Tuesday, 27 Oct 2015 - AMC

Dow -41.62 at 17581.10, Nasdaq -4.56 at 5030.14, S&P -5.29at 2065.87

Another quiet session before the outcome of FOMC meeting on Wednesday. Market was moving sideway in a very tight range but it seems there was some covering of position during the last few hours. 

Asia markets remained in mixed while Europe markets were moving lower. 
  

Market Summary

Industry Watch

Strong: Health Care

Weak: Consumer Discretionary, Energy, Financials, Industrials, Materials

Other Market Moving Factor:

• Futures slide to lows after September Core Durable Orders (-0.4%; Briefing.com consensus +0.2%)
• Dow components DuPont (DD), Pfizer (PFE), and Merck (MRK) report better than expected results
• Dow Jones Transportation Average underperforms

[BRIEFING.COM] The stock market endured its second consecutive retreat on Tuesday, but the overall trading dynamic was very similar to the range-bound affair from Monday. The S&P 500 lost 0.3% while the Nasdaq Composite (-0.1%) outperformed throughout the session. 

In some ways, the cautious posture was not all that shocking considering tomorrow afternoon will feature the release of the October FOMC policy directive, which will cross the wires at 14:00 ET. 

As for today, nine sectors ended the day in negative territory with cyclical groups showing relative weakness across the board. The energy sector (-1.2%) spent its second consecutive day behind the remaining nine groups as lower oil prices weighed. To that point, WTI crude fell 1.8% to $43.22/bbl. 

Similar to energy, the industrial sector (-1.0%) surrendered close to 1.0% while the remaining cyclical sectors posted slimmer losses. For its part, the industrial space was pressured by transport stocks as the Dow Jones Transportation Average tumbled 2.6% with JetBlue Airways (JBLU 25.36, -0.85) leading the dive. Shares of JBLU fell 3.2% even though the company reported a one-cent beat on in-line revenue. 

Elsewhere among cyclical sectors, technology (-0.6%) traded ahead of the broader market during morning action, but ended among the laggards after IBM (IBM 137.86, -5.80) disclosed that the Securities and Exchange Commission is conducting an investigation into the company's revenue recognition with a focus on transactions in the U.S., U.K., and Ireland. IBM tumbled 4.0% while another influential sector component—Apple (AAPL 114.55, -0.73)—lost 0.6% ahead of its quarterly report. 

Moving to the countercyclical side, the consumer staples sector (+0.1%) outperformed slightly, which was largely thanks to an intraday spike in Walgreens Boots Alliance (WBA 95.16, +5.68), brought on by a Wall Street Journal report indicating the company will acquire Rite Aid (RAD 8.67, +2.59) for roughly $10 billion. 

On the upside, the health care sector (+1.7%) spent the entire session in the green after Merck (MRK 53.47, +0.56) and Pfizer (PFE 34.99, +0.83) reported better than expected results. The two Dow components posted respective gains of 1.1% and 2.4% while biotechnology also contributed to the strength in the sector with iShares Nasdaq Biotechnology ETF (IBB 327.65, +10.20) spiking 3.2%. 

Treasuries rallied throughout the morning, hitting their highs around midday before surrendering a portion of their gains; however, the 10-yr note settled firmly in the green with its yield slipping two basis points to 2.03%. 

Today's participation was ahead of recent averages as more than a billion shares changed hands at the NYSE floor. 

