Dow -78.57 at 16201.32, Nasdaq -18.27 at 4734.47, S&P -6.51 at 1932.25
I was expecting a rather flat session on Thursday but what's surprising was the strong pullback later on in the day. Market opened pretty much the same as the previous sessions with a big drop and there was an increase in buying interest in the afternoon. As we are expecting GDP number tomorrow, I think we are pretty neutral at the moment. However I feel the market is still defensive.
Markets around the world were showing a mixed performance with Asia market showing some upside while Europe continue to remain weak.
Market Summary
Industry Watch
Strong: Consumer Staples, Energy, Utilities
Weak: Financials, Health Care, Materials, Industrials
Other Market Moving Factor:
- European markets pressured by automakers
- Caterpillar (CAT) lowers guidance and announces restructuring plans, feeding continued growth concerns
[BRIEFING.COM] The stock market finished Thursday on a modestly lower note after erasing the bulk of its early loss. The S&P 500 settled lower by 0.3% while the Dow Jones Industrial Average (-0.5%) and Nasdaq Composite (-0.4%) underperformed.
The final standing represented a notable shift from the morning dynamic that saw equity indices gap down at the start amid selling in Europe. To that point, markets in France and Germany both lost near 2.0% apiece with automakers facing continued pressure. BMW was among the weakest performers in Germany, falling 5.2%, with company executives pushing back against insinuations that the company may have taken a page out of Volkswagen's playbook, saying they are ready to provide vehicles for testing on demand.
To be sure, the losses among automakers were not the culprit behind the slide in Europe, but they represented another source of pressure in market that has been wrestling with persistent growth concerns surrounding China. Those concerns were echoed by Caterpillar (CAT 65.80, -4.40) as the manufacturer of heavy machinery lowered its guidance and announced plans to reduce its workforce by 4,000 to 5,000 people by the end of next year. Shares of CAT settled lower by 6.3%, keeping the industrial sector (-0.7%) among the laggards throughout the day.
The industrial sector finished the day in negative territory, but the cyclical group put a notable dent in its opening decline, climbing off lows alongside the broader market. As for the S&P 500, the benchmark index hit its low just after 11:00 ET, which was followed by a steady march higher that accelerated during the late afternoon.
Similar to industrials, heavily-weighted financials (-0.7%) and health care (-1.1%) underperformed into the close, but their losses were outweighed by an intraday rally in energy (+0.4%), technology (unch), and consumer staples (+0.1%). In addition, the utilities sector (+0.8%) displayed relative strength throughout the day, building on its gain even as Treasuries slipped from their highs with the 10-yr yield narrowing its loss to two basis points at 2.13% after testing the 2.09% level in the morning.
Elsewhere, the energy sector turned positive with help from crude oil, which rallied 0.9% to $44.94/bbl after briefly dipping below $44.00/bbl in the morning. The energy sector narrowed this week's loss to 1.5% while WTI crude will enter the Friday session little changed for the week.
Also of note, the consumer discretionary sector (-0.3%) settled in-line with the broader market even though homebuilders displayed relative strength after KB Home (KBH 14.60, +0.15) reported a one-cent beat on better than expected revenue. KB Home settled higher by 1.1% while iShares Dow Jones US HomeConstruction ETF (ITB 27.21, +0.07) added 0.3%.
Today's participation was ahead of recent averages as more than a billion shares changed hands at the NYSE floor.
