Market Summary
from Briefing.comIndustry Watch
Strong: Consumer Discretionary, Financials, Industrials, Materials
Weak: Consumer Staples, Energy, Health Care, Utilities, Telecom Services
Market Moving Factors
- European Central Bank leaves interest rate corridor unchanged and announces plans to purchase EUR60 billion per month through September 2016
- S&P 500 retakes 50-day moving average (2046)
This week has featured action from several major central banks and that extravaganza was topped off today when the European Central Bank announced the highly-anticipated launch of a quantitative easing program.
Prior to the U.S. open, ECB President Mario Draghi revealed plans to purchase investment-grade corporate and government debt in the amount of EUR60 billion per month. According to Mr. Draghi, the program will continue through September 2016 and will be deployed ‘decentrally,' meaning national central banks will participate in the risk sharing. When asked about the program's limits, Mr. Draghi said the take-up is limited to 25.0% of a given issue. The announcement boosted European debt (Italy 10-yr yield -14 bps to 1.55%) and weighed on the euro, sending the single currency lower by nearly 300 pips to 1.1340 against the dollar.
The resulting greenback strength pushed the Dollar Index (94.28, +1.37) above the 94.00 level for the first time since September 2003. In turn, this was a headwind for dollar-denominated commodities, and especially crude oil, which also had to contend with a larger than expected inventory build. The energy component fell 2.9% to $46.38/bbl while the energy sector (+0.6%) registered a modest gain after spending the first half of the session in negative territory.
Similar to energy, the materials sector (+1.3%) underperformed while the remaining cyclical groups finished ahead of the broader market.
The financial sector (+2.5%) settled in the lead, but the spike could not lift the group off the bottom of the January leaderboard. The sector narrowed its month-to-date loss to 2.9% while Dow components American Express (AXP 84.37, -3.30) and Travelers (TRV 108.17, +3.16) headed in opposite direction following earnings. American Express lost 3.8% after the company beat top-line estimates and announced plans to cut 4,000 jobs whereas Travelers rallied 3.0% in reaction to better than expected earnings.
Financials were followed by discretionary shares (+1.9%) with the group enjoying broad support. Online commerce names Amazon.com (AMZN 310.32, +13.07) and eBay (EBAY 57.14, +3.77) posted respective gains of 4.4% and 7.1% after eBay reported a one-cent beat and announced plans for a 7.0% reduction of the company's workforce. It is also worth mentioning the company agreed to appoint an Icahn Capital executive to its Board of Directors.
Elsewhere, the top-weighted tech sector (+2.0%) displayed broad strength while the PHLX Semiconductor Index (+0.6%) struggled to keep pace due to disappointing guidance from Xilinx (XLNX 38.96, -2.55) and SanDisk (SNDK 78.90, -1.54). The pair lost 6.1% and 1.9%, respectively.
Also of note, the industrial sector (+1.6%) finished just ahead of the broader market, but transport stocks soared following better than expected results from Alaska Air (ALK 67.94, +2.96), Southwest Airlines (LUV 45.35, +3.52), JB Hunt (JBHT 84.23, +2.19), and Union Pacific (UNP 119.83, +5.43). The Dow Jones Transportation Average spiked 2.9% to erase its January decline.
Unlike the six cyclical sectors, defensively-oriented groups spent the day behind the market. Telecom services (-0.6%) and utilities (-0.4%) could not stay out of the red while consumer staples (+1.1%) and health care (+1.3%) ended in the green.
Treasuries finished with slim losses that sent the 10-yr yield higher by a basis point to 1.88%.
Today's participation was ahead of average with roughly 871 million shares changing hands at the NYSE floor.
Economic data was limited to Initial Claims and the FHFA Housing Market Index:
- The initial claims level declined to 307,000 from an upwardly revised 317,000 (from 316,000) while the Briefing.com consensus expected a decline to 302,000
- This was the first time since July 2014 that the initial claims level exceeded 300,000 for three consecutive weeks
- As with last week, the Department of Labor reported that there were no special factors impacting the initial claims level
- Continuing claims increased to 2.443 million from an upwardly revised 2.428 million (from 2.424 million)
- The FHFA Housing Price Index for November rose 0.8%, which followed an increase of 0.6% in October
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Economic Data
from Briefing.com
| Date | ET | Release | For | Actual | Briefing.com Forecast | Briefing.com Consensus | Prior | Revised From |
|---|---|---|---|---|---|---|---|---|
| Jan 22 | 08:30 | Initial Claims | 01/17 | 307K | 310K | 302K | 317K | 316K |
| Jan 22 | 08:30 | Continuing Claims | 01/10 | 2443K | 2425K | 2400K | 2428K | 2424K |
| Jan 22 | 09:00 | FHFA Housing Price Index | Nov | 0.8% | NA | NA | 0.4% | 0.6% |
| Jan 22 | 10:30 | Natural Gas Inventories | 01/17 | -216 bcf | NA | NA | -236 bcf | |
| Jan 22 | 11:00 | Crude Inventories | 01/17 | 10.071M | NA | NA | 5.389M |
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Technical Update
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Market Internal
NYSE :Higher than prev day volume @ 890.4M vs 771.4M
Advancers outpaced Decliners(adv/dec): 2444M/658M
New highs outpaced low(high/low): 268/33
NASDAQ :
Higher than prev day volume @ 1986.4M vs 1827.6M
Advancers outpaced Decliners(adv/dec): 2021M/757M
New lows outpaced highs(high/low): 64/81
Advancers outpaced Decliners by an average 3.16 to 1 on higher volumes than prev day (+277.8 +10.69%)
VOLATILITY S&P500 (VIX) :
16.40 -2.45(-13.00%)
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Bonds, Currencies & Commodities
from Briefing.comBonds
Yields Firm Amid Volatile Trade:- Treasuries lost ground amid a volatile trade.
