The Market at 04:20PM ET
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Moving the Market
Risk tolerance improves amid rebound in oil
A rebound in financials
Strong: Financials, Materials, Energy, Industrials
Weak: Utilities, Health Care, Technology
[BRIEFING.COM] The stock market ended its week in upbeat fashion, with the major indices recouping large portions of their weekly losses. As a result, the Dow Jones Industrial Average cut its loss to 231 points (-1.4%) from last Friday's close while the S&P surrendered 15 points (-0.8%) over that same period. Today's trade saw a higher tolerance for risk investments as the beleaguered financial sector (+4.0%) and oil were able to lead the market higher while a positive reading from January's Retail Sales report boosted investor sentiment.
Yesterday's chatter regarding OPEC members being ready to cooperate on production cuts gained traction overnight as oil lifted in overseas trade. The energy component was able to maintain this momentum in our session and managed a 12.2% pop to close at $29.33/bbl. Short covering likely provided additional fuel to this rally, but despite this impressive run, WTI crude ended its week down 5.0%.
European indices were able to get a reprieve from recent sharp selling action after better than feared earnings results from Commerzbank lifted their financial sector. This positive sentiment was echoed by Deutsche Bank (DB 17.38, +1.87), which announced that it will buy back more than $5 billion worth of its senior debt.
The U.S. financial sector was able to build off this momentum, cutting this week's loss from 6.4% to 2.4%. The rebound was helped by news from JPMorgan Chase (JPM 57.49, +4.42) indicating that CEO Jamie Dimon purchased 500,000 more shares of JPM for roughly $26 million. Other money center banks also rallied in the financial sector with JPMorgan Chase ending the week virtually flat (57.75).
Commodity-sensitive materials (+2.9%) and energy sectors (2.6%) were able to follow financials on the leaderboard with energy being the main beneficiary from the upswing in oil. Independent oil and gas companies benefited the most while Dow component Chevron (CVX 85.43, +2.44) finished in-line with the energy sector.
The heavily-weighted technology (+1.4%) and health care spaces (+1.4%) followed telecom services (+1.2%) and utilities (-0.3%) on the bottom of the leaderboard as large-cap constituents underperformed. To that point, Facebook (FB 102.01, +0.10) and Alphabet (GOOGL 706.89, +0.53) ended the session near their flat lines while Johnson & Johnson (JNJ 101.82, +0.12) and Merck & Co. (MRK 49.03, +0.18) also finished little changed.
Today's rally in equities took a toll on safe-havens with gold and Treasuries retreating. Gold surrendered 0.6% to end its pit session at $1,239.40/ozt while selling in the 10-yr note sent its yield higher by nine basis points to 1.75%.
The positive retail sales report contributed to a rally in the dollar, which advanced against the yen and euro. The dollar/yen pair ended at 113.25 (+0.9%) while the euro slid 0.5% against the dollar to 1.1256.
Today's participation was heavier than the recent average with 1.12 billion shares changing hands ahead of the extended weekend.
Today's economic data included the Retail Sales report for January, the December Business Inventory Report, and the preliminary reading of the Michigan Sentiment Index for February:
The market will be closed on Monday in observance of Presidents Day. Tuesday's economic data includes the 8:30 ET release of the Empire Manufacturing Report (Briefing.com consensus -9.9) for February. Meanwhile, the NAHB Housing Market Index for February (Briefing.com consensus 60) and December's Net Long-Term TIC Flows will cross the wires at 10:00 ET and 16:00 ET, respectively.
Week in Review: Pressure Persists
The past week featured another weak showing from the equity market with the S&P 500 surrendering 0.8%. The benchmark index was down 2.3% going into Friday, but a broad-based 2.0% surge helped the S&P 500 narrow its weekly loss.
The S&P 500 ended the week ahead of the Dow Jones Industrial Average, which fell 1.4%, while equity markets across the world had a similar showing to U.S. stocks. Japan's Nikkei faced particularly heavy selling that sent the index lower by 11.1% in just four sessions. That weakness coincided with noteworthy yen strength as the Japanese currency extended its aggressive advance that began the day after the Bank of Japan's decision to implement negative rates. The dollar/yen pair fell more than 350 pips to 113.25 from 116.85 after being down 600 pips on Thursday.
The unwavering yen strength indicated the presence of caution in the foreign exchange market while gold and bonds also advanced, benefitting from the defensive sentiment across financial markets. Gold futures rocketed into the $1,250 area, ending the week higher by 7.1% at $1239.40/ozt. For its part, the 10-yr note hit a three-year high on Thursday, which lowered its yield to 1.57%. Friday selling in the 10-yr note ran the benchmark yield to 1.75%, representing a ten basis point decline for the week.
