16 Sep 2013 AMC

16 Sep 2013 AMC

Market Summary 

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

·         UK's FTSE: + 0.6%

·         Germany's DAX: + 1.2%

·         France's CAC: + 0.9%

·         Spain's IBEX: + 0.7%

·         Portugal's PSI: -0.7%

·         Italy's MIB Index: + 1.1%

·         Irish Ovrl Index: + 1.5%

·         Greece ATHEX Composite: + 0.2%

Before Market Opens

S&P futures vs fair value: +216.80. Nasdaq futures vs fair value: +25.20.
The S&P 500 futures trade higher by 1.0%.

Asian markets ended mostly higher except for China's Shanghai Composite and Japan's Nikkei. The Shanghai Composite shed 0.2% and Japan's Nikkei was closed in observance of Respect for the Aged Day. Among news of note, the approval rating of Prime Minister Shinzo Abe's cabinet increased to 61.8% from 57.7%. Regional economic data was limited. South Korea's trade surplus narrowed to $4.85 billion from $4.92 billion, India's WPI rose 6.1% year-over-year (5.8% expected, 5.8% prior), and New Zealand's Westpac Consumer Sentiment ticked down to 115.4 from 116.6. 

·         In Japan, the Nikkei was closed.

·         Hong Kong's Hang Seng advanced 1.5% as internet and gaming names led the way. Galaxy Entertainment, Tencent Holdings, and Sands China gained between 2.5% and 5.7%.

·         In China, the Shanghai Composite slipped 0.2% following a choppy session. Industrials lagged with Anhui Expressway and China Shipping Container Lines down 6.2% and 4.5%, respectively.

Major European indices trade near their best levels of the day with Germany's DAX (+1.3%) in the lead after the Christian Social Union won an absolute majority in the Bavarian election. The victory sets up the potential for the CDU-CSU coalition to remain in power after next weekend's nationwide vote. Also of note, the Free Voters (FW) party, which opposes EU-wide bailouts, took 8.5% of the vote, which could make the party a factor in coalition talks. Economic data was limited. Eurozone CPI ticked up 0.1% month-over-month and 1.3% year-over-year, as expected. In addition, the Labor Cost Index came in at 0.9% (1.7% previous) and core CPI increased 1.1% year-over-year, in-line with expectations. Italian trade surplus expanded to EUR5.95 billion (EUR4.13 billion expected, EUR3.62 billion prior) while the trade balance within the EU widened to EUR3.15 billion from EUR1.19 billion. 

·         Great Britain's FTSE trades up 0.8% as financials outperform. Prudential and Standard Life are higher by 2.5% and 2.9%, respectively. On the downside, miner Fresnillo has plunged 12.8%.

·         In France, the CAC holds a gain of 0.8% as growth-sensitive names pace the advance. Lafarge and Schneider Electric are both up near 2.5%. Telecom name Orange leads to the downside with a loss of 1.2%.

·         Germany's DAX is higher by 1.2% as 27 of 30 components register gains. Drug makers Bayer and Merck are among the leaders with respective advances of 2.0% and 4.2% while apparel manufacturer Adidas lags with a loss of 1.1%.

Market Internals

Market Internals
The Dow closed up 119 (+0.77%) at 15495, the S&P 500 closed up 10 (+0.57%) at 1698, and the Nasdaq closed down 4 (-0.12%) at 3718. Action came on slightly below average volume (NYSE 655 mln vs. avg. of 668; NASDAQ 1496 mln vs. avg. of 1539), with advancers outpacing decliners (NYSE 2078/996, NASDAQ 1371/1134) and new highs outpacing new lows (NYSE 235/25, NASDAQ 197/17).

Relative Strength: 
Turkey-TUR +4.73%, Indonesia-IDX +3.82%, Thailand-THD +2.77%, Rare Earths-REMX +2.50%, Singapore-EWS +2.23%, Egypt-EGPT +2.13%, Cocoa-NIB +1.87%, Natural Gas-UNG +1.77%, U.S. Home Construction-ITB +1.46%, Lithium-LIT +1.42%.

