Dow +619.07 at 16285.51, Nasdaq +191.05 at 4697.54, S&P +72.90 at 1940.51
Market gap up in the pre-market, suggesting a possibility of a pullback. The bullish strength seemed to fade a little in the first half of Wednesday session before a strong rally to bring the market higher. Meanwhile FOMC member William Dudley was speaking last night and it was inferred that a rate hike in September is rather unlikely.
Mixed performance around the world markets as China continues to suffer another down session despite the effort from PBoC to cut interest rate. Europe markets were mostly flat to the downside while the rest of Asia markets were showing some recovery.
Market Summary
Industry Watch
Strong: Consumer Discretionary, Financials, Health Care, Technology
Weak: Energy, Utilities
Other Market Moving Factor:
- Futures market remains volatile: early losses followed by a steady rally
- China's Shanghai Composite declines 1.3% despite easing measures from People's Bank of China
[BRIEFING.COM] The stock market rebounded from six days of consecutive losses on Wednesday with the S&P 500 spiking 3.9%. The benchmark index narrowed its weekly loss to 1.5% while the Nasdaq gained 4.2%, trimming this week's decline to 0.2%.
Equity indices began the day on a higher note after index futures rallied during overnight action. That advance occurred even as China's Shanghai Composite lost 1.3%, seeing little response to yesterday's rate cut from the People's Bank of China.
Once the trading day begun, the key indices spent the first three hours of action in a slow slide from their highs. The market saw little immediate reaction to comments from FOMC vice Chair William Dudley, who said that a case for a rate hike in September seems less compelling than it was a few weeks ago.
Despite the comments from Mr. Dudley, the market continued dripping from highs, but the S&P 500 was able to reverse course upon hitting the 1,880 level. Although there was nothing special about that mark, it is worth noting that the turn occurred as the dollar began rallying against the euro and yen, suggesting the return of carry flows. The greenback continued climbing alongside equities into the late afternoon, pushing the Dollar Index higher by 0.7%.
On a related note, Treasuries retreated during morning action and saw a second slide in the afternoon that sent the benchmark 10-yr yield higher by 12 basis points to 2.19%.
The considerable spike in yields kept the utilities sector (+1.7%) behind the broader market while the remaining nine groups gained between 2.8% and 5.3%.
The technology sector (+5.3%) finished in the lead after showing relative strength throughout the trading day. Large cap names like Apple (AAPL 109.62, +5.89), Facebook (FB 87.19, +4.19), and Google (GOOGL 659.74, +47.27) spiked between 5.1% and 7.7% while high-beta chipmakers also outperformed. The PHLX Semiconductor Index jumped 5.1% with all 30 components posting gains. Thanks to today's surge, the SOX index is now up 1.6% for the week.
Elsewhere, the health care sector (+4.3%) finished in second place, thanks in part to the relative strength in biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 341.75, +16.49) spiked 5.1%, turning this week's loss into a 0.6% week-to-date gain.
Also of note, the energy sector (+3.5%) settled not far behind the broader market even though crude oil surrendered 1.6%, falling to $38.68/bbl. There was some M&A activity in the sector that may have been lost in the shuffle as Cameron (CAM 59.93, +17.46) surged 41.1% after agreeing to be acquired by Schlumberger (SLB 70.09, -2.43) for $14.80 billion in cash and stock, which translates to roughly $66.36/share.
Today's participation was well above average with more than 1.25 billion shares changing hands at the NYSE floor.
Economic data was limited to Durable Orders and MBA Mortgage Index:
- Durable goods orders increased 2.0% in July after increasing an upwardly revised 4.1% (from 3.4%) in June while the Briefing.com consensus expected a decline of 0.6%
- A big reason for the upside surprise came from the automotive sector as orders for motor vehicles and parts products rose 4.0% in July after increasing 0.8% in June.
