Dow -12.69 at 16272.01, Nasdaq +6.92 at 4627.08, S&P +3.79 at 1923.81
Technically a flat session ahead of Friday's NFP. Market saw some selling at the opening from yesterday surge and followed by continuation of short-covering. Basically market is still nothing but a two way trade.
Asia markets continue to finish higher with both Hang Seng and Shanghai Composite closed for holiday, while over at Europe, markets were mostly flat to downside.
Market Summary
Industry Watch
Strong: Energy, Materials
Weak: Consumer Discretionary, Consumer Staples, Technology, Telecom Services, Utilities
Other Market Moving Factor:
- Bank of Japan not looking to boost size of its QQE program at this time, according to Bloomberg
- Biotechnology remains weak
[BRIEFING.COM] The stock market ended Thursday on a modestly higher note after climbing off its intraday low. The S&P 500 (+0.20%) settled within four points of its unchanged level while the Dow (-0.08%) and Nasdaq (+0.15%) underperformed.
Equities began the first session of Q4 just above their flat lines after a pre-market retreat caused S&P 500 futures to surrender a 25-point gain. The early morning slide from pre-market highs gathered steam following a Bloomberg report indicating the Bank of Japan does not plan to introduce additional stimulus at this time.
In addition to pressuring stocks, the report gave a boost to the yen, sending the dollar/yen pair to a session low near 119.50; however, the currency pair was able to claw its way back into the 120.00 range in the afternoon while stocks also climbed off their lows.
Five sectors ended the day in the green with the health care sector (+0.9%) finishing among the leaders. Biotechnology, meanwhile, struggled to keep pace with the broader sector, but a late rally in the iShares Nasdaq Biotechnology ETF (IBB 305.60, +2.27) helped the ETF end higher by 0.8% after being down as much as 2.1% at its lowest point.
The early underperformance in biotechnology kept the Nasdaq behind the broader market into the afternoon while the technology sector also struggled. To be fair, the tech sector trimmed its loss to 0.1% during the afternoon, while high-beta chipmakers could not follow suit, sending the PHLX Semiconductor Index lower by 1.2%. As for top-weighted tech names, Apple (AAPL 109.58, -0.72) lost 0.7% while Google (GOOGL 642.00, +3.63) added 0.6%.
Elsewhere among cyclical groups, the materials sector (+1.1%) held the lead throughout the session while the consumer discretionary space (+0.7%) rallied behind automakers and homebuilders. Ford (F 13.67, +0.10) and General Motors (GM 30.67, +0.65) posted respective gains of 0.7% and 2.2% after reporting solid September sales while the iShares Dow Jones US Home ConstructionETF (ITB 26.45, +0.35) climbed 1.3%.
Also of note, the energy sector (+0.1%) settled just behind the broader market after being up more than 2.0% at the start. That early strength was brought on by a sharp morning spike in crude oil, but the energy component surrendered its entire gain, ending lower by 0.9% at $44.75/bbl after briefly crossing above $47.00/bbl. The intraday turnaround developed shortly after it was reported the Senate Banking Committee approved a bill to roll back the ban on crude oil exports.
Treasuries registered slim gains after spending the day near their flat lines with the 10-yr yield ticking down one basis point to 2.04%.
Today's participation was ahead of recent averages with more than 950 million shares changing hands at the NYSE floor.
Economic data included Initial Claims, Construction Spending, and ISM Index:
- Weekly initial claims increased to 277,000 from an unrevised 267,000 while the Briefing.com consensus expected an increase to 270,000
- Despite the larger-than-expected increase, the four-week moving average declined to 271,000 from 272,000, which is a level consistent with an employment sector nearing full employment
- The continuing claims level declined to 2.191 million from an upwardly revised 2.244 million (from 2.242 million), representing the lowest reading since November 2000
- The ISM Manufacturing Index declined to 50.2 in September from 51.1 while the Briefing.com consensus expected a decline to 50.6
- If there is one bit of solace in the data, it is that manufacturing conditions -- nationally -- managed to stay in an expansion mode, albeit barely. The same could not be said for the regional data from the Federal Reserve manufacturing surveys, which showed sharp contractions in every area of the country.
