Market Summary
from Briefing.comIndustry Watch
Strong: Financials, Industrials, Materials, Real Estate
Weak: Consumer Discretionary, Energy, Telecom Services, Health Care
- The financial sector exhibits relative strength
- Crude oil is retreating on a strengthening U.S. dollar and expectations that U.S. producers will boost output.
[BRIEFING.COM] Wednesday's trading session closed in the neighborhood of where it opened as investors generally elected to watch rather than act amid a batch of economic data and a slew of corporate news. The major averages finished mixed with the S&P 500 and the Nasdaq adding 0.2% and 0.3%, respectively, while the Dow fell 0.1%. A late burst of buying interest led by the financial sector, however, left each of the major averages at, or near, their best levels of the day when the closing bell rang.
Frankly, there wasn't a lot of trading excitement throughout the session. The major indices all held to tight trading ranges, reined in by a lack of any meaningful sector leadership, a stark jump in long-term rates, and an awareness that Fed Chair Yellen was going to be speaking at 3:00 p.m. ET on the goals of monetary policy.
Ms. Yellen's speech, as it turned out, was mostly an academic exercise. She didn't provide any "new" information for the market per se, yet her reminder that interest rates are apt to creep higher provided some verbal reassurance that facilitated the positive finish for today's market.
Her speech followed a mixed batch of economic data this morning, which featured a stronger than expected Industrial Production report for December, a weaker than expected NAHB Housing Market Index for January, and the highest year-over-year increase in the Consumer Price Index (+2.1%) since June 2014.
In aggregate, Ms. Yellen's remarks and today's data didn't alter the view that the Fed will continue to abide by its projection for three rate hikes in 2017.
The financial sector (+0.8%) had a slow-developing rally today, but eventually got it in gear toward the end of the session and finished at its highs for the day. A lackluster response to better-than-expected earnings news from Goldman Sachs (GS 234.29, -1.45), Citigroup (C 57.39, -0.99), and U.S. Bancorp (USB 50.56, +0.25) kept a lid on things, yet there was underlying strength in other components that proved to be an effective offset and a driver of today's gains.
Thus far, the financial sector has been fairly slow to respond to better-than-expected earnings reports as it continues to digest a huge move following the election, which produced a 20.5% gain for the sector in the fourth quarter.
In other corporate news, Target (TGT 66.85, -4.09) lowered its Q4 guidance following disappointing holiday sales. The news had a ripple effect on other retailers, which led to a 0.3% decline in the SPDR S&P Retail ETF (XRT 44.25, -0.11, -0.39). Naturally, the consumer discretionary sector (-0.2%) felt the pressure and closed near the bottom of today's leaderboard.
The energy sector (-0.3%) also posted a lackluster performance, falling in tandem with crude oil. The commodity's downtick was forced by some renewed strength in the dollar and expectations that U.S. producers will boost output in response to the higher prices. The U.S. Dollar Index (101.25, +0.92) finished 0.9% higher while gold closed down 0.1% at $1,212.10/ozt.
The top-weighted technology sector outperformed the broader market with a 0.3% increase. The sector was driven primarily by a bullish performance from chipmakers, which rebounded from Tuesday's selling and drove a 1.4% gain in the PHLX Semiconductor Index.
The U.S. Treasury market came under selling pressure in the overnight trade -- pressure which never relented much during the regular session. Securities across the curve were on the defensive, with the belly and back end of the curve getting hit the hardest. The yield on the 5-yr note jumped 10 basis points to 2.23%. The yield on the 10-yr note, meanwhile, also increased 10 basis points to 2.42%
Reviewing today's economic data:
Frankly, there wasn't a lot of trading excitement throughout the session. The major indices all held to tight trading ranges, reined in by a lack of any meaningful sector leadership, a stark jump in long-term rates, and an awareness that Fed Chair Yellen was going to be speaking at 3:00 p.m. ET on the goals of monetary policy.
Ms. Yellen's speech, as it turned out, was mostly an academic exercise. She didn't provide any "new" information for the market per se, yet her reminder that interest rates are apt to creep higher provided some verbal reassurance that facilitated the positive finish for today's market.
Her speech followed a mixed batch of economic data this morning, which featured a stronger than expected Industrial Production report for December, a weaker than expected NAHB Housing Market Index for January, and the highest year-over-year increase in the Consumer Price Index (+2.1%) since June 2014.
