S&P 500 On Three Day Losing Skid, Asian Markets Mixed On Data

U.S. markets closed a bit lower overnight with the S&P 500 adding to its losing streak in 2014. It has now lost ground for three days in a row. Mixed economic data and cautious traders added to mixed sentiment as they are waiting for the NFP due out on Friday.

Wednesday will see the minutes of the last Federal Open markets Committee meeting (FOMC) from last month. Then all eyes will be on payrolls and unemployment. The ISM non-manufacturing number came in at 53. We had expected 54.6 as it came in at 53.9 the month before. This dampened sentiment just a bit. However, new orders for factory goods expanded by 1.8 percent as that number recovered from November.

In other economic news, China’s service industry growth slowed and momentum in Europe gained in December. This indicates the recovery in Europe is ongoing, but still very much on the edge.

STOCKS

The DJIA lost 44.89 points to close at 16,425.10. The S%P 500 lost 4.6 points to finish the day at 1,826.77. Materials and consumer discretionary were hit hard. Telecommunications and financials fared better on the day. The S&P has declined for three trading sessions in a row to start 2014 off.

The tech heavy Nasdaq Composite also fell for the third straight day. The Composite lost 18.23 points to finish at 4,113.68.

For the day, for every 7 stocks that were up, 8 fell on the NYSE. We saw 669 million shares traded and the Composite volume was close to 3.3 billion.

Asian markets are mixed at the open as investors are cautious here as well.

The Nikkei continues to see profit taking as is has now fallen to its lowest level in two weeks. We fell two percent yesterday and we are currently down 0.53 percent now. The USD/JPY is falling, indicating a strengthening yen and is now below 104.

The Shanghai Composite is down 0.4 percent as it continues its bearish momentum. Beijing has “vowed” to closely watch the banking sector as the country’s regulator said it plans to help diminish liquidity problems by enforcing more supervision. Mainland banks fell 1 percent after the news. In Australia, the ASX 200 is up after its biggest one day drop on Monday. A better than expected trade deficit sparked buying as it came in at AUD$188 million. We expected to come in wider at AUD$300.

CURRENCIES

EUR/USD (1.3628) has recovered from the support near 1.3570 since being rejected near 1.39. With 1.3570 holding we could rally back to 1.3675 and 1.370. If that breaks we can revisit 1.3720 before moving lower again. If 1.3570 breaks, expect a dip to 1.35 and lower.

USD/JPY (104.331) has recovered a bit since moving below 104. We are riding a rising trend line and could still expect a rally back to 105.50. A sustained close below 104 is bearish for 103.50 but as long as that holds our target of 109 remains valid.

AUD/USD (0.8938) failed at 0.90 and has been trading near the resistance at 0.8975 ever since. We need to break that to see a rally to 0.91 or higher. Right now we could dip to 0.8750.

COMMODITIES       

WTI (93.69) continues to move lower. We are targeting 93.50 and then maybe 93. A break below that last level tests the important level squarely at 90.

WTI Brent (107.24) while we remain bullish here. We are still below 108 and run the risk of testing 105.50 and lower. As mentioned yesterday, we need to watch this closely as the bullish trend could be ending for a fall to 104.50.

Copper (3.364) our analysis has not changed from yesterday, we have risen above 3.35 and we are close to a key level at 3.40. We have to break above 3.4 to continue this rally, if not expect some profit taking towards 3.25 or 3.20.

TODAY’S OUTLOOK

All eyes are on the U.S. as the FOMC minutes from last month will be released. They reduced their asset purchases by $10 billion a month at that meeting and we will be looking for forward guidance and remarks going forward.