Dow -289.95 at 16384.79, Nasdaq -66.63 at 4827.23, S&P -32.12 at 1958.08
Market had a big sell-off at the opening post Fed Day and continue to slide lower for the rest of the session. I reckon part of the sell-off was attributed to profit taking from the short rally until Thursday. Also, Friday is showing the lack of confidence in the market after the Fed decided to keep interest rate unchanged. We shall see how the market might react next week. That should give us more confirmation on the market sentiment...
Europe markets were down in red while Asia markets were mixed with Nikkei dropped by about 2%.
Market Summary
Industry Watch
Strong: Utilities
Weak: Energy, Financials, Materials, Industrials, Technology
Other Market Moving Factor:
- Risk-on sentiment begins fading during European session: Treasuries rally
- S&P 500 enters Friday +1.8% week-to-date
[BRIEFING.COM] The stock market ended the week on a broadly lower note. The S&P 500 lost 1.6%, surrendering 0.2% for the week, while the Nasdaq (-1.4%) outperformed, finishing the week higher by 0.1%.
Equity indices spent the entire Friday session in the red after heavy selling in the futures market ensured a lower start. The overnight weakness in futures was accompanied by a retreat in Europe as investors shied away from risk assets amid the persistent uncertainty. On one hand, Greece will vote for a new parliament on Sunday and it is unclear whether the potential transition of power will upset the bailout agreement with eurozone creditors. On the other hand, yesterday's FOMC decision to hold the policy line has re-invited the rate-hike uncertainty that had pressured equity markets going into the September meeting. The uncertainty remains in place because Fed Chair Yellen, in her press conference, maintained that FOMC members are still looking to raise rates before the year ends.
Today's retreat in stocks was accompanied by a rally in the Treasury market. The 10-yr note climbed throughout the day, pressuring its yield nine basis points to a two-week low of 2.13%.
All ten sectors ended in the red with cyclical groups leading the decline. The energy sector (-2.7%) spent the day well behind its peers as crude oil surrendered its weekly gain, ending today's pit session lower by 4.7% at $44.68/bbl.
Elsewhere, heavily-weighted financials (-1.9%) and industrials (-2.2%) also underperformed throughout the day, limiting the market's brief rebound attempt in the late morning. The likes of Citigroup (C 50.29, -1.36) and JPMorgan Chase (JPM 60.94, -1.71) both lost near 2.7%, responding to the prospect of lower rates for longer.
All things considered, the S&P 500 could have suffered a larger decline, but the top-weighted technology sector (-1.3%) showed some slight relative strength, thanks to Apple (AAPL 113.45, -0.47), which shed 0.4%. Another tech sector member, Adobe Systems (ADBE 81.25, +0.94), also fared better than the broader market, climbing 1.2% after reporting a bottom line beat and issuing cautious guidance.
With overall uncertainty running high, volatility protection was in demand, evidenced by a two-point spike in the CBOE Volatility Index (VIX 22.84, +1.70). Today's participation was well above average, largely thanks to quadruple witching. As a result, more than 2.1 billion shares changed hands at the NYSE floor.
Economic data was limited to the Leading Indicators report, which increased 0.1% in August after an upward revision made the growth rate flat (from -0.2%) in July. The Briefing.com Consensus expected the index to increase 0.2%.
On Monday, the Existing Home Sales report for August will be released at 10:00 ET (Briefing.com consensus 5.50 million).
- Nasdaq Composite +1.9% YTD
- Russell 2000 -3.3% YTD
- S&P 500 -4.9% YTD
- Dow Jones Industrial Average -8.1% YTD
Week in Review: Fed Holds Pat
The stock market began the week on a lower note with the S&P 500 surrendering 0.4% while the Nasdaq Composite (-0.3%) outperformed slightly. Overall, the Monday affair was very quiet with many investors sticking to the sidelines ahead of Thursday's FOMC policy announcement. To that point, fewer than 800 million shares changed hands at the NYSE floor versus a 20-day average of 984 million. A cautious tone was set during overnight action after China and Japan both released disappointing industrial production reports. Equity bulls attempted to turn the tide during European action, but their efforts were not successful with the selling spilling into the U.S. session. The key indices hit their lows shortly after 13:00 ET and remained near those levels until the close. Nine sectors registered losses while the utilities space (+0.3%) eked out a slim gain, which was aided by strength in Treasuries that sent the 10-yr yield lower by two basis points to 2.17%.