- With the exception of Customer Inventories -- which are reportedly too high -- all of the sub-indices either declined or were unchanged in September. That included a notable drop in both the Production (51.8 from 53.6) and New Orders (50.1 from 51.7).
- Construction spending increased 0.7% in August after increasing a downwardly revised 0.4% (from 0.7%) while the Briefing.com consensus expected an increase of 0.5%
- Private construction spending increased 0.7% in August, down from a 1.1% increase in July
- Most of the August private construction gain came from the residential sector as residential construction spending rose a solid 1.3% in August after increasing 0.6% in July
Tomorrow, the September Nonfarm Payrolls report will be released at 8:30 ET (Briefing.com consensus 205,000) while August Factory Orders (consensus -1.0%) will be reported at 10:00 ET.
Global Market
ASIA
The Chinese market was closed for the National Holiday on Thursday, yet China still made a splash as its official Manufacturing PMI report was slightly better than expected at 49.8, albeit still in contraction territory, and up from the prior month’s level of 49.7. That helped put a bid in most markets in the Asian-Pacific region on Thursday, which were also bolstered by Wall Street’s strong showing on Wednesday, first-of-the-month inflows, and continued policy stimulus expectations.
Economic data
- Japan
- Q3 Tankan Large Manufacturers Index 12.0 (expected 13.0; prior 15.0)
- Q3 Tankan Large Non-Manufacturers Index 25.0 (expected 20.0; prior 23.0)
- September Final Manufacturing PMI 51.0 (expected 50.9; prior 50.9)
- China
- September Official Manufacturing PMI 49.8 (expected 49.6; prior 49.7)
- September Official Non-Manufacturing PMI 53.4 (prior 53.4)
- September Final Caixin Manufacturing PMI 47.2 (expected 47.2; prior 47.0)
- September Final Caixin Services PMI 50.5 (expected 51.2; prior 51.5)
- South Korea
- September Trade Balance KRW 8.90 bln (expected KRW 6.06 bln; prior KRW 4.30 bln)
- Exports -8.3% year-over-year (expected -10.0%; prior -14.9%)
- Imports -21.8% (expected -18.1%; prior -18.3%)
- September Nikkei Manufacturing PMI 49.2 (prior 47.9)
- August Industrial Production +0.4% month-over-month (expected -1.1%; prior -0.3%); +0.3% year-over-year (expected -2.0%; prior -3.2%)
- Retail Sales +1.9% month-over-month (prior +2.0%)
- August Service Sector Output +0.4% (prior +1.7%)
- Australia
- September AIG Manufacturing Index 52.1 (prior 51.7)
- India
- September Nikkei Markit Manufacturing PMI 51.2 (expected 52.0; prior 52.3)
Equity Markets
- Japan’s Nikkei increased 1.9% on the heels of a weaker than expected Tankan Large Manufacturers Index that continued to feed policy stimulus expectations. Gains were led by the financials (+3.0%), industrials (+2.7%), and materials (+2.7%) sectors. GS Yusa Corp (+6.7%), Sumitomo Realty & Development Co (+6.5%), and Mitsubishi Electric (+5.7%) led all gainers while Taisei (-3.5%), Japan Tobacco (-3.3%), and Shimizu Corp (-2.8%) were the biggest losers. Out of the 225 index members, 191 ended higher, 29 finished lower, and 5 were unchanged.
- Hong Kong’s Hang Seng: closed for holiday (National Day)
- China’s Shanghai Composite: closed for holiday (National Day)
- India’s Sensex jumped 0.3%, which was down from its opening 1.1% gain. The index was underpinned by strength in the health care (+1.9%), technology (+1.6%), and industrials (+1.0%) sectors. The top individual leaders were Lupin Ltd (+3.2%), Sun Pharmaceuticals (+2.3%), and Tata Consultancy Services (+2.1%). Bharat Heavy Electricals (-3.3%), GAIL India (-2.9%), and Maruti Suzuki India (-2.3%) were the worst-performing issues. Out of the 30 index members, 13 ended higher and 17 finished lower.