Economic data included Durable Orders, Consumer Confidence, and Case-Shiller Index: 

• Durable goods orders declined 1.2% in September after declining a downwardly revised 3.0% (from -2.3%) while the Briefing.com consensus expected a decline of 1.3% 
  • The drop wasn't a surprise as manufacturers are struggling to counteract the negative effects of a strong dollar and global economic weakness 
  • Excluding transportation, durable goods orders declined 0.4% in September after declining a downwardly revised 0.9% (from +0.2%) in August while the consensus expected an increase of 0.2% 
• The Conference Board's Consumer Confidence Index declined to 97.6 in October from a downwardly revised 102.6 (from 103.0) while the Briefing.com consensus expected a decline to 102.5 
  • The Present Situation Index declined to 112.1 in October from 120.3 while the Expectations Index fell to 88.0 from 90.8 
• The Case-Shiller 20-city Home Price Index for August rose 5.1% against a 5.0% increase expected by the Briefing.com consensus 
  • This followed the previous month's revised increase of 4.9% (from 5.0%) 

Tomorrow, the weekly MBA Mortgage Index will be reported at 7:00 ET.

Global Market

ASIA
Most markets in the Asia-Pacific region ended the day with modest losses, pressured by general profit-taking activity and weakness in the energy and financial sectors. There weren’t many headline drivers, leaving many participants reluctant to participate in front of Apple’s earnings report after today’s close and the Federal Open Market Committee’s policy decision/directive on Wednesday.

Economic data

• China
• September industrial profits -0.1% year-over-year (prior -8.8%)
• Japan
• Corporate Services price Index +0.6% year-over-year (expected +0.6%; prior +0.8%)
• South Korea
• October Consumer Confidence 105.0 (prior 103.0)
• Hong Kong
• September Trade Balance HKD -36.4 bln (expected HKD -33.1 bln; prior HKD -25.1 bln)
• Exports -4.6% month-over-month (expected -4.0%; prior -6.1%)
• Imports -7.6% month-over-month (expected -8.0%; prior -7.4%)
• New Zealand
• September Trade Balance NZD -3,200 mln (expected NZD -2,846 mln; prior NZD -3.372 mln)
• Exports NZD 3.69 bln (expected NZD 3.90 bln; prior NZD 3.71 bln)
• Imports NZD 4.91 bln (expected NZD 4.78 bln; prior 4.79 bln)

Equity Markets

• Japan’s Nikkei declined 0.9% and ended near its lows for the day. Losses were paced by the industrials (-2.0%), financials (-1.8%), materials (-1.7%), and technology (-1.5%) sectors. The worst-performing issues were Minebea (-5.7%), Sumco (-5.7%), and OKUMA (-4.7%. Seven & i Holdings (+3.2%), Haseko (+2.1%), and Shionogi & Co (+1.5%) topped the list of individual gainers. Out of the 225 index members, 41 ended higher, 182 finished lower, and 2 were unchanged.
• Hong Kong’s Hang Seng increased 0.1% and ended at its high for the day. The Hang Seng had been down 1.0% earlier in the day, but rallied back in the afternoon trade, as did the mainland market. Belle International Holdings (+6.1%), Want Want China Holdings (+2.0%), and BOC Hong Kong Holdings (+1.6%) topped the list of winners while Sino Land (-3.9%), China Resources Power Holdings (-3.8%), and Cheung Kong Property Holdings (-1.9%) brought up the rear. Out of the 50 index members, 21 ended higher, 23 finished lower, and 6 were unchanged.
• China’s Shanghai Composite increased 0.1% after being down as much as 2.8% shortly after the start of trading. The thrust of the rebound effort came after the lunch break and came on no news of note. Earlier in the day China reported industrial profits fell 0.1% year-over-year in September versus an 8.8% decline in the prior month.
• India’s Sensex declined 0.4% and spent the entirety of its session in negative territory within a fairly tight trading range. The energy (-1.5%) and financials (-1.2%) were the main sector laggards. Lupin (-5.2%), Oil & Natural Gas Co (-3.3%), and GAIL India (-3.2%) led individual decliners while Maruti Suzuki India (+2.6%), Sun Pharmaceuticals (+2.2%), and Wipro (+1.1%) topped the list of winners. Out of the 30 index members, 10 ended higher and 20 finished lower.
• Australia’s S&P/ASX 200 ended the day with a fractional loss after trading in tight16-point range throughout the session. The main drags were energy (-2.3%), gold (-2.2%), and resources (-1.8%) sectors. Out of the 200 index members, 93 ended higher, 95 finished lower, and 14 were unchanged.
• Regional advancers: Thailand +0.02%, Philippines +0.02%
• Regional decliners: South Korea -0.2%, Taiwan -0.5%, Malaysia -0.6%, Indonesia -0.4%, Singapore -1.0%, Vietnam -0.03%