The market raced higher on Tuesday with the Dow Jones Industrial Average (+1.4%) pacing the advance while the S&P 500 (+1.3%) followed not far behind. Thanks to the broad-based rally, the S&P 500 erased all of its decline from Monday and then some, settling at its best level since August 28. Although the Tuesday tone differed greatly from Monday, it is worth noting that trading volume remained relatively light with 760 million shares changing hands at the NYSE floor. That total represented a notable decline from the 20-day average of more than a billion shares as some investors continued sticking to the sidelines ahead of Thursday's policy statement from the Fed and a potential fed funds rate hike. The rally began in the futures market shortly after the release of the Retail Sales report for August, which came in just below expectations (+0.2%; Briefing.com consensus +0.3%); however, core sales increased 0.5%, suggesting the presence of some underlying consumption strength. Stocks followed the report's release with a rally while Treasuries began a daylong retreat. The 10-yr note settled on its low with its yield higher by nine basis points at 2.28%.
The major averages strung together their second consecutive advance on Wednesday with the S&P 500 climbing 0.9%. The benchmark index extended its weekly gain to 1.7% while the Nasdaq Composite (+0.6%) underperformed, but still brought its week-to-date advance up to 1.4%. Equities spent the first hour of the day near their flat lines before racing higher alongside the energy sector (+2.8%), which had shown relative strength from the start. That strength was closely linked to the buying surge in crude oil futures that sent the energy component higher by 5.8% to $47.15/bbl. A significant portion of the rally developed after the release of the weekly EIA inventory report, which showed a draw of 2.104 million barrels.
Thursday ended on a lower note after the Federal Reserve made no changes to its policy stance. The S&P 500 shed 0.3% while the Nasdaq Composite (+0.1%) outperformed throughout the day. FOMC days are known for afternoon volatility and the Thursday affair lived up to that billing even though the policy statement from the Federal Reserve was virtually a carbon copy of the previous directive. The FOMC acknowledged positive labor market conditions in the U.S., but indicated that concerns related to an economic slowdown in China have outweighed the domestic positives. Ms. Yellen stressed that these developments have weighed on the inflation outlook, contributing to the decision to maintain status quo.
Global Market
ASIA
Markets in the Asia-Pacific region were mostly higher on Friday, getting a bump from the Federal Reserve’s decision to leave the target range for the federal funds rate unchanged and word that home prices in China increased for the fourth straight month. Japan (-2.0%) was the notable exception, as it fell sharply with a stronger yen pressuring its performance.
Economic data
- China
- August House Prices +0.3% month-over-month (prior +0.3%); -2.3% year-over-year (prior -3.7%)
- South Korea
- August PPI -0.5% month-over-month (prior -0.4%); -4.4% year-over-year (prior -4.0%)
Equity Markets
- Japan’s Nikkei declined 2.0% and closed on its lows for the session. A stronger yen reportedly contributed to the selling pressure as export-oriented stocks were on the defensive. Pacing the retreat were the financials (-3.4%), industrials (-2.8%), and materials (-2.8%) sectors. Sompo Japan Nipponkoa Holdings (-6.4%), Dia-ichi Life Insurance Co (-6.2%), and JFE Holdings (-5.4%) were the worst-performing issues. KDDI Corp (+4.4%), Pioneer Corp (+3.7%), and Seven & I Holdings (+1.8%) led a small group of winners. Out of the 225 index members, 11 ended higher, 213 finished lower, and 1 was unchanged. For the week the Nikkei declined 1.1%.
- Hong Kong’s Hang Seng increased 0.3%, following form with the mainland market. Friday’s top-performing issues were Sands China (+5.8%), Cheung Kong Property Holdings (+4.7%), and Galaxy Entertainment Group (+4.1%). Downside leaders were China Resources Enterprise (-48.3%), Lenovo Group (-2.4%), and HSBC Holdings (-1.3%). Out of the 50 index members, 33 ended higher, 13 finished lower, and 4 were unchanged. For the week the Hang Seng increased 1.9%.