- The complex pressed to session lows ahead of this morning's Mario Draghi press conference before surging back into positive territory as Europe's QE program was announced.
- European QE will consist of purchases totaling EUR60 bln per month through September 2016 and will not discriminate against bonds with a negative yield.
- The volatile session produced a range of 15bps in yields at the long end of the curve.
- Up front, the 2Y added +2bps to 51.5bps. This area remains under close watch as it has been viewed as a key pivot since June.
- In the belly, the 5Y rallied +4.6bps to 1.382%. Resistance in the 1.450%/1.500% region remains in focus.
- The 10Y climbed +4.3bps to 1.896%. The benchmark yield probed 1.950% ahead of the ECB announcement before tumbling to a low of 1.812%.
- Selling at the long end caused the 30Y to edge up +2.9bps to 2.469%. The yield finished today's session at a one-week high.
- A steeper curve won out as the 2-10-yr spread widened to 138bps.
- Precious metals went off near their best levels of the day as gold added +$11 to $1305 and silver climbed +$0.27 to $18.47.
- Data: Existing home sales and leading indicators (10).
Currencies
Dollar Crosses 94.00:- The Dollar Index trades above 94.00 for the first time September 2003.
- EURUSD is -230 pips @ 1.1380 as trade presses to a fresh 11-year low following Mario Draghi's introduction of European QE. Today's announcement outlined a EUR60 bln per month of purchases in various securities, 33% of which will be sovereign debt, lasting until September 2016. Mr. Draghi noted the program will not discriminate against bonds with a negative yield. The 1.1000 area is setting up as the next key level. Eurozone data is heavy as Flash Manufacturing and PMI data from across the region is released.
- GBPUSD is -120 pips @ 1.5020 as action slides to an 18-month low. Sterling managed cross 1.5200 early despite the disappointing public sector net borrowing and CBI Industrial Order Expectations numbers, but pushed through key 1.5100 support as traders digested today's ECB action. Britain's retail sales will cross the wires tomorrow.
- USDCHF is +130 pips @ .8720 as buyers take control for the first time in three days. The .8400/.8800 range has been in place for the past week and will be monitored closely.
- USDJPY is +25 pips @ 118.20. Early selling following the ECB announcement pressed the pair onto support in the 117.25 area, but buyers once again stepped up in defense of the level. The bulls will look for another test of the 50 dma (118.71), which served as a headwind during the previous two sessions.
- AUDUSD is -20 pips @ .8060 as action flirts with its lowest close since July 2009. Recent selling has come amid speculation the Reserve Bank of Australia could join the Bank of Canada in announcing a surprise rate cut. Chinese data out tonight is limited to HSBC Flash Manufacturing PMI.
- USDCAD is +55 pips @ 1.2395 as trade climbs to a new six-year high. The late 2008/early 2009 highs near 1.3000 are setting up as an important level. Canada's CPI and retail sales data is due out tomorrow.
Commodities
Crude Oil Gives Up Gains, Closes Lower:- WTI crude oil prices gave back today's gains to finish the day at a loss
- Mar crude oil ended the day $1.40 lower at $46.38/barrel
- Natural gas futures fell today, which was helped by the weekly storage data that was released earlier this morning
- Feb nat gas ended the day $0.14 lower at $2.84/MMBtu
- Precious metals posted a modest gains with Feb gold rising $8.20 to $1301.50/oz and Mar silver gaining $0.17 to $18.36/oz
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Preview: Friday, 23 Jan 2015
Economic Data
| Date | ET | Release | For | Actual | Briefing.com Forecast | Briefing.com Consensus | Prior | Revised From |
|---|---|---|---|---|---|---|---|---|
| Jan 23 | 10:00 | Existing Home Sales | Dec | 5.00M | 5.10M | 4.93K | ||
| Jan 23 | 10:00 | Leading Indicators | Dec | 0.4% | 0.5% | 0.6% |
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