24 July 2013 AMC

24 July 2013 AMC

Market Summary 

Market Internals

 

The S&P 500 closed down 6 (-0.38%) at 1686, the Dow closed down 26 (-0.16%) at 15542, and the Nasdaq closed up 0.3 (+0.01%) at 3580. Action came on mixed volume (NYSE 679 mln vs. avg. of 779; NASDAQ 1742 mln vs. avg. of 1663), with decliners outpacing advancers (NYSE 751/2323, NASDAQ 981/1474) and new highs outpacing new lows (NYSE 201/63, NASDAQ 236/14). 

Relative Strength: 
Wind Energy-FAN +2.96%, Italy-EWI +1.41%, Spain-EWP +1.34%, Volatility-VXX +1.33%, France-EWQ +0.88%, Cloud Computing-SKYY +0.87%, Austria-EWO +0.82%, Technology-Software-IGV +0.71%, Greece-GREK +0.70%, Technology-XLK +0.67%.

Relative Weakness: 
Junior Gold Miners-GDXJ -5.47%, Silver Miners-SIL -4.00%, Metals and Mining-XME -3.40%, Turkey-TUR -3.36%, Coffee-JO -3.29%, Egypt-EGPT -3.20%, U.S. Home Construction-ITB -2.89%, Peru-EPU -2.10%, Vietnam-VNM -1.82%, Middle East and Africa-GAF -1.70%.

Leaders and Laggards

Sector Performance (% change of the day): Tech (+0.86%), Health Care (-0.13%), Consumer Discretionary (-0.29%), Telecom (-0.57%), Consumer Staples (-0.63%), Industrials (-0.69%), Financials (-0.84%), Materials (-0.92%), Energy (-0.96%), Utilities (-1.55%).

Technical Updates

Briefing's Commentaries 

The S&P 500 ended today's session with a loss of 0.4% after equities ran into significant resistance at the open. Although investors received a full slate of mostly better-than-expected earnings, aggressive profit-taking prevented the S&P from breaching the 1,700 level. However, today's decline comes after the benchmark index ended twelve of the past fourteen sessions with gains, climbing 4.9% during that span. 

Nine of ten sectors ended in the red while technology outperformed with a gain of 0.9%. The tech sector spent the entire session in positive territory after Apple's (AAPL 440.51, +21.52) earnings topped analyst estimates. The largest tech stock gained 5.1% but chipmakers did not fare as well. The PHLX Semiconductor Index fell 1.8% and index component Broadcom (BRCM 27.01, -4.82) tumbled 15.1% after its cautious guidance overshadowed the company's in-line report. 

Outside of technology, the health care space (-0.1%) ended ahead of the broader market. The sector received some support from Eli Lilly (LLY 52.55, +1.56) as well as biotechnology companies. Eli Lilly gained 3.1% following its earnings beat on strong revenue growth and the iShares Nasdaq Biotechnology ETF (IBB 193.01, +0.66) added 0.3%. 

On the downside, heavily-weighted energy, financials, and industrials spent the entire session in a steady decline, which prevented the S&P from staging a meaningful intraday recovery. The energy sector lost 1.0% while crude oil fell 1.8% to $105.26 per barrel. 

Elsewhere, the financial sector ended lower by 0.8% as nearly all major banks registered losses. Discover Financial (DFS 50.43, -0.28) shed 0.6% despite beating on earnings and revenue. 

Also of note, industrials were pressured by transportation-related names. The Dow Jones Transportation Average fell 1.1% as 17 of 20 components registered losses. Railroads were pressured following below-consensus earnings from Norfolk Southern (NSC 74.66, -2.21). Meanwhile, Delta Air Lines (DAL 20.80, +0.35) and United Continental (UAL 34.97, +0.41) settled with respective gains of 1.7% and 1.2% after Delta reported a bottom-line beat. 

While the three cyclical groups pressured the broader market, the rate-sensitive utilities (-1.6%) sector ended at the bottom of today's leaderboard. On a related note, Treasuries sold off before the open and held their levels throughout the session. The benchmark 10-yr yield climbed eight basis points to 2.59%. 

