26 Sep 2013 AMC

26 Sep 2013 AMC

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: + 0.2%

·         Germany's DAX: 0.0%

·         France's CAC: -0.2%

·         Spain's IBEX: + 0.3%

·         Portugal's PSI: 0.0%

·         Italy's MIB Index: -1.2%

·         Irish Ovrl Index: -0.4%

·         Greece ATHEX Composite: + 0.8%

Before Market Opens

S&P futures vs fair value: +4.40. Nasdaq futures vs fair value: +15.50.
The S&P 500 futures trade higher by 0.2%.

The major Asian bourses ended mostly lower as China's Shanghai Composite (-1.9%) paced the decline. The weakness came as reports suggested Beijing may lower its annual growth target to 7.5% from 8.0% for the 2011-2015 timeframe. The People's Bank of China conducted reverse repurchase operations in the amount of CNY80 billion as it continues to inject liquidity into the system ahead of the Golden Week. Meanwhile, Japan's Nikkei outperformed after overnight reports suggested the government was considering an imminent corporate tax cut, but Japanese Finance Minister Aso pushed back against that as he suggested a capex tax break. It was also reported that there are no plans to introduce more stimulus as part of any deal. Central bank action, or rather inaction, saw the Bank of Korea surprise markets by keeping its benchmark rate unchanged at 1.88% when many were expecting a hike to 2.00%. Data from the region was mostly disappointing as South Korean consumer confidence slid to 102 (105 previous) while Singaporean industrial production rose a less than expected 3.5% year-over-year (4.9% expected) and Taiwan's industrial production slipped 0.7% year-over-year (+4.7% expected). Elsewhere, Hong Kong's trade deficit narrowed to HKD39.6 billion (HKD40.6 billion expected, HKD37.2 billion previous). 

·         In Japan, the Nikkei advanced 1.2% as trade posted its best finish in two months. Bathroom equipment maker Lixil Group jumped 4.0% after announcing plans to purchase European peer Grohe for $4 billion. 

·         China's Shanghai Composite fell 1.9% as trade broke below the 200-day moving average. Financials were among the laggards as Pudong Development Bank and Everbright Bank fell approximately 4.0% and 1.0%, respectively. 

·         In Hong Kong, the Hang Seng shed 0.4% as action slipped for the third time in four days. Exporter Li & Fung fell 3.1% as a result of yesterday's report that Wal-Mart inventories are piling up. 

Major European indices trade lower with Italy's MIB (-1.4%) leading to the downside amid reports President Giorgio Napolitano has cancelled a planned appearance at an event due to a "disturbing" political development. This comes after yesterday's comments from PDL lawmakers who reiterated their intention to quit the government should Silvio Berlusconi be banned from holding public office. In reaction, Italy's benchmark 10-yr yield is higher by 13 basis points at 4.36%. Participants received a handful of economic data points. Eurozone M3 Money Supply expanded 2.3% year-over-year (2.2% forecast, 2.2% prior) and private loans decreased 2.0% year-over-year (-2.0% expected, -1.9% previous). Great Britain's final second quarter GDP indicated growth of 0.7% quarter-over-quarter (0.7% expected, 0.7% last) while the year-over-year reading increased 1.3% (1.5% consensus, 1.5% previous). Separately, business investment fell 2.7% quarter-over-quarter (0.9% expected, 0.9% prior) and the current account deficit narrowed to GBP13.0 billion from GBP21.8 billion (GBP12.0 billion expected). French consumer confidence ticked up to 85 from 84, as expected. Italy's retail sales ticked down 0.3% month-over-month (0.3% forecast, -0.2% prior) while the year-over-year reading fell 0.9% (-3.0% last). 

·         Great Britain's FTSE is little changed as financials lag. Barclays and Royal Bank of Scotland hold respective losses of 1.7% and 0.9%. Consumer names are among the advancers with G4S, TUI Travel, and Whitbread up between 1.8% and 2.4%. 

·         In Germany, the DAX holds a loss of 0.1% with banks also leading to the downside. Deutsche Bank and Commerzbank are both down near 1.2%. Utilities have displayed strength with E.ON and RWE up 0.4% and 2.0%, respectively. 

·         France's CAC trades down 0.1% with steelmaker Vallourec (-2.0%) leading the decliners. Telecom provider Orange (+2.6%) is the top index performer for the second day in a row. 

