Market Summary
from Briefing.comIndustry Watch
Strong: Technology
Weak: Consumer Discretionary, Energy, Financials, Industrials
Market Moving Factors
- S&P 500 testing 50-day moving average (2045)
- December Nonfarm Payrolls beat estimates (252K; Briefing.com consensus 245K), but wage growth contracts 0.2% (expected +0.2%)
- Markets in Europe retreat amid reports ECB remains undecided on format for QE program
[BRIEFING.COM] The S&P 500 began the first full week of 2015 with a slide below its 50-day moving average (2045) and found itself fighting that level once again on Friday. The benchmark index settled just below the 50-day average, losing 0.8% to lock in a 0.6% decline for the week while the Nasdaq (-0.7%) outperformed slightly, falling 0.5% for the week.
Friday's affair was a bit of a roller coaster with the first downswing coming in the early morning hours when futures retreated in reaction to a Bloomberg report indicating the European Central Bank remains unsure of a format for its QE program. The news rattled U.S. futures and markets in Europe considering a QE announcement in two weeks was all but priced in.
The early morning slip was followed by a swift recovery of the losses when the December Nonfarm Payrolls report beat expectations (252K; Briefing.com consensus 245K) on the headline level. The resulting rebound rally was short-lived, fading as soon as the cash market opened and, we would contend, as soon as participants finished reading the report.
Specifically, the lack of payroll growth took the shine off what would have been a decent report. Hourly wages declined 0.2% and November growth was slashed in half (to +0.2% from +0.4%). Once the realization that without payroll growth there can be no consumption growth sank in, equities retreated. In addition to pressuring stocks, dimming growth prospects weighed on crude oil ($48.40/bbl, -$0.41) while boosting Treasuries. The benchmark 10-yr yield fell four basis points to 1.97% after bouncing off the 1.95% level.
Cyclical sectors bore the brunt of today's losses with four of six growth-oriented groups ending in-line with or behind the broader market. Notably, the implications stemming from the absence of wage growth kept financials (-1.3%) and consumer discretionary shares (-1.1%) behind the broader market throughout the session.
The financial sector finished at the bottom of the barrel while the discretionary sector ended just above with retailers fueling the weakness. The SPDR S&P Retail ETF (XRT 95.25, -1.74) lost 1.8%. However, the widespread selling in retail stocks masked the relative strength among homebuilders. The iShares Dow Jones US Home Construction ETF (ITB 26.61, +0.07) gained 0.3%.
Elsewhere among cyclical sectors, industrials (-1.1%) finished among the laggards while energy (-0.8%), materials (-0.5%), and technology (-0.3%) outperformed.
The relative strength of the technology sector prevented the S&P 500 from revisiting its morning low. Several large cap names like Apple (AAPL 112.01, +0.12), Cisco Systems (CSCO 27.79, +0.28), IBM (IBM 159.11, +0.69), and Oracle (ORCL 43.39, -0.02) held their own while chipmakers eked out gains with the PHLX Semiconductor Index adding 0.1%.
Similar to chipmakers, the high-beta biotechnology group spent the day ahead of the broader market. The iShares Nasdaq Biotechnology ETF (IBB 313.32, -1.12) shed 0.4%, helping the Nasdaq Composite finish a bit ahead of the broader market.
Although biotechnology was able to underpin the Nasdaq, the group failed to lift the health care sector (-0.8%) ahead of the broader market as large cap components weighed.
Outside of healthcare, the remaining countercyclical groups ended near the broader market with consumer staples, telecom services, and utilities losing between 0.7% and 0.8%.
Today's participation was below average with roughly 713 million shares changing hands at the NYSE floor.
Economic data included Nonfarm Payrolls and Wholesale Inventories:
Friday's affair was a bit of a roller coaster with the first downswing coming in the early morning hours when futures retreated in reaction to a Bloomberg report indicating the European Central Bank remains unsure of a format for its QE program. The news rattled U.S. futures and markets in Europe considering a QE announcement in two weeks was all but priced in.
The early morning slip was followed by a swift recovery of the losses when the December Nonfarm Payrolls report beat expectations (252K; Briefing.com consensus 245K) on the headline level. The resulting rebound rally was short-lived, fading as soon as the cash market opened and, we would contend, as soon as participants finished reading the report.
Specifically, the lack of payroll growth took the shine off what would have been a decent report. Hourly wages declined 0.2% and November growth was slashed in half (to +0.2% from +0.4%). Once the realization that without payroll growth there can be no consumption growth sank in, equities retreated. In addition to pressuring stocks, dimming growth prospects weighed on crude oil ($48.40/bbl, -$0.41) while boosting Treasuries. The benchmark 10-yr yield fell four basis points to 1.97% after bouncing off the 1.95% level.
Cyclical sectors bore the brunt of today's losses with four of six growth-oriented groups ending in-line with or behind the broader market. Notably, the implications stemming from the absence of wage growth kept financials (-1.3%) and consumer discretionary shares (-1.1%) behind the broader market throughout the session.
