Elsewhere among cyclical sectors, technology (+0.5%) was largely responsible for the intraday rebound as the sector rallied behind Apple (AAPL 115.24, +1.75). The largest stock by market cap plunged 5.5% yesterday and opened lower by 3.5% today, but climbed to settle with a gain of 1.5%. In other tech names, there was plenty of strength among high-beta chipmakers with the PHLX Semiconductor Index climbing 0.6%. Cree (CREE 26.59, +1.39) was among the leaders, spiking 5.5% despite missing earnings estimates and reporting revenue in-line with its warning from June.
Similar to chipmakers, the high-beta biotech group outperformed during afternoon action, which contributed to the rebound. The iShares Nasdaq Biotechnology ETF (IBB 370.16, +2.99) climbed 0.8% while the broader health care sector tacked on 0.1%.
Today's session invited the strongest trading volume of the week with more than 910 million shares changing hands at the NYSE floor.
On the economic front, the June Job Openings and Labor Turnover Survey showed a decrease in openings to 5.249 million from 5.357 million while the Treasury Budget statement for June showed a deficit of $149.20 billion (Briefing.com consensus -$149.00 billion).
Tomorrow, weekly Initial Claims (Briefing.com consensus 271K), July Retail Sales (consensus 0.5%), and July Import/Export Prices will be reported at 8:30 ET while the June Business Inventories report (expected 0.3%) will be released at 10:00 ET.
Global Market
Asian Markets Close: Japan’s Nikkei -1.6%; Hong Kong’s Hang Seng -2.4%; China’s Shanghai Composite -1.1%
It was a sea of red across the Asia-Pacific region as equity markets remained on the defensive following another big jolt of weakness in the yuan that perpetuated Tuesday’s concerns about competitive devaluation. A batch of weaker than expected data out of China didn’t help matters globally as that perpetuated concerns about the country’s economic slowdown and end demand in general.
Economic data
- China
- July Industrial Production +6.0% year-over-year (expected +6.6%; prior +6.8%)
- July Fixed Asset Investment +11.2% year-over-year (expected +11.5%; prior +11.4%)
- July Retail Sales +10.5% year-over-year (expected +10.6%; prior +10.6%)
- Japan
- June Industrial Production +1.1% month-over-month (expected +0.8%; prior +0.8%)
- June Capacity Utilization +0.7% month-over-month (prior -3.0%)
- Tertiary Industry Activity Index +0.3% month-over-month (expected +0.1%; prior -0.7%)
- July CGPI -0.2% month-over-month (expected -0.1%; prior -0.2%); -3.0% year-over-year (expected -2.9%; prior -2.4%)
- South Korea
- July Unemployment Rate 3.7% (expected 3.9%; prior 3.9%)
- August M2 Money Supply +9.7% (prior +9.5%)
- Australia
- August Westpac Consumer Sentiment 7.8% (prior -3.2%)
- Q2 Wage Price Index +0.6% quarter-over-quarter (expected +0.6%; prior +0.5%); +2.3% year-over-year (expected +2.3%; prior +2.3%)
Equity Markets
- Japan’s Nikkei declined 1.6%, led lower by the industrials (-2.0%), materials (-2.0%), technology (-2.0%), and consumer staples (-1.9%) sectors. The biggest laggards were JFE Holdings (-7.1%), SCREEN Holdings (-6.5%), and Kobe Steel (-6.1%). Unitika (+7.7%), Pioneer Corp (+5.3%), and Furukawa (+2.9%) topped the list of winners. Out of the 225 index members, 33 ended higher, 189 finished lower, and 3 were unchanged.
- Hong Kong’s Hang Seng declined 2.4% in a trend-down day. Property stocks comprised a notable point of weakness. China Overseas Land & Investment (-8.3%), China Resources Land (-8.0%), and BOC Hong Kong Holdings (-7.8%) were the worst-performing issues. Li & Fung (+2.8%) and CLP Holdings (+1.3%) were the only stocks to gain in excess of 1.0%. Out of the 50 index members, 5 ended higher, 42 finished lower, and 3 were unchanged.
- China’s Shanghai Composite declined 1.1% after succumbing to a bout of selling interest in the last hour of trading. The weakness followed weaker than expected results for the July industrial production, fixed asset investment, and retail sales reports that fed concerns about the economic slowdown in China. Losses were held in check most likely by the assumption that the soft data increase the likelihood of additional policy stimulus.
