1 Oct 2013 AMC- Market Rallies on Shutdown... WHAT!??!?!

1 Oct 2013 AMC- Market Rallies on Shutdown... WHAT!??!?!

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: 0.0%

·         Germany's DAX: + 1.1%

·         France's CAC: + 1.3%

·         Spain's IBEX: + 1.7%

·         Portugal's PSI: + 0.5%

·         Italy's MIB Index: + 3.1%

·         Irish Ovrl Index: + 1.0%

·         Greece ATHEX Composite: + 0.8%

Before Market Opens

S&P futures vs fair value: +2.90. Nasdaq futures vs fair value: +7.70.
The S&P 500 futures trade higher by 0.2%. 

It was a sea of green across Asia as all of the major averages aside from Australia's ASX (-0.2%) advanced. Japan's Nikkei (+0.2%) eked out a gain after Prime Minister Abe moved towards hiking the sales tax to 8% from 5%, beginning in April, and also announcing the consideration of monetary stimulus that may include cash handouts. Meanwhile, Australia's ASX was the laggard after the Reserve Bank of Australia held its key rate steady at a record low 2.50% while also leaving open the possibility of further rate cuts. Markets in China and Hong Kong were closed for Golden Week, but that did not stop the release of the disappointing Chinese Manufacturing PMI (51.1 actual v. 51.6 expected, 51.0 previous). Data from the rest of the region showed Japan's Tankan Manufacturing (12 actual versus 7 expected, 4 previous) and Non-Manufacturing Indices in-line to better than expected while average cash earnings missed (-0.6% year-over-year actual versus -0.2% expected). Elsewhere, Australia's retail sales beat (0.4% month-over-month actual versus 0.3% expected) and Indonesia's trade deficit swung to a surplus ($0.13 billion actual versus -$0.89 billion expected, -$2.31 billion previous). 

·         In Japan, the Nikkei added 0.2% as trade ticked higher for the first time in three days. Heavyweight Softbank posted a 2.5% advance while Honda Motor added 0.9%. 

·         Hong Kong's Hang Seng was closed. 

·         In China, the Shanghai Composite was closed. 

Major European indices trade in mixed fashion with Great Britain's FTSE underperforming (-0.3%) while other indices rebound from yesterday's weakness. In Italy, Prime Minister Enrico Letta is scheduled to address the parliament on Wednesday at 16:00 ET local time. It is currently unclear whether Mr. Letta will seek a confidence vote. Separate reports indicate up to 20 PDL Senators have looked into forming a breakaway party after Silvio Berlusconi called for his party's resignation from government. Investors received a fair share of data. Eurozone Manufacturing PMI slipped to 56.7 from 57.1 (57.3 expected) and the unemployment rate held steady at 12.0% (12.1% forecast). Germany reported a 25,000 increase in the number of unemployed (-5,000 expected, 9,000 prior) and the unemployment rate ticked up to 6.9% from 6.8% (6.8% consensus). Separately, Manufacturing PMI slipped to 51.1 from 51.3 (51.3 forecast). Great Britain's Manufacturing PMI fell to 56.7 from 57.1 (57.3 forecast). French Manufacturing PMI improved to 49.8 from 49.5 (49.5 expected). Italy's Manufacturing PMI slipped to 50.8 from 51.3 (51.0 consensus) and the monthly unemployment rate rose to 12.2% from 12.1% (12.0% expected). 

·         Great Britain's FTSE is lower by 0.3%. Producer of consumer goods Unilever leads to the downside with a loss of 3.7% after making cautious remarks about its most recent quarter. On the upside, financials Aviva and Barclays trade higher by 2.3% and 1.3%, respectively. 

·         In Germany, the DAX trades up 0.6% as financials display strength. Commerzbank and Deutsche Boerse hold respective gains of 2.0% and 2.7%. 

·         France's CAC is higher by 0.7% with banks contributing to the strength as BNP Paribas, Credit Agricole, and Societe Generale sport gains between 0.9% and 1.3%. Beverage producer Pernod Ricard is the worst index performer, down 1.5%.

