Market Summary
from Briefing.comIndustry Watch
Strong: Telecom Services, Consumer Staples, Utilities, Real Estate, Health Care, Consumer Discretionary
Weak: Technology, Financials
Market Moving Factors
- Chipmakers down after Taiwan Semi (TSM) issued cautious guidance.
- U.S. dollar hits 2017 low amid an uptick in the euro and the Japanese yen.
- Financials lead retreat amid flattening yield curve
[BRIEFING.COM] Equity indices finished Thursday's session lower amid a cautious tone on all fronts. The Dow led the retreat with a loss of 0.3%, while the benchmark S&P 500 index (-0.2%) registered a slimmer loss.
The risk-off trade began with heavy selling pressure that pushed the stock market into negative territory at the opening bell. The U.S. dollar followed suit, while the Treasury market benefited from the defensive posturing. The stock market did eventually tick up, but ended the day after trending sideways at its eventual closing level all afternoon. Since President-elect Donald Trump was short on detail regarding his policy proposals at yesterday's news conference, the downside bias may have had something to do with misgivings about the actual policies living up to the pre-inauguration hype.
Financials led today's retreat, closing lower by 0.7%. The sector also sits in the red for the week (-0.7%), but will have an opportunity to change that tomorrow as a batch of banks will be reporting their quarterly results before the opening bell, including JPMorgan Chase (JPM 86.24, -0.84), Wells Fargo (WFC 54.50, -0.30), and Bank of America (BAC 22.92, -0.15). The three names surrendered between 0.6% and 1.0% on Thursday.
The technology sector (-0.3%) fared only slightly better, thanks in part to tumbling chipmakers who dragged the PHLX Semiconductor Index down 0.9%. The four remaining cyclical sectors also finished in the red with energy sliding 0.5% despite crude oil's positive performance. The commodity finished its trading day higher for the second session in a row, up 1.4% at $53.03/bbl.
On the countercyclical side, four out of five sectors finished in the green, including health care (+0.1%). The space received a boost from the biotech industry, evidenced by the 0.4% increase in the iShares Nasdaq Biotechnology ETF (IBB 279.04, +1.19). Biotechnology's gain came after the ETF tumbled 3.0% yesterday after Mr. Trump expressed a desire to bring back pharmaceutical operations to the United States and voiced support for competitive drug price bidding. Telecom services (+0.6%) finished at the top of leaderboard, while real estate (+0.4%), and utilities (+0.1%) also finished in positive territory.
In corporate news, Fiat Chrysler (FCAU 9.95, -1.14) ended lower by 10.3% after the Environmental Protection Agency accused the automaker of violating the Clean Air Act by installing and failing to disclose "engine management software in light-duty model year 2014, 2015, and 2016 Jeep Grand Cherokees and Dodge Ram 1500 trucks with 3.0 liter diesel engines sold in the United States." The accusations are reminiscent of the 2015 Volkswagen case, which resulted in a $4.3 billion settlement with US regulators.
U.S. Treasuries traded with gains for most of today's session but declined following the $12 bln 30-year Treasury auction and closed well off their intraday highs. The 10-yr yield finished lower by two basis points at 2.36%.
Economic data included Import/Export Prices, Initial Claims, and Treasury Budget:
The risk-off trade began with heavy selling pressure that pushed the stock market into negative territory at the opening bell. The U.S. dollar followed suit, while the Treasury market benefited from the defensive posturing. The stock market did eventually tick up, but ended the day after trending sideways at its eventual closing level all afternoon. Since President-elect Donald Trump was short on detail regarding his policy proposals at yesterday's news conference, the downside bias may have had something to do with misgivings about the actual policies living up to the pre-inauguration hype.
Financials led today's retreat, closing lower by 0.7%. The sector also sits in the red for the week (-0.7%), but will have an opportunity to change that tomorrow as a batch of banks will be reporting their quarterly results before the opening bell, including JPMorgan Chase (JPM 86.24, -0.84), Wells Fargo (WFC 54.50, -0.30), and Bank of America (BAC 22.92, -0.15). The three names surrendered between 0.6% and 1.0% on Thursday.