- Aircraft orders, which were expected to push overall durable goods orders into negative territory, declined a relatively modest 7.8%. That drop was easily offset by the aforementioned increase in motor vehicle orders
- Excluding transportation, durable goods orders increased 0.6% in July after increasing an upwardly revised 1.0% (from 0.6%) in June while the consensus expected an increase of 0.4%
- The weekly MBA Mortgage Index ticked up 0.2% to follow last week's 3.6% increase
Tomorrow, weekly Initial Claims (Briefing.com consensus 275K) and the second estimate of Q2 GDP (consensus 3.1%) will be released at 8:30 ET while the Pending Home Sales report for July (expected 1.0%) will cross the wires at 10:00 ET.
Global Market
ASIA
Asian Markets Close: Japan’s Nikkei +3.2%; Hong Kong’s Hang Seng -1.5%; China’s Shanghai Composite -1.3%
It was a mixed day of trading action in the Asian-Pacific markets, which saw Japan’s Nikkei rebound 3.2% and China’s Shanghai Composite decline another 1.3%. The loss in China was logged after stepped-up selling pressure late in the session that suggested investors remain nervous and weren’t overly impressed with the scope of the latest easing measures announced by the People’s Bank of China.
Economic data
- Japan
- Corporate Services Price Index +0.6% year-over-year (expected +0.4%; prior +0.4%)
- South Korea
- August Consumer Confidence 102 (expected 99; prior 100)
- Australia
- Q2 Construction Work Done +1.6% quarter-over-quarter (expected -1.5%; prior -0.8%)
- New Zealand
- July Trade Balance NZD -649 mln (expected NZD -750 mln; prior NZD -194 mln)
- Exports NZD 4.20 bln (expected NZD 3.85 bln; prior NZD 4.14 bln)
- Imports NZD 4.85 bln (expected NZD 4.50 bln; prior NZD 4.33 bln)
- Singapore
- Industrial Production +1.0% month-over-month (expected +2.7%; prior -2.8%); -6.1% year-over-year (expected -3.3%; prior -4.0%)
Equity Markets
- Japan’s Nikkei rebounded 3.2% following the prior two sessions in which it plunged 8.7%. Buying efforts picked up throughout the session and the Nikkei ended near its highs for the day, driven by gains in the technology (+4.4%), consumer discretionary (+4.0%), and financials (+3.4%) sectors. TDK Corp (+10.2%), Nitto Denko Corp (+9.3%), and Tokyo Electric Power (+8.7%) paced the winners while Pacific Metals (-3.5%), Nippon Paper Industries (-2.5%), and Komatsu (-1.9%) led the laggards. Out of the 225 index members, 210 ended higher and 15 finished lower.
- Hong Kong’s Hang Seng declined 1.5% and ended near its lows for the day as selling efforts picked up in the afternoon session — a move that mimicked trading in the mainland markets. Galaxy Entertainment Group (-5.6%), Hengan International (-5.1%), and Tingyi Cayman Islands Holding (-4.7%) were the biggest losers. Kunlun Energy (+3.5%), China Shenhua Energy (+2.5%), and CNOOC (+1.9%) topped a small group of winners. Out of the 50 index members, 11 ended higher, 36 finished lower, and 3 were unchanged.
- China’s Shanghai Composite dropped another 1.3%, coughing up a 4.3% gain in the final two hours of trading as sellers resumed their efforts. The downturn following the PBOC easing measures suggests participants were unimpressed with the scope of the PBOC’s measures to help boost the economy and restore investor confidence. Separately, it was reported that the PBOC injected 140 billion yuan (~$22 bln) into the interbank money market on Wednesday, presumably to help offset capital outflows.
- India’s Sensex declined 1.2% and also finished near its lows for the day, slipping under the weight of late selling pressure. The financials (-2.2%), industrials (-1.3%), and health care (-1.2%) sectors led the losses. Hero MotoCorp (-3.8%), State Bank of India (-3.0%), and Mahindra & Mahindra (-2.8%) were the worst-performing issues. Bharat Heavy Electricals (+4.0%), Bajaj Auto (+2.1%), and Tata Motors (+1.9%) were the best-performing stocks. Out of the 30 index members, 11 ended higher and 19 finished lower.
- Australia’s S&P/ASX 200 increased 0.7% and ended near its highs for the day, helped by a rebound in the energy (+2.8%), information technology (+1.9%), and resources (+1.9%) sectors. Out of the 200 index members, 109 ended higher, 79 finished lower, and 12 were unchanged.
