Friday, 30 Jan 2015 - AMC

      

Market Summary

from Briefing.com

Industry Watch

Strong:  Energy
Weak:  Consumer Staples, Health Care, Financials, Industrials, Utilities

Market Moving Factors  

• Advance reading of Q4 GDP misses estimates (2.6%; Briefing.com consensus 3.2%)
• S&P 500 -1.8% week-to-date, entering today

Dow -251.90 at 17164.95, Nasdaq -48.17 at 4635.24, S&P -26.26 at 1994.99

[BRIEFING.COM] The stock market ended a down month on a sharply lower note. The Dow (-1.5%) and S&P 500 (-1.3%) widened their respective January losses to 3.7% and 3.1% while the Nasdaq Composite (-1.0%) lost 2.1%. Furthermore, this marked the first time since early 2012 that the market registered losses in two consecutive months.

The key indices struggled at the start after a disappointing GDP report for the fourth quarter introduced a new wrinkle into a deteriorating outlook for global growth. Overnight, Japan and the eurozone saw a slowdown in their respective inflation data while a handful of U.S. companies joined a growing chorus of names that have reduced their guidance for the first quarter. On that note, consensus Q1 earnings growth has contracted to just 0.2% from 8.6% on December 1, according to S&P Capital IQ.

Equities followed their lower open with another slip, but the S&P 500 turned around just north of the 2,000 level and spent the afternoon working back to its flat line. The rebound coincided with a Der Spiegel report indicating Germany is ready to back EUR20 billion in aid for Greece, but the package would be contingent on Greece accepting reform conditions imposed by the troika. This contrasted with earlier comments from Greek Finance Minister Yanis Varoufakis who said Greece will no longer negotiate with the troika. Furthermore, Germany's government was quick to deny the report from Der Spiegel.

The afternoon rebound also featured a surge in crude oil, which spiked to end the day higher by 8.0% at $48.17/bbl. However, crude notched its high just ahead of the 14:30 ET pit close and inched away from that level in electronic trade while the S&P 500 slumped back below its 100-day moving average (2,010) to a new low.

Nine of ten sectors registered losses while energy (+0.7%) benefitted from the spike in crude. However, today's surge was a small victory considering the sector lost 4.9% in January. Dow component Chevron (CVX 102.53, -0.47) shed 0.5% after its plans to cut capital expenditures by 13.0% overshadowed better than expected results.

Speaking of the Dow, the index stayed near the S&P 500, but a 2.8% spike in the shares of Visa (V 254.91, +6.91) masked the fact that 15 of 30 Dow members lost more than 2.0% while four of the 15 tumbled 3.0% or more. As for Visa, the payment processor spiked after beating estimates and announcing a 4:1 split, which will become effective March 19 and remove some of Visa's influence over the price-weighted index.

In other earnings of note, Amazon.com (AMZN 354.53, +42.75) soared 13.7% after beating operating income estimates and issuing cautious guidance for the first quarter. The stock helped the consumer discretionary sector (-1.1%) finish a few steps ahead of the broader market.

Although the market endured a whipsaw session, that was not the case with Shake Shack (SHAK 45.90, +24.90), which made its public debut today. Shares of the hamburger chain rocketed higher by 118.6% after pricing the IPO at $21.

Treasuries spiked, ending near their highs with the 10-yr yield down eight basis points at 1.67%.

Today's participation was well ahead of average with more than a billion shares changing hands at the NYSE floor.

Economic data included Q4 GDP, Employment Cost Index, Chicago PMI, and Michigan Sentiment:

