Dow +304.06 at 16776.43, Nasdaq +73.49 at 4781.26, S&P +35.68 at 1987.04
Another big opening in the market. The rally looked rather convincing as Monday was bullish all round. This more or less validates the strength of the bulls. However market was quiet after the strong opening before we saw more bulls stepped in to bring the market higher.
Markets around the world were showing some upside as well. The weak NFP report on Friday surely gave the global markets some boost here.
Market Summary
Industry Watch
Strong: Energy, Financials, Industrials, Materials, Telecom Services
Weak: Health Care
Other Market Moving Factor:
- Global equities rally despite disappointing PMI readings from Asia and Europe
- Biotechnology surrenders early gain
[BRIEFING.COM] The stock market enjoyed an upbeat start to the trading week with the S&P 500 returning near its rebound high from the middle of September. The benchmark index climbed 1.8% while the Nasdaq Composite (+1.6%) followed not far behind.
The Monday buying frenzy was not fueled by quarterly earnings as the first portion of the reporting period is still two weeks away. Instead, the advance was a continuation of the Friday rally, which was predicated on the belief that a disappointing September Nonfarm Payrolls report would prevent the Federal Reserve from raising rates at the October meeting. In that same vein, the bad-is-good dynamic appeared to be on display overseas as Japan's Nikkei (+1.6%), Germany's DAX (+2.7%), and France's CAC (+3.5%) vaulted higher even though Services PMI readings in Japan (51.4; prior 53.7) and the eurozone (53.7; expected 54.0) disappointed.
With global investors showing hope for more monetary stimulus, the spotlight will be on the Bank of Japan considering the central bank will begin a two-day policy meeting on Tuesday. Last week, Bloomberg reported that the BoJ is not looking to increase the size of its quantitative and qualitative easing program, but some investors remain hopeful for a surprise to the contrary. The yen retreated about 0.5% against the dollar today, sending the dollar/yen pair up to 120.50 after spending the bulk of the past two weeks near 120.00.
All ten sectors finished the day in positive territory, but the health care space (+0.3%) struggled to stay in the green as biotechnology weighed. The iShares Nasdaq Biotechnology ETF (IBB 313.20, -2.33) was in for another volatile session, surrendering an early gain to end lower by 0.7% after being down more than 2.0%. That being said, biotechnology's underperformance only left its mark on the Nasdaq as the tech-heavy index lagged throughout the day. Meanwhile, the S&P 500 overcame that weakness with ease.
Cyclical sectors were at the forefront of the Monday advance with energy (+3.0%) holding the lead throughout the session. The sector rallied behind crude oil early on and continued its charge into the afternoon even as WTI crude retreated from its best level of the day, ending higher by 1.6% at $46.26/bbl.
Elsewhere, top-weighted technology (+1.9%) and financials (+2.1%) spent the day just ahead of the broader market while the industrial sector (+2.8%) was nearly as strong as energy. Transport stocks went along for the ride with the Dow Jones Transportation Average spiking 2.3% to register its fifth consecutive advance.
Also of note, the technology sector managed to spend the day ahead of the broader market even though Apple (AAPL 110.78, +0.40) struggled to keep pace. The sector heavyweight underperformed after Digitimes reported that new iPhone sales in Japan have not kept up with demand observed after the previous release.
Today's rally in equities coincided with daylong selling in the Treasury market that pushed the 10-yr note below Friday's low. As a result, the benchmark yield rose seven basis points to 2.06%.
Trading volume was well above average as more than a billion shares changed hands at the NYSE floor.
Economic data was limited to the ISM Services Index, which declined to 56.9 in September from 59.0 while the Briefing.com consensus expected a drop to 58.0. Although many of the sub-categories in the index showed sharp declines in September, there wasn't a prevalence of contractions like those that plagued the ISM Manufacturing Index. The services sector remains much more robust than the manufacturing sector.
Tomorrow, the August Trade Balance will be reported at 8:30 ET (Briefing.com consensus -$44.50 billion).
Global Market
ASIA
The new week began on a bullish note for markets in the Asia-Pacific region, which traded in rally mode on the heels of Wall Street’s strong showing on Friday. The gains flowed primarily from an expectation that the weak employment report out of the U.S. will keep the Federal Reserve on hold longer than anticipated. Indonesia (+3.2%) was the biggest gainer on Monday followed by India (+2.1%) and Singapore (+2.1%) as emerging markets took heart in the idea the Federal Reserve won’t be raising interest rates soon.
