Wednesday, 28 Jan 2915 - AMC

      

Market Summary

from Briefing.com

Industry Watch

Strong: Technology
Weak: Consumer Discretionary, Energy, Health Care, Financials, Materials

Market Moving Factors  

• Sliding crude pressures energy sector and weighs on overall risk tolerance
• Better than expected earnings from Apple (AAPL) and others
• FOMC policy directive reiterates intent to remain patient

[BRIEFING.COM] The stock market finished the midweek session on a lower note despite showing considerable strength in the early going. The S&P 500 (-1.4%) lost its 100-day moving average (2,010) and settled behind the Nasdaq Composite (-0.9%) while the Russell 2000 (-1.7%) lagged throughout the day.

Equities appeared to be on solid footing at the start with the Nasdaq up 1.0% after Apple (AAPL 115.31, +6.17) reported better than expected results for the quarter and issued strong guidance. The stock surged 5.7% and helped the technology sector (-0.1%) finish near its flat line while most of the remaining sectors struggled.

The benchmark index traded little changed ahead of the afternoon release of the latest policy statement from the Fed, but slumped into the close. Once again, the policy directive reiterated the Fed's intent to remain patient in determining the appropriate timing for the first rate hike, which helped send Treasuries to new highs. The 10-yr yield fell ten basis points to 1.73% while the 30-yr yield dropped 11 basis points to register its lowest close on record (2.28%).

The Fed described U.S. economic growth as ‘solid' while categorizing job growth as ‘strong.' The central bank did not spend much time discussing overseas developments, which could help explain some of the selling that developed after the statement was released. Furthermore, the FOMC showed little concern over low inflation, saying that while the price level is expected to decline in the near term, a gradual return to 2.0% should follow once the ‘transitory effects of lower energy prices and other factors dissipate.'

Today, however, energy prices deteriorated further with crude oil dropping 3.6% to $44.53/bbl. The energy component continued slipping in electronic trade while the energy sector plunged 3.9% to widen its January decline to 5.7%.

The energy sector resides near the bottom of the January leaderboard with only financials (-2.0%) showing a larger decline for the month (-6.3%). Together, the underperformance of the pair serves as a reminder of the global growth concerns that have been at the forefront so far in 2015.

Elsewhere among influential sectors, consumer discretionary (-1.3%) and health care (-1.5%) finished a little behind the market while industrials (-0.9%) outperformed. Retailers and media names pressured the discretionary sector while biotechnology weighed on health care. The iShares Nasdaq Biotechnology ETF (IBB 318.98, -7.00) lost 2.2%.

For its part, the industrial space ended ahead of the broader market thanks to upbeat earnings and guidance from Dow component Boeing (BA 139.64, +7.16). In other earnings news, Electronic Arts (EA 54.61, +6.20) and Freescale Semiconductor (FSL 31.16, +4.81) surged 12.8% and 18.3%, respectively, after beating estimates.

The afternoon slide fueled a rush for portfolio protection, evidenced by a 17.9% spike in the CBOE Volatility Index (VIX 20.30, +3.08). The near-term volatility measure returned to last week's levels with the entire move taking place after the FOMC statement.

Today's participation was a little above average with 835 million shares changing hands at the NYSE floor.

Economic data was limited to the weekly MBA Mortgage Index, which fell 3.2% to follow the prior week's surge of 16.1%.

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Economic Data

from Briefing.com

Date	ET	Release	For	Actual	Briefing.com Forecast	Briefing.com Consensus	Prior	Revised From
Jan 28	07:00	MBA Mortgage Index	01/24	-3.2%	NA	NA	14.2%
Jan 28	10:30	Crude Inventories	01/24	8.874M	NA	NA	10.071M
Jan 28	14:00	FOMC Rate Decision	Jan	0.25%	0.25%	0.25%	0.25%

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Technical Update

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Market Internal

NYSE :
Higher than average volume @ 856.6M vs 818.198M
Decliners outpaced Advancers(adv/dec): 825M/2306M
New highs outpaced low(high/low): 327/97

NASDAQ :
Higher than average volume @ 2094.7M vs 1757.038M
Decliners outpaced Advancers(adv/dec): 679M/2093M
New highs outpaced low(high/low): 83/79

Decliners outpaced Advancers by 2.92 to 1 on higher than average volumes (+376.064 +14.60%)



VOLATILITY S&P500 (VIX) :
20.44 3.22(18.70%)

Internals seem to indicate quite a bit of fear in the market.