FX

• USD/CNY +0.01% at 6.3525
• USD/INR +0.02 at 64.9763
• USD/JPY -0.5% at 120.44

EUROPE
Major European indices trade lower across the board with Spain’s IBEX (-1.3%) trailing the region. On a separate note, a delay in Greece’s implementation of EU-required reforms will push back the upcoming bailout payment into next month, according to Suddeutsche Zeitung.

• Eurozone September Private Sector Loans +1.1%, as expected (prior 1.0%) and September M3 Money Supply +4.9% year-over-year (consensus 5.0%; prior 4.9%)
• UK’s preliminary Q3 GDP +0.5% quarter-over-quarter (expected 0.6%; prior 0.7%); +2.3% year-over-year (consensus 2.4%; last 2.4%). Separately, Index of Services +0.9% (expected 1.0%; prior 0.8%)

Closing Prices

• UK’s FTSE: -0.8%
• Germany’s DAX: -1.0%
• France’s CAC: -1.0%
• Spain’s IBEX: -1.5%
• Portugal’s PSI: -2.1%
• Italy’s MIB Index: -1.2%
• Irish Ovrl Index: -1.2%
• Greece ASE General Index: + 1.3%

Macroeconomic Data

Economic Data

from Briefing.com

• Durable Orders : -1.2% vs -1.3% (Prior -3.0% - Down)
• Durable Goods - ex transportation : -0.4% vs 0.2% (Prior -0.9% - Down)
• Case-Shilled 20-city Index : 5.1% vs 5.0% (Prior 4.9% - Down)
• Consumer Confidence : 97.6 vs 102.5 (Prior 102.6 - Down)

DURABLE ORDERS

Highlights

• Durable goods orders declined 1.2% in September after declining a downwardly revised 3.0% (from -2.3%) in August. The Briefing.com Consensus expected durable goods orders to decline 1.3%.
• Excluding transportation, durable goods orders declined 0.4% in September after declining a downwardly revised 0.9% (from +0.2%) in August. The consensus expected these orders to increase 0.2%.

Key Factors

• The drop in durable goods demand wasn’t a surprise. Manufacturers are struggling to counteract the negative effects of a strong dollar and global economic weakness. The impact from these two headwinds are putting a sizable dent in manufacturing growth.
• In September, a significant portion of the decline in durable goods orders was a result of a second consecutive month of weak aircraft orders. Total aircraft orders declined 20% in September after declining 5.5% in August.
• The pullback in orders excluding transportation was correctly foreshadowed by the regional Federal Reserve manufacturing surveys. Nearly every region surveyed revealed new orders contractions in September.
• Large orders declines were reported in primary metals (-2.9%), machinery (-1.3%), and computers and related products (-4.5%). Some of those declines were offset by gains in communications equipment (2.4%) and fabricated metal products (1.7%).
• Business investment continued to slide. Orders of nondefense capital goods excluding aircraft declined 0.3% in September after declining 1.6% in August.
• There was one bright spot in the report. Shipments of nondefense capital goods excluding aircraft, which factor into the nonresidential investment in equipment component of GDP, increased a reasonable 0.5% in September after declining 0.8% in August.

Big Picture

• Durable goods orders have declined in five of the nine months thus far in 2015.

CONSUMER CONFIDENCE

Highlights

• The Conference Board's Consumer Confidence Index declined to 97.6 in October from a downwardly revised 102.6 (from 103.0) in September. The Briefing.com Consensus expected the Consumer Confidence Index to decline to 102.5.