Relative Weakness: 
Silver Miners-SIL -3.26%, Silver-SLV -2.24%, Gasoline-UGA -2.02%, Oil-USO -1.90%, Commodities-GSG -1.58%, Vietnam-VNM -1.04%, India-INP -0.91%, Poland-EPOL -0.79%, Brazilian Real-BZF -0.17%, Chinese Yuan-CYB -0.04%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: S&P 500 Climbs Despite Weakness in Technology
The S&P 500 added 0.6% after a pair of weekend headlines provided an opening boost to equities. Stocks began the session sharply higher after Larry Summers, who was thought to be the hawkish frontrunner, withdrew his name from consideration to be the next chairman of the Federal Reserve. 

In addition, news that Russia and the United States have signed an agreement to decommission Syria's chemical weapons within a year also contributed to the early bid. 

With Larry Summers becoming an afterthought in the Fed chair discussion, bonds and equities rallied while the dollar slipped. The benchmark 10-yr note was up close to a point before surrendering most of its gain into the close. The 10-yr yield ended lower by two basis points at 2.87%.

The intraday reversal in Treasuries may have reflected the market's expectation for a $10-$15 billion tapering announcement coming at Wednesday's FOMC press conference. 

Nine of ten sectors finished in positive territory while the underperformance of technology (-0.3%) weighed on the Nasdaq. The largest tech stock, Apple (AAPL 450.12, -14.78), settled lower by 3.2% as sellers were in control throughout the session. High-beta chipmakers fared a bit better as the PHLX Semiconductor Index tacked on 0.4%. 

Energy (+0.02%) and consumer discretionary (+0.4%) shares lagged while the remaining cyclical sectors outperformed. The energy space ended little changed as crude oil fell 2.0% to $106.08 per barrel after the agreement to dismantle Syria's chemical weapons reduced the likelihood of a military intervention. 

Meanwhile, financials (+1.1%), industrials (+1.3%), and materials (+1.1%) held near their highs into the close. The industrial sector was a notable leader as just about all components posted gains. Dow member Boeing (BA 115.67, +4.34) surged 3.9% amid reports indicating the company is nearing a fighter jet deal with South Korea's government. Transports also displayed strength as the Dow Jones Transportation Average advanced 1.1%. 

Countercyclical sectors ended mixed as consumer staples (+0.9%), health care (+0.8%), and telecom services (+0.8%) outperformed while utilities (+0.2%) lagged. 

Participation was a bit on the light side as 655 million shares changed hands on the floor of the New York Stock Exchange. 

With the budget debate heating up once again, President Obama spoke earlier today, reminding once again that he has no plans to negotiate over the debt ceiling. 

In today's economic data, the Empire Manufacturing Survey for September registered a reading of 6.3, which was down from the prior month's reading of 8.2. Economists polled by Briefing.com had expected that the survey would improve to 9.0. 

Separately, August industrial production increased 0.4% while the Briefing.com consensus expected an uptick of 0.5%. Capacity utilization hit 77.8%, which was in-line with the Briefing.com consensus. 

Tomorrow, August CPI and core CPI will be reported at 8:30 ET while July net long-term TIC flows and the September NAHB Housing Market Index will be released at 9:00 ET and 10:00 ET, respectively.

Commodities

Closing Commodities: Crude Oil Sells Off Back Below $107/Barrel
Commodities were mixed in afternoon action. Gold and silver slid lower in afternoon activity, crude oil sold off back below $107/barrel.

Copper has been consolidated this afternoon and natural gas hit a new HoD in recent action. Crude oil spent the entire day in negative territory and fell as low as $106.14/barrel in morning trade.

Heading into the close or pit trading, crude oil sold off and extended gains further minutes after pit trading closed, pulling Oct crude as low as $106.26/barrel. At the end of the pit session, Oct crude ended fell $1.64/barrel to $106.57/barrel. 

Oct natural gas rallied higher earlier this morning and ended the day $0.06 higher at $3.74/MMBtu.

Precious metals gains today with Dec gold rising $9.50 to $1318.30/oz and Dec silver gaining $0.28 to $22.00/oz.