·         Italy's MIB is down 1.4% as bank shares trade broadly lower. Banco Popolare, UniCredit and Mediobanca are all down between 3.0% and 3.5%.

Market Internals

Market Internals -Technical-
The Nasdaq closed up 26 (+0.70%) at 3787, the Dow closed up 55 (+0.36%) at 15328, and the S&P 500 closed up 6 (+0.35%) at 1699. Action came on mixed volume (NYSE 603 mln vs. avg. of 693; NASDAQ 1745 mln vs. avg. of 1580), with advancers outpacing decliners (NYSE 1935/1102, NASDAQ 1511/1002) and new highs outpacing new lows(NYSE 117/22, NASDAQ 143/17).

Relative Strength: 
Indonesia-IDX +2.07%, Wind Energy-FAN +1.95%, Cocoa-NIB +1.89%, Biotechnology-XBI +1.82%, Egypt-EGPT +1.81%, Biotechnology-IBB +1.64%, Gasoline-UGA +1.59%, Japan-EWJ +1.59%, Poland-EPOL +1.50%, Thailand-THD +1.32%.

Relative Weakness: 
Junior Gold Miners-GDXJ -2.49%, Silver Miners-SIL -2.41%, Volatility-VXX -1.94%, Coffee-JO -1.39%, Peru-EPU -1.19%, Platinum-PPLT -1.13%, Turkey-TUR -1.08%, Mexico-EWW -1.01%, Middle East and Africa-GAF -0.97%, Italy-EWI -0.69%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: S&P 500 Snaps Five-Day Losing Streak
The S&P 500 added 0.4%, snapping its five-day losing streak that saw the index surrender almost 2.0%. Although the benchmark average settled in the green, it was unable to maintain all of its early gain or register a close above the 1,700 level. 

In general, some of today's price action resembled that of yesterday with the S&P making two unsuccessful runs at 1,700. However, unlike yesterday, the major averages ended in positive territory with the Nasdaq in the lead (+0.7%). 

The tech-heavy index benefitted from the outperformance of biotech as the iShares Nasdaq Biotechnology ETF (IBB 210.16, +3.40) climbed 1.6%. Meanwhile, major traditional tech companies were mixed. Apple (AAPL 486.22, +4.69) advanced 1.0% and Intel (INTC 23.41, -0.29) lost 1.2%. The broader tech sector added 0.3%. 

Today's performance of financials also marked a departure from yesterday as top components ended mixed. Citigroup (C 48.93, -0.33) was the weakest performer among the majors while the sector ended little changed. Despite yesterday's rebound, the sector is down almost 3.5% since last Thursday. 

On a related note, JPMorgan Chase (JPM 51.89, +0.19) President and Chief Executive Officer Jamie Dimon met with Attorney General Eric Holder to discuss a potential settlement in a mortgage-backed securities issuance case brought against the bank. However, no announcement was made today. 

Remaining cyclical sectors were mixed as energy (+0.1%) lagged; consumer discretionary (+0.9%) and materials outperformed (+0.6%); and industrials (+0.4%) ended in-line with the S&P. 

Notably, the discretionary sector received support from apparel manufacturers with Nike (NKE 70.34, +1.42) rising 2.1% ahead of its quarterly earnings report, scheduled for an after-hours release. 

Even though equities posted gains, it was the final-hour rally that saved the market from ending on session lows. With choppy price action abound, the CBOE Volatility Index (VIX 14.05, +0.04) added 0.3% as participants adjusted their near-term volatility expectations. 

Treasuries posted slim losses with the benchmark 10-yr yield rising one basis point to 2.65%. 

Trading volume was below average as only 603 million shares changed hands on the floor of the NYSE. 

This morning, market participants heard from Minneapolis Fed President Narayana Kocherlakota, who said low inflation levels give the Fed room to expand the scope of its policy reach. Mr. Kocherlakota channeled his inner Mario Draghi by adding that the central bank will do "whatever it takes" to achieve the goal of higher employment. 

In overseas news of note, Italian markets lagged amid reports President Giorgio Napolitano cancelled a planned appearance at an event due to a "disturbing" political development. After European markets closed for the day, a separate report indicated Prime Minister Enrico Letta called a summit of the parties for a ‘government check-up.' These developments followed yesterday's comments from PDL lawmakers who reiterated their intention to quit the government should Silvio Berlusconi be banned from office. In reaction, Italy's benchmark 10-yr yield rose seven basis points to 4.30%. 

