12/17 Friday is witching day for stocks

Administrator - Thursday, 17 December 2015 06:50

Friday is witching day for stocks

After suffering a serious post-Fed bashing, stocks could trade with both high volatility and high volume on the final quadruple witching Friday of the year.

The market sold off sharply into the close Thursday, with the Dow ending down 253 at 17,495 and the S&P 500 off 31 points or 1.5 percent to 2041. The twin culprits of falling oil prices and a stronger dollar reversed the previous day’s rally, along with concerns that the Fed may be too optimistic about raising rates.

Bond yields fell with the 10-year at about 2.22 percent, and the 2-year at 0.98 percent. Yields move inversely to price. West Texas Intermediate oil futures settled down 1.6 percent to $34.95 per barrel, just above the low of $34.53 per barrel reached on Monday. While that move seems tiny, oil prices rose nearly 10 percent off the Monday low before falling back down again.

“We’ve got a quadruple witch tomorrow. People are nervous today in advance of triple witching Friday,” said Leo Grohowski, chief investment officer with BNY Mellon Wealth Management. Quadruple “witching” expiration is the quarterly expiration of stock and index options and stock and index futures.

Thursday’s sell-off was “a little bit of a hangover” after Wednesday’s late-day rally in the wake of the Fed rate hike announcement, Grohowski said.


This could be what drives stocks next year

Worries that the Fed will keep hiking rates with a too weak economy is a recurring theme for the stock market.

Fed Chair Janet Yellen re-emphasized that economic data remain the most important signpost for the path of future hiking, after the central bank raised rates Wednesday.

For that reason, the ISM manufacturing survey and other reports in early January could play an outsized role for markets.

ScreenHunter_63 Dec. 17 18.47

According to UBS strategists, the ISM manufacturing survey, on the first trading day of the new year, could be a factor that helps determine the course of markets for the month of January.

For that matter, it could also influence performance for the year, if you believe the Wall Street adage — so goes January, so goes the year.

“Between the employment report in the first week of January and the ISM report, basically the first (trading days) of January are really going to set the tone for the entire month of January, and quite honestly looking to market history, it could very well set the whole tone for the year,” said Julian Emanuel, equities and derivative strategist at UBS.

The Dow was down triple digits Thursday as oil prices sank and the dollar strengthened. Jobless claims data were strong. The Philadelphia Fed’s gauge of manufacturing activity in the mid-Atlantic region fell to negative 5.9 from 1.9 in November.

“There’s a clear dividing line between bulls and bears now. If you’re bullish, you think the Fed is raising rates because the economy is good. It’s very gradual and everything’s going to be fine next year. That was yesterday’s rally,” said Peter Boockvar, chief market analyst at Lindsey Group.

“Then you get today, when you see the Philly Fed number, and you think ‘Geez, she’s embarking on this rate hike cycle in the seventh year of an economic expansion that’s showing signs of strain. She’s hiking interest rates, when global growth is soft and manufacturing is in recession. She’s raising interest rates and she wants to do it four times this year.'”

The December ISM survey will be especially important after it was surprisingly weak in November, falling to 48.6 percent, under 50 for the first time in three years. A reading under 50 signals contraction, and to many on Wall Street it reinforced what they were already seeing in other data — a manufacturing recession.

Boockvar said the bullish argument is that manufacturing is just a small part of the economy. “It’s all these numbers. There’s a lot of service businesses that do business with manufacturers, and the ISM services hasn’t been that great either. She picked a fine time to raise rates.”


12/13 ‘The Fed Awakens’ expected this week amid volatility spike

Administrator - Sunday, 13 December 2015 08:00

‘The Fed Awakens’ expected this week amid volatility spike

For about a decade there hasn’t been a new Star Wars movie or a Federal Reserve rate hike, and both are expected to drop this week. And while fanboys will be transfixed on “The Force Awakens,” investor attention will be firmly fixed on “The Fed Awakens.”

The highly anticipated December Federal Open Market Committee meeting comes on the heels of a fresh spike in volatility and falling oil prices. Last week, the Dow Jones Industrial Average DJIA, -1.76% dropped 3.3%, the S&P 500 index SPX, -1.94% fell 3.8%, and the Nasdaq Composite Index COMP, -2.21% shed 4.1%.

On Wednesday, the Fed will end its two-day policy meeting where the central bank is widely expected to raise interest rates for the first time since 2006, and Fed watchers are already trying to anticipate the rate of increases over 2016.

While the Fed meeting will be the centerpiece this week, investors will still be keeping a sharp eye on the falling price of oil and market volatility, according to Jeff Carbone, managing director and co-founder of Cornerstone Financial Partners.

Last week, Oil prices fell 11% and the CBOE Volatility Index VIX, +26.11% the so-called “fear index,” jumped 68%.

With the Fed promising, and not delivering on, a rate hike for more than a year, Carbone still thinks it’s too early. That sort of reluctance was echoed by Chicago Fed President Charles Evans earlier in the month.

One area Carbone points to is the selloff in high-yield debt ahead of the Fed meeting, which places even more strain on energy companies, which make up a large portion of the high-yield debt market. Last week, the S&P 500’s energy sector took the worst hit of the index’s 10 sectors with a 6.5% drop.

“The economy is not strong enough,” Carbone said. “I’m thinking they’re raising rates because they want to, and to get it going so we can move on.”

