18 June 2013 AMC

18 June 2013 AMC

Market Summary 

Market Internals

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Technical Updates

Briefing's Commentaries 

Stock Market Update 16:20 ET Dow +138.38 at 15318.23, Nasdaq +30.05 at 3482.18, S&P +12.77 at 1651.81 : [BRIEFING.COM] The major averages ended higher across the board as the S&P 500 advanced 0.8%.  Equities climbed steadily since the opening bell as investors prepared for tomorrow's policy decision from the Federal Reserve. Although chatter in recent weeks has included speculation the Fed would look to taper its asset purchases, today's broad gains suggest investors expect mostly reassuring words from Chairman Bernanke at tomorrow's press conference.  All ten sectors ended with solid gains, but today's rally was predicated on the strength of cyclical names.  The industrial space rose 1.3% amid outperformance in transportation and defensive stocks. The Dow Jones Transportation Average advanced 1.0% as 19 of 20 components registered gains. GATX (GMT 48.05, -0.45) was the lone decliner after Stifel Nicolaus downgraded the stock to ‘Hold' from ‘Buy.'  With regards to defensive stocks, Dow component General Electric (GE 24.33, +0.56) settled higher by 2.4% after forging a strategic partnership with Accenture (ACN 82.93, +0.48). The broader PHLX Defense Index climbed 1.7%.  Discretionary stocks also made a significant contribution to today's rally as the sector displayed broad strength. The lone pocket of weakness was among homebuilders as the group ended in mixed fashion following today's housing data. New home sales for the month of May hit an annualized rate of 914,000, which was short of the 950,000 expected by the Briefing.com consensus.  Notably, single-family starts increased a minuscule 0.3% in May from 597,000 in April to 599,000. This sector tends to be very stable. The lack of solid rebound after 4.2% decline in April could signal a slowdown in overall construction levels.  Interestingly, the financial space was more tentative in its advance, posting a gain of 0.6%. Today's rise helped the sector erase its month-to-date loss.  Meanwhile, this month's top performer, telecom, was able to build on its strength. The sector ended higher by 1.3% to bring it June return to 4.1%.  Treasuries ended the day little changed as investors stood pat ahead of tomorrow's FOMC meeting. The benchmark 10-yr yield ticked up less than one point to 2.182%.  Consumer prices increased 0.1% in May, which was the first increase since February after prices fell 0.2% in March and 0.4% in April. The Briefing.com consensus expected the CPI to increase 0.2%. Surprisingly, the higher-than-expected food and energy prices from the May PPI did not pass through to consumer prices.  Energy prices increased a modest 0.4% in May after falling 4.3% in April. Gasoline prices, which caused the decline in energy prices in April, were unchanged in May. In contrast, energy prices in the PPI rose 1.3% on a 1.5% increase in gasoline costs. Meanwhile, food prices declined 0.1% in May after increasing 0.2% in April. The food at home category, which includes grocery store purchases, fell by 0.3%. That was the largest monthly decline since July 2009. Dairy product prices fell by 0.8%.  Excluding food and energy, core prices rose 0.2% in May, up from a 0.1% gain in both March and April. The consensus expected these prices to increase 0.1%.  Tomorrow, the weekly MBA Mortgage Index will be reported at 7:00 ET while the FOMC decision is set to cross the wires at 14:00 ET. ..NYSE Adv/Dec 2070/977. ..NASDAQ Adv/Dec 1729/749.

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ECONOMIC COMMENTARY

Australia Economic Data

- RBA Minutes for June meeting, for details click here

China Economic Data

- May Actual FDI +0.3% vs +0.4% in May 2012
- May Conference Board Leading Index 261.6 vs 260.8 in Apr

Japan Economic Data

- Apr final Industrial Production -3.4% vs -2.3% in prelim
- May final Machine Tool Orders -7.4% vs -7.4% prelim

Eurozone Economic Data

- May New Car Registrations -5.9% vs +1.7% in Apr

UK Economic Data

- May CPI +2.7% vs +2.4% in May 2012
- May Core CPI +2.2% vs +2.0% in May 2012
- May RPI +3.1% vs +2.9% in May 2012

Germany Economic Data

- Jun ZEW Econ Sentiment 38.5 vs 36.4 in May
- Jun ZEW Current Situations 8.6 vs 8.9 in May

U.S. Economic Data

- May CPI M/M +0.1% vs +0.2% 
- May Core CPI M/M +0.2% vs +0.2% 
- May Building Permits 974K vs 983K; Prior revised to 1005K from 1017K
- May Housing Starts 914K vs 950K; Prior revised to 856K from 853K