Economic data
- Japan
- August Average Cash Earnings +0.5% year-over-year (expected +0.7%; prior +0.9%)
- September Nikkei Services PMI 51.4 (prior 53.7)
- Australia
- September AIG Services Index 52.3 (prior 55.6)
- September MI Inflation Gauge +0.3% (prior +0.1%)
Equity Markets
- Japan’s Nikkei increased 1.6%, bolstered by gains in all sectors. The biggest gainers were the health care (+2.2%) and industrials (+2.0%) sectors. Japan Steel Works (+5.8%), Sumco Corp (+5.4%), and Mitsubishi Corp (+5.2%) led all winners while UNY Group Holdings (-2.4%), Mitsubishi Motors (-2.2%), and Unitika (-1.7%) paced the losers. Out of the 225 index members, 195 ended higher, 24 finished lower, and 6 were unchanged.
- Hong Kong’s Hang Seng increased 1.6%, taking its cue primarily from Wall Street as the mainland market remained closed for holiday. Investor sentiment was boosted by the thought that the Federal Reserve won’t be raising interest rates in the near term. Tingyi Cayman Islands Holding Corp (+5.6%), Galaxy Entertainment (+5.3%), and Belle International Holdings (+5.0%) topped the list of winners. Out of the 50 index members, only three — China Resources Enterprise (-3.3%), Want Want China Holdings (-0.5%), and China Unicom Hong Kong (-0.3%) — finished lower.
- China’s Shanghai Composite: closed for holiday (National Day)
- India’s Sensex jumped 2.1% and closed near its highs for the day. The gains were driven by the materials (+4.5%), industrials (+3.8%), and financials (+3.7%) sectors. Tata Steel (+6.2%), Tata Motors (+5.8%), and ICICI Bank (+5.3%) were the best-performing issues. Maruti Suzuki India (-3.5%), Dr Reddy’s Laboratories (-1.3%), and Lupin (-1.2%) led a small group of losers. Out of the 30 index members, 25 ended higher and 5 finished lower.
- Australia’s S&P/ASX 200 increased 2.0%, garnering strength from a rebound in the gold (+7.5%), metals & mining (+3.9%), and resources (+3.6%) sectors. Out of the 200 index members, 192 ended higher, 6 finished lower, and 2 were unchanged.
- Regional advancers: South Korea +0.4%, Taiwan +0.6%, Malaysia +1.2%, Indonesia +3.2%, Singapore +2.1%, Thailand +1.6%, Vietnam +1.4%, Philippines +1.6%
- Regional decliners: None
FX
- USD/CNY -0.02% at 6.3561
- USD/INR -0.4% at 65.2637
- USD/JPY +0.3% at 120.25
EUROPE
Major European indices trade higher across the board with France’s CAC (+3.4%) showing relative strength.
- Eurozone September Services PMI 53.7 (expected 54.0; prior 54.0) and August Retail Sales 0.0% month-over-month (expected -0.1%; prior 0.6%); +2.3% year-over-year (consensus 1.8%; last 3.0%). Also of note October Sentix Investor Confidence 11.7 (expected 11.6; previous 13.6)
- Germany’s September Services PMI 54.1 (consensus 54.3; previous 54.3)
- UK’s September Services PMI 53.3 (expected 56.0; last 55.6)
- France’s September Services PMI 51.9 (consensus 51.2; prior 51.2)
- Italy’s September Services PMI 53.3 (expected 54.0; previous 54.6)
- Spain’s September Services PMI 55.1 (consensus 58.5; prior 59.6)
Closing Prices
- UK’s FTSE: + 2.8%
- Germany’s DAX: + 2.7%
- France’s CAC: + 3.5%
- Spain’s IBEX: + 3.6%
- Portugal’s PSI: + 3.5%
- Italy’s MIB Index: + 2.7%
- Irish Ovrl Index: + 3.0%
- Greece ASE General Index: + 4.1%
Macroeconomic Data
Economic Data
from Briefing.com
- ISM Services : 56.9 vs 58.0 (Prior 59.0)
ISM SERVICES
Highlights
- The ISM Non-manufacturing Index declined to 56.9 in September from 59.0 in August. The Briefing.com Consensus expected the ISM Non-Manufacturing Index to decline to 58.0.
Key Factors
- Although many of the sub-categories in the index showed sharp declines in September, there wasn't a prevalence of contractions like those that plagued the ISM Manufacturing Index.
- The services sector remains much more robust and than the manufacturing sector.Business activities slowed as the related index fell to 60.2 in September from 63.9 in August. Growth in both new (56.7 from 63.4) and unfilled (54.5 from 56.5) orders slowed in September. Neither index, however, is in immediate danger of contracting.
