Market Summary
from Briefing.comIndustry Watch
Strong: Financials, Industrials, Telecom Services
Weak: Consumer Staples, Health Care, Materials, Utilities
Market Moving Factors
- January Nonfarm Payrolls (257K, Briefing.com consensus 235K) beat estimates: December reading revised to 329K from 252K
- Crude oil extends gain from Thursday
Dow -60.59
at 17824.29,
Nasdaq -20.70
at 4744.40,
S&P -7.05
at 2055.47
[BRIEFING.COM] The major averages capped a strong week with a defensive finish. The S&P 500 lost 0.3%, to narrow its weekly gain to 3.0% while the Nasdaq (-0.4%) underperformed, but managed to end the week higher by 2.4%.
Equities climbed at the open in reaction to the release of a better than expected Nonfarm Payrolls report for January. According to the Bureau of Labor Statistics, January payrolls increased by 257,000 (Briefing.com consensus 235,000) while the December reading saw a large upward revision to 329,000 from 252,000. Hourly earnings (+0.5%; consensus +0.3%) surpassed estimates, which bolstered the report.
The gain in hourly earnings shaped a consensus view that the employment report showcased strong labor market conditions, but that analysis may not be completely correct. According to the National Conference of State Legislators, the minimum wage in 20 states increased on January 1, 2015. The change in state policies resulted in a 0.3% increase in the average minimum wage, with all of the states equally weighted. When weighted by state payrolls, the average minimum wage increased by a slightly less but still hefty 0.2%, which is not a trivial gain. Since the Bureau of Labor Statistics reports wages based on averages and not medians, the increase in the bottom of the wage spectrum caused an overall increase in average wages. Just about 0.2 percentage points of the 0.5 percentage point gain in hourly earnings came from the three lowest paid sectors -- retail trade, leisure and hospitality, and other services. Those three sectors are also the most likely to employ minimum wage workers.
That being said, the report caused participants to reassess their expectations for the timing of the first fed funds rate hike. On that note, The Wall Street Journal's Jon Hilsenrath said today's jobs report increased the chance that the Fed will alter the language that indicates plans to remain ‘patient' before hiking rates. In addition, this year's FOMC voting member and Atlanta Fed President Dennis Lockhart said liftoff should begin "around mid-year, or a little later."
Accordingly, the Treasury complex responded with a slide led by the 5-yr note. The 5-yr yield surged 17 basis points to 1.48% while the benchmark 10-yr yield climbed 12 basis points to 1.94%, representing a 27-basis point rally since last Friday.
Equities held modest gains through the first half of the session, but market breadth never turned positive, which hinted at a potential reversal. That reversal materialized after Standard & Poor's downgraded Greece to ‘B-‘ and said another downgrade could be in the cards. Later in the day, Eurogroup Chief Jeroen Dijsselbloem said Greece must apply for a bailout extension by February 16 in order to maintain financial backing from the eurozone.
The downgrade and subsequent comments from Mr. Dijsselbloem sparked some profit taking after a strong run earlier this week; however, it is worth mentioning that the market was probing a resistance level and its failure to clear that area could signal more downside in the near term. Despite the afternoon slip, nine sectors posted weekly gains between 0.7% (health care) and 7.0% (telecom services), while the rate-sensitive utilities sector lost 4.1% today to end the week lower by 3.7%.
Outside of utilities, the health care sector (-0.8%) was the only group that lost more than 0.6%. Biotechnology contributed to the relative weakness with the iShares Nasdaq Biotechnology ETF (IBB 315.59, -4.32) falling 1.4% to end the week lower by 1.9%.
On the upside, telecom services (+1.9%) and financials (+0.7%) held gains throughout the session. The telecom sector was underpinned by Verizon (VZ 49.33, +1.47), which surged 3.1% after confirming a sale of its wireless assets in three states to Frontier Communications (FTR 7.93, +0.23) for $10.54 billion, leasing the rights to over 11,300 wireless towers to American Tower (AMT 95.73, -3.86) for about $5 billion, and entering into an accelerated $5 billion share repurchase program.