• According to the advance estimate, GDP increased 2.6% in Q4 2014 (Briefing.com consensus 3.2%), down from a 5.0% increase in the third quarter 
  • Real final sales increased 1.8% in the fourth quarter after increasing 5.0% in the third quarter 
  • Much of the GDP gain was the result of lower prices adding a boost to the "real" economy. Nominal GDP growth was anemic (2.5%), which was down by more than 50% from both second (6.8%) and third quarter (6.4%) growth levels 
  • Consumption spending was a bright spot, increasing 4.3%, which was the largest jump since 2006 
• The Employment Cost index Increased 0.6% in Q4, down from a 0.7% increase in Q3 while the Briefing.com consensus expected an increase of 0.5% 
  • Wages and salaries decelerated, up 0.5% after increasing 0.8% in Q3 2014 
  • Benefits spending growth increased 0.6% for a second consecutive quarter 
• The Chicago PMI for January increased to 59.4 from 58.8 while the Briefing.com consensus expected a drop to 58.0 
  • Production levels accelerated as the related index increased to 64.1 in January from 62.7 in December 
• The University of Michigan Consumer Sentiment Index was virtually unchanged in January, ticking down to 98.1 from 98.2 (Briefing.com consensus 98.2) 
  • Lower gasoline prices and improvements in the labor market were key for overall sentiment growth in January 

On Monday, December Personal Income, Personal Spending, and Core PCE Prices will be reported at 8:30 ET while the ISM Index for January and December Construction Spending will be released at 10:00 ET.

• Nasdaq Composite -2.1% YTD 
• S&P 500 -3.1% YTD 
• Russell 2000 -3.4% YTD 
• Dow Jones Industrial Average -3.7% YTD

Week in Review: Stocks Slide to End January

The stock market began the week on a quiet note with the Dow (unch), Nasdaq (+0.3%), and S&P 500 (+0.3%) settling near their flat lines. The small-cap Russell 2000 (+1.0%) outperformed, but the action took place against the backdrop of anemic trading volume as the East Coast braced for Winter Storm Juno. The intraday lack of trading activity masked the fact that the weekend featured an important election in Greece. As expected, the anti-bailout Syriza party came away victorious, and despite failing to secure absolute majority, the party was able to form a coalition with Independent Greeks—a party that also opposes EU bailouts. So far, Syriza officials have been very careful when discussing the future of Greece with Finance Minister Yanis Varoufakis saying a euro exit is not in the plans and that talks of a ‘Grexit' should not be sensationalized.

The major averages stumbled on Tuesday with the S&P 500 (-1.3%) returning below its 50-day moving average (2,047). The benchmark index settled ahead of the Dow Jones Industrial Average (-1.7%), but behind the Russell 2000 (-0.5%). Stocks careened lower at the start of the session after several large companies cautioned that dollar strength will present a headwind to their future earnings. Most notably, Caterpillar (CAT), DuPont (DD), Microsoft (MSFT), and Procter & Gamble (PG) lost between 1.3% and 9.3% while Pfizer (PFE), and United Technologies (UTX) held up relatively well despite their warnings. However, cautious guidance from six Dow components was not the only issue as investors had to digest a disappointing Durable Orders report while Consumer Confidence and New Home Sales beat expectations.

Equities 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. The key indices appeared to be on solid footing at the start with the Nasdaq up 1.0% after Apple (AAPL) 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.'

The market endured a volatile session on Thursday, but a steady rebound off morning lows helped the major averages register their first gain in three days. The Dow Jones Industrial Average paced the advance (+1.3%) while the S&P 500 (+1.0%) reclaimed its 100-day moving average (2,010). Equities faced some selling pressure at the start amid continued weakness in crude oil. The energy component set a fresh January low in the $43.60/bbl area, but was able to charge back to unchanged by the pit close. That rebound improved the overall risk tolerance and helped the S&P 500 find support just a point above its January low (1988.12). Dip buyers entered the picture about 90 minutes after the start of the session, which helped all ten sectors rebound off their lows. The materials space (+1.4%) finished in the lead thanks to better than expected earnings from Dow Chemical (DOW). The stock spiked 4.6% and gave a boost to its peers. Meanwhile, the other commodity-related sector—energy (+0.2%)—was the weakest performer.