- Australia’s S&P/ASX 200 increased 1.8%, paced by gains in the energy (+2.5%), utilities (+2.3%), and resources (+2.0%) sectors. Out of the 200 index members, 170 ended higher, 26 finished lower, and 4 were unchanged.
- Regional advancers: South Korea +0.8%, Taiwan +1.4%, Malaysia +0.8%, Indonesia +0.7%, Singapore +0.4%, Vietnam +0.2%
- Regional decliners: Thailand -0.2%, Philippines -0.04%
FX
- USD/CNY unch at 6.3571
- USD/INR -0.05% at 65.5550
- USD/JPY +0.1% at 119.98
EUROPE
Major European indices trade in mixed fashion with UK’s FTSE (+0.8%) showing relative strength. The euro has essentially held its ground against the dollar after the release of regional PMI readings that were mostly disappointing. Currently, the single currency hovers near 1.1150 against the dollar after spending the night in a tight range.
- Eurozone September Manufacturing PMI held at 52.0, as expected
- Germany’s September Manufacturing PMI 52.3 (expected 52.5; prior 52.5)
- France’s September Manufacturing PMI 50.6 (expected 50.4; previous 50.4)
- Italy’s September Manufacturing PMI 52.7 (consensus 53.3; last 53.8)
- Spain’s September Manufacturing PMI 51.7 (expected 52.8; last 53.2)
- Swiss Retail Sales -0.3% month-over-month (expected 0.3%; last 0.1%) and September SVME PMI 49.5 (consensus 53.3; previous 53.8)
Closing Prices
- UK’s FTSE: + 0.2%
- Germany’s DAX: -1.6%
- France’s CAC: -0.7%
- Spain’s IBEX: + 0.1%
- Portugal’s PSI: + 1.2%
- Italy’s MIB Index: -0.7%
- Irish Ovrl Index: -0.5%
- Greece ASE General Index: -1.8%
Macroeconomic Data
Economic Data
from Briefing.com
- Challenger Job Cuts : 93.2% (Prior 2.9%)
- Initial Claims : 277K vs 270K (Prior 267K)
- Continuing Claims : 2191K vs 2248K (Prior 2244K - Up)
- ISM Index : 50.2 vs 50.6 (Prior 51.1)
- Construction Spending : 0.7% vs 0.5% (Prior 0.7%)
- Natural Gas Inventories : 98 bcf (Prior 106 bcf)
- Auto Sales : (Prior 5.6M)
- Truck Sales : (Prior 8.5M)
UNEMPLOYMENT CLAIMS
Highlights
- The initial claims level increased to 277,000 for the week ending September 26 from an unrevised 267,000 for the week ending September 19. The Briefing.com Consensus expected the initial claims level to increase to 270,000.
- The continuing claims level declined to 2.191 mln for the week ending September 19 from an upwardly revised 2.244 mln (from 2.242 mln) for the week ending September 12. The consensus pegged the continuing claims level at 2.242 mln.
Key Factors
- Despite the larger-than-expected increase, the four-week moving average declined a bit to 271,000 from 272,000. These levels are consistent with an employment sector nearing full employment.
- Over the past several weeks, the initial claims level has flirted with 15-year lows. This week, the continuing claims level met that same threshold.
- That is the lowest continuing claims level since the week ending November 11, 2000, when it reached 2.161 mln.
Big Picture
- The overall trend in claims supports a labor market that is at, or very near, full employment.
ISM INDEX
Highlights
- The ISM Manufacturing Index declined to 50.2 in September from 51.1 in August. The Briefing.com Consensus expected the index to decline to 50.6 in September.
Key Factors
- If there is one bit of solace in the data, it is that manufacturing conditions – nationally – managed to stay in an expansion mode, albeit barely. The same could not be said for the regional data from the Federal Reserve manufacturing surveys, which showed sharp contractions in every area of the country.
- That said, there isn’t much hope that the index will manage to stay in an expansion mode in October.
