23 Sep 2013 AMC

23 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: -0.5%

·         France's CAC: -0.8%

·         Spain's IBEX: -0.7%

·         Portugal's PSI: -0.8%

·         Italy's MIB Index: -0.3%

·         Irish Ovrl Index: -0.3%

·         Greece ATHEX Composite: + 0.6%

Before Market Opens

S&P futures vs fair value: -3.30. Nasdaq futures vs fair value: +15.20.
The S&P 500 futures trade lower by 0.2%.

Asian markets ended the first session of the week mostly lower. Hong Kong's Hang Seng shed 0.6% after the start was delayed by typhoon Usagi. Elsewhere, Japan's Nikkei was closed for Autumn Equinox. Thailand remained under pressure with the SET index falling 3.4%. Also of note, Chinese short-term lending rates were on the rise with the two-week SHIBOR rate climbing 34 basis points to 4.35%. Regional economic data was limited. China's HSBC Manufacturing PMI rose to 51.2 from 50.1 (50.9 expected), which marked the highest reading since April. Hong Kong's CPI came in at 4.5% year-over-year (4.4% expected, 6.9% prior). 

·         In Japan, the Nikkei was closed. 

·         Hong Kong's Hang Seng ended lower by 0.6% as financials lagged. HSBC fell 1.9% and New World Development lost 2.9%. On the upside, Belle International jumped 4.6%. 

·         In China, the Shanghai Composite settled higher by 1.3%. Industrials outperformed with Huayi Electric and Keda Group both jumping the limit, 10.0%. Drug maker Nanjing Pharmaceutical lost 4.1%. 

Major European indices trade with modest losses after German Chancellor Angela Merkel's CDU received the most votes in this weekend's election. However, her former ally, FDP, was unable to reach the 5.0% threshold required to enter parliament meaning Ms. Merkel will need to seek out a different coalition partner. Participants received a fair share of data. Eurozone Manufacturing PMI slipped to 51.1 from 51.4 (51.8 expected) while the Services PMI increased to 52.1 from 50.7 (51.1 forecast). Germany's Manufacturing PMI decreased to 51.3 from 51.8 (52.2 consensus) while the Services PMI improved to 54.4 from 52.8 (53.1 forecast). French Manufacturing PMI ticked down to 49.5 from 49.7 (50.1 expected) and the Services PMI climbed to 50.7 from 48.9 (49.3 forecast). Italy reported no wage inflation month-over-month (0.1% prior). 

·         France's CAC is lower by 0.3% as oil company Technip leads to the downside with a loss of 2.1%. Producers of basic materials outperform as Solvay and Vallourec trade higher by 1.5% and 1.3%, respectively. 

·         In Germany, the DAX trades down 0.4% as drug makers Bayer and Merck weigh with respective losses of 1.0% and 0.5%. Basic materials have displayed strength as BASF and HeidelbergCement trade with gains close to 1.0%. 

·         Great Britain's FTSE holds a loss of 0.5%. Barclays is the weakest performer, down 2.6%. On the upside, consumer names Burberry and J Sainsbury trade higher by 0.9% and 0.5%, respectively.

Market Internals

Market Internals -Technical-
The S&P 500 closed down 8 (-0.47%) at 1702, the Dow closed down 50 (-0.32%) at 15401, and the Nasdaq closed down 9 (-0.25%) at 3765. Action came on near average volume (NYSE 690 mln vs. avg. of 692; NASDAQ 1646 mln vs. avg. of 1563), with decliners outpacing advancers (NYSE 1286/1762, NASDAQ 1085/1433) and new highs outpacing new lows (NYSE 80/36, NASDAQ 132/27).

Relative Strength: 
Lithium-LIT +3.02%, Coffee-JO +2.44%, Chile-ECH +1.89%, Latin America 40-ILF +1.41%, South Africa-EZA +1.29%, Volatility-VXX +1.26%, Utilities-XLU +1.21%, BRICs-EEB +0.93%, Israel-EIS +0.90%, 20+ Year Treasuries-TLT +0.72%. 

Relative Weakness: 
Silver Miners-SIL -2.53%, Gold Miners-GDX -2.29%, Natural Gas-UNG -2.22%, Thailand-THD -2.22%, Gasoline-UGA -1.96%, Junior Gold Miners-GDXJ -1.88%, Indonesia-IDX -1.49%, Sweden-EWD -0.77%, Nordic 30-GXF -0.72%, Turkey-TUR -0.67%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: Stocks Slump Despite Apple's Jump
The major averages began the week on a lower note as the S&P 500 shed 0.5%. Stocks spent the first half of the session in a steady retreat, but managed to regain a portion of their losses during afternoon action. 

