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Thursday, 15 Jan 2015 - AMC

      

Market Summary

from Briefing.com

Industry Watch

Strong: Consumer Staples, Materials, Telecom Services, Utilities
Weak: Energy, Financials, Technology

Market Moving Factors  

  • Swiss National Bank abandons EURCHF 1.2000 floor, likely in anticipation of a QE announcement from ECB: franc surges higher by about 14.0% versus USD
  • Crude oil surrenders morning advance
  • S&P 500 fails to hold 100-day moving average (2,007)

[BRIEFING.COM] The major averages continued their rough week with the S&P 500 (-0.9%) registering its fifth consecutive decline after failing to hold the 100-day moving average (2007). The price-weighted Dow Jones Industrial Average (-0.6%) fared a bit better while the Nasdaq Composite (-1.5%) and Russell 2000 (-1.7%) underperformed.

This morning, market participants were greeted by an astounding move in the foreign exchange market. Specifically, the Swiss franc was up as much as 25.0% against the dollar after the Swiss National Bank abandoned the EURCHF 1.20 floor and lowered the benchmark deposit rate to -0.75%. The move was likely taken in anticipation of a QE announcement from the ECB, and the dollar/franc pair was able to narrow its loss to 15.0% (0.8687); however, that was still large enough to resonate with investors who were lulled into a false sense of security by the SNB's pledge to maintain the exchange rate floor.

Equity indices began the day with slim gains, but the morning strength faded alongside crude oil, which slid from a session high at $51.00/bbl to $46.57/bbl. The energy component ended the day lower by 4.1%, but that masked the fact that crude fell almost 9.0% from its best level of the day. Furthermore, that pullback was closely correlated with a broad-market slide, which was paced by cyclical sectors.

The two top-weighted groups—technology (-1.5%) and financials (-1.3%)—spent the day at the bottom of the leaderboard and their underperformance prevented the market from staging a notable rebound. Most large cap tech components held up relatively well, but Apple (AAPL 106.86, -2.94) fell 2.7% after Mizuho downgraded the stock to ‘Neutral' from ‘Buy.' Similarly, high-beta social media names lagged with the likes of Facebook (FB 74.05, -2.23), LinkedIn (LNKD 213.21, -6.22), and Yelp (YELP 50.12, -2.08) falling between 2.8% and 4.0%. Chipmakers also struggled, but the PHLX Semiconductor Index (-0.8%) ended ahead of the broader market thanks to an 8.7% surge in Taiwan Semiconductor (TSM 22.89, +1.83) after the company beat earnings estimates and issued upbeat guidance.

Elsewhere, the financial sector retreated under the weight of two more quarterly reports that missed their mark. Citigroup (C 47.23, -1.82) reported below-consensus earnings and revenue while Bank of America (BAC 15.20, -0.84) delivered a one-cent beat on light revenue. The two names posted respective losses of 3.7% and 5.2% while the sector extended its January decline to 6.1%.

Also of note, the consumer discretionary sector (-1.3%) finished among the laggards as retailers and homebuilders struggled. The SPDR S&P Retail ETF (XRT 92.12, -2.16) lost 2.3% while iShares Dow Jones US Home Construction ETF (ITB 24.60, -1.30) fell 5.0% despite better than expected earnings from Lennar (LEN 42.48, -3.28). The stock fell 7.2% after company management made cautious comments about its outlook, echoing the remarks made earlier this week by KB Home (KBH 12.39, -1.15).

On the upside, consumer staples (+0.2%) and utilities (+0.7%) posted gains while another countercyclical sector—health care (-1.1%)—was pressured by biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 307.70, -7.87) lost 2.5%, which contributed to the underperformance of the Nasdaq.

Treasuries registered solid gains with the 10-yr yield sliding nine basis points to 1.76%.

Today's participation was ahead of average with more than 850 million shares changing hands at the NYSE floor.

