Dow +125.61 at 16510.19, Nasdaq +1.73 at 4828.95, S&P +8.94 at 1966.97
I guess Monday was more of a technical rebound. And maybe that might just set the market for another sell-off. I didn't really see a strong bullish strength coming from the market but I have not see a clear trend after Fed announcement last Thursday. However it looks to me that bears are still very much in play with bulls trying to hold the support.
Markets around the world mostly closed in the upside.
Market Summary
Industry Watch
Strong: Energy, Financials, Technology
Weak: Health Care, Telecom Services, Utilities
Other Market Moving Factor:
- Atmel (ATML) to be acquired by Dialog Semiconductor (DLGNF) for $4.60 billion
- Biotechnology weighs
[BRIEFING.COM] The stock market began the trading week on a higher note despite seeing some intraday volatility. The S&P 500 gained 0.5% while the Nasdaq Composite underperformed throughout the day, but was able to settle just above its flat line.
Equity indices rallied out of the gate with the advance continuing through the first hour of action. All ten sectors took part in the opening move higher, but health care was quick to surrender its gain. The countercyclical group ended lower by 1.4% while biotechnology struggled mightily, sending the iShares Nasdaq Biotechnology ETF (IBB 340.78, -15.98) lower by 4.5%.
The biotechnology ETF struggled from the get-go, but the group accelerated its decline after presidential candidate Hillary Clinton sent out a tweet saying she is ready to unveil a plan that would target price gouging among specialty drug makers. Today's selling dropped IBB below its 200-day moving average (347.36) to levels last seen at the start of September.
Outside of health care, the remaining sectors posted gains with relative strength in heavily-weighted financials (+1.1%) and technology (+1.0%) keeping the S&P 500 ahead of the Nasdaq Composite. It is worth pointing out that solid gains in large cap tech names like Apple (AAPL 115.21, +1.76), Google (GOOGL 666.98, +6.06), and Microsoft (MSFT 44.11, +0.63) masked the relative weakness in chipmaker names. The PHLX Semiconductor Index shed 0.1% while Atmel (ATML 8.19, +0.92) bucked the trend, surging 12.7% after agreeing to be acquired by Dialog Semiconductor (DLGNF 41.25, -8.00) for $4.60 billion.
Meanwhile, the remaining cyclical sectors also posted gains. The energy space rose 0.6% as crude oil surged 4.5% to $46.68/bbl while the consumer discretionary sector (+0.7%) was underpinned by retailers. The SPDR S&P Retail ETF (XRT 46.40, +0.30) gained 0.7% while homebuilders lagged after a below-consensus August Existing Home Sales report (5.31 million; Briefing.com consensus 5.50 million) overshadowed better than expected earnings from Lennar (LEN 51.58, -0.17).
Strikingly, Treasuries retreated throughout the day, continuing their slide even as stocks retreated from their highs. As a result, the 10-yr note settled on its low with the benchmark yield rising six basis points to 2.21%.
Today's participation was a bit light with fewer than 800 million shares changing hands at the NYSE floor.
Economic data reported today was limited to the Existing Home Sales report for August, which showed a 4.8% decline to an annualized rate of 5.31 million units while the Briefing.com consensus expected a reading of 5.50 million.
The overall story in the housing market remains the same. Tight supplies and relatively high prices have cut into both demand and affordability conditions. Unless price growth softens or an influx of inventories gives buyers more options, sales growth will suffer.
Still, underlying demand trends aren't terrible. Even though sales in August were the lowest since April, the drop came immediately after a month where sales rose to their highest point since February 2007. That suggests the move was likely normal volatility rather than a big shift in trends.
Tomorrow's economic data will be limited to the 10:00 ET release of the FHFA Housing Price Index for July.
Global Market
ASIA
Markets in the Asia-Pacific region ended Monday mostly lower, feeling the weight of disappointment from Friday’s downturn on Wall Street and underlying concerns about the pace of global growth. China’s Shanghai Composite (+1.9%) was a notable exception in the region as it both started and ended its session on a burst of buying interest.
