Dow +140.10 at 16739.95, Nasdaq +28.72 at 4889.24, S&P +17.22 at 1995.31
Well markets around the world were literally on the upside ahead of Thursday's Fed news. Market saw a slight hesitation at the early opening but eventually buying interest kicked in and brought the market higher. It looks as though the market wanted a rate hike already. Nonetheless the decision will be announced on 2pm ET tomorrow.
The surprise drawdown in oil inventory pushed oil price higher. And crude oil is forming a higher low. Crude oil has been rallying after hitting the bottom below $38/barrel in August.
Market Summary
Industry Watch
Strong: Consumer Staples, Energy, Materials, Utilities
Weak: Financials, Health Care, Technology
Other Market Moving Factor:
- FOMC begins two-day meeting: policy decision expected tomorrow at 14:00 ET
- In-line August CPI (-0.1%) does little to alter rate-hike debate
- Anheuser-Busch Inbev (BUD) approaches SABMiller (SBMRY) about a potential acquisition
[BRIEFING.COM] The major averages strung together their second consecutive advance 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.
The sharp rally in the energy sector underpinned the overall market, which rallied despite the uncertainty surrounding tomorrow's FOMC policy statement, which could be highlighted by the first rate hike in more than nine years.
To be fair, there were some other areas of relative strength. Notably, the consumer staples sector (+1.1%) saw increased activity thanks to M&A rumblings among brewers and distillers after Anheuser-Busch Inbev (BUD 115.43, +7.39) approached SABMiller (SBMRY 56.45, +9.72) about a potential acquisition. SABMiller expressed willingness to entertain discussions, and the news boosted its peers, none more so than Molson Coors Brewing (TAP 82.98, +10.34), which surged 14.2%.
The news of a merger brewing in the consumer sector invited the heaviest NYSE floor volume of the week (863 million), but tomorrow's session is all but sure eclipse today's tally once the FOMC decision is announced.
Elsewhere, the industrial sector (+0.7%) settled not far behind the broader market, doing so despite relative weakness among transport stocks. Specifically, the Dow Jones Transportation Average was limited to a gain of 0.2% as FedEx (FDX 149.63, -4.37) weighed. Shares of FDX surrendered 2.8% in reaction to below-consensus earnings and guidance, dragging its peer, UPS (UPS 100.08, -0.44), lower by 0.4%.
The industrial sector settled just ahead of financials (+0.6%) while another cyclical group—technology (+0.4%)—underperformed throughout the day with Apple's (AAPL 116.35, +0.07) flat close keeping the sector behind the broader market.
The relative weakness in the technology sector translated into underperformance for the Nasdaq, but it is worth noting the index was also pressured by biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 355.14, -2.32) lost 0.7%, erasing the bulk of yesterday's gain. For its part, the health care sector ended behind the remaining nine groups, but still added 0.3%.
Unlike stocks, Treasuries spent the day inside a narrow range, slipping to lows into the close with the 10-yr yield rising one basis point to 2.30%.
Economic data included CPI and the NAHB Housing Market Index:
- Consumer prices declined an in-line 0.1% in August after increasing 0.1% in July
- A steep 2.0% drop in energy costs was responsible for the downtick, representing the first decline in energy prices since a 1.3% drop in April
- Food prices increased 0.2% for a second consecutive month
- Excluding food and energy, core CPI increased 0.1% for a second consecutive month in August, which is what the consensus expected
- There were no outliers in the core price index and trends remain soft and stable.
- The NAHB Housing Market Index for September rose to 62 from 61 while the Briefing.com consensus expected the reading to hold at 61
Tomorrow, weekly Initial Claims (Briefing.com consensus 275,000), August Housing Starts (consensus 1.158 million), Building Permits (expected 1.158 million), and the Q2 Current Account Balance (expected deficit of $112.20 billion) will be released at 8:30 ET while the Philadelphia Fed Survey for September will cross the wires at 10:00 ET. The day's data will be topped off with the 14:00 ET release of the FOMC policy statement and fed funds rate decision (consensus unchanged at 0.25%).