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Economic Data

from Briefing.com

Date	ET	Release	For	Actual	Briefing.com Forecast	Briefing.com Consensus	Prior	Revised From
Jan 30	08:30	GDP-Adv.	Q4	2.6%	3.2%	3.2%	5.0%
Jan 30	08:30	Chain Deflator-Adv.	Q4	0.0%	1.0%	1.0%	1.4%
Jan 30	08:30	Employment Cost Index	Q4	0.6%	0.3%	0.5%	0.7%
Jan 30	09:45	Chicago PMI	Jan	59.4	57.5	58.0	58.8	58.3
Jan 30	09:55	Michigan Sentiment - Final	Jan	98.1	97.5	98.2	98.2

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Technical Update

DOW


NASDAQ


S&P500

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Market Internal

NYSE :
Higher than average volume @ 1216.2M vs 824.332M
Decliners outpaced Advancers(adv/dec): 1002M/2119M
New highs outpaced low(high/low): 203/112

NASDAQ :
Higher than average volume @ 2214.7M vs 1767.366M
Decliners outpaced Advancers(adv/dec): 705M/2055M
New lows outpaced highs(high/low): 50/103

Decliners outpaced Advancers by 2.45 to 1 on higher volumes 3430.9 (+32.38%) than avg 2592 (+0.33%)



VOLATILITY S&P500 (VIX) :
20.97 2.212(11.78%)

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Bonds, Currencies & Commodities

from Briefing.com

Bonds

Security Blanket:

• The Treasury market found a safe-haven bid again, driven early in the day by some weaker than expected economic data and later in the session by some geopolitical noise and stock market volatility.
• The early drivers included the following:
  • A report showing CPI declined 0.6% year-over-year in January in the eurozone versus a 0.2% decline in December
  • A report indicating Japanese household spending declined 3.4% year-over-year in December
  • The advance Q4 GDP report for the U.S. showing weaker than expected annualized growth of 2.6% (Briefing.com consensus 3.2%). Real final sales were up 1.8%, trailing the prior 10-quarter average of 2.40%.
• The late drivers included the following:
  • A rumor that ISIS is on the move in northern Iraq
  • A late breakdown in the major stock indices that fostered some safe-haven positioning on account of the volatility in the stock market and some underlying anxiety going into the weekend
• Buying efforts were steady, but solid, across the curve 
  • 2-yr yield -4 bps to 0.48%
  • 5-yr yield -10 bps to 1.18%
  • 7-yr yield -9 bps to 1.49%
  • 10-yr yield -8 bps to 1.67%
  • 30-yr bond -7 bps to 2.25%
• 2-10-yr spread flattens to 119 basis points from 125 basis points
• Hottest area of the day, though, was the oil pit. Prices dropped early, but came roaring back on news of a sharp drop in the U.S. oil rig count (down 90 to 1543), the ISIS rumor, and short-covering activity
  • WTI traded below $44.50/bbl in morning action, but settled pit trading up 8% at $48.17/bbl
• Commodities in general fared reasonably well, getting little interference from the dollar, which was roughly flat
  • Gold +2.2% to $1283.00/troy oz.
  • Copper +2.7% to $2.52/lb
  • Silver +2.8% to $17.24/troy oz.
• Russian central bank cut its key rate to 15% from 17%, contending it has seen a stabilization of inflation and depreciation expectations as expected following its bump to 17% from 10.5% a month ago
• Other data:
  • The Employment Cost Index Increased 0.6% in Q4 2014, down from a 0.7% increase in the third quarter. The Briefing.com Consensus expected the index to increase 0.5%. 
  • The Chicago PMI increased to 59.4 in January, up from 58.8 in December. The Briefing.com Consensus expected the index to fall to 58.0. 
  • The University of Michigan Consumer Sentiment Index was virtually unchanged in the January. The final reading came in at 98.1, down slightly from 98.2 in the preliminary reading. The index is up from 93.6 in December. The Briefing.com Consensus expected the Consumer Sentiment Index to remain at 98.2.

Currencies

Dollar Remains Strong Despite GDP Miss: The Dollar Index has shook off a lower than expected GDP number to move back toward the high end of 94. The DXY continues to hold 94.40 support following the generally hawkish FOMC statement from Wednesday. The Q4 GDP printed at +2.6% which was below the Briefing.com consensus of +3.2%. Wages also remained relatively tame as the Employment Cost Index was in line. But it is still running above the recent trend and was not enough to shake investors out of the dollar.