With safe-haven assets on the rise, crude oil struggled mightily, setting a fresh 2016 low at $26.05/bbl on Thursday, but a Friday rebound lifted the energy component to $29.44/bbl, representing a 4.7% decline for the week.
For the most part, the selling that defined the week's action was tied to persistent growth concerns. The financial sector (-2.4%) was among the weakest performers, ending only ahead of utilities (-2.5%). The financial sector widened its 2016 loss to 14.4% partly due to an ongoing adjustment in the market's rate hike expectations. Furthermore, growing worries about the exposure of major financials to the battered commodity sector have also taken a toll on the economically-sensitive group. Deutsche Bank was in the spotlight last week as the stock set a 30-year low with investors showing concern over the bank's derivative exposure.
Similar to financials, eight of the remaining nine sectors registered losses for the week while the consumer staples sector ended the week higher by 0.8%.
[BRIEFING.COM] The Dow Jones Industrial Average (+1.8%) currently leads the S&P 500 (+1.7%) as the indices trade a respective six points and two points from fresh session highs.
The tech-heavy Nasdaq (+1.5%) has underperformed the other indices as big tech names restrain the gains in the larger composite. To that point, Apple (AAPL 93.88, +0.18), Alphabet (GOOGL 706.36, +0.00), and Facebook (FB 102.11, +0.20) each show gains of no more than 0.2%. Meanwhile, consumer discretionary giant Amazon (AMZN 506.12, +2.30) also weighs on the Nasdaq.
On the commodities front, WTI crude ended its pit session higher by 12.2% at $29.33/bbl. This represents a week to date drop of 5.1% and a 13.0% fall since the end of January.
[BRIEFING.COM] The stock market hovers near its session high with the S&P 500 (+1.6%) trading behind the Dow Jones Industrial Average (+1.7%).
The consumer staples sector (+1.1%) continues to underperform the broader market. To be fair though, today's overall action is a rebound from short-term oversold conditions and the countercyclical group has shown relative strength during that period. The sector has added 0.5% this week. The next best performing sector is health care with a week-to-date decline of 0.6%. The financial sector is the weakest performer of the week, up 3.5% today, but down 2.8% since last Friday.
Elsewhere, consumer staples component Dr. Pepper Snapple (DPS 92.05, +2.46) shows relative strength after increasing its quarterly dividend to $0.53 a share from $0.48 and authorizing a $1 billion common share buyback.
The yield on the 10-yr note is hovering at a session high, up nine basis points at 1.75%.
[BRIEFING.COM] The major averages have floated higher since our last update with the S&P 500 (+1.3%) currently six points below its session high.
Oil has pulled back from its session high ($29.61/bbl), but remains higher by 10.8% at $29.05/bbl.
The industrials sector (+1.4%) continues to trade roughly in-line with the broader market even though large-cap constituent Boeing (BA 108.44, -0.28) shows relative weakness. Boeing has declined 0.1% after being downgraded at JPMorgan from "Overweight" to "Neutral." Meanwhile fellow aerospace name Lockheed Martin (LMT 206.63, -0.55) trades in the red after the U.S. Court of Federal Claims denied an injunction that would have allowed the company time to protest the award of a $6.7 billion contract to Oshkosh (OSK 31.54, +1.21).
On a separate note, the yield on the 10-yr note is now higher by nine basis points at 1.75%. This represents an 11-basis point move from yesterday's low of 1.64%.
[BRIEFING.COM] The major U.S. indices have pulled back slightly since our last update, but still sport solid gains for the day.
A look inside the Dow Jones Industrial Average JPMorgan (JPM 56.84, +3.77), DuPont (DD 58.26, +1.64), and Travelers (TRV 106.48, +2.71) are outperforming. JPMorgan is leading the Dow higher after its CEO Jamie Dimon purchased 500k shares, worth ~$26 mln. DuPont is strong as materials outperform, and Travelers is being helped by broad strength in financials, today's best performing sector.
Conversely, Johnson & Johnson (JNJ 101.28, -0.42) is the worst-performing Dow component as health care lags the broad market strength.
Despite today's strong showing, the DJIA is still poised to close the week lower by more than 2%, which extends 2016's year-to-date losses to nearly 9%.