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Dec corn fell 2 cents to $4.57/bushel

·         Dec wheat closed unchanged at $6.41/bushel

·         Nov soybeans fell 34 cents to $13.48/bushel

·         Oct ethanol closed unchanged at $1.78/gallon

COMEX Metals Closing Prices

·         Dec gold rose $9.50 to $1318.30/ounce

·         Dec silver rose $0.28 to $22.00/ounce

·         Dec copper rose 2 cents to $3.22/lbs

NYMEX Energy Closing Prices

·         Oct crude oil fell $1.64 to $106.57/barrel

·         Oct natural gas rose 6 cents to $3.74/MMBtu

·         Oct heating oil fell 4 cents to $3.07/gallon

·         Oct RBOB gasoline fell 5 cents to $2.72/gallon

Treasuries

Treasuries Reverse Sharply: 10-yr: +02/32..2.874%..USD/JPY: 99.10..EUR/USD: 1.3334
Steady selling throughout U.S. trade dropped Treasuries well off their overnight highs. The complex saw strong overnight gains develop on word that Lawrence Summers had withdrawn his name from contention to become the next Fed chairman, setting the stage for Janet Yellen to possibly take the reins. Ms. Yellen is viewed as the candidate most likely to continue the policies of current chairman Ben Bernanke. Maturities across the complex leaked lower throughout the session as traders booked profits following the overnight surge. Disappointing data and further banter of a debt ceiling showdown in Congress failed to spark any meaningful buying as traders remained on edge ahead of tomorrow's start to the highly anticipated two-day FOMC meeting. It is widely anticipated the FOMC will announce the tapering of its asset purchase program at the meeting, marking the beginning of the end of its bond-buying scheme. The long bond lagged from the U.S. open, eventually giving up all of its gains before ending down 20/32. Today's reversal marked a greater than one point swing from session highs to session lows and caused the 30-yr yield to end the day up almost 2.5 bps at 3.871% after testing 3.750% earlier this morning. Elsewhere, the benchmark 10-yr yield climbed 10 bps off this morning's lows, ending slightly lower at 2.874%. Traders will be watching the 2.900% level closely over the coming days as it had represented near-term support before today's decline. Buying weighed heaviest on the belly of the curve as the 5-yr sank 7 bps to 1.635%. A steeper yield curve prevailed as the 2-10-yr spread widened to 247.5 bps. Precious metals gave up most of their gains as gold added $2 to $1311 and silver tacked on $0.15 to near $21.90. Data continues to flow on Tuesday with CPI, core CPI (8:30), net long-term TIC Flows (9), and the NAHB Housing Market Index (10)

Next Day In View 

Economic Commentary

Economic Data Summary:

·         September Empire Manufacturing 6.3 vs Briefing.com consensus of 9.0; August was 8.6

·         August Industrial Production 0.4% vs Briefing.com consensus of 0.5%; July was 0.0%

o    The improvement in manufacturing contrasted with trends in the regional and national manufacturing surveys and again explains why we do not use the manufacturing survey data when predicting economic growth. Those surveys showed a massive increase in production in July followed by softer growth in August. The hard industrial production data showed the opposite: a sizable pullback in July and a nice rebound in August. Gains in motor vehicle and parts production, up 5.2% in August after declining 4.5% in July, were responsible for a large portion of the manufacturing gain. Excluding the motor vehicle sector, manufacturing production increased a more modest 0.4%.

·         August Capacity Utilization 77.8% vs Briefing.com consensus of 77.8%; July was 77.6

Upcoming Economic Data:

·         August CPI due out Tuesday at 8:30 (Briefing.com consensus of 0.2%; July was 0.2%)

·         August Core CPI due out Tuesday at 8:30 (Briefing.com consensus of 0.2%; July was 0.2%)

·         July Net Long Term TIC Flows due out Tuesday at 9:00 (Briefing.com consensus of ; June was -$66.9 bln)

·         September NAHB Housing Market Index due out Tuesday at 9:15 (Briefing.com consensus of 59; August was 59)

Upcoming Fed/Treasury Events:

·         The Federal Reserve is set to begin at two day meeting on Tuesday. Decision will be announced (along with economic projections) at 14:00 followed by a press conference by Ben Bernanke at 14:30

Other International Events of Interest

·         Eurozone CPI ticked up 0.1% month-over-month and 1.3% year-over-year, as expected. In addition, the Labor Cost Index came in at 0.9% (1.7% previous) and core CPI increased 1.1% year-over-year, in-line with expectations. 