Key Factors

• The Present Situation Index declined to 112.1 in October from 120.3 in September. The Expectations Index fell to 88.0 from 90.8.
• Despite improvement in jobs security, as shown by historic lows in the initial claims level, and relatively low gasoline prices, consumer confidence weakened over the last month. That stands in contrast to the preliminary October reading of the University of Michigan Consumer Sentiment Index, which increased to 92.1 from 87.2 in September.
• The decrease in confidence is unlikely to have a material impact on consumption trends. Consumption relies on income not sentiment. As long as the labor market continues to improve, consumption growth should follow.

Big Picture

• Consumer confidence has little influence on consumption. As long as payroll levels continue to expand, the resulting income growth should keep consumption gains steady regardless of the monthly ebbs and flows in confidence levels.

Market Internals

NYSE:

Higher Volumes than the day before – 995.0M vs 840.8M 


Decliners outpaced Advancers (adv/dec): 801 / 2292

New Lows outpaced New Highs (highs/lows): 43 / 115

NASDAQ:

Higher Volumes than the day before – 1907.3M vs 1751.1M

Decliners outpaced Advancers (adv/dec): 841 / 2028

New Lows outpaced New Highs (highs/lows): 57 / 115

VOLATILITY S&P500 (VIX)
15.43 +0.14 (+0.92%)

Internals are reflecting the buildup in bearishness in the market. New Lows manage to surge higher as well. VIX is hovering around the support level at 15.00 and I suppose market is showing some sign of resilience. This is a strong support and let's see if the market is going to hold on to the support or break lower.

Technical Updates

DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)

17,581.43 -41.62 (-0.24%)

Volume: 115,182,837 (below average of 117,946,545)
Range: 17,540.57 - 17,635.18

NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)

5,030.15 -4.56 (-0.09%)
Volume: 455,955,945 (below average of 480,812,227)

Range: 5,009.07 - 5,040.08

S&P 500 INDEX (SPX: CBOE)

2,065.89 -5.29 (-0.26%)

Volume: 650,112,000 (below average of 657,386,989)

Range: 2,058.84 - 2,070.37

The indices continue to show some pullback until the support level. Both DOW and S&P seem to form a support at their 200MAs while NASDAQ is sitting on the support at 5,010. Is this the end of the pullback or are we seeing more downside? I think the FOMC decision is definitely going to be the market moving factor.

Commodities

Closing Commodities: Nat Gas Recovers Morning Sell-Off, Ends Flat; Oil Spends The Day In The Red

• Natural gas futures were volatile again today given the bearish supply/weather outlook situation
• Also note that the Dec contract is now the front-month contract, which ended the day flat at $2.36/MMBtu
• Dec crude oil spent the day in the red all day and closed -1.8% at $43.22/barrel
• Precious metals were less volatile
• Gold remained consolidated in afternoon trade. Dec gold finished $0.50 lower to $1165.60/oz, while Dec silver ended -0.3% at $15.86/oz

Energy Closing Prices

• December crude oil futures fell $0.81 (-1.8%) to $43.22/barrel
• December natural gas closed flat at $2.36/MMBtu
• RBOB Gasoline closed $0.01 lower at $1.27/gallon
• Heating oil futures closed $0.04 lower at $1.44/gallon

Agriculture Closing Prices

• December corn closed $0.05 lower (-1.3%) at $3.80/bushel
• December wheat closed $0.03 lower (-0.6%) at $5.07/bushel
• November soybeans closed $0.05 higher (+0.6%) at $8.91/bushel
• Sugar #11 closed $0.22 cents lower at 14.42 cents/lb

Metals Closing Prices

• December gold ended today’s session $0.50 lower at $1165.60/oz
• December silver closed today’s session $0.05 lower (-0.3%) at $15.86/oz
• December copper closed flat at $2.36/lb

