27 Sep 2013 AMC

27 Sep 2013 AMC

Market Summary 

 

European Markets Closing Prices

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

·         UK's FTSE: -0.8%

·         Germany's DAX: 0.0%

·         France's CAC: 0.0%

·         Spain's IBEX: -0.5%

·         Portugal's PSI: -0.6%

·         Italy's MIB Index: -1.3%

·         Irish Ovrl Index: -0.5%

·         Greece ATHEX Composite: + 0.2%

Before Market Opens 

S&P futures vs fair value: -6.00. Nasdaq futures vs fair value: -10.30.
The S&P 500 futures continue to hover near their lows as participants exhibit caution ahead of the weekend with the budget battle expected to generate some headlines over the next two days.

Markets across Asia were mostly higher amid a rather quiet overnight trade. China's Shanghai Composite (+0.4%) and Hong Kong's Hang Seng (+0.2%) saw modest gains halt their recent slides. Meanwhile, Japan's Nikkei (-0.3%) underperformed as Finance Minister Aso provided further pushback against cutting the corporate tax rate. Also impacting trade was the country's core inflation reading, as a print of 0.8% month-over-month marked the fastest rise since November 2008. Data from the rest of the region was limited as South Korea's current account surplus narrowed to $5.74 billion ($6.77 billion previous, $3.1 billion expected) and Thailand's industrial production sank 3.1% year-over-year (+4.9% expected). 

·         In Japan, the Nikkei shed 0.3% as trade lingers near a two-month high. Exporters were hit as the yen strengthened with Kyocera and Tokyo Electron giving up 2.5% and 1.7%, respectively. Meanwhile, it was a sell the news reaction as shares of Lixil Group shed 2.2% after announcing its agreement to buy European peer Grohe. 

·         Hong Kong's Hang Seng added 0.4% as shares ticked higher for the second time in six days. China Huishan Dairy was down as much as 9.7% from today's IPO price before ending the day off 3.0%. 

·         In China, the Shanghai Composite ticked up 0.2% amid a choppy trade. Financials outperformed as Haitong Securities and Citic Securities added 4.4% and 2.8%, respectively.

Major European indices trade lower with Italy's MIB (-0.8%) leading to the downside amid indications the grand coalition may fail after PDL lawmakers vowed to quit government should Silvio Berlusconi be banned from holding office. Prime Minister Enrico Letta is scheduled to meet with President Giorgio Napolitano today to discuss the situation. Italian yields are notably higher this morning with the benchmark 10-yr yield up 17 basis points at 4.40%. Elsewhere, Spain has revised its 2014 GDP growth forecast to 0.7% from 0.4%. In addition, the unemployment rate at the end of 2014 is expected to be at 25.9%, down from the previous estimate of 26.7%. Participants received a fair share of data. Eurozone consumer confidence slipped to -15.0 from -15.6, as expected. Separately, the Business and Consumer Survey rose to 96.9 from 95.3 (96.0 expected) and Business Climate held steady at -0.2 (-0.1 expected). Also of note, retail PMI slipped to 48.6 from 50.3. Great Britain's Index of Services slipped to 0.5% from 0.6% (0.6% consensus) and Nationwide HPI rose to 0.9% from 0.7% (0.5% expected). French GDP remained unchanged at 0.5%, as expected. In addition, consumer spending increased 0.4% month-over-month (0.4% forecast, -0.8% prior). Italian Business Confidence improved to 96.6 from 93.4 (93.4 expected). Spain's retail sales fell 4.5% year-over-year (-3.8% forecast, -3.4% prior) and the government budget deficit narrowed to EUR2.40 billion from EUR5.10 billion (-EUR2.50 expected). 

·         In France, the CAC holds a loss of 0.2%. Steelmaker Vallourec is the weakest index performer, down 9.4% after providing a cautious outlook. Defense contractors are displaying strength with EADS and Safran up 0.7% and 1.4%, respectively. 

