Dow Jones changes Industrial makeup 9/20/13: Adds GS, V, NKE. Replacing AA, BAC, HPQ (on Expo day could make a difference for expo spreads). Dow 30 shake-up is the first “three-for-three” change to the blue-chip index since April 8, 2004, as high-priced stocks replaced lower-priced stocks. The release also said the changes won’t cause any disruption in the level of the index, because the divisor used to calculate the [DJIA] from its components’ prices on their respective home exchanges will be changed. [GS], [NKE], [V] joined Dow industrials; out are [AA], [BAC], [HPQ]. Nike, Visa rally 2% and Goldman Sachs was up 3% premarket. http://on.mktw.net/18LVwQb
Today started with 300k ESU and 1.3k SPU traded on Globex, trading range was 1669.00– 1681.25. Monday’s regular trading hours (RTH’s), SPU pit session trading range was 1658.70 – 1671.50 before settling at 1669.10, up 15.6 handles.
Here we go again with the global growth… Roger_Volz (05:52) China’s industrial output rose 10.4 percent in August from a year earlier and retail sales gained 13.4 percent, the National Bureau of Statistics said today. The advance in industrial production exceeded the median estimate for 9.9 percent growth in a Bloomberg survey and a 9.7 percent increase in July. The retail-sales figure compared with a projection for 13.3 percent advance and a 13.2 percent gain the previous month. Also, ASMUSSEN SAYS TOO EARLY FOR EURO AREA TO EXIT MONETARY STANCE.
Today’s pit session gapped 11.5 handles higher to 1680.70 – 1680.20 before trading 1677.00 in the opening minutes and continuing to trend higher to 1682.70 at 9:56. A retest of the early low held, double-bottomed before the sideways to slightly higher trade kicked in as GS led the financial sector. Hours before its new product event, [AAPL] traded a morning high of $504.45, $18 off its 2-week low, but pulled back to $500 area before The Event kicked off. The indices found comfort in trading sideways in the upper end of the mornings range with the S&P 500 trading in the 1681 area during the lunch hour(s).
Some early headlines that provided support: Another batch of upbeat economic data out of China. Syria accepts Russian proposal to put chemical weapons under international control – Foreign Minister, according to IFX. Weighing on crude down $2.50 midday. France to propose UN Security Council resolution to dismantle Syria’s chemical arsenal. Also, Senate Republican leader McConnell announces his opposition to the military strikes against Syria – the only one among top four congressional leaders to oppose a Syria resolution.
Well, that did not take too long to play out…Roger_Volz (11:57) Russia rejects French proposal for U.N. Security Council resolution on Syria as “unacceptable. Under threat of force…And the Syrian Foreign Minister says they are willing to cooperate fully with Russia to give up their chemical weapons…iceChat (12:41) Why on earth would Russia work to undermine its own plan just 24 hours after first proposing it? There are three ways to think about this: the optimistic view, the pessimistic view and the middle ground. http://wapo.st/1eAAk4g
After AAPL’s new product event kicked off, at 12:00CT, the stock traded from $500 area to $506.81 before fading back to new daily lows, sub $500 – as good just wasn’t good enough. iceChat (14:12) AAPL Citi positive – MARGINS SURPRISE TO THE UPSIDE – Based on our estimated BOM cost of $240, we think the GM of the 5C is 56%, above the 4S at 30% and the 5/5S at 53%.
During the afternoon session, the S&P 500 continued to trade quietly in the 1681 area. However, some spotted smoke and where there’s smoke there is… iceChat (12:54) chatter – (traders) buying downside protection spiders and SPX. However, there were no new, visible signals – other than the old September jitters… iceChat (14:12) Closing imbalances are to buy across the board…volumes decent…once again lack of any sell interest has them appearing larger than they should…some early sell side in AG’s/Retail… The early look on the closing imbalance showed (14:10) MiM – MrTopStep Imbalance Meter showing 83%, $276M to the buy side, but the imbalance flipped over the next 35 minutes while the S&P 500 continued to trade in the 1681 area… At 2:45 the SPU was trading 1681.50 area when the closing imbalance showed a modest $382M to the sell side. The cash close traded 1683 area before settling at 1682.40, up 13.3 handles on the day.
Did someone say the votes are not there?… President Obama told senators he wants Congress to delay Syria votes, in effect giving time for the Russian chemical weapons proposal to play out.
Beware…The U.S. government has returned from vacation, both the House and Senate are in session…with only 8 legislative days before the end of the fiscal year and before the current spending authority expires. Without action (including a month-long emergency extension) shutdown on Oct. 1. Treasury “X Date” May Hit As Soon As October 18th http://bit.ly/15T6Jv6
Mortgage demand is slumping following a back-up in rates, according to the WSJ. [WFC] spoke at the Barclays conf and said originations would fall to $80B in Q3 while gain-on-sale margins also would slump. A bunch of mortgage firms (including WFC and [BAC]) have said they would cut jobs in response to the lower volume outlook. Also, according to Manpower’s new survey the hiring outlook in the U.S. now stands at its strongest level since 2Q 2008 after steadily improving for four years, although still significantly below its previous peak in 2006.
Posted yesterday – Jon Hilsenrath – WSJ; The issue of tapering isn’t settled, according to Hilsenrath. One option that has gained popularity at the Fed lately: taper by a small amount (say $10B) and then emphasize to the market how further reductions will be very data-dependent and not automatic. The initial taper should be thought of as a “cautious first step.” According to Fed models, the timing of tapering isn’t all that critical, although it sends an important signal to markets, which could then begin to discount the end of the program earlier than FOMC officials would want.
People who still do not know why taper now must see this: http://vimeo.com/72371984