10 Oct 2013 AMC- Market rallied on possible US Gov deal... but... the deal hasn't go through yet...

10 Oct 2013 AMC- Market rallied on possible US Gov deal... but... the deal hasn't go through yet... 

Market Summary 

 European Markets Closing Prices

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

·         UK's FTSE: + 1.5%

·         Germany's DAX: + 2.0%

·         France's CAC: + 2.2%

·         Spain's IBEX: + 2.4%

·         Portugal's PSI: + 0.7%

·         Italy's MIB Index: + 1.5%

·         Irish Ovrl Index: + 1.5%

·         Greece ATHEX Composite: + 1.1%

Before Market Opens

S&P futures vs fair value: +13.70. Nasdaq futures vs fair value: +27.20.
The S&P 500 futures trade higher by 0.9% amid indications the House of Representatives could pass a short-term debt limit increase.

Markets across Asia ended mixed as Japan's Nikkei (+1.1%) led and China's Shanghai Composite (-0.9%) lagged. The Nikkei outperformed as the yen weakened and both core machinery orders (5.4% month-over-month actual versus 2.9% expected) and Tertiary Industry Activity (0.7% month-over-month actual versus 0.5% expected) topped estimates. Meanwhile, sellers were in control in China as the Shanghai Composite slid on relatively light volume. The losses came despite reassurances from Chinese Premier Li Keqiang that GDP will stay above its 7.5% target for the first three quarters of the year. Data was mixed out of Australia as employment change missed (9.1K actual versus 15.2K expected) as the unemployment rate ticked down to 5.6% from 5.8% (5.8% expected). 

·         In Japan, the Nikkei closed higher by 1.1%, posting a third straight day of gains. Exporters were strong as Mazda Motor and Nissan Motor added 2.4% and 2.6%, respectively. 

·         Hong Kong's Hang Seng shed 0.4%, erasing a good portion of its early losses. Retailers were under pressure on reports sales during the Golden Week holiday were disappointing. Cosmetics maker Sa Sa tumbled 5.9%. 

·         In China, the Shanghai Composite fell 0.9% as trade closed on the 200-day moving average. Brokerage stocks were weak with Citic Securities and China Merchants Securities shedding 3.8% and 3.3%, respectively. 

Major European indices hover near their best levels of the session with peripheral markets in the lead as Italy's MIB and Spain's IBEX hold gains close to 1.7% apiece. Economic data was limited as French industrial production ticked up 0.2% month-over-month (0.5% expected, -0.6% previous) and Italy's industrial production slipped 0.3% month-over-month (0.7% consensus, -1.0% prior). Meanwhile, the year-over-year reading fell 4.6% (-4.3% expected, -4.2% last). 

·         In Great Britain, the FTSE trades higher by 0.8% with consumer names pacing the gains. GKN, Persimmon, and Whitbread are all up between 3.5% and 6.5%. Electricity supplier National Grid is the weakest performer, down 1.0%. 

·         Germany's DAX holds a gain of 1.3% as financials lead with Commerzbank and Deutsche Bank up 5.8% and 1.9%, respectively. Exporters are also among the leaders as BMW and Volkswagen trade with gains close to 1.5% apiece. 

·         France's CAC is higher by 1.5% with 38 of 40 components trading higher. Renault leads with a gain of 5.1% while Veolia Environnement lags with a loss of 0.4%. 

·         Markets in Italy and Spain outperform with banks providing leadership. Italian Banco Popolare and Spain's CaixaBank trade with respective gains of 4.3% and 3.6%.

Market Internals

Market Internals -Technical-
The Nasdaq closed up 83 (+2.26%) at 3761, the Dow closed up 323 (+2.18%) at 15126, and the S&P 500 closed up 36 (+2.18%) at 1693. Action came on above average volume (NYSE 738 mln vs. avg. of 696; NASDAQ 1830 mln vs. avg. of 1597), with advancers outpacing decliners (NYSE 2657/2157, NASDAQ 2157/401) and new highs outpacing new lows (NYSE 112/25, NASDAQ 94/14).

Relative Strength: 
Poland-EPOL +4.57%, Thailand-THD +4.42%, Biotechnology-XBI +4.17%, Biotechnology-IBB +3.58%, Indonesia-IDX +3.56%, Chile-ECH +3.51%, Clean Energy-PBW +3.38%, India-INP +3.34%, Social Media-SOCL +3.23%, Oil and Gas Exploration-XOP +3.07%.

Relative Weakness: 
Volatility-VXX -9.77%, Gold Miners-GDX -1.53%, Corn-CORN -1.07%, Silver-SLV -1.07%, Japanese Yen-FXY -0.92%, Grains-JJG -0.67%, Swiss Franc-FXF -0.15%, Canadian Dollar-FXC -0.04%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: Stocks Climb on Talks of Short-Term Debt Ceiling Increase
The S&P 500 jumped 2.2%, turning its October loss into a gain of 0.7%. The Nasdaq outperformed, advancing 2.3%, but the tech-heavy index remains lower by 0.3% for the month. 