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Bonds, Currencies & Commodities

from Briefing.com

Bonds

Another Day, Another Treasury Rally:

• Wednesday started on a good note for the Treasury market and it ended on one, too. "International developments" had plenty to do with the buying interest on both ends of the day.
  • Early interest was triggered by rising concerns over the anti-austerity/debt restructuring posture of Greece's new government
    • Greek banks led a 9.2% decline in Greece's stock market
    • Greek 10-yr bond yields surged 103 basis points to 10.51%
  • Late buying interest was triggered by the FOMC's acknowledgment that it will now be looking at international developments in its assessment of how it's progressing toward its objectives of maximum employment and 2 percent inflation
    • With market participants cognizant that international developments are far from ideal, buying interest picked up on the belief that the FOMC may indeed hold at the zero bound past the middle of the year
• The market's dovish interpretation was reflected across the curve as all securities hit their highs in price and lows in yield following the release of the FOMC directive
  
  • 2-yr yield -3 bps to 0.48%
  • 5-yr yield -9 bps to 1.25%
  • 7-yr yield -10 bps to 1.53%
  • 10-yr yield -10 bps to 1.73%
  • 30-yr bond -11 bps to all-time low yield of 2.28%
• 2-10-yr spread flattened to 122 basis points from 131 basis points at Tuesday's settlement
• A further drop in oil prices (-4.0% to $44.41/bbl) following a bearish inventory report from the Energy Information Administration also supported buying at the inflation-sensitive back end of the curve
• Up front, there was strong demand for the $26 billion 2-yr note auction.  
  • Auction drew a high yield of 0.54% on a 3.74 bid-to-cover ratio that exceeded the prior 12-auction average of 3.37
• A disappointing sell-off in the stock market after the FOMC decision helped underpin the Treasury market into the cash settlement
  • The S&P 500, up 0.6% at its high, was down 0.8% as of this post
• Strikingly, the U.S. Dollar Index (+0.5% at 94.46) extended its gains after the FOMC decision
• There was no economic data of note on Wednesday.  Thursday will feature the Initial Claims report (08:30 ET) and the Pending Home Sales report for December (10:00 ET).
• Auctions on Thursday include the $35 billion 5-yr note auction (delayed due to Northeast snowstorm) and the $29 billion 7-yr note auction

Currencies

Fed Sees Economy on 'solid pace' and inflation heading lower; Watching 'International Developments':

The Dollar Index is rally to session highs as the market digests the latest Fed statement. Expectations for any meaningful additions were low and overall the statement did provide few changes to the December commentary. But there were two items that were added, one hawkish and one dovish. So there was a little bit for everyone. When describing the economy the FOMC said it was expanding at a solid pace, an uptick in language from the prior 'moderate'. And then the Fed added in 'international developments' as factors in its decision. A hint that it was closely watching overseas markets. The DXY has rallied to 94.45 after some initial whippy action.

• The euro is giving up some of its recent gains following the release of the statement. The euro was trading at 1.1360 in immediate reaction but has fallen about 60 pips to challenge the 1.13 level for support. German jobs numbers (4am ET), CPI (2-7am), Eurozone Money Supply and Private Loans (4am) and an Italian 10-year Bond Auction (4am) will all be on trader's radars tomorrow morning. 
• The pound has slipped back below the 1.52 level on the dollar strength. Just prior to the FOMC, Bank of England Governor John Carney spoke and provided dovish commentary as he noted that the ECB could not fight stagnation by itself. Mr. Carney said the country would eventually get back to more normal rates but his concern over weak inflation and growth suggested that was not until 2016 at the earliest. The pound is trading at 1.5140.
•  The reaction in the yen has been pretty muted. Perhaps the ambiguity in the statement has kept the carry trade at bay while the markets bounce around the commentary. The yen does remain strong overall as it has been able to hold 118 support.

Commodities

WTI Crude Oil Gets Hit Again:

• Energy futures traded lower today, led by losses by oil futures
• Mar crude oil ended the day -3.6% lower at $44.53/barrel
• Mar nat gas lost 8 cents to $2.85/MMBtu
• Precious metals finished the day mixed. 
• Mar gold lost $6.50/oz to $1285.60/oz, while Mar silver rose $0.01 to $18.09/oz

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Preview: Thursday, 29 Jan 2015

Economic Data

Date	ET	Release	For	Actual	Briefing.com Forecast	Briefing.com Consensus	Prior	Revised From
Jan 29	08:30	Initial Claims	01/24		315K	301K	307K
Jan 29	08:30	Continuing Claims	01/17		2450K	2429K	2443K
Jan 29	10:00	Pending Home Sales	Dec		0.6%	0.6%	0.8%
Jan 29	10:30	Natural Gas Inventories	01/24		NA	NA	-216 bcf

Other Events of Interest

Earnings

Commentary

Today has been quite a bearish day, probably expect short covering on Friday.

Market Call: Down.