In today's economic data, the weekly initial claims level fell to 305,000 from an upwardly revised 310,000 (from 309,000). The Briefing.com consensus expected the initial claims level to increase to 325,000. There were no special factors that impacted the initial claims this week. The computer glitches, which caused biases over the previous two weeks, have been corrected. As such, the report suggests real improvement in labor conditions in September. 

Separately, the third estimate for second quarter GDP was little changed at 2.5%. The GDP price deflator, though, was revised down to 0.6% from 0.8%. 

Also of note, pending home sales for August fell 1.6%, which was better than the 2.3% decrease expected by the Briefing.com consensus. Today's reading followed last month's decrease of 1.3%. 

Tomorrow, August personal income, personal spending and core PCE prices will be reported at 8:30 ET while the final reading of the September University of Michigan Consumer Sentiment Survey will be released at 9:55 ET.

Commodities

Closing Commodities: Crude Oil Rises 0.4%, Gold And Silver Fall

·         Nov crude oil booked its first gain in six sessions despite a stronger dollar index. The energy component briefly fell into negative territory and to a session low of $102.37 per barrel in late afternoon pit trade but regained momentum heading into the close. It settled 0.4% higher at $103.00 per barrel, slightly below its session high of $103.19 per barre

·         Nov natural gas slid to a session low of $3.45 per MMBtu on weak inventory data that showed a build of 87 bcf when a smaller build of 76-79 build was anticipated. However, it erased the loss and broke into positive territory in afternoon floor action. It settled with a 0.6% gain at $3.57 per MMBtu

·         Precious metals fell today as the dollar index strengthened following an unexpected fall in weekly jobless claims data. The initial claims level fell to 305,000 from an upwardly revised 310,000 (from 309,000), while the Briefing.com consensus expected the level to increase to 325,000

·         Dec gold slipped from its session high of $1337.80 per ounce and dipped below the $1320.00 per ounce level in early afternoon pit trade. It eventually settled with a 0.9% loss at $1324.10 per ounce

·         Dec silver retreated into negative territory from its session high of $22.07 per ounce. Unable to erase much of its loss, it settled 0.7% lower at $21.75 per ounce.

NYMEX Energy Closing Prices

·         Nov crude oil rose $0.36 to $103.00/barrel 

o    Crude oil rose for the first time in six sessions despite a stronger dollar index. The energy component briefly fell into negative territory and to a session low of $102.37 in late afternoon pit trade but regained momentum heading into the close. It settled slightly below its session high of $103.19, booking a gain of 0.4%. 

·         Nov natural gas rose 2 cents to $3.57/MMBtu 

o    Natural gas slid to a session low of $3.45 on weak inventory data that showed a build of 87 bcf when a smaller build of 76-79 bcf was anticipated. However, it erased the loss and broke into positive territory in afternoon floor action. It settled just below its session high of $3.58, or 0.6% higher. 

·         Nov heating oil rose 3 cents to $3.00/gallon 

·         Nov RBOB gasoline rose 3 cents to $2.69/gallon

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Dec corn rose 2 cents to $4.57/bushel 

·         Dec wheat rose 8 cents to $6.78/bushel 

·         Nov soybeans fell 5 cents to $13.17/bushel 

·         Nov ethanol rose 5 cents to $1.90/gallon 

·         Nov sugar (#16 (U.S.)) fell 0.18 of a penny to 21.05 cents/lbs

COMEX Metals Closing Prices

  Dec gold fell $12.00 to $1324.10/ounce 

·         Gold fell today as the dollar strengthened following an unexpected fall in weekly jobless claims data. The initial claims level fell to 305,000 from an upwardly revised 310,000 (from 309,000), while the Briefing.com consensus expected the level to increase to 325,000. The yellow metal slipped from its session high of $1337.80 and dipped below $1320.00 in early afternoon pit trade. It eventually settled with a 0.9% loss. 

  Dec silver fell $0.15 to $21.75/ounce 

·         Silver also pulled back following the claims data. It retreated from its session high of $22.07 into negative territory, brushing a session low of $21.67. Unable to erase much of the loss, it settled 0.7% lower. 