Equities registered the bulk of their gains at the open amid indications the budget stalemate may be getting a bit closer to a resolution. Participants rushed into equities after House Republicans proposed extending the debt limit by six weeks in order to allow for a broader discussion on spending. Currently, the Republican plan does not call for ending the partial government shutdown, which was met with an initial pushback from the White House. However, subsequent reports from the White House suggested President Obama ‘may' consider the short-term proposal. 

As a result of today's rally, the S&P managed to regain both its 50- and 100-day moving averages. 

All ten sectors registered solid gains with financials (+2.9%) ending in the lead. The sector outperformed for the second consecutive session as JPMorgan Chase (JPM 52.52, +1.77) and Wells Fargo (WFC 41.44, +1.08) settled with respective gains of 3.5% and 2.7%. The two banks are scheduled to report their quarterly results ahead of tomorrow's opening bell. 

Elsewhere, the industrial sector advanced 2.7% as defense contractors (PHLX Defense Index +3.1%) and transports (DJ Transportation Average +2.3%) rallied. 

Also of note, the Nasdaq outperformed as biotech companies rallied after seeing sharp losses earlier in the week. The iShares Nasdaq Biotechnology ETF (IBB 201.47, +6.97) spiked 3.6%, but is still off 5.2% this week. 

The relative strength of biotech helped the health care sector (+2.3%) end ahead of the broader market while the remaining countercyclical groups (consumer staples, telecom services, and utilities) underperformed with gains between 1.4% and 1.9%. 

Treasuries ended with slim losses as the benchmark 10-yr yield rose three basis points to 2.69%. 

Trading volume was in-line with average as 738 million shares changed hands on the floor of the NYSE. 

In today's economic data, weekly initial claims increased to 374,000 from 308,000 with much of the increase being attributed to California paring down their sizable backlogs in applications after computer glitches in September impeded the normal processing of initial claims. That resulted in a temporary drop in initial claims. Those claims were finally filed properly this week, which resulted in a large upward spike in claims. 

Tomorrow, the preliminary October Michigan Consumer Sentiment Survey will be released at 9:55 ET.

Commodities

Closing Commodities: Gold Hits New LoD In Electronic Trade
Commodities ended the day mixed with WTI crude oil down a few cents and nat gas, RBOB, heating oil and copper all higher. Silver ended flat and gold fell $10. 

Crude oil futures rallied today and rose as high as $103.57/barrel. Crude fell back below $103/barrel in the final minutes of floor trading and ended the day three cents lower at $103/barrel.

Natural gas traded in positive territory all session today and closed 2.5% higher at $3.72/MMBtu. 

Gold ended the day just over $10/oz lower at $1297/oz and silver ended unchanged. In electronic trade, gold fell to a new LoD and is now $1291.40/oz. Silver is at $21.75/oz.

COMEX Metals Closing Prices

·         Dec gold fell $10.10 to $1297/ounce

·         Dec silver end the day unchanged at $21.89/ounce

·         Dec copper rose 2 cents to $3.25/lbs

CBOT Agriculture and Ethanol Closing Prices

·         Dec corn fell 5 cents to $4.39/bushel

·         Dec wheat fell 5 cents to $6.85/bushel

·         Nov soybeans rose 1 cent to $12.88/bushel

·         Nov ethanol rose 1 cent to $1.73/gallon

NYMEX Energy Closing Prices

·         Nov crude oil fell $0.03 to $103.00/barrel

·         Nov natural gas rose 9 cents to $3.72/MMBtu

·         Nov heating oil rose 6 cents to $3.07/gallon

·         Nov RBOB gasoline rose 7 cents to $2.70/gallon

Natural gas inventory data

Natural gas inventory showed a build of 90 bcf vs expectations for a build of 90-96 bcf.

Treasuries

Treasuries Hit on Potential Short-Term Debt Ceiling Hike: 10-yr: -07/32..2.697%..USD/JPY: 98.23..EUR/USD: 1.3526

·         Treasuries finished at their best levels of U.S. trade, but an afternoon rally was unable to lift maturities into the green. Click here to see an intraday yields chart.

·         The complex managed to withstand a barrage of early selling as traders shed Treasuries in favor of riskier assets on word of a potential six-week debt ceiling hike. 

·         Trade held in a tight range throughout the morning before rallying off the lows in response to the strong $13 bln 30y reopening. 

·         Auction Results:The reopening drew 3.758% (3.777% when issued) and a solid 2.64x bid/cover as indirect (41.9%) and direct (22.6%) bidders saw strong takedowns. Primary dealers ended up just 35.5% of the supply. 

·         Upfront, the 4w bill saw a volatile trade with action taking place in a 12.5bp range (0.155%-0.280%) before ending -1.6bps at 0.248%. 

·         Interestingly, the 3m bill lagged the rest of the front end, settling little changed at 0.043% as the potential six-week debt ceiling hike caused the underperformance. 