- Regional advancers: South Korea +2.6%, Taiwan +0.5%, Malaysia +1.1%, Indonesia +0.2%, Vietnam +3.0%, Philippines +0.6%
- Regional decliners: Singapore -0.5%, Thailand -0.5%
FX
- USD/CNY -0.05% at 6.4093
- USD/INR -0.03% at 66.075
- USD/JPY +0.6% at 119.50
EUROPE
Major European indices began the day with sharp losses, but they have been climbing off their lows since the start of the session. At this juncture, regional markets hover near their flat lines.
- UK’s August CBI Distributive Trades Survey rose to 24 from 21 (expected 18) while BBA Mortgage Approvals came in at 46,000, as expected (prior 44,800)
- Swiss July Consumption Indicator rose to 1.64 from 1.61
Closing Prices
- UK’s FTSE: -1.7%
- Germany’s DAX: -1.3%
- France’s CAC: -1.4%
- Spain’s IBEX: -1.0%
- Portugal’s PSI: -1.0%
- Italy’s MIB Index: -0.8%
- Irish Ovrl Index: + 0.3%
- Greece ASE General Index: + 0.2%
Macroeconomic Data
Economic Data
from Briefing.com
- MBA Mortgage Index : 0.2% (Prior 3.6%)
- Durable Orders : 2.0% vs -0.8% (Prior 3.4%)
- Durable Goods - ex transportation : 0.6% vs 0.5% (Prior 0.8%)
- Crude Inventories : -5.452M (Prior 2.620M)
DURABLE ORDERS AND DURABLE GOODS
Highlights
- Durable goods orders increased 2.0% in July after increasing an upwardly revised 4.1% (from 3.4%) in June. The Briefing.com Consensus expected durable goods orders to decline 0.6%.
- Excluding transportation, durable goods orders increased 0.6% in July after increasing an upwardly revised 1.0% (from 0.6%) in June. The consensus expected these orders to increase 0.4%.
Key Factors
- A big reason for the much better-than-expected gain in durable goods demand came from the automotive sector. Orders for motor vehicles and parts products rose 4.0% in July after increasing 0.8% in June. That move follows the huge increase in the production and assembly of motor vehicles that was reported in the July industrial production data.
- Aircraft orders, which were expected to push overall durable goods orders into negative territory, declined a relatively modest 7.8%. That drop was easily offset by the aforementioned increase in motor vehicle orders.
- Demand for finished durable goods was extremely strong. Orders of machinery (2.0%), communications equipment (1.8%), and electrical equipment (1.3%) all exceeded 1.0% growth.
- Demand for manufacturing inputs, however, wasn’t so hot. Both primary (-1.8%) and fabricated metals (-1.3%) orders declined in July.
- Business capital demand remained very robust. Orders of nondefense capital goods excluding aircraft increased 2.2% in July after increasing an upwardly revised 1.4% (from 0.7%) in June. That was the largest increase in orders of business capital goods since a 5.8% gain in June 2014. Shipments, which factor into GDP growth calculations, rose 0.6% in July after increasing 0.9% in June.
Big Picture
- Manufacturing production growth still lags orders demand trends, which is producing large numbers of unfilled backlogs.
Market Internals
NYSE:
Higher Volumes than the day before – 1311.6M vs 1270.2M
Advancers outpaced Decliners (adv/dec): 2493 / 648
New Lows outpaced New Highs (highs/lows): 2 / 216
NASDAQ:
Higher Volumes than the day before – 2608.9M vs 2596.9M
Advancers outpaced Decliners (adv/dec): 2146 / 727
New Lows outpaced New Highs (highs/lows): 6 / 152
VOLATILITY S&P500 (VIX)
30.32 -5.70 (-15.82%)
Technical Updates
16,285.51 +619.07 (+3.95%)
Volume: 208,424,513 (above average of 103,722,084)
Range: 15,676.26 - 16,303.75
Range: 15,676.26 - 16,303.75
4,697.54 +191.05 (+4.24%)
Volume: 633,104,536 (above average of 458,384,677)
Volume: 633,104,536 (above average of 458,384,677)
Range: 4,530.04 - 4,703.97
1,940.51 +72.90 (+3.90%)
Volume: 1,028,890,000 (above average of 581,782,569)
Range: 1,872.75 - 1,943.09
DOW bounced back from the support level at 15,680 and it is approaching a resistance at 16,360. While NASDAQ barely managed to break above Monday's high and S&P also barely stay above its resistance at 1,910. From here, the strength of the pullback is going to be tested again and we should see the market try to fight higher for the next few sessions. If not, the market might just continue to slide lower.