Economic data included Initial Claims, PPI, Empire Manufacturing, and the Philadelphia Fed Survey:
  • The initial claims level increased to 316,000 from an upwardly revised 297,000 (from 294,000) while the Briefing.com consensus expected a drop to 290,000 
    • That was the largest initial claims level since the beginning of June 2014 when 318,000 claims were filed 
    • It is possible that the rise in claims is the beginning of an upward move in layoff levels from energy-related activities. Low oil prices are expected to cause layoffs as fracking becomes uneconomical 
  • Producer prices declined 0.3% in December after declining 0.2% in November while the Briefing.com consensus expected a decline of 0.4% 
    • Total energy prices fell 6.6% in December, which was the sixth consecutive month of price declines 
    • Excluding food and energy, core PPI increased 0.3% in December after being flat in November. The consensus expected an uptick of 0.1% 
  • The Empire Manufacturing Survey for January registered a reading of 9.9, which was above the prior month's reading of -1.2 and also above the Briefing.com consensus estimate, which was pegged at 6.5 
  • The Philadelphia Fed's Manufacturing Business Outlook Survey dropped to 6.3 in January from a downwardly revised 24.3 (from 24.5) while the Briefing.com consensus expected a drop to 19.0 
    • That was the lowest level since the index turned negative (-6.3) in February 2014 
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Economic Data

from Briefing.com
Date ET Release For Actual Briefing.com Forecast Briefing.com Consensus Prior Revised From
Jan 15 08:30 Initial Claims 01/10 316K 295K 290K 297K 294K
Jan 15 08:30 Continuing Claims 01/03 2424K 2400K 2400K 2475K 2452K
Jan 15 08:30 PPI Dec -0.3% -0.5% -0.4% -0.2%
Jan 15 08:30 Core PPI Dec 0.3% 0.2% 0.1% 0.0%
Jan 15 08:30 Empire Manufacturing Jan 9.9 5.0 6.5 -1.2 -3.6
Jan 15 10:00 Philadelphia Fed Jan 6.3 10.0 19.0 24.3 24.5
Jan 15 10:30 Natural Gas Inventories 01/10 -236 bcf NA NA -131 bcf

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Technical Update


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Market Internal

NYSE :
Lower than prev day volume @ 879.6M vs 928.6M
Decliners outpaced Advancers(adv/dec): 1100M/2006M
New highs outpaced low(high/low): 191/122

NASDAQ :
Lower than prev day volume @ 1951.9M vs 2058.5M
Decliners outpaced Advancers(adv/dec): 618M/2163M
New lows outpaced highs(high/low): 35/141


Decliners outpaced Advancers by an average 2.43 to 1 on lower volumes than prev day (-155.6 -5.21%)



VOLATILITY S&P500 (VIX) :
22.39 +0.91 (+4.24)

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Bonds, Currencies & Commodities

from Briefing.com

Bonds

Treasuries See 14th Gain in 15 Days:
  • Treasuries booked their 14th gain in 15 days. 
  • The complex held losses early on in overnight trade before rallying into positive territory in response to the surprise action by the Swiss National Bank. The SNB eliminated its EURCHF1.20 floor and cut its Libor Rate -50bps to -75bps ahead of what is perceived to be the introduction of European-style QE at next week's ECB meeting. 
  • Action pressed to its best levels of the morning of the data, but slumped back to the flat line after PPI (-0.3% actual v. -0.4% expected) and Core PPI (+0.3% actual v. +0.1% expected) posted hotter than expected results while Empire Manufacturing (9.9 actual v. 6.5 expected) beat and both initial (316K actual v. 290K expected) and continuing (2424K actual v. 2400K expected) disappointed. 
  • Maturities would be unable to hold their breakeven lines and trade presses higher into the lunchtime hour after Philly Fed (6.3 actual v. 19.0 expected, 24.3 previous) missed.
  • Afternoon weakness in equities ran maturities to their best levels of the day ahead of the cash close. 
  • Up front, the 2Y eased -4.9bps @ 0.436%. The yield finished the day at levels last seen around Halloween.
  • In the belly, the 5Y tumbled -7.9bps to 1.224%. The yield closed at levels last seen in June 2013, but was unable to put in a print below the October 15 low (1.118%). 
  • The 10Y shed -6.2bps to 1.775%. The benchmark yield put in fresh 20-month lows and is now less than 40bps from an all-time low print. 
  • The long end lagged with the 30Y falling -4bps to 2.411%. Action dipped below the previous record low of 2.395%, hitting 2.393% before ticking higher into the close. 
  • Curve flattening continued as the 2-10-yr spread narrowed to 134bps. 
  • Precious metals saw a mixed session as gold added +$24 to $1259 and silver slid -$0.12 to $16.86. 
  • Data: CPI (8:30), industrial production and capacity utilization (9:15), Michigan Sentiment (9:55) and Net Long Term TIC Flows (16). 
  • Fed Speak: Minny's Kocherlakota gives his "Goal-Based Monetary Policy Report" (8:50) and St. Louis' Bullard discusses the economy and monetary policy (13:10).