Global Market
ASIA
Markets in the Asia-Pacific region seemed to follow Wall Street’s lead early on Wednesday and China’s lead late on Wednesday. To that end, gains were registered in nearly every market, yet none more so than China’s Shanghai Composite (+4.9%), which soared over 5.0% in a one-hour span that unfolded late in the trading session.
Economic data
- Australia
- MI Leading Index -0.3% month-over-month (prior +0.1%)
- New Zealand
- Q2 Current Account NZD -1.22 bln quarter-over-quarter (expected NZD -1.50 bln; prior NZD 0.66 bln); NZD -8.30 bln year-over-year (expected NZD -8.80 bln; prior NZD -8.60 bln)
Equity Markets
- Japan’s Nikkei increased 0.8%, supported by gains in the industrials (+2.1%) and technology (+2.0%) sectors. Topping the list of individual winners were Sumco Corp (+6.1%), JTEKT Corp (+5.3%), and Pioneer Corp (+5.0%). Kansai Electric Power (-6.2%), Chubu Electric Power (-5.8%), and Nippon Paper Industries (-5.1%) were the biggest losers. Out of the 225 index members, 158 ended higher, 63 finished lower, and 4 were unchanged.
- Hong Kong’s Hang Seng increased 2.4%, scoring the bulk of that gain in the final two hours of trading. Upside leaders included Galaxy Entertainment Group (+6.3%), Lenovo Group (+5.0%), and Sands China (+4.7%). Out of the 50 index members, only two — China Resources Enterprise (-1.4%) and Hengan International Group (-0.7%) — ended the day lower.
- China’s Shanghai Composite surged 4.9%. Remarkably, the Composite was down 0.6% roughly 90 minutes before the end of the session. A late spike in buying interest, however, turned the tide in a big way. While there were some headlines that could ostensibly be cited as a catalyst for the late surge (eg. PBOC Chief Economist making uplifting remarks about the economy), it was generally regarded as a government-backed move.
- India’s Sensex jumped 1.0%, riding the leadership of the financials (+1.4%) and consumer discretionary (+1.3%) sectors. Hero MotoCorp (+2.5%), Axis Bank (+2.4%), and Sun Pharmaceuticals (+2.3%) led individual winners while Bharat Heavy Electricals (-0.7%), Larsen & Toubro (-0.6%), and Coal India (-0.6%) paced a handful of losers. Out of the 30 index members, 26 ended higher and 4 finished lower.
- Australia’s S&P/ASX 200 increased 1.6% and ended at its highs for the day. The upside move was powered by strength in the energy (+2.6%), resources (+2.0%), and financials (+1.9%) sectors. Out of the 200 index members, 147 ended higher, 42 finished lower, and 11 were unchanged.
- Regional advancers: South Korea +2.0%, Taiwan +0.9%, Singapore +0.9%, Thailand +0.9%, Vietnam +0.2%, Philippines +0.1%
- Regional decliners: Indonesia -0.3%
- Closed for holiday: Malaysia (Malaysia Day)
FX
- USD/CNY +0.01% at 6.3708
- USD/INR +0.1% at 66.4325
- USD/JPY +0.03% at 120.46
EUROPE
Major European indices trade higher across the board with France’s CAC (+1.5%) showing relative strength. On a related note, France’s Finance Minister Michel Sapin released the 2016 budget and growth forecast for the country, seeing 2016 GDP growth at 1.5% against 1.0% expected this year. Meanwhile, the 2016 inflation forecast has been raised to 1.0% from 0.1% in 2015
- Eurozone August CPI 0.0% month-over-month (expected -0.6%; prior -0.6%); +0.1% year-over-year (consensus 0.2%; last 0.2%). Separately, Core CPI +0.3% month-over-month (prior -0.7%); +0.9% year-over-year (consensus 1.0%; prior 1.0%)
- UK’s July Average Earnings Index + Bonus +2.9% (consensus 2.5%; prior 2.6%) while August Claimant Count Change 1,200 (expected -5,000; prior -6,800) and the Unemployment Rate 5.5% (expected 5.6%; prior 5.6%)
