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Mon, 20th February 2017

Anirudh Sethi Report

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Archives of “Index” Tag

Overnight US Markets :Dow closed + 92 points -Hits New High

Stocks shook of earlier losses and ended higher Tuesday, led by a rise in bank stocks as major indexes pushed further into record territory.

The Dow Jones industrial average gained 92 points, or 0.5%, to an all-time closing high well above that landmark 20,000 level — and a little over halfway to the next 1,000-point rung, at 20,504.41.

Meanwhile the Standard & Poor’s 500 index rose 0.4% and the Nasdaq composite index gained 0.3%. Both indexes also set new all-time closing highs. All three indexes’ previous closing highs came in Monday’s session.

Bond yields rose after Federal Reserve Chair Janet Yellen said the central bank is still on track to raise interest rates gradually.

Yellen answered questions before a Senate committee, and she said that the strengthening job market and a modest move higher in inflation should warrant continued, gradual increases in interest rates.

Bond yields moved higher immediately following Yellen’s comments. The yield on the 10-year Treasury note rose to 2.47% from 2.43% late Monday.

Overnight US Market :Dow closed +143 points.S&P 500 up 12 points.

Stocks around the world continued to push higher Monday, and U.S. indexes again hit records. Bond yields climbed.

The Standard & Poor’s 500 index rose 12.15 points, or 0.5%, to close at a record 2,328.25 and topped $20 trillion in market value for the first time ever. The Dow Jones industrial average rose 142.79 points, or 0.7%, to an all-time closing high of 20,412.16. The Nasdaq composite gained 29.83 points, or 0.5%, to a record 5,763.96.

Treasury yields also rose as the yield on the 10-year Treasury note rose to 2.43% from 2.41% late Friday. Two-year and 30-year Treasury yields also notched higher.

Roughly five stocks rose for every three that fell on the New York Stock Exchange. Financial stocks helped lead the way, and those in the S&P 500 rose 1.3%. That’s the largest gain among the 11 sectors that make up the index. Raw-material producers and industrial companies were also strong.

Stocks resumed their upward climb last week after stalling for a couple weeks. Strong earnings reports have helped drive the gains. The majority of companies in the S&P 500 that have reported fourth-quarter earnings so far, 69%, have beaten Wall Street’s expectations, according to S&P Global Market Intelligence. It’s mostly come through companies keeping control of costs better than analysts were forecasting.

Overnight US Market :Dow closed -19 points.

Energy companies led U.S. stock indexes lower Monday as the price of crude oil declined. Phone company and materials stocks were also among the big decliners. Investors were weighing the latest batch of company earnings news.

The Dow Jones industrial average fell 19.04 points, or 0.1%, to 20,052. The Standard & Poor’s 500 index fell 4.86 points, or 0.2%, to 2293, as the broad-based index snapped a three-day winning streak. The Nasdaq composite index fell 3.21, or 0.1%, to 5664, as the tech-heavy index pulled back from Friday’s record closing high.

Benchmark U.S. crude fell 82 cents, or 1.5%, to close at $53.01 a barrel in New York. Brent crude, used to price international oils, lost $1.09, or 1.9%, to $55.72 a barrel in London.

Several energy companies were trading lower. Devon Energy slid 3.2%, while Chesapeake Energy dropped 3%. Marathon Oil shed 4.1%.

The 10-year Treasury yield fell to 2.42% from 2.47% late Friday.

Investors are still cautious as Trump’s early acts as president have been shaping markets for the past couple of weeks. On Friday, Trump directed the Treasury Secretary to look for potential changes to the Dodd-Frank law, which reshaped financial regulations after the 2008-09 financial crisis. Investors applauded that move but remain uncertain about the future impact of other policies. Over the weekend, the U.S. immigration ban on refugees and travelers from seven Muslim-majority countries was blocked by a federal judge and an appeals court turned down a Justice Department request to set that judgment aside. The White House said it expects the courts to restore executive order, which was founded on a claim of national security.