- India’s Sensex declined 1.3% and finished near its lows for the day. The materials (-3.1%), energy (-2.8%), and financials (-2.5%) sectors were the weakest links. Vedanta (-7.9%), Hindalco Industries (-7.1%), and Coal India (-5.1%) paced declining issues while Sun Pharmaceuticals (+3.0%), Infosys (+2.9%), and Tata Consultancy Services (+2.5%) led a small group of winners. Out of the 30 index members, 8 ended higher and 22 finished lower.
- Australia’s S&P/ASX 200 declined 1.7%, dragged lower by losses in the information technology (-7.3%), metals & mining (-4.0%), and resources (-3.9%) sectors. Out of the 200 index members, 29 ended higher, 162 finished lower, and 9 were unchanged.
- Regional advancers: None
- Regional decliners: South Korea -0.6%, Taiwan -1.3%, Malaysia -1.6%, Indonesia -3.1%, Singapore -2.9%, Vietnam -1.4%, Philippines -1.0%
- Closed for holiday: Thailand (H.M. The Queen Birthday)
FX
- USD/CNY +1.0% at 6.3858
- USD/INR +0.9% at 64.7612
- USD/JPY -0.6% at 124.42
EUROPE
Major European indices trade lower across the board with France’s CAC (-2.4%) leading the slide. Elsewhere, Germany’s government is reportedly looking at ways that would enable the eurozone to guarantee Greece’s obligations to the International Monetary Fund, thus eliminating the need for debt relief that has been requested by the IMF.
- Eurozone June Industrial Production -0.4% month-over-month (expected -0.2%; prior -0.4%); +1.2% year-over-year (consensus 1.5%; last 1.6%)
- UK’s June Average Earnings Index + Bonus +2.4% year-over-year (consensus 2.8%; prior 3.2%) while July Claimant Count -4,900 (expected +1,500; prior +200). Separately, the Unemployment Rate held at 5.6%, as expected
- France’s June Current Account surplus expanded to EUR1.00 billion from EUR200 million, as expected
- Italy’s June trade surplus narrowed to EUR2.81 billion from EUR4.14 billion (expected surplus of EUR3.98 billion)
- Swiss August ZEW Expectations increased to 5.9 from -5.4
Closing Prices
- UK’s FTSE: -1.4%
- Germany’s DAX: -3.3%
- France’s CAC: -3.4%
- Spain’s IBEX: -2.4%
- Portugal’s PSI: -1.1%
- Italy’s MIB Index: -3.0%
- Irish Ovrl Index: -2.7%
- Greece ASE General Index: -1.9%
Macroeconomic Data
Economic Data
from Briefing.com
- MBA Mortgage Index : 0.1% (Prior 4.7%)
- JOLTS - Job Openings : 5.249M (Prior 5.357M - Down)
- Crude Inventories : -1.682M (Prior -4.407M)
- Treasury Budget : -$149.2B vs -$149.0B (Prior -$94.6B)
TREASURY BUDGET
Highlights
- The Treasury Budget showed a deficit of $149.2 bln in July, up from a deficit of $94.6 bln in July 2014. The Treasury data are not seasonally adjusted, and the July deficit cannot be compared to the $50.5 bln surplus in May.
Key Factors
- The actual deficit was not much different than the CBO's Treasury Budget forecast of -$149.0 bln that was released a few days ago.
- Total revenues increased to $225.5 bln in July 2015 from $214.5 bln in July 2014, a gain of $11.0 bln.
- Total outlays increased by $65.7 bln to $374.7 bln in July 2014 from $309.1 bln in July 2014.
- Fiscal year-to-date, the deficit is $465.5 bln versus $460.5 bln for the comparable period in FY 2014.