- In a somewhat unusual note, the Employment Index increased to 58.3 in September from 56.0. That comes as the hard employment data showed a sizable slowdown in payroll gains.
Big Picture
- The market generally doesn't pay much attention to the services index because the services sector is less cyclical than the manufacturing sector. To that end, September marked the 68th consecutive month in which economic activity in the non-manufacturing sector has expanded.
Market Internals
NYSE:
Higher Volumes than the day before – 1091.7M vs 1078.5M
Advancers outpaced Decliners (adv/dec): 2749 / 376
New Highs outpaced New Lows (highs/lows): 47 / 17
NASDAQ:
Lower Volumes than the day before – 1989.8M vs 2168.9M
Advancers outpaced Decliners (adv/dec): 2200 / 644
New Highs outpaced New Lows (highs/lows): 41 / 36
VOLATILITY S&P500 (VIX)
19.54 -1.40 (-6.69%)
Technical Updates
Volume: 127,657,415 (above average of 110,615,047)
Range: 16,502.10 - 16,798.37
Range: 16,502.10 - 16,798.37
4,781.26 +73.49 (+1.56%)
Volume: 490,216,819 (above average of 466,905,171)
Volume: 490,216,819 (above average of 466,905,171)
Range: 4,740.24 - 4,785.91
1,987.05 +35.69 (+1.83%)
Volume: 725.9M (above average of 619,071,913)
Range: 1,954.33 - 1,989.17
All 3 indices manage to break above their respective 20MAs. DOW had a big jump as it went up to the upper bound of its Bollinger Bands and 50MA. NASDAQ went up and looking to approach the 50MA. S&P is approaching its resistance at around 1,990 with the 50MA just a tad higher. It looks to me that the 3 indices are likely to face some resistance going forward. And if they do close higher, I suppose we can look forward to more upside...
Commodities
- Oil prices were a big story today after more catalysts hit the commodity.
- Oil prices rose today after Russia said it was ready to talk about global oil markets if an OPEC/non-OPEC meeting were to arise, among other catalysts.
- Separately, Russia airstrikes in Syria are providing more tension on geopolitical issues.
- By the end of today’s floor trading session, Nov crude oil rose +1.6% to $46.28/barrel.
- In other energy, Nov natural gas gained one cent to finish at $2.46/MMBtu.
- Some metals lost some steam in afternoon activity, but still closed a little higher.
- Silver came back, however, and ended the day near today’s high, finishing +0.48 at $15.72/oz.
- Dec gold ended +$1.20 to $1137.90/oz. Dec copper, meanwhile, ended +$0.03 at $2.36/lb
Energy Closing Prices
- November crude oil futures rose $0.73 (+1.6%) to $46.28/barrel
- November natural gas closed $0.01 higher at $2.46/MMBtu
- RBOB Gasoline closed $0.05 higher at $1.39/gallon
- Heating oil futures closed $0.03 higher at $1.55/gallon
Agriculture Closing Prices
- December corn closed $0.05 higher at $3.94/bushel
- December wheat closed $0.03 higher at $5.15/bushel
- November soybeans closed $0.08 higher at $8.83/bushel
- Sugar #11 closed $0.11 cents higher at 13.64 cents/lb
Metals Closing Prices
- December gold ended today’s session $1.20 higher at $1137.90/oz
- December silver closed today’s session $0.48 higher at $15.72/oz
- December copper closed $0.03 higher at $2.36/lb
Currencies
Weak Service PMI's Drive Euro, Yen, and Sterling Lower
- The U.S. Dollar Index jumped 0.33% to 96.15 today as Treasury yields moved higher with the rally in risk assets
- EUR/USD: -0.30% to $1.1176
- The eurozone's services PMI was revised down to 53.7 for September from a prior estimate of 54.0. The final reading for August was 54.4
- The national figure for Germany was revised down to 54.1 from 54.3 after showing 54.9 in August, while France's was revised up to 51.9 from a flash reading of 51.2. France's services PMI was 50.6 in August
- Spain's services PMI dropped to 55.1 in September from 59.6 in August, according to the initial estimate. Italy's declined to 53.3 in September from 54.6 in August
- Eurozone retail sales were unchanged m/m in August after rising 0.4% in July
- The eurozone's services PMI was revised down to 53.7 for September from a prior estimate of 54.0. The final reading for August was 54.4
- GBP/USD: -0.19% to $1.5149
- The U.K.'s services PMI unexpectedly fell to 53.3 in September from 55.6 in August
- USD/CHF: +0.51% to 0.9766
- USD/JPY: +0.45% to 120.50
- Japan's Markit/Nikkei Services PMI printed 51.4 in September, down from 53.7 in August. That puts the composite PMI at 51.2 for September, a five-month low
