Market Summary
from Briefing.comIndustry Watch
Strong: Technology, Health Care
Weak: Energy, Utilities, Real Estate, Telecom Services
- Apple's (AAPL) positive quarterly earnings report has failed to provide a boost to the broader market.
- The FOMC voted unanimously to maintain the fed funds target range at 0.50%-0.75%.
- ADP Employment Report and ISM Index surprise on upside, helping to bolster growth (and inflation) assumptions.
[BRIEFING.COM] Pockets of strength kept the S&P 500 near its flat line on Wednesday despite investors' lack of buying conviction. The S&P 500 finished flat while the Nasdaq (+0.5%) and Dow Jones industrial Average (+0.1%) ended modestly higher thanks to a huge move in shares of Apple (AAPL 129.92, +8.57, +7.1%) following its fiscal first quarter earnings report, which was replete with record revenues, earnings, and iPhone sales.
Wednesday's session opened with a lot of optimism as market participants reacted favorably to Apple's earnings results; however, investors soon lost conviction and the major indices soon relinquished most, if not all, of their opening gains.
The inability to maintain a bullish bias in the wake of Apple's report was regarded as a disappointing development that weighed on investor sentiment. At the same time, market participants were grappling with some inflation concerns and some rate-hike edginess in front of the FOMC policy decision at 2:00 p.m. ET after the ADP Employment Change and Manufacturing ISM Index reports for January checked in stronger than expected.
The aforementioned reports supported the notion that economic growth looks poised to accelerate in 2017 -- a view that in turn fueled a belief that higher inflation will accompany that growth. That outlook manifested itself in a weak Treasury market and a strengthening dollar, yet those respective moves were tempered following the release of the FOMC's policy directive.
The FOMC voted unanimously to maintain the current fed funds target range at 0.50%-0.75%, as expected. By and large, there was little change in the wording of the directive from the December meeting. There was some concern ahead of its release that it might have a hawkish-sounding angle to it, but the fact that it was little changed took a little of the rate-hike edge off the market.
That edge was rooted in the thinking that the directive's language might contain some signaling that the FOMC is leaning to a rate hike in March, which the fed funds futures market currently does not expect.
In any event, buying efforts in the dollar subsided and selling efforts in the Treasury market tapered off after the release of the directive. The 2-yr note yield, which is sensitive to changes in the fed funds rate, dropped from 1.25% to 1.21% after the FOMC decision. The benchmark 10-yr yield for its part closed relatively flat, up one basis point at 2.48%.
For sector standings, technology finished near the top of the day's leaderboard amid the spike in Apple's stock and a positive showing from chipmakers. The PHLX Semiconductor Index finished 1.7% higher following Advanced Micro Devices's (AMD 12.06, +1.69) upbeat earning report. The company closed Wednesday's session 16.3% higher.
The heavily-weighted financial sector (unch) also closed the day higher, along with materials (+0.6%), and health care (+0.7%). The health care space rallied on Anthem's (ANTM 160.79, +6.65) better than expected quarterly earnings report and an uptick from the biotechnology industry. The iShares Nasdaq Biotechnology ETF (IBB 280.42, +2.35) finished higher for the second day in a row, adding 0.9%.
At the bottom of the leaderboard was utilities (-1.7%), which suffered from the uptick in interest rates and the negative response to the earnings report from Dominion Resources (D 71.85, -4.43, -5.8%). The lightly-weighted telecom services (-0.7%) and real estate (-1.1%) sectors also finished lower, extending their losses for the week to 1.1% and 0.9%, respectively.
Today's economic data included the FOMC Rate Decision, January ISM Index, January ADP Employment Change, December Construction Spending, and the weekly MBA Mortgage Index:
Wednesday's session opened with a lot of optimism as market participants reacted favorably to Apple's earnings results; however, investors soon lost conviction and the major indices soon relinquished most, if not all, of their opening gains.
The inability to maintain a bullish bias in the wake of Apple's report was regarded as a disappointing development that weighed on investor sentiment. At the same time, market participants were grappling with some inflation concerns and some rate-hike edginess in front of the FOMC policy decision at 2:00 p.m. ET after the ADP Employment Change and Manufacturing ISM Index reports for January checked in stronger than expected.
The aforementioned reports supported the notion that economic growth looks poised to accelerate in 2017 -- a view that in turn fueled a belief that higher inflation will accompany that growth. That outlook manifested itself in a weak Treasury market and a strengthening dollar, yet those respective moves were tempered following the release of the FOMC's policy directive.
The FOMC voted unanimously to maintain the current fed funds target range at 0.50%-0.75%, as expected. By and large, there was little change in the wording of the directive from the December meeting. There was some concern ahead of its release that it might have a hawkish-sounding angle to it, but the fact that it was little changed took a little of the rate-hike edge off the market.
That edge was rooted in the thinking that the directive's language might contain some signaling that the FOMC is leaning to a rate hike in March, which the fed funds futures market currently does not expect.