Meanwhile, financials benefited from the rise in short-term interest rates with the sector adding 4.8% for the week. Elsewhere among cyclical groups, the energy sector lost 0.3%, but jumped 5.4% for the week as crude oil rallied 2.4% to $51.67/bbl. The energy component spiked more than 9.0% since last Friday.
Also of note, the top-weighted technology sector (-0.6%) settled a bit behind the broader market. Earnings were in focus today with LinkedIn (LNKD 263.40, +25.43) and Twitter (TWTR 48.01, +6.75) soaring 10.7% and 16.4%, respectively, after beating estimates. On the flip side, GoPro (GPRO 47.12, -7.25) and Yelp (YELP 45.11, -12.36) stumbled. GoPro slid 13.3% in reaction to cautious guidance while Yelp tumbled 21.5% after its report revealed a slowdown in user growth.
Today's participation was ahead of average with more than 900 million shares changing hands at the NYSE floor.
Economic data was limited to Nonfarm Payrolls and Consumer Credit:
The stock market began February on a higher note. The S&P 500 spiked 1.3% while the Nasdaq (+0.9%) and Russell 2000 (+0.9%) underperformed. Overall, the Monday session was fairly quiet with the market spending some time on each side of its unchanged level. The S&P 500 began with a slim gain, but relative weakness among high-beta biotechnology and chipmaker names kept heavily-weighted health care (+0.6%) and technology (+1.0%) sectors on the defensive. The S&P 500 tried to overcome that weakness, but was rebuffed by its 100-day moving average in the 2,010 area. However, a second effort in the late afternoon sent the S&P 500 well above the 100-day average to end the day. All ten sectors finished in the green with energy (+3.0%) spending the entire session in the lead. The sector benefitted from a 2.8% advance in crude oil ($49.59/bbl) while also drawing strength from ExxonMobil (XOM), which reported better than expected earnings thanks to a $1 billion non-cash windfall resulting from deferred tax items and a favorable ruling for expropriated Venezuela assets.
The market registered its second consecutive advance on Tuesday with the S&P 500 climbing 1.4% to retake its 50-day moving average (2,044). The price-weighted Dow (+1.8%) fared a bit better while the Nasdaq Composite (+1.1%) underperformed. Equities displayed strength from the get-go after markets in Europe responded positively to a Financial Times report suggesting Greece will soften its negotiating stance; however, Finance Minister Yanis Varoufakis said there has been no ‘U-turn' in Greece's position while German Chancellor Angela Merkel set expectations for a drawn out process, saying the ongoing talks will ‘drag on for months.' Despite a rocky road ahead, the market happily continued retracing its losses from January. The S&P 500 narrowed its quarter-to-date decline to 0.4% with all ten sectors ending in the green.
The major averages finished the Wednesday session on a lower note. The S&P 500 lost 0.4% after tumbling from its high to a new low during the final 30 minutes of action after it was reported that the European Central Bank has lifted its waiver that allowed for the acceptance of Greek government debt as collateral. The announcement came with a caveat that the counterparty status of Greek banks remains unchanged and they may satisfy their liquidity needs through Emergency Liquidity Assistance. However, the news showed that the negotiations are likely to be tumultuous, which contrasted with the rosy picture painted in previous days. Despite the closing slide, a handful of influential sectors like consumer discretionary (+0.7%), technology (+0.1%), and consumer staples (+0.1%) were able to finish in the green.