Today's new home sales report surprised to the upside but home builders sold off regardless. The iShares Dow Jones US Home Construction ETF (ITB 22.55, -0.67) fell 2.9%. 

Unlike existing home sales, which showed an unexpected downturn in June, new home sales increased for a third consecutive month. Sales rose 8.3% in June to 497,000 from a downwardly revised 459,000 (from 476,000) in May. The Briefing.com consensus expected sales to increase to 483,000. The June sales total was the highest since May 2008 when 504,000 new homes were sold. 

Separately, the weekly MBA Mortgage Index fell 1.2% to follow last week's decline of 2.6%. This was the sixth negative reading in a row and the tenth decline out of the past eleven weeks. 

Tomorrow, weekly initial claims and June durable orders will be reported at 8:30 ET. On the earnings front, 3M (MMM 116.33, -0.42) and Colgate-Palmolive (CL 58.47, +0.06) will report their results before the opening bell. 

The U.S. Treasury will auction $29 billion in 7-yr notes.

Commodities

Treasuries

The Treasury market got hit early and basically stayed down all day, notwithstanding a little buying push into the close. The strongest uppercut came from the Flash Composite PMI reading for the eurozone for July, which tipped back into expansion mode at 50.4. That was up from 48.7 in June and provided a measure of hope that the troubled region is poised to return to a growth mode.

Conversely, the HSBC Flash PMI estimate for China hit an 11-month low of 47.7. That headline was overshadowed, however, by the eurozone PMI reading and an underlying presumption that Chinese officials will announce some type of new stimulus to reverse the sagging fortunes of the manufacturing sector. 

The eurozone PMI report set the tone for Treasuries early which, like their counterparts in Europe, experienced broad-based selling pressure as participants unwound some safety trades. The inclination to do so was helped along by a batch of better-than-expected earnings results from blue chip companies, like Apple (AAPL 442.61, +23.62), Boeing (BA 106.90, -0.89), Ford (F 17.36, +0.42), PepsiCo (PEP 85.94, -0.27), WellPoint (WLP 87.67, +0.16), and Eli Lilly (LLY 52.54, +1.55), as well as a better-than-expected headline print for New Home Sales in June, which increased 8.3% to a seasonally adjusted annual rate of 497,000. That marked the highest level since May 2008.

Treasuries retreated to their lows for the session after the new home sales report, but ratcheted down yet another notch in the wake of the $35 bln 5-yr note auction that was met with tepid demand. 

The auction drew 1.41% and a 2.46x bid-to-cover that was in-line with the prior auction but below the 12-auction average of 2.80x. The indirect bid was solid at 53.9%, but the direct bid of 8.3% was weak as it was roughly half of the 12-auction average. Primary dealers were left with 38% of the supply. 

The bulk of today's selling efforts were concentrated along the intermediate to long end of the curve, where yields from the 5-yr note to the 30-yr bond increased 7 basis points on average.

Treasuries were spared larger losses perhaps by the fact that the stock market ran into resistance after an opening push higher that saw the S&P 500 stall just shy of 1700. The Nasdaq Composite, led by Apple, jumped more than 22 points shortly after the start of trading but eventually gave that all back and then some. It made a subsequent rebound try, but was basically flat for the day as of this writing while the Dow and S&P 500 were down 0.3% and 0.4%, respectively.

As expected, the jump in long-term rates led to some collateral damage among some of the stock market's more rate-sensitive areas like the utilities sector (-1.6%), REITs, and homebuilders. Separately, commodities also rolled over as the dollar picked up steam during the trading session. Crude futures fell $2.01 to $105.19/bbl while gold futures dropped $15.90, or 1.2%, to $1319.30/oz.

Tomorrow will produce another heavy slate of earnings reports, a $29.0 bln 7-yr note auction, and notable economic releases in the form of the weekly initial claims and June Durable Orders reports at 8:30 a.m. ET.