In any event, buying efforts in the dollar subsided and selling efforts in the Treasury market tapered off after the release of the directive. The 2-yr note yield, which is sensitive to changes in the fed funds rate, dropped from 1.25% to 1.21% after the FOMC decision. The benchmark 10-yr yield for its part closed relatively flat, up one basis point at 2.48%.
For sector standings, technology finished near the top of the day's leaderboard amid the spike in Apple's stock and a positive showing from chipmakers. The PHLX Semiconductor Index finished 1.7% higher following Advanced Micro Devices's (AMD 12.06, +1.69) upbeat earning report. The company closed Wednesday's session 16.3% higher.
The heavily-weighted financial sector (unch) also closed the day higher, along with materials (+0.6%), and health care (+0.7%). The health care space rallied on Anthem's (ANTM 160.79, +6.65) better than expected quarterly earnings report and an uptick from the biotechnology industry. The iShares Nasdaq Biotechnology ETF (IBB 280.42, +2.35) finished higher for the second day in a row, adding 0.9%.
At the bottom of the leaderboard was utilities (-1.7%), which suffered from the uptick in interest rates and the negative response to the earnings report from Dominion Resources (D 71.85, -4.43, -5.8%). The lightly-weighted telecom services (-0.7%) and real estate (-1.1%) sectors also finished lower, extending their losses for the week to 1.1% and 0.9%, respectively.
Today's economic data included the FOMC Rate Decision, January ISM Index, January ADP Employment Change, December Construction Spending, and the weekly MBA Mortgage Index:
- The FOMC voted unanimously to maintain the fed funds target range at 0.50%-0.75%.
- The ISM Index for January rose to 56.0 from a revised reading of 54.5 in December (from 54.7) while the Briefing.com consensus expected an uptick to 55.0.
- The key takeaway from the report is that helps validates the market's upbeat assumptions about economic growth accelerating in 2017.
- The ADP National Employment Report showed an increase of 246,000 in January (Briefing.com consensus 165,000) while the December reading was revised lower to 151,000 from 153,000.
- The Construction Spending report for December showed a 0.2% decrease while the Briefing.com consensus expected an increase of 0.2%.
- The key takeaway from the report is that private construction spending was up for the third straight month. The value of this report for the market, though, is negligible since it is a dated report, the output of which was already imputed in the fourth quarter GDP report last week.
- The weekly MBA Mortgage Index declined 3.2% to follow last week's 4.0% increase.
- Russell 2000 +0.2% YTD
- Dow Jones Industrial Average +0.7% YTD
- S&P 500 1.8% YTD
- Nasdaq Composite 4.8% YTD
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Economic Data
from Briefing.com| Date | ET | Release | For | Actual | Briefing.com Forecast | Briefing.com Consensus | Prior | Revised From |
|---|---|---|---|---|---|---|---|---|
| Feb 01 | 07:00 | MBA Mortgage Index | 01/28 | -3.2% | NA | NA | 4.0% | |
| Feb 01 | 08:15 | ADP Employment Change | Jan | 246K | 180K | 165K | 151K | 153K |
| Feb 01 | 10:00 | ISM Index | Jan | 56.0 | 55.2 | 55.0 | 54.5 | 54.7 |
| Feb 01 | 10:00 | Construction Spending | Dec | -0.2% | 0.4% | 0.2% | 0.9% | -- |
| Feb 01 | 10:30 | Crude Inventories | 01/28 | +6.500M | NA | NA | +2.840M | |
| Feb 01 | 14:00 | FOMC Rate Decision | Feb | 0.625% | 0.625% | 0.625% | 0.625% | |
| Feb 01 | 14:00 | Auto Sales | Jan | 4.67M | NA | NA | 5.30M | |
| Feb 01 | 14:00 | Truck Sales | Jan | 9.22M | NA | NA | 9.25M |
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Technical Update
DOW JONES INDUSTRIAL AVERAGE19890.94 +26.85 (+0.14%)
Volume: 426.67 Mil above average of 265.19 Mil
Range: 19845.99 - 19967.73
S&P 500 INDEX
2279.55 +0.68 (+0.03%)
Volume: 2478.98 Mil above average of 1761.71 Mil
Range: 2272.44 - 2289.14
DOW JONES TRANSPORTATION AVERAGE
9171.39 -20.59 (-0.22%)
Volume: 79.40 Mil above average of 52.85 Mil
Range: 9096.19 - 9236.71
NASDAQ COMPOSITE
5642.649902 +27.86 (+0.50%)
Volume: 2223.56 Mil above average of 1803.30 Mil
Range: 5621.029785 - 5662.109863
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Market Internal
NYSE :Higher than average volume @ 902.9M vs 854.8M
Decliners outpaced Advancers(adv/dec): 1389M/1511M
New highs outpaced low(high/low): 141/10
NASDAQ :
Higher than average volume @ 2220.4M vs 1760.4M
Advancers outpaced Decliners(adv/dec): 1431M/1424M
New highs outpaced low(high/low): 139/32
Decliners outpaced Advancers by 1.04 to 1 on higher volumes 3123.3 (+19.43%) than avg 2615 (-0.30%)
VOLATILITY S&P500 (VIX) :
11.81 -0.18 (-1.50%)
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Bonds
from Briefing.comMarket Moving Factors
- MBA Mortgage Index for the week ending 1/28: Actual -3.2% w/w, Prior 4.0%
- 30-year fixed mortgage rate: Actual 4.39%, Prior 4.35%
- January ADP Employment Change: Actual 246K, Briefing.com consensus 165K, Prior 151K (revised from 153K)
- January ISM Manufacturing Index: Actual 56.0, Briefing.com consensus 55.0, Prior 54.7
- December Construction Spending: Actual -0.2%, Briefing.com consensus 0.2%, Prior 0.9%
- Crude Inventories for the week ending 1/28: Actual 6.5 mln bbl., Consensus +3.289 mln bbl.