Seven of ten sectors finished in the red while technology (+0.3%), telecom services (+0.1%), and utilities (+1.2%) outperformed. The technology sector—and the Nasdaq—received an opening boost from the shares of Apple (AAPL 490.64, +23.23) after the largest sector component reported strong weekend demand for two of its latest devices. As a result of better-than-expected sales, the company said it expects fourth quarter revenue to come in near the top end of analyst estimates. Apple settled higher by 5.0% and component suppliers like Cirrus Logic (CRUS 23.20, +1.19) and Skyworks Solutions (SWKS 25.86, +0.27) also displayed strength. 

Elsewhere in technology, BlackBerry (BBRY 8.81, +0.09) rose 1.0% after agreeing to a buyout offer from a consortium led by Toronto-based Fairfax Financial. Per the agreement, BlackBerry shareholders will receive $9.00 per share, which would represent a total transaction value of roughly $4.7 billion. 

The outperformance of Apple masked the losses among many other top tech components. Google (GOOG 886.50, -16.61) lost 1.8% and the newest Dow member Visa (V 196.24, -2.59) fell 1.3%. Just like Visa, the other two new Dow additions—Goldman Sachs (GS 165.25, -4.50) and Nike (NKE 68.98, -0.39)—ended in the red. 

Goldman Sachs settled behind the remaining Dow components as the financial sector (-1.5%) was the only group that ended with a loss larger than 1.0%. The broad weakness was brought on by a Financial Times report indicating Citigroup (C 49.57, -1.64) is likely to record a significant drop in third quarter trading revenue. Separately, afternoon reports from Reuters revealed that U.S. prosecutors in California are planning to announce charges related to mortgage-backed securities issuance against JPMorgan Chase (JPM 51.46, -1.34). 

Also of note, the industrial sector (-0.1%) outperformed as two of its top components, Boeing (BA 117.51, +0.88) and General Electric (GE 24.28, +0.27), both gained near 1.0%. However, transportation companies kept the sector from turning positive as the Dow Jones Transportation Average lost 0.6%. 

Countercyclical sectors ended mixed as utilities and telecom services ended ahead of the S&P while health care (-0.7%) lagged and consumer staples (-0.5%) ended in-line. 

Treasuries finished near their highs with the benchmark 10-yr yield lower by two basis points at 2.72%. 

Trading volume was on the light side as less than 700 million shares changed hands on the floor of the New York Stock Exchange. 

In news from overseas, the German federal election saw Chancellor Angela Merkel's CDU receive the most votes, but its former coalition partner, FDP, failed to reach the 5.0% threshold needed to enter parliament. This means Ms. Merkel's party will need to find a different coalition partner. Following the CDU victory, Chancellor Merkel said she does not see the need to change Europe's policy course. 

Tomorrow, the July Case-Shiller 20-city Index and July FHFA Housing Price Index will both be reported at 9:00 ET while the September consumer confidence report will cross the wires at 10:00 ET.

Commodities

Closing Commodities: Crude Oil Drops 1.2%; Gold And Silver Decline

·         Nov crude oil fell for a third consecutive session, dipping as low as $103.12 per barrel in morning pit trade. It traded slightly above that level for the remainder of the session and settled at $103.58 per barrel, or 1.2% lower

·         Oct natural gas fell deeper into the red as it pulled back from its session high of $3.67 per MMBtu set in early morning floor action. It closed at its session low of $3.60 per MMBtu, booking a loss of 2.4%

·         Precious metals also traded lower today, extending Friday's losses

·         Dec gold brushed a session low of $1317.90 per ounce in morning action and settled with a 0.4% loss at $1327.30 per ounce

·         Dec silver chopped around slightly below the unchanged line after dipping to a session low of $21.67 per ounce. It eventually settled with a 0.2% loss at $21.87 per ounce.

COMEX Metals Closing Prices

  Dec gold fell $5.30 to $1327.30/ounce 

·         Gold extended Friday's losses, trading in negative territory for its entire floor session. The yellow metal brushed a session low of $1317.90 in morning action and settled with a 0.4% loss. 

  Dec silver fell $0.04 to $21.87/ounce 

·         Silver chopped around slightly below the unchanged line after dipping to a session low of $21.67 in morning pit trade. It eventually settled with a 0.2% loss. 