Housing Starts Rebound in May, Gains Below Expectations
New home starts increased 6.8% in May from an upwardly revised 856,000 (from 853,000) in April to 914,000. The Briefing.com consensus expected 950,000 new homes to be started in May. While the gain in starts was strong, it is still 9.1% below where it was in March when 1.005 mln homes were started. It was wishful thinking that starts could rebound as quickly as the consensus expected. Most of the drop in starts in April was the result of a massive pullback (32.2%) in multifamily construction. This volatile sector had been running much hotter than its long-term trend and starts will unlikely return to pace any time soon. The more worrisome trend is that single-family starts only rose a minuscule 0.3% in May from 597,000 in April to 599,000. This sector tends to be very stable. The lack of solid rebound after 4.2% decline in April could signal a slowdown in overall construction levels. Still, the number of homes under construction rose from 606,000 in April to 620,000 in May. The 2.3% increase should be enough to keep residential investment growth as a main contributor to second quarter GDP growth.

Lower-than-Expected Energy Price Growth Keeps Inflation in Check
Consumer prices increased 0.1% in May, which was the first increase since February after prices fell 0.2% in March and 0.4% in April. The Briefing.com consensus expected the CPI to increase 0.2%. Surprisingly, the higher-than-expected food and energy prices from the May PPI did not pass through to consumer prices. Energy prices increased a modest 0.4% in May after falling 4.3% in April. Gasoline prices, which caused the decline in energy prices in April, were unchanged in May. In contrast, energy prices in the PPI rose 1.3% on a 1.5% increase in gasoline costs. Food prices declined 0.1% in May after increasing 0.2% in April. The food at home category, which includes grocery store purchases, fell by 0.3%. That was the largest monthly decline since July 2009. Dairy product prices fell by 0.8%. Excluding food and energy, core prices rose 0.2% in May, up from a 0.1% gain in both March and April. The consensus expected these prices to increase 0.1%. Again, there were no unusual outliers that caused the slight acceleration in inflation. Core CPI, which is running at 1.7% y/y, is still well below the Fed's target level.

Asian Markets Close; Nikkei -0.2%, Hang Seng UNCH, Shanghai +0.1%
The major Asian bourses ended mixed amid a relatively lackluster session. Japan's Nikkei (-0.2%) slipped amid a rather tame session, for a change. Overnight, at the G8 conference, German Chancellor Angela Merkel pushed back against the new easy money policy of Japan, commenting on the impact on foreign exchange. Data out showed Chinese home prices climb 6.0% MoM while Hong Kong's unemployment rate ticked down to 3.4% (3.5% previous). Looking at the currencies...USDCNY edged up to 6.1288; USDINR climbed to 58.76; USDJPY is stronger at 95.30; AUDUSD is lower near .9455.

In Japan, the Nikkei closed -0.2% amid a choppy trade. Exporters saw a mixed fate as Toshiba added 1.1% and Panasonic shed 0.5%. Elsewhere, Sony rallied 4.4% after Third Point increased its stake in an effort to make a presentation on a partial spinoff of the co's entertainment unit.

In Hong Kong, the Hang Seng finished unchanged, giving up early gains. Mainland financials lagged after China's sovereign wealth fund increased its stake in the sector. China Construction base was among the worst performers in the space, shedding 0.5%.

In China, the Shanghai Composite settled +0.1% as property developers rallied on the back of the increase in home prices. Gemdale gained 1.7% and Poly Real Estate tacked on 0.2%. 

In India, the Sensex closed -0.5% as action was unable to retake the 50- and 100-day moving averages. Financials fell on a weak rupee with HDFC Bank giving up 1.5%. Meanwhile, telecom provider Bharti Airtel lost 1.7% after a competitor lowered roaming charges. Click here to see a daily Sensex chart.

In Australia, the ASX finished -0.2% as financials led and miners lagged. ANZ was the top performer among the big four' financials, as shares added 2.3%. Elsewhere, miners ended in the red with Rio Tinto falling 0.6% and BHP Billiton sliding 0.3%.

In Taiwan, the Taiex closed +0.2% as Acer gained 1.4%.
In South Korea, the Kospi finished +0.9% as Hyundai Motor surged 3.9%.

Jason's Commentaries



AEROSPACE/DEFENSE NEWS ...

EADS's Airbus (EADSY) has received an $11 bln order from EasyJet, according to reports 
Click Here for the Reuters.com Article

United Continental (UAL) becomes North American launch customer for Boeing (BA) 787-10 as it increases Dreamliner order to 65 
Co increased its 787 Dreamliner order to 65 aircraft (including six previously delivered aircraft) with an order for 20 787-10s. United is the North American launch customer for the 787-10 and it expects delivery of its first aircraft in 2018. United ordered 10 incremental 787-10 aircraft and will convert 10 existing 787s on order to 787-10s, enabling the airline to further modernize its international widebody fleet by replacing older, less efficient aircraft.