Economic data included Initial Claims, Durable Orders, and New Home Sales:
- Weekly initial claims increased to 267,000 from an unrevised 264,000 while the Briefing.com consensus expected an increase to 271,000
- Layoff trends remain extremely low as the four-week moving average dropped to 272,000 from 273,000, remaining at levels normally associated with full employment
- Durable goods orders declined 2.0% in August after increasing a downwardly revised 1.9% (from 2.2%) in July while the Briefing.com consensus expected a decline of 2.0%
- As expected, the transportation sector weighed down durable goods demand with total transportation orders declining 5.8%, paced be falling orders for motor vehicles (-1.6%) and aircraft (-3.5%)
- Excluding transportation, durable goods orders were flat in August after increasing an unrevised 0.4% while the consensus expected an increase of 0.2%
- New home sales increased 5.7% in August to 552,000 from an upwardly revised 522,000 (from 507,000) while the Briefing.com consensus expected a reading of 515,000
- That was the most new homes sold since 593,000 homes were sold in February 2008; however, at that time, sales were trending down
- Demand was strongest in the Northeast, where sales increased 24.1%. Sales in the South (7.4%) and West (5.4%) were also positive while sales in the Midwest declined 9.1%
Tomorrow, the third estimate of Q2 GDP will be released at 8:30 ET (Briefing.com consensus 3.7%) while the final reading of the Michigan Sentiment survey for September (consensus 87.0) will be reported at 10:00 ET.
Global Market
ASIA
Markets in the Asia-Pacific region were mixed on Thursday, yet Japan’s Nikkei (-2.8%) was a notable standout for its weakness, which followed a three-day holiday closure. The downturn was labeled a catch-up trade that mirrored the general weakness that has been seen in other regional markets this week, except China, which is outperforming as President Xi Jinping visits the U.S.
Economic data
- Japan
- September Manufacturing PMI 50.9 (expected 51.3; prior 51.7)
- All Industries Activity Index +0.2% month-over-month (expected +0.1%; prior +0.5%)
- Hong Kong
- August Trade Balance HKD -25.1 bln (expected HKD -23.3 bln; prior HKD -28.4 bln)
- Exports -6.1% year-over-year (expected -2.1%; prior -1.6%)
- Imports -7.4% year-over-year (expected -4.2%; prior -5.2%)
- New Zealand
- August Trade Balance NZD -1,035 mln month-over-month (expected NZD -850 mln; prior -649 mln); NZD -3,331 mln year-over-year (expected NZD -3 mln; prior NZD — 3 mln)
Equity Markets
- Japan’s Nikkei declined 2.8% in its first trading session since last Friday, ending at its lows for the day. The weakness was described a catch-up trade related to the fallout from the Volkswagen scandal and ongoing growth concerns fueled by China’s weak manufacturing PMI reading on Wednesday. In the same vein, Japan’s manufacturing PMI for September dropped for the first time in three months and added to Thursday’s selling pressure. Losses were paced by the industrials (-4.3%), technology (-3.2%), and materials (-3.2%) sectors. The biggest laggards were JTEKT Corp (-10.4%), NSK Ltd (-9.2%), and OKUMA Corp (-9.1%). Shiseido Co (+3.4%), Aeon Co (+2.8%), and Seven & I Holdings (+2.5%) led a small group of winners. Out of the 225 index members, 14 ended higher and 211 finished lower.
- Hong Kong’s Hang Seng declined 1.0% and finished near its lows for the session. The weakness followed on the heels of Wall Street’s weak showing and was a continuation of the weakness seen throughout the weak. The Hang Seng is down 3.8% since Friday’s close. Leading Thursday’s losses were Galaxy Entertainment Group (-3.5%), Swire Pacific (-2.8%), and AIA Group (-2.6%). China Mengniu Dairy (+2.5%), China Resources Enterprise (+2.2%), and Power Assets Holdings (+1.9%) topped a small list of winners. Out of the 50 index members, 11 ended higher and 39 finished lower.
- China’s Shanghai Composite jumped 0.9%, bolstered by a burst of buying interest in the final hour that took the Composite up 0.7%. The late spike will drive speculation that it was government-sponsored, particularly with President Xi Jinping in the U.S. right now speaking favorably of China’s reform efforts.