Economic Data
- Hong Kong
- August CPI +2.4% year-over-year (expected +2.5%; prior 2.5%)
- New Zealand
- Westpac Consumer Sentiment 106.0 (prior 113.0)
- Credit Card Spending +10.5% year-over-year (prior +9.8%)
Equity Markets
- Japan’s Nikkei: closed for holiday (Respect for the Aged Day)
- Hong Kong’s Hang Seng declined 0.8%. It finished off its lows as mainland markets rallied late, yet the Hang Seng couldn’t complete the comeback effort from an early 1.5% decline that followed in the wake of Wall Street’s weak finish on Friday. Galaxy Entertainment (-3.9%), China Resources Power Holdings (-3.8%), and CNOOC (-3.5%) led the losses. Power Assets Holdings (+2.1%), Belle International Holdings (+1.4%), and China Resources Land (+1.5%) topped a small list of winners. Out of the 50 index members, 11 ended higher, 34 finished lower, and 5 were unchanged.
- China’s Shanghai Composite increased 1.9%, aided by a 1.2% gain over the final 45 minutes of trading. There wasn’t a specific news catalyst for the late pop, although sentiment was reportedly boosted a bit on Monday by a Chinese Beige Book survey that contradicted the view that China is headed for a hard landing.
- India’s Sensex declined 0.1% but recouped nearly the entirety of an early 0.9% slide. The energy (-1.3%), health care (-1.0%), and consumer staples (-1.0%) sectors were the weakest areas. Top laggards included Reliance Industries (-1.9%), Bharti Airtel (-1.3%), and Dr Reddy’s Laboratories (-1.2%). Upside leaders were Hindalco Industries (+2.9%), Axis Bank (+2.0%), and Maruti Suzuki India (+2.0%). Out of the 30 index members, 13 ended higher and 17 finished lower.
- Australia’s S&P/ASX 200 declined 2.0%, with global growth concerns weighing on investor sentiment. Losses were paced by the metals & mining (-2.6%), resources (-2.6%), and materials (-2.5%) sectors. Out of the 200 index members, 10 ended higher, 182 finished lower, and 8 were unchanged.
- Regional advancers: Singapore +0.1%, Thailand +0.2%, Vietnam +1.0%
- Regional decliners: South Korea -1.6%, Taiwan -1.8%, Malaysia -1.8%, Indonesia -0.1%, Philippines -0.6%
FX
- USD/CNY +0.1% at 6.3694
- USD/INR +0.1% at 65.7450
- USD/JPY +0.4% at 120.51
EUROPE
Major European indices trade higher across the board with France’s CAC +1.4% in the lead. The weekend election in Greece resulted in Syriza taking just over 35.0% of the vote, allowing the party to form a coalition government with its previous partner, Independent Greeks.
- Germany’s August PPI -0.5% month-over-month (expected -0.3%; prior 0.0%); -1.7% year-over-year (consensus -1.5%; last -1.3%)
- Spain’s Trade Deficit narrowed to CHF1.40 billion from CHF2.05 billion
Closing Prices
- UK’s FTSE: + 0.1%
- Germany’s DAX: + 0.3%
- France’s CAC: + 1.1%
- Spain’s IBEX: + 0.3%
- Portugal’s PSI: + 1.2%
- Italy’s MIB Index: + 1.1%
- Irish Ovrl Index: + 0.4%
- Greece ASE General Index: -0.6%
Macroeconomic Data
Economic Data
from Briefing.com
- Existing Home Sales : 5.31M vs 5.50M (Prior 5.58M - Down)
EXISTING HOME SALES
Highlights
- Existing home sales declined 4.8% in August to 5.31 mln seasonally adjusted annual rate (SAAR) from a downwardly revised 5.58 mln SAAR (from 5.59 mln) in July. The Briefing.com Consensus expected sales to fall to 5.50 mln SAAR.
Key Factors
- The overall story in the housing market remains the same. Tight supplies and relatively high prices have cut into both demand and affordability conditions. Unless price growth softens or an influx of inventories give buyers more options, sales growth will suffer.
- Still, underlying demand trends aren’t terrible. Even though sales in August were the lowest since April, the drop came immediately after a month where sales rose to their highest point since February 2007. That suggests the move was likely normal volatility rather than a big shift in trends.
- Furthermore, first-time homebuyers accounted for 32% of all sales in August, up from 28% in July and 29% in August 2014. These buyers are the lifeblood of a normal marketplace, and the return from a depressed July also signals that trends remain firm.
- Finally, all-cash sales dipped to 22% of all sales in August, down from 23% in July. Sales to individual investors accounted for 12% of sales, down from 13% in July. This suggests that a greater portion of buyers are actually living in the home.
- Distressed sales accounted for 7% of all sales for a second consecutive month in August. That was the lowest level of distressed demand since that National Association of Realtors began tracking the data.