• The euro is testing the 1.13 level for support following a round of poor economic data. The Eurozone CPI came in lower than expected. But this should not come as a major surprise given the ECB plan to potentially pump over a trillion euro into the system in order to spur prices higher. The new Greek government met with EU officials and said it would not accept an extension of the Greek bail out (ends Feb 28) and that it would not work with the Troika. The headlines appear worse than the actual talks though as the two sides continue to talk and move toward an amicable settlement. 
• The pound is testing the key 1.50 psyche level for support. Net Lending, Money Supply, and Mortgage Apps all were weak today. Coupled with a strong dollar and we are seeing cable bid.
• The yen continues to straddle the 118 area but is pushing higher on some risk off trade at the months end. Economic data from the region was weak as Household Spend, Industrial Production and CPI data all missed expectations. 117 has set up as a key resistance level for yen over the past week so investors will be closely watching to see how it reacts to another test. 
• The Russian ruble has tumbled back to test 70 support after the central bank surprised markets with a rate cut. The central bank cut its rates to 15% from 17% as fears of an economic slow down are trumping the ruble valuation worries. The move comes a little over a month after the bank hiked rates 6.5 points. The ruble is still off from the December spike low of 79 but remains in a firm downward trend and has little support at the current levels 

Commodities

Oil Surges 8% In Pit Trading Following ISIS/Iraq Rumors:

• WTI crude oil steals the show on a late-day surge higher
• Mar crude oil picked up steam following rumors that ISIS was on the move in Northern Iraq, according to CNBC
• Who knows what's actually going on, yet, but either way March crude oil closed 8% higher at $48.17/barrel
• Mar nat gas lost $0.03 to $2.69/MMBtu
• Feb gold rallied $24 to $1278.90/oz, while Mar silver rose $0.45 to $16.76/zo
• Mar copper closed $0.04  higher at $2.49/lb

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Preview: Week of 2 - 6 Feb 2015

Economic Data

Date	ET	Release	For	Actual	Briefing.com Forecast	Briefing.com Consensus	Prior	Revised From
Feb 02	08:30	Personal Income	Dec		0.3%	0.3%	0.4%
Feb 02	08:30	Personal Spending	Dec		-0.2%	-0.2%	0.6%
Feb 02	08:30	PCE Prices - Core	Dec		0.0%	0.0%	0.0%
Feb 02	10:00	ISM Index	Jan		55.0	54.7	55.1	55.5
Feb 02	10:00	Construction Spending	Dec		0.9%	0.8%	-0.3%
Feb 03	10:00	Factory Orders	Dec		-2.4%	-2.0%	-0.7%
Feb 03	14:00	Auto Sales	Jan		NA	NA	5.9M
Feb 03	14:00	Truck Sales	Jan		NA	NA	7.9M
Feb 04	07:00	MBA Mortgage Index	01/31		NA	NA	-3.2%
Feb 04	08:15	ADP Employment Change	Jan		250K	230K	241K
Feb 04	10:00	ISM Services	Jan		56.5	56.5	56.5	56.2
Feb 04	10:30	Crude Inventories	01/31		NA	NA	8.874M
Feb 05	07:30	Challenger Job Cuts	Jan		NA	NA	6.6%
Feb 05	08:30	Initial Claims	01/31		300K	290K	265K
Feb 05	08:30	Continuing Claims	01/24		2375K	2375K	2385K
Feb 05	08:30	Trade Balance	Dec		-$43.0B	-$38.0B	-$39.0B
Feb 05	08:30	Productivity-Prel	Q4		-0.5%	0.2%	2.3%
Feb 05	08:30	Unit Labor Costs	Q4		1.0%	1.2%	-1.0%
Feb 05	10:30	Natural Gas Inventories	01/31		NA	NA	-94 bcf
Feb 06	08:30	Nonfarm Payrolls	Jan		235K	235K	252K
Feb 06	08:30	Nonfarm Private Payrolls	Jan		225K	225K	240K
Feb 06	08:30	Unemployment Rate	Jan		5.6%	5.6%	5.6%
Feb 06	08:30	Hourly Earnings	Jan		0.2%	0.3%	-0.2%
Feb 06	08:30	Average Workweek	Jan		34.6	34.6	34.6
Feb 06	15:00	Consumer Credit	Dec		$16.0B	$15.0B	$14.1B

Other Events of Interest

Earnings

Commentary

That concludes January