  Dec copper rose 4 cents to $3.31/lbs

Treasuries

Treasuries Snap Four-Day Win Streak: 10-yr: -03/32..2.646%..USD/JPY: 98.86..EUR/USD: 1.3480
Treasuries ended a lackluster session with modest losses as the complex spent the day locked in a tight range. Treasuries slipped to their lows early in U.S. trade after initial claims (305K actual v. 325K expected) continued to show improvement and Q2 GDP - Third Estimate held steady at 2.5% (2.6% expected). The complex would slide to new lows after the better than expected pending home sales (-1.6% actual v. -2.3% expected) before spending the rest of the session mired in a sleepy trade. 

Today's session saw continued banter over the debt ceiling as players on both sides of the aisle refused to make concessions necessary in order to jump start budget/debt ceiling negotiations. Also making headlines today was Minneapolis Fed President Kocherlakota, who suggested the Fed must do "whatever it takes" to achieve its goal of higher employment, even increasing stimulus, if necessary. 

Some selling developed following today's disappointing $29 bln 7-yr note auction, which drew 2.058% and a weak 2.46x bid/cover (12-auction average 2.63x), but bears were not able to produce fresh lows. Today's weakness had the biggest impact on the belly of the curve where yields climbed as much as 5 bps. The benchmark 10-yr yield was never a threat to break 2.600%, settling up 3 bps near 2.645%. Selling swung the yield curve steeper as the 2-10-yr spread widened to 230 bps. Elsewhere, precious metals ended near their lows with gold down $13 and silver off $0.20 to $1323 and $21.70, respectively. 

Data concludes on Friday with personal income and spending, PCE prices - core (8:30), and Michigan Sentiment - Final (9:55). Chicago's Evans will be in Oslo, Norway discussing "The Role of Monetary Policy Revisited" (5:45 & 10:15). Boston's Rosengren will give opening remarks at the NY Fed's Conference on Stable Funding (8:30). NY's Dudley will be upstate in Syracuse to speak before the Syracuse University Whitman School of Management (14)

Next Day In View 

Economic Commentary

Economic Summary: Jobless Claims fall unexpectedly; Q2 GDP remains at 2.5%; Pending home sales decline slower than expected; Kocherlakota makes very dovish remarks; 3 voting FOMC members to speak tomorrow
Economic Data Summary:

·         Weekly Initial Claims 305K vs Briefing.com consensus of 325K; Last Week was 309K

·         Weekly Continuing Claims 2.823 M vs Briefing.com consensus of 2.775 M ; Last Week was 2.787 M

o    The computer glitches, which caused biases over the previous two weeks, have been corrected. That means there was real improvement in labor conditions in September. Normally, this type of gain would foreshadow a large increase in nonfarm payrolls. However, over the last few months, the payroll data has shown that businesses have indeed pulled back on layoffs but have not actively pursued new hiring. 

·         Q2 GDP Third Estimate 2.5% vs Briefing.com consensus of 2.6%; First Quarter was 2.5%

·         Q2 GDP Deflator -- Third Estimate 0.6% vs Briefing.com consensus of 0.8%; First Quarter was 0.8%

o    The revisions to the components of GDP were extremely minor and did not change the overall outlook or trends for future economic growth. Real final sales were revised up to 2.1% from 1.9%. That is up from a 0.2% increase in Q1 2013. The increase in real final sales was a result of a downward revision to inventories (from a contribution of 0.59 percentage points to 0.41 percentage points) and upward revisions to both fixed investment (+6.5% from +6.0%) and government spending (-0.4% from -0.9%). 

·         August Pending Home Sales -1.6% vs Briefing.com consensus of -2.3%; July was -1.3%

Fed/Treasury Events Summary:

·         Fed Board Member Jeremy Stein (voter, dove) noted that taper vote was a 'close call'; says rate of purchase will remain tied to jobs.

·         Minneapolis Fed President Kocherlakota (not a voting member in 2013, will have vote next year, typically dovish) said "The low levels of inflation realizations and medium-term inflation expectations—both notably below the FOMC's target inflation rate of 2 percent per year—demonstrate that there is considerable monetary policy capacity to provide much needed stimulus to the labor market... Doing whatever it takes in the next few years will mean that the FOMC is willing to use any of its congressionally authorized tools to achieve the goal of higher employment, no matter how unconventional those tools might be."