Overnight US Market :Dow closed +32 points

Stock indexes wavered between small gains and losses before ending mixed Thursday as investors sized up the latest company earnings news. Consumer goods and industrial stocks climbed the most, while health care and utilities were among the biggest laggards.

The Dow Jones industrial average climbed further above the 20,000 level it passed Wednesday. gaining 32 points, or 0.2% to 20,100.91.

Wall Street came off solid gains from the day before. The Dow Jones industrial average, after topping the magic 20K milestone and staying there, hit a record closing high along with the Nasdaq composite and the S&P 500.

On Thursday the Nasdaq slipped fractionally, losing just 0.02% to 5655.18. Off a little less than 0.1% was the S&P 500, now at 2296.68.

It’s been a record-making week on Wall Street. The S&P 500 index and Nasdaq composite closed at all-time highs on Tuesday and Wednesday. The Dow, which tracks 30 major industrial companies, added its own milestone Wednesday after it breached the 20,000 mark for the first time.

The market is getting a general boost from strong company earnings and investor optimism that the Trump administration’s policies on taxes, regulation and trade will be good for business.

Oil  prices jumped as benchmark U.S. crude oil was up $1.07, or 2%, at $53.82 per barrel in New York. Brent crude, used to price international oils, was up $1.08, or 1.9%, at $56.50 a barrel in London.

China Orders No Market Selloffs During President’s Davos Trip

As we observed in yesterday morning’s market wrap, while US traders took the day off for the MLK holiday, China was busy defending an accelerating selloff across its stock markets.

During Monday trading, having traded quietly lower for the past few days, Chinese stocks tumbled in early trading on the mainland and in Hong Kong’s offshore market amid weakness in Asian equities. The Shanghai Composite Index dropped as much as 2.2% to head for its fifth loss in as many days, its longest losing streak since Aug. 2015.However a sudden bout of late afternoon buying sent the loss down to just -0.3%, on speculation China’s national team was once again back in the markets.

 

Demonetisation may deal a bigger earnings blow to banks than to consumer firms

Banks had been expected to be among the big beneficiaries of demonetisation, thanks to a flood of deposits and the resultant cut in the cost of funds. But at least in the short term, banks, too, will feel the pain no less.

The impact of the demonetisation shock on corporate earnings will be felt across sectors, and will be visible as early as next week when December quarter results start trickling in.

Much of the narrative about demonetisation’s impact has focused on the consumer sector, because of its cash-reliant supply chains, and real estate. However, banks suffered, too, Bloomberg data shows.

Consensus earnings per share (EPS) estimates for fiscal 2017 for the BSE Bankex index have dropped 6.25% since 8 November, when the government invalidated Rs500 and Rs1,000 currency notes. That is lower than the earnings estimate cut for BSE Realty (down 39.5%) and industrials (8%) and about the same as automobiles (6.34%).

Banks have not only been hit by slowing credit demand, they have also had to forgo fee income on ATM transactions and card payments.

“Banks have lost on new business coming in, with all focus being on exchanging notes, and facilitating the new currency,” said Ajay Bodke, chief executive and chief portfolio manager, portfolio management services, at broking firm Prabhudas Lilladher Pvt. Ltd.

Global Equities Encountering Resistance At Year-End

The Global Dow Index is running into its long-term Down trendline stemming from the 2007 all-time peak.

Here in the U.S., equity investors have been a bit spoiled as they’ve watched index after index break into all-time high ground this year. Around the globe, investors have not been so lucky. Yes, most international indices have rallied solidly this year. However, with few exceptions, the rallies have still left these international markets shy of their all-time highs. One illustration of this situation can be seen in a chart of the Global Dow Index (GDOW).

We’ve posted many times on the GDOW due to its reliable conformity to technical charting tools, despite the fact that very little money is traded off of it. Additionally, we have found it to be an accurate barometer of the state of the global equity market. Specifically, the GDOW is an equally-weighted index of 150 of the world’s largest stocks. While this includes U.S.-based companies, its heavy dose of international exposure has led to its aforementioned position below its all-time high.

Furthermore, it is currently running into potential resistance in the form of its post-2007 Down trendline connecting the 2007, 2014 and 2015 tops.