Equities zoomed higher on Thursday, allowing the S&P 500 (+1.0%) to reclaim its loss from Wednesday and then some. The benchmark index erased the remainder of its decline from January while the Dow (+1.2%) and Russell 2000 (+1.3%) outperformed. The key indices made the bulk of their advance during the opening hour and spent the rest of the day in narrow ranges near their highs. The opening spike took place after investors realized that Wednesday's ECB decision to lift a waiver that allowed for the acceptance of Greek government bonds as collateral was political at its core. Germany's Die Welt reported that the ECB has granted up to EUR60 billion in funding to the Bank of Greece through ELA channels. That being said, the negotiations are unlikely to unfold without a hitch, evidenced by the press conference after Greece's Finance Minister Yanis Varoufakis met with his German counterpart Wolfgang Schaeuble. Mr. Schaeuble said he was advised to say the two "Agreed to disagree," but Mr. Varoufakis countered, saying "We didn't even agree to disagree."
Equities climbed at the open in reaction to the release of a better than expected Nonfarm Payrolls report for January. According to the Bureau of Labor Statistics, January payrolls increased by 257,000 (Briefing.com consensus 235,000) while the December reading saw a large upward revision to 329,000 from 252,000. Hourly earnings (+0.5%; consensus +0.3%) surpassed estimates, which bolstered the report.
The gain in hourly earnings shaped a consensus view that the employment report showcased strong labor market conditions, but that analysis may not be completely correct. According to the National Conference of State Legislators, the minimum wage in 20 states increased on January 1, 2015. The change in state policies resulted in a 0.3% increase in the average minimum wage, with all of the states equally weighted. When weighted by state payrolls, the average minimum wage increased by a slightly less but still hefty 0.2%, which is not a trivial gain. Since the Bureau of Labor Statistics reports wages based on averages and not medians, the increase in the bottom of the wage spectrum caused an overall increase in average wages. Just about 0.2 percentage points of the 0.5 percentage point gain in hourly earnings came from the three lowest paid sectors -- retail trade, leisure and hospitality, and other services. Those three sectors are also the most likely to employ minimum wage workers.
That being said, the report caused participants to reassess their expectations for the timing of the first fed funds rate hike. On that note, The Wall Street Journal's Jon Hilsenrath said today's jobs report increased the chance that the Fed will alter the language that indicates plans to remain ‘patient' before hiking rates. In addition, this year's FOMC voting member and Atlanta Fed President Dennis Lockhart said liftoff should begin "around mid-year, or a little later."
Accordingly, the Treasury complex responded with a slide led by the 5-yr note. The 5-yr yield surged 17 basis points to 1.48% while the benchmark 10-yr yield climbed 12 basis points to 1.94%, representing a 27-basis point rally since last Friday.
Equities held modest gains through the first half of the session, but market breadth never turned positive, which hinted at a potential reversal. That reversal materialized after Standard & Poor's downgraded Greece to ‘B-‘ and said another downgrade could be in the cards. Later in the day, Eurogroup Chief Jeroen Dijsselbloem said Greece must apply for a bailout extension by February 16 in order to maintain financial backing from the eurozone.
The downgrade and subsequent comments from Mr. Dijsselbloem sparked some profit taking after a strong run earlier this week; however, it is worth mentioning that the market was probing a resistance level and its failure to clear that area could signal more downside in the near term. Despite the afternoon slip, nine sectors posted weekly gains between 0.7% (health care) and 7.0% (telecom services), while the rate-sensitive utilities sector lost 4.1% today to end the week lower by 3.7%.
Outside of utilities, the health care sector (-0.8%) was the only group that lost more than 0.6%. Biotechnology contributed to the relative weakness with the iShares Nasdaq Biotechnology ETF (IBB 315.59, -4.32) falling 1.4% to end the week lower by 1.9%.
On the upside, telecom services (+1.9%) and financials (+0.7%) held gains throughout the session. The telecom sector was underpinned by Verizon (VZ 49.33, +1.47), which surged 3.1% after confirming a sale of its wireless assets in three states to Frontier Communications (FTR 7.93, +0.23) for $10.54 billion, leasing the rights to over 11,300 wireless towers to American Tower (AMT 95.73, -3.86) for about $5 billion, and entering into an accelerated $5 billion share repurchase program.