Big Picture
- Raw data available at: www.fiscal.treasury.gov/fsreports/rpt/mthTreasStmt/current.htm
Market Internals
NYSE:
Higher Volumes than the day before – 938.0M vs 857.1M
Decliners outpaced Advancers (adv/dec): 1535 / 1562
New Lows outpaced New Highs (highs/lows): 30 / 207
NASDAQ:
Higher Volumes than the day before – 2081.0M vs 1899.2M
Decliners outpaced Advancers (adv/dec): 1240 / 1590
New Lows outpaced New Highs (highs/lows): 33 / 146
VOLATILITY S&P500 (VIX)
13.61 -0.10 (-0.73%)
Technical Updates
17,402.51 -0.33 (-0.00%)
Volume: 120,399,972 (above average of 93,219,500)
Range: 17,125.81 - 17,423.90
Range: 17,125.81 - 17,423.90
5,044.39 +7.60 (+0.15%)
Volume: 474,104,484 (above average of 434,006,359)
Volume: 474,104,484 (above average of 434,006,359)
Range: 4,945.79 - 5,055.75
2,086.05 +1.98 (+0.10%)
Volume: 632,320,000 (above average of 534,371,031)
Range: 2,052.09 - 2,089.06
The 3 indices were forming almost the same reaction. Despite with the death cross, DOW bounced back after hitting the support at 17,500 and closed slightly above the support at 17,360. NASDAQ sits on the support at 4,950 and went back up to test its resistance at 5,040. S&P stay above its 200MA and its ascending trend line but it is approaching a resistance at 2,090. I would say the market is still bearish at the moment however the bulls are not likely to go down without putting up a fight.
Commodities
- Grains got hammered today on the monthly USDA WASDE report. Corn lost 4.9% to $3.69/bu, wheat dropped -2.6% to $4.94/bu and soybeans tanked -6.4% to $9.10/bu
- The dollar index continued to trade in negative territory, which helped keep commodities mostly propped up, such as copper, precious metals and natural gas
- However, natural gas has largely been driven by weather forecasts and oil has been driven by many variables, particularly the oversupply issues.
- Today, Sept nat gas rallied 3% to $2.93/MMBtu.
- Sept crude oil ended the session 0.3% higher to $43.23/barrel.
- In current trade, gold, silver, copper and natural gas futures are all sitting near today’s highs.
- The dollar index is currently -1.1%.
- Dec gold rose 1.4% today to $1123.70/oz, while Sept silver gained+1.2% at $15.48/bu. Copper climbed 1%.
Energy
- September crude oil futures rose $0.11 (+0.3%) to $43.23/barrel
- September natural gas closed $0.08 higher (+2.7%) at $2.93/MMBtu
- RBOB Gasoline closed $0.07 higher at $1.76/gallon
- Heating oil futures closed $0.03 higher at $1.59/gallon
Agriculture
- December corn closed $0.19 lower (-4.9%) at $3.69/bushel
- September wheat closed $0.13 lower (-2.6%) at $4.94/bushel
- November soybeans closed $0.62 lower (-6.4%) to $9.10/bushel
- Sugar #11 closed $0.08 cents lower at 10.54 cents/lb
- Agricultural commodity price action was driven by this morning’s WASDE report release
Metals
- December gold ended today’s session $15.60 higher (+1.4%) at $1123.70/oz
- September silver closed today’s session $0.19 higher (+1.2%) at $15.48/oz
- September copper closed $0.02 higher (+0.9%) at $2.35/lb
Currencies
- The U.S. Dollar Index fell 1.03% to 96.28 as investors anticipated a slower pace of interest rate policy normalization from the Fed. Since the Chinese government began to let market forces determine the value of the yuan, the Chinese currency has fallen 3.5% and the probability of a Fed hike at the September meeting has declined to 38%
- EUR/USD: +1.06% to $1.1161
- The German government is exploring the option of the EU indemnifying the IMF against potential losses from the Greek bailout in exchange for the IMF backtracking on its insistence for extensive debt relief
- GBP/USD: +0.17% to $1.5604
- The UK's Average Earnings Index (including bonuses) rose 2.4%, missing expectations and trailing the 3.2% growth in May
- The unemployment rate remained to 5.6%, in line with expectations
- USD/JPY: -0.67% to 124.23
- In Japan, Industrial Production grew a better-than-expected 1.1% m/m in June versus 0.8% growth in May
- The Tertiary Industry Activity Index rose 0.3% m/m versus a 0.7% decline in May
- In Japan, Industrial Production grew a better-than-expected 1.1% m/m in June versus 0.8% growth in May
- USD/CHF: -1.38% to 0.9746
- ZEW Expectations for the Swiss economy jumped to 5.9 in August from -5.4 in July
- USD/CAD: -0.76% to 1.3001
- AUD/USD: +0.72% to $0.7365
- Australia's Westpac Consumer Sentiment rose 7.8% in August versus a fall of 3.2% in the prior reading
- The Wage Price Index rose 0.6% q/q in Q2, in line with expectations and better than the 0.5% from Q1
- NZD/USD: +0.86% to$ 0.6614
Bonds
- The U.S. Treasury market gave back early gains today as the equity markets went from deep losses to gains and the 10-year Treasury auction found little buying interest
- Yield Check:
- 2-yr: unch at 0.66%
- 5-yr: +3 bps to 1.51%
- 10-yr: unch at 2.14%
- 30-yr: +3 bps to 2.84%
- News:
- William Dudley, president of the New York Federal Reserve Bank, said that the Fed could raise rates in September
- He also said that monetary policy cannot solve problems of skills mismatches
- June JOLTS - Job Openings were 5.294 mln, down from the prior reading of 5.357 mln
- The MBA Mortgage Index for the week ending 8/8 rose 0.1% versus +4.7% in the prior week
- The $24 billion 10-year note auction was met with lackluster demand, sporting a 0.7 bp tail and the lowest bid-to-cover ratio since 2009
- High Yield: 2.115%
- Bid-to-cover: 2.40
- Indirect bid: 60.1%
- Direct bid: 5.8%
- The Treasury Budget showed a deficit of $149.2 bln in July, up from a deficit of $94.6 bln in July 2014. The Treasury data are not seasonally adjusted, and the July deficit cannot be compared to the $50.5 bln surplus in May
- William Dudley, president of the New York Federal Reserve Bank, said that the Fed could raise rates in September
- Commodities:
- WTI crude: +0.74% to $43.40/bbl.
