25 Sep 2013 AMC

25 Sep 2013 AMC

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: -0.3%

·         Germany's DAX: 0.0%

·         France's CAC: 0.0%

·         Spain's IBEX: + 0.8%

·         Portugal's PSI: + 0.8%

·         Italy's MIB Index: + 0.1%

·         Irish Ovrl Index: -0.1%

·         Greece ATHEX Composite: + 0.4%

Before Market Opens

S&P futures vs fair value: +1.90. Nasdaq futures vs fair value: +6.70.
The S&P 500 futures hover near their flat line.

Asian markets ended on a mixed note. Japan's Nikkei (-0.8%) was among the laggards while Hong Kong's Hang Seng outperformed (+0.1%). China's Shanghai Composite shed 0.4% as the 2-week SHIBOR rate continued to climb (+38 bps to 5.18%) while shorter and longer rates retreated. Elsewhere, Australia's ASX displayed relative strength (+0.8%) after the Reserve Bank of Australia released its semi-annual Financial Stability Review Report, which said the banking system is in ‘strong shape.' Regional economic data was limited as Japan's CSPI increased 0.6% year-over-year (0.5% expected, 0.6% previous) and New Zealand's trade deficit widened to $1.19 billion from $774 million ($743 million expected). 

·         Japan's Nikkei closed lower by 0.8% as growth-sensitive names weighed. Furakawa lost 6.0% and Nisshin Steel Holdings tumbled 6.7%. Tokyo Electron outperformed with a gain of 13.2% after Applied Materials agreed to buy the company for $9.39 billion. 

·         In Hong Kong, the Hang Seng added 0.1% with gaming and telecom names displaying strength. China Mobile added 0.7% and Sands China rose 1.8%. On the downside, China Coal Energy lost 3.3%. 

·         China's Shanghai Composite slipped 0.4% with financials leading to the downside. Heavyweight China Vanke lost 2.2%. 

Major European indices have spent the bulk of the session in negative territory. In news of note, non-performing loans at Greek Piraeus Bank are on the rise and additional loss provisions may be necessary this quarter. Economic data was limited to a handful of releases. Germany's GfK Consumer Climate ticked up to 7.1 from 7.0 (7.0 expected). Great Britain's CBI Distributive Trades Survey rose to 34 from 27 (24 consensus).The French Business Survey slipped to 97 from 98 (99 expected). Italian consumer confidence improved to 101.1 from 98.4 (98.5 forecast). Lastly, Spain's PPI slipped 0.1% year-over-year (0.5% consensus, 0.8% last). 

·         Germany's DAX is off 0.2% as financials lag. Commerzbank and Muenchener Re are down 5.4% and 1.2%, respectively. ThyssenKrupp outperforms with a gain of 4.1% after receiving permission to ease the terms of its loan deals. 

·         In France, the CAC holds a loss of 0.3%. Consumer names lead to the downside with Kering and LVMH Moet Hennessy trading lower by 0.7% and 1.5%, respectively. Telecom carrier Orange is the top performer, up 2.7%. 

·         In Great Britain, the FTSE is lower by 0.3%. Carnival holds a loss of 6.2% after receiving a series of downgrades. Meanwhile, financials are among the leaders. Barclays and Royal Bank of Scotland hold respective gains of 1.5% and 2.6%.

Market Internals

Market Internals -Technical-
The Dow closed down 61 (-0.40%) at 15273, the S&P 500 closed down 5 (-0.27%) at 1693, and the Nasdaq closed down 7 (-0.19%) at 3761. Action came on mixed volume (NYSE 641 mln vs. avg. of 694; NASDAQ 1769 mln vs. avg. of 1575), with mixed advancers/decliners (NYSE 1547/1513, NASDAQ 1166/1315) and new highs outpacing new lows (NYSE 111/20, NASDAQ 153/18).