Meanwhile, financials benefited from the rise in short-term interest rates with the sector adding 4.8% for the week. Elsewhere among cyclical groups, the energy sector lost 0.3%, but jumped 5.4% for the week as crude oil rallied 2.4% to $51.67/bbl. The energy component spiked more than 9.0% since last Friday.
Also of note, the top-weighted technology sector (-0.6%) settled a bit behind the broader market. Earnings were in focus today with LinkedIn (LNKD 263.40, +25.43) and Twitter (TWTR 48.01, +6.75) soaring 10.7% and 16.4%, respectively, after beating estimates. On the flip side, GoPro (GPRO 47.12, -7.25) and Yelp (YELP 45.11, -12.36) stumbled. GoPro slid 13.3% in reaction to cautious guidance while Yelp tumbled 21.5% after its report revealed a slowdown in user growth.
Today's participation was ahead of average with more than 900 million shares changing hands at the NYSE floor.
Economic data was limited to Nonfarm Payrolls and Consumer Credit:
- Nonfarm payrolls added 257,000 new jobs in January after adding an upwardly revised 329,000 (from 252,000) in December while the Briefing.com consensus expected a reading of 235,000
- Private payrolls increased by 267,000 in January, down from an upwardly revised 320,000 (from 240,000) in December while the consensus an increase of 225,000
- The decline in the average hourly wage in December (-0.2%) was more than offset by a surge in wage growth (0.5%) in January, which easily topped the consensus forecast of a 0.3% gain. However, the sustainability of this growth remains in question considering 20 states raised their minimum wage in January
- The unemployment rate ticked up to 5.7% in January from 5.6% in December as a result of an uptick in the labor force participation rate
- Consumer credit increased by $14.80 billion in December, up from a downwardly revised $13.50 billion in November while the Briefing.com consensus expected an increase of $15.00 billion
- Nasdaq Composite +0.2% YTD
- Russell 2000 +0.2% YTD
- Dow Jones Industrial Average UNCH YTD
- S&P 500 -0.2% YTD
Week in Review: Stocks Recover January Losses
The stock market began February on a higher note. The S&P 500 spiked 1.3% while the Nasdaq (+0.9%) and Russell 2000 (+0.9%) underperformed. Overall, the Monday session was fairly quiet with the market spending some time on each side of its unchanged level. The S&P 500 began with a slim gain, but relative weakness among high-beta biotechnology and chipmaker names kept heavily-weighted health care (+0.6%) and technology (+1.0%) sectors on the defensive. The S&P 500 tried to overcome that weakness, but was rebuffed by its 100-day moving average in the 2,010 area. However, a second effort in the late afternoon sent the S&P 500 well above the 100-day average to end the day. All ten sectors finished in the green with energy (+3.0%) spending the entire session in the lead. The sector benefitted from a 2.8% advance in crude oil ($49.59/bbl) while also drawing strength from ExxonMobil (XOM), which reported better than expected earnings thanks to a $1 billion non-cash windfall resulting from deferred tax items and a favorable ruling for expropriated Venezuela assets.
The market registered its second consecutive advance on Tuesday with the S&P 500 climbing 1.4% to retake its 50-day moving average (2,044). The price-weighted Dow (+1.8%) fared a bit better while the Nasdaq Composite (+1.1%) underperformed. Equities displayed strength from the get-go after markets in Europe responded positively to a Financial Times report suggesting Greece will soften its negotiating stance; however, Finance Minister Yanis Varoufakis said there has been no ‘U-turn' in Greece's position while German Chancellor Angela Merkel set expectations for a drawn out process, saying the ongoing talks will ‘drag on for months.' Despite a rocky road ahead, the market happily continued retracing its losses from January. The S&P 500 narrowed its quarter-to-date decline to 0.4% with all ten sectors ending in the green.
