11 Sep 2013 AMC

11 Sep 2013 AMC

Market Summary 

 Before Market Opens

S&P futures vs fair value: -2.00. Nasdaq futures vs fair value: -15.00.
The S&P 500 futures trade lower by 0.1%.

Markets across Asia finished little changed amid a quiet trade. The region's bourses failed to see any real reaction to news that President Obama has put the Congressional vote on a conflict in Syria on hold as he seeks a diplomatic solution. Comments from Chinese Premier Li Keqiang covered a wide spectrum as he suggested municipal debt is under control and that China will look to gradually make the yuan convertible. Data from the region was light with Malaysia's industrial production posting a sharp 7.6% year-over-year increase (5.8% expected). 

·         Japan's Nikkei closed unchanged after an early bid ran the index to its best level in seven weeks. Exporters posted solid gains as Komatsu added 2.7% and Fuji Heavy Industries tacked on 2.6%. 

·         In Hong Kong, the Hang Seng slipped 0.2% as trade posted its first loss in five days. iPhone assembler FIH Mobile sank 4.8% as the Apple event in China was largely disappointing. 

·         China's Shanghai Composite added 0.2% as shares climbed for a fourth day. Materials stocks were strong with aluminum maker Chalco surging the limit, 10%. Meanwhile, shares of China Mobile slid 1.4% after the company failed to announce a deal to carry Apple's iPhone. 

Major European indices trade in mixed fashion with Italy's MIB (+1.0%) and Spain's IBEX (+0.8%) leading the way. The Italian Senate committee tasked with determining the political future of PDL leader Silvio Berlusconi has postponed its debate to Thursday. Also of note, European Central Bank member Luc Coene said, "It's clear that we are not at the end of the Greek problem for the moment" and that the country will need more help at least once more. Participants received a moderate amount of data. Germany's CPI was unchanged month-over-month while the year-over-year reading came in at 1.5%, as expected. France reported a current account deficit of EUR3.20 billion (-EUR1.70 billion expected, -EUR1.80 billion prior) while nonfarm payrolls declined 0.2% quarter-over-quarter (-0.2% expected, -0.2% prior). Great Britain's average earnings ex-bonus ticked up 1.0% (1.0% expected, 1.1% previous) while average earnings index + bonus increased 1.1% (1.2% forecast, 2.2% prior). In addition, the claimant count change came in at -32.6K (-22.0K expected, -36.3K last) and the unemployment rate ticked down to 7.7% from 7.8% (7.8% expected). Lastly, the CB Leading Index rose 0.7% month-over-month (-0.3% prior). 

·         Great Britain's FTSE is lower by 0.1% as financials lag. Admiral Group, Lloyds Banking Group, and Standard Chartered are all down between 2.0% and 4.7%. On the upside, ARM Holdings trades up 5.2% after Apple said its newest devices use processors provided by ARM. 

·         France's CAC holds a loss of 0.1% as technology companies weigh. Gemalto and STMicroelectronics are lower by 4.8% and 1.0%, respectively. Utilities have displayed strength as Electricite de France, GDF Suez, and Veolia Environnement sport gains between 0.9% and 2.9%. 

·         In Germany, the DAX is higher by 0.5% with financials among the leaders. Commerzbank and Deutsche Bank hold respective gains of 3.6% and 1.2%. 

·         Elesewhere, Italy's MIB (+1.0%) and Spain's IBEX (+0.8%) have received support from bank shares.

European Markets Closing Prices

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

·         UK's FTSE: + 0.1%

·         Germany's DAX: + 0.6%

·         France's CAC: + 0.1%

·         Spain's IBEX: + 0.8%

·         Portugal's PSI: + 0.2%

·         Italy's MIB Index: + 1.3%

·         Irish Ovrl Index: -0.4%

·         Greece ATHEX Composite: -0.4%

Market Internals

Market Internals -Technical-
The Dow closed up 136 (+0.89%) at 15327, the S&P 500 closed up 5 (+0.31%) at 1689, and the Nsadaq closed down 4 (-0.11%) at 3725. Action came on mixed volume (NYSE 657 mln vs. avg. of 667; NASDAQ 1634 mln vs. avg. of 1524), with mixed advancers/decliners (NYSE 1709/1352, NASDAQ 1191/1302) and new highs outpacing new lows(NYSE 175/68, NASDAQ 172/17). 

Relative Strength: 
Coffee-JO +3.73%, Poland-EPOL +2.40%, Copper Miners-COPX +2.16%, Italy-EWI +2.13%, South Africa-EZA +1.93%, Middle East and Africa-GAF +1.85%, Spain-EWP +1.82%, U.S. Home Construction-ITB +1.80%, Timber-CUT +1.38%, Lithium-LIT +1.35%. 