- China’s Shanghai Composite increased 0.4%, aided by a report showing the fourth straight monthly gain in home prices and a deceleration in the pace of decline on a year-over-year basis. For the week the Shanghai Composite declined 3.2%.
- India’s Sensex increased 1.0% after being closed for a holiday on Thursday. The gain was driven by the energy (+2.2%) and financials (+2.0%) sectors. Axis Bank (+4.7%), Oil & Natural Gas Co. (+3.8%), and Sun Pharmaceuticals (+3.1%) were the best-performing issues while Bajaj Auto (-3.3%), Hindalco Industries (-2.3%), and Cipla Ltd (-1.8%) brought up the rear. Out of the 30 index members, 17 ended higher and 13 finished lower. For the week the Sensex increased 2.4%.
- Australia’s S&P/ASX 200 increased 0.5%, helped by leadership from the gold and banking stocks. Out of the 200 index members, 122 ended higher, 62 finished lower, and 16 were unchanged. For the week the S&P/ASX 200 increased 2.0%.
- Regional advancers: South Korea +0.8%, Taiwan +0.2%, Indonesia +0.04%, Vietnam +0.7%, Philippines +0.1%
- Regional decliners: Malaysia -0.7%, Singapore -0.6%, Thailand -0.1%
FX
- USD/CNY -0.02% at 6.3643
- USD/INR -0.9% at 65.8450
- USD/JPY -0.7% at 119.70
EUROPE
Major European indices trade lower across the board with Germany’s DAX (-2.8%) showing relative weakness.
- Eurozone July Current Account surplus narrowed to EUR22.60 billion from EUR24.90 billion (expected surplus of EUR21.30 billion)
Closing Prices
- UK’s FTSE: -1.3%
- Germany’s DAX: -3.1%
- France’s CAC: -2.6%
- Spain’s IBEX: -2.6%
- Portugal’s PSI: -0.7%
- Italy’s MIB Index: -2.7%
- Irish Ovrl Index: -1.0%
- Greece ASE General Index: + 0.8%
Macroeconomic Data
Economic Data
from Briefing.com
- Leading Indicators : 0.1% vs 0.2% (Prior -0.0% - Up)
LEADING INDICATORS
Highlights
- The Conference Board's Leading Economic Index increased 0.1% in August after an upward revision made the growth rate flat (from -0.2%) in July. The Briefing.com Consensus expected the index to increase 0.2%.
Key Factors
- Since 8 of the 10 components of the index are known prior to the release, the difference between the consensus forecast and the actual result is typically minor.
- In this case, a small expected decline in manufacturer orders of nondefense capital goods excluding aircraft was the likely cause for the discrepancy.
- Building permits, which lopped off 0.51 percentage points of growth in July, added 0.11 percentage points in August.
Big Picture
- The Leading Indicators have not declined in six consecutive months.
Market Internals
NYSE:
Higher Volumes than the day before – 2578.7M vs 1004.5M
Decliners outpaced Advancers (adv/dec): 936 / 2151
New Lows outpaced New Highs (highs/lows): 14 / 114
NASDAQ:
Higher Volumes than the day before – 3060.1M vs 1885.2M
Decliners outpaced Advancers (adv/dec): 1031 / 1865
New Lows outpaced New Highs (highs/lows): 50 / 73
VOLATILITY S&P500 (VIX)
22.28 +1.14 (+5.39%)
Technical Updates
Volume: 341,706,081 (above average of 111,810,832)
Range: 16,343.76 - 16,674.74
Range: 16,343.76 - 16,674.74
4,827.23 -66.72 (-1.36%)
Volume: 1,362,087,422 (above average of 465,694,345)
Volume: 1,362,087,422 (above average of 465,694,345)
Range: 4,819.09 - 4,878.71
1,958.03 -32.17 (-1.62%)
Volume: 1,860,981,000 (above average of 624,933,431)
Range: 1,953.45 - 1,989.66
I am seeing a reversal pattern in all 3 major indices. Well that doesn't sound so good. DOW broke below its 61.8% Fib support and went down to find its next support level at around 16,350-16,360 area. If the support doesn't hold, we might see DOW hit 16,000 next. NASDAQ also went down to find its support at 4,820. S&P went down from the support level at 1,990 and broke below its 61.8% support level as well. Technically speaking, the 3 indices have gone down to re-test their previous breakout resistance level and possibly more downside to come if they break below the level. Next important support for DOW, NASDAQ and S&P would be 16,000, 4,750 and 1,925 respectively.