- India’s Sensex increased 0.2%, led by gains in the technology (-2.0%), health care (+1.3%), and consumer discretionary (+1.0%) sectors that helped offset losses in the energy (-2.3%), industrials (-2.0%), and materials (-1.7%) sectors. Lupin Ltd (+3.6%), GAIL India (+2.3%), and Infosys (+2.2%) were the best-performing stocks while Oil & Natural Gas Co (-3.8%), Coal India (-2.9%), and Tata Steel (-2.7%) brought up the rear. Out of the 30 index members, 16 ended higher and 14 finished lower.
- Australia’s S&P/ASX 200 increased 1.5% in a rebound effort from losses earlier in the weak. Gains were paced by the gold (+3.8%), REIT (+2.8%), and consumer staples (+2.2%) sectors. Out of the 200 index members, 166 ended higher, 27 finished lower, and 9 were unchanged.
- Regional advancers: South Korea +0.1%
- Regional decliners: Taiwan -0.9%, Thailand -0.1%, Vietnam -0.4%, Philippines -0.1%
- Closed for holiday: Indonesia (Celebration of HAJJ), Malaysia (Hari Raya Haji), Singapore (Hari Raya Haji)
FX
- USD/CNY -0.03% at 6.3823
- USD/INR +0.3% at 66.1675
- USD/JPY -0.5% at 119.72
EUROPE
Major European indices trade lower across the board with Germany’s DAX (-2.1%) pacing the retreat amid concerns Volkswagen’s issues may not be unique to the automaker. On a separate note, the Norges Bank has unexpectedly lowered its deposit rate by 25 basis points to 0.75%.
- Germany’s September Ifo Business Climate Index 108.5 (expected 108.0; prior 108.4). Business Expectations 103.3 (expected 101.5; prior 102.2) and Current Assessment 114.0 (consensus 114.7; last 114.8). Also of note, GfK Consumer Climate 9.6 (expected 9.8; last 9.9)
- Italy’s July Retail Sales +0.4% month-over-month (expected 0.2%: prior -0.4%) while Industrial Sales -1.1% month-over-month (consensus 1.6%; last 0.7%) and Industrial New Orders +0.6% month-over-month (expected 0.4%; previous 3.0%)
- UK’s BBA Mortgage Approvals 46,700 (expected 46,300; prior 46,300)
- France’s September Business Survey 104 (expected 102; previous 103)
Closing Prices
- UK’s FTSE: -1.2%
- Germany’s DAX: -1.9%
- France’s CAC: -1.9%
- Spain’s IBEX: -2.1%
- Portugal’s PSI: -1.4%
- Italy’s MIB Index: -2.3%
- Irish Ovrl Index: -2.7%
- Greece ASE General Index: -0.1%
Macroeconomic Data
Economic Data
from Briefing.com
- Initial Claims : 267K vs 271K (Prior 264K)
- Continuing Claims : 2242K vs 2248K (Prior 2243K - Up)
- Durable Orders : -2.0% vs -2.0% (Prior 1.9% - Down)
- Durable Goods - ex transportation : 0.0% vs 0.2% (Prior 0.4%)
- New Home Sales : 552K vs 515K (Prior 522K - Up)
- Natural Gas Inventories : 106 bcf (Prior 73 bcf)
UNEMPLOYMENT CLAIMS
Highlights
- The initial claims level increased to 267,000 for the week ending September 19 from an unrevised 264,000 for the week ending September 12. The Briefing.com Consensus expected the initial claims level to increase to 271,000.
- The continuing claims level declined to 2.242 mln for the week ending September 12 from an upwardly revised 2.243 mln (from 2.237 mln) for the week ending September 5. The consensus expected the continuing claims level to increase to 2.248 mln.
Key Factors
- Layoff trends remain extremely low. The four-week moving average dropped to 272,000 from 273,000 and is hovering at levels normally associated with full employment.
Big Picture
- The overall trend in claims supports a labor market that is at, or very near, full employment.