Relative Weakness: 
Volatility-VXX -3.18%, Indonesia-IDX -1.52%, Biotechnology-XBI -1.22%, Clean Energy-PBW -1.17%, Utilities-XLU -0.98%, MLP Index-AMJ -0.77%, China 25 Index-FXI -0.75%, Japan-EWJ -0.68%, BRICs-EEB -0.57%, Chile-ECH -0.44%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: S&P 500 Posts Seventh Consecutive Gain
The major averages ended in mixed fashion as the Nasdaq shed 0.1% while the S&P 500 added 0.3% to register its seventh consecutive advance. For its part, the Dow Jones Industrial Average gained 0.9%. 

The key indices diverged at the open with the tech-heavy Nasdaq and S&P 500 starting in negative territory due to significant weakness in the largest tech stock. Apple (AAPL 467.71, -26.93) sank 5.4% after the company's overnight product refresh event in China did not reveal a deal with China Mobile (CHL 55.87, -1.53) as many investors had expected. The underperformance of Apple kept the Nasdaq and the technology sector (-0.5%) in the red throughout the day while the S&P was able to shake off the opening weakness. 

Rotten price action in the shares of Apple masked the solid gains in many other large tech names. Cisco Systems (CSCO 24.38, +0.22), Oracle (ORCL 33.02, +0.16), Google (GOOG 896.19, +7.52), and Microsoft (MSFT 32.74, +0.35) added between 0.5% and 1.1%. 

Meanwhile, the price-weighted Dow was unaffected by Apple as the largest member of the blue chip index, IBM (IBM 190.70, +4.10), gained 2.2% after saying last night it will be selling its lower margin customer care business process outsourcing services business to Synnex for $505 million. Including IBM, 26 of 30 Dow components ended in the green. 

Outside of technology, the financial sector (+0.1%) was the only cyclical group that trailed behind the S&P. Citigroup (C 50.73, -0.36) lost 0.7% after reports from Fox Business News indicated the bank plans to lay off 2,200 employees in its mortgage unit. 

The broader market was kept afloat by the relative strength of the remaining growth-sensitive sectors. Energy, industrials, materials, and discretionary shares gained between 0.5% and 0.8% with energy and materials in the lead. 

The energy sector added 0.8% as crude oil rose 0.3% to $107.72 per barrel. The other commodity-related space, materials, tacked on 0.6%. Gold miners contributed to the relative strength as the Market Vectors Gold Miners ETF (GDX 26.79, +0.22) climbed 0.8%. However, the underlying metal ended little changed at $1364.20 per troy ounce. 

Countercyclical sectors have been a bit shaky in recent days, but ended today's session in mixed fashion. Consumer staples (+0.8%) and health care (+0.7%) outperformed while telecom services (unch) and utilities (-0.9%) lagged. 

Treasuries jumped to their highs following today's solid $21 billion 10-yr note reopening. The benchmark 10-yr yield ended lower by six basis points at 2.91%. 

Participation in today's session was a bit below average as 657 million shares changed hands on the floor of the New York Stock Exchange. 

Last evening, President Obama addressed the nation regarding the situation in Syria. Mr. Obama continued to make a case for a targeted military strike against the Middle Eastern country, but indicated the Russian proposal requiring Syria to put its weapons under international control will also be considered. 

July wholesale inventories ticked up 0.1% while the Briefing.com consensus expected an increase of 0.2%. Today's report follows last month's unrevised decrease of 0.2%. 

Separately, the weekly MBA Mortgage Index fell 13.5% to its lowest level since November 2008. Today's decline was paced by a 20.2% decrease in the refinance index. 

Tomorrow, weekly initial claims, August export prices ex-agriculture and import prices ex-oil will all be reported at 8:30 ET. In addition, the Treasury will release its August budget at 14:00 ET.

Commodities

Closing Commodities: Crude Oil Ends 0.1% Higher

·         Oct crude oil fell below the $107.00 per barrel level following inventory data that showed a draw of 0.219 mln barrels when expectations called for a draw of 1.5-2.1 mln barrels. However, the energy component quickly recovered back into positive territory, advancing to a session high of $108.09 per barrel. It pulled back heading into the close and settled at $107.55 per barrel, or 0.1% higher.

·         Oct natural gas traded mostly in negative territory today. It climbed to a session high of $3.62 per MMBtu in late afternoon action but retreated back into the red and settled 0.3% lower at $3.57 per MMBtu.