- Swiss September ZEW Expectations 9.7 (prior 5.9)
Closing Prices
- UK’s FTSE: + 1.5%
- Germany’s DAX: + 0.4%
- France’s CAC: + 1.7%
- Spain’s IBEX: + 2.0%
- Portugal’s PSI: + 1.8%
- Italy’s MIB Index: + 0.7%
- Irish Ovrl Index: + 0.3%
- Greece ASE General Index: + 1.5%
Macroeconomic Data
Economic Data
from Briefing.com
- MBA Mortgage Index : -7.0% (Prior -6.2%)
- CPI : -0.1% vs -0.1% (Prior 0.1%)
- Core CPI : 0.1% vs 0.1% (Prior 0.1%)
- NAHB Housing Market Index : 62 vs 61 (Prior 61)
- Crude Inventories : -2.104M (Prior 2.570M)
- Net Long-Term TIC Flows : $7.7B (Prior $103.1B - Up)
CONSUMER PRICE INDEX
Highlights
- Consumer prices declined 0.1% in August after increasing 0.1% in July. The Briefing.com Consensus expected the CPI to decline 0.1%.
- Excluding food and energy, core CPI increased 0.1% for a second consecutive month in August. That was exactly what the consensus expected.
Key Factors
- The drop in the CPI was caused by a steep 2.0% drop in energy costs. That was the first decline in energy prices since a 1.3% drop in April, and it was the largest decline since a 9.6% decline in January. A 4.1% drop in gasoline prices was the main catalyst for the decline in energy prices.
- Food prices increased 0.2% for a second consecutive month.
- There were no outliers in the core price index and trends remain soft and stable.
- Shelter prices, which increased 0.4% in July, came down a bit and increased 0.2%. Apparel prices increased 0.3% for a second consecutive month. Medical care services prices were flat.
- Year-over-year, core CPI increased 1.8% in August. The growth rate has been virtually unchanged over the last six months.
Big Picture
- CPI growth trends are well below the Fed's target level, and there are very few underlying pressures that would cause these trends to suddenly change.
Market Internals
NYSE:
Higher Volumes than the day before – 884.6M vs 778.5M
Advancers outpaced Decliners (adv/dec): 2376 / 705
New Lows outpaced New Highs (highs/lows): 27 / 46
NASDAQ:
Higher Volumes than the day before – 1662.7M vs 1580.1M
Advancers outpaced Decliners (adv/dec): 1773 / 1074
New Lows equal New Highs (highs/lows): 34 / 34
VOLATILITY S&P500 (VIX)
21.35 -1.19 (-5.28%)
Technical Updates
Volume: 99,623,148 (below average of 110,148,977)
Range: 16,593.90 - 16,755.98
Range: 16,593.90 - 16,755.98
4,889.24 +28.72 (+0.59%)
Volume: 382.7M (below average of 461,086,581)
Volume: 382.7M (below average of 461,086,581)
Range: 4,848.15 - 4,893.44
1,995.31 +17.22 (+0.87%)
Volume: 592,020,686 (below average of 613,151,815)
Range: 1,977.93 - 1,997.26
It seems we are seeing a breakout in the 3 indices on Wednesday. DOW broke above its 61.8% Fib resistance level and 16,750 is likely to test the strength of the breakout. NASDAQ also went above 4,860 and approaching its next resistance at 4,900. S&P has broken its resistance at 1,980 and looking for more upside. It is likely to meet another resistance around 2,010. If we see the 3 major indices break above their respective resistance, market is signalling a green light to get long.
Commodities
- According to the Bloomberg Commodity Index, commodities are about 1% today. The dollar index sold off today, which has provided overall upside in commodities.
- In current trade, oil, gold, silver and copper futures remain near today’s highs.
- WTI oil prices rallied following today’s EIA weekly storage data, which showed a larger-than-expected oil draw.