·         Germany's DAX is lower by 0.3% as producers of basic materials weigh. BASF, K+S, and Linde are down between 1.2% and 2.5%. Utility names are among the handful of outperformers with E.ON and RWE both up near 0.4%. 

·         Great Britain's FTSE trades down 0.8% as miners weigh. Anglo American, Antofagasta, and BHP Billiton are all down between 2.4% and 3.8%. On the upside, industrials Babcock International and GKN hold respective gains of 0.6% and 1.2%. 

·         Italy's MIB is down 0.8% as most components hover in the red. Banco Popolare and Unione di Banche Italia hold losses close to 2.0% apiece. Silvio Berlusconi's Mediaset is among the outperformers, up 0.4%.

Market Internals

 

Market Internals -Technical-
The Dow closed down 70 (-0.46%) at 15258, the S&P 500 closed down 7 (-0.41%) at 1692, and the Nasdaq closed down 6 (-0.15%) at 3782. Action came on mixed volume (NYSE 647 mln vs. avg. of 693; NASDAQ 1642 mln vs. avg. of 1580), with decliners outpacing advancers (NYSE 996/2034, NASDAQ 945/1531) and new highs outpacing new lows (NYSE 72/30, NASDAQ 103/17).

Relative Strength: 
Volatility-VXX +4.26%, Cotton-BAL +1.46%, Cocoa-NIB +1.26%, Gold-GLD +0.92%, Greece-GREK +0.82%, Clean Energy-PBW +0.80%, Austria-EWO +0.73%, British Pound-FXB +0.67%, Japanese Yen-FXY +0.67%, Swiss Franc-FXF +0.52%.

Relative Weakness: 
India-INP -3.20%, Sugar-SGG -3.09%, Thailand-THD -2.83%, Indian Rupee-ICN -2.17%, Steel-SLX -2.02%, Mexico-EWW -1.97%, South Africa-EZA -1.92%, Coal-KOL -1.84%, Coffee-JO -1.70%, Metals and Mining-XME -1.57%. 

Leaders and Laggards

Technical Updates

Commentaries 

Closing Market Summary: Stocks Slump Amid Ongoing Budget Battle
Equities ended the week on a lower note with the S&P 500 shedding 0.4%. The index widened its loss for the week to 1.1% as participants exhibited caution ahead of the weekend given the uncertainty associated with the ongoing budget showdown. 

Earlier today, the Senate passed a funding bill that would keep the government running through November 15. The bill passed with a 54-44 vote after the provision to defund Obamacare was removed from the language. However, the bill will now head back to the House of Representatives where the defunding provision originated. President Obama weighed in during the late afternoon, saying it is up to Congress to keep government operating and that the G.O.P. is blocking the process. 

Concerns over the budget debate have weighed on sentiment throughout the week, contributing to the weakness in the S&P. Meanwhile, the Nasdaq displayed relative strength and finished the week with a slim gain of 0.2%. 

The Nasdaq outperformed today as biotechnology overshadowed the underperformance of the tech sector (-0.6%). The iShares Nasdaq Biotechnology ETF (IBB 210.73, +0.57) added 0.3%, also contributing to the relative strength of the health care sector, which tacked on 0.1%. 

Another pocket of relative strength could be found among discretionary shares (+0.1%). Even though homebuilders lagged and the iShares Dow Jones US Home Construction ETF (ITB 22.38, -0.29) lost 1.3%, the sector received support from apparel manufacturers. Dow component Nike (NKE 73.64, +3.30) rallied 4.7%, notching a fresh record high after reporting better-than-expected earnings and above-consensus worldwide futures orders. 

Elsewhere, traditional tech companies lagged with top-weighted names like Apple (AAPL 482.75, -3.47), Google (GOOG 876.39, -1.78), and Intel (INTC 22.98, -0.43) posting losses between 0.2% and 1.8%. Microsoft (MSFT 33.27, +0.50) outperformed, climbing 1.5% amid reports Ford (F 17.05, -0.22) Chief Executive Officer Alan Mulally may become the next CEO of the tech company. 

