The Market at 04:20PM ET
Dow: +164.70… | Nasdaq: +42.85… | S&P: +17.14…
NASDAQ Vol: 1.87 bln… Adv: 2096… Dec: 775…
NYSE Vol: 1.15 bln… Adv: 2113… Dec: 871…
Moving the Market
Financials rebound following yesterday's Deutsche Bank (DB)-driven decline
Quarter-end flows expected to boost volatility
Strong: Financials, Consumer Staples, Health Care, Energy, Industrials
Weak: Utilities, Real Estate, Telecom Services
[BRIEFING.COM] The stock market ended a bumpy week on a higher note with all three major averages climbing near 0.8%. The S&P 500 (+0.8%) rallied into the late afternoon, but selling during the final minutes of the session drove the index just below its 50-day moving average (2168.4), which acted as resistance throughout the month. The S&P 500 gained 0.2% for the week, but shed 0.1% for the month. The benchmark index advanced 3.3% during the third quarter, underperforming the Nasdaq (+0.8%), which climbed 9.7% in Q3 and gained 1.9% in September.
Deutsche Bank (DB 13.09, +1.61) dominated headlines for the second day in a row, but today's focus was on a rebound in the stock amid reassurances from the bank's Chief Executive Officer John Cryan. Mr. Cryan sent a letter to employees, in which he described the bank's capital position as solid, noting that liquid reserves are well above pre-crisis levels from 2007. The stock doubled its late-morning gain, ending higher by 14.0%, after AFP reported the bank's MBS settlement with the Department of Justice will be reduced to $5.4 billion from $14.0 billion. The report was not confirmed by Deutsche Bank and it is worth noting that markets in Germany will be closed on Monday in observance of Unification Day.
The rebound in Deutsche Bank boosted sentiment in the financial sector (+1.4%), which narrowed its September loss to 2.9%, but still ended the month well behind the other ten sectors. Friday's sector-wide rally did not stop Wells Fargo (WFC 44.55, +0.18) from ending in the red as the stock set a fresh low for the year (44.10). The stock spent the entire month in a sharp decline, falling 12.5%, amid fallout from the discovery of more than two million illegally-opened credit card and deposit accounts.
The financial sector was followed by energy (+1.3%), which locked in a market-leading 3.0% gain for the month. The growth-sensitive sector outpaced crude oil, which climbed 0.8% to $48.11/bbl. The energy component gained 7.6% in September, but slipped 0.5% for the quarter.
Consumer staples (+1.0%) and health care (+1.0%) also spent the day among the leaders while other defensively-oriented sectors like utilities (-0.7%), telecom services (-0.3%), and real estate (-0.5%) lagged.
Elsewhere, the top-weighted technology sector (+0.6%) finished in the middle of the pack, masking relative strength among chipmakers as interest surrounding Qualcomm's (QCOM 68.50, +1.05) rumored acquisition of NXP Semiconductor (NXPI 102.02, +5.89) grew. NXP Semiconductor surged nearly 25.0% after Thursday's Wall Street Journal report brought the potential acquisition to light. The PHLX Semiconductor index advanced 1.6% on Friday.
Today's rally in stocks lured some money out of the Treasury market, sending the 10-yr yield higher by four basis points to 1.60%.
Quarter-end flows resulted in increased participation as more than 1.2 billion shares changed hands at the NYSE floor.
Economic data included Personal Income, Personal Spending, Core PCE Prices, Chicago PMI, and Michigan Sentiment:
Monday's economic data will include the 10:00 ET release of August Construction Spending (Briefing.com consensus 0.2%) and September ISM Index (Briefing.com consensus 50.4) while auto and truck sales for September will be reported throughout the day.
Week in Review: Bank Shares Wobble, But Market Holds
The stock market saw some volatility during the past week, which could be easy to overlook, considering the S&P 500 added 0.2% for the week. The trading week began with a decline that was driven by renewed concerns about Deutsche Bank's capital standing. German Chancellor Angela Merkel said that the bank would not be eligible for state aid if it were to experience a capital shortfall. This drove up concerns that something may indeed be wrong at Deutsche Bank. The stock remained in focus throughout the week, leading another market-wide swoon on Thursday amid reports that some funds who clear trades with Deutsche Bank have reduced their positions and withdrawn some excess cash. The stock ended Thursday with a 6.7% decline, weighing on sentiment in the broader market.