·         Dec gold chopped around slightly below the breakeven line today following President Obama's speech on Syria. The President has put the Congressional vote on an attack on Syria on hold as he seeks a diplomatic solution. The yellow metal brushed a session low of $1359.20 per ounce and settled just 40 cents lower at $1363.60 per ounce. 

·         Dec silver, on the other hand, traded higher, rising to a session high of $23.23 per ounce. It eventually settled 0.7% higher at $23.17 per ounce.

NYMEX Energy Closing Prices

·         Oct crude oil rose $0.16 to $107.55/barrel 

o    Crude oil slipped to a session low of $106.95 on weaker-than-anticipated inventory data. However, the energy component quickly recovered into positive territory and advanced to a session high of $108.09. It pulled back slightly heading into the close and settled with a 0.1% gain. 

·         Oct natural gas fell 1 cent to $3.57/MMBtu 

o    Natural gas spent most of today's floor trade in negative territory. It climbed to a session high of $3.62 in late afternoon pit action but retreated back into the red and settled with a 0.3% loss. 

·         Oct heating oil settled unchanged at $3.07/gallon 

·         Oct RBOB gasoline fell 3 cents to $2.71/gallon

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Dec corn rose 4 cents to $4.73/bushel 

·         Dec wheat rose 1 cent to $6.47/bushel 

·         Nov soybeans rose 2 cents to $13.58/bushel 

·         Oct ethanol fell 1 cent to $1.88/gallon 

·         Nov sugar (#16 (U.S.)) rose 0.07 of a penny to 21.10 cents/lbs

COMEX Metals Closing Prices

·         Dec gold fell $0.40 to $1363.60/ounce 

o    Gold chopped around slightly below the unchanged line today as investors reacted to President Obama's speech on Syria. The President has put the Congressional vote on an offensive against Syria on hold as he seeks a diplomatic solution. The yellow metal brushed a session low of $1359.20 and settled just 40 cents below the breakeven level. 

·         Dec silver rose $0.16 to $23.17/ounce 

o    Silver, on the other hand, traded higher, rising to a session high of $23.23. It eventually settled with a 0.7% gain. 

·         Dec copper settled unchanged at $3.26/lbs

DoE Inventory Data
Dept of Energy reports that for the week ending Sep 6: 

·         Crude oil inventories had a draw of 0.219 mln (consensus called for a draw of 1.5-2.1 mln)

·         Gasoline inventories had a build of 1.658 mln (consensus called for a draw of 1.0-1.3 mln)

·         Distillate inventories had a build of 2.586 mln (consensus called for a build of 0.5-0.6 mln)

Summary of Weekly Petroleum Data for the Week Ending Sep 6, 2013
Production: U.S. crude oil refinery inputs averaged about 15.9 mln barrels per day (bpd) during the week ending September 6, 2013, roughly the same as the previous week's average. Refineries operated at 92.5% of their operable capacity last week. Gasoline production was flat compared to the previous week, averaging 9.1 mln bpd. Distillate fuel production was also unchanged last week, averaging about 5.0 mln bpd.

Imports: U.S. crude oil imports averaged about 8.0 mln bpd last week, down by 238 thousand bpd from the previous week. Over the last four weeks, crude oil imports averaged over 8.1 mln bpd. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 401 thousand bpd. Distillate fuel imports averaged 99 thousand bpd last week.

Inventory: U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 0.2 mln barrels from the previous week. At 360.0 mln barrels, U.S. crude oil inventories are near the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 1.7 mln barrels last week and are in the upper half of the average range. Finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories increased by 2.6 mln barrels last week but remain near the lower limit of the average range for this time of year.

Demand: Total products supplied over the last four-week period averaged 19.0 mln bpd, up by 1.7% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged about 9.0 mln bpd. Distillate fuel product supplied averaged 3.7 mln bpd over the last four weeks, up by 8.6% from the same period last year.