Relative Strength: 
Junior Gold Miners-GDXJ +4.49%, Silver Miners-SIL +2.62%, Clean Energy-PBW +1.90%, Gold Miners-GDX +1.75%, Sugar-SGG +1.68%, Poland-EPOL +1.34%, Spain-EWP +1.14%, Greece-GREK +1.04%, Austria-EWO +0.95%, Eastern Europe-ESR +0.91%.

Relative Weakness: 
Indonesia-IDX -2.35%, Cocoa-NIB -1.63%, Rare Earths-REMX -1.52%, Brazilian Real-BZF -1.42%, Sweden-EWD -1.32%, Chile-ECH -1.28%, Turkey-TUR -1.26%, Lithium-LIT -1.04%, Smart Grid Infrastructure-GRID -1.00%, Coal-KOL -0.96%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: S&P 500 Registers Fifth Consecutive Loss
The S&P 500 shed 0.3%, extending its losing streak to five sessions. Including today's decline, the benchmark index has surrendered 1.9% since last Thursday. 

Stocks endured a sloppy session as the S&P made two unsuccessful attempts at holding the 1,700 level. After opening just above its flat line, the S&P 500 slipped into the red before recovering swiftly with the help of energy (-0.1%) and materials (+0.2%). The financial sector (+0.5%) also fueled this morning's rebound after losing roughly 3.5% during the past four sessions. 

The morning recovery placed the S&P above 1,700, but the index could not muster additional strength as consumer staples (-0.8%), health care (-0.8%), technology (-0.3%), and utilities (-0.7%) weighed. The underperformance of these groups briefly pressured the S&P back to its flat line. This retreat was followed by another run to 1,700, but the index slid from this level back to lows after a report from Bloomberg indicated Wal-Mart (WMT 74.65, -1.10) is cutting its orders amid a pile-up in inventories. 

Concerns about lackluster sales at the largest retailer were received as a warning regarding the well-being of the broader sector, causing other retailers like Costco (COST 115.41, -0.93), Dollar General (DG 57.00, -1.11), and Target (TGT 63.24, -0.67) to slump to their lows. The affected names were able to regain a portion of their losses after CNBC cited a Wal-Mart official who described the headlines as misleading. 

Afternoon action saw the S&P climb off its lows, but the index was unable to regain its flat line. 

Commodities ended in mixed fashion as energy fell and metals displayed strength. Crude oil fell 0.8% to $102.31 per barrel while gold added 1.3%, ending at $1333.50 per troy ounce. 

Treasuries saw steady demand throughout the session, and the benchmark 10-yr yield fell four basis points to 2.62%. 

With the debt ceiling looming, Secretary of Treasury Jack Lew was quoted as saying the spending limit will be reached no later than October 17. The Congressional Budget Office also provided an estimate, expecting the spending ability to be exhausted between October 22 and the end of the month. 

Trading volume was below average as 641 million shares changed hands on the floor of the NYSE. 

In today's economic data, durable orders increased 0.1% after declining a downwardly revised 8.1% in July. The Briefing.com consensus estimate called for a 0.5% increase. Excluding transportation, durable orders declined 0.1% (+0.9% consensus) following an upwardly revised decline of 0.5% for July. Notwithstanding the headline disappointment, there were some encouraging elements to the report like the 0.9% increase in new orders for machinery, the 2.4% jump in new orders for motor vehicles and parts, and positive business investment data. New home sales managed a modest rebound in August. Sales rose from a downwardly revised 390,000 in July to 421,000 in August. The Briefing.com consensus expected new home sales to increase to 415,000. Even after the uptick, sales were at their second lowest level since December 2012. 

New home sales represent the number of newly signed contracts and are much more responsive to changes in interest rates than the existing home sales data. The initial increase in mortgage rates caused a brief spike in sales in June as buyers rushed in to take advantage of relatively low rates before they went higher. That caused a large "payback" period to develop in July where sales fell 14%. The weak rebound in August suggests that buyers are not comfortable at current mortgage rates. 

Separately, the MBA Mortgage Index rose 5.5%, posting its second consecutive increase. 

Tomorrow, weekly initial claims and the third estimate of second quarter GDP will be reported at 8:30 ET while August pending home sales will be announced at 10:00 ET.