The major averages finished the Wednesday session on a lower note. The S&P 500 lost 0.4% after tumbling from its high to a new low during the final 30 minutes of action after it was reported that the European Central Bank has lifted its waiver that allowed for the acceptance of Greek government debt as collateral. The announcement came with a caveat that the counterparty status of Greek banks remains unchanged and they may satisfy their liquidity needs through Emergency Liquidity Assistance. However, the news showed that the negotiations are likely to be tumultuous, which contrasted with the rosy picture painted in previous days. Despite the closing slide, a handful of influential sectors like consumer discretionary (+0.7%), technology (+0.1%), and consumer staples (+0.1%) were able to finish in the green.
Equities zoomed higher on Thursday, allowing the S&P 500 (+1.0%) to reclaim its loss from Wednesday and then some. The benchmark index erased the remainder of its decline from January while the Dow (+1.2%) and Russell 2000 (+1.3%) outperformed. The key indices made the bulk of their advance during the opening hour and spent the rest of the day in narrow ranges near their highs. The opening spike took place after investors realized that Wednesday's ECB decision to lift a waiver that allowed for the acceptance of Greek government bonds as collateral was political at its core. Germany's Die Welt reported that the ECB has granted up to EUR60 billion in funding to the Bank of Greece through ELA channels. That being said, the negotiations are unlikely to unfold without a hitch, evidenced by the press conference after Greece's Finance Minister Yanis Varoufakis met with his German counterpart Wolfgang Schaeuble. Mr. Schaeuble said he was advised to say the two "Agreed to disagree," but Mr. Varoufakis countered, saying "We didn't even agree to disagree."
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Economic Data
from Briefing.com
| Date | ET | Release | For | Actual | Briefing.com Forecast | Briefing.com Consensus | Prior | Revised From |
|---|---|---|---|---|---|---|---|---|
| Feb 06 | 08:30 | Nonfarm Payrolls | Jan | 257K | 235K | 235K | 329K | 252K |
| Feb 06 | 08:30 | Nonfarm Private Payrolls | Jan | 267K | 225K | 225K | 320K | 240K |
| Feb 06 | 08:30 | Unemployment Rate | Jan | 5.7% | 5.6% | 5.6% | 5.6% | |
| Feb 06 | 08:30 | Hourly Earnings | Jan | 0.5% | 0.2% | 0.3% | -0.2% | |
| Feb 06 | 08:30 | Average Workweek | Jan | 34.6 | 34.6 | 34.6 | 34.6 | |
| Feb 06 | 15:00 | Consumer Credit | Dec | $14.8B | $16.0B | $15.0B | $13.5B | $14.1B |
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Market Internal
NYSE :Higher than average volume @ 926.8M vs 843.152M
Decliners outpaced Advancers(adv/dec): 1145M/1963M
New highs outpaced low(high/low): 125/15
NASDAQ :
Higher than average volume @ 2020.2M vs 1809.494M
Decliners outpaced Advancers(adv/dec): 1280M/1474M
New highs outpaced low(high/low): 104/35
Decliners outpaced Advancers by 1.42 to 1 on higher volumes 2947 (+11.10%) than avg 2653 (-0.05%)
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Bonds, Currencies & Commodities
from Briefing.comBonds
U-G-L-Y:- There was nothing pretty about Friday's trade for market bulls. Treasuries got clobbered following the stronger than expected January Employment Situation report.