Market Internals

Market Internals -Technical-
The Nasdaq closed up 47 (1.23%) at 3818, the S&P 500 closed up 13 (0.8%) at 1695, and the Dow closed up 62 (0.41%) at 15192. Action came on slightly above average volume (NYSE 716 mln vs. avg. of 695; NASDAQ 1751 mln vs. avg. of 1587), with advancers outpacing decliners (NYSE 2192/851, NASDAQ 1824/712) and new highs outpacing new lows (NYSE 202/23, NASDAQ 213/18). 

Relative Strength: 
Indonesia-IDX +4.84%, Thailand-THD +4.72%, Turkey-TUR +4.66%, Wind Energy-FAN +2.67%, Italy-EWI +2.55%, Mexico-EWW +2.44%, Biotechnology-XBI +2.07%, Social Media-SOCL +2.03%, Biotechnology-IBB +1.99%, Oil and Gas Exploration-XOP +1.99%. 

Relative Weakness: 
Volatility-VXX -3.53%, Junior Gold Miners-GDXJ -3.14%, Silver-SLV -2.32%, Base Metals-DBB -1.32%, Heating Oil-UHN -1.28%, Japan-EWJ -0.42%, Canadian Dollar-FXC -0.25%, Swiss Franc-FXF -0.13%, Brazilian Real-BZF -0.11%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: Stocks Rally Despite First Day of Shutdown
The S&P 500 kicked off the fourth quarter on an upbeat note, climbing 0.8%. Stocks made the bulk of their advance during the opening 90 minutes before spending most of the afternoon near their highs. Late afternoon trade saw some profit-taking, but a final-minute surge sent the indices back to their highs as equities appeared unconcerned with the first day of the government shutdown. 

All ten sectors posted gains as equities drew strength from typical start-of-quarter inflows. Risk assets also benefited from the rebound in Europe where yesterday's fears of a possible collapse of the Italian government were alleviated by reports indicating about 20 PDL ministers are ready to form a breakaway party supporting Prime Minister Enrico Letta. The fluid situation is expected to become a bit clearer tomorrow when the prime minister appears in front of the parliament. 

The Nasdaq was the top performing index of the third quarter (+10.8%) and its relative strength continued into today's session. The index advanced 1.2% with support from its largest component. Apple (AAPL 487.96, +11.21) rose 2.4% after activist investor Carl Icahn said, in a tweet, that he pushed for a $150 billion buyback during his dinner meeting with Chief Executive Officer Tim Cook. 

The outperformance of the Nasdaq was also due in part to the relative strength of the tech sector (+1.0%) and biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 213.78, +4.18) climbed 2.0%, contributing to the strength of the health care sector (+1.3%), which ended in the lead. 

In the health care space, Dow component Merck (MRK 48.74, +1.13) jumped 2.4% after announcing restructuring plans that include about 8,500 layoffs. 

Outside of technology and health care, the discretionary sector (+0.9%) was the only other outperformer. Retailers fared well as Amazon.com (AMZN 320.95, +8.31) advanced 2.7% and the broader SPDR S&P Retail ETF (XRT 82.93, +0.91) added 1.1%. 

Elsewhere, commodity-related sectors, energy (+0.5%) and materials (+0.5%), finished in the green even as crude oil and gold registered losses. The underlying commodities fell 0.5% and 2.8% to $101.84 per barrel and $1290.00 per troy ounce, respectively. 

Treasuries ended near their lows with the benchmark 10-yr yield rising three basis points to 2.64%. 

Trading volume was roughly in-line with the average as 717 million shares traded hands on the floor of the NYSE. Today's economic data was limited to the September ISM Manufacturing Index, which increased to 56.2 from 55.7. This represented the strongest reading since April 2011 while the Briefing.com consensus expected the index to fall to 55.0. 

Production levels improved modestly as the related index increased to 62.6 in September from 62.4. After reaching its highest point since April 2011, the new orders index fell from 63.2 in August to a still elevated 60.5 in September. 