Commodities
- The dollar index continued to climb higher today, which helped weigh on commodities, which are currently sitting at a 16-year low, according to the Bloomberg Commodity Index.
- Metals all ended the day lower, led by silver, which ended floor trading -4.1% at $14.05/oz (Sept contract).
- Dec gold lost -1.2% to $1124.470/oz, while Dec copper fell –0.6% to $2.25/lb.
- WTI crude sold off into the close of pit trading today, ending the session -1.6% at $38.68/barrel.
- In other energy, Sept natural gas lost flat at $2.69/MMBtu.
Energy
- October crude oil futures fell $0.64 (-1.6%) to $38.68/barrel
- September natural gas closed flat at $2.69/MMBtu
- RBOB Gasoline closed $0.07 lower at $1.37/gallon
- Heating oil futures closed $0.01 lower at $1.40/gallon
Agriculture
- December corn closed $0.04 lower at $3.73/bushel
- December wheat closed $0.02 lower at $4.94/bushel
- November soybeans closed $0.12 lower to $8.65/bushel
- Sugar #11 closed $0.07 cents lower at 10.53 cents/lb
Metals
- December gold ended today’s session $14.20 lower (-1.2%) at $1124.70/oz
- September silver closed today’s session $0.60 lower (-4.1%) at $14.05/oz
- September copper closed $0.06 lower (-2.6%) at $2.25/lb
Currencies
Dollar Index Rallies for Second Day
- The U.S. Dollar Index climbed 0.54% today as the financial panic from Monday continued to ebb, albeit with some big aftershocks. U.S. Treasury yields have moved higher again on very strong durable goods data, and that has encouraged speculators against the greenback to close their positions
- Durable goods orders soared past expectations in July, rising 2.0% m/m versus the Briefing.com consensus of -0.6% and a jump of 3.4% in June
- Excluding transportation, durable goods orders rose 0.6% in July versus the Briefing.com consensus of 0.4% and the 0.6% increase in June
- EUR/USD: -1.45% to $1.1357
- France recorded 3.55 mln jobseekers in July, unchanged from June
- GBP/USD: -1.41% to $1.5474
- British Bankers Association Mortgage Approvals rose to a 17-month high of 46,033 in July from 44,802 in June
- The CBI Distributive Trades Survey rose to 24 in August from 21 in July, far surpassing forecasts
- USD/JPY: +0.75% to 119.56
- The Corporate Services Price Index rosea better-than-expected 0.6% y/y in August versus +0.4% in July
- USD/CHF: +1.13% to 0.9508
- Switzerland's Consumption Indiciator rose to 1.64 in July from 1.61 in June
- AUD/USD: -0.32% to $0.7096
- Reserve Bank of Australia Governor Stevens spoke publicly and said that structural reform rather than monetary policy was necessary to spur higher growth. Australia has been hit by a steep decline in mining investment from falling commodity prices
- NZD/USD: -0.68% to $06423
- New Zealand's trade deficit narrowed to -2.69 bln in July from -2.85 bln in August
Bonds
Treasury Yields Spike on Durable Goods and Stock Buying
- U.S. Treasuries fell sharply today after equity markets calmed down and investors received a very robust Durable Goods Orders report. The yield curve steepened quite sharply as the 30-year yield moved 33 basis points above its Monday low to 2.95%
- Yield Check:
- 2-yr: +3 bps to 0.67%
- 5-yr: +6 bps to 1.48%
- 10-yr: +12 bps to 2.19%
- 30-yr: +15 bps to 2.95%
- News:
- The MBA Mortgage Index for the weekended 8/22 rose 0.2% versus 3.6% in the prior week
- Durable goods orders soared past expectations in July, rising 2.0% m/m versus the Briefing.com consensus of -0.6% and a jump of 3.4% in June
- Excluding transportation, durable goods orders rose 0.6% in July versus the Briefing.com consensus of 0.4% and the 0.6% increase in June
- A big reason for the much better-than-expected gain in durable goods demand came from the automotive sector. Orders for motor vehicles and parts products rose 4.0% in July after increasing 0.8% in June. That move follows the huge increase in the production and assembly of motor vehicles that was reported in the July industrial production data
- NY Fed President William Dudley said that, "From my perspective, at this moment, the decision to begin the normalization process at the September FOMC meeting seems less compelling to me than it was a few weeks ago" at a press conference this morning
- He went on to say, "But normalization could become more compelling by the time of the meeting as we get additional information on how the U.S. economy is performing and more information on international and financial market developments, all of which are important in shaping the U.S. economic outlook"
- Commodities:
- WTI crude: -0.94% to $38.94/bbl.