Commodities

Closing Commodities: Metals Rally, Hold Gains; Crude Oil Slids Lower
Commodities ended the day mixed. Gold, silver and copper all rose today and are all still higher in electronic trade and sitting just under the high's for the day.

In the energy space, crude oil and natural gas futures are on the other end. Crude oil has been sliding lower all session (pit trading session) and is now sitting right at its session low, one in which was just hit a few minutes ago. Natural gas is now flat and is just above its LoD.

Precious metals rallied this morning and held its gains for the day. Dec gold rose $19.40/oz in today's pit trading session and ended the day at $1336.10/oz. Dec silver rose $0.32 to $21.90/oz.

Nov crude oil fell $0.47 to $102.64/barrel, while Oct nat gas rose 6 cents to $3.55/MMBtu during today's pit trading session.

COMEX Metals Closing Prices

·         Dec gold rose $19.40 to $1336.10/ounce

·         \Dec silver rose $0.32 to $21.90/ounce

·         Dec copper rose 1 cent to $3.27/lbs

NYMEX Energy Closing Prices

·         Nov crude oil fell $0.47 to $102.64/barrel

·         Oct natural gas rose 6 cents to $3.55/MMBtu

·         Nov heating oil rose 1 cent to $2.97/gallon

·         Nov RBOB gasoline rose 1 cent to $2.66/gallon

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Dec corn rose 6 cents to $4.55/bushel

·         Dec wheat rose 12 cents to $6.70/bushel

·         Nov soybeans rose 10 cents to $13.22/bushel

·         Oct ethanol rose 7 cents to $1.90/gallon

·         Nov sugar (#16 (U.S.)) rose 0.24 of a penny to 21.23 cents/lbs

Treasuries

Treasuries Gain for Fourth Day: 10-yr: +09/32..2.619%..USD/JPY: 98.45..EUR/USD: 1.3528
Treasuries ended on their best levels of the session as maturities advanced for the fourth consecutive day. The complex saw an overnight bid persist into U.S. trade, and then gather steam following this morning's mixed durable orders and new home sales data. Traders also had to deal with comments from Treasury Secretary Lew suggesting Treasury will exhaust its extraordinary measures on October 17, causing the debt ceiling to be breached if a deal is not in place. The CBO announced its own guesstimate, marking October 22 as the day. Regardless, a solid bid remained in place into this afternoon's average $35 bln 5-yr note auction. The auction drew 1.436% and a slightly less than average 2.67x bid/cover (12-auction average 2.73x). Indirect (44.9%) and direct (11.8%) bidder demand was in-line with their own 12-auction averages, leaving primary dealers with 43.3% of the supply. Treasuries resumed their climb after some post auction selling, finishing on their best levels of the day. The 5-yr yield shed 3.7 bps on the session, ending at 1.381%. Elsewhere, the benchmark 10-yr yield erased nearly 4 bps to finish at 2.614%. Today's move closed the August 12/13 gap, and has action testing support in the 2.600% area. A breakdown of that level paves the way for a test of the critical 2.450% area. Curve flattening persisted as the 2-10-yr spread narrowed to 227 bps. A solid day for precious metals saw gold add $20 and silver tack on $0.25 to close at $1336 and $21.85, respectively. Thursday will see initial and continuing claims, GDP - Third Estimate (8:30), and pending home sales (10). Treasury will auction $29 bln 7-yr notes. Minny's Kocherlakota will be in Houghton, MI to discuss "Monetary Policy Strategy" (12:15). KC's George travels to Denver, CO to speak on the U.S. economy (21:15)