- Oct crude oil ultimately closed today’s session at +5.7% at $47.14/barrel.
- In other energy, Oct natural gas declined -2.6% at $2.66/MMBtu
- Silver displayed a nice rally, ultimately climbing +4% to end the day at $14.89/oz. Dec copper rose 1.5% at $1119.20/oz/
- In base metals, Dec copper rose +0.8% to $2.45/lb
Metals
- December gold ended today’s session $16.40 higher (+1.5%) at $1119.20/oz
- December silver closed today’s session $0.57 higher (+4%) at $14.89/oz
- December copper closed $0.02 higher (+0.8%) at $2.45/lb
Agriculture
- December corn closed $0.04 lower (-1%) at $3.86/bushel
- December wheat closed $0.06 lower (-1.2%) at $4.89/bushel
- November soybeans closed $0.03 higher (+0.3%) to $8.87/bushel
- Sugar #11 closed $0.07 cents higher at 11.47 cents/lb
Energy
- October crude oil futures rose $2.55 (+5.7%) to $47.14/barrel
- October natural gas closed $0.07 lower (-2.6%) at $2.66/MMBtu
- RBOB Gasoline closed $0.05 higher at $1.38/gallon
- Heating oil futures closed $0.04 higher at $1.54/gallon
Currencies
Dollar Declines
- The U.S. Dollar Index fell 0.31% to 95.32 today, losing ground after the release of August consumer price index data and then again following the September NAHB housing market report
- The U.S.'s headline consumer price index fell 0.1% m/m, in line with the Briefing.com consensus. The headline CPI rose 0.1% in July
- Core CPI increased 0.1% in August, in line with the Briefing.com consensus, following a 0.1% gain in July
- The NAHB Housing Market Index climbed to 62 in September, better than the Briefing.com consensus of 61 and the August reading of 61
- EUR/USD: +0.17% to $1.1290
- The eurozone's consumer price index (CPI) rose a smaller-than-expected 0.1% in the year to August after rising 0.2% y/y in July. The initial estimate for August had been 0.2%
- The core CPI increased 0.9%, missing expectations and the prior month's reading of 1.0%. The initial estimate for August was 1.0%
- The Organization for Economic Cooperation and Development upgraded its 2015 growth forecast for the eurozone to 1.6% from 1.4% in June
- GBP/USD: +1.00% to $1.54999
- Total pay growth in the U.K., as measured by the Average Earnings Index, beat expectations at 2.9% y/y in July versus 2.6% growth in June
- The unemployment rate unexpectedly fell to 5.5% in July from 5.6% in June
- USD/JPY: +0.13% to 120.59
- S&P cut Japan's credit rating to A+, outlook stable, from AA- due to the failure of Abenomics to achieve escape velocity from that country's prolonged bout of deflation
- USD/CHF: -0.50% to 0.9694
- Switzerland's ZEW Economic Expectations Index rose to 9.7 in September from 5.9 in August
- USD/CAD: -0.48% to 1.3181
- Manufacturing sales growth was upwardly-revised to 1.7% m/m in July, more than expected and more than the 1.2% growth in June
- AUD/USD: +0.82% to $0.7189
- The Westpac/Melbourne Institute Leading Index fell 0.3% m/m in August following a upwardly-revised 0.1% gain in July
- Westpac's chief economist said that the report indicates Australian GDP growth closer to 2.75% than 3%
- NZD/USD: +0.14% to $0.6357
- New Zealand's NZD 821 mln current account surplus from Q1 turned into a NZD 1.2 bln deficit in the second quarter. The consensus estimate was for a deficit of just under NZD 1.5 bln
Bonds
Dead-Cat Bounce
- The U.S. Treasury complex ended today in the red after failing to follow through on a morning rally. The economic data came out almost perfectly in line, although the NAHB Housing Market Index did edge up to 62 from 61, its highest level since 2005. Equities and oil both gained ground, which didn't help the Treasury bulls' cause. Tomorrow, the FOMC will announce its long-awaited interest rate decision and investor attention will turn back to China, the upcoming Greek election on September 20th, and the potential for a government shutdown in the U.S.