Treasuries

Strong 10-yr Reopening Lifts Treasuries: 10-yr: +15/32..2.914%..USD/JPY: 99.90..EUR/USD: 1.3310
Treasuries ended just off their best levels of the session, sparked by today's strong $21 bln 10-yr reopening. Light buying over the course of the overnight session was met with some stiff resistance as U.S. markets opened for business. Sellers dumped Treasuries early as Verizon's record corporate issuance of $49 bln was digested, causing trade to slide back to the flat line where it chopped around ahead of this afternoon's reopening. The reopening drew 2.946% (highest at-auction yield since June 2011) and a solid 2.86x bid/cover as both indirect (36.6%) and direct (29.6%) bids were strong. Primary dealers were left with just 33.8% of the supply. Treasuries took the elevator back up to session highs, ending on their best levels. The belly of the curve saw the biggest decline in yield as the 5-yr slid more than 5 bps to finish on 1.700% support. Elsewhere, the benchmark 10-yr yield ended the day off 4 bps at 2.920%. Traders will be watching the 2.900% level over the coming sessions as the area has held up as support over the past week. Bull flattening developed along the yield curve as the 2-10-yr spread narrowed to 247 bps. Precious metals were mixed as gold ended flat at $1364 and silver climbed $0.15 to near $23.15. Data remains slow on Thursday with initial and continuing claims, import/export prices (8:30), and the Treasury budget (14). Treasury will hold a $13 bln 30-yr reopening.

Next Day In View 

Economic Commentary

Economic Summary: Wholesale inventories slightly miss expectations; Obama puts Syria Congressional vote on hold to discuss diplomatic solution
Economic Data Summary:

·         Weekly MBA Mortgage Applications -13.5% (Last Week was 1.3%)

·         July Wholesale Inventories 0.1% vs Briefing.com consensus of 0.2%; June was -0.2%

o    . Durable goods inventories increased 0.6% in July after increasing 0.1% in June. Large gains in machinery (+1.2%) and miscellaneous durables (+1.9%) offset declines in professional equipment (-1.2%) and computer equipment (-3.5%). Nondurable goods inventories fell 0.8% in July after declining 0.7% in June. For a second consecutive month, the decline in nondurable goods inventories was primarily due lower farm product inventories. 

Fed/Treasury Events Summary:

·         President Obama has put the Congressional vote on a conflict in Syria on hold as he seeks a diplomatic solution.

Upcoming Economic Data:

·         Weekly Initial Claims due out Thursday at 8:30 (Briefing.com consensus of 327K; Last Week was 323K)

·         Weekly Continuing Claims due out Thursday at 8:30 (Briefing.com consensus of 2.975 M ; Last Week was 2.951 M )

·         August Export Prices Ex-Ag due out Thursday at 8:30 (Briefing.com consensus of ; July was 0.0%)

·         August Import Prices Ex-oil due out Thursday at 8:30 (Briefing.com consensus of ; July was -0.4%)

·         August Treasury Budget due out Thursday at 14:00 (Briefing.com consensus of -$146.0 bln; July was -$190.5 bln)

Upcoming Fed/Treasury Events:

·         The Treasury will auction off $65 bln in new debt this week. Results for each remaining auction will be announced at 13:00

o    Wednesday: $21 bln in 10 year notes

o    Thursday: $13 bln in 30 year bonds

Other International Events of Interest

·         Germany's CPI was unchanged month-over-month while the year-over-year reading came in at 1.5%, as expected. 

·         Great Britain's average earnings ex-bonus ticked up 1.0% (1.0% expected, 1.1% previous) while average earnings index + bonus increased 1.1% (1.2% forecast, 2.2% prior). In addition, the claimant count change came in at -32.6K (-22.0K expected, -36.3K last) and the unemployment rate ticked down to 7.7% from 7.8% (7.8% expected). Lastly, the CB Leading Index rose 0.7% month-over-month (-0.3% prior). 

On other news.... 

Apple: Street Reaction to yesterday afternoon's iPhone unveiling (470.89 -23.75)
During trading hours yesterday, AAPL took the wraps off of two new iPhone models: the lower-end iPhone 4C (starts at $99 subsidized) and the higher-end iPhone 4S (starts at $299). While the initial reaction to the company's presentation was rather muted, AAPL shares began to sell off towards the conclusion of the event - largely in part on the lack of an announcement of a new deal with China Mobile (CHL). The company did confirm a deal with Japan's DCM, but CHL's 740 mln subscribers is viewed as the crown jewel of mobile deals for AAPL.

Yet, it was anticipated that AAPL would potentially announce a deal with CHL in Beijing this morning at an 8 AM local time event. When that didn't occur, sellers began to hammer the stock. Downgrades from 3 firms this morning only added to pressure on AAPL. Although AAPL was able to secure the final government license that's required to run the iPhone on China Mobile's network, it did little to support the stock. Investors still expect the two companies to come together, but the lack of an imminent deal is weighing on shares with the stock down ~5%. 