Next Day In View 

Economic Commentary

New Home Sales Rebound, Still Weak
New home sales managed a modest rebound in August. Sales rose from a downwardly revised 390,000 in July to 421,000 in August. The Briefing.com consensus expected new home sales to increase to 415,000. Even after the uptick, sales were at their second lowest level since December 2012. New home sales represent the number of newly signed contracts and are much more responsive to changes in interest rates than the existing home sales data. The initial increase in mortgage rates caused a brief spike in sales in June as buyers rushed in to take advantage of relatively low rates before they went higher. That caused a large "payback" period to develop in July where sales fell 14%. The weak rebound in August suggests that buyers are not comfortable at current mortgage rates. Inventories remain low. The number of months' supply at the current pace of sales fell to 5.0 months from 5.2 months in July. That is up from 4.3 months' supply in June, but well below a 6 months' supply that builders typically keep during periods of normal market conditions. The median home price increased only 0.6% in August to $254,600. That was the smallest price gain since June 2012, and it suggests that builders may not be able to tack on higher prices amid elevated mortgage rates.

On other news.... 

DoE Inventory Data
Dept of Energy reports that for the week ending Sep 20: 

·         Crude oil inventories had a build of 2.64 mln (consensus called for a draw of 1.05 mln)

·         Gasoline inventories had a build of 0.217 mln (consensus was between a draw of 0.75 mln and build of 0.1 mln)

·         Distillate inventories had a draw of 0.234 mln (consensus called for a draw of 0.6-0.925 mln)

Currencies 

Dollar Snaps Four-Day Win Streak: 10-yr: +09/32..2.625%..USD/JPY: 98.55..EUR/USD: 1.3520
The Dollar Index holds on session lows near 80.35 as trade looks likely to post its first loss in five sessions. Sellers were in control throughout the morning before a quiet afternoon trade produced a tight five cent range between 80.30 and 80.35. Click here to see a daily Dollar Index chart.

·         EURUSD is +55 pips at 1.3520 as trade looks as though it will snap the current three-day losing streak. Traders are watching the 1.3530 level closely, with any close north of there marking a seven-month closing high. Eurozone data is limited to M3 money supply. 

·         GBPUSD is +75 pips at 1.6075 as action holds just off the highs. Sterling continues to lead the way against the greenback, tacking on close to 600 pips in September alone. Britain's current account balance and Final GDP will cross tomorrow. 

·         USDCHF is -35 pips at .9095 as trade is on track to close at a near eight-month low. Bulls have not had much to cheer about as of late as sellers have been in control for 11 of the past 14 sessions, erasing almost 400 pips since the first week of September. 

·         USDJPY is -20 pips at 98.55 as action probes the 50-day moving average. Trade has been quiet throughout the month of September as most action has been limited to the 98.00/100.00 range. Next week looms large as a resolution to the long awaited sales tax hike is expected. 

·         AUDUSD is -20 pips at .9365 amid a rather lackluster trade. The pair has seen just a 20 pip range for most of the U.S. session with trade managing to survive an early test of .9350 support. 

·         USDCAD is +10 pips at 1.0310 as trade ticks higher for the fourth time in five days. This pair is one to watch over the coming days as trendline support off the September 2012 lows aids the 200-day moving average (1.0220). 

Jason's Commentaries


Well, I was right this time... Market was flat last night with Dow down by -0.4%, Nasdaq down by -0.19% and S&P500 down by -0.27%. Market went through a very choppy session last night and continued its 5th consecutive loss after hitting a new high after the FOMC minutes. The main laggard in the market was the staples and Healthcare. Walmart lagged the staples as there is a rise in its inventories, indicating weakening consumer sentiments. Financials managed to be the biggest gainers of 0.55%. The financial sector was beaten down as there are much investigations going on the market to penalize the financials for causing the Financial Crisis. JP Morgan even offered $3b to stop its digging of evidence. After the London Whale incident, JP Morgan led the sector lower after being dug for more evidence on the sale of MBS during the Pre-Financial crisis period. 

 Volumes were decent at 641.2m shares traded on the NYSE and it's pretty flat on the internals. VIX was down at -0.5%. On the Dow, we've crossed the 15300 level and the next possible significant level that we might be heading towards is at 14,900. Since next week is the employment data week, I reckon we won't be heading down so soon, so quickly.

Market Call: FLAT to downside

Date: 26 Sep 2013