[BRIEFING.COM] The stock market opened its final session of the week on a positive note with the major averages benefiting from a renewed appetite for risk. Contributing to this general optimism was a reversal in crude oil, positive retail sales numbers, and a rebound in the struggling financial sector. The major averages were able to build off their strong start with the S&P 500 currently trading seven points below its best level of the day.
European indices were able to shake off losses in Asia as they responded to a better than feared earnings report from Commerzbank. This surprise offered a reprieve for the European financial sector and the regional indices as a whole. Deutsche Bank (DB 17.28, +1.77) also helped matters when it announced that it will buy back more than $5 billion worth of senior debt.
The U.S. financial sector (+3.6%) has been able to build on this positive sentiment as the economically-sensitive group rallied out of the gate. Meanwhile, JPMorgan Chase (JPM 57.19, +4.11) has contributed to the positive sentiment as investors respond to the news that CEO Jamie Dimon purchased 500,000 more shares of JPM for roughly $26 million. Meanwhile, American International Group (AIG 53.28, +2.76) has rallied 5.5% after increasing its dividend 14.0%, announcing a $5 billion share repurchase, and nominating two influential names to their Board of Directors.
Global equities have benefited from a reversal in crude oil. This upswing follows increased speculation regarding supply cuts, with short covering likely providing additional fuel to the rally. At this juncture, WTI crude trades higher by 12.3% at $29.44/bbl, but is still down 4.7% from last Friday.
The energy sector (+2.3%) is the main beneficiary of the rebound in oil and trails materials (+2.6%) and financials (+3.5%) on the leaderboard. Independent oil and gas companies outperform in the commodity-sensitive group with Anadarko Petroleum (APC 37.87, +2.18) climbing 6.1%. Meanwhile, Dow component Chevron (CVX 85.19, +2.20) has rallied 2.6%.
It is worth noting the health care space (+0.3%) has underperformed throughout today's session. Biotechnology trades in-line with the broader market while large cap names like Pfizer (PFE 29.09, -0.04) and Merck & Co (MRK 48.83, -0.02) sit near their flat lines.
Safe haven investments have retraced some of this week's advance with gold surrendering 0.9% to $1,237.20/ozt while Treasuries also trade in the red with the 10-yr yield higher by eight basis points at 1.74%.
The U.S. Dollar Index has climbed in recent action at the expense of the yen and the euro. Currently, the dollar/yen pair trades at 113.35 (+0.8%) while the euro has slid 0.7% against the dollar to 1.1242.
Today's economic data included the Retail Sales report for January, the December Business Inventory Report, and the preliminary reading of the Michigan Sentiment Index for February:
[BRIEFING.COM] The major averages float beneath their best levels of the day with the tech-heavy Nasdaq (+1.4%) trading behind the S&P 500 (+1.5%). The two indices trade off their highs by 5 points and 3 points, respectively.
The heavyweight technology space (+1.2%) has underperformed the benchmark index for the bulk of the trading day as large name tech companies demonstrate relative weakness. Alphabet (GOOGL 707.31, +0.95) and Apple (AAPL 93.72, +0.02) show upticks of 0.1% apiece. Elsewhere, the high-beta chipmakers show relative strength, evidenced by the PHLX Semiconductor Index (+2.2%). The sub-group is benefiting from rebounds in Avago Technologies (AVGO 121.27, +4.96) and Skyworks (SWKS 57.57, +1.72). Despite today's strength, the names still show respective weekly losses of 3.6% and 5.4%.
[BRIEFING.COM] The major averages hover below their session highs with the S&P 500 (+1.4%) five points off its best level of the day.
The consumer discretionary space (1.3%) trades behind the broader market, owed partially to the relative weakness of media companies. The sub-group has been hurt by a string of negative responses to earnings this past week. On that note, CBS (CBS 42.88, -0.69) has lost 1.6% despite reporting in-line results after yesterday's close. Meanwhile automobile companies are benefiting from the January Retail Sales report which showed a 0.6% jump in motor vehicle sales during that period. Ford (F 11.39, +0.21) and General Motors (27.36, +0.47) outperform with respective gains of 1.9% and 1.7%. To be fair though, Ford is also benefiting from the release of European sales figures that showed increases from last year.
[BRIEFING.COM] The S&P 500 (+1.5%) trades at a new session high, cutting its weekly loss to 1.2%.
