Market Summary
from Briefing.comIndustry Watch
Strong: Consumer Discretionary, Energy, Industrials, Materials
Weak: Consumer Staples, Financials, Health Care, Technology
Market Moving Factors
- European markets pressured after ECB member Nowotny cautions not to get 'overexcited' for tomorrow's policy meeting
- Bank of England minutes show two previous dissenters join the majority, arguing for continuation of low rates: FTSE rallies
- Crude oil on the rise
The highly-anticipated policy meeting at the European Central Bank will take place tomorrow morning, but that did not stop the Wednesday session from being filled with central bank-related storylines. The Bank of Japan got the ball rolling overnight by lowering its inflation outlook to 1.0% from 1.7%, which boosted the yen (117.80).
The Bank of England was next on tap with the minutes from its latest policy meeting. The minutes were a bit surprising as Messrs. McCafferty and Weale, who previously voted in favor of rate hikes, rejoined the majority in their belief that hiking rates too early would prolong the period of low inflation. The newfound dovish tilt at the BoE helped UK's FTSE spike 1.6% to outperform the region.
Meanwhile, other European indices struggled in the early going after ECB governing council member Ewald Nowotny said policymakers should maintain their long-term perspective and that "one should not get overexcited" about [the meeting].
Mr. Nowotny's remarks contributed to a cautious start in the U.S., but global equities jumped off their lows in reaction to reports indicating the European Central Bank is set to propose EUR50 billion in asset purchases through 2016. The euro wobbled on the news before ending the day near 1.1590 against the dollar. In a surprising move, Germany's 10-yr note tumbled, sending the benchmark yield higher by seven basis points to 0.47%.
The Bank of Canada completed the central bank bonanza with a surprise 25-basis point cut to 0.75% in response to crashing oil prices, which are expected to put downward pressure on Canadian inflation. The loonie retreated to its lowest level since early 2009, sending USDCAD to 1.2330 from 1.2070.
All ten sectors registered gains with energy (+1.8%) maintaining the lead throughout the session. The recently-batter sector was able to trim its January loss to 2.8% with help from crude oil, which spiked 2.7% to $47.78/bbl. Another commodity-related sector—materials (+1.0%)—followed not far behind with steelmakers underpinning the move. The Market Vectors Steel ETF (SLX 33.38, +0.68) gained 2.1%.
Elsewhere, the remaining cyclical sectors ended mixed with respect to the broader market. Industrials (+0.7%) and consumer discretionary (+0.6%) outperformed with the latter receiving a boost from above-consensus earnings reported by Netflix (NFLX 409.28, +60.48).
On the flip side, financials (+0.2%) and technology (+0.2%) spent the day among the laggards. The tech sector could not keep pace with the market due to a 3.1% loss in the shares of IBM (IBM 152.09, -4.86) after the Dow component missed revenue estimates and issued disappointing guidance. However, chipmakers rallied behind better than expected results from ASML (ASML 106.59, +2.78) and Cree (CREE 33.88, +1.54). The broader PHLX Semiconductor Index advanced 1.1%.
Over on the countercyclical side, the utilities sector (+1.0%) extended its January advance to 4.3% while consumer staples (+0.3%), telecom services (+0.2%), and health care (+0.1%) underperformed.
Treasuries notched their highs in the morning before giving up those gains in early afternoon action. As a result, the 10-yr yield jumped six basis points to 1.86%.
Participation was a bit below average with roughly 750 million shares changing hands at the NYSE floor.
Economic data was limited to Housing Starts/Building Permits and the MBA Mortgage Index:
- Led by a large increase in single-family construction, new housing starts increased 4.4% in December to 1.089 million from an upwardly revised 1.043 million (from 1.028 million) in November
- The Briefing.com consensus pegged new housing starts at 1.040 million
- Single-family construction increased 7.2% to 728,000 from 679,000 in November, representing the largest number of single-family starts January 2008 (773,000)
- Building permits fell to a seasonally adjusted annualized rate of 1.032 million versus a revised 1.052 million for November (from 1.035 million)
- The Briefing.com consensus expected permits to come in at 1.060 million
- The weekly MBA Mortgage Index spiked 14.2% to follow last week's 49.1% surge
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Economic Data
from Briefing.com
| Date | ET | Release | For | Actual | Briefing.com Forecast | Briefing.com Consensus | Prior | Revised From |
|---|---|---|---|---|---|---|---|---|
| Jan 21 | 07:00 | MBA Mortgage Index | 01/17 | 14.2% | NA | NA | 49.1% | |
| Jan 21 | 08:30 | Housing Starts | Dec | 1089K | 1030K | 1040K | 1043K | 1028K |
| Jan 21 | 08:30 | Building Permits | Dec | 1032K | 1050K | 1060K | 1052K | 1035K |
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Technical Update
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Market Internal
NYSE :Lower than prev day volume @ 771.4M vs 861M
Advancers outpaced Decliners(adv/dec): 1969M/1119M
New highs outpaced low(high/low): 133/56
NASDAQ :
Lower than prev day volume @ 1827.6M vs 1828.7M
Decliners outpaced Advancers(adv/dec): 1161M/1601M
New lows outpaced highs(high/low): 45/101
Advancers outpaced Decliners by an average 1.15 to 1 on lower volumes than prev day (-90.7 -3.37%)
VOLATILITY S&P500 (VIX) :
18.85 -1.04 (-5.23%)
Market Internals do not show strength in either direction. The Vix is showing higher lows implying more bearishness ahead?