A turnaround in Deutsche Bank and the market developed on Friday when bank CEO John Cryan sent a letter to employees, assuring them of the bank's health. The stock rallied out of the gate on Friday, receiving another boost after AFP reported that the bank is nearing a $5.40 billion settlement with the Justice Department, down from the $14 billion that was originally sought by the DoJ.
As for rate hike expectations, they ended the week higher, but dipped briefly after Friday's economic data introduced another confounding element into the discussion. Specifically, August Core PCE Prices declined 0.1% (Briefing.com consensus +0.2%) even though other inflation measures trended up in August. The implied probability of a rate hike at the December meeting fell to 53.1% intraday, but climbed to 61.7% by the end of the day, up from last week's 54.2%, according to the fed funds futures market.
[BRIEFING.COM] Equity indices have probed new session highs going into the final hour of action. The S&P 500 is higher by 1.0% while the Dow Jones Industrial Average (+1.1%) trades a step ahead.
Today's advance in equities has been accompanied by increased risk tolerance in other areas of capital markets. Crude oil settled higher by 0.8% at $48.11/bbl to end the quarter little changed while gold slid 0.7% to $1317.00/ozt., also ending the quarter flat.
Treasuries sit just above their lows with the 10-yr yield up four basis points at 1.60%. Modest selling in the 10-yr note during the third quarter has increased its yield by 13 basis points from the June settlement.
[BRIEFING.COM] The S&P 500 (+1.0%) has made a run at a fresh session high, looking to end the day above its 50-day moving average (2168.4), which has posed some challenges throughout the month.
The benchmark index slashed below that mark on September 9, falling 2.5%, amid surging sovereign yields and news of an underground nuclear test in North Korea. The S&P 500 bounced back the next day, but could not return above the 50-day moving average. Volatility in the following days saw the index slide down to its 100-day moving average (2120 at the time), which served as support. The S&P 500 returned above its 50-day moving average on September 22, but sellers returned in the next two days. This was followed by index testing its 50-day average throughout this week.
The S&P 500 looks to enter the fourth quarter with a 6.3% gain for the year.
[BRIEFING.COM] Recent action saw the key indices turn towards their session highs, putting the S&P 500 (+0.9%) back within two points of its best level of the day.
Financials (+1.5%), energy (+1.4%), and consumer staples (+1.2%) have been among the leaders since the early going while the health care sector (+1.0%) has lurked in their neighborhood.
Heavily-weighted insurance providers like Cigna (CI 129.94, -0.86), Aetna (AET 115.30, +0.27), and Humana (HUM 176.79, +0.97) trail the broader market, overshadowing solid gains in biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 290.11, +4.24) is higher by 1.5%.
The health care sector is set to end the month lower by 0.6%, narrowing its third-quarter gain to 0.6%.
[BRIEFING.COM] The major averages have settled into narrow ranges just below their session highs. The S&P 500 trades up 0.8%, looking to end the quarter with a 3.4% gain.
Sector standing has not changed much with nine groups holding gains between 0.3% (telecom services) and 1.5% (financials) while real estate (-0.1%) and utilities (-0.9%) underperform as participants pile back into riskier areas of the market.
Today's weakest sector-utilities-is also set to go down as the worst performers in the third quarter. The group is on track to end the quarter with a 6.9% decline, finishing behind telecom services (-6.1%) and consumer staples (-3.2%). On the upside, the technology sector (+0.6%) is on course to gain 12.5% for the quarter.
Treasuries sit near their lows with the 10-yr yield up four basis points at 1.60%.
[BRIEFING.COM] The stock market trades higher at midday, making yesterday's decline a distant memory. The S&P 500 is higher by 0.9%, on track to add 0.3% for the week.
Equity indices charged out of the gate, boosted by improved sentiment surrounding Deutsche Bank (DB 13.14, +1.66). Shares of the German banking giant have erased yesterday's losses after two positively-framed reports made the rounds. Chief Executive Officer John Cryan sent a letter to employees, in which he assured them of the bank's capital position, and pointed out that liquid reserves are well above levels from 2007.
The news propelled a rebound in European trade, which carried into the opening hours of the New York session. Deutsche Bank stock has received another boost, extending its gain to 14.4% after AFP reported that the bank is nearing an agreement with the Department of Justice to reduce the mortgage-backed securities settlement to $5.40 billion from $14.00 billion. The focus is likely to remain on Deutsche Bank in the coming days, but markets in Germany will be closed on Monday in observance of Unification Day.