Commodities
- December gold ended today’s session $20.70 higher (+1.9%) at $1137.70/oz
- December silver closed today’s session $0.17 higher (+1.1%) at $15.16/oz
- December copper closed $0.07 lower (-2.8%) at $2.39/lb
Agriculture
- December corn closed $0.03 lower at $3.77/bushel
- December wheat closed $0.05 higher at $4.86/bushel
- November soybeans closed $0.18 lower at $8.67/bushel
- Sugar #11 closed $0.48 cents lower at 10.96 cents/lb
Energy
- October crude oil futures fell $2.23 (-4.8%) to $44.69/barrel
- October natural gas closed $0.04 lower (-1.5%) at $2.61/MMBtu
- RBOB Gasoline closed $0.02 lower at $1.36/gallon
- Heating oil futures closed $0.04 lower at $1.49/gallon
Currencies
Greenback Reverses Losses
- The U.S. Dollar Index fell as low as 94.10 overnight but recovered its losses and moved into the green to trade up 0.34% to 94.87
- Today's session was light on economic data. August Leading Indicators rose 0.1%, short of the Briefing.com consensus of 0.2%. The July reading was revised up to 0.0% from an initial reading of -0.2%)
- EUR/USD: -0.42% to $1.1352
- The eurozone's current account surplus narrowed less than expected to EUR22.6 bln in July from EUR25.4 bln in June
- GBP/USD: -0.11% to $1.5556
- USD/JPY: -0.30% to 119.81
- The Bank of Japan released the minutes from its August 6-7 meeting but the confidence in the economy that was expressed by board members has likely changed since China's yuan revaluation and the ensuing market volatility
- USD/CHF: +0.14% to 0.9637
- USD/CAD: +0.04% to 1.3179
- Canada's core consumer price index rose 0.2% m/m in August, in line with expectations. The index was unchanged in July
- The headline CPI was flat in August. The market had expected a rise and the index grew 0.1% in July
- Canada's core consumer price index rose 0.2% m/m in August, in line with expectations. The index was unchanged in July
- AUD/USD: +0.46% to $0.7214
- Reserve Bank of Australia Governor Glenn Stevens wondered in public remarks if the stimulative effect of easy monetary policy is worth the potential for creating financial instability
- NZD/USD: +0.51% to $0.6409
Bonds
Government Yields Plunge
- The U.S. Treasury complex followed through on its post-FOMC gains from Thursday during today's session, but the primary beneficiary of that rally was the long end of the curve instead of the 2 and 5-year notes which led the way higher yesterday. Steep declines in global equity markets and oil prices encouraged the buying of U.S. government debt and European sovereign debt rallied in sympathy, with the 10-year German Bund yield declining 12 basis points to 0.66%. Greece is holding its general election on Sunday and the race is a toss-up between the left-wing Syriza party and New Democracy on the right. Neither party is expected to win a majority and so a coalition government or a minority government remain the likely outcomes
- Yield Check:
- 2-yr: unch at 0.68%
- 5-yr: -5 bps to 1.43%
- 10-yr: -7 bps to 2.13%
- 30-yr: -8 bps to 2.93%
- News:
- The Conference Board's Leading Economic Index rose 0.1% in August after remaining unchanged in July (revised up from -0.2%). The Briefing.com consensus was for a gain of 0.2%
- The $13 bln 10-year TIPS auction (reopening) had a bid-to-cover ratio of 2.36 and had a high yield of 0.600%. The auction drew an indirect bid of 73%
- Commodities:
- WTI crude: -4.26% to $44.90/bbl.
- The Baker Hughes rig count fell by 8 to 644 in the week to September 18
- Gold: +1.75% to $1,136.60/troy oz.
- While gold is up sharply since the FOMC announcement and Fed Chair Yellen's press conference yesterday, this is likely due to dollar weakness as long-dated Treasuries are showing little concern for upside inflation risks
- Copper: -3.08% to $2.3765/lb.
- WTI crude: -4.26% to $44.90/bbl.