In aggregate, Ms. Yellen's remarks and today's data didn't alter the view that the Fed will continue to abide by its projection for three rate hikes in 2017.
The financial sector (+0.8%) had a slow-developing rally today, but eventually got it in gear toward the end of the session and finished at its highs for the day. A lackluster response to better-than-expected earnings news from Goldman Sachs (GS 234.29, -1.45), Citigroup (C 57.39, -0.99), and U.S. Bancorp (USB 50.56, +0.25) kept a lid on things, yet there was underlying strength in other components that proved to be an effective offset and a driver of today's gains.
Thus far, the financial sector has been fairly slow to respond to better-than-expected earnings reports as it continues to digest a huge move following the election, which produced a 20.5% gain for the sector in the fourth quarter.
In other corporate news, Target (TGT 66.85, -4.09) lowered its Q4 guidance following disappointing holiday sales. The news had a ripple effect on other retailers, which led to a 0.3% decline in the SPDR S&P Retail ETF (XRT 44.25, -0.11, -0.39). Naturally, the consumer discretionary sector (-0.2%) felt the pressure and closed near the bottom of today's leaderboard.
The energy sector (-0.3%) also posted a lackluster performance, falling in tandem with crude oil. The commodity's downtick was forced by some renewed strength in the dollar and expectations that U.S. producers will boost output in response to the higher prices. The U.S. Dollar Index (101.25, +0.92) finished 0.9% higher while gold closed down 0.1% at $1,212.10/ozt.
The top-weighted technology sector outperformed the broader market with a 0.3% increase. The sector was driven primarily by a bullish performance from chipmakers, which rebounded from Tuesday's selling and drove a 1.4% gain in the PHLX Semiconductor Index.
The U.S. Treasury market came under selling pressure in the overnight trade -- pressure which never relented much during the regular session. Securities across the curve were on the defensive, with the belly and back end of the curve getting hit the hardest. The yield on the 5-yr note jumped 10 basis points to 2.23%. The yield on the 10-yr note, meanwhile, also increased 10 basis points to 2.42%
Reviewing today's economic data:
- Total CPI rose 0.3% (Briefing.com consensus +0.3%) in December while core CPI, which excludes food and energy, increased 0.2% (Briefing.com consensus +0.2%). On a year-over-year basis, total CPI is up 2.1% and core CPI has increased 2.2%.
- The key takeaway from this report is that the consumer inflation rate is steadily rising, which is supporting the Federal Reserve's tightening bias at this juncture.
- December Industrial Production increased 0.8% (Briefing.com consensus +0.6%) while Capacity Utilization rose to 75.5% (Briefing.com consensus 75.4%).
- The key takeaway from the report is that overall industrial production remains soft, having slipped at an annual rate of 0.6% in the fourth quarter and increasing just 0.5% year-over-year.
- The NAHB Housing Market Index for January fell to 67 from a revised 69 in December (from 70).
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Economic Data
from Briefing.com| Date | ET | Release | For | Actual | Briefing.com Forecast | Briefing.com Consensus | Prior | Revised From |
|---|---|---|---|---|---|---|---|---|
| Jan 18 | 07:00 | MBA Mortgage Index | 01/14 | 0.8% | NA | NA | 5.8% | -- |
| Jan 18 | 08:30 | CPI | Dec | 0.3% | 0.3% | 0.3% | 0.2% | -- |
| Jan 18 | 08:30 | Core CPI | Dec | 0.2% | 0.2% | 0.2% | 0.2% | -- |
| Jan 18 | 09:15 | Industrial Production | Dec | 0.8% | 0.8% | 0.6% | -0.7% | -0.4% |
| Jan 18 | 09:15 | Capacity Utilization | Dec | 75.5% | 75.6% | 75.4% | 74.9% | 75.0% |
| Jan 18 | 10:00 | NAHB Housing Market Index | Jan | 67 | NA | NA | 69 | 70 |
| Jan 18 | 14:00 | Fed's Beige Book | Jan | NA | NA | NA | ||
| Jan 18 | 16:00 | Net Long-Term TIC Flows | Jan | $30.8B | NA | NA | $9.3B | $9.4B |
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Technical Update