·         Street Reaction:

o    Downgrades - AAPL was downgraded to Neutral from Buy at BofA/Merrill, downgraded to Neutral from Outperform at Credit Suisse, and downgraded to Neutral from Buy at UBS. The firms mainly cited a lack of a lower cost phone, particularly calling out the company's pricing strategy. A delay in the China Mobile deal was also a concern.

o    Canaccord believes the new iPhone 5S has very competitive high-end specifications versus leading Android smartphones including the world's first 64-bit A7 processor, a separate M7 motion coprocessor and Touch ID -- a fingerprint authentication sensor built into the new home button. Further, firm believes new capabilities in iOS 7 available September 18 along with the features and new colors for the 5S and 5C should drive strong sales, particularly to Apple's large iOS base. Tgt to $550 from $530.

o    Cowen note, with a "low priced" and "lower margin" 5C nowhere to be found and new deals w/NTT DoCoMo (announced) and China Mobile (pending), AAPL took the high road in the call to move downmarket, maintaining focus on profit share over unit share. Net/net, firm maintained its Outperform as '14E Street numbers look very beatable.

o    Stifel notes Apple's price structure for the iPhone 5C is $99 and $199 for 16GB and 32GB (w/ a two-year contract). However, the company's website notes that a contract-free iPhone 5C (16GB) begins at $549 (vs. iPhone 5S at $649), or above our previewed $300-$400 range. Apple will keep the pricing structure of iPhone 5S ($199/$299/$399, 16GB/32GB/64GB) suggesting carrier subsidization remains intact - a positive in firm's view.

o    FBR believe these product announcements to be essentially in line with pre-launch expectations. Target to $525 from $500.

o    ISI notes the iPhone 5C marks the company's first foray into the "mass market" segment of the smartphone industry and has the potential to return AAPL to y/y EPS growth.

Currencies 

Dollar Breaks Below 200-Day: 10-yr: +14/32..2.919%..USD/JPY: 99.98..EUR/USD: 1.3310
Selling over the course of the session has dropped the Dollar Index to its worst levels of the day near 81.45. Today's weakness is notable as trade was unable to retake 82.00 support while also breaking below the 200-day moving average (81.75). Click here to see a daily Dollar Index chart.

·         EURUSD is +50 pips at 1.3315 as trade holds just off session highs. Today marks the single currency's fourth straight advance with trade now testing resistance in the 1.3325/1.3350 region. The ECB's Monthly Bulletin and eurozone industrial production will cross the wires tomorrow. 

·         GBPUSD is +90 pips at 1.5820 as trade rallies for the eighth time in nine days. The recent strength comes as data continues to outpace estimates, as it has since the beginning of July. Sterling has managed to climb roughly 1000 pips over the past two months and looks like it will post its best close since February. The Bank of England's Inflation Report hearings take place tomorrow. 

·         USDCHF is -50 pips at .9295 as sellers retake control, pushing the pair lower for the third time in four days. Today's weakness has dropped action below both the 50- and 200-day moving average, and has action testing minor support near .9300. A breakdown of that level opens up another test of the key .9200 level. 

·         USDJPY is -45 pips at 99.95 as trade slips back below parity. Early strength ran the pair to its best level in nearly two months, but action now holds on the lows. The 98.80/99.00 level will be key as both the 50- and 100-day moving averages aid support in the area. Japan's core machinery orders are due out tonight. 

·         AUDUSD is +20 pips at .9330 as action holds on its best levels of the session. Today's advance has the hard currency higher for the seventh time in the past eight days, and has bulls looking ahead to a test of the 100-day moving average (.9400). Australian data is heavy with employment change, the unemployment rate, and MI Inflation Expectations.

·         USDCAD is -30 pips at 1.0320 as trade slumps for the sixth time in seven sessions. Today's weakness has pushed action below the 100-day moving average, and is providing a test of support in the region. Trendline support off the September 2012 lows comes into play near 1.0250. Canada's New Home Price Index will be released.

Jason's Commentaries


Apple sunk last night... dragging down both Nasdaq and S&P500.... Causing a loop sided movement in the market. However, IBM was able to lead the Dow to a strong gain of 134 points... Dow started the day with a bullish bias and able to hold it all the way to the closing bell. While the S&P500 and Nasdaq had some rough right as Apple weighs, started the day in a bearish tone which subsequently reversed higher.. The last min spike probably came as a window dressing.. Volume were slightly weaker than average, standing at 658m shares traded on the NYSE. Besides the Tech sector, the Utilities was in the red.. Discretionary, staples and energy were the main leader last night with more than 0.7& gain.. It seems that on the Dow, it's likely to hit the resistance of 15,400 and the S&P500 has broken the resistance at 1680. Seems that we're on a bullish mode now... On the treasuries, the 10y auction came at a success pushing up the yields off the low...

Market Call:FLAT to upside

Date: 12 Sep 2013