Wednesday, February 26, 2014

23 Feb AMC - Market dips slightly as consumer sentiment falls below expectation

Market Summary

The stock market spun its wheels during the Tuesday session, ending essentially where it started. The S&P 500 shed 0.1% after spending the bulk of day within a striking distance of its flat line. 

Equity indices tried to build on the relative strength of the two consumer sectors, but the rally attempts were stifled by the daylong underperformance of the top three groups. 

Financials (-0.6%), health care (-0.2%), and technology (-0.3%) lagged from the opening bell and slumped to lows during the final hour of action. Since the three sectors account for more than 46.0% of the entire S&P 500, their underperformance acted as a headwind. 

In the financial sector, Morgan Stanley (MS 29.71, -0.60) was the weakest performer among the majors while JPMorgan Chase (JPM 57.03, -1.00) fell 1.7% after announcing plans to eliminate jobs in its mortgage banking unit. In addition, the financial giant said it has observed a lower level of client activities across most investment banking units so far this year. 

Elsewhere, the technology sector succumbed to the pressure exerted by some of its top components. Apple (AAPL 522.06, -5.49) lost 1.0% while Cisco Systems (CSCO 21.84, -0.28), Facebook (FB 69.85, -0.93), and Qualcomm (QCOM 74.91, -0.52) fell between 0.7% and 1.3%. 

Unlike the traditional tech space, biotechnology remained strong. The iShares Nasdaq Biotechnology ETF (IBB 273.23, +1.15) added 0.4%, extending its year-to-date advance to 20.3%. Despite the strength, health care ended among the laggards. 

On the upside, the consumer discretionary sector (+0.5%) finished in the lead after Home Depot (HD 80.98, +3.11) reported an earnings beat on below-consensus revenue. The company guided fiscal-year 2015 results below analyst estimates, but boosted its dividend 21.0% to $0.47 per share. On a related note, most homebuilders rallied while Toll Brothers (TOL 38.25, -0.09) shed 0.2% despite beating on earnings. The broader iShares Dow Jones US Home Construction ETF (ITB 25.55, +0.28) rose 1.1%. 

Homebuilders received a measure of support from lower rates as the 10-yr yield slipped four basis points to 2.70%. Participation was well below average with only 633 million shares changing hands at the NYSE. 

Today's economic data included three reports: 
  • The Conference Board's Consumer Confidence Index slipped to 78.1 in February from a downwardly revised 79.4 (from 80.7) while the consensus pegged the index at 80.8. Typically, confidence mirrors trends in stock prices, gasoline costs, employment levels, and media reports. There has been increased volatility among these indicators, but overall trends have been moving sideways. The slight drop in confidence, which is still above the December level (77.5), is likely nothing more than consumers reacting to the recent volatility. 
  • The December Housing Price Index from the FHFA increased 0.8%, which followed an uptick of 0.1% observed in November. 
  • The Case-Shiller 20-city Home Price Index for December rose 13.4% while a 13.6% increase had been expected by the consensus. This followed the November increase of 13.7%. 
Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while New Home Sales for January will be reported at 10:00 ET. 
  • Nasdaq Composite +2.7% YTD 
  • Russell 2000 +1.1% YTD 
  • S&P 500 -0.2% YTD 
  • Dow Jones Industrial Average -2.4% YTD

Market Internals

Leaders & Laggards

Technical Summary

Next Day in view

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