DOW JONES INDUSTRIAL AVERAGE19804.72 -22.05 (-0.11%)
Volume: 279.76 Mil above average of 217.44 Mil
Range: 19739 - 19828.2
S&P 500 INDEX
2271.89 +4.00 (+0.18%)
Volume: 1998.64 Mil above average of 1464.31 Mil
Range: 2263.35 - 2272.01
DOW JONES TRANSPORTATION AVERAGE
9140.87 +41.29 (+0.45%)
Volume: 71.86 Mil above average of 38.85 Mil
Range: 9034.12 - 9147.54
NASDAQ COMPOSITE
5555.649902 +16.92 (+0.31%)
Volume: 1683.32 Mil below average of 1881.89 Mil
Range: 5534.77002 - 5555.97998
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Market Internal
NYSE :Lower than average volume @ 759.1M vs 900.8M
Advancers outpaced Decliners(adv/dec): 1569M/1354M
New highs outpaced low(high/low): 76/12
NASDAQ :
Lower than average volume @ 1671.4M vs 1846.8M
Advancers outpaced Decliners(adv/dec): 1603M/1247M
New highs outpaced low(high/low): 81/30
Advancers outpaced Decliners by 1.22 to 1 on lower volumes 2430.5 ( -11.54%) than avg 2748 (-0.08%)
VOLATILITY S&P500 (VIX) :
12.48 +0.61 (+5.14%)
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Bonds
from Briefing.comBonds
Market Moving Factors- MBA Mortgage Index for the week ending 1/14: Actual 0.8% w/w, Prior 5.8%
- Average 30-year fixed rate: 4.27%, Prior 4.32%
- December CPI: Actual 0.3%, Briefing.com consensus 0.3%, Prior 0.2%
- Core CPI: Actual 0.2%, Briefing.com consensus 0.2%, Prior 0.2%
- December Industrial Production: Actual 0.8%, Briefing.com consensus 0.6%, Prior -0.7% (revised from -0.4%)
- Capacity Utilization: Actual 75.5%, Briefing.com consensus 75.4%, Prior 74.9% (revised from 75.0%)
- Dallas Fed President Kaplan (FOMC voter): sees upside risk to energy prices in next 3-5 years; sees U.S. 2017 GDP growth of around 2.3%, not including policy changes from Washington; in a pretty tight labor market, corporate tax reform and infrastructure projects could increase productivity growth; global deflationary forces still powerful and strong USD will be a headwind for U.S. inflation
- January NAHB Housing Market Index: Actual 67, Prior 69 (revised from 70)
- Minneapolis Fed President Kashkari (FOMC voter): No comments on monpol or economic outlook
- January Fed Beige Book: Fed sees wages gaining modestly in most areas; industries optimistic on 2017 growth outlook
- Fed Chair Yellen (FOMC voter): wage growth only recently picked up and remains fairly low; waiting for too long to hike rates could force sharper path down the road; economy near maximum employment
- November Net Long-Term TIC Flows (16:00 ET)
Treasuries Extend Losses on Yellen Remarks
- U.S. Treasuries are nursing sharp losses today although CPI and industrial production data for December came out mostly in line with estimates. The undeniable fact is that the relief rally in Treasuries that began in mid-December lowered yields from the 5 to 30-year maturities by roughly 30 basis points and some of the faster money longs took money off of the table over the past four days. Fed Chair Yellen spoke this afternoon and said that she and most of her colleagues on the FOMC expected "a few" rate hikes per year through the end of 2019. If you take Yellen literally, "a few" is probably more than "a couple" and so likely three or more. Three hikes per year (of 25 basis points each) through the end of 2019 would put the Fed funds rate at 2.875% by that time. While there are many developments that could derail that forecast, the five year note yield is up by 10 basis points and that is steepening the yield curve sharply from the 1 to the 5-year maturity. We noted in our 10:59 ET comment that the 5-year yield's 50-day moving average was touched on Tuesday and traders appear to have taken that support level at face value. U.S. industrial production surprised on the upside in December but mostly due to higher utility output on cooler weather. The downward revision to November's change was also of greater magnitude than December's beat, so on balance the report disappointed for the whole fourth quarter. The S&P 500 is now up 0.04% to 2,268.7 and the U.S. Dollar Index is up 0.90% to 101.23