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Bonds, Currencies & Commodities
from Briefing.comBonds
Treasuries Give Up Early Gains, Finish Decisively Red:- Treasuries closed lower after surrendering their early gains.
- The complex pressed to its best levels of the morning following the mixed housing starts (1089K actual v. 1040K expected) and building permits (1032K actual v. 1060K expected) data, but quickly ran into a wave of selling as central banks made headlines on both sides of the Atlantic.
- First, reports surfaced suggesting tomorrow's European Central Bank meeting will introduce a EUR50 bln per month sovereign bond buying program.
- Then, the Bank of Canada announced a surprise 25bp rate cut to 75bps.
- The flurry of headlines sparked a flight into riskier assets, causing money to move out of the safety of Treasuries.
- Up front, the 2Y ticked up +0.9bps to 49.5bps. The 50bp area has served as a key pivot level since June.
- In the belly, the 5Y is +4.3bps @ 1.336%. Three days of selling has run the yield 17bps off Friday's lows and has action moving towards a test of 1.450%/1.500% resistance.
- The 10Y rallied +4.6bps to 1.853%. The benchmark yield has little resistance to contend with until the 2.000% area.
- Selling at the long end ran the 30Y up +4.2bps to 2.440%. An early bid pushed the yield on the long bond to a record low 2.351% before climbing nearly 9bps off the low.
- A steeper curve won out as the 2-10-yr spread widened to 136bps.
- Precious metals ended mixed as gold fell -$1 to $1293 and silver climbed +$0.25 to $18.20.
- Data: Initial and continuing claims (8:30), and FHFA Housing Price Index (9).
Currencies
Dollar Little Changed in Volatile Trade:- The Dollar Index has recouped its early losses and now drifts little changed near 93.00.
- The greenback saw a volatile morning as trade was whipped around in response to the mixed US housing data and central bank headlines out of Europe and Canada.
- EURUSD is +30 pips @ 1.1580 as trade fights to avoid a fresh 11-year low. The single currency rallied to its best levels of the day in an immediate response to reports suggesting tomorrow's European Central Bank meeting will be the introduction of a EUR50 bln per month sovereign debt buying program that will last through 2016. However, trade gave up those gains as participants digested the news over the course of the morning. The recent lows near 1.1540 are being watched closely. Spain's unemployment rate will cross the wires ahead of tomorrow's decision.
- GBPUSD is -25 pips @ 1.5115 after surrendering its early gains. Sterling shrugged off this morning's strong jobs report and instead traded lower in response to the unanimous MPC vote for keeping rates on hold (two previously voted for a hike), pushing back expectations the Bank of England would be the first major Western central bank to hike rates. The 1.5100 area remains in focus. British data scheduled for tomorrow includes public sector net borrowing and CBI Industrial Order Expectations.
- USDCHF is -135 pips @ .8615. The pair has struggled to gain traction since last week's shocking removal of the EURCHF1.20 floor, failing several times at the .8800 level. Bulls will look to defend the .8400 area and put in a tradable bottom.
- USDJPY is -100 pips @ 117.80 after the Bank of Japan lowered its inflation forecast for the fiscal year to 1% (1.7% previous). The 117.00 level remains under scrutiny as a breakdown puts key 116.00 support in the crosshairs.
- AUDUSD is -80 pips @ .8090 as trade slides back onto key support. The hard currency was bid early in the session, but reversed into negative territory after today's surprise from the Bank of Canada as many fear the RBA may be the next central bank to surprise with a rate cut. Australia's inflation expectations will be released tonight.
- USDCAD is +250 pips @ 1.2360 as action presses to its best levels since April 2009. The pair surged to fresh six-year highs after the Bank of Canada surprised markets with a 25bp cut to 75bps. The 200 mma (1.2325) provides some resistance in the area.
Commodities
WTI And Natural Gas Move Higher:
- Energy futures posted some gains today.
- WTI crude oil rallied over the $48/barrel level, but pulled back some and close below here
- However, WTI crude rallied $1.27 overall and closed today's session at $47.78/barrel
- Feb natural gas futures recovery some of yesterday's losses and ended $0.15 higher today at $2.98/MMBtu
- Precious metals sold off following some ECB comments
- Feb gold lost steam and close $0.60 lower at $1293.30/oz
- Mar silver finished with a small gain of $0.23 to $18.19/oz
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Preview: Thursday, 22 Jan 2015
Economic Data
| Date | ET | Release | For | Actual | Briefing.com Forecast | Briefing.com Consensus | Prior | Revised From |
|---|---|---|---|---|---|---|---|---|
| Jan 22 | 08:30 | Initial Claims | 01/17 | 310K | 302K | 316K | ||
| Jan 22 | 08:30 | Continuing Claims | 01/10 | 2425K | 2400K | 2424K | ||
| Jan 22 | 09:00 | FHFA Housing Price Index | Nov | NA | NA | 0.6% | ||
| Jan 22 | 10:30 | Natural Gas Inventories | 01/17 | NA | NA | -236 bcf | ||
| Jan 22 | 11:00 | Crude Inventories | 01/17 | NA | NA | 5.389M |
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