Currencies

Dollar Firms in Volatile Trade:
  • The Dollar Index holds small gains as trade continues to test the 92.30 area that has served as a headwind over the past couple of sessions. 
  • The greenback has been whipped around in one of the more volatile trade in recent memory as markets digest today's action by the Swiss National Bank. 
  • EURUSD is -170 pips @ 1.1620 as trade flirts with its worst close in 11 years. The single currency has been pressured in response to today's developments at the Swiss National Bank, which has led many to believe a European-style QE program is coming at next week's meeting. Eurozone data due out tomorrow is limited to Final CPI. 
  • GBPUSD is -45 pips @ 1.5185 after giving up its early gains. The 1.5000 region remains in focus with a breakdown pushing sterling to levels last seen in June 2010. 
  • USDCHF is -1340 pips @ .8845 amid an historic session. Earlier, the Swiss National Bank stunned markets by removing its EURCHF1.20 floor and cutting its Libor Rate -50bps to -75bps. An equally spectacular move took hold in EURCHF, which is -1735 pips @ 1.0275. Swiss retail sales will cross the wires tomorrow. 
  • USDJPY is -85 pips @ 116.45 as sellers remain in control for a fifth day. The pair has been offered throughout the day despite the overnight core machinery orders miss and a reiteration by the Bank of Japan that it will do what's necessary to hit its 2% inflation target. Many participants have taken note of the Nikkei report that came out during U.S. trade, which indicated some members of the BOJ are questioning the benefits of further easing. A breakdown of 116.00 puts the 100 dma (113.31) in focus. Japan's tertiary industry activity is scheduled for release tonight. 
  • AUDUSD is +65 pips @ .8215. The hard currency saw an overnight boost in response to the strong jobs report, and managed to shrug off the disappointing Chinese new loans data. Action remains on target to close at a one-month high.
  • USDCAD is -10 pips @ 1.1940 Early selling dropped the pair to 1.1800, but a steady bid into the equity open helped erase those losses. Six-year highs in the 1.2000 area are being watched closely.

Commodities

  • WTI crude oil displayed huge volatility again today, ultimately closing $2.19 lower at $46.36/barrel
  • This is well off of today's high of $51.27/barrel
  • Feb natural gas fell 6 cents today to close at $3.17/MMBtu
  • Feb gold rose $29.60 to $1264.60, while Mar silver rose $0.11 to $17.10/oz

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Preview: Friday, 16 Jan 2015

Economic Data

DateETReleaseForActualBriefing.com ForecastBriefing.com ConsensusPriorRevised From
Jan 1608:30CPIDec-0.4%-0.4%-0.3%
Jan 1608:30Core CPIDec0.1%0.1%0.1%
Jan 1609:15Industrial ProductionDec-0.2%0.0%1.3%
Jan 1609:15Capacity UtilizationDec79.8%80.0%80.1%
Jan 1609:55Mich SentimentJan95.094.193.6
Jan 1616:00Net Long-Term TIC FlowsNovNANA-$1.4B

Other Events of Interest

Earnings



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