- Yield Check:
- 2-yr: unch at 0.81%
- 5-yr: unch at 1.61%
- 10-yr: +1 bp to 2.30%
- 30-yr: +1 bp to 3.08%
- News:
- The headline consumer price index fell 0.1% m/m, in line with the Briefing.com consensus. The headline CPI rose 0.1% in July
- Core CPI increased 0.1% in August, in line with the Briefing.com consensus, following a 0.1% gain in July
- The National Association of Home Builders reported that its Housing Market Index climbed to 62 in September, better than the Briefing.com consensus of 61 and the August reading of 61
- The six-month outlook component declined to 68 from 70, but prospective buyer traffic moved to a one-year high and the index of current sales hit a nine-year high
- The MBA Mortgage Index fell 7.0% for the week ending 9/12. The index had declined 6.2% in the prior week
- The headline consumer price index fell 0.1% m/m, in line with the Briefing.com consensus. The headline CPI rose 0.1% in July
- Commodities:
- WTI crude: +5.40% to $47.00
- Crude inventories fell by 2.1 mln barrels in the week ending 9/12
- Gold: +1.44% to $1,118.50/troy oz.
- Copper: +1.05% to $2.452/lb.
- WTI crude: +5.40% to $47.00
- Currencies:
- EUR/USD: +0.04% to $1.1276
- USD/JPY: +0.15% to 120.62
- Data Out Thursday:
- Initial Jobless Claims for the week ending 9/12 and Continuing Jobless Claims for the week ending 9/5 (08:30 ET)
- August Housing Starts and Building Permits (08:30 ET)
- Q2 Current Account Balance (08:30 ET)
- September Philadelphia Fed (10:00 ET)
- Natural Gas Inventories for the week ending 9/12 (10:30 ET)
- September FOMC Rate Decision (14:00 ET)
Treasury Yields:
- 2 Year Note 0.82% UNCH
- 5 Year Note 1.62% +0.01
- 10 Year Note 2.30% +0.02
- 30 Year Bond 3.08% +0.02
2/30 Spread: 226 bps ( +2 ) … 2/10 Spread: 148 bps ( +2 )
Preview for Thursday 17 Sept, 2015
Economic Data
Thursday (17 Sept) :
- Initial Claims : 275K (Prior 275K)
- Continuing Claims : 2254K (Prior 2260K)
- Housing Starts : 1160K (Prior 1206K)
- Building Permits : 1159K (Prior 1119K)
- Current Account Balance : -$112.2B (Prior -$113.3B)
- Philadelphia Fed : 6.5 (Prior 8.3)
- Natural Gas Inventories : (Prior 68 bcf)
- FOMC Rate Decision : 0.25% (Prior 0.25%)
Earnings Highlights
Thursday (17 Sept) :
BMO - MANU MCS RAD
AMC - ADBE MCFT
BMO - MANU MCS RAD
AMC - ADBE MCFT
Summary
Enough say on the FOMC meeting. I have been mentioning it since the start of the week as it is definitely going to be a very strong market mover. On top of that we are seeing some important economic data such as unemployment claims, building permits. Being so, I think Thursday is not going to be an easy session.
Looking at the reaction in the market, I think we might see a rate hike from the Fed in September. Otherwise we might set up for a nasty sell-off. Anyway I am staying off the market at the moment until the sign is clear.
Enough say on the FOMC meeting. I have been mentioning it since the start of the week as it is definitely going to be a very strong market mover. On top of that we are seeing some important economic data such as unemployment claims, building permits. Being so, I think Thursday is not going to be an easy session.
Looking at the reaction in the market, I think we might see a rate hike from the Fed in September. Otherwise we might set up for a nasty sell-off. Anyway I am staying off the market at the moment until the sign is clear.
Direction for Thursday 17 Sept, 2015: Abstain
2015 Daily Directional Accuracy: 91/145 (62.76%)
2015 Weekly Directional Accuracy: 21/34 (61.76%)
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