SG Market (31 Jul 14)

US Market: US shares ended mixed as a surprisingly strong 2Q GDP growth was offset by weaker earnings and Fed’s decision to taper its stimulus for a sixth consecutive month. The DJIA fell 32 pts to 16,880 (-0.2%), while the S&P 500 was flat at 1,970 (unch) and the Nasdaq Composite added 20 pts to 4,463 (+0.5%). Markets opened broadly higher as the economy accelerated by a better-than-forecast 2Q growth of 4%, reversing from a revised 2.1% contraction in the 1Q. Separately, the private sector added 218,000 payrolls, a decline from the 281,000 gain in Jun, but the reading did little to change perceptions that the economy is strengthening. But the key indices tilted lower after the central bank scaled back its monthy bond purchases by another US$10b to US$25b as expected, but held its base fed funds rate near zero. The only notable shift was that the FOMC dropped its previous expression of concern over low inflation. This drove the 10Y treasury yield up 9bps to 2.55%. Banking stocks advanced, including BofA (+1.6%), Citigroup (+1.2%) and Wells Fargo (+1.1%), while biotechnology stocks rose 1%, led by better-than-expected earnings from Amgen (+5.4%) and Edwards Lifesciences (+10%). Twitter bolted 20% higher after its 2Q revenue more than doubled to US$312m with number of active users surging 24% to 271m. Online shop and hotel listing service Yelp jumped 8.8% after posting 2Q profit vs a loss the previous year. Goodyear leapt 8% after 2Q earnings beat estimates. S’pore shares are ripe for a pullback as STI extends into grossly overbought territory on deteriorating momentum. Topside resistance is tipped at 3,360 with underlying support at 3,280. US Market: US shares ended mixed as a surprisingly strong 2Q GDP growth was offset by weaker earnings and Fed’s decision to taper its stimulus for a sixth consecutive month. The DJIA fell 32 pts to 16,880 (-0.2%), while the S&P 500 was flat at 1,970 (unch) and the Nasdaq Composite added 20 pts to 4,463 (+0.5%). Markets opened broadly higher as the economy accelerated by a better-than-forecast 2Q growth of 4%, reversing from a revised 2.1% contraction in the 1Q. Separately, the private sector added 218,000 payrolls, a decline from the 281,000 gain in Jun, but the reading did little to change perceptions that the economy is strengthening. But the key indices tilted lower after the central bank scaled back its monthy bond purchases by another US$10b to US$25b as expected, but held its base fed funds rate near zero. The only notable shift was that the FOMC dropped its previous expression of concern over low inflation. This drove the 10Y treasury yield up 9bps to 2.55%. Banking stocks advanced, including BofA (+1.6%), Citigroup (+1.2%) and Wells Fargo (+1.1%), while biotechnology stocks rose 1%, led by better-than-expected earnings from Amgen (+5.4%) and Edwards Lifesciences (+10%). Twitter bolted 20% higher after its 2Q revenue more than doubled to US$312m with number of active users surging 24% to 271m. Online shop and hotel listing service Yelp jumped 8.8% after posting 2Q profit vs a loss the previous year. Goodyear leapt 8% after 2Q earnings beat estimates. S’pore shares are ripe for a pullback as STI extends into grossly overbought territory on deteriorating momentum. Topside resistance is tipped at 3,360 with underlying support at 3,280.