Currencies

Commodity Currencies Fall

• The U.S. Dollar Index rose 0.06% to 96.92 today as weaker than expected economic data in the U.S. was outweighed by speculation of more monetary easing from the European Central Bank
  • Orders for durable goods declined 1.2% in September, better than the Briefing.com consensus of -1.3%. Durable goods orders fell 3.0% in August (revised down from -2.3%)
• EUR/USD: -0.14% to $1.1041
  • Private sector lending in the eurozone grew 1.1% y/y in September, in line with expectations and faster than the 1.0% rate recorded in August
  • The European Central Bank's chief economist, Peter Praett, said that the ECB has "no taboos" about expanding its balance sheet or further easing monetary policy. he last time that Praett used the phrase "no taboo" was in November of 2014, just before the beginning of the EUR 1.1 tln asset purchase program
• GBP/USD: -0.33% to $1.5303
  • U.K. GDP grew by a smaller-than-expected 0.5% in the third quarter, down from 0.7% in Q2. Slower construction and manufacturing growth caused the deceleration in output
• USD/CHF: +0.30% to 0.9859
  • Switzerland's Consumption Indicator rose to 1.65 in September from an upwardly revised 1.64 in August
• USD/JPY: -0.60% to 120.33
  • In Japan, the Corporate Services Price Index grew by 0.6% in the year to September, in line with expectations. The CSPI grew 0.7% in August
• USD/CAD: +0.74% to 1.3261
• AUD/USD: -0.70% to $0.7195
• NZD/USD: -0.05% to $0.6778
  • New Zealand's trade deficit unexpectedly widened in September to NZD -1.222 bln from NZD -1.079 bln in August
    • Falling exports of dairy products contributed to the miss

Bonds

Sovereign Debt Investors Front-Run ECB

• The Treasury complex rallied on Tuesday with the belly of the curve seeing the strongest gains and the 30-year bond lagging. The economic data out of the U.S. was weak, particularly the durable goods orders for September, and some dovish comments from the European Central Bank's chief economist Peter Praett pushed the 10-year Bund yield to its lowest level since May
  • 2-yr: -2 bps to 0.63%
  • 5-yr: -3 bps to 1.36%
  • 10-yr: -2 bps to 2.03%
  • 30-yr: -1 bp to 2.86%

• The big report out today was durable goods orders for September. While the headline number just edged past the consensus estimate, the ex-transportation number missed badly and both data series were revised down significantly in August
  • Orders for durable goods declined 1.2% in September, better than the Briefing.com consensus of -1.3%. Durable goods orders fell 3.0% in August (revised down from -2.3%)
    • The drop in durable goods demand wasn't a surprise. Manufacturers are struggling to counteract the negative effects of a strong dollar and global economic weakness
  • Excluding transportation, durable goods orders declined 0.4% in September after declining a downwardly-revised 0.9% (from +0.2%) in August. The consensus expected these orders to increase 0.2%
  • Housing prices in the U.S. grew more than expected in August, with the Case-Shiller 20-City Index rising 5.1% y/y and 0.4% m/m. The Briefing.com consensus was for a 5.0% y/y gain and the reading for August was +4.9% (revised down from +5.0%)
  • The Conference Board's Consumer Confidence Index declined to 97.6 in October from a downwardly-revised 102.6 (from 103.0) in September. The Briefing.com consensus expected the Consumer Confidence Index to decline to 102.5
  • Peter Praett of the European Central Bank's governing council said that the ECB has "no taboos" about expanding its balance sheet or further easing monetary policy. ECB President Mario Draghi surprised the market last week when he said that the deposit rate had been considered as a potential form of further loosening in monetary policy after other central banks have experimented successfully with sub-zero short-term interest rates. The deposit rate is already at -0.2% and many analysts had expected that a reduction from that level was not in the cards

•  Commodities:
  • WTI crude: -1.82% to $43.18/bbl.
  • Gold: -0.02% to $1,166.00/troy oz.
  • Copper: +0.28% to $2.3635/lb.