The technology sector (-0.3%) fared only slightly better, thanks in part to tumbling chipmakers who dragged the PHLX Semiconductor Index down 0.9%. The four remaining cyclical sectors also finished in the red with energy sliding 0.5% despite crude oil's positive performance. The commodity finished its trading day higher for the second session in a row, up 1.4% at $53.03/bbl.
On the countercyclical side, four out of five sectors finished in the green, including health care (+0.1%). The space received a boost from the biotech industry, evidenced by the 0.4% increase in the iShares Nasdaq Biotechnology ETF (IBB 279.04, +1.19). Biotechnology's gain came after the ETF tumbled 3.0% yesterday after Mr. Trump expressed a desire to bring back pharmaceutical operations to the United States and voiced support for competitive drug price bidding. Telecom services (+0.6%) finished at the top of leaderboard, while real estate (+0.4%), and utilities (+0.1%) also finished in positive territory.
In corporate news, Fiat Chrysler (FCAU 9.95, -1.14) ended lower by 10.3% after the Environmental Protection Agency accused the automaker of violating the Clean Air Act by installing and failing to disclose "engine management software in light-duty model year 2014, 2015, and 2016 Jeep Grand Cherokees and Dodge Ram 1500 trucks with 3.0 liter diesel engines sold in the United States." The accusations are reminiscent of the 2015 Volkswagen case, which resulted in a $4.3 billion settlement with US regulators.
U.S. Treasuries traded with gains for most of today's session but declined following the $12 bln 30-year Treasury auction and closed well off their intraday highs. The 10-yr yield finished lower by two basis points at 2.36%.
Economic data included Import/Export Prices, Initial Claims, and Treasury Budget:
- Import prices excluding oil declined 0.2% in December after ticking down 0.1% in November. Export prices excluding agriculture increased 0.4% in December after declining 0.1% in November (revised from +0.2%).
- The Import/Export Price Index report for December fit within the scope of the reflation trade that has been driving the stock market.
- The latest weekly initial jobless claims count totaled 247,000 while the Briefing.com consensus expected a reading of 255,000. Today's tally was above the revised prior week count of 237,000 (from 235,000). As for continuing claims, they declined to 2.087 million from the revised count of 2.116 million (from 2.112 million).
- The latest initial claims report won't diminish any confidence in the state of the labor market, which continues to be solid. Initial jobless claims held below 300,000 for the 97th straight week -- the longest streak since 1970.
- The Treasury Budget for December showed a deficit of $27.5 billion versus a deficit of $14.4 billion for December 2015.
- The Treasury Budget data is not seasonally adjusted, so the December deficit cannot be compared to the $136.7 billion deficit registered in November.
- Russell 2000 +0.3% YTD
- Dow Jones Industrial Average +0.7% YTD
- S&P 500 +1.4% YTD
- Nasdaq Composite +3.1% YTD
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Economic Data
from Briefing.com| Date | ET | Release | For | Actual | Briefing.com Forecast | Briefing.com Consensus | Prior | Revised From |
|---|---|---|---|---|---|---|---|---|
| Jan 12 | 08:30 | Export Prices ex-ag. | Dec | 0.4% | NA | NA | -0.1% | 0.2% |
| Jan 12 | 08:30 | Import Prices ex-oil | Dec | -0.2% | NA | NA | -0.1% | -- |
| Jan 12 | 08:30 | Initial Claims | 01/07 | 247K | 245K | 255K | 237K | 235K |
| Jan 12 | 08:30 | Continuing Claims | 12/31 | 2087K | NA | NA | 2116K | 2112K |
| Jan 12 | 10:30 | Natural Gas Inventories | 01/07 | -151 bcf | NA | NA | -49 bcf | |
| Jan 12 | 14:00 | Treasury Budget | Dec | -$27.5B | NA | NA | -$14.4B |
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Technical Update
DOW JONES INDUSTRIAL AVERAGE19891 -63.28 (-0.32%)
Volume: 306.29 Mil above average of 205.20 Mil
Range: 19770.47 - 19929.29
S&P 500 INDEX
2270.44 -4.88 (-0.21%)
Volume: 1937.39 Mil above average of 1386.25 Mil
Range: 2254.25 - 2271.78
DOW JONES TRANSPORTATION AVERAGE
9144.47 -41.85 (-0.46%)
Volume: 64.25 Mil above average of 36.35 Mil
Range: 9046.52 - 9174
NASDAQ COMPOSITE
5547.490234 -16.16 (-0.29%)
Volume: 1801.75 Mil below average of 1902.83 Mil