·         In Germany, the Christian Social Union party has won an absolute majority in the Bavarian election. The victory sets up the potential for the CDU-CSU coalition to remain in power after next weekend's nationwide vote. Also of note, the Free Voters (FW) party, which opposes EU-wide bailouts, took 8.5% of the vote, which could make the party a factor in coalition talks. 

On other news.... 

Currencies 

Dollar Trims Losses: 10-yr: +05/32..2.866%..USD/JPY: 99.10..EUR/USD: 1.3339
The Dollar Index has seen a steady bid throughout most of the U.S. session, halving its early losses. Overnight selling provided a test of 81.00, but that area was able to hold as buyers stepped in to defend support. The Index is on track to close at its lowest level in close to three weeks. Click here to see a daily Dollar Index chart.

·         EURUSD is +55 pips at 1.3345 as trade climbs for the fifth time in the past seven sessions. Over that time the pair has added close to 250 pips as trade looks for another test of the important 1.3400 level. Today's advance comes despite comments from ECB head Mario Draghi suggesting rates will remain low for " an extended period of time" as the region's recovery "is only in its infancy" and that "unemployment is still far too high." Eurozone data includes the current account balance, ZEW Economic Sentiment, and German ZEW Economic Sentiment. 

·         GBPUSD is +35 pips at 1.5905 as action looks to close at an eight-month high. Sterling has closed lower just two times in September, tacking on close to 400 pips since the beginning of the month. Britain's CPI, PPI input, and RPI are due out tomorrow. 

·         USDCHF is -35 pips at .9260 as sellers remain in control. The pair has fallen in six of the past seven days, giving up close to 200 pips over that time. The .9200 support level looms large over the coming days. 

·         USDJPY is -35 pips at 99.00 as trade tests significant support in the area. Today's weakness has the pair probing its 50- and 100-day moving averages as trade pushes lower for a fourth straight day. Some are expecting increased volatility overnight as Japanese markets reopen following the holiday weekend. 

·         AUDUSD is +80 pips at .9325 as trade contends with its best close in four months. Early buying ran the hard currency above its 100-day moving average (.9370) for the first time in five months, but sellers quickly emerged to defend the area. Near-term support rests in the .9300 area, with further support coming into play near .9200. The minutes from the latest Reserve Bank of Australia meeting will cross the wires ahead of new motor vehicle sales. 

·         USDCAD is -35 pips at 1.0315 as trade is on track for its first loss in three days. The pair has seen a steady climb over the course of the session as bulls attempt to retake the 100-day moving average (1.0335). Key support rests in the 102.50/1.0300 area. Canadian data is limited to manufacturing sales.

Jason's Commentaries


The Summers Rally led both Dow and S&P500 with gain of 118 points and 9.61 points respectively. However, Nasdaq ended the day with a loss of 0.12% after opening up at the all the time. I wonder, how insulted would I be if I'm Larry Summers and the market rallied because he pulled out from the Fed presidential contest. 

The market opened generally higher but Nasdaq faced a huge drag by Apple which sunk 3.18% lsat night. S&P500 managed to shrug off Apple's drag and managed to maintain its gain. Dow jones didn't seemed to be much affect until 1pm where profit taking started happening. It could also due to the halt in options trading again. US, Syria and Russia agreed to an agreement to sign the decommissioning of Syria's chemical weapons which would likely put the expectation of war off. And with the hawkish Larry Summers gone from the potential candidate, Janet Yellen is likely to the next chair person of the Fed Reserve. 

Volumes were standing at 654.6m shares traded on the NYSE last night, with the bulls outpacing the bears. Tech and Energy were the only 2 laggards in that bullish run last night. Industrials, materials and Financials were the biggest gainers of 1.3%, 1.11% and 1.11% respectively. On the technical perspective, we're having quite a bearish candlestick pattern. Nasdaq is having somewhat like a bearish kick, while the other indices are having that long shadow. Ahead of the Fed meeting on Wed, I reckon Tuesday to be a flat to downside day.

Market Call: Flat to downside

Date: 17 Sep 2013