Market Summary
from Briefing.comIndustry Watch
Strong: Health Care, Telecom Services, Utilties
Weak: Consumer Discretionary, Energy, Industrials, Technology
Market Moving Factors
- Small caps underperform
- Manufacturing PMI readings from China (50.1 from 50.3) and eurozone (50.6 from 50.8) decline
- Euro slides to 1.2050 versus dollar after Draghi op-ed calls for more integration in the eurozone
[BRIEFING.COM] The major averages rebounded from their recent swoon with the S&P 500 (+1.2%) posting its first gain in six sessions. The benchmark index settled just behind the Nasdaq Composite (+1.3%) while the Dow Jones Industrial Average (+1.2%) and Russell 2000 (+1.2%) ended in-line with the S&P 500.
The midweek advance occurred in two stages with the market climbing out of the gate amid upbeat action overseas. The S&P 500 notched its morning high 30 minutes after the opening bell, but returned to its opening level two hours after the start of the session. Equity indices then charged to new highs after Bloomberg reported that German officials are expected to show willingness to restructure Greek debt. The report said that a debt write-off is not being discussed, but repayment terms may be eased.
Stocks caught a second wind following the Bloomberg report and spent the remainder of the session near their afternoon highs, all but ignoring the FOMC minutes from the December meeting. The lack of reaction was understandable, considering the document did not introduce anything ‘new' in particular.
According to the minutes, the Fed's intent to be ‘patient,' which was announced by Janet Yellen in the December press conference, means that a rate hike will not occur in the next couple of meetings.
Nine of ten sectors ended in the green with health care (+2.3%) spending the entire session in the lead. The countercyclical sector was underpinned by biotechnology with the iShares Nasdaq Biotechnology ETF (IBB 312.00, +11.19) surging 3.7%. The strong showing from the high-beta group kept the Nasdaq ahead of S&P 500 for the bulk of the session. Meanwhile, top-weighted technology names were not as strong. Apple (AAPL 107.75, +1.49) and Microsoft (MSFT 46.23, +0.58) posted solid gains while Google (GOOGL 505.15, -1.49) and IBM (IBM 155.05, -1.02) could not stay out of the red, resulting in daylong underperformance from the technology sector (+0.9%).
As for the remaining cyclical groups, consumer discretionary (+1.5%) was the only growth-sensitive sector able to finish ahead of the broader market thanks to broad support. Retailers climbed with the SPDR S&P Retail ETF (XRT 95.70, +2.44) adding 2.6% while homebuilders had an even stronger showing. The iShares Dow Jones US Home Construction ETF (ITB 25.93, +0.82) spiked 3.3%.
Elsewhere, the energy sector (+0.3%) was among the early leaders, but finished the day just north of its low. For its part, crude oil alternated between gains and losses before ending the pit session higher by 1.5% at $48.70/bbl.
On the downside, the telecom services sector (-1.4%) represented the lone decliner, spending the entire session in negative territory.
Treasuries ended the day in the middle of their range with the 10-yr yield up one basis point at 1.96% after marking an intraday high just above 2.00%. The benchmark note climbed after the release of the FOMC minutes, suggesting fixed income traders were not concerned with a possibility of a swift rate hike.
Participation was just short of recent averages with 758 million shares changing hands at the NYSE floor. Economic data released this morning was limited to ADP Employment, Trade Deficit, and the MBA Mortgage Index:
- The ADP National Employment Report revealed that employment in the nonfarm private business sector rose 241K in December while the Briefing.com consensus expected an increase of 230K
- The November reading was revised up to 227,000 from 208,000
- The U.S. trade deficit declined to $39.00 billion in November from a downwardly revised $42.20 billion (from $43.40 billion) in October while the consensus expected a decline to $41.80 billion
- That was the smallest trade deficit since December 2013 (-$37.40 billion)
- Even though U.S. petroleum producers have increased their exports of petroleum-based products over the last few years, the U.S. is still a net importer of crude products. The fall in oil prices had a larger impact in lowering total imports than reducing exports, which led to the smaller trade deficit in November.
- The MBA Mortgage Index, which was not reported last week, rose 11.1%, but fell 9.1% over the two-week period since the last update
Technical Update
Under Construction
Economic Data
| Date | ET | Release | For | Actual | Briefing.com Forecast | Briefing.com Consensus | Prior | Revised From |
|---|---|---|---|---|---|---|---|---|
| Jan 07 | 07:00 | MBA Mortgage Index | 01/03 | 11.1% | NA | NA | -18.2% | |
| Jan 07 | 08:15 | ADP Employment Change | Dec | 241K | 245K | 230K | 227K | 208K |
| Jan 07 | 08:30 | Trade Balance | Nov | -$39.0B | -$40.6B | -$41.8B | -$42.2B | -$43.4B |
| Jan 07 | 10:30 | Crude Inventories | 01/03 | -3.062M | NA | NA | -1.754M | |
| Jan 07 | 14:00 | FOMC Minutes | 12/17 |
Market Internals
Bonds, Currencies & Commodities
from Briefing.comBonds
Post-FOMC Minutes Rally Propels Treasuries to Ninth Straight Gain:
- Treasuries gained for a ninth straight session.
- The complex traded lower overnight and pressed to its worst levels of the day after ADP Employment Change (241K actual v. 230K expected) and the trade balance (-$39 bln actual v. -$41.8 bln expected) outpaced estimates.
- Buying developed into the lunchtime hour and maturities climbed to their best levels of the session following the release of the latest FOMC minutes.
- The minutes suggested "labor market conditions improved further" and that "the foreign economic situation could result in slower domestic economic growth than currently expected." They continued, "The Committee might begin normalization at a time when core inflation was near current levels, although in that circumstance participants would want to be reasonably confident inflation will move back toward 2% over time."
- Up front, the 2Y added +1.6bps to 63bps. Support in the area remains in focus.
- In the belly, the 5Y fell -2bps to 1.473%. Action probed the closely watched 1.500% level before the afternoon bid proved overwhelming.
- The 10Y slipped -0.9bps to 1.954%. The benchmark yield ticked above 2.00% before ultimately failing at the level and putting in its lowest close since May 2013.
- Buying at the long end pushed the 30Y down -0.8bps to 2.515%. The yield on the long bond finished ~6bps off its record low close.
- A flatter curve won out as the 2-10-yr spread narrowed to 132.5bps.
- Precious metals lost ground as gold fell -$4 to $1215 and silver slipped -$0.03 to $16.61.
- Data: Challenger Job Cuts (7:30), initial and continuing claims (8:30) and consumer credit (14).
- Fed Speak: Boston's Rosengren speaks at the 2015 Wisconsin Economic Forecast Luncheon (13:30) and Minny's Kocherlakota takes part in a town hall forum (20).
No comments:
Post a Comment