On the earnings front, shares of Accenture (ACN 74.09, -1.78) lost 2.4% after the company's cautious first-quarter revenue guidance outweighed its mixed earnings. 

The industrial sector (-0.6%) also weighed on the S&P amid broad weakness. Transportation-related names were pressured by airlines with United Continental (UAL 30.91, -3.16) tumbling 9.3%. The broader Dow Jones Transportation Average lost 0.6% even as crude oil posted a modest decline (-0.3% at $102.68/bbl). 

Treasuries climbed steadily and the benchmark 10-yr yield slipped two basis points to 2.63%. 

Below-average volume plagued the market throughout the week, and today's session saw 647 million shares change hands on the floor of the New York Stock Exchange. 

The final reading of the September University of Michigan Consumer Sentiment Index was revised up to 77.5 from 76.8 in the advance report. The Briefing.com consensus expected the Consumer Sentiment Index to increase to 77.3. Even though sentiment was revised higher in the final release, the index is still well below the final August reading of 82.1. The month-to-month drop in sentiment was in-line with the Conference Board's Consumer Confidence Index, which dropped to 79.7 in September from 81.8 in August. 

Consumer sentiment levels normally follow trends in equity prices, gasoline prices, media reports, and unemployment trends. Even though the initial claims level is clearly showing an improvement in labor conditions, consumers still believe that the labor market is not improving. That negative response offset strong gains in the equity market. 

Separately, August personal income increased 0.4% after increasing an upwardly revised 0.2% in July. The Briefing.com consensus expected personal income to increase 0.3%. As expected from the August employment report, wages rose a solid 0.4% in August after declining 0.2% in July. 

The weakness in the equity market in August reduced personal income receipts on assets by 0.2%. Gains in the equity market in July were the sole reason why income growth was positive in July. On Monday, the September Chicago PMI will be reported at 9:45 ET. 

Commodities

Closing Commodities: Natural Gas Falls 5% On The Week

·         Nov crude oil fell for the fourth time this week as tension eased over the conflict in the Middle East. The energy component pulled back from a session high of $103.77 per barrel and dipped to a session low of $102.44 per barrel. It settled 0.2% lower at $102.83 per barrel, bringing losses for the week to 1.9%

·         Nov natural gas oscillated between positive and negative territory today. It brushed a session low of $3.52 per MMBtu in early morning floor trade but regained momentum in afternoon pit action and settled with a 0.6% gain at its session high of $3.59 per MMBtu. Still, natural gas booked a 4.8% loss for the week

·         Precious metals traded higher today, gaining support from a weaker dollar index

·         Dec gold rose to a session high of $1344.50 per ounce moments after pit trade opened and spent most of the session trading just below the $1340.00 per ounce level. It settled 1.1% higher at $1338.50 per ounce, booking a 0.4% gain for the week

·         Dec silver spent most of the session trading slightly above the unchanged line after pulling back from its session high of $22.17 per ounce. It settled with a 0.3% gain at $21.81 per ounce, shaving losses for the week to 0.5%.

COMEX Metals Closing Prices

  Dec gold rose $14.40 to $1338.50/ounce 

·         Gold traded higher today, gaining support from a weaker dollar index. It touched a session high of $1344.50 moments after pit trade opened and spent most of the session trading just below the $1340.00 level. The yellow metal settled 1.1% higher, booking a 0.4% gain for the week. 

  Dec silver rose $0.06 to $21.81/ounce 

·         Silver spent a big portion of today's pit trade trading slightly above the unchanged line after pulling back from its session high of $22.17 set in early morning floor action. It settled with a 0.3% gain, shaving losses for the week to 0.5%. 