·         The belly of the curve trailed behind for most of the session with yields there ending up as much as +3.5bp. 

·         Early selling produced an upside breakout from the 2.600%/2.650% range that had been in place in the 10y over the past two weeks. The benchmark yield ended the day +3.5bps at 2.685%, its highest level in nearly three weeks. 

·         The long bond outperformed post-reopening as a solid afternoon bid dropped the 30y yield to a close of +1.8bps at 3.742%. 

·         Today's selling swung the yield curve steeper as the 2-10-yr spread widened to 233bps. 

·         Elsewhere, precious metals ended on their lows with gold -$14 at $1293 and silver off $0.10 near $21.80. 

·         Tomorrow's Data: Friday's data is limited to Michigan Sentiment (9:55). Retail sales, retail sales ex-auto, PPI, core PPI, and business inventories releases will all be postponed.

Next Day In View 

Economic Commentary

Economic Summary: Jobless Claims rise based on computer problems; Republicans are considering a short-term debt ceiling hike; all other data delayed; Michigan Sentiment tomorrow at 9:55
Economic Data Summary:

·         Weekly Initial Claims 374K vs Briefing.com consensus of 318K; Last Week was 308K

·         Weekly Continuing Claims 2.905 M vs Briefing.com consensus of 2.903 M ; Last Week was 2.925 M

o    Computer glitches in the beginning of September impeded the normal processing of initial claims. That resulted in a temporary drop in initial claims. Those claims were finally filed properly this week, which resulted in a large upward spike in claims. The federal workers furloughed as a result of the government shutdown have not been included in the initial claims tally. However, some auxiliary jobs performed by non-federal workers that were tied to the government shutdown were lost. That accounted for about 23% of the increase in claims. The majority of the impact of the federal government furloughs will begin next week. 

·         September Export Prices Ex-Ag -- delayed due to ongoing Government shutdown

·         September Import Prices Ex-oil  -- delayed due to ongoing Government shutdown

Fed/Treasury Events Summary:

·         House Republicans are considering a short-term debt ceiling hike in exchange for a broader framework to cut spending.

·         Saint Louis Fed President James Bullard did not comment on monetary policy in his speech today.

Upcoming Economic Data:

·         September Treasury Budget due out today at 14:00 -- will be delayed due to ongoing Government shutdown

·         September Retail Sales due out Friday at 8:30  -- will be delayed due to ongoing Government shutdown

·         September Retail Sales Ex-Auto due out Friday at 8:30  -- will be delayed due to ongoing Government shutdown

·         September Core PPI due out Friday at 8:30 (Briefing.com consensus of 0.1%; August was 0.0%)  -- will be delayed due to ongoing Government shutdown

·         October Michigan Sentiment -prelim due out Friday at 9:55 (Briefing.com consensus of 74.5; September-Final was 77.5)  

·         August Business Inventories due out Friday at 10:00 (Briefing.com consensus of 0.2%; July was 0.4%)  -- will be delayed due to ongoing Government shutdown

Upcoming Fed/Treasury Events:

·         Fed Board Member Daniel Taruillo (voting FOMC member, dovish) to speak tomorrow at 13:45

·         San Francisco Fed President John Williams (not a voting FOMC member, typically moderate) to speak tomorrow at 14:30

·         Boston Fed President Eric Rosengren (voting FOMC member, typically dovish) to speak tomorrow at 18:30

·         The Treasury is scheduled to auction off $13 bln in 30 year bonds tomorrow. Results will be announced at 13:00

·         Fed Board Governor Jerome Powell (voting FOMC member, typically dovish) to speak tomorrow at 11:00

Other International Events of Interest

·         Japan's core machinery orders rose 5.4% (2.0% expected, 0.0% prior) and the tertiary industry activity index increased 0.7% (0.5% forecast, -0.4% previous). Separately, the foreign bonds buying report indicated net sales in the amount of JPY2.23 trillion (JPY672.20 billion) while bank lending increased 2.0% (2.0% prior). Also of note, household confidence improved to 45.4 from 43.0 (43.8 expected). 

On other news.... 

Today after the close the following companies were scheduled to report earnings: MU, SWY, EOPN, OZRK, ANGO

Futures are lower after hours: S&P 500 futures are -4.22 from fair value of 1686.92 and Nasdaq100 futures are -10.8 from fair value of 3203.05.

Tomorrow morning before the open four economic reports are scheduled to be released: 1) Retail Sales (Consensus -0.1%), 2) Retail Sales ex-auto (Consensus 0.2%), 3) PPI (Consensus 0.2%), and 4) Core PPI (Consensus 0.1%)

Tomorrow before the open the following companies are scheduled to report earnings: JPM, WFC, WBS, INFY

Currencies 

Dollar Drifts Little Changed: 10-yr: -07/32..2.692%..USD/JPY: 98.20..EUR/USD: 1.3530
The Dollar Index holds slim gains near 80.45 amid a rather uneventful trade. The majority of the session