Market Summary
from Briefing.comIndustry Watch
Strong: Materials, Financials, Energy, Technology
Weak: Telecom Services, Health Care, Real Estate
- A risk-on tone has pushed cyclical sectors ahead of their countercyclical peers.
[BRIEFING.COM] Slow and steady was the theme on Tuesday as the major averages opened flat and advanced throughout the duration of the session to close solidly higher. The Nasdaq (+0.9%) picked up steam in the afternoon to finish a step ahead of the S&P 500 (+0.7%), while the small-cap Russell 2000 (+1.7%) surpassed them all.
Investors replaced yesterday's cautious tone with a risk-on attitude. The change of heart was most obvious in the Treasury market, which lost all of Monday's gain as the 10-yr yield swung seven basis points higher to 2.47% after losing the same amount the day before. The U.S. dollar faced a similar dynamic, with the U.S. Dollar Index (100.34, +0.39) adding 0.4% after succumbing to selling pressure on Monday.
Generally speaking, investors traded Treasuries for stocks, but they were more specifically after growth-sensitive equities as all six cyclical sectors outpaced the broader market. Materials led all sectors with a 2.5% gain, setting the pace early following DuPont's (DD 76.05, +3.27) positive earnings report. The stock jumped 4.5% after the company beat earnings estimates and announced that its merger with Dow Chemical (DOW 59.64, +2.50) is expected to close in the first half of 2017.
A ways off from the materials sector was the financial space (+1.2%). The sector ended in second place after many of its top components recouped some of the losses suffered at the start of the earnings season. Technology, the only sector with more influence than financials, finished the day 1.0% higher after strength in chipmakers sent the PHLX Semiconductor Index higher by 2.0%. In the broader tech space, Yahoo! (YHOO 43.90, +1.50) was the most notable advancer after reporting favorable earnings results following yesterday's close.
Following the pro-cyclical narrative, energy added 1.0% on the back of crude oil's 0.8% advance. The commodity finished near this week's flat line, at $53.15/bbl, as reports pointing to lower production from top exporters offset an uptick in U.S. drilling.
On the non-cyclical side of the market, telecom services (-2.7%) finished the day at the bottom of the leaderboard following the disappointing earnings report from Verizon (VZ 50.12, -2.29), which also weighed on AT&T (T 41.36, -0.64). The two stocks account for a significant share of the lightly-weighted sector.
Health care (-0.7%) also finished in the red, while consumer staples bucked the trend, advancing 0.8%. The space's solid showing stemmed from an upbeat response to Kimberly Clark's (KMB 121.79, +4.81) better than expected earnings report. Sector heavyweights like like Procter & Gamble (PG 87.86, +0.90) and Coca-Cola (KO 41.90, +0.47) outperformed, adding close to 1.0% apiece.
Today's economic data was limited to December Existing Home Sales:
Investors replaced yesterday's cautious tone with a risk-on attitude. The change of heart was most obvious in the Treasury market, which lost all of Monday's gain as the 10-yr yield swung seven basis points higher to 2.47% after losing the same amount the day before. The U.S. dollar faced a similar dynamic, with the U.S. Dollar Index (100.34, +0.39) adding 0.4% after succumbing to selling pressure on Monday.
Generally speaking, investors traded Treasuries for stocks, but they were more specifically after growth-sensitive equities as all six cyclical sectors outpaced the broader market. Materials led all sectors with a 2.5% gain, setting the pace early following DuPont's (DD 76.05, +3.27) positive earnings report. The stock jumped 4.5% after the company beat earnings estimates and announced that its merger with Dow Chemical (DOW 59.64, +2.50) is expected to close in the first half of 2017.
A ways off from the materials sector was the financial space (+1.2%). The sector ended in second place after many of its top components recouped some of the losses suffered at the start of the earnings season. Technology, the only sector with more influence than financials, finished the day 1.0% higher after strength in chipmakers sent the PHLX Semiconductor Index higher by 2.0%. In the broader tech space, Yahoo! (YHOO 43.90, +1.50) was the most notable advancer after reporting favorable earnings results following yesterday's close.
Following the pro-cyclical narrative, energy added 1.0% on the back of crude oil's 0.8% advance. The commodity finished near this week's flat line, at $53.15/bbl, as reports pointing to lower production from top exporters offset an uptick in U.S. drilling.
On the non-cyclical side of the market, telecom services (-2.7%) finished the day at the bottom of the leaderboard following the disappointing earnings report from Verizon (VZ 50.12, -2.29), which also weighed on AT&T (T 41.36, -0.64). The two stocks account for a significant share of the lightly-weighted sector.
Health care (-0.7%) also finished in the red, while consumer staples bucked the trend, advancing 0.8%. The space's solid showing stemmed from an upbeat response to Kimberly Clark's (KMB 121.79, +4.81) better than expected earnings report. Sector heavyweights like like Procter & Gamble (PG 87.86, +0.90) and Coca-Cola (KO 41.90, +0.47) outperformed, adding close to 1.0% apiece.
Today's economic data was limited to December Existing Home Sales:
- Existing home sales for December decreased 2.8% from November to an annualized rate of 5.49 million units while the Briefing.com consensus expected a reading of 5.55 million.
- The key takeaway from the report is that inventory constraints, rising prices, and higher mortgage rates remain a key obstacle to stronger sales activity.
