Enis’s Macro Wrap – Index Flat Again, But Big Underlying Moves

by Enis November 1, 2012 7:07 am • Commentary

I mentioned in yesterday morning’s wrap that the SPX index hadn’t moved in a week.  However, in that period, we’ve had several days where there have been big underlying single stock moves.  In other words, this is a volatile market.  Just not on the index level.

For example, here were the moves larger than 2% in the SPX top 100 yesterday:

  • PFE:  -2.2%
  • C:  +2.2%
  • BAC:  +2.2%
  • AMZN:  -2.2%
  • HD:  +2.2%
  • EMC:  +2.1%
  • EBAY:  -2.5%
  • LLY:  -3.2%
  • F:  +7.7%
  • LOW:  +3.3%
  • TXN:  -2.9%
  • APC:  +3.5%
  • BIIB:  -3.3%
  • CELG:  -2.5%
  • BAX:  +2.4%
  • EOG:  +2.1%

And that’s just in the SPX top 100, where single stock volatility is more subdued than the rest of the market (since it’s the largest companies).  The moves even sometimes ran counter to sector based moves, as EMC was up more than 2% even though technology was weak, APC was up 3.5% even though energy was weak, and BAX was up 2.4% even though health care was weak.

Clearly, one reason for the big moves yesterday was month end and fiscal year end for some mutual funds.    But this focus on single stocks is why we have not traded many index ETFs for the past 3 months.  If market correlation ever does pick back up, you will see us (and others) shift to index ETFs for trading exposure.

Markets overnight:

  • SPX futures dropped 6 points right after the market closed yesterday, and have been in negative territory ever since.
  • Chinese PMI came in line to consensus estimates, at 50.2.  Other regions saw a pick up in PMI readings as well, as Taiwan, India, and Russia all had their highest readings since May.
  • The Shanghai index was up 1.7%, while the rest of Asia was mixed (Hong Kong, Japan, Taiwan higher, Korea, Indonesia and Australia lower)
  • Europe opened in the red, but has since rallied, up 0.5% now.  Interestingly, SPX futures are still red, down 0.1%.  The once wide gap between Euro Stoxx and SPX performance this year (11% at one point) has now narrowed to only 3% outperformance by the SPX year-to-date
  • Little movement in the dollar, Treasuries, or commodities overnight.
  • ADP Employment Change at 8:15 am, Jobless Claims at 8:30 am, and ISM Manufacturing at 10:00 am