  Dec copper fell 2 cents to $3.30/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Dec corn rose 2 cents to $4.53/bushel 

·         Dec wheat rose 8 cents to $6.54/bushel 

·         Nov soybeans fell 8 cents to $13.08/bushel 

·         Oct ethanol rose 3 cents to $1.89/gallon 

·         Nov sugar (#16 (U.S.)) fell 0.17 of a penny to 20.96 cents/lbs

NYMEX Energy Closing Prices

  Nov crude oil fell $1.28 to $103.58/barrel 

·         Crude oil fell for a third consecutive session, dipping as low as $103.12 in morning pit trade. It spent the remainder of the session trading slightly above that level and settled with a 1.2% loss. 

  Oct natural gas fell 9 cents to $3.60/MMBtu 

·         Natural gas fell deeper into the red as it pulled back from a session high of $3.67 set in early morning pit trade. It closed at its session low, booking a 2.4% loss. 

  Nov heating oil fell 5 cents to $2.96/gallon 

  Nov RBOB gasoline fell 5 cents to $2.62/gallon

Treasuries

Modest Gains for Treasuries
Treasuries fared relatively well on Monday as modest gains were seen across the curve. The benchmark 10-yr note saw its yield dip two basis points to 2.72% and that was pretty much the tale of the tape. Yields on the 2-yr, 3-yr, and 7-yr notes, as well as the 30-yr bond, also fell by two basis points. The "big winner" today was the 5-yr note, which saw its yield drop three basis points to 1.46%.

Sellers never really presented much of a challenge in Monday's session. Buyers didn't step up in force either, yet there were enough outside influences to maintain a steady layer of support under the market. 

·         Stocks languished amid earnings concerns.

o    There was a Financial Times report saying Citigroup (C 49.38, -1.83) might have suffered a large drop in third quarter trading revenue

o    There was a sobering sense that the Fed's decision not to taper last week could be a harbinger of weaker-than-expected economic activity and profit growth
 

·         Stocks were also challenged by the sense they had gotten overextended on a short-term basis

o    Before Friday's session, the S&P 500 was up 5.5% in the month of September

o    An intraday reversal in favorite momentum names Netflix (NFLX 301.00, -12.83), Tesla (TSLA 180.16, -3.23), and Priceline.com (PCLN 996, -7.01) contributed to the thinking that a period of consolidation is on order for stocks
 

·         Congress still didn't show any progress in reaching a budget agreement
 

·         There continued to be blurred lines of communication out of Fed officials

o    Atlanta Fed President Lockhart (non-voter on FOMC) said there is unlikely to be enough evidence between now and the October 29-30 FOMC meeting to change the Fed's perspective on where the economy stands

o    New York Fed President Dudley (voter on FOMC) said the economic and labor market improvement tests have not been met and that he sees little evidence of a pickup in the economy's forward momentum

o    Dallas Fed President Fisher (non-voter on FOMC, but will vote in 2014) said he argued in favor of a tapering announcement at the September meeting since he thought doing nothing would increase uncertainty about future policy and call the Fed's communications into question.
 

·         Manufacturing PMI reports for September for the eurozone and a flash PMI estimate for the US showed a deceleration in the pace of expansion from August levels
 

·         The HSBC PMI report for China hit a six-month high in September (51.2), but notably, energy and industrial metal prices did not respond favorably to the news. Crude dropped 1.3% to $103.58/bbl while copper prices slipped 0.6% to $3.30/lb.

Looking ahead to Tuesday, the Treasury market will be digesting the latest Case-Shiller Home Price Index (July), FHFA Housing Price Index (July), and Consumer Confidence (September) reports. In addition, it will also be asked to absorb new supply with a $33 bln 2-yr note auction and to digest more Fed speak. Cleveland Fed President Pianalto (Cleveland president votes in 2014) will be speaking at 9:30 a.m. ET and Kansas City Fed President George, the lone dissenter at the September FOMC meeting, will be speaking at 1:00 p.m. ET.

Next Day In View 

Economic Commentary

Economic Summary: No US data today; Dudley says two tests for tapering are labor market improvement & economic forward momentum, says these metrics not achieved but progress made; Pianalto & George to speak tomorrow
Fed/Treasury Events Summary:

·         NY Fed President William Dudley (voting FOMC member, typically dovish) said '"To begin to taper, I have two tests that must be passed: (1) evidence that the labor market has shown improvement, and (2) information about the economy's forward momentum that makes me confident that labor market improvement will continue in the future. So far, I think we have made progress with respect to these metrics, but have not yet achieved success."