- With the exception of Customer Inventories – which are reportedly too high – all of the sub-indices either declined or were unchanged in September. That included a notable drop in both the Production (51.8 from 53.6) and New Orders (50.1 from 51.7) Indices.
- Backlog levels suffered the biggest monthly decline as the index dropped to 41.5 in September from 46.5 in August. That was the fourth consecutive monthly contraction. Without a steady supply of backlogs, production growth will be difficult.
Big Picture
- This is a highly overrated index. It is merely a survey of purchasing managers. It is a diffusion index, which means that it reflects the number of people saying conditions are better compared to the number saying conditions are worse. It does not weight for size of the firm, or for the degree of better/worse. It can therefore underestimate conditions if there is a great deal of strength in a few firms. The data have thus not been either a good forecasting tool or a good read on current conditions during this business cycle. It must be recognized that the index is not hard data of any kind, but simply a survey that provides broad indications of trends.
CONSTRUCTION SPENDING
Highlights
- Construction spending increased 0.7% in August after increasing a downwardly revised 0.4% (from 0.7%) in July. The Briefing.com Consensus expected construction spending to increase 0.5%.
Key Factors
- Private construction spending increased 0.7% in August, down from a 1.1% increase in July.
- Most of the August private construction gain came from the residential sector. Residential construction spending rose a solid 1.3% in August after increasing 0.6% in July.
- Spending on new structures rose 1.5%, up from a 0.9% gain in July. That gain was in-line with the housing starts data release, which showed a sizable increase in the number of single-family homes under construction.
- Home improvement project spending increased 0.7% in August after increasing 0.1% in July.
- Nonresidential construction spending increased 0.2% in August, down from a 1.6% gain in July. Declines in power (-0.1%), office (-0.3%) and commercial (-1.5%) spending were offset by large gains in the lodging (3.2%) and manufacturing (1.5%) sectors.
- After declining 1.3% in July, public construction rebounded and increased 0.5% in August. Much of that gain was the result of a 10.0% increase in power construction.
Big Picture
- Construction spending topped expectations and remained robust in September.
Market Internals
NYSE:
Lower Volumes than the day before – 979.2M vs 1233.9M
Decliners outpaced Advancers (adv/dec): 1505 / 1556
New Lows outpaced New Highs (highs/lows): 11 / 158
NASDAQ:
Lower Volumes than the day before – 2120.7M vs 2366.5M
Decliners outpaced Advancers (adv/dec): 1196 / 1623
New Lows outpaced New Highs (highs/lows): 20 / 201
VOLATILITY S&P500 (VIX)
22.50 -1.95 (-7.96%)
Technical Updates
Volume: 111,416,980 (above average of 109,983,806)
Range: 16,073.82 - 16,348.87
Range: 16,073.82 - 16,348.87
4,627.08 +6.92 (+0.15%)
Volume: 501,353,617 (above average of 465,466,267)
Volume: 501,353,617 (above average of 465,466,267)
Range: 4,559.21 - 4,628.23
1,923.82 +3.79 (+0.20%)
Volume: 676,563,000 (above average of 639,964,000)
Range: 1,900.70 - 1,927.21
I am seeing some bullish strength from the 3 indices. DOW was rejected at 16,350 initially but it is going back to re-test the resistance again. NASDAQ continue to stay above its resistance at 4,610 and it is looking to go up further. Next resistance is likely to be around 4,660. S&P managed to hold its support at 1,900 and it is approaching its resistance at 61.8% Fib. That seems to be a healthy pullback in the market but if there is no conviction from the buyers, we are going to see the market continue to go down from here.
Commodities
- The dollar index traded lower today, but this only helped select commodities
- WTI oil futures sold off rapidly from today’s high and finished the day in the red
- Nov crude ultimately ended -0.9% at $44.75/barrel.