The August construction spending report was also on today's schedule, but was delayed due to the government shutdown. 

Tomorrow, the weekly MBA Mortgage Index will be reported at 7:00 ET and the September ADP Employment Change report will cross the wires at 8:15 ET.

Commodities

Closing Commodities: Gold Falls 3%, Crude Decilne 0.3%

·         Precious metals and crude oil fell today as investors reacted to the first U.S. government shutdown in 17 years. Dec gold fell below the $1300.00 level, selling off sharply in the first 20 minutes of pit trade. It traded near the $1290.00 per ounce level for the remainder of the session and settled with a 3.0% loss at $1285.70 per ounce.

·         Dec silver slid from its session high of $21.46 per ounce set moments after floor trade opened and brushed a session low of $20.63 per ounce. It inched slightly higher in afternoon pit action and settled at $21.16 per ounce, or 2.6% lower.

·         Crude oil fell for a third consecutive session, brushing a session low of $101.06 per barrel. It gained momentum as it headed into the close and touched a session high of $102.10 per barrel just before settling with a 0.3% loss at $102.02 per barrel

·         Natural gas, on the other hand, spent its entire floor session in positive territory. It pulled back slightly from its session high of $3.65 per MMBtu and settled with a 1.4% gain at $3.61 per MMBtu.

NYMEX Energy Closing Prices

  Nov crude oil fell $0.29 to $102.02/barrel 

·         Crude oil fell for a third consecutive session as the U.S. government shut down for the first time in 17 years. The energy component brushed a session low of $101.06 but gained momentum as it headed into the close. It pushed higher to a session high of $102.10 and settled just below that level, shaving losses to 0.3%. 

  Nov natural gas rose 5 cents to $3.61/MMBtu 

·         Natural gas, on the other hand, spent its entire floor session in positive territory. It pulled back slightly from its session high of $3.65 and settled with a 1.4% gain. 

  Nov heating oil fell 2 cents to $2.95/gallon 

  Nov RBOB gasoline fell 2 cents to $2.61/gallon

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Dec corn fell 3 cents to $4.39/bushel 

·         Dec wheat rose 4 cents to $6.84/bushel 

·         Nov soybeans fell 13 cents to $12.68/bushel 

·         Nov ethanol fell 2 cents to $1.67/gallon 

·         Nov sugar (#16 (U.S.)) rose 0.30 of a penny to 21.30 cents/lbs

COMEX Metals Closing Prices

  Dec gold fell $40.30 to $1285.70/ounce 

·         Gold extended yesterday's losses, falling below $1300 as investors reacted to the federal government shutdown. The yellow metal sold off sharply from its session high of $1315.00 in the first 20 minutes of pit trade and traded near the $1290.00 level for the remainder of the session. It eventually settled with a 3.0% loss. 

  Dec silver fell $0.57 to $21.16/ounce 

·         Silver also struggled in negative territory. It fell from its session high of $21.46 set moments after floor trade opened and brushed a session low of $20.63. It inched slightly higher in afternoon pit action and settled with a 2.6% loss. 

  Dec copper fell 4 cents to $3.28/lbs

Treasuries

Treasuries Slip in Choppy Trade: 10-yr: -10/32..2.644%..USD/JPY: 97.80..EUR/USD: 1.3535
Treasuries ended near session lows amid a choppy trade as the government shutdown had little impact on action. The complex opened in the red and held there throughout the session as trade was limited to a tight range. Some light selling surfaced following the release of the better than expected ISM Index (56.2 actual v. 55.0 expected), but overall the weakness was a footnote in the uneventful session. Yields across most of the curve climbed 3 bps with the 10-yr ticking up to 2.646% to close at its highest level in a week. Traders will continue to watch 2.600% over the coming days as key near-term support rests at the level. A steeper yield curve developed on the selling as the 2-10-yr spread widened to 231 bps. Elsewhere, precious metals were weak as gold fell $36 to $1291 and silver shed $0.45 to near $21.25. Wednesday's data includes the weekly MBA Mortgage Index (7) and ADP Employment Change (8:15). Fed speak kicks off for the week with Boston's Rosengren in South Burlington, VT to speak at a luncheon held by the New England Federal Credit Union and Lake Champlain Regional Chamber (12)

Next Day In View 

Economic Commentary

On other news.... 