The stock market as a whole is benefiting from the ongoing rally in oil. At this juncture, WTI crude has climbed 11.4% to trade at $29.20/bbl. The commodity is enjoying increased speculation regarding supply cuts with short covering likely providing additional fuel. The energy sector (+2.5%) is the main beneficiary of this move and only follows financials (+3.5%) on the leaderboard. Independent oil and gas companies outperform in the commodity-sensitive group while Dow component Chevron (CVX 85.30, +2.31) outperforms in both groups.
Elsewhere, safe haven investments have tumbled with gold declining 1.1% to $1,234.50/ozt while the yield on the 10-yr note is higher by seven basis points at 1.73%. The U.S. Dollar Index has also climbed in recent action at the expense of the yen and the euro. Currently, the dollar/yen pair trades at 112.94 (+0.6%) while the euro has slid 0.8% against the dollar to 1.1225.
[BRIEFING.COM] The Dow Jones Industrial Average (+1.1%) and the S&P 500 (+1.0%) have notched new highs since our last update (15844.09 and 1849.47, respectively), but have since floated below those levels.
Today's rally is being led by the financial sector (+2.5%), which has been the best performing group throughout today's session. The space is rebounding from a loss of 3.8% this week and 7.3% in the month of February. These represent the largest losses by any sector during those periods. JPMorgan Chase (JPM 56.20, +3.13) leads the group after the bank's CEO disclosed a purchase of 500,000 shares. Meanwhile, American International Group (AIG 53.28, +2.73) has rallied 4.8% after increasing its dividend 14.0%, announcing a $5 billion share repurchase, and nominating two influential names to their Board of Directors.
On the commodities front, WTI crude trades near fresh session highs, rebounding 9.4% to $28.67/bbl.
[BRIEFING.COM] The S&P 500 trades higher by 0.7%
Just released, the preliminary reading of the University of Michigan Consumer Sentiment survey for February decreased to 90.7 (Briefing.com consensus 92.7) from the reading of 92.0 that was reported in January.
Separately, Business Inventories increased 0.1% in December which was in-line with the Briefing.com consensus. The prior month's reading was revised to -0.1% from -0.2%.
[BRIEFING.COM] As expected, the major averages opened in positive territory with the S&P 500 (+0.9%) pacing the tech-heavy Nasdaq (+0.9%).
Nine of ten sectors trade in the green with financials (+2.3%) showing the largest gain of the day. The economically-sensitive group is followed by energy (+1.5%). The remaining gainers show climbs between 0.2% (telecom services) and 0.8% (consumer discretionary). Utilities is the lone decliner with a loss of 0.5%.
On the commodities front, WTI crude continues its rally as the energy component trades at $28.04/bbl (+7.0%). Gold continues to pull back as the precious metal falls 0.8% to $1,237.80/ozt
The yield on the 10-yr treasury note is higher by four basis points at 1.70%.
The stock market is on track for a higher open with S&P 500 futures trading 18 points above fair value.
Overnight, U.S. equity futures rose in tandem with oil as the commodity rebounded from yesterday's 5.1% decline. The energy component climbed as speculation regarding a production cut found new life after the commodity's pit session yesterday. WTI currently trades 6.0% higher at $27.79/bbl. Risk tolerance increased overnight as U.S. Treasuries yields rose and gold prices slipped. Currently, the yield on the 10-yr note is higher by three basis points at 1.69%.
Futures briefly hit new highs after retail sales rose 0.2% (Briefing.com consensus+0.2%) in January. Excluding autos, retail sales increased 0.4% while the prior month's reading was revised to 0.1% from -0.1%. Meanwhile, the December Business Inventory Report (Briefing.com consensus -0.1%) and the preliminary reading of the Michigan Sentiment Index for February (Briefing.com consensus 92.7) will cross the wires at 10:00 ET.
On the corporate front, Deutsche Bank (DB 16.87, +1.36) announced that it will buy back more than $ 5 billion worth of senior debt. The bank will announce a public tender offer for dollar and euro denominated unsecured debt securities. This news follows the S&P lowering the lender's tier 1 issue rating to 'B+' from 'BB-'. Meanwhile, JPMorgan Chase's (JPM 55.36, +2.29) CEO, Jamie Dimon, bought 500,000 more shares of JPM stock for roughly $26 million.
The S&P 500 futures trade 20 points above fair value.
Equity markets in the Asia-Pacific region struggled on Friday with Japan's Nikkei diving 4.8% after being closed on Thursday. The index closed near its session low, but the slide was not congruent with yen strength as the Japanese currency held its ground throughout the night. The dollar/yen pair traded near 112.50 at the start of the Tokyo session and it remains in that area at this time.