- Yield Check:
- 2-yr: +6 bps to 1.21%
- 5-yr: +10 bps to 1.92%
- 10-yr: +9 bps to 2.41%
- 30-yr: +6 bps to 3.00%
- News:
- The U.S. consumer price index rose 0.3% m/m in December (2.1% y/y), matching the Briefing.com consensus. November's growth was 0.2% m/m (1.7% y/y)
- The core CPI was up 0.2% m/m in December (2.2% y/y), also matching the Briefing.com consensus. November's core CPI growth was 0.2% (2.1% y/y)
- The growth was driven by housing and fuel costs
- U.S. industrial production grew by 0.8% m/m in December, beating the Briefing.com consensus for growth of 0.6%. November saw a decline of 0.7% (revised from -0.4%)
- Manufacturing production, which strips out utilities and mining output from industrial production, was up just 0.2% m/m after falling 0.1% in November
- Capacity utilization rose to 75.5% from a downwardly revised 74.9% in November. The Briefing.com consensus was 75.4%
- Dallas Fed President Robert Kaplan, who votes on the FOMC this year, said today that he sees U.S. GDP growth of ~2.3% in 2017. That estimate does not factor in potential fiscal and regulatory changes in Washington. Kaplan went on to say that the strong U.S. dollar will be a headwind for U.S. inflation
- The NAHB Housing Market Index fell to 67 for January from a downwardly revised 69 in December
- The Fed's Beige Book of economic activity in the Fed's 12 districts since the end of November said that the economy expanded modestly during that period
- District reports cited widespread difficulties in finding workers for skilled positions; several also noted problems recruiting for less-skilled jobs
- Most districts said wage pressures had increased
- Fed Chair Janet Yellen said today that the U.S. economy is "near maximum employment and inflation is moving toward our goal." She went on to say that rate hikes would be gradual and data-dependent
- Yellen added that "I and most of my colleagues” were thinking in December that hiking rates “a few times a year” would make sense through the end of 2019
- Her comments sent the Treasury complex to session lows
- The U.S. consumer price index rose 0.3% m/m in December (2.1% y/y), matching the Briefing.com consensus. November's growth was 0.2% m/m (1.7% y/y)
- Commodities:
- WTI crude: -2.27% to $51.29/bbl.
- Gold: -0.73% to $1,204.1/troy oz.
- Copper: -0.44% to 2.6135/lb.
- Currencies:
- EUR/USD: -0.60% to 1.0640
- USD/JPY: +1.30% to 114.25
- Data out Thursday:
- Initial Jobless Claims for the week ending 1/14 and Continuing Jobless Claims for the week ending 1/7 (08:30 ET)
- December Housing Starts and Building Permits (08:30 ET)
- January Philadelphia Fed (08:30 ET)
- Natural Gas Inventories for the week ending 1/14 (10:30 ET)
- Crude Inventories for the week ending 1/14 (11:00 ET)
- TIPS Auction:
- $13 bln 10-year TIPS auction (results at 13:00 ET)
- Fed Speakers:
- San Francisco Fed President Williams (non-FOMC voter) (10:00 ET)
- Fed Chair Yellen (FOMC voter) (20:00 ET)
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Preview: Thursday, 19 January 2017
Economic Data
| Date | ET | Release | For | Actual | Briefing.com Forecast | Briefing.com Consensus | Prior | Revised From |
|---|---|---|---|---|---|---|---|---|
| Jan 19 | 08:30 | Initial Claims | 01/14 | 246K | 252K | 247K | ||
| Jan 19 | 08:30 | Continuing Claims | 01/07 | NA | NA | 2087K | ||
| Jan 19 | 08:30 | Housing Starts | Dec | 1200K | 1193K | 1090K | ||
| Jan 19 | 08:30 | Building Permits | Dec | 1230K | 1217K | 1201K | ||
| Jan 19 | 08:30 | Philadelphia Fed | Jan | 16.0 | 15.3 | 21.5 | ||
| Jan 19 | 10:30 | Natural Gas Inventories | 01/14 | NA | NA | -151 bcf | ||
| Jan 19 | 11:00 | Crude Inventories | 01/13 | NA | NA | +4.100M |
Commentary
Divergent internals. The uptick in Vix indicates increased fear in the market.
Direction for Thursday, 19 January 2017: Down
Daily Accuracy: 5/9 56%
Direction for Thursday, 19 January 2017: Down
Daily Accuracy: 5/9 56%
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