Range: 5496.819824 - 5550.669922
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Market Internal
NYSE :Lower than average volume @ 787.3M vs 911.6M
Decliners outpaced Advancers(adv/dec): 1145M/1761M
New highs outpaced low(high/low): 72/15
NASDAQ :
Lower than average volume @ 1794.6M vs 1854.4M
Decliners outpaced Advancers(adv/dec): 959M/1883M
New highs outpaced low(high/low): 90/25
Decliners outpaced Advancers by 1.73 to 1 on lower volumes 2581.9 ( -6.66%) than avg 2766 (+0.16%)
VOLATILITY S&P500 (VIX) :
11.54 +0.28 (+2.49%)
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Bonds
from Briefing.comBonds
Market Moving Factors- St. Louis Fed President Bullard (non-FOMC voter): Fed can be patient on inflation; sees fiscal changes as having more impact in 2018; says markets are getting a little ahead of themselves; still forecasts one rate hike in 2017
- December Import prices ex-oil: Actual 0.2%, Prior -0.1%
- December Export prices ex-ag.: Actual 0.4%, Prior 0.2%
- Initial Jobless Claims for the week ending 1/7: Actual 247K, Briefing.com consensus 255K, Prior 237K (revised from 235K)
- Continuing Jobless Claims for the week ending 12/31: Actual 2087K, Prior 2112K
- Philadelphia Fed President Harker (FOMC voter): Economy is displaying considerable strength; 3 hikes in 2017 appropriate if economy stays on track; inflation will hit target in 2017/8
- Chicago Fed President Evans (FOMC voter): Low trend U.S. growth of 1.75% is bad for households and global economy; median FOMC forecast of 3 2017 rate hikes is "plausible"; economic recovery is "extremely mature"; recent average hourly earnings growth (0.4% m/m for December) is good news
- Natural Gas Inventories for the week ending 1/7: Actual -151 bcf, Expected -144 bcf, Prior -49 bcf
- Atlanta Fed President Lockhart (non-FOMC voter, retiring in February): If inflation overshoots Fed's target by too much, we could see demands to preemptively hike rates; rate hike path dependent on how economy responds to fiscal changes
- $12 bln 30-year Treasury reopening: High yield: 2.914% (when-issued 2.911%), Bid-to-cover: 2.32, Indirect bid: 66.7%, Direct bid: 4.5%
- Fed Chair Yellen (FOMC voter) (17:30 ET)
Treasuries Unwind Gains Late in Session After Weak Bond Auction
- U.S. Treasuries traded with gains for most of today's session but declined following the $12 bln 30-year Treasury auction and remain well off of their intraday highs. Initial jobless claims edged higher last week to 247K but that data series remains of little consequence to financial markets. Claims have remained near historic lows all year and only a sustained upturn is likely to concern investors. There was a flood of communication from Fed speakers today and Chicago Fed President Charles Evans remained pessimistic about the return of normalcy to the U.S. economy. He believes that trend GDP growth will remain around 1.75% for the foreseeable future without a very surprising jump in labor productivity. Philadelphia Fed President Patrick Harker said that he sees three 25-basis point rate hikes for the Fed this year as long as the economy remains on its current path. Harker also said that the Fed would have to think about halting the reinvestment of interest income from its portfolio once the Fed funds rate gets to 1.00%. The 30-year Treasury auction was met with tepid demand and tailed by 0.3 basis points. Friday's session features December's Retail Sales report. The S&P 500 is losing 0.27% at 2,269.1 and the U.S. Dollar Index is down 0.35% to 101.43
- Yield Check:
- 2-yr: -2 bps to 1.17%
- 5-yr: -2 bps to 1.86%
- 10-yr: -2 bps to 2.36%
- 30-yr: unch at 2.95%
- News:
- Initial jobless claims rose to 247K for the week ending January 7 from the prior week's 237K (revised up from 235K)
- Continuing jobless claims fell to 2087K from 2112K
- U.S. import prices excluding oil rose 0.2% m/m in December after dipping 0.1% in November
- U.S. export prices excluding agricultural goods jumped by 0.4% m/m in December, adding to 0.2% growth in November
- Chicago Fed President Charles Evans (FOMC voter) said this morning that trend real GDP growth in the U.S. is 1.75% and that this is bad news. He noted that temporary surprises could occur:
- "The U.S. economy could experience a burst of 4 percent growth for a year...[but] it is not possible to just birth a large cohort of 25-year-olds."