- Gold: -1.29% to $1,123.50/troy oz.
- Copper: -2.51% to $2.5555/lb.
- Currencies:
- EUR/USD: -1.73% to $1.1327
- USD/JPY: +0.87% to 119.70
- Data Out Thursday:
- Initial Jobless Claims for the week ended 8/22 and Continuing Jobless Claims for the week ended 8/15 (08:30 ET)
- Q2 GDP and GDP Deflator – Second Estimate (08:30 ET)
- July Pending Home Sales (10:00 ET)
- Natural Gas Inventories for the week ended 8/22 (10:30 ET)
- Treasury Auction:
- $29 bln 7-year note auction
Treasury Yields:
- 2 Year Note 0.67% UNCH
- 5 Year Note 1.49% +0.01
- 10 Year Note 2.18% +0.06
- 30 Year Bond 2.94% +0.10
2/30 Spread: 227 bps ( +10 ) … 2/10 Spread: 151 bps ( +6 )
Preview for Thursday 27 August, 2015
Economic Data
Thursday (27 Aug) :
- Initial Claims : 272K (Prior )
- Continuing Claims : 2239K (Prior )
- GDP - Second Estimate : 3.1% (Prior 2.3%)
- GDP Deflator - Second Estimate : 2.0% (Prior 2.0%)
- Pending Home Sales : 1.0% (Prior -1.8%)
- Natural Gas Inventories : (Prior 53 bcf)
Earnings Highlights
Thursday (27 Aug) :
BMO - FLWS BURL DXLG DG IKGH ISLE SJM MIK MOV PLL PDCO SDRL SIG TIF TD YGE
AMC - ARO ANFI ADSK BEBE CAL GME MRVL MCFT OVTI QADA SWHC SPLK SPWH ULTA VEEV VMEM ZOES
Summary
I suppose today was probably more of a short-covering session ahead of tomorrow's second estimate GDP number. On top of that, the stance from William Dudley on the rate hike in September was less compelling. That might pushed more traders to cover their shorts.
Given the GDP number is a market mover, it is going to affect the market in some way. I think it would be likely to determine where the market is heading for the short-term, be it continue to pullback or more selling to the downside. I think the market might have a bullish follow through from yesterday and try to go up to re-test its resistance.
After Hours Report (Briefing)
Futures are higher after hours: S&P 500 futures are +3.84 from fair value of 1,937.41 and Nasdaq100 futures are +3.69 from fair value of 4,217.51.
Tomorrow morning before the open four economic reports are scheduled to be released: 1) Initial Claims (Consensus 275K), 2) Continuing Claims (Consensus 2249K), 3) GDP - Second Estimate (Consensus 3.1%), and 4) GDP Deflator - Second Estimate (Consensus 2.0%)
Tomorrow before the open the following companies are scheduled to report earnings: TD, DG, SJM, SIG, PDCO, SDRL, BURL, TIF, MIK, FLWS, MOV, DXLG, GOGL, IKGH, SKYS
Direction for Thursday 27 Aug, 2015: Up
2015 Daily Directional Accuracy: 84/135 (62.22%)
2015 Weekly Directional Accuracy: 19/31 (61.29%)
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