DURABLE GOODS ORDERS
Highlights
- Durable goods orders declined 2.0% in August after increasing a downwardly revised 1.9% (from 2.2%) in July. The Briefing.com Consensus expected durable goods orders to decline 2.0%.
- Excluding transportation, durable goods orders were flat in August after increasing an unrevised 0.4% in July. The consensus expected these orders to increase 0.2%.
Key Factors
- As expected, the transportation sector weighed down durable goods demand. Total transportation orders declined 5.8% as orders of motor vehicles (-1.6%) and aircraft (-3.5%) declined.
- Downbeat regional Federal Reserve manufacturing surveys and a sharp pullback in the national ISM New Orders Index provided an accurate foreshadowing of the lackluster orders performance outside of transportation.
- Gains in machinery (1.0%) and other durables (0.8%) were offset by declines in fabricated metals (-1.8%), electrical equipment (-0.6%), and computers and electronics (-0.2%).
- Business capital demand was surprisingly resilient. After two months of strong gains (2.1% in July and 1.5% in June) orders of nondefense capital goods excluding aircraft dipped only 0.2% in August. A larger pullback after a couple months of strong gains is typically normal. Shipments, which factor into the investment component of GDP, declined 0.2% in August after increasing 0.5% in July.
Big Picture
- Demand for business investment remains firm despite a small monthly pullback in August orders of nondefense capital goods excluding aircraft.
NEW HOME SALES
Highlights
- New home sales increased 5.7% in August to 552,000 from an upwardly revised 522,000 (from 507,000) in July. The Briefing.com Consensus pegged new home sales at 515,000.
Key Factors
- That was the most new home sold since 593,000 homes were sold in February 2008. At that time, however, sales were trending down.
- Demand was strongest in the Northeast, where sales increased 24.1%. Sales in the South (7.4%) and West (5.4%) were also positive, while sales in the Midwest declined 9.1%.
- The breakout in August was unexpected. Sales in 2015 had averaged a little over 500,000 homes per month through July and volatility was kept to a minimum.
- The move in August could be a result of buyers being pulled into the marketplace in the anticipation that mortgage rates could increase in the near future. The National Association of Realtors reported that some of the recent gains in existing home sales came from rushed purchases. A similar response in the new home sector is very probable. If this is the case, we would expect to see a payback period develop over the next couple of months.
- Months's supply dropped to 4.7 months in August from 4.9 months in July. A normal market typically maintains a 6-months supply.
- The median selling price increased 0.3% to $292,700.
Big Picture
- While sales are still trending above 2013 and 2014 levels, we haven't seen the clear and steady move higher that would indicate a normalizing market.
Market Internals
NYSE:
Higher Volumes than the day before – 1031.8M vs 782.6M
Decliners outpaced Advancers (adv/dec): 1234 / 1830
New Lows outpaced New Highs (highs/lows): 5 / 345
NASDAQ:
Higher Volumes than the day before – 1968.8M vs 1599.8M
Decliners outpaced Advancers (adv/dec): 1276 / 1554
New Lows outpaced New Highs (highs/lows): 26 / 191
VOLATILITY S&P500 (VIX)
23.47 +1.34 (+6.06%)
Technical Updates
Volume: 122,217,667 (above average of 112,902,348)
Range: 16,016.36 - 16,257.11
Range: 16,016.36 - 16,257.11
4,734.48 -18.26 (-0.38%)
Volume: 481,385,232 (above average of 469,092,985)
Volume: 481,385,232 (above average of 469,092,985)
Range: 4,670.12 - 4,746.21
1,932.24 -6.52 (-0.34%)
Volume: 715,118,000 (above average of 633,146,200)
Range: 1,908.92 - 1,937.17
The candlestick patterns are suggesting a bounce in the indices. It seems to me that the indices are consolidating in a tight range and we might see some sideway before the market decides to break lower. DOW sits on the support level at 16,000-16,100 area and seems to break above its trend line. NASDAQ also found a support at its 61.8% Fib level and likewise for S&P at around 1,910. In addition, all 3 indices are at the lower bound of their respective Bollinger Bands. So we might see a technical bounce on Friday.