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Overnight Dow Jones closed up 65 points.New High Continues….

Stocks gained Thursday, the Nasdaq joining the Dow, S&P 500 and Russell 2000 in record territory as all four indexes hit new all-time closing highs.

After a quiet start, major U.S. stock indexes jumped in afternoon trading as the market built on a surge the previous day. Banks and basic materials companies made the biggest gains, and technology companies also climbed. Defense contractors and other industrial companies took losses.

The small-stock Russell 2000 surged 1.5%.

Meanwhile the Dow Jones industrial average ended up about 65 points, or 0.3%. The Standard & Poor’s 500 index rose 0.2%. The Nasdaq composite jumped 0.4%.

These are the new closing highs for the four indexes:

► Dow: 19,614.81
► S&P 500: 2246.19
► Nasdaq: 5417.36
► Russell 2000: 1386.37

U.S. government bond prices fell, sending yields higher. The yield on the 10-year Treasury note rose to 2.40% from 2.34%. That drove banks stocks up since higher interest rates will allow banks to charge more for lending money. Goldman Sachs (GS), which has surged 32% since the presidential election and is trading at a nine-year high, was up 2.5%, and Bank of America (BAC) picked up 1.7%.

European stocks climbed for the second day in a row. Germany’s DAX index was up 1.8% and France’s CA 40 index gained 0.9%. London’s FTSE 100 rose 0.4%.

India : August IIP shrinks; stands at -0.7% versus -2.5% in July

The Index of Industrial Production (IIP) for the month of August contracted (-)0.7% versus (-)2.5% in July. The General Index for the month of August 2016 stands at 175.3, which is 0.7 percent lower as compared to the level in the month of August 2015. The cumulative growth for the period April-August 2016 over the corresponding period of the previous year stands at (-) 0.3 percent, said a Ministry of Statistics & Programme Implementation release.

The Indices of Industrial Production for the Mining, Manufacturing and Electricity sectors for the month of August stand at 113.5, 184.3 and 194.6 respectively, with the corresponding growth rates of (-) 5.6%, (-) 0.3% and 0.1%. The cumulative growth in these three sectors during April-August 2016 over the corresponding period of 2015 has been 0.6%, (-) 1.2% and 5.7% respectively.

In terms of industries, seven out of the twenty two industry groups in the manufacturing sector have shown negative growth. “The industry group ‘Electrical machinery & apparatus n.e.c.’ has shown the highest negative growth of (-) 49.4 percent followed by (-) 22.4 percent in ‘Furniture; manufacturing n.e.c.’ and (-) 6.6 percent in ‘Wearing apparel; dressing and dyeing of fur’,” the release said. While Basic goods sector grew at 3.3%, capital goods contracted (-)22.2.%. Intermediate goods grew at 3.6%.

Commodities attract record $54bn of inflows

Is the sun shining again on commodity investments? With inflows of $54bn during January and August, investment flows into the asset class are at an all-time high for the first eight months of any year, according to Barclays.

In its latest report on investment flows into commodities, the bank says investments into commodities are supported by three factors: Worries about global economic growth have fuelled money into gold, the desire of investors to benefit from volatility in individual commodities, and lastly, the revival of commodities as a diversification and inflation hedging tool

Gold, especially, has regained its sparkle among investors says Barclays. As the report noted:

Indeed, gold has been by far the single most popular commodity investment in 2016, with flows into physically backed ETPs at a net $27bn, accounting for half of all flows into commodities. This year’s inflow comes after three consecutive years of net outflows from gold ETPs and is already far ahead of the previous record set in 2009, which saw a total net inflow of $19bn.

This year could see the first year of net inflows to commodities indices linked investments for the first time since 2012, says the report. Pension funds and other long-term investors typically buy exposure to the sector through swaps on commodity indices that cover oil, agriculture and metals. That allows them to get broad exposure in one stroke. One of the most popular is the Bloomberg Commodity Index.

The report is optimistic that investment flows will continue “for some years to come”.
It explains: