22 Aug 2013 AMC

22 Aug 2013 AMC

Market Summary 

Market Internals

Market Internals -Technical-
The Nasdaq closed up 39 (+1.08%) at 3639, the S&P 500 closed up 14 (+0.86%) at 1657, and the Dow closed up 66 (+0.44%) at 14964. Action came on below average volume (NYSE 573 mln vs. avg. of 741; NASDAQ 892 mln vs. avg. of 1590), with advancers outpacing decliners (NYSE 2605/508, NASDAQ 1961/519) and new lows outpacing new highs (NYSE 69/74, NASDAQ 79/19).

Relative Strength: 
Coal-KOL +4.61%, India-INP +3.67%, Metals and Mining-XME +3.22%, Copper Miners-COPX +2.94%, Steel-SLX +2.87%, China 25 Index-FXI +2.70%, Silver Miners-SIL +2.49%, Italy-EWI +2.39%, Poland-EPOL +2.18%, Spain-EWP +2.15%.

Relative Weakness: 
Corn-CORN -3.32%, Volatility-VXX -2.39%, Turkey-TUR -2.14%, Grains-JJG -2.06%, Agriculture-DBA -1.08%, Livestock-COW -1.07%, Japanese Yen-FXY -0.91%, Malaysia-EWM -0.76%, British Pound-FXB -0.60%, Canadian Dollar-FXC -0.40%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: Stocks Climb Despite Intraday Halt
The major averages registered gains across the board, but a three-hour halt of all Nasdaq-listed issues prevented normal trading from taking place throughout the afternoon. 

Stocks climbed out of the gate after upbeat survey data from China and the eurozone reassured investors. China's HSBC Manufacturing PMI jumped to 50.1 from 47.7 (48.3 expected) while the eurozone Manufacturing PMI improved to 51.3 from 50.3 (50.8 forecast). In addition, the Services PMI reading rose to 51.0 from 49.8 (50.2 expected). 

The economic data provided a boost to growth-sensitive sectors as five of six cyclical groups registered gains larger than 1.0%. The technology sector lagged with an advance of 0.5%. The largest sector component, Apple (AAPL 502.96, +0.60), ended little changed and Dow member Hewlett-Packard (HPQ 22.22, -3.16) endured its worst session in two years, falling 12.5%, after reporting in-line results and saying it is unlikely to experience revenue growth in 2014. 

Speaking of technology, the tech-heavy Nasdaq fell victim to an early-afternoon glitch that kept all member shares from trading for three full hours. The impact could be felt across other indices as they drifted inside narrow ranges on thin volume. 

Once normal trading resumed during the final hour of the day, the major indices rose to fresh highs. The S&P tested its 50-day moving average, but could not settle above that level. 

The energy sector finished atop the leaderboard with a gain of 1.4% as crude oil advanced 1.2% to $105.05 per barrel. 

Interestingly, the discretionary sector also finished among the leaders despite weakness in the retail space. Recent quarterly reports from retailers have not reflected very well on consumer spending. That theme remained in effect today as Abercrombie & Fitch (ANF 38.53, -8.27) missed on earnings and revenue while guiding third quarter earnings below analyst expectations. The SPDR S&P Retail ETF (XRT 79.14, +0.12) ended little changed, but the discretionary sector climbed 1.1% with home builders contributing to the strength. 

Treasuries registered losses as the benchmark 10-yr yield added nearly five basis point to 2.90%. 

Trading volume was well below average with only 573 million shares changing hands on the floor of the NYSE as the afternoon Nasdaq halt took a bite out of activity. 

Investors received a handful of economic data today. The initial claims level rose to 336,000 for the week ending August 17 from an upwardly revised 323,000 (from 320,000) for the week ending August 10. The Briefing.com consensus expected the initial claims level to increase to 337,000. The upward move in the initial claims level is likely just normal volatility. Over the past four weeks, moving average for initial claims has dropped to its lowest level since November 2007. 

Separately, the Conference Board's Index of Leading Indicators increased 0.6% in July after holding flat in June. That was the strongest increase since increasing 0.8% in April. The Briefing.com consensus expected the index to increase 0.5%. 

Since eight of the 10 components of the index are known prior to the release, the difference between the actual number and the consensus is typically minor. In this case, a smaller-than-expected decline in manufacturers' new orders of nondefense capital goods excluding aircraft was the likely cause for the small upside surprise. 

Lastly, the June FHFA Housing Price Index rose 0.7% to follow last month's 0.8% increase. 

Tomorrow's economic data will be limited to July new home sales with the report set to be released at 10:00 ET.

Markets across Asia were mostly lower as only India's Sensex (+2.3%) and Hong Kong's Hang Seng (+0.4%) ended in the green. Today's advance was the first in five days for the Sensex and came despite the rupee hitting a record low 65.55 against the dollar. In addition to the rupee, Indonesia's rupiah, Malaysia's ringgit, and Thailand's baht all fell to multi-year lows against the greenback. Overnight, Fitch held its sovereign rating for India at ‘BBB-‘ while maintaining a ‘Stable' outlook. Elsewhere, China's Shanghai Composite (-0.3%) slipped despite the HSBC Flash Manufacturing PMI posting an expansionary reading of 50.1 (48.3 expected, 47.7 previous) as the better than expected number provided some push back against hopes Beijing would move to stimulate the economy. The Philippines PSEi tumbled 6.0% in its first session of the week. Data from the rest of the region was limited to Taiwan's unemployment rate, which held at 4.2%. 

·         In Japan, the Nikkei shed 0.4% as trade closed at its lowest level in nearly two months. Exporters were generally stronger thanks to the weaker yen as Honda Motor added 0.7% and Toyota tacked on 0.3%. Meanwhile, Tokyo Electric Power sank another 4.1% as it deals with leaking radioactive water. 

·         Hong Kong's Hang Seng added 0.4% as commodity-related plays led the way. China Shenhua Energy rallied 2.3% and Jiangxi Copper tacked on 1.5%. Elsewhere, telecom equipment maker ZTE gained 1.5% following its better than expected quarterly results. 

·         In China, the Shanghai Composite slipped 0.3% amid a choppy trade. Brokerage firms remained weak as the fallout continued from last week's flash smash higher. Everbright Securities gave up another 2.8% before being halted midday. 

Major European indices trade with solid gains across the board after core economies reported their preliminary PMI readings. Germany's Manufacturing PMI climbed to 52.0 from 50.7 (51.2 consensus) while the Services PMI increased to 52.4 from 51.3 (51.8 expected). Elsewhere, French Manufacturing PMI remained unchanged at 49.7 (50.3 forecast) while the Services PMI slipped to 47.7 from 48.6 (49.2 expected). As a result, the aggregate Eurozone Manufacturing PMI increased to 51.3 from 50.3 (50.8 forecast) while the Services PMI rose to 51.0 from 49.8 (50.2 expected). Separately, Swiss trade surplus narrowed to CHF2.38 billion from CHF2.82 billion (CHF2.91 billion expected). In headlines of note, Bank of England member Martin Weale said the central bank has not ruled out implementing fresh stimulus measures. 

·         In Great Britain, the FTSE is higher by 0.9% as miners outperform following upbeat HSBC Manufacturing PMI data from China. Antofagasta, Glencore Xstrata, and Vedanta Resources are all up between 2.6% and 3.0%. 

·         France's CAC trades up 0.9% as financials lead the way. BNP Paribas and Societe Generale are both up near 2.5%. On the downside, Publicis Groupe holds a loss of 0.8%. 

·         In Germany, the DAX holds a gain of 1.1% as 28 of 30 components trade higher. Commerzbank and Deutsche Bank are in the lead with respective advances of 4.6% and 2.4%. K+S and Merck are the only two decliners as they sport respective losses of 1.9% and 0.5%. 

In domestic economic data, the June Housing Price Index from the FHFA increased 0.7%, which follows a 0.8% uptick observed during the prior month.

Commodities

Closing Commodities: Crude Oil Ends 1.1% Higher, Natural Gas Gains 2.6%

·         Oct crude oil lifted off its session low of $103.80 per barrel moments after equities markets opened. It touched a session high of $105.18 per barrel and settled at $104.99 per barrel, or 1.1% higher

·         Sep natural gas extended yesterday's gains when a better-than-anticipated inventory build of 57 bcf (consensus called for a build of 66-69 bcf) pushed prices to a session high of $3.56 per MMBtu. It eventually settled with a 2.6% gain at $3.55 per MMBtu

·         Dec gold and Sep silver rose to their respective session highs of $1381.40 and $23.33 per ounce after data released this morning showed the initial claims level rose to 336,000 for the week ending Aug 17 from an upwardly revised 323,000 for the week ending Aug 10.

·         However, both metals pulled-back as they headed into afternoon floor trade. Gold settled just 60 cents higher at $1370.60 per ounce while closed at $23.03 per ounce, booking a 0.3% gain

NYMEX Energy Closing Prices

·         Oct crude oil rose $1.11 to $104.99/barrel 

o    Crude oil rose today, lifting from its session low of $103.80 set moments after equities markets opened. The energy component advanced to a session high of $105.18 and settled just below that level, booking a gain of 1.1%. 

·         Sep natural gas rose 9 cents to $3.55/MMBtu 

o    Natural gas extended yesterday's gains following better-than-anticipated inventory data. It touched a session high of $3.56 and eventually settled with a 2.6% gain. 

·         Oct heating oil fell 1 cent to $3.07/gallon 

·         Oct RBOB gasoline rose 2 cents to $2.84/gallon

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Dec corn fell 19 cents to $4.64/bushel 

·         Sep wheat fell 9 cents to $6.30/bushel 

·         Nov soybeans fell 14 cents to $12.88/bushel 

·         Sep ethanol settled unchanged at $2.30/gallon 

·         Nov sugar (#16 (U.S.)) fell 0.05 of a penny to 20.40 cents/lbs o:p>

Treasuries

Treasuries Fall for Seventh Time in Nine Days: 10-yr: -01/32..2.902%..USD/JPY: 98.66..EUR/USD: 1.3350
Treasuries were saddled with losses for the seventh time in the past nine sessions as sellers remained in control following yesterday's FOMC Minutes, which the market believes signaled the beginning of the end of the Fed's bond buying program. Most of today's losses actually came shortly after yesterday's cash close as heavy selling developed in the final hour of trade for U.S. equities. Traders were on the lookout all day long for headlines coming out of the Kansas City Fed's Jackson Hole Symposium, but were rather disappointed with the lackluster results. Selling had the biggest impact on the belly of the curve as the 5-yr yield tacked on another 8 bps to close at 1.686%, its highest since July 2011. Meanwhile, the 10-yr yield tested the 2.940% level in overnight action before ending the day up 4.5 bps at 2.901%. Significant outperformance could be seen in the wings of the curve as the 2- and 30-yr yield closed little changed at 0.396% and 3.885%, respectively. Curve steepening persisted as the 2-10-yr spread widened to 249.5 bps. Elsewhere, precious metals gained as gold climbed $5 to $1375 and silver added $0.15 to near $23.10. Friday's data is limited to new home sales (10). The Kansas City Fed's Jackson Hole Symposium continues. STL's Bullard will be in Memphis, TN speaking on monetary policy and the U.S. economy

Next Day In View 

Economic Commentary

Economic Summary: Jobless Claims in line with expectations; Leading Indicators slightly ahead of estimates; Jackson Hole 2013 begins today
Economic Data Summary:

·         Weekly Initial Claims 336K vs Briefing.com consensus of 337K; Last Week was revised to 323K from 320K

·         Weekly Continuing Claims 2.999 M vs Briefing.com consensus of 2.959 M ; Last Week was revised to 2.970 M from 2.969 M

o    y. Over the past four weeks, moving average for initial claims has dropped to its lowest level since November 2007. That is a sure sign that labor market conditions have substantially improved over the previous month. The current level of initial claims supports payroll gains in the neighborhood of 200,000 per month. The continuing claims level increased from a slightly upwardly revised 2.970 mln (from 2.969 mln) for the week ending August 3 to 2.999 mln for the week ending August 10. The consensus expected the continuing claims level to fall to 2.959 mln.

·         June FHFA Housing Price Index 0.7% vs Briefing.com consensus of ; May was 0.7%

·         July Leading Indicators 0.6% vs Briefing.com consensus of 0.5%; June was 0.0%

o     The Briefing.com consensus expected the index to increase 0.5%. Since eight of the 10 components of the index are known prior to the release, the difference between the actual number and the consensus is typically minor. In this case, a smaller-than-expected decline in manufacturers' new orders of nondefense capital goods excluding aircraft was the likely cause for the small upside surprise. 

Upcoming Economic Data:

·         July New Home Sales due out Friday at 10:00 (Briefing.com consensus of 485K; June was 497K)

Upcoming Fed/Treasury Events:

·         Fed's Jackson Hole Conference begins today. We will have updates on any notable comments from the conference.

Other International Events of Interest

·         In India, the rupee continued its slide to fresh record lows against the dollar with the dollar/rupee pair rising to a session high of 65.56 before slipping back to its current 64.90. 

·         China's HSBC Manufacturing PMI jumped to 50.1 from 47.7 (48.3 expected). 

·         Eurozone Manufacturing PMI increased to 51.3 from 50.3 (50.8 forecast) while the Services PMI rose to 51.0 from 49.8 (50.2 expected). 

On other news.... 

NASDAQ issues statement on Securities Industry Processor (30.46 )
NASDAQ OMX issued the following statement:

"Earlier this afternoon, NASDAQ OMX became aware that price quotes were not being disseminated by the Securities Industry Processor (SIP), which consolidates and disseminates all prices for the industry.Responding to the SIP issue, in order to protect the integrity of the markets, NASDAQ OMX issued a regulatory halt for all trading in NASDAQ-listed securities. In the first 30 minutes, technical issues with the SIP were resolved. For the remaining period of time, NASDAQ OMX, other exchanges, regulators and market participants coordinated with each other to ensure an orderly re-opening of trading in NASDAQ-listed securities. Trading resumed and the balance of the trading day finished in normal course.NASDAQ OMX will work with other exchanges that are members of the SIP to investigate the issues of today, and we will support any necessary steps to enhance the platform."




General Dynamics awarded U.S. Special Operatins Command contract worth up to ~$562.2 mln (84.50 +0.79)
Co and Tactical Systems of St. Petersburg, Fla., was awarded an indefinite-delivery/indefinite-quantity contract with firm-fixed-price, cost-plus-fixed-fee and cost delivery orders (or any combination of those) contract with total ceiling of $562,210,980 for the purchase of Ground Mobility Vehicles 1.1 (GMV 1.1). The GMV 1.1 is a highly mobile, C/MH-47-transportable platform with associated manuals, spare parts, mechanical/operator training and a Government Furnished C4ISR suite non-developmental item with Special Operations Forces-peculiar modifications. The majority of the work will be performed in St. Petersburg, Fla., and Ladson, S.C. The term of the contract is seven years, and is expected to be completed by September 2020. This contract will be funded at the delivery order level. One delivery order will be issued at the time of contract award and funded with $9,807,029 of research, development, test and evaluation funds, under fiscal 2012 and 2013, and $4,999,500 procurement funds under fiscal 2012 and 2013.

European Markets Closing Prices
European markets are now closed; stock markets across Europe performed as follows:

·         UK's FTSE: + 0.9%

·         Germany's DAX: + 1.4%

·         France's CAC: + 1.1%

·         Spain's IBEX: + 2.0%

·         Portugal's PSI: + 2.2%

·         Italy's MIB Index: + 2.6%

·         Irish Ovrl Index: + 0.9%

·         Greece ATHEX Composite: -0.6%

Currencies 

Dollar Firms in Sleepy Trade: 10-yr: -03/32..2.904%..USD/JPY: 98.64..EUR/USD: 1.3358
The Dollar Index has held in a tight 10 cent for most of the U.S. session as a rather sleepy trade looks ahead to the final hour. An early bid provided a test of the 200-day moving average near 81.70, but that level was rejected and trade pushed down to 81.50. Most of today's U.S. trade has been locked between 81.40/81.50. Click here to see a daily Dollar Index chart. 

·         EURUSD is +5 pips at 1.3365 as trade has seen a sharp reversal off the overnight lows. The single currency dipped below 1.3300 in early action but has seen a slow climb throughout U.S. trade, managing to retake minor support. Earlier, Flash Manufacturing and Services PMI data mostly topped estimates with only French readings being weak. Eurozone data is light with just Belgium's NBB Business Climate set for release. 

·         GBPUSD is -65 pips at 1.5590 as sellers have been in control throughout the session following dovish comments from a usually hawkish member of the Monetary Policy Committee. Martin Weale suggested more QE would likely be necessary if the economic recovery in the UK were to falter. Near-term support rests in the 1.5530 area and aided by the 200-day moving average. Britain's Second Estimate GDP, preliminary business investment, and BBA mortgage approvals are due out tomorrow. 

·         USDCHF is +15 pips at .9235 as trade clings to small gains. The pair continues to hold key support in the .9200 area, but has slipped well off its best levels of the session (.9290).

·         USDJPY is +90 pips at 98.60 as trade gains for a second session. Traders continue to watch the 89.00 area where trendline resistance collides with the 50- and 100-day moving averages. 

·         AUDUSD is +30 pips at .9005 as trade has regained minor support in the area. Today's advance comes on the heels of last night's expansionary Chinese HSBC Flash Manufacturing PMI number. 

·         USDCAD is +45 pips at 1.0520 as trade advances for a third day. Today's bid comes on the disappointing Canadian retail sales data (-0.6% MoM actual v. -0.3% MoM expected), and has bulls looking to retest the July highs (1.0575). Tomorrow, Canadian data is limited to CPI.

Jason's Commentaries

This definitely came as a surprise that the market has gotten bullish yesterday. Futures were up at 0.5% before market open which quickly translated into a bullish momentum which propels the market forward. Asia and Europe was doing well despite the reaction from FOMC minutes. However, the FOMC minutes were already widely expected. China has some outstanding results from the HSBC Manufacturing PMI which led the Asia market to the upside.

The market continued to go higher until 12am ET when Nasdaq halted trading due to a processor fault which subsequently resumed trading at 3.25pm ET. Internals may not be as reliable as Nasdaq were untradable for most of the day. However, we can see that that there was some sort of divergence based on the NYSE data. VIX dropped significantly as well at -7.4%. The main leader of the board is Energy sector and the industrials sectors as Slumberger is leading the energy sector and the industrials were being led by United Technologies and 3M. While on the technical perspective, a bounce was actually quite expected as the Dow is already sitting on its support of 14,900. Not to mention that the S&P500 is also bouncing off its support. Unemployment claims rose from 323k to 336k as well, which doesn't seem to drag the market down at all. Treasuries once again, sunk under the pressure of Fed tapering which is crashing the bond market down for the 7th session. Seems to me that a lot of money is flowing out of the treasury market and they are definitely going to park their money somewhere.

Market Call:Flat to upside

Date: 23 Aug 2013