Ten of eleven sectors trade in the green at midday with financials (+1.5%) out in front while energy (+1.3%), consumer staples (+1.1%), and industrials (+1.0%) follow.
The energy sector has spent the first half of action among the leaders even though crude oil has struggled to stay in the green. The energy component remains higher by 0.6% at $48.11/bbl after creeping above $48.25/bbl earlier. Thanks to today's gain, the energy sector is set to finish the month (+3.0%) in the lead, ahead of technology (+2.6%).
The top-weighted technology sector (+0.7%) has struggled to keep pace with the broader market, which is a function of modest gains in large components overshadowing bigger increases among higher-beta names. The PHLX Semiconductor Index has rallied 2.1% amid continued M&A rumors surrounding NXP Semiconductor (NXPI 102.54, +6.42). The stock has spiked 6.7% today and is now up nearly 25.0% since yesterday's Wall Street Journal report revealed Qualcomm's (QCOM 69.12, +1.67) interest in the Dutch semiconductor company.
Today's advance in equities comes as participants position for the start of the fourth quarter. Treasuries have retreated, sending the 10-yr yield up five basis points to 1.61%.
Economic data included Personal Income, Personal Spending, Core PCE Prices, Chicago PMI, and Michigan Sentiment:
[BRIEFING.COM] The major averages remain near their recent levels with the S&P 500 (+0.8%) trading just behind the Nasdaq Composite (+0.9%). The tech-heavy Nasdaq is on track to end the month higher by 2.0% versus a 0.1% decline in the S&P 500.
Biotechnology has contributed to the relative strength in the Nasdaq as the iShares Nasdaq Biotechnology ETF (IBB 289.90, +4.03) climbs 1.4%. Meanwhile, the technology sector (+0.6%) trades a bit behind the broader market as modest gains in heavily-weighted components like Alphabet (GOOGL 805.19, +2.55), Oracle (ORCL 39.23, +0.11), and Microsoft (MSFT +57.58, +0.18) overshadow a strong showing from chipmakers.
The PHLX Semiconductor Index has jumped 1.9% with NXP Semiconductor (NXPI 102.66, +6.54) surging 6.8% as rumors of a potential acquisition by Qualcomm (QCOM 68.93, +1.48) gather momentum.
[BRIEFING.COM] The S&P 500 (+0.8%) remains in the upper end of its trading range, tracking a 0.2% gain for the week. The index is down 0.1% for the month, narrowing its third-quarter gain to 3.3%.
The financial sector (+1.4%) has been in focus throughout the week and the group remains on course to finish the month well behind the other sectors (-2.9%). On the upside, the energy sector (+1.2%) is set to gain 2.9% for the month, followed by technology (+0.5%; +2.3% month-to-date).
Treasuries have extended their losses with the 10-yr yield rising three basis points to 1.59%.
[BRIEFING.COM] Equity indices have vaulted to new session highs with the S&P 500 extending its advance to 0.9%.
Just about every sector has contributed to the rally in the market, but the financial space (+1.5%) remains well ahead of its peers. Deutsche Bank (DB 12.89, +1.41) has extended its gain to 12.3% after AFP reported that the bank is nearing a $5.40 billion settlement with the Justice Department. This is seen as a positive considering the Justice Department was reportedly seeking $14 billion from the bank.
The financial sector is followed by consumer staples (+1.2%) and energy (+1.1%), with the latter climbing amid a 0.8% advance in crude oil to $48.22/bbl.
[BRIEFING.COM] The major averages have returned to their opening levels after a brief pullback. The S&P 500 is higher by 0.6%, trading within two points of its best level of the day.
The financial sector (+1.0%) has spring-boarded into the lead as bank shares garner interest following yesterday's underperformance. Deutsche Bank (DB 12.31, +0.83) has spiked 7.3%, erasing yesterday's drop, after Chief Executive Officer John Cryan sent a letter to employees, assuring them of the bank's capital standing. The rally in the stock has overshadowed comments from Eurogroup President Jeroen Dijsselbloem, who said the bank must stand on its own, without help from the German government. German markets will be closed on Monday in observance of Unification Day.
