Thursday, January 30, 2014

29 Jan 2014 AMC - Market down due to Fed cut asset purchase program by $10b

Market Summary

Equities ended broadly lower with small caps leading the weakness. The Russell 2000 lost 1.4% while the S&P 500 fell 1.0% as nine of ten sectors finished in the red. Although today's session generated plenty of excitement, some of the events that played out over the course of the day were set in motion yesterday. 

Shortly after yesterday's session on Wall Street ended, the Central Bank of Turkey shocked the market with a 445-basis point hike to 12.00% in an attempt to halt the rapidly weakening lira. The move worked...for 15 hours. The lira strengthened after the announcement, but spent the remainder of the overnight session in a steady retreat, giving up all of its gains. 

Interestingly, yesterday's news of out of Turkey also gave a boost to U.S. equity futures while weighing on the yen. The moves did not hold as futures spent the night in a steady retreat while the yen rallied. 

The Japanese currency maintained its strength throughout the session, posing a headwind to equities. Dollar/yen spent the entire trading day just above the 102.00 level while yen futures gained 0.6%, extending their 2014 advance to 3.0%. 

Meanwhile, stocks hovered near their opening levels in the morning, but fell to fresh lows after the Federal Open Market Committee released its latest policy statement, which called for another $10 billion reduction to monthly asset purchases. Strikingly, just like losses observed earlier in the day, the post-FOMC retreat was accompanied by more yen strength. 

The materials sector (+0.5%) withstood the broad-based weakness with help from Dow Chemical (DOW 44.77, +1.71), which rallied 4.1% after beating on earnings. Miners also outperformed as the Market Vectors Gold Miners ETF (GDX 23.86, +0.46) gained 2.0%. On a related note, gold futures advanced 0.9% to $1262.00 per troy ounce. 

Elsewhere, the other commodity-related sector, energy, outperformed with a loss of 0.3%. The sector finished well ahead of the broader market thanks to bottom-line beats reported by Marathon Petroleum (MPC 86.85, +3.68) and Valero (VLO 51.50, +1.30). 

Other cyclical groups were mixed with respect to the broader market as technology (-0.9%) outperformed while consumer discretionary (-1.7%), financials (-1.1%), and industrials (-1.0%) lagged. 

On the countercyclical side, health care (-0.9%), telecom services (-0.4%), and utilities (-0.1%) outperformed while consumer staples (-1.8%) ended behind the remaining sectors. 

Treasuries ended on their highs with the 10-yr yield down seven basis points at 2.69%. 

Tomorrow, weekly initial claims and the advance fourth quarter GDP report will be released at 8:30 ET while the December Pending Home Sales report will cross the wires at 10:00 ET. 
  • Nasdaq Composite -3.0% YTD 
  • Russell 2000 -3.5% YTD 
  • S&P 500 -4.0% YTD 
  • Dow Jones Industrial Average -5.1% YTD

Market Internals

Leaders & Laggards

Technical Updates

Next Day in view

Alvin's Commentaries

Market started off with a slight bearish bias. After 2pm FOMC statement of tapering to 10b/month asset purchase program, the market continue to slide further ending all 3 indices in the red. All 9 sectors ended in the red except for Material (+0.41%). Volume is at 736m shares traded on the NYSE. On Thursday we have the unemployment claim and Home sales data. 

Market Call: Flat to the Upside
Date: 30 Jan 2014

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