Major European indices trade higher across the board as they rebound from heavy selling earlier this week. The rebound has coincided with a bounce in oil, overshadowing generally disappointing economic data. The euro, meanwhile, has retreated to 1.1240 against the dollar after climbing above 1.1350 yesterday.
The S&P 500 futures trade 20 points above fair value.
Just released, January retail sales increased 0.2% which was in-line with the Briefing.com consensus. The prior month's reading was revised to +0.2% from -0.1%. Excluding autos, retail sales increased 0.4% while the consensus expected a down tick of 0.1%.
U.S. equity futures hover below overnight highs with the S&P 500 futures trading 17 points above fair value. This morning's positive sentiment can generally be attributed to a 5.1% rebound in oil ($27.55/bbl) from yesterday's pit session close of $26.14/bbl.
Treasury yields rest just below overnight highs with the yield on the 10-yr note higher by two basis point at 1.69%.
On the economic front, the Retail Sales report for January (Briefing.com consensus +0.0%) will be released at 8:30 a.m. ET. Meanwhile, the December Business Inventory Report (Briefing.com consensus -0.1%) and the preliminary reading of the Michigan Sentiment Index for February (Briefing.com consensus 92.7) will cross the wires at 10:00 ET.
In U.S. corporate news of note:
Reviewing overnight development:
[BRIEFING.COM] The capital markets have been a hot mess in 2016 and things heated up again on Thursday on a series of headlines that led mostly to a risk-averse disposition.
The concise overview is that stock prices declined, oil prices fell, gold prices surged, the yen continued to strengthen, and the 10-year Treasury yield slipped to its lowest level (1.54%) since August 2012.
To say the least, there were a lot of factors at play on Thursday, including a second day of monetary policy testimony from Fed Chair Yellen in front of the Senate Banking Committee. The key headline items contributing to the broader market's weakness included the following:
The confluence of these factors, and others, led to a decidedly negative start to the day for the equity market.
Fed Chair Yellen didn't provide any reprieve from the selling pressure during her testimony either. She did acknowledge that negative interest rates are still on the table as a potential tool for further policy accommodation, yet she also asserted that economic evidence to date is not enough to suggest a rate cut is the Fed's next move.
Strikingly, the Dow Jones Industrial Average and S&P 500 fell to new lows for the day after the conclusion of her testimony while the Nasdaq Composite came back to test its morning low. In the case of the S&P 500, it cut a path through its January 20 intraday low (1812.29) to 1810.10. Just as it did, however, a headline from Dow Jones crossed the wires suggesting OPEC members are ready to cooperate on a possible production cut.
That headline led to a dramatic change in the trading tone, as the major indices rallied late in the day on the back of a resurgent energy sector (-0.4%), which had been down as much as 3.1% in response to a 5.1% drop in oil prices during pit trading to $26.14 per barrel.
At the same time, there was a large wave of buying interest in large-cap technology stocks that bolstered the S&P 500 technology sector (-0.2%) and helped drive the Nasdaq Composite back into positive territory after being down as many as 74 points earlier in the session. A closing volley of selling interest left the Nasdaq down 0.4% for the day.
By the time the closing bell rang, all S&P 500 sectors had worked their way back from larger losses but none ended with a gain. The financial sector (-3.0%) was the most conspicuous underperformer.
The technology sector (-0.2%), which got a nice boost from Cisco (CSCO 24.68, +2.17, +9.6%) after its pleasing earnings report, exhibited relative strength along with the consumer staples (-0.8%), telecom services (-0.5%), energy (-0.4%) and consumer discretionary (-0.1%) sectors.
The US Treasury market was a picture of strength throughout Thursday's trading. Granted the benchmark 10-yr note finished off its best levels of the session, yet it drew some notable buying interest that dropped its yield to 1.64% from 1.70% on Wednesday.
That move was precipitated by a flight-to-safety amid the volatility elsewhere. Similarly, gold prices also benefited from the safety trade, rising 4.4% to $1247.30/troy ounce.
The only economic release today was the weekly initial claims report. It was better than expected with claims decreasing by 16,000 to 269,000 (Briefing.com consensus 280,000) for the week ending February 6. Friday will feature the influential Retail Sales report for January at 8:30 a.m. ET.
Volume on Thursday was heavier than average with 1.32 billion shares trading at the NYSE. The advance-decline line favored decliners at the NYSE by a 4-to-1 margin, which was better than earlier in the day but still indicative of a market lacking conviction from buyers.