- In other energy, Nov natural gas slid sharply lower today, ending -3.6% at $2.44/MMBtu
- Metals lost steam as well
- Dec gold dropped -0.2% to finish the day at $1113.60/oz, while Dec silver fell -0.3% to close at $14.49/oz
- Copper lost recent momentum, falling -1.7% today to $2.30/lb
Energy Closing Prices
- November crude oil futures fell $0.40 (-0.9%) to $44.75/barrel
- November natural gas closed $0.09 lower (-3.6%) at $2.44/MMBtu
- RBOB Gasoline closed flat at $1.37/gallon
- Heating oil futures closed $0.02 lower at $1.52/gallon
Agriculture Closing Prices
- December corn closed flat at $3.89/bushel
- December wheat closed $0.05 higher at $5.18/bushel
- November soybeans closed $0.16 lower at $8.77/bushel
- Sugar #11 closed $0.38 cents higher at 13.26 cents/lb
Metals Closing Prices
- December gold ended today’s session $1.70 lower (-0.2%) at $1113.60/oz
- December silver closed today’s session $0.04 lower (-0.3%) at $14.49/oz
- December copper closed $0.04 lower (-1.7%) at $2.30/lb
Currencies
Dollar Index Drops on ISM
- The U.S. Dollar Index lost 0.18% to 96.18 today after the ISM Index missed estimates for September
- The ISM Index fell to 50.2 in September from 51.1 in August. The Briefing.com consensus was for 50.6. Readings above 50 indicate expansion
- Construction spending in August grew 0.7%, better than the Briefing.com consensus of 0.5% and the downwardly-revised 0.4% from July
- EUR/USD: +0.12% to $1.1185
- The eurozone's manufacturing PMI fell to 52.0 in September from 52.3 in August
- On a national basis, Spain's manufacturing PMI fell to 51.7 from 53.2, Germany's dipped to 52.3 from 52.5, France's unexpectedly rose to 50.6 from 50.4 in August, and Italy's dropped to 52.7 from 53.8
- The eurozone's manufacturing PMI fell to 52.0 in September from 52.3 in August
- GBP/USD: +0.03% to $1.5130
- The U.K.'s manufacturing PMI was unchanged from August at 51.5 in September, according to the latest revision
- USD/CHF: +0.33% to 0.9777
- Swiss retail sales fell 0.3% y/y in August after climbing an upwardly-revised 0.1% in July
- USD/JPY: +0.01% to 119.93
- Japan's Tankan index for large manufacturers fell to a lower-than-expected 12 in the third quarter from 15 in Q2
- The corresponding index for large services companies jumped to 25 in Q3 from 23 in Q2. Analysts had forecast a decline
- Japan's Tankan index for large manufacturers fell to a lower-than-expected 12 in the third quarter from 15 in Q2
- USD/CAD: -0.49% to 1.3258
- The RBC Manufacturing PMI fell to 48.6 in September from 49.4 in August
- AUD/USD: +0.35% to $0.7031
- The AIG Manufacturing Index rose to 52.1 in September from 51.7 in August
- NZD/USD: +0.23% to $0.6403
- USD/RUB: +0.64% to 65.77
- Russia's Markit Manufacturing PMI rose to 49.1 in September from 47.9 in August
Bonds
Treasuries Trade Sideways After Weak ISM
- The U.S. Treasury market ended mostly unchanged today, with the 30-year bond closing modestly higher while 2's and 5's lost ground. The ISM Manufacturing Index missed estimates, falling to 50.2 in September, a level just barely indicating expansion. Construction spending for August beat expectations but was accompanied by a downward revision to the July number
- Yield Check:
- 2-yr: +1 bp to 0.64%
- 5-yr: unch at 1.37%
- 10-yr: unch at 2.04%
- 30-yr: -1 bp to 2.85%
- News:
- The ISM Index fell to 50.2 in September from 51.1 in August. The Briefing.com consensus was for 50.6. Readings above 50 indicate expansion
- With the exception of Customer Inventories -- which are reportedly too high -- all of the sub-indices either declined or were unchanged in September. That included a notable drop in both the Production (51.8 from 53.6) and New Orders (50.1 from 51.7) Indices
- Backlog levels suffered the biggest monthly decline as the index dropped to 41.5 in September from 46.5 in August. That was the fourth consecutive monthly contraction. Without a steady supply of backlogs, production growth will be difficult
- Construction spending in August grew 0.7%, better than the Briefing.com consensus of 0.5% and the downwardly-revised 0.4% from July
- Initial Jobless Claims for the week ending 9/26 rose to 277K from 267K in the prior week. The Briefing.com consensus was for 270K initial claims
- Continuing Jobless Claims dropped to 2191K for the week ending 9/19 from an upwardly-revised prior reading of 2244K. The Briefing.com consensus was 2242K
- That was the lowest level of continuing claims since 2000
- The ISM Index fell to 50.2 in September from 51.1 in August. The Briefing.com consensus was for 50.6. Readings above 50 indicate expansion
- Commodities:
- WTI crude: -0.31% to $44.95/bbl.