  Dec copper rose 2 cents to $3.33/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Dec corn fell 3 cents to $4.54/bushel 

·         Dec wheat rose 4 cents to $6.82/bushel 

·         Nov soybeans rose 3 cents to $13.20/bushel 

·         Nov ethanol fell 1 cent to $1.72/gallon 

·         Nov sugar (#16 (U.S.)) fell 0.05 of a penny to 21.00 cents/lbs

NYMEX Energy Closing Prices

  Nov crude oil fell $0.17 to $102.83/barrel 

·         Crude oil fell for the fourth time this week as prices pulled back from a session high of $103.77. The energy component dipped to a session low of $102.44 and settled with a 0.2% loss. Today's decline brought losses for the week to 1.9%. 

  Nov natural gas rose 2 cents to $3.59/MMBtu 

·         Natural gas see-sawed between positive and negative territory, brushing a session low of $3.52 in early morning floor trade. It regained momentum in afternoon pit action and settled with a 0.6% gain at its session high. Still, natural gas booked a 4.8% weekly loss. 

  Nov heating oil fell 2 cents to $2.98/gallon 

  Nov RBOB gasoline fell 3 cents to $2.66/gallon

Treasuries

Treasuries See Third Week of Gains: 10-yr: +07/32..2.624%..USD/JPY: 98.25..EUR/USD: 1.3520
Treasuries gained ground for a third consecutive week, marking the first time since March that the feat has been accomplished. The bid was fueled by continued uncertainty over the looming budget battle and debt ceiling debate as the government looks to avoid a shutdown and a default. This week concluded with the Senate approving a bill that would extend the continuing resolution until the middle of November, allowing Congress to focus on the debt ceiling debate that must be resolved in the next two to three weeks. The measure must still be passed by the House. This week's economic data was mostly in-line with forecasts as durable orders -ex transportation (-0.1% actual v. +0.9% expected), initial claims (305K actual v. 325K expected), and pending home sales (-1.6% actual v. 2.3% expected) were outliers. Case-Shiller 20-city Index, new home sales, GDP - third estimate, personal income and spending, and Michigan Sentiment - Final were all relatively in-line with estimates. 

Buying had the biggest impact on the belly of the curve as yields there ended the week lower by as much as 11 bps. The benchmark 10-yr yield paced this week's decline, settling at 2.619%. Traders will continue to monitor the 10-yr yield closely as 2.600% represents some decent support. Elsewhere in the belly, the 5-yr yield shed 8 bps this week, settling at 1.396%. The 1.350%-1.400% area will be in focus as support at the level dates back to the beginning of the summer. Both yields finished at their lowest levels in seven weeks. This week's bid flattened the yield curve as the 2-10-yr spread narrowed to 229.5 bps. Precious metals managed to eke out gains this week as gold rallied $$14 to $1338 and silver climbed $0.15 to $21.80. Monday's data is limited to Chicago PMI (9:45)
On other news.... 

Boeing: Reuters reporting that Vietnam Airlines palns to order 19 BA 787 Dreamliners valued at over $4 bln (118.26 -1.12)

Currencies 

Dollar Set to Post Worst Close Since February: 10-yr: +11/32..2.611%..USD/JPY: 98.10..EUR/USD: 1.3517
The Dollar Index is lower for the second time in three days action remains on track to post its lowest close since February. Some early selling provided a test of the 80.20 level, but so far the September lows have been able to hold. Click here to see a daily Dollar Index chart.

·         EURUSD is +35 pips at 1.3520 as action has erased all of yesterday's losses. Early buying ran the single currency above the 1.3550 level, but it appears as though a close above that level will remain elusive. Attention now turns to next week's European Central Bank meeting where it is expected by the minority that a third LTRO will be launched. Eurozone data includes CPI Flash Estimate and German retail sales. 

·         GBPUSD is +90 pips at 1.6125 as action looks to put in its best close in more than nine months. Sterling remains bid as data out of the UK continues to outpace estimates. Today's advance was sparked by the better than anticipated Nationwide Home Price Index. Minor support rests near 1.6000. Britain's net lending to individuals is scheduled for release. 

·         USDCHF is -45 pips at .9055 as trade contends with its worst close since May 2012. The .9000 area is on many traders' radars as support there dates back to November 2011.