Commodities
- Gold and silver futures held gains today, which came after this morning’s rally
- By the end of today’s session, Dec gold closed +2.0% at $1153.90/oz, while Dec silver ended +2.4% at $15.14/oz
- Oil prices recovered off of today’s low and is now near today’s high along with natural gas
- Nov crude oil closed the session +0.9% at $44.94/barrel, while Oct nat gas rose +0.8% to $2.59/MMBtu
- Dec copper ended today flat at $2.30/lb
- The dollar index was lower today, which helped give an overall boost to commodities. However, the index is only down now modestly at 95.95 (-0.1%)
Metals
- December gold ended today’s session $22.20 higher (+2.0%) at $1153.90/oz
- December silver closed today’s session $0.35 higher (+2.4%) at $15.14/oz
- December copper closed flat at $2.30/lb
Agriculture
- December corn closed $0.01 lower at $3.82/bushel
- December wheat closed $0.10 lower at $4.97/bushel
- November soybeans closed $0.04 higher at $8.68/bushel
- Sugar #11 closed $0.24 cents higher at 11.19 cents/lb
Energy
- November crude oil futures rose $0.41 (+0.9%) to $44.94/barrel
- October natural gas closed $0.02 higher (+0.8%) at $2.59/MMBtu
- RBOB Gasoline closed $0.04 lower at $1.38/gallon
- Heating oil futures closed $0.02 higher at $1.55/gallon
Currencies
Greenback Declines for Second-Straight Session
- The U.S. Dollar Index fell 0.11% to 95.96 today, trading to some degree with the U.S. stock market and government bond yields since declining yields and equities signal a lower likelihood of the Federal Reserve tightening interest rate policy and therefore lower returns to long dollar positions
- New home sales rose to a 552K annual rate in August from 522K in July. The Briefing.com consensus was for a rate of 515K/year
- Durable goods orders fell 2.0% in August after increasing a downwardly-revised 1.9% (from 2.2%) in July. The Briefing.com consensus expected durable goods to decline 2.0%
- Initial jobless claims rose to 267K for the week ending 9/19 from 264K in the prior week. The Briefing.com consensus was 271K
- Continuing jobless claims fell to 2.242 mln from a downwardly-revised 2237K in the prior week. The Briefing.com consensus was 2.248 mln
- EUR/USD: +0.38% to $1.1224
- Germany's Ifo Business Climate Index unexpectedly rose to 108.5 in September from 108.3 in August. The survey was taken before the Volkwagen scandal hit the news, but after the financial market volatility of August
- Germany's Gfk Consumer Climate Index fell more than expected to 9.6 in October from 9.9 in August
- GBP/USD: -0.11% to $1.5232
- In the U.K., the British Bankers Association reported that the U.K.'s net mortgage lending touched a five-year high of GBP 1.955 bln in August
- Mortgage approvals rose to an 18-month high of 46,473 in August from 46,315 in July
- In the U.K., the British Bankers Association reported that the U.K.'s net mortgage lending touched a five-year high of GBP 1.955 bln in August
- USD/CHF: -0.40% to 0.9758
- USD/JPY: -0.26% to 119.93
- Japan's flash PMI fell to a lower-than-expected 50.9 in September from 51.7 in August. New order growth slowed in September and panelists blamed weakening demand in China
- USD/CAD: +0.06% to 1.3334
- AUD/USD: +0.26% to $0.7020
- NZD/USD: +1.10% to $0.6350
- New Zealand's trade deficit widened more than expected to a one-year high in August of NZ 1.035 bln from NZ 726 mln in July
- EUR/NOK: +2.39% to 9.494
- Norway's central bank surprised the markets with a 25 basis point cut in the deposit rate to 0.75% and opened up the door for more easing later in the year
Bonds
Yield Move Lower