The financial sector finished at the bottom of the barrel while the discretionary sector ended just above with retailers fueling the weakness. The SPDR S&P Retail ETF (XRT 95.25, -1.74) lost 1.8%. However, the widespread selling in retail stocks masked the relative strength among homebuilders. The iShares Dow Jones US Home Construction ETF (ITB 26.61, +0.07) gained 0.3%.
Elsewhere among cyclical sectors, industrials (-1.1%) finished among the laggards while energy (-0.8%), materials (-0.5%), and technology (-0.3%) outperformed.
The relative strength of the technology sector prevented the S&P 500 from revisiting its morning low. Several large cap names like Apple (AAPL 112.01, +0.12), Cisco Systems (CSCO 27.79, +0.28), IBM (IBM 159.11, +0.69), and Oracle (ORCL 43.39, -0.02) held their own while chipmakers eked out gains with the PHLX Semiconductor Index adding 0.1%.
Similar to chipmakers, the high-beta biotechnology group spent the day ahead of the broader market. The iShares Nasdaq Biotechnology ETF (IBB 313.32, -1.12) shed 0.4%, helping the Nasdaq Composite finish a bit ahead of the broader market.
Although biotechnology was able to underpin the Nasdaq, the group failed to lift the health care sector (-0.8%) ahead of the broader market as large cap components weighed.
Outside of healthcare, the remaining countercyclical groups ended near the broader market with consumer staples, telecom services, and utilities losing between 0.7% and 0.8%.
Today's participation was below average with roughly 713 million shares changing hands at the NYSE floor.
Economic data included Nonfarm Payrolls and Wholesale Inventories:
- Nonfarm payrolls increased by 252,000 in December after adding an upwardly revised 353,000 (from 321,000) in November while the Briefing.com consensus expected an increase of 245,000
- The unemployment rate fell to 5.6% in December from 5.8% in November (consensus 5.7%), but that resulted from a large decline in labor force
- Average hourly wages in December contracted 0.2% after increasing a downwardly revised 0.2% (from 0.4%) in November
- Wholesale inventories increased 0.8% in November after increasing an upwardly revised 0.6% (from 0.4%) in October while the Briefing.com consensus expected an increase of 0.3%
- Durable wholesale inventories increased 0.8% in November, up from a 0.1% increase in October. Large gains in professional equipment (1.3%), machinery (0.9%), and automotive (0.6%) offset declines in lumber (-0.5%) and furniture (-0.3%)
- Nondurable wholesale inventories increased 0.7% in November, down from a 1.5% increase in October. Low oil prices pushed petroleum inventories down 3.7%. That loss was more-than-offset by a 5.7% increase in farm product inventories
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Economic Data
from Briefing.com
| Date | ET | Release | For | Actual | Briefing.com Forecast | Briefing.com Consensus | Prior | Revised From |
|---|---|---|---|---|---|---|---|---|
| Jan 09 | 08:30 | Nonfarm Payrolls | Dec | 252K | 240K | 245K | 353K | 321K |
| Jan 09 | 08:30 | Nonfarm Private Payrolls | Dec | 240K | 225K | 235K | 345K | 314K |
| Jan 09 | 08:30 | Unemployment Rate | Dec | 5.6% | 5.8% | 5.7% | 5.8% | |
| Jan 09 | 08:30 | Hourly Earnings | Dec | -0.2% | 0.2% | 0.2% | 0.2% | 0.4% |
| Jan 09 | 08:30 | Average Workweek | Dec | 34.6 | 34.6 | 34.6 | 34.6 | |
| Jan 09 | 10:00 | Wholesale Inventories | Nov | 0.8% | 0.3% | 0.3% | 0.6% | 0.4% |
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Technical Update
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Market Internal
NYSE :Lower than prev day volume @ 731.9M vs 777.6M
Decliners outpaced Advancers(adv/dec): 1145M/1926M
New highs outpaced low(high/low): 152/58
NASDAQ :
Lower than prev day volume @ 1706.1M vs 1947.9M
Decliners outpaced Advancers(adv/dec): 943M/1821M
New highs outpaced low(high/low): 79/48
Decliners outpaced Advancers by an average 1.79 to 1 on lower volumes than prev day (-287.5 -10.55%)
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Bonds, Currencies & Commodities
from Briefing.comBonds
- The first full week of trading for the month of January is done and it was a good week for the Treasury market. Yields fell sharply across the curve.