- 2-yr yield +13 bps to 0.65%
- 5-yr yield +16 bps to 1.47%
- 10-yr yield +12 bps to 1.94%
- 30-yr yield +9 bps to 2.52%
- The notable headlines from the report are as follows:
- Nonfarm payrolls increased by 257,000 (Briefing.com consensus 235,000)
- December nonfarm payrolls revised to 329,000 from 252,000
- November nonfarm payrolls revised to 423,000 from 353,000
- Private sector payrolls increased by 267,000 (Briefing.com consensus 225,000)
- December private sector payrolls revised to 320,000 from 240,000
- November private sector payrolls revised to 414,000 from 345,000
- Unemployment rate was 5.7% (Briefing.com consensus 5.6%) versus 5.6% in December
- The U6 unemployment rate, which accounts for the total unemployed plus persons marginally attached to the labor force and the underemployed, was 11.3% versus 11.2% in December
- Persons unemployed for 27 weeks or more accounted for 31.5% of the unemployed versus 31.9% in December
- Average hourly earnings increased 0.5% (Briefing.com consensus 0.3%) after an unrevised 0.2% decline in December
- Aggregate earnings were up 0.7%, which is solid indicator for a pickup in spending
- Over the last 12 months, average hourly earnings have risen 2.2%
- The average workweek was 34.6 hours (Briefing.com consensus 34.6)
- Manufacturing workweek was 41.0 hours versus 40.9 hours in December
- Factory overtime was 3.5 hours versus 3.6 hours in December
- The labor force participation rate was 62.9% versus 62.7% in December
- Nonfarm payrolls increased by 257,000 (Briefing.com consensus 235,000)
- It didn't take much to read between the lines of the price action. Faced with an indication that average hourly earnings rose 0.5% in January and that annual benchmark revisions helped drive much stronger payroll increases than previously reported, market participants priced in the prospect of an earlier than expected rate hike by the Federal Reserve
- That thought process was evident in the sharp selling at the front of the curve
- It was also evident in the fed funds futures market
- Probability of first hike at the July meeting moved up to 47% from 31% on Thursday
- Probability of first rate hike at the September meeting moved up to 64% from 47% on Thursday
- Considerations about the timing of the first rate hike won out above all else. To wit, Treasuries went out at their lows despite:
- Negative headlines surrounding Greece
- S&P cut its credit rating to "B-" from "B" with a negative watch
- Reports that Eurogroup head Dijsselbloem saying Greece needs to apply for bailout extension by Feb. 16
- The U.S. stock market failing to hold early gains and selling off late in the session
- Negative headlines surrounding Greece
- 10-yr yield cleared resistance at 1.90%, which was the top end of a trading range that had held intact since mid-January.
- U.S. Dollar Index surged 1.2% to 94.65, bolstered by rate hike expectations and some safe-haven positioning in front of the weekend
- Fed speak: Atlanta Fed President Lockhart (an FOMC voter) reiterated his position that the interest rate lift-off is on track for mid-2015; expects 1H15 to be 'noisy'; sees low inflation as transitory
Currencies
Jobs Pushes Dollar Back Toward Multi-Year Highs: The Dollar Index is rallying back toward the 95 level following a strong January jobs report. The detractors will point to January typically being a difficult read due to seasonal adjustments, but the headline read was certainly bullish for the dollar. Nonfarm Payrolls and revisions came in well above expectations. Perhaps even more importantly, Hourly Earnings was up 0.5% against expectations of a 0.2% increase. The number has raised expectations that the Fed will take its next step in the long tightening cycle and drop the term 'patient' in its March meeting. DXY is currently trading at 94.63. The multi-year high is 95.48 set on January 23.
- With the dollar on the rise, the euro is coming under selling pressure as it dips back to 1.1339. The single currency is also seeing some selling pressure after it once again failed to break above 1.15 in trade. Markets have taken a small break from the Greek headlines as Hollande and Merkel travel to Russia to discuss the Ukraine issue with Putin.
- The pound has given up some of its recent gains against the dollar as it dips back below the 1.53 level. Sterling is trading at 1.5250. A test of 1.52 support would be closely monitored by markets.
- The yen has finally broken out of the 117 area as a risk on rally ensues following the U.S. jobs report. The yen spiked through the 118 support level and has fallen to 119 on the heels of the U.S. jobs report. A test of 120 is likely in the cards for the yen.
Commodities
- WTI crude oil was actionable again today
- Mar crude oil initially began to fall following the weekly Baker Hughes rig count, but has since pulled back.
- Despite some pullback, Mar crude still closed $1.20 to $51.67/barrel
- Precious metals remained weak today after dropping hard following the morning jobs numbers
- Apr gold closed pit trade $28.40 lower at $1234.60/oz, while Mar silver fell $0.51 to $16.68/oz
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