J. C. Penney sued by shareholder over stock issuance, according to reports (8.75 -0.06)

Goldman Sachs: Berkshire Hathaway (BRK.B) exercises its warrant to purchase ~13 mln Goldman shares (159.00 +0.79)
Co announced that Berkshire Hathaway Inc., and certain of its subsidiaries (collectively, Berkshire Hathaway) have exercised in full their warrant to purchase shares of Goldman Sachs' common stock. Goldman Sachs will deliver 13,062,594 shares of common stock to Berkshire Hathaway on October 4, 2013.



Currencies 

Dollar Holds Little Changed: 10-yr: -10/32..2.648%..USD/JPY: 97.96..EUR/USD: 1.3528
The Dollar Index holds little changed as a quiet session nears the close. Early selling provided a test of the 80.00 level, but that area was able to hold as trade rallied back to the flat line near 80.20. Click here to see a daily Dollar Index chart.

·         EURUSD is flat at 1.3520 as traders remain cautious ahead of tomorrow's European Central Bank rate decision. No change is expected from the current 0.50%, and, as always, participants will be paying close attention to the accompanying Mario Draghi press conference. The 1.3450/1.3550 that has been in place for much of the past two weeks will be watched closely. Eurozone data is limited to Spanish unemployment change. 

·         GBPUSD is +10 pips at 1.6195 as trade lingers near a nine-month high. An early bid provided a test of the 1.6300 level, just short of the 2013 highs, but sellers have managed to gain control over the course of the session as Britain's Manufacturing PMI fell short of estimates. The 1.6000 area is setting up as decent near-term support. Britain's Construction PMI is due out tomorrow. 

·         USDCHF is +15 pips at .9065 as trade has managed to reverse its early losses and recover yesterday's slide. The early weakness dropped the pair to a 19-month low below .9000, but buyers quickly stepped in to defend the level. 

·         USDJPY is -20 pips at 98.05 as trade presses the lower end of the September range. Recent selling has dropped action below both the 50- and 100-day moving averages, causing some to shift their focus towards the 97.00 area. Today's weakness comes as the Japanese government appears to be on the verge of pushing through a sales tax hike to 8% (5% current) while also considering a stimulus package to offset some of the impact. 

·         AUDUSD is +65 pips at .9390 as trade readies for its best close in over a week. Overnight, the Reserve Bank of Australia held its key rate steady at 2.50% while also noting further rate cuts may still occur. Australian data includes building approvals and the trade balance. Chinese banks remain closed for Golden Week. 

·         USDCAD is +15 pips at 1.0330 as action looks to close at a fresh three-week high. Current levels have been on the radars of many as resistance in the area is helped by the 50- and 100-day moving averages.

Jason's Commentaries


What a mockery to the US gov... Asia markets is not affected after shutdown, European and US market rallied upon shutdown. It seems that the GOP is going to lose their house in the next election, and Obama being the first president having a shutdown, which can possibly last for 1 week, in 17 years. The market started the day with a very bullish upbeat which lasted till 12pm ET and stayed sideways to the downside till the closing. There was a strong spiked at the closing bell. Volumes were healthy at 715m shares and the internals were showing that the bears did not stand a chance. The market is likely to continue its uptrend as Nasdaq broke its high once again. There's gonna be another bull run coming. Healthcare and Tech were the main leaders last night, leading the market to such a strong upbeat. Due to the shutdown, only ADP employment report will be released today. The long-waited non-farm payrolls will be delayed as a result of the shutdown. It seems that today will be a flat day.

Market Call: FLAT

Date: 2 Oct 2013