- 2-yr -11 bps to 0.56%
- 5-yr -16 bps to 1.44%
- 10-yr -14 bps to 1.97%
- 30-yr -13 bps to 2.56%
- Volatility in the stock market, a continued decline in oil prices, festering deflation concerns out of the eurozone, and a startling report that average hourly earnings decreased 0.2% in December provided much of the rationale for the buying interest
- Friday's session was ultimately governed by the recognition that the drop in average hourly earnings should indeed leave the FOMC patient in raising the fed funds rate
- 2-yr yield fell 5 bps to 0.56%
- Meanwhile, the fed funds futures showed a drop in the probability of the first rate hike occurring at the September 2015 meeting from 59% to 52%
- Over the last 12 months, average hourly earnings are up just 1.7% versus 2.0% in November. Other key components of the December employment report included the following:
- Nonfarm payrolls increased by 252,000 (Briefing.com consensus 245,000) and payrolls for October and November were revised up by a combined 50,000
- Private sector payrolls increased by 240,000 (Briefing.com consensus 235,000) and payrolls for October and November were revised up by a combined 50,000
- The unemployment rate fell to 5.6% from 5.8% (Briefing.com consensus 5.7%)
- The labor force participation rate fell to 62.7% from 62.9%, which helped to explain the drop in the unemployment rate
- Wholesale Inventories for November increased 0.8% (Briefing.com consensus 0.3%), yet wholesale sales fell 0.3%. That pushed up the inventory-to-sales ratio to 1.21 from 1.20
- Briefing.com boosted its Q4 GDP forecast this week to 3.6% from 3.2%, driven by the smaller than expected net export deficit and the jump in wholesale inventories
Currencies
Currencies Tighten Up Trading Range in Afternoon Trade: The Dollar Index has been trading just below the 92 level for the majority of the afternoon. The range has been tight with the DXY bouncing between the 91.89 to 92.05 area the majority of the time. Some profit taking following the job reaction pop has led to some of the weakness. But the light hourly earnings number has also raised some concerns over a potential lack of inflation. This could push back expectations for a Fed rate hike.
- The euro is trading at 1.1835 as it recovered some early losses. The euro will move back into focus next week when the European Court of Justice is set to rule on the legality of the OMT program. The Court is expected to pass the program and set the table for a QE announcement at the January 22 ECB meeting.
- The pound has held on to early gains as it trades around 1.5160. On Tuesday the country will post its latest inflation report with markets looking to see if the deflationary pressures in Europe are impacting the U.K. as well.
- The yen was able to rally to the 118.50 area as risk off trade took control of markets mid day. It has cooled off and traded in a tight pattern just above the 118.50 level for the majority of the afternoon.
Commodities
- Commodities ended the day mixed
- WTI lost some steam in afternoon action and finished with a modest loss
- Nat gas held on to a little upside, closing 2 cents higher at $2.695/MMBtu
- Feb gold rallied today and finished with a $7.70 gain at $1216.20/oz.
- Mar silver, meanwhile, rose 4 cents to $16.41/oz
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Preview: 12 - 16 Jan 2015
Economic Data
| Date | ET | Release | For | Actual | Briefing.com Forecast | Briefing.com Consensus | Prior | Revised From |
|---|---|---|---|---|---|---|---|---|
| Jan 13 | 10:00 | JOLTS - Job Openings | Nov | NA | NA | 4.834M | ||
| Jan 13 | 14:00 | Treasury Budget | Dec | $3.0B | $3.0B | +$53.2B | ||
| Jan 14 | 07:00 | MBA Mortgage Index | 01/10 | NA | NA | 11.1% | ||
| Jan 14 | 08:30 | Retail Sales | Dec | -0.2% | 0.1% | 0.7% | ||
| Jan 14 | 08:30 | Retail Sales ex-auto | Dec | 0.0% | 0.1% | 0.5% | ||
| Jan 14 | 08:30 | Export Prices ex-ag. | Dec | NA | NA | -1.2% | ||
| Jan 14 | 08:30 | Import Prices ex-oil | Dec | NA | NA | -0.2% | ||
| Jan 14 | 10:00 | Business Inventories | Nov | 0.4% | 0.3% | 0.2% | ||
| Jan 14 | 10:30 | Crude Inventories | 01/10 | NA | NA | -3.062M | ||
| Jan 14 | 14:00 | Fed's Beige Book | Jan | NA | NA | NA | ||
| Jan 15 | 08:30 | Initial Claims | 01/10 | 295K | 293K | 294K | ||
| Jan 15 | 08:30 | Continuing Claims | 01/03 | 2400K | 2400K | 2452K | ||
| Jan 15 | 08:30 | PPI | Dec | -0.5% | -0.4% | -0.2% | ||
| Jan 15 | 08:30 | Core PPI | Dec | 0.2% | 0.1% | 0.0% | ||
| Jan 15 | 08:30 | Empire Manufacturing | Jan | 5.0 | 7.0 | -3.6 | ||
| Jan 15 | 10:00 | Philadelphia Fed | Jan | 10.0 | 19.0 | 24.3 | 24.5 | |
| Jan 15 | 10:30 | Natural Gas Inventories | 01/10 | NA | NA | -131 bcf | ||
| Jan 16 | 08:30 | CPI | Dec | -0.4% | -0.4% | -0.3% | ||
| Jan 16 | 08:30 | Core CPI | Dec | 0.1% | 0.1% | 0.1% | ||
| Jan 16 | 09:15 | Industrial Production | Dec | -0.2% | 0.0% | 1.3% | ||
| Jan 16 | 09:15 | Capacity Utilization | Dec | 79.8% | 80.0% | 80.1% | ||
| Jan 16 | 09:55 | Mich Sentiment | Jan | 95.0 | 94.1 | 93.6 | ||
| Jan 16 | 16:00 | Net Long-Term TIC Flows | Nov | NA | NA | -$1.4B |
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