- Gold: +1.35% to $1,122.60
- Copper: +0.73% to $2.35/lb.
- Currencies:
- EUR/USD: +1.13% to $1.1168
- USD/JPY: -0.68% to 124.21
- Data Out Thursday:
- Initial Jobless Claims for the week ending 8/08 and Continuing Jobless Claims for the week 8/01 (08:30 ET)
- July Retail Sales and Retail Sales ex-auto (08:30 ET)
- July Export Price ex-ag and Import Prices ex-oil (08:30 ET)
- June Business Inventories (10:00 ET)
- Natural Gas Inventories for the week ending 8/08)
- Treasury Auction:
- $16 bln 30-year bond auction (results at 13:00 ET)
Treasury Yields:
- 2 Year Note 0.67% -0.01
- 5 Year Note 1.52% -0.01
- 10 Year Note 2.14% -0.01
- 30 Year Bond 2.84% +0.03
2/30 Spread: 217 bps ( +4 ) … 2/10 Spread: 147 bps ( UNCH )
Preview for Thursday 13 August, 2015
Economic Data
Thursday (13 Aug) :
- Initial Claims : 273K (Prior 270K)
- Continuing Claims : 2247K (Prior 2255K)
- Retail Sales : 0.5% (Prior -0.3%)
- Retail Sales ex-auto : 0.5% (Prior -0.1%)
- Export Prices ex-agri : (Prior -0.1%)
- Import Prices ex-oil : (Prior -0.2%)
- Business Inventories : 0.3% (Prior 0.3%)
- Natural Gas Inventories : (Prior 32 bcf)
Earnings Highlights
Thursday (13 Aug) :
BMO - AAP CRNT COTY DANG DDS GK KSS PFNX STOR TRCO VSTO
AMC - AMAT AZPN BLCM PRSS DAR LOCO EXXI GLOB JYNT KING JWN PAAS PCTY SINA RARE VCYT WB WX YY
BMO - AAP CRNT COTY DANG DDS GK KSS PFNX STOR TRCO VSTO
AMC - AMAT AZPN BLCM PRSS DAR LOCO EXXI GLOB JYNT KING JWN PAAS PCTY SINA RARE VCYT WB WX YY
Summary
The extent of the pullback somewhat indicates a return of confidence from the bulls. However with the general market being in a round top state (mentioned here last Friday), it would need a strong catalyst to bring the market up. Looking at the situation, I reckon the odds is still with the downside.
There is not much of upside in the after-hours and as the indices are approaching a resistance going forward, it would take a strong conviction from the bulls to push the market higher.
The extent of the pullback somewhat indicates a return of confidence from the bulls. However with the general market being in a round top state (mentioned here last Friday), it would need a strong catalyst to bring the market up. Looking at the situation, I reckon the odds is still with the downside.
There is not much of upside in the after-hours and as the indices are approaching a resistance going forward, it would take a strong conviction from the bulls to push the market higher.
Direction for Thursday 13 Aug, 2015: Down
2015 Daily Directional Accuracy: 79/125 (63.20%)
2015 Weekly Directional Accuracy: 18/29 (62.07%)
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