15 Aug 2013 AMC

15 Aug 2013 AMC

Market Summary 

Market Internals

Market Internals
The Nasdaq closed down 63 (-1.72%) at 3606, the Dow closed down 225 (-1.47%) at 15112, and the S&P 500 closed down 24 (-1.43%) at 1661. Action came on mixed volume (NYSE 721 mln vs. avg. of 745; NASDAQ 1678 mln vs. avg. of 1620), with decliners outpacing advancers (NYSE 483/2645, NASDAQ 478/2065) and new lows outpacing new highs (NYSE 20/406, NASDAQ 37/47).

Relative Strength: 
Gold Miners-GDX +6.03%, Volatility-VXX +5.31%, Silver-SLV +5.03%, Corn-CORN +3.58%, Grains-JJG +2.57%, Swiss Franc-FXF +0.98%, British Pound-FXB +0.86%, Japanese Yen-FXY +0.82%, Canada-EWC +0.65%, New Zealand-ENZL +0.28%.

Relative Weakness: 
Egypt-EGPT -3.00%, Clean Energy-PBW -2.85%, Biotechnology-XBI -2.69%, Greece-GREK -2.62%, Cloud Computing-SKYY -2.51%, Indonesia-IDX -2.32%, Biotechnology-IBB -2.23%, Internet Composite-FDN -2.23%, Turkey-TUR -2.06%, Mexico-EWW -1.73%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: Stocks Succumb to Broad Pressure
The S&P 500 ended lower by 1.4% as broad-based weakness persisted throughout the session. Stocks slumped at the open after disappointing guidance from Cisco Systems (CSCO 24.48, -1.89) and Wal-Mart (WMT 74.41, -1.99) combined with a spike in Treasury yields pressured the major averages. 

Networking company Cisco reported a slight earnings beat, but its cautious demand outlook coupled with news of 4,000 layoffs caused the stock to slump 7.2%. 

Separately, Wal-Mart fell 2.6% after reporting in-line results, and saying current quarter same-store sales are expected to be essentially flat. 

In addition, the 10-yr yield spiked to its highest level in two years after today's jobless claims, in-line inflation, and the better-than-expected Empire Manufacturing data were perceived as supportive of the Fed cutting back on its asset purchases as early as September. The benchmark 10-yr yield ended higher by six basis points at 2.78% after climbing as high as 2.82%. Although yields ended off their highs, stocks settled on their lows. 

All ten sectors finished in the red with seven of ten groups posting losses larger than 1.0% while, energy (-0.7%), materials (-0.8%), and telecom services (-0.9%) outperformed. 

Of the three sectors, the materials space staged a notable partial recovery off its opening lows as gold miners contributed to the rebound. The Market Vectors Gold Miners ETF (GDX 30.43, +1.73) jumped 6.0% as gold futures advanced 2.2% to $1362.50 per troy ounce. Despite today's decline, the materials sector continues to hold an August gain of 1.4%. 

Outside of materials, only the technology sector remains in positive territory for the month (+0.6%). However, the group led to the downside today as all top components registered losses. High-beta chipmakers underperformed as well with the PHLX Semiconductor Index falling 2.2%. 

The technology sector was followed closely by the discretionary space. Although the sector tumbled 1.8%, homebuilders registered broad gains. The iShares Dow Jones US Home Construction ETF (ITB 21.30, +0.49) gained 2.4% after declining steadily through the first half of the month. Despite today's advance, the home builders ETF remains lower by 4.4% in August, and essentially flat for the year. The industry group rallied today after the August NAHB Housing Market Index rose to 59 from 56. 

Today's opening sell off caused the CBOE Volatility Index (VIX 14.55, +1.51) to break out of its recent range after spending the entire month between 11.83% and 13.91%. The near-term volatility measure ended at its best level since mid-July as participants scrambled in search of protection. 

Economic data was plentiful. The initial claims level fell to 320,000 for the week ending August 10 from an upwardly revised 335,000 (from 333,000) for the week ending August 3. That was the lowest initial claims reading since October 2007. The Briefing.com consensus expected the initial claims level to increase to 339,000. More importantly, the Department of Labor announced that there was nothing unusual in the claims data. The large drop in layoffs was a result of improvement in labor conditions and not from statistical anomalies. 

Industrial production was flat in July after increasing a downwardly revised 0.2% (from 0.3%) in June. The Briefing.com consensus expected industrial production to increase 0.4%. The report serves as a prime example of why we do not follow the ISM and regional manufacturing surveys very closely. 

According to the surveys, production levels in July increased to their highest point since May 2004 and had the largest one-month gain since June 2009. If these surveys accurately portrayed the manufacturing sector, then the manufacturing component of industrial production should have risen by at least 1.0% in July. In actuality, manufacturing production declined 0.1% in July after rising a downwardly revised 0.2% (from 0.3%) in June. 

Moving on, the Philadelphia Fed's Business Outlook dropped from 19.8 in July to 9.3 in August. The consensus expected the index to fall to 10.0. 

Also of note, consumer prices rose 0.2% in July. That was down from a 0.5% gain in June and exactly what the Briefing.com consensus expected. Energy prices were up 0.2% after increasing 3.4% in June. Gasoline costs increased 1.0%, but much of that gain was offset by a 2.8% decline in residential natural gas prices. Food prices rose 0.1%. Excluding food and energy, core prices rose 0.2% for a third consecutive month, which is what the consensus expected. 

Tomorrow, July housing starts, building permits, second quarter productivity, and unit labor costs will all be reported at 8:30 ET. In addition, the preliminary reading of the August Michigan Consumer Sentiment Survey will cross the wires at 9:55 ET.

Commodities

NYMEX Energy Closing Prices

·         Sep crude oil rose $0.48 to $107.34/barrel 

o    Crude oil rose for a fifth consecutive session on growing supply concerns over the escalating violence in Egypt. The energy component briefly dipped to a session low of $106.69 but quickly rose back into positive territory. It eventually settled with a 0.4% gain. 

·         Sep natural gas rose 8 cents to $3.42/MMBtu 

o    Natural gas extended yesterday's gains following better-than-anticipated inventory data. Inventories showed a build of 65 bcf when a larger build of 69-70 bcf was expected. It rose to a session high of $3.43 and settled just below that level, booking a gain of 2.4%. 

·         Sep heating oil rose 2 cents to $3.07/gallon 

·         Sep RBOB gasoline rose 4 cents to $2.98/gallon

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Dec corn rose 18 cents to $4.73/bushel 

·         Sep wheat rose 8 cents to $6.38/bushel 

·         Nov soybeans rose 27 cents to $12.65/bushel 

·         Sep ethanol rose 5 cents to $2.25/gallon 

·         Nov sugar (#16 (U.S.)) rose 0.14 of a penny to 20.44 cents/lbs

COMEX Metals Closing Prices

·         Dec gold rose $26.60 to $1359.70/ounce 

o    Gold slipped to a session low of $1317.90 following numerous economic data released this morning that included Initial Claims and CPI. However, the yellow metal found buying support and lifted into positive territory in late morning action. It then rallied to a session high of $1367.90 as chatter circulated that a tier 1 firm was buying gold and while CNBC aired a story of an explosion in Lebanon, although the news had been out earlier. The dollar index sold-off sharply at the same time. Gold eventually settled slightly below its session high, booking a 2.0% gain.

·         Sep silver rose $1.13 to $22.91/ounce 

o    Silver also lifted to a session high of $23.19 after trading as low as $21.70 in morning action. It settled with a solid 5.2% gain. 

·         Sep copper settled unchanged at $3.34/lb

Closing Commodities: Precious Metals Surge Higher

·         Sep crude oil rose for a fifth consecutive session as supply concerns increased over the escalating violence in Egypt. The energy component traded as high as $107.85 per barrel and settled with a 0.4% at $107.34 per barrel.

·         Sep natural gas gained support on inventory data that showed a build of 65 bcf when a larger build of 69-70 bcf was anticipated. Prices rose as high as $3.43 per MMBtu from a session low of $3.31 per MMBtu.

·         Natural gas settled 2.4% higher at $3.42 per MMBtu.Dec gold and Sep silver slipped to their respective session lows of $1317.90 and $21.70 per ounce following numerous economic data released this morning that included Initial Claims and CPI. However, both metals found buying support and lifted into positive territory.

·         Gold surged in a late rally to a session high of $1367.90 per ounce as chatter circulated that a tier 1 firm was buying gold and while the dollar index sold off sharply. It settled with a 0.4% gain at $1359.70 per ounce.

·         Silver popped to a session high of $23.19 per ounce and settled with a solid 5.2% gain at $22.91 per ounce.

Treasuries

Longer Dated Yields Close at Two-Year Highs: 10-yr: -15/32..2.772%..USD/JPY: 97.31..EUR/USD: 1.3354
Treasuries ended modestly lower, trimming their losses in afternoon trade. The complex tumbled to session lows in response to this morning's better than expected initial claims data, which saw a print of 320K (339K expected), the lowest since October 2007. The sharp selloff ran yields at the long end to their highest levels in two years as the 10-yr probed 2.820% and the 30-yr jumped above 3.835%. Yields hovered in a tight range for the remainder of the morning before easing into the close. Most yields ended the day higher by close to 4 bps with the 10-yr settling at 2.755%, its highest close in two years. Interestingly, the 2-yr yield ticked up 2 bps on the session, settling at 0.354%, but remained well below the June high of 0.430%. Curve steepening developed as the 2-10-yr spread widened to 240 bps. Elsewhere, precious metals saw heavy buying as gold rallied $30 to $1363 and silver surged $1.25 to near $23.05. Data concludes for the week on Friday with housing starts, building permits, productivity-prel., unit labor costs (8:30), and Michigan Sentiment (9:55). 

Next Day In View 

On other news.... 

Notable earnings out after the bell

·         Dell (DELL) is expected to report Q2 (July) non-GAAP EPS of $0.24 (vs. $0.50 last year) on rev of $14.15 bln (-2%). Q1 EPS came in at $0.21 on rev of $14.07 bln vs. ests of $0.35 and $13.5 bln. Co has missed earnings expectations 3 of the last 5 quarters. Dell's margins have been squeezed by lower cost Asian cos; meanwhile, global PC shipments continue to decline/disappoint as the trend towards mobile computing continues. Nearly one fourth of the co's rev now comes from services/software. Founder/CEO Michael Dell is trying to take the co private. Dell would rather not go through the necessary restructuring under the scrutiny of Wall Street. After much back and forth, Dell has most recently agreed to be taken private by Founder/CEO Michael Dell and Silver Lake for $13.75/share in cash plus a $0.13 special dividend, the latest revision also states that the majority of shareholders must vote against it to block the deal. Carl Icahn has accumulated a large position and filed litigation to prevent the latest deal from going through, as he claims th co is worth much more. While DELL's stock may not move much on the report given the pending takeover, the Street will be watching closely due to the implications for HPQ's business as well as the rest of the PC supply chain (QQQ, SMH). 

·         Nordstrom (JWN) is expected to report Q2 EPS of $0.88 on sales +10% y/y to $3.2 bln and comps +6.7%. The earnings release will include updated FY14 outlook (sales given as %)—current estimates are for EPS of $3.78 (in-line with $3.65-3.80 prior guidance), total sales +5.7% to $12.43 bln (+4-6% prior guidance), comps +3.9% (+3-5% prior guidance). JWN may also provide quarterly EPS/comps expectations in comparison to its FY14 outlook; M disapointed th eeStreet yesterday while KSS was better than feared this morning; JCP reports on Tuesday morning.

Currencies 

Dollar Takes Afternoon Slide: 10-yr: -12/32..2.758%..USD/JPY: 97.43..EUR/USD: 1.3338
The Dollar Index saw a tight range for most of the session, but a sharp drop in afternoon trade has action on track to post a loss of 0.6%. The afternoon slide has pushed the Index onto the 81.20 level with trade holding just above a two-month closing low. 

·         EURUSD is +80 pips at 1.3340 with trade seeing a sharp reversal off session lows. The single currency tested the 1.3200 area early in the session, is now testing minor resistance as bulls look ahead to another retest of the June and August highs near 1.3400. Eurozone CPI will accompany the current account balance. Click here to see a daily EURUSD chart.

·         GBPUSD is +140 pips at 1.5645 with today's bid catapulting trade above the 200-day moving average. Sterling bulls took charge following today's solid British retail sales number, and now have their sights set the June highs near 15700/1.5750.

·         USDCHF is -95 pips at .9255 after early buying was rejected by the 50- and 200-day moving averages. Today's sharp slide has action looking to retest key support in the .9200 area. 

·         USDJPY is -70 pips at 97.30 after sellers emerged in defense of 98.00 resistance as the convergence of the 50- and 100-day moving averages, as well as trendline resistance off the May highs proved too much for the bulls to handle. A breakdown of the 96.00 level sets up a potential test of 94.00 and the 200-day moving average. 

·         AUDUSD is +15 pips at .9140 as action has seen a steady climb over the course of the day. The .9200 area has provided some resistance over the past week, but a real victory for the bulls would be the ability to reclaim .9300. 

·         USDCAD is -25 pips at 1.0310 after early buying was rejected by the 50-day moving average for a second session. Today's weakness sets up another test of the 100-day moving average. Canadian data includes manufacturing sales and foreign securities purchases.

Jason's Commentaries


What a bloodshed last night.. That was totally out of my expectation. With the support level broken at 15400 points, the effect was quite huge. Coupled the breaking of the 50MA on indices certainly caused some medium term fear. Market started with a 0.8% loss on the futures which quickly turn into more than 150 drops on the Dow. The main laggards in the market was mainly the Tech with Cisco down 7.18%, HP down by 4.53% and Intel down by 2.33%. Across the board, it was a sea of red. Nonetheless, volume were only standing at 721m shares(correction of 620m shares previously) traded on the NYSE, which is not as terrific. I reckon it's a total irrational day where many alog traders got stopped out which caused the massive sell off. On top of that, Cisco dropped 7%? Come on... Cutting jobs is good for the company profits...It was irrational... there're still some upside to go before we go down big time.. I believe market might retrace a little today to the upside.

Market Call: Flat to upside

Date: 15 Aug 2013