Alaska Air (ALK) orders three Bombardier Q400 NextGen turboprop airliners
Bombardier Aerospace announced that Horizon Air has signed a firm contract to acquire three 76-seat Bombardier Q400 NextGen turboprop airliners. The transaction represents the conversion of three previously booked options on the aircraft. The airline also reconfirmed its options on another seven Q400 NextGen aircraft. Based on the list price of the Q400 NextGen aircraft, the contract is valued at approximately $98 million. The three new aircraft will increase Horizon Air's orders for Q400 and Q400 NextGen airliners to 51 aircraft.

IAE (UTX is shareholder) is assembling the first V2500-E5 engines - selected in 2011 to power Embraer (ERJ) Defense and Security's new KC-390 multi-role tanker/transport aircraft - in June. In addition, Philippine Airlines has selected IAE International Aero Engines AG's V2500 engine to power its order for 34 A321 aircraft.

Ducommun (DCO) has received a multi-year contract from Sikorsky Aircraft, a unit of United Technologies (UTX), to continue to produce electromechanical assemblies for various models of the UH-60 BLACK HAWK helicopter.

Aerojet Rocketdyne, a GenCorp (GY) co, and Experimental Design Bureau Fakel of Kaliningrad, Russia, announced the signing of an extension to the teaming agreement between the two cos. The agreement provides Aerojet Rocketdyne with the right to market and sell Fakel's low-power Hall thrusters (<1.5kW) in the U.S. market.

China Aircraft Leasing has entered into an agreement under which IAE International Aero Engines AG will provide V2500 engines to power 11 new A320 family aircraft. IAE is a multinational aero engine consortium whose shareholders are comprised of Pratt & Whitney (UTX), Pratt & Whitney Aero Engines International GmbH, Japanese Aero Engines and MTU Aero Engines.

Aviation Capital Group has selected Pratt & Whitney PurePower PW1100G-JM engines to power 12 firm A320neo aircraft. Deliveries are scheduled to start in 2018. Pratt & Whitney is a division of United Technologies (UTX).

Jacobs Engineering Group (JEC) was awarded a contract by Polimeri Europa UK to provide services to support a major expansion at Polimeri Europa UK's plant in Grangemouth, Scotland. Officials did not disclose the contract value. Co was also selected as an awardee to provide services to the Department of Homeland Security as part of the Technical, Acquisition and Business Support Services contract (a five-year multiple-award IDIQ contract with an $11 bln funding limit).

LATAM Airlines has selected Pratt & Whitney, a division of Untied Technologies (UTX), PurePower PW1100G-JM engines to power its order of 42 firm A320neo family aircraft. Also, Pratt & Whitney has delivered the 100th F135 propulsion system, the power plant for the F-35 Lightning II, to the U.S. government.

Parker Aerospace, an operating segment of Parker Hannifin (PH), has been chosen by Rolls-Royce to partner on its Trent XWB-97 engine program. The Rolls-Royce Trent XWB-97 engine is being developed for the new Airbus (EADSY) A350 XWB-1000 aircraft. Parker estimates that the agreement will generate ~ $2.2 bln in revs over the life of the program.

Spirit Airlines (SAVE) expands aftermarket agreement with IAE; adds coverage for 86 incremental V2500 engines 
Co amended their existing V-Services fleet Hour Agreement to include coverage for 86 incremental V2500 engines. Spirit's entire current and future fleet of A320 family aircraft powered by V2500 engines will be covered by an IAE V-Services aftermarket agreement. The deal is valued at ~$700 mln.

Embraer SA (ERJ) and Boeing (BA) team to market and sell KC-390 medium-airlift aircraft 
Co are partnering on the sales and marketing of Embraer's KC-390 -- a multi-mission mobility and aerial refueling aircraft with advanced capabilities in the medium-sized airlift market. Under the agreement, Boeing is the lead for KC-390 sales, sustainment and training opportunities in the U.S., UK and select Middle East markets. Embraer will manufacture the aircraft and collaborate on sales, sustainment and training.

Boeing (BA) may be getting additional Korean Air orders, according to reports 
See related Reuters.com story.

Boeing (BA) confirms Korean Air has agreed to purchase five 747-8 Intercontinental airplanes and six 777-300ER jetliners, valued at approximately $3.6 bln

Got the call wrong last night. Was expected the market to stay flat last night however, the market went up more than 130 points. It could be the market pricing in anticipation of the Fed's decision. Volumes were much lower than average, standing at 645m shares traded on the NYSE. Bulls outpaced the bears slightly. 5 stocks on the Dow makes up most of the gains on Dow last night. While we're having the Paris Airshow, contracts are dishing out like mad. The defense and aerospace industry are likely to make a run soon. I will be expecting the market to stay sidelined at the initial part of the market. After 2pm ET, we're gonna expect some serious volatility.

Market Call: ABSTAIN

Date: 19 June 2013