- Currencies:
- EUR/USD: -0.77% to $1.1311
- USD/JPY: -0.19% to 119.95
- Week Ahead:
- Monday: August Existing Home Sales (10:00 ET); Atlanta Fed President Lockhart (FOMC voter) (13:00 ET)
- Tuesday: July FHFA Housing Price Index (09:00 ET); $26 bln 2-year note auction (results at 13:00 ET); Atlanta Fed President Lockhart (FOMC voter)(19:00 ET)
- Wednesday: MBA Mortgage Index for the week ending 9/19 (07:00 ET); Crude Inventories for the week ending 9/19 (10:30 ET); $35 bln 5-year note auction (results at 13:00 ET); Atlanta Fed President Lockhart (FOMC voter) (12:30 ET)
- Thursday: Initial Jobless Claims for the week ending 9/19 and Continuing Jobless Claims for the week ending 9/12 (08:30 ET); August Durable Goods Orders and Durable Goods ex-transportation (08:30 ET); August New Home Sales (10:00 ET); Natural Gas Inventories for the week ending 9/19 (10:30 ET); $29 bln 7-year note auction (results at 13:00 ET); Fed Chair Yellen (17:00 ET) (FOMC Voter)
- Friday: Q2 GDP and GDP Deflator – Third Estimate (08:30 ET); September Michigan Sentiment – Final (10:00 ET); St. Louis Fed President James Bullard participates in a discussion on "New Directions in Monetary Policy" (09:15 ET) (non-FOMC voter); Kansas City Fed President Esther George (non-FOMC voter) (13:25 ET)
Treasury Yields:
- 2 Year Note 0.69% -0.01
- 5 Year Note 1.45% -0.05
- 10 Year Note 2.13% -0.08
- 30 Year Bond 2.93% -0.09
2/30 Spread: 224 bps ( -8 ) … 2/10 Spread: 144 bps ( -7 )
Preview for the week Monday 21 Sept to Friday 25 Sept, 2015
Economic Data
Monday (21 Sept) :
- Existing Home Sales : 5.50M (Prior 5.59M)
- FHFA Housing Price Index : (Prior 0.2%)
- MBA Mortgage Index : (Prior -7.0%)
- Crude Inventories : (Prior -2.104M)
- Initial Claims : 271K (Prior 264K)
- Continuing Claims : 2248K (Prior 2237K)
- Durable Orders : -2.0% (Prior 2.2%)
- Durable Goods - ex transportation : 0.2% (Prior 0.4%)
- New Home Sales : 515K (Prior 507K)
- Natural Gas Inventories : (Prior 73 bcf)
- GDP - Third Estimate : 3.7% (Prior 3.7%)
- GDP Deflator - Third Estimate : 2.1% (Prior 2.1%)
- Michigan Sentiment - Final : 87.0 (Prior 85.7)
Earnings Highlights
Monday (21 Sept) :
BMO - LEN NEOG
AMC - RHT THO
BMO - LEN NEOG
AMC - RHT THO
Tuesday (22 Sept) :
BMO - AZO KMX CCL CAG DRI FDS GIS
AMC - CPRT
Wednesday (23 Sept) :
BMO - WMS
AMC - AVNW FUL JBL SCS WOR
Thursday (24 Sept) :
BMO - WMS
AMC - AVNW FUL JBL SCS WOR
Friday (25 Sept) :
BMO - BBRY
AMC - FINL
Summary
We saw some selling in the market last Friday and we shall see how the market might react next week. That should set the tone of the market in the short term. I suppose market was rather disappointed with the Fed to maintain status quo. If the market close below its support level next week, we are going to see the bears taking control of the market.
Next week there are speeches from Atlanta Fed President Lockhart and Fed Chairperson Janet Yellen. They are most likely to be justifying the delay in rate hike and depending on whether they might raise the interest rate at the end of the year, that might influence the market in someway. But right now, I think the market can still go lower...
Direction for Monday 21 Sept, 2015: Down
Direction for the week Monday 21 Sept to Friday 25 Sept, 2015: Down
Direction for the week Monday 21 Sept to Friday 25 Sept, 2015: Down
2015 Daily Directional Accuracy: 92/146 (63.01%)
2015 Weekly Directional Accuracy: 22/35 (62.86%)
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