- Russell 2000 +0.9% YTD
- Dow Jones Industrial Average +0.8% YTD
- S&P 500 +1.8% YTD
- Nasdaq Composite +4.1% 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 24 | 10:00 | Existing Home Sales | Dec | 5.49M | 5.58M | 5.55M | 5.65M | 5.61M |
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Technical Update
DOW JONES INDUSTRIAL AVERAGE19912.71 +112.86 (+0.57%)
Volume: 374.46 Mil above average of 237.33 Mil
Range: 19786.71 - 19949.24
S&P 500 INDEX
2280.07 +14.87 (+0.66%)
Volume: 2229.23 Mil above average of 1583.50 Mil
Range: 2266.68 - 2284.63
DOW JONES TRANSPORTATION AVERAGE
9288.59 +150.40 (+1.65%)
Volume: 64.48 Mil above average of 45.21 Mil
Range: 9147.7 - 9314.13
NASDAQ COMPOSITE
5600.959961 +48.02 (+0.86%)
Volume: 1805.37 Mil below average of 1852.12 Mil
Range: 5558.490234 - 5606.529785
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Market Internal
NYSE :Lower than average volume @ 865M vs 889.0M
Advancers outpaced Decliners(adv/dec): 2190M/768M
New highs outpaced low(high/low): 192/11
NASDAQ :
Lower than average volume @ 1793.1M vs 1821.5M
Advancers outpaced Decliners(adv/dec): 2050M/804M
New highs outpaced low(high/low): 166/33
Advancers outpaced Decliners by 2.70 to 1 on lower volumes 2658.1 ( -1.93%) than avg 2710 (-0.37%)
VOLATILITY S&P500 (VIX) :
11.07 -0.70 (-5.95%)
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Bonds
from Briefing.comMarket Moving Factors
- Markit U.S. Manufacturing PMI: Preliminary 55.1 (highest since March 2015), Prior 54.3
- December Existing Home Sales: Actual 5.49M, Briefing.com consensus 5.55M, Prior 5.61M
- $26 bln 2-year Treasury auction: High yield 1.210% (WI 1.204%), Bid-to-cover 2.68 , Indirect bid 48.8%, Direct bid: 9.3%
Treasuries Drop Sharply as Stocks Resume Upward Path
- Treasuries traded sharply lower as global equity investors pushed stocks higher and U.S. existing home sales reportedly missed estimates in December. The $26 bln 2-year Treasury note auction was met with solid demand but the strength of the stock-market rally and the weakening technical backdrop for Treasuries were forces too great to overcome. Markit's U.S. Manufacturing PMI moved to a one-year high for January, according to preliminary data. The S&P 500 now trades up 0.82% to 2,283.8 and the U.S. Dollar Index is up 0.19% to 100.35
- Yield Check:
- 2-yr: +4 bps to 1.19%
- 5-yr: +7 bps to 1.93%
- 10-yr: +7 bps to 2.47%
- 30-yr: +6 bps to 3.05%
- News:
- U.S. existing home sales fell to a seasonally adjusted annual rate of 5.49 million in December from a 5.61 million SAAR in November. The Briefing.com consensus was a 5.55 million SAAR
- The median selling price was up 4.0% y/y to $232,200
- First-time homebuyers accounted for 32% of the transactions
- Supply was down 6.3% y/y to 1.65 million at the end of November, the lowest level since the survey began in the early 1990s
- Markit's U.S. Manufacturing PMI rose to 55.1 for January from 54.3 in December, beating economists' expectations. New orders, output, and domestic demand were all strong
- The $26 bln 2-year Treasury auction was met with strong demand leading to a lower-than-average primary dealer takedown. Results:
- High yield: 1.210% (when-issued 1.204%)
- Bid-to-cover: 2.68
- Indirect bid: 48.8%
- Direct bid: 9.3%
- U.S. existing home sales fell to a seasonally adjusted annual rate of 5.49 million in December from a 5.61 million SAAR in November. The Briefing.com consensus was a 5.55 million SAAR
- Commodities:
- WTI crude: +0.76% to $53.15/bbl.
- Gold: -0.74% to $1,206.6/troy oz.
- Copper: +2.25% to $2.7070/lb.
- Currencies:
- EUR/USD: -0.33% to 1.0722
- USD/JPY: +0.87% to 113.88
- Data out Wednesday:
- MBA Mortgage Index for the week ending 1/121 (07:00 ET)
- November FHFA Housing Price Index (09:00 ET)
- Crude Inventories for the week ending 1/21 (10:30 ET)
- Treasury Auction:
- $34 bln 5-year Treasury auction (results at 13:00 ET)
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Preview: Wednesday, 25 January 2017
Economic Data
| Date | ET | Release | For | Actual | Briefing.com Forecast | Briefing.com Consensus | Prior | Revised From |
|---|---|---|---|---|---|---|---|---|
| Jan 25 | 07:00 | MBA Mortgage Applications Index | 01/21 | NA | NA | 0.8% | ||
| Jan 25 | 09:00 | FHFA Housing Price Index | Nov | NA | NA | 0.4% | ||
| Jan 25 | 10:30 | Crude Inventories | 01/21 | NA | NA | +2.300M |
Commentary
A straight up bullish day, but the volumes do not support the rally. The dip at the end of the day seems to suggest that the market might be over bought and there might be a pullback tomorrow.
Direction for Wednesday, 25 January 2017: Down
Daily Accuracy: 7/12 58%
Direction for Wednesday, 25 January 2017: Down
Daily Accuracy: 7/12 58%
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