Domestic financials have also caught a bid with JPMorgan Chase (JPM 66.46, +0.81) and Citigroup (C 46.80, +1.00) climbing 1.2% and 2.2%, respectively. However, Wells Fargo (WFC 44.34, -0.03) continues showing relative weakness, trading flat.
Treasuries have slid to lows, pushing the 10-yr yield up two basis points to 1.58%.
[BRIEFING.COM] Equity indices have backed away from their early highs with the S&P 500 narrowing its gain to 0.3%.
Consumer staples (+0.7%) and financials (+0.6%) remain in the lead, but both groups have ticked down from their early levels. Conversely, the real estate sector has dipped into the red.
Just released, the University of Michigan Consumer Sentiment report for September was revised to 91.2 from 89.8 while the Briefing.com consensus expected a reading of 90.0.
[BRIEFING.COM] As expected, the major averages have climbed out of the gate. The S&P 500 trades higher by 0.5% with all eleven sectors showing early gains.
The opening advance has been paced by strength in consumer staples (+0.8%) and a rebound in the financial sector (+0.7%), which has narrowed its September decline to 3.4%. That said, the sector remains behind the other ten groups for the month. Outside of the two leaders, the remaining sectors trade near the broader market.
Treasuries have turned lower in recent action, pushing the benchmark 10-yr yield up one basis point to 1.57%.
On the economic front, the just released Chicago Purchasing Managers Index for September rose to 54.2 from 51.5 while the Briefing.com consensus expected a reading of 52.0.
The final reading of the Michigan Sentiment Index for September (Briefing.com consensus 90.0) will be released at 10:00 ET.
The stock market is on track for a modestly higher open with the S&P 500 futures trading six points above fair value.
Index futures saw some overnight weakness, but they have been on the comeback trail throughout the morning. The rebound in U.S. futures has masked broad-based losses in Europe associated with concerns about the regional banking system. Deutsche Bank (DB 11.95, +0.47) is on track to open higher by 4.1% in New York, but Frankfurt-listed shares remain down 2.0%. For its part, the euro has retreated 0.4% against the dollar to 1.1175.
Today's session coincides with the end of September and the end of the third quarter, so it would not be surprising if quarter-end flows resulted in some added volatility.
Economic data released this morning featured in-line Personal Income (+0.2%) and Core PCE Prices (+0.2%) for August while Personal Spending (0.0%; Briefing.com consensus 0.2%) missed expectations.
More data will be released today with the Chicago PMI for September (Briefing.com consensus 52.0) slated for a 9:45 ET release while the final reading of the Michigan Sentiment Index for September (Briefing.com consensus 90.0) will be reported at 10:00 ET.
Treasuries hold gains with the 10-yr yield down one basis point at 1.55%.
The S&P 500 futures trade eight points above fair value.
Equity indices in the Asia-Pacific region ended the week on a mixed note. Investors received a boatload of data, which included disappointing inflation numbers from Japan. It is worth noting that trading volume in the region is likely to take a hit next week as Golden Week keeps markets in China closed until Monday, October 10.
Major European indices trade lower across the board with Spain's IBEX (-1.2%) showing relative weakness. The region has been pressured by continued concerns about the health of Deutsche Bank, which has weighed on other European financials. The euro has also retreated, falling 0.5% against the dollar to 1.1168.
The S&P 500 futures trade six points above fair value.
August personal income rose 0.2%, which is what the Briefing.com consensus expected. August personal spending was unchanged, which is below the 0.2% uptick called for by the Briefing.com consensus.
Separately, Core PCE prices for August rose 0.2%, in-line with the Briefing.com consensus.
U.S. equity futures trade modestly higher with S&P 500 futures hovering three points above fair value. The modest uptick has masked broad-based selling in Europe, which has been attributed to continued concerns about the health of Deutsche Bank (DB 11.58, +0.10). U.S.-listed shares of the banking giant show a pre-market gain, but the stock is down more than 4.0% in Frankfurt. It is worth remembering that today is the end of the month, which could invite some added volatility.
Treasuries hold modest gains with the 10-yr yield down one basis point at 1.55%.
Today's economic data will include Personal Income (Briefing.com consensus +0.2%), Personal Spending (Briefing.com consensus +0.2%), and Core PCE Prices (Briefing.com consensus +0.2%) for August, which will be released at 8:30 ET. September Chicago PMI (Briefing.com consensus 52.0) and the final reading of the University of Michigan Sentiment Index for September (Briefing.com consensus 90.0) will cross the wires at 9:45 ET and 10:00 ET, respectively.
