Europe’s Quantitative Easing Puts the S&P in the Back Seat
The S&P 500 futures opened higher Wednesday and rallied. With the exception of an 11:00 CT 4-handle pullback, the ESM15 moved sideways to higher all day. After it made a late-day high at 2105.50, the German DAX sold off 95 points. With $1.7bil to sell MOC the ESM15 sold off down to 2099.00 in the final minutes of the day. Up until a few months ago the S&P 500 was the top dog of the global indices, but now it seems like some of the European bourses are leading the way. As I’ve said many times, the S&P goes first, but recently it’s Europe that’s going first with the DAX leading the way.
Energy RIP
Early in the day I got on the microphone and I spoke to the room. Over the last several days crude oil futures (CLM15:CME) have been selling off from the $51-$52 level down to the $48- $49 level and making higher lows. I had a feeling, and told the room that I thought crude oil was going to go to $58. To me it looked like crude oil was back-and-filling going into today’s crude oil options expiration.
Crude oil futures rallied hard after the US government inventory data showed the smallest rise in oil stockpiles this year, a drop in gas oil inventories and a slight fall in US oil production. It was the smallest build since Jan. 2 and was well below the 4.1 million expected by analysts. Energy stocks in the S&P gained 2.3% and crude oil futures rallied 5.8% to $56.39 which added up to 20 points of the Dow Jones gain for the day.
Better Than Expected
On the earnings front, Bank of America Corp. (BOA) said it swung to a first-quarter profit but missed analyst expectations, pushing the stock down 1.1%. Intel Corp. reported better-than-expected earnings, rising 4.3% and adding about 9 points to the Dow Jones overall gain, and Delta Airlines said its first-quarter earnings more than tripled analyst expectations, benefiting from lower fuel prices. And after the close, Netflix reported it had added 4.8 million streaming subscribers in the first quarter, beating expectations. Netflix stock rose 11% in after-hours trading.
At the end of the day everything seems to be working in favor of the stock market right now. ECB President Mario Draghi kept rates unchanged as expected, making several positive comments about the central bank’s commitment to its bond buying program. All in all, it was a positive day for the stock market, with the Dow Jones futures closing up 58 points or +0.40% to 18022.00. The S&P futures (ESM15:CME) closed up +0.50% or up 8.9 points to 2099.80; at the high of the day the ESM15 was just 4.25 points off its all-time high. The CME Group’s Nasdaq futures closed up 24 points or +0.70% to 4421.75 and the Russell 2000 futures closed up +0.80%, to a new record high close.
Something is missing, but that doesn’t mean that the S&P is going to go up hard or down hard. What it feels like to me is a shift going on and it’s something investors in the United States are not used to, and it’s called buy Europe / sell US.
In Asia 9 out of 11 markets closed higher (Shanghai Comp +2.71%) and in Europe 10 out of 12 markets are trading lower. Today’s economic calendar includes housing starts, jobless claims, Philadelphia Fed business outlook survey, EIA natural gas report, 6-month bill announcement, 5-year TIPS, Atlanta Fed President Dennis Lockhart speech on the economic outlook and monetary policy, in West Palm Beach, Fla., Federal Reserve Chair Stanley Fischer and ECB board member Peter Praet on panel at IMF discussing inflation, in Washington, Cleveland Fed President Loretta Mester speech on the economy and monetary policy, in New York, Eric Rosengren speaks, Fed balance sheet, money supply and earnings from BTO, MMM, ALXN, MO, AMAG, BEAV, CAB, COG, CSL, CAT, DLPH, DPZ, DOW, DPS, EW, LLY, EQM, FAF, FCX ,HSY, HMC, IBN, IMAX, IR, JNS, JBLU, JCI, MJN, MDSO, NVS, NUE, PENN, PEP, PJC, PII, PG, PRLB, PHM, DGX, RTN, COL, RCL, SNA, UAL, UNP, VDSI, GRA, WBC, WHR, ATC, ALGN, ALTR, AMZN, BIDU, CUDA, BRCM, BCR, ELY, CYN, DGII, ETFC, EFII, HBI, JNPR, KLAC, LVS, MSCC, MSFT, MTX, MPWR, NEM, OLM, P, QLIK, RMD, SBAC, SBUX, SPWR, SIVB, SYNA, TRN, and VRS.
S&P Futures Up 5 of the Last 6 Sessions
Our view: Like yesterday, we have another very big round of economic and earnings reports today. Yesterday the April expiration stats were modestly favorable, but today’s stats are not. The Thursday of the April options expiration week has been up 11 / down 14 of the last 25 occasions and expo Friday has been up 16 / down 9 of the last 25. The problem for the shorts goes back to one thing: never sell a quiet market, and despite all the eco-reports and earnings I think today’s trade could end up just as slow as yesterday. Our view is we see a two-way trade today: down in the early part of the day and up late morning to midday. You can take it from there.
April Expiration Study:
http://www.mrtopstep.com/wp-content/uploads/2015/04/ExpirationStats_4.pdf
As always, please use protective buy and sell stops when trading futures and options.
In Asia 9 out of 11 markets closed higher: Shanghai Comp. +2.71%, Hang Seng +0.44%, Nikkei +0.08%
In Europe 10 of 12 markets are trading lower: DAX -1.51%, FTSE -0.38%, MICEX -0.63%, Athens GD.AT -0.97% (at 6:00 am CT)
Fair value: S&P -6.71 , Nasdaq -7.84, DOW -79.96
Total volume: LOW 1Mil ESM and 4.3k SPM traded
Economic schedule: Housing starts, jobless claims, Philadelphia Fed Business Outlook survey, EIA natural gas report, 6-month bill announcement, 5-year TIPS, Fed balance sheet, money supply.
E-mini S&P 5002088.25-12.50 - -0.60%
Crude56.50+2.39 - +4.42%
Shanghai Composite
Hang Seng27653.12-86.59 - -0.31%
Nikkei 22519652.88-232.89 - -1.17%
DAX11754.18-244.68 - -2.04%
FTSE 1006992.53-67.92 - -0.96%
Euro1.0760