Next Day In View 

Today after the close look for the following companies to report:

• RELL, RT, ETFC, HWAY, AMP, SWFT, XOOM, ETH, ITC, KALU, NFX, OI, OII, SLG, TMK, AHL, AIZ, AKAM, ANGI, ARII, ASGN, BDN, BRKL, CAKE, CCI, CDNS, CLGX, CLW, CMO, CMRE, COG, CROX, CSGP, CTXS, CVTI, DAVE, EFX, EQIX, FFIV, FLS, FORR, GGG, HMN, HRC, INFN, ITMN, KEX, LOGI, LSI, MKSI, MLNX, MTSN, ORLY, PDH, PMTC, QCOM, RJF, RYL, SCI, SRCL, SUSQ, SYA, TAL, TBI, TCBI, TER, TEX, TILE, TQNT, TSCO, TWI, TYL, VAR, WDC, WLL, ZNGA, AAN, AEM, AMCC, ATR, BIDU, CLUB, IM, RRC, WRE, AVB, WSH, FB, LVS, V, FBHS, USAK, CA, TRIP, SGMO, SQNM, WCRX, SKX, EGHT

Tomorrow before the open look for the following companies to report:

• MCS, WCC, NPBC, UA, TNC, JNS, XRX, ABB, ASH, COR, CS, CWEI, JAH, LO, NAFC, PACR, SLAB, TDY, TKR, USG, VDSI, VLY, WAB, AIXG, ALK, ALXN, ASPS, BC, BCO, BG, BHE, BIIB, BLL, BMS, BMY, BSX, BWA, CAB, CAM, CCE, CELG, CFX, CL, CLI, CMS, CNX, CRI, CRR, CSH, DAN, DEST, DLX, DNKN, DO, DOW, DST, EQT, ESI, FAF, GPK, HOG, HSY, HZO, ICLR, IDCC, IMAX, IVC, KMT, LLL, LSTR, LTM, LUV, MDP, MHO, MJN, MMM, NBL, NMM, NWE, ODFL, ORI, PDS, PHM, POT, PTEN, RCL, RDWR, RS, RTN, RYN, SFE, STC, SUI, SXC, SXCP, TRS, UCBI, UFS, UTHR, VCI, WRLD, YNDX, ZMH, AEP, DHI, FLIR, GNC, GRA, LAZ, HNT, MDSO, CRY, HOT, LM, MGLN, MHFI, SIRI, PNK, ACT, ARG, BBW, CPN, GG, GM, GPI, IP, MGI, NXTM, SCOR, STRA, VNTV, DFT, KDN, KEM, PCP, ACAT, MNRO, ALKS, QSII, IXYS, GHM

On other news.... 

After Hours Gainers: 
Companies trading higher in after hours in reaction to earnings: FB +16.5%, TRIP +14.3%, NBBC +13.6%, BIDU +13.5%, TQNT +13.1%, XOOM +10.8%, FFIV +7.5%, CTXS +6.4%, CVTI +5.8%, QCOM +4.3%, CMO +4.2%, DAVE +4.1%, ETFC +4.1%, ARII +3.5%, RYL +3.2%, SYA +2.7%, WLL +2.5%, CSGP +2.2%, ITC +2.1%, V+2%, COG +1.8%, FBHS +1.8%, EGHT +1.4%, OII +1.4%, PEIX +1.4%, AEM +1.2%, FLS +1%, SKX +1%, MTSN +0.9%, AAN +0.8%

Companies trading higher in after hours in reaction to news: ATLS +4.6% (increased quarterly distribution ~42% to $0.44 from $0.31 per common unit, ARP +3.3% (increases quarterly distribution by ~6% to $0.54 from $0.51 per common unit), IMAX +2.4% (announced it expanded its worldwide partnership with Wanda and AMC Theaters), PHM +2.2% (declared $0.05 quarterly dividend; increased share repurchase authorization to $352 mln from $250 mln), COG +1.8% (announced two-for-one stock split; doubled dividend on a pre-split basis), ELN +1.8% (seeing reports that Perrigo and Forest Labs are working on making bids for ELN), BSX +1.7% (received FDA 510(k) clearance for the Rhythmia Mapping System)