Upcoming Economic Data:

·         August Personal Income due out Friday at 8:30 (Briefing.com consensus of 0.3%; July was 0.1%)

·         August Personal Spending due out Friday at 8:30 (Briefing.com consensus of 0.2%; July was 0.1%)

·         August PCE Prices - Core due out Friday at 8:30 (Briefing.com consensus of 0.1%; July was 0.1%)

·         September Michigan Sentiment - Final due out Friday at 9:55 (Briefing.com consensus of 77.3; August was 76.8)

Upcoming Fed/Treasury Events:

·         The Treasury is scheduled to auction off $29 bln in 7 year notes Thursday. Results will be released at 13:00

·         Kansas City Fed President Esther George (voting FOMC member, typically hawkish) to speak Thursday at 21:15

·         Chicago Fed President Charlie Evans (voting FOMC member, typically dovish)to speak tomorrow at 5:45 and at 10:15

·         Boston Fed President Eric Rosengren (voting FOMC member. typically dovish) to speak tomorrow at 8:30

·         NY Fed President Bill Dudley (voting FOMC member, typically dovish) to speak tomorrow at 14:00

Other International Events of Interest

·         Great Britain's final second quarter GDP indicated growth of 0.7% quarter-over-quarter (0.7% expected, 0.7% last) while the year-over-year reading increased 1.3% (1.5% consensus, 1.5% previous). Separately, business investment fell 2.7% quarter-over-quarter (0.9% expected, 0.9% prior) and the current account deficit narrowed to GBP13.0 billion from GBP21.8 billion (GBP12.0 billion expected). 

On other news.... 

Currencies 

Dollar Recoup's Yesterday's Losses: 10-yr: -05/32..2.654%..USD/JPY: 98.83..EUR/USD: 1.3482
The Dollar Index holds just off session highs near 80.60 as the bulls look to be back on track after yesterday's slide. Today's advance has allowed the Index to recoup yesterday's loss, and has action higher for the fifth time in the past six sessions. Bulls continue to set their sights on the 80.80/81.00 level as it had previously held as support until the Fed failed to taper at last week's meeting. Click here to see a daily Dollar Index chart.

·         EURUSD is -40 pips at 1.3480 as sellers have been in control throughout the session. Earlier, headlines suggested Italian Prime Minister Letta has summoned parties for a ‘government check-up' after PDL leaders indicated their party would withdraw from the government if Silvio Berlusconi was barred from politics. Traders are watching minor support in the 1.3450 level, but the 1.3400 area is far more important. Eurozone data includes German preliminary CPI and French consumer spending. ECB head Mario Draghi will speak in Milan. 

·         GBPUSD is -50 pips at 1.6025 as action has erased most of yesterday's gains. The pair tested the 1.6100 level in overnight trade, but the wider than expected current account deficit allowed sellers to take control. Little support exists until 1.5700. Britain's Nationwide Home Price Index is due out tomorrow. 

·         USDCHF is +15 pips at .9110 as trade lingers at its lowest levels since February. A victory for the bulls would be the retaking of what was support in the .9200 area. Switzerland's KOF Economic Barometer is scheduled for released. 

·         USDJPY is +40 pips at 98.85 amid yet another uneventful day for the pair. Action remains locked in its tight 98.00/100.00 range that has been in place throughout September as traders await next week's consumption tax ruling. Tokyo core CPI will cross the wires tonight. 

·         AUDUSD is -15 pips at .9345 as action slides for the fifth time in six days. The recent selloff has been rather limited as the pair has only surrendered 150 pips over that time. Participants are taking note of .9300 support that is helped by the 100-day moving average. 

·         USDCAD is +5 pips at 1.0320 at a one and a half-week high. The current level is under close watch as sellers appear ready to defend resistance in the area. Trendline support off the September 2012 lows aids the 200-day moving average (1.0220).

Jason's Commentaries


The market got really funky last night when there is rumor of JP Morgan entering a settlement talk with the DOJ. However, the market quickly sold back down and remained flat down. The Nasdaq was able to lead the market up as Ebay rallied. Volume was standing at 572.9m shares traded on the NYSE. I'm going to expect the market to be really funky before the employment report comes out next week. Furthermore, the market is going get really screwed up by the debt ceiling talks. from what I see, the debt ceiling will be raised once again and the market will get really volatile during this period. And guess what, futures is already opening at -0.45% before market opens. Seems that we're going down today. 

Market Call: DOWN

Date: 27 Sep 2013