·         USDJPY is -85 pips at 98.10 as action tests the lower bound of its September range. Next week's action will be key as participants await a ruling on the consumption tax and the October Bank of Japan meeting. A breakdown of the 98.00 level may result in a test of the 200-day moving average (96.30). Japan's preliminary industrial production and retail sales are due out late Sunday. 

·         AUDUSD is -45 pips at .9320 as trade tests support in the area helped by the 100-day moving average. The hard currency has had trouble gaining momentum over the past week and a half as sellers have been in control for five of the past seven sessions, shaving off close to 200 pips. A breakdown of the .9300 level sets up a test of .9200, with further support coming from the 50-day moving average (.9155). Australian data is limited to private sector credit. China's HSBC Final Manufacturing PMI will be released. 

·         USDCAD is -5 pips at 1.0305 amid another quiet day of the pair. Recent action has stalled at resistance in the area, but traders are more concerned with if the pair will be able to withstand another test of trendline support that is helped by the 200-day moving average (1.0225). Canadian data includes GDP and the Raw Materials Price Index.

Weekly Analysis
Week 38



Technical Updates



 

 
Briefing's Commentaries

Week in Review: Budget Battle Weighs on Markets 

Monday's session saw the major averages start 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. Concerns about the lack of progress in budget negotiations contributed to the decline with participants keeping one eye on Washington throughout the week. 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 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 22.97, -0.28) and Skyworks Solutions (SWKS 24.77, -0.24) also displayed strength. 

On Tuesday, the S&P 500 settled lower by 0.3%, registering its fourth consecutive loss. Small caps outperformed the benchmark average as the Russell 2000 added 0.2%. Stocks slipped during the opening hour in reaction to a below-consensus consumer confidence report for September. Despite the opening slip, the S&P recovered swiftly, but was unable to hold the 1,700 level into the close as financials and technology weighed. The financial sector (-0.6%) underperformed for a second consecutive day with JPMorgan Chase (JPM 52.24, +0.35) leading to the downside. The stock fell 2.2% after The New York Times revealed the Department of Housing and Urban Development sought a $20 billion settlement in a mortgage-backed securities issuance case against the bank. 

The S&P 500 shed 0.3% on Wednesday, extending its losing streak to five sessions. 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. 

On Thursday, 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 the Thursday's price action mirrored that of Wednesday with the S&P making two unsuccessful runs at 1,700. The Nasdaq ended in the lead (+0.7%), benefitting from the outperformance of biotech as the iShares Nasdaq Biotechnology ETF climbed 1.6%.



Next Week In View

Events and conferences of interest for next week
Events and conferences of interest for next week, Sep 30th - Oct 4th, are listed below. For a complete list of next week's events, please see the events calendar.

Monday

·         Johnson Rice Energy Conference

o    Scheduled to appear: NBR, SWN, SYRG, GDP, CWEI, DNR, AXAS, DVR, PKD, AREX, GST, BRS, MPO, CPE, EXH, CIE, OIS, OAS, SPN, NBL, DRC, PXD, HLX, RRC, ROSE, BAS, PES, CRZO, CBG, PVA, COG, TDW, KEG, EXXI, IO, WTI, DWSN, END

·         11th Annual Cold Chain GDP and Temperature Management Logistics

o    Scheduled to appear: DYAX, MRK, PFE, LLY, NVS, DNDN, ABT, ABBV, SHPG, LLY, SNY, BAYRY.PK, FDX, LLY, HSP, LLY, LMNX, MCK, MRK, BMY, ZGNX, ABT, JNJ, ABBV, MCK, JNJ, NVS