After Hours Losers: 

Companies trading lower in after hours in reaction to earnings: SQNM -31.1%, CROX -21.6%, TER -8.3%, RT -6.9%, EQIX -6.1%, CAKE -5.7%, VAR -5.7%, ANGI -4.9%, WDC -3.8%, TWI -2.5%, ITMN -2.4%, INFN -2.4%, TEX -1.9%, PMTC -1.1%, LVS -0.8%, AKAM -0.7%, CMRE -0.5%, NFX -0.5%, ETH -0.5%, KEX -0.4%, AIZ-0.4%, GGG -0.3%, TSCO -0.2%, AVB -0.2%

Companies trading lower in after hours in reaction to news: HERO -3.8% (provided further information on incident on jackup drilling rig Hercules 265; has contracted an outside environmental expert to monitor currents), BHI -0.3% (disclosed it received a Civil Investigative Demand from the DoJ)
Humana announces intent to acquire American Eldercare; terms not disclosed (91.57 +0.98)
Co announced that it has signed a definitive agreement to acquire American Eldercare Inc., the largest provider of nursing home diversion services in the state of Florida. Terms of the transaction were not disclosed. Annualized revenues for American Eldercare of approximately $75 million are anticipated to increase to over $1 billion in 2015. The transaction is subject to state regulatory approvals and is anticipated to close by the fourth quarter of 2013. 


Western Digital beats by $0.15, beats on revs (67.53 -0.30)
Reports Q4 (Jun) earnings of $1.96 per share, $0.15 better than the Capital IQ Consensus Estimate of $1.81; revenues fell 21.6% year/year to $3.73 bln vs the $3.63 bln consensus.

For its fourth fiscal quarter ended June 28, 2013, the company reported revenue of $3.7 billion, hard-drive shipments of 59.9 million

Co to issue guidance on CC at 17:00




Currencies 


Strong European PMIs Boost Euro: The Dollar Index is venturing below the the 82 level for the first time in a month. The DXY is attempting to hold this level at the time of this writing. The DXY saw selling early as European PMI data came in better than expected. The DXY dipped to 81.94 on two separate occasions but saw quick rallies back to the 82.20 area. However it has been unable to hold this level. New Home Sales data this morning was mixed as the June numbers beat expectations but May saw a lower revision. Some may view it as better than feared given the concern surrounding housing after the recent spike in mortgage rates. 

• The euro was able to rally from 1.3190 to the 1,3260 level following the preliminary release of the July PMI data. Numbers across the board were better than expected. This continues a recent run of better than feared data in the region and it is helping build some confidence in the long awaited return to growth in 213. This has helped provide a bid to the euro despite the back drop of Greek and Portuguese political issues that could derail any recovery. 
• The pound gave up some of its recent gains. Sterling had pushed to the 1.54 level yesterday but has since slipped back to the 1.5350 area on relatively no news (not counting the royal baby which is the dominant focus in the region). 
• The yen was able to push to the 99.40 level in overnight trade but has been on the decline for the majority of the July 24 session. The yen fell back to 100.40 before stabilizing. News was relatively scarce which suggests the currency will continue to consolidate and straddle this key 100 psych level in coming sessions as there are few remaining catalysts left until September (FOREX, BONDX). 

Jason's Commentaries


It was rather a volatile session last night which ended up flat. Tech led the market but the rest of the sectors did not do as well. The worst laggard is Utilities followed by Energy which lagged at 1.52% and 1.11%. Tech was mainly held up by Apple, which gained 5.14% and HP which gained 1.48%. Volumes as usual was weaker than average at 678m shares traded. Internals were pointing towards a bearish day and VIX gained substaintially as well. On the technical note, Dow is finding support at 15500 and we might see more volatile days to come as the earning seasons continues. Crude oil dropped from $107.5 to $105 last night. Gold, Silver and Copper also sunk last night.

Market Call: Flat to downside

Date: 25 June 2013