- U.S. Treasuries rallied today in a curve-flattening trade as global equities moved lower amidst the Volkswagen emissions scandal and concerns about global growth. Governments did give back a fair amount of ground by the end of the day as equities rallied, trying to draw a line under the stock sell-off that began with last week's FOMC rate announcement. Orders for durable goods came out slightly below expectations but new home sales exceeded estimate and hit a new cycle-high. Fed Chair Yellen will speak at 17:00 ET today and her remarks will be closely watched
- Yield Check:
- 2-yr: -2 bps to 0.68%
- 5-yr: -3 bps to 1.44%
- 10-yr: -3 bps to 2.12%
- 30-yr: -4 bps to 2.91%
- News:
- Durable goods orders fell 2.0% in August after increasing a downwardly-revised 1.9% (from 2.2%) in July. The Briefing.com consensus expected durable goods to decline 2.0%
- Excluding transportation, durable goods orders were flat in August after increasing an unrevised 0.4% in July. The consensus expected these orders to increase 0.2%
- New home sales rose to a 552K annual rate in August from 522K in July. The Briefing.com consensus was for an annual rate of 515K
- Initial jobless claims rose to 267K for the week ending 9/19 from 264K in the prior week. The Briefing.com consensus was 271K
- Continuing jobless claims fell to 2.242 mln from a downwardly-revised 2.237 mln in the prior week. The Briefing.com consensus was 2.248 mln
- The $29 bln 7-year note auction was met with solid demand:
- High yield: 1.813%
- Bid-to-cover: 2.51
- Indirect bid: 62.6%
- Direct bid: 8.9%
- Durable goods orders fell 2.0% in August after increasing a downwardly-revised 1.9% (from 2.2%) in July. The Briefing.com consensus expected durable goods to decline 2.0%
- Commodities:
- WTI crude: +1.26% to $45.04/bbl.
- Natural Gas: +0.93% to 2.593/mbtu
- Inventories for the week ending 9/19 showed a build of 106 billion cubic feet versus expectations for a build of 97 bcf
- Gold: +1.70% to $1,150.70/troy oz.
- Copper: +0.37% to $2.304/lb.
- Currencies:
- EUR/USD: +0.35% to $1.1221
- USD/JPY: -0.15% to 120.06
- Data Out Friday:
- Q2 GDP and GDP Deflator – Third Estimate (08:30 ET)
- September Michigan Sentiment – Final (10:00 ET)
- Fed Speakers:
- St. Louis Fed President James Bullard (non-FOMC voter) participates in a discussion on "New Directions in Monetary Policy" (09:15 ET)
- Kansas City Fed President Esther George (non-FOMC voter) (13:25 ET)
Treasury Yields:
- 2 Year Note 0.67% -0.03
- 5 Year Note 1.44% -0.03
- 10 Year Note 2.13% -0.03
- 30 Year Bond 2.91% -0.04
2/30 Spread: 224 bps ( -1 ) … 2/10 Spread: 146 bps ( UNCH )
Preview for Friday 25 Sept, 2015
Economic Data
Friday (25 Sept) :
- 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
Friday (25 Sept) :
BMO - BBRY
AMC - FINL
BMO - BBRY
AMC - FINL
Summary
I feel that market does not have a clear direction at the moment and is likely to remain in the tight range for the short term. So we might see some short covering and dip buying on Friday to bring up the market.
Tomorrow economic data includes GDP number (3rd estimate) and that might give the market some push.
I feel that market does not have a clear direction at the moment and is likely to remain in the tight range for the short term. So we might see some short covering and dip buying on Friday to bring up the market.
Tomorrow economic data includes GDP number (3rd estimate) and that might give the market some push.
Direction for Friday 25 Sept, 2015: Up
2015 Daily Directional Accuracy: 95/150 (63.33%)
2015 Weekly Directional Accuracy: 22/35 (62.86%)
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