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.
Market Internals
NYSE:
Lower Volumes than the day before – 821.9M vs 2578.7M
Advancers outpaced Decliners (adv/dec): 1833 / 1229
New Lows outpaced New Highs (highs/lows): 15 / 78
NASDAQ:
Lower Volumes than the day before – 2013.7M vs 3060.1M
Decliners outpaced Advancers (adv/dec): 1337 / 1511
New Lows outpaced New Highs (highs/lows): 31 / 70
VOLATILITY S&P500 (VIX)
20.14 -2.14 (-9.61%)
Technical Updates
Volume: 90,728,488 (below average of 112,342,569)
Range: 16,391.88 - 16,578.60
Range: 16,391.88 - 16,578.60
4,828.96 +1.73 (+0.04%)
Volume: 453,539,421 (below average of 466,638,127)
Volume: 453,539,421 (below average of 466,638,127)
Range: 4,795.91 - 4,881.46
1,966.97 +8.94 (+0.46%)
Volume: 570,775,000 (below average of 626,511,077)
Range: 1,955.80 - 1,979.64
There is still weakness in the market. DOW is sitting on its support at 16,360. NASDAQ is about to break below its support at 4,820. S&P could not close above its resistance at 1,970 and seems to head lower. I suppose if the support levels are to be broken, we should see more short-selling in the market.
Commodities
- The dollar index traded higher today The dollar index traded higher today, which helped pressure some commodities today.
- However, other commodities such as oil rallied and held gains.
- Oil was one of the best performing commodities today, ending with a gain of +4.3% at $46.94/barrel.
- In other energy, Oct nat gas fell -1.1% to $2.58/MMBtu.
- Metals were mixed today with copper ending the day unchanged at $2.39/lb, gold lower and silver higher.
- Dec gold finished the day -0.4% at $1132.90/oz/oz, while Dec silver +0.3% at $15.21/oz.
Metals
- December gold ended today’s session $4.80 lower (-0.4%) at $1132.90/oz
- December silver closed today’s session $0.05 higher (+0.3%) at $15.21/oz
- December copper closed flat at $2.39/lb
Agriculture
- December corn closed $0.08 higher at $3.87/bushel
- December wheat closed $0.11 higher at $4.97/bushel
- November soybeans closed $0.07 higher at $8.73/bushel
- Sugar #11 closed $0.03 cents lower at 10.93 cents/lb
Energy
- November crude oil futures rose $1.92 (+4.3%) to $46.94/barrel
- October natural gas closed $0.03 lower (-1.1%) at $2.58/MMBtu
- RBOB Gasoline closed $0.04 higher at $1.40/gallon
- Heating oil futures closed $0.05 higher at $1.54/gallon
Currencies
Dollar Snaps Back
- The U.S. dollar gained against all of the majors today, completely unwinding the sell-off that followed the FOMC's decision last Thursday. The dollar sold off then due to the decision to hold interest rates steady as well as an accompanying statement that was widely construed to be dovish, but the Treasury market has pulled back from its highs today and that has encouraged dollar bulls to return
- U.S. Dollar Index: +1.06% to 95.87
- Sales of existing homes fell 4.8% to a seasonally adjusted annual rate of 5.31 mln in August. The Briefing.com consensus was for 5.50 mln and the July reading was revised up to 5.58 mln from 5.59 mln
- Atlanta Fed President Dennis Lockhart (FOMC voter) said today that he supported the decision to delay the first rate hike at the September FOMC meeting, but that he still expects the FOMC to hike this year
- EUR/USD: -1.00% to $1.1195
- Alexis Tsipras's Syriza party won a clear victory in the Greek election with 35.5% of the vote. New Democracy, the conservative party that was widely polled to be in a virtual dead heat with Syriza, only took a 28% share
- The election result will make it easier for Greece to implement its third bailout than if Syriza got fewer votes, as the pollsters had predicted before the weekend
- Producer prices in Germany dropped a greater-than-expected 0.5% m/m in August. Prices were flat m/m in July. The change in factory gate prices was -1.7% y/y in August, making it the 25th consecutive month of year-on-year declines
- Spain's trade deficit narrowed to EUR-1.396 bln in July from EUR-2.0496 bln in June
- Alexis Tsipras's Syriza party won a clear victory in the Greek election with 35.5% of the vote. New Democracy, the conservative party that was widely polled to be in a virtual dead heat with Syriza, only took a 28% share