In U.S. corporate news of note:
Reviewing overnight developments:
[BRIEFING.COM] The stock market ended the Thursday affair on a lower note as concerns regarding Deutsche Bank's (DB 11.48, -0.82) capital position weighed on the major averages. The Dow Jones Industrial Average (-1.1%) finished slightly behind the Nasdaq Composite (-0.9%) and the S&P 500 (-0.9%).
Equity indices began the day on a quiet note, looking to consolidate after yesterday's oil-fueled risk rally. The benchmark index occupied a narrow nine-point trading range through the first half of trade as participants mulled over a recently-minted production cap agreement. OPEC surprised participants yesterday by announcing that it would limit production to between 32.5 million and 33.0 million barrels per day. However, specific terms of the agreement will not be released or put into effect until the oil collective meets on November 30.
The broader market broke lower near midday as reports indicated that approximately ten hedge funds have reduced their exposure to Deutsche Bank in recent days. The stock was down as much as 9.1%, ending lower by 6.7%. The German lender issued a statement in the afternoon, asserting that there had been recent outflows from its hedge fund business, but that Deutsche Bank's prime brokerage division remains profitable. Recall that capital concerns increased after the U.S. Department of Justice requested that the bank pay $14 billion to settle civil claims associated with the residential mortgage-backed securities crisis. The major averages notched session lows shortly after midday as heavily-weighted financials (-1.5%) and health care (-1.8%) led to the downside. The S&P 500 settled lower by 0.9%, testing technical support near the 2153/2151 price level. All eleven sectors finished in the red with utilities (-1.5%), financials (-1.5%), and health care (-1.8%) underperforming while energy (-0.1%) led to the upside.
The economically-sensitive financial sector (-1.5%) moved lower in sympathy with Deutsche Bank (DB 11.48, -0.82) as participants expressed concerns over the global banking landscape. Meanwhile, Wells Fargo (WFC 44.37, -0.94) declined 2.1% after CEO John Stumpf testified before the House Financial Services Committee. The congressional hearing was again heated as lawmakers questioned the sales tactics that led to the creation of more than two million fake deposit and credit-card accounts. The broader space extended its monthly loss to 4.2%, trailing the remaining sectors.
In the health care sector (-1.8%), biotechnology underperformed, evidenced by the 3.1% decline in the iShares Nasdaq Biotechnology ETF (IBB 285.87, -9.21). Mylan (MYL 38.47, -1.75) fell 4.4% after the CMS indicated that it had previously informed the company that it had misclassified its EpiPen device under the Medicaid Drug Rebate program. Recall that a group of U.S. lawmakers have recently pushed for the DoJ to investigate Mylan for this misclassification.
In the technology sector (-0.6%), the high-beta chipmakers outperformed, evidenced by the 1.3% gain in the PHLX Semiconductor Index. NXP Semiconductor (NXPI 96.12, +13.88) rallied 16.9% after reports indicated that Qualcomm (QCOM 67.45, +4.00) could be looking to acquire the company. Conversely, Apple (AAPL 112.17, -1.78) underperformed after it was removed from Barclay's Top Pick list. The firm also lowered its 2016 smartphone revenue and unit growth estimates for Apple.
The commodity-sensitive energy sector (-0.1%) finished at the top of the board as crude oil extended its rally. WTI crude finished higher by 1.4% ($47.73/bbl; +$0.66), showing marked resilience to the downturn in the broader market.
Treasuries ended on a higher note with yields slipping through the curve. The yield on the 10-yr note finished lower by one basis point at 1.56%.
Today's participation was above the recent average as more than 971 million shares changed hands on the NYSE floor.
Today's economic data included the third estimate of second quarter GDP, weekly initial claims, International Trade in Goods for August, and Pending Home Sales for August:
Tomorrow's economic data will include Personal Income (Briefing.com consensus +0.2%), Personal Spending (Briefing.com consensus +0.2%), and Core PCE Prices (Briefing.com consensus +0.2%) for August, which will each be released at 8:30 ET. Separately, Chicago PMI (Briefing.com consensus 52.0) and the final reading of the University of Michigan Sentiment Index for September (Briefing.com consensus 90.0) will cross the wires at 9:45 ET and 10:00 ET, respectively.