- February FOMC Rate Decision: No change at 0.50-0.75%, unanimous; notes improving sentiment of businesses and consumers
- January Auto and Truck Sales: 17.61 mln annualized, down from 18.43 in December
Treasuries Recover Most of Morning's Losses After FOMC Decision
- The U.S. Treasury yield curve flattened sharply this morning as yields in the front end and belly of the curve moved higher following very positive U.S. economic data reports. ADP estimated that the U.S. economy added 246K private-sector jobs in January and ISM reported that manufacturing sentiment remains very strong. That move in Treasuries was unwound in the afternoon, however, after the FOMC unanimously decided to keep monetary policy on hold and released a statement that provided no fodder for the Treasury bears. The S&P 500 began the morning on a very strong note but bled away the gains and now trades unchanged at 2,278.8. The U.S. Dollar Index is up just 0.16% to 99.67 after rallying as high as 100.04
- Yield Check:
- 2-yr: unch at 1.21%
- 5-yr: +1 bp to 1.93%
- 10-yr: +1 bp to 2.48%
- 30-yr: +1 bp to 3.08%
- News:
- ADP estimated that the U.S. economy added 246K jobs last month versus the Briefing.com consensus for 165K. December's change was revised down to 151K from 153K
- Goods-producing: 46K
- Service-providing: 201K
- "The U.S. labor market is hitting on all cylinders and we saw small and midsized businesses perform exceptionally well," said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute.
- The ISM Manufacturing Index jumped to a two-year high of 56.0 for January from 54.7 for December, exceeding the Briefing.com consensus of 55.0
- New orders ticked up to 60.4 from 60.3
- Production rose to 61.4 from 59.4
- The employment index rose to 56.1 from 52.8
- Prices paid jumped to 69.0 from 65.5
- U.S. construction spending fell 0.2% m/m in December, missing the Briefing.com consensus for growth 0.2%. November's change was +0.9%
- The key takeaway from the report is that private construction spending was up for the third straight month. That said, the headline number was already imputed in the fourth quarter GDP report last week so it shouldn't have surprised investors
- On a year-over-year basis, total construction spending is up 4.2%, with total private construction spending up 6.3% and total public construction spending down 1.8%
- The FOMC decided unanimously to keep rates on hold today. Fed funds futures had showed only a negligible chance for a move before the announcement
- The accompanying statement showed no big changes from the December meeting's
- ADP estimated that the U.S. economy added 246K jobs last month versus the Briefing.com consensus for 165K. December's change was revised down to 151K from 153K
- Commodities:
- WTI crude: +1.31% to $53.50/bbl.
- Gold: -0.03% to $1,211/troy oz.
- Copper: -0.48% to $2.714/lb.
- Currencies:
- EUR/USD: -0.21% to 1.0774
- USD/JPY: +0.13% to 113.09
- Data out Thursday:
- January Challenger Job Cuts (07:30 ET)
- Initial Jobless Claims for the week ending 1/28 and Continuing Jobless Claims for the week ending 1/21 (08:30 ET)
- Q4 Productivity -- Preliminary and Unit Labor Costs -- Preliminary (08:30 ET)
- Natural Gas Inventories for the week ending 1/21 (10:30 ET)
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Preview: Thursday, 2 February 2017
Economic Data
| Date | ET | Release | For | Actual | Briefing.com Forecast | Briefing.com Consensus | Prior | Revised From |
|---|---|---|---|---|---|---|---|---|
| Feb 02 | 07:30 | Challenger Job Cuts | Jan | NA | NA | 42.4% | ||
| Feb 02 | 08:30 | Initial Claims | 01/28 | 248K | 250K | 259K | ||
| Feb 02 | 08:30 | Continuing Claims | 01/28 | NA | NA | 2100K | ||
| Feb 02 | 08:30 | Productivity-Prel | Q4 | 1.4% | 1.0% | 3.1% | ||
| Feb 02 | 08:30 | Unit Labor Costs | Q4 | 2.3% | 1.9% | 0.7% | ||
| Feb 02 | 10:30 | Natural Gas Inventories | 01/28 | NA | NA | -119 bcf |
Commentary
Decliners match Advancers
Direction for Thursday, 2 February 2017: Flat?
Daily Accuracy: 12/19 63%
Direction for Thursday, 2 February 2017: Flat?
Daily Accuracy: 12/19 63%
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