- New orders were weak and employment growth was strong
- Japan's Markit/Nikkei Services PMI printed 51.4 in September, down from 53.7 in August. That puts the composite PMI at 51.2 for September, a five-month low
- USD/CAD: -0.53% to 1.3095
- AUD/USD: +0.54% to $0.7090
- The AIG Services Index dropped to 52.3 in September from 55.6 in August
- NZD/USD: +0.94% to $0.6006
- USD/RUB: -1.84% to 64.83
- Markit reported that Russia's services PMI rose to 51.3 in September from 49.1 in August
- Russia's CPI rose 0.6% m/m in September, less than expected but more than the gain in August
Bonds
Yields Rise on Greater Risk Appetite
- The U.S. Treasury complex sold off today as investors sought to reposition themselves for a rally in risky assets. The ISM Non-Manufacturing Index dropped more than expected in September, but the market shrugged off the report as just another indication that the Fed will maintain its zero interest-rate policy for longer than previously expected. The yield curve is steeper this afternoon as one would expect during a risk rally
- Yield Check:
- 2-yr: +3 bps to 0.61%
- 5-yr: +5 bps to 1.35%
- 10-yr: +6 bps to 2.06%
- 30-yr: +7 bps to 2.90%
- News:
- The ISM Non-Manufacturing Index fell to 56.9 in September from 59.0 in August. The Briefing.com consensus was for 58.0
- Although many of the sub-categories in the index showed sharp declines in September, there wasn't a prevalence of contractions like those that plagued the ISM Manufacturing Index. The services sector remains much more robust than the manufacturing sector
- Business activities slowed as the related index fell to 60.2 in September from 63.9 in August. Growth in both new (56.7 from 63.4) and unfilled (54.5 from 56.5) orders slowed in September. Neither index, however, is in immediate danger of contracting
- In a somewhat unusual note, the Employment Index increased to 58.3 in September from 56.0. That comes as the hard employment data showed a sizable slowdown in payroll gains
- The ISM Non-Manufacturing Index fell to 56.9 in September from 59.0 in August. The Briefing.com consensus was for 58.0
- Commodities:
- WTI crude: +1.78% to $46.35/bbl.
- Gold: -0.16% to $1,134.80/troy oz.
- Copper: +1.33% to $2.3565/lb.
- Currencies:
- EUR/USD: -0.25% to $1.1184
- USD/JPY: +0.43% to 120.47
- Data Out Tuesday:
- August Trade Balance (08:30 ET)
- Treasury Auction:
- $24 bln 3-year auction (results at 13:00 ET)
- Fed Speaker:
- San Francisco Fed President Williams (FOMC voter) (17:30 ET)
Treasury Yields:
- 2 Year Note 0.61% +0.03
- 5 Year Note 1.35% +0.06
- 10 Year Note 2.07% +0.08
- 30 Year Bond 2.90% +0.08
2/30 Spread: 229 bps ( +5 ) … 2/10 Spread: 146 bps ( +5 )
Preview for Tuesday 6 Oct, 2015
Economic Data
Tuesday (6 Oct) :
- Trade Balance : -$44.5B (Prior -$41.9B)
Earnings Highlights
Tuesday (6 Oct) :
BMO - PEP
AMC - PSG TISI YUM
AMC - PSG TISI YUM
Summary
We have seen quite a fair bit of 'bear rally'. There seems to be a sign of overbought in the market on Monday. As such we might see some profit-taking tomorrow before the market could continue to go for another run.
Meanwhile things are pointing to more upside in the market. But I think it is still early to tell. I suppose this week FOMC minutes should give us some insights on the Fed's view and maybe then we would see how the market reacts to that.
Here is something from Steven Spencer of SMB capital,
We have seen quite a fair bit of 'bear rally'. There seems to be a sign of overbought in the market on Monday. As such we might see some profit-taking tomorrow before the market could continue to go for another run.
Meanwhile things are pointing to more upside in the market. But I think it is still early to tell. I suppose this week FOMC minutes should give us some insights on the Fed's view and maybe then we would see how the market reacts to that.
Here is something from Steven Spencer of SMB capital,
we all "know" market is a short here but acting like its 2012-13 ;) maybe #FED started QE4 on the sly? https://t.co/8hZ2LDgmAp
— steven spencer (@sspencer_smb) October 5, 2015
Direction for Tuesday 6 Oct, 2015: Down
2015 Daily Directional Accuracy: 100/156 (64.10%)
2015 Weekly Directional Accuracy: 23/37 (62.16%)
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