·         Deutsche Bank 21st Annual Leveraged Finance Conference

o    Scheduled to appear: AIR, ACMP, ACW, AOI, APU, AMKR, SBGI, PBH, ATW, CAR, BZH, BLC, BERY, HAWK, BCEI, BYD, CLMT, XEC, CBB, CMC, CMLS, DAN, DAL, FST, FSL, GNCMA, GTN, HK, HTZ, LBTYA, LINE, MPW, MINI, MNTG, OMN, PCYG, PENN, PPC, QEP, RDNT, RRC, SALM, SGMS, CKH, SEM, SFY, TMUS, NGLS, NXST, NIHD, TSO, RYL, UAL, VHS, VTG, WNR, HDS, DNR, RGC, VNR, TRS, APL, CLUB, SEMG, TEN, SIRI, CHK, ELNK, URI, LTD, CHTR, ALSK, RHP, HL, CCOI, KEM, NTLS, BGS, CCI, CVO, SXC, SXCP, CWEI, SRI, DLLR, GFF, FTR, WWWW, MWA, MTH, MTW, HOV, MDCA, FRP, VCI, MGI

Tuesday

·         JMP Securities Financial Services and Real Estate Conference

o    Scheduled to appear: HTS, CMO, ARCC, AMSF, BKD, NRF, SF, RAS, HTGC, ARI, AMTG, DLLR, MHO, RM, IVR, DX, CSU, ONE, PRAA, TICC, EFC, AVHI, ECPG, ALEX, GCAP, SBY, AINV, HF, VR, NYMT, WD, AFSI, TWO, HCI, GHL, MFA, RSO

·         CDN World Summit

o    Scheduled to appear: ALLT, DTEGY.PK, TELNY.PK, TEF, ORAN, ALU, TELNY.PK, DTEGY.PK, ERIC, CCIH

·         Society of Telecommunications Consultants Conference

o    Scheduled to appear: ISIS, PTCT

Wednesday

·         ECB Rate Decision at 7:45

·         Ethernet and SDN Expo

o    Scheduled to appear: CSCO, CIEN, T, TWTC, ALU, ALU, CIEN, CIEN, CIEN, CMCSA, CMCSA, CYNI, EXFO, LMOS, MRVC.PK, TWC, TWTC, TWTC, VZ

·         eCommerce Expo 2013

o    Scheduled to appear: ECOM, CPWR, N, PFSW, UPS

Thursday

·         IEEE METSAC Symposium

o    Scheduled to appear: ANSS

·         5th AIChE (American Institute of Chemical Engineers) Southwest Process Technology Conference

o    Scheduled to appear: ALB

·         Analogic Corporation Investor Day 2013

o    Scheduled to appear: ALOG

Friday

·         BoJ Decision (out overnight)

·         Fed's Fisher to speak at 8:30

·         Fed's Dudley to speak at 9:15

Economic Commentaries



Jason's Commentaries

Another down day in the market last week. Ending the week in the red. Looking ahead, the market is exceptionally cautious about the debt ceiling talks coming over the weekend. However, the market decided to sell off on Monday's asia's session. At 730am ET, futures are off more than 0.7%, making this one of the most bearish open for 2013. The government will shutdown if there is no deal done. However, i reckon it is unlikely to happen. The US government is already in such financial dire straits. By allowing their government to shut down will shatter the market's confidence in their treasuries, which will eventually cause their borrow costs to skyrocket. So far it's all the news network's doing for causing the market to sell down so badly for Monday's open.

Looking back at Friday's numbers, the market  started with a slight bearish bias and remained flat through the session. Nasdaq was able to fight back most of its losses. Both S&P500 and Dow Jones post losses of around 0.4%. There's quite a bit of weakness in the tech sector as Cisco, Intel, Verizon, posting more than 1.4% losses on Friday. However, the strong gains in Microsoft, Facebook, Yahoo and Celgene managed to drag Nasdaq up. Volumes were decent at 647m shares traded on the NYSE.

While looking ahead, we're going to have a very bearish open to the US market, and it's gonna be a great opportunity to rinse everyone out of the market. I'm expecting the US gov to come out with an answer that will cause the market to rally at least until Thursday. We'll be having a slew of employment data coming out this week as well as the ISM numbers. This week is going to be a real volatile week. Time to tighten your seat belts =D

Market Call: DOWN

Date: 30 Sep 2013