- Evans also said that only a surprise jump in labor productivity or the size of the labor force would change his gloomy outlook
- Philadelphia Fed President Patrick Harker said this morning that three 25-bp rate hikes in 2017 will be appropriate if the U.S. economy stays on its current path
- Harker said that he is waiting for more data before deciding when the next rate hike should come
- He said that when Fed funds rate hits 1.00%, the Fed "must" think about tapering reinvestments of its asset portfolio (currently, interest income from the portfolio gets reinvested into new securities)
- Harker went on to say that the U.S. economy is displaying considerable strength and that he expects inflation to hit the Fed's 2% target in 2017 or 2018
- Harker votes this year on the FOMC
- St. Louis Fed President James Bullard (non-FOMC voter) said this morning that he still sees only one 25-basis point rate hike in 2017 and that the Fed can afford to be patient on inflation
- He said that he sees fiscal policy having more of an effect in 2018 than this year
- $12 bln 30-year Treasury reopening
- High yield: High yield: 2.914% (when-issued 2.911%)
- Bid-to-cover: Bid-to-cover: 2.32
- Indirect bid: Indirect bid: 66.7%
- Direct bid: Direct bid: 4.5%
- Initial jobless claims rose to 247K for the week ending January 7 from the prior week's 237K (revised up from 235K)
- Commodities:
- WTI crude: +1.57% to $53.07/bbl.
- Gold: -0.02% to $1,196.3/troy oz.
- Copper: +2.32% to $2.67/lb.
- Currencies:
- EUR/USD: +0.27% to 1.0614
- USD/JPY: -0.33% to 114.71
- Data out Friday:
- December PPI and Core PPI (08:30 ET)
- December Retail Sales and Retail Sales ex-auto (08:30 ET)
- Philadelphia Fed President Harker (FOMC voter) (09:30 ET)
- November Business Inventories (10:00 ET)
- January Michigan Sentiment (10:00 ET)
- Fed Speaker:
- Philadelphia Fed President Harker (FOMC voter) (09:30 ET)
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Preview: Friday, 13 January 2017
Economic Data
| Date | ET | Release | For | Actual | Briefing.com Forecast | Briefing.com Consensus | Prior | Revised From |
|---|---|---|---|---|---|---|---|---|
| Jan 13 | 08:30 | PPI | Dec | 0.3% | 0.3% | 0.4% | ||
| Jan 13 | 08:30 | Core PPI | Dec | 0.1% | 0.1% | 0.4% | ||
| Jan 13 | 08:30 | Retail Sales | Dec | 0.8% | 0.7% | 0.1% | ||
| Jan 13 | 08:30 | Retail Sales ex-auto | Dec | 0.6% | 0.6% | 0.2% | ||
| Jan 13 | 10:00 | Business Inventories | Nov | 0.5% | 0.6% | -0.2% | ||
| Jan 13 | 10:00 | Mich Sentiment | Jan | 99.0 | 98.5 | 98.2 |
Commentary
Market internals are still very mixed, with no clear direction. Bond yields has gone down from yesterday. I expect the market to go sideways tomorrow, but if I really have to choose, then...
Direction for Friday, 13 January 2017: DOWN
Daily Accuracy: 4/7 57%
Direction for Friday, 13 January 2017: DOWN
Daily Accuracy: 4/7 57%
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