With headwinds like falling oil prices and a weakening dollar, expect volatility to continue this week right on up to the meeting, he said.

A handful of S&P 500 companies will also report earnings this week:

Report date Company/ticker (FactSet EPS / revenue estimate)
Mon., Dec. 14 None scheduled
Tues., Dec. 15 None scheduled
Wed., Dec. 16
Thurs., Dec. 17
  • Accenture PLC ACN, -2.14%  ($1.32 / $7.93 billion)
  • General Mills Inc. GIS, -1.16%  (83 cents / $4.62 billion)
  • Red Hat Inc. RHT, -1.32%  (46 cents / $521.5 million)
Fri., Dec. 18
  • Lennar Corp. LEN, -1.75%  ($1.11 / $2.98 billion)
  • CarMax Inc. KMX, -1.99%  (68 cents / $3.64 billion)
  • Darden Restaurants Inc. DRI, +0.03%  (42 cents / $1.62 billion)

11/30 Gold suffers biggest monthly percentage drop since 2013

Administrator - Monday, 30 November 2015 08:56

Gold suffers biggest monthly percentage drop since 2013


Gold futures on Monday scored their first one-day gain in three sessions, but prices for the metal still suffered their biggest monthly percentage drop in more than two years as investors penciled in a Federal Reserve rate increase in December.

Gold for December delivery GCZ5, +0.25% rose $9.60, or 0.9%, to settle at $1,065.80 an ounce. February gold GCG6, +0.24% which is now the most-active contract, tacked on $9.10, or 0.9%, to $1,065.30 an ounce.

Based on the most-active contracts, gold futures lost roughly 6.7% for the month of November—their largest monthly percentage drop since June 2013. The monthly dollar loss of about $76.10 an ounce was the biggest since July of this year.

December silver SIZ5, -0.07% gained 4.2 cents, or 0.3%, to $14.05 an ounce for the session, while March silver SIH6, +0.42% the more active contract, rose 3.8 cents, or 0.3%, to $14.086 an ounce. Prices fell about 9.5% for the month, based on the most-active contracts.

On a technical basis, “gold’s chart does not look very constructive at this point, as it eyes the psychologically important $1,000 an ounce,” said Taki Tsaklanos, head of research at Secular Investor. “Gold bulls would need to see buying interest picking up, as a break below $1,000 an ounce would result in weakness, with the next secular support target of $850…the peak of January 1980.”

Meanwhile, the U.S. Federal Reserve’s “dreaded” December meeting is almost here, and “it has been chatter about the Fed daring to raise rates from zero that has seen gold and silver slide to these new multiyear lows,” said Adrian Ash, head of research at BullionVault.

Higher interest rates can be negative for gold, which tends to benefit from looser monetary policy.

The Fed’s two-day policy meeting will conclude Dec. 16. The European Central Bank will hold a policy meeting this Thursday.

11/01 Energy companies may rain on S&P 500 earnings parade

Administrator - Sunday, 1 November 2015 05:52

Energy companies may rain on S&P 500 earnings parade
Facebook, Tesla among big earnings on tap

So far corporate earnings season surprisingly has buoyed the stock market, helping the main indexes to some of their best gains in years. But October’s big run could fade into a distant memory this week with the earnings calendar laden by the languishing energy-sector.

“About half of S&P 500 companies have reported with 67% beating on bottom-line with an earnings surprise of plus 3.4%. More importantly, guidance activity so far has been better than feared.” strategist Dubravko Lakos-Bujas at J.P. Morgan said in his report.

Energy companies are likely to be spoilers, with the sector expected to post an earnings decline of 65% year-over-year, as crude-oil prices remain depressed.

West Texas Intermediate crude-oil CLZ5, +0.72% settled at $46.59 a barrel on the New York Mercantile Exchange Friday, down 43% over the past year. The international benchmark brent crude LCOZ5, +1.43% traded at $49.56 a barrel, also off 43% in the past 12 months.

Energy earnings for week Nov. 2-6
Date Company FactSet EPS/revenue
Nov. 2 Diamond Offshore Drilling DO, +1.84% 60 cents/$594 mln
Noble Energy NBL, +2.11% (17 cents)/$948 mln
Pioneer Natural Resources PXD, -0.64% (4 cents)/$791 mln
Nov. 3 Columbia Pipeline Group CPGX, +1.02% 20 cents/$347 mln
NiSource NI, +1.43% 2 cents/$913 mln
Sempra Energy SRE, +1.10% 88 cents/$2.94 bln
Devon Energy DVN, +2.17% 52 cents/$4.02 bln
Newfield Exploration NFX, -0.02% 16 cents/$460 mln
Oneok OKE, +1.92% 40 cents/$2.46 bln
Cimarex Energy XEC, +0.21% (8 cents)/$350 mln
Nov. 4 Chesapeake Energy CHK, +2.74% (14 cents)/$2.92 bln
Spectra Energy SE, +0.28% 22 cents/$1.3 bln
Marathon Oil MRO, +4.73% (40 cents/$1.42 bln)
Nov. 5 Apache APA, +1.18% (37 cents)/$1.6 bln
EOG Resources EOG, +0.39% (30 cents)/$2.4 bln

ScreenHunter_47 Nov. 01 17.43

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