·         Dallas Fed President Richard Fisher (hawk, non-voter) argued against decision to keep bond buying unchanged at September meeting; said the decision not to taper hurt the Fed's credibility.

·         Atlanta Fed President Dennis Lockhart (not a voting FOMC member, typically moderate) says that September decision not to taper was a close call

Upcoming Economic Data:

·         July Case Schiller 20 City Index due out Tuesday at 9:00 (Briefing.com consensus of 12.0%; June was 12.1%)

·         July FIFA Housing Price Index due out Tuesday at 9:00 (Briefing.com consensus of ; June was 0.7%)

·         September Consumer Confidence due out Tuesday at 10:00 (Briefing.com consensus of 80.0; August was 81.5)

Upcoming Fed/Treasury Events:

·         Cleveland Fed President Sandra Pianalto (not a voting FOMC member, typically dovish) to speak tomorrow at 9:30

·         Kansas City Fed President Esther George (FOMC dissenter, hawkish) to speak tomorrow at 13:00

Other International Events of Interest

·         China's HSBC Manufacturing PMI rose to 51.2 from 50.1 (50.9 expected). This marked the highest reading since April.

·         Eurozone Manufacturing PMI slipped to 51.1 from 51.4 (51.8 expected) while the Services PMI increased to 52.1 from 50.7 (51.1 forecast). 

·         In Europe, the big news was that Germany's chancellor Merkel will keep her job following the weekend election, which was widely expected. Germany's DAX is -0.2% following the expected outcome. Staying in Europe, Germany and France posted less than stellar PMI readings, with both not only missing expectations, but falling from the prior month.

On other news.... 

Apple: Weekend iPhone sales ahead of expectations - Cowen (467.41 )
Cowen notes AAPL announced BMO that it sold ~9MM new iPhone 5S/5C over the weekend with more than 200MM iOS devices being updated with iOS7. This compares to ~5MM iPhone 5 and ~100MM iOS6 downloads in the first weekend of launch in September 2012. This is roundly better than its ~7MM expectation (some peers were still saying 5MM as recently as this morning) and, firm thinks, also materially better than buy side expectations of ~7-8MM. Firm thinks this result validates Apple's decision to maintain focus on profitability vs market share.







Currencies 

Currency Commentary: Currencies Quiet Amid Fed Speakers

·         The Dollar Index remained in a tight trading range on a relatively uneventful trading day. The DXY hit 80.52 out of the gate as it saw some safe haven bids. But it failed to hold that level and slipped back to 80.37 intraday. We are now seeing the DXY move back into the 80.40 area. The moves came while Fed speakers took to the air waves with Dudley, Lockhart, and Fisher speaking today. Dudley provided a dovish outlook as he noted the economy had not significantly passed tests to reign in QE. Fisher was hawkish as per usual, saying the decision  not to taper only confused the markets. Lockhart was more even keel just noting that the vote to taper was close. The Fed calendar remains packed tomorrow with Pianalto and George speaking. House price data in the form of Case Shiller and the FHFA reports are also due out as is the September Consumer Confidence. 

·         The euro slipped below the 1.35 level in early trade but firmly held the 1.3480 level. The single currency has been trading just below the 1.35 level the majority of the session. It will be a quiet day tomorrow on  the calendar with a German Ifo Survey being the most meaningful news. 

·         The pound continues to hold the 1.60 level. Tomorrow the BoEs Miles will be speaking. He has tended to be dovish and mentioned the potential need for more stimulus so it will be interesting to see if his comments impact sterling. 

·         The yen has been hovering at the low end of the 98 level. The currency has fainted at moves below 99 but so far has held that level in a quiet trading session (FOREX, BONDX).

Jason's Commentaries

I definitely did not see the DFDM coming so fast. After the new addition of Goldman Sachs, Visa and Nike got added into the Dow Jones, we've got a hit in the Financial Sector as Citi reducing its Q3 earnings results. Market started with a bearish bias and continued got flat till the closing bell. Apple was one of the main stock that helped the market from going down further as the iphone 5S sales was much better than expect. The Utilities was the major gainer on the S&P500 and Tech was led by Apple. However, the rest of the market remains bearish. 690m shares changed hands on the NYSE, which provide quite decent volume internals were pointing towards the downside last night. On technicals, we're definitely sitting on the 15400 support level. And i'll be expecting the market to head up slightly today.

Market Call: FLAT to upside

Date: 24 Sep 2013