• Currencies:
  • EUR/USD: -0.17% to $1.1037
  • USD/JPY: -0.55% to 120.38

• Data Out Wednesday:
  • MBA Mortgage Index for the week ending 10/24 (07:00 ET)
  • Crude Inventories for the week ending 10/24 (10:30 ET)
  • October FOMC Rate Decision (14:00 ET)
• Treasury Auction:
  • $35 bln 5-year note auction (results at 13:00 ET)

Treasury Yields:

• 2 Year Note 0.65% -0.01
• 5 Year Note 1.38% -0.03
• 10 Year Note 2.05% -0.02
• 30 Year Bond 2.86% -0.01

2/30 Spread: 221 bps ( UNCH ) …  2/10 Spread: 140 bps ( -1 )

Preview for Wednesday 28 Oct, 2015

Economic Data

Wednesday (28 Oct) :

• MBA Mortgage Index : (Prior 11.8%)
• Crude Inventories : (Prior 8.028M) 
• FOMC Rate Decision : 0.25% (Prior 0.25)

Earnings Highlights 

Wednesday (28 Oct) :

BMO - AAC ACCO AGCO AMED ANTM APO AIT ARW ADP AN AXTA BDC BGCP BOKF BAH BSX CARB CG CBZ CHMT CMC COT CFR XRAY DHX DORM DX EVER EVR FDML FCAU FCF FSV FLIR GRMN GNRC GD ROCK GHM HTA HSY HES HLT HCBK ICON IDXX IBP IP JLL LVLT LFUS MDLZ NOV NEE NMR NSC NOC OXY PCG Q RDWR ROL RES SAIA SSE SLAB SAH SONS SO HOT STRA SNCR TEL TECH TKR TGI UMC VLO VLY VNTV WOOF VRTS WBA WCIC WEX WILN
During Mkt Hours - CNFL
AMC - ABX ACGL AEM AF AFFX AFOP AMC AMGN AMSF ANIK AR ARII ARR ARRS ASGN ATML BANC BLKB BWLD CACI CAVM CBL CGI CHDN CLI CMO CMPR CNL CNO CNW CRUS CSGP CW CWT DMRC DRE DYAX ECHO ELLI EPE EPR EQIX EQY ESI ESIO ESRT ESV EXR FARO FFIV FMC FORM FORR FR GPRO HBI HBM HLS HMN HOS HT HUBG HVT HY INT INVN ISIL KEX KRA KRC KS KWR LGCY LNC LOCK LOPE LQ MAA MANT MAR MC MDCA MEOH MMLP MN MTGE MTW MUR NCIT NE NEM NFBK NGD NPO NSIT NTRI NVDQ NXPI O OCN OEC OGS OII ORLY OTEX PEIX PLXS POWI PPC PRXL PSA PSEM PTC QDEL QEP QGEN QRVO QUIK REG RJET ROG ROVI RRC SCI SGI SGMO SIGI SIMO SPN SPRT SPWR SSS STAA STNR SU SWI TAL TFSL THG THRX TILE TLLP TSO TTMI UNM VAR VECO VRTX WDC WES WGP WLL WMB WPRT WRK WSTL WTS YELP

Summary

Big day ahead on Wednesday with almost every traders and investors will be watching closely on the FOMC meeting decision. Being so, market has been staying flat for the past few sessions. I suppose many are looking at the Fed's stance on raising the interest rate and perhaps when are they going to do so.

As tomorrow is going to be very uncertain, it is better to be cautious and stay out first.

Direction for Wednesday 28 Oct, 2015: Abstain

2015 Daily Directional Accuracy: 110/171  (64.33%) 

2015 Weekly Directional Accuracy: 25/39 (64.10%)