- Gold: -0.16% to $1,113.40/troy oz.
- Copper: -1.45% to $2.307/lb.
- Natural Gas: -3.68% to $2.431/mbtu
- Natural gas inventories for the week ending 9/26 climbed 98 bcf versus expectations for +100 bcf
- Currencies:
- EUR/USD: +0.11% to $1.1184
- USD/JPY: -0.01% to 119.90
- Data Out Friday:
- September Employment Situation Report (08:30 ET)
- August Factory Orders (10:00 ET)
- Fed Speakers:
- Boston Fed President Eric Rosengren (non-FOMC voter) (08:30 ET)
- Minneapolis Fed President Kocherlakota (non-FOMC voter) is a panelist in "Should U.S. Monetary Policy have a Ternary Mandate?" (09:00 ET)
- St. Louis Fed President Bullard (non-FOMC voter) (09:00 ET)
- Cleveland Fed President Mester (non-FOMC voter) participates in panel, "Micro Prudential Versus Macro Prudential: Problems with Supervisory Control" (11:00 ET)
- Fed Vice Chair Fischer (FOMC voter) (13:00 ET)
Treasury Yields:
- 2 Year Note 0.64% UNCH
- 5 Year Note 1.37% UNCH
- 10 Year Note 2.05% -0.01
- 30 Year Bond 2.85% -0.02
2/30 Spread: 221 bps ( -2 ) … 2/10 Spread: 141 bps ( -1 )
Preview for Friday 2 Oct, 2015
Economic Data
Friday (2 Oct) :
- Nonfarm Payrolls : 205K (Prior 173K)
- Nonfarm Private Payrolls : 200K (Prior 140K)
- Unemployment Rate : 5.1% (Prior 5.1%)
- Hourly Earnings : 0.2% (Prior 0.3%)
- Average Workweek : 34.6 (Prior 34.6)
- Factory Orders : -1.0% (Prior 0.4%)
Earnings Highlights
Friday (2 Oct) :
BMO - None
AMC - None
BMO - None
AMC - None
Summary
Market was rather uncertain lately going into Friday. I assume tomorrow is likely be more extreme given we are seeing NFP and many Fed Speakers in the session. A good NFP number could possibly provide a dovish outlook for the Fed to raise interest rate by the end of 2015 (according to Fed Chair Yellen statement previously). Also I think the market right now needs a strong catalyst to push for an upside.
I believe most traders will be looking at the jobs number before market opens to determine how the session might go. I am staying out for good as there are going to be a lot of "noises" around.
Market was rather uncertain lately going into Friday. I assume tomorrow is likely be more extreme given we are seeing NFP and many Fed Speakers in the session. A good NFP number could possibly provide a dovish outlook for the Fed to raise interest rate by the end of 2015 (according to Fed Chair Yellen statement previously). Also I think the market right now needs a strong catalyst to push for an upside.
I believe most traders will be looking at the jobs number before market opens to determine how the session might go. I am staying out for good as there are going to be a lot of "noises" around.
Direction for Friday 2 Oct, 2015: Abstain
2015 Daily Directional Accuracy: 99/155 (63.87%)
2015 Weekly Directional Accuracy: 23/36 (63.89%)
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