- GBP/USD: -0.20% to $1.5499
- The Rightmove Housing Price Index, which measures asking prices for homes in the U.K., rose a smaller-than-expected 0.9% m/m in September after a 0.8% fall in August
- USD/JPY: +0.45% to 120.54
- USD/CHF: +0.17% to 0.9703
- USD/CAD: +0.07% to 1.3236
- Canadian wholesale sales were flat m/m in July. The market had been expecting a rise and sales jumped 1.3% in June
- AUD/USD: -0.77% to $0.7135
- NZD/USD: -1.28% to $0.6317
- New Zealand's Westpac Consumer Sentiment fell to 106.0 in the second quarter versus 113 in Q1. The slowdown in China, the revaluation of the yuan, and declines in dairy prices all contributed to deteriorating sentiment
Bonds
Yields Rise as Curve Steepens
- U.S. Treasuries sold off sharply today in a curve-steepening trade as oil prices tracked higher and the U.S. stock market rebounded somewhat from Friday's sell-off. The session was light on news flow, with August Existing Home Sales being the only scheduled economic release and Atlanta Fed President Lockhart the lone Fed speaker
- Yield Check:
- 2-yr: +2 bps to 0.70%
- 5-yr: +5 bps to 1.49%
- 10-yr: +7 bps to 2.20%
- 30-yr: +8 bps to 3.02%
- News:
- Sales of existing homes dropped 4.8% to a seasonally adjusted annual rate of 5.31 mln in August. The Briefing.com consensus was for 5.50 mln and the July reading was revised up to 5.58 mln from 5.59 mln
- The median selling price was up 4.7% to 228,700 in the year to August
- Tight supply in the housing market is keeping prices elevated and reducing the volume of transactions
- Inventories of existing homes grew by 1.3% to 2.29 mln
- Atlanta Fed President Dennis Lockhart (FOMC voter) said today that he supported the decision to delay the first rate hike at the September FOMC meeting, but that he still expects the FOMC to hike this year
- He said that it was too early to know whether market volatility foreshadowed a slowdown in economic activity, and so he though that it was prudent to wait for more visibility
- Lockhart said that he doesn't "anticipate large first-order impacts on U.S. growth" from China's slowdown. First-order effects would be the direct ones like a decline in GDP from lower export demand, whereas second-order effects would be through the transmission mechanism of lower commodity prices or other indirect links
- He went on to say, As things settle down, I will be ready for the first policy move on the path to a more normal interest-rate environment. I am confident the much-used phrase "later this year" is still operative."
- Sales of existing homes dropped 4.8% to a seasonally adjusted annual rate of 5.31 mln in August. The Briefing.com consensus was for 5.50 mln and the July reading was revised up to 5.58 mln from 5.59 mln
- Commodities:
- WTI crude: +3.58% to $46.63/bbl.
- Gold: -0.47% to $1,132.50/troy oz.
- Copper: +0.10% to $2.3885/lb.
- Currencies:
- EUR/USD: -1.00% to $1.1195
- USD/JPY: +0.44% to 120.52
- Data Out Tuesday:
- July FHFA Housing Price Index (09:00 ET)
- Treasury Auction:
- $26 bln 2-year note auction (results at 13:00 ET)
- Fed Speaker:
- Atlanta Fed President Lockhart (FOMC voter)(19:00 ET)
Treasury Yields:
- 2 Year Note 0.72% +0.03
- 5 Year Note 1.51% +0.06
- 10 Year Note 2.20% +0.07
- 30 Year Bond 3.02% +0.09
2/30 Spread: 230 bps ( +6 ) … 2/10 Spread: 148 bps ( +4 )
Preview for Tuesday 22 Sept, 2015
Economic Data
Tuesday (22 Sept) :
- FHFA Housing Price Index : (Prior 0.2%)
Earnings Highlights
Tuesday (22 Sept) :
BMO - AZO KMX CCL CAG DRI FDS GIS
AMC - CPRT
BMO - AZO KMX CCL CAG DRI FDS GIS
AMC - CPRT
Summary
Monday session did not really show a clear direction of where the market is heading. Somehow I think it could lead us to a weakening week ahead. But I think the bears are still very much in control and most probably we should see a downward pressure on the market.
Direction for Tuesday 22 Sept, 2015: Down
2015 Daily Directional Accuracy: 92/147 (62.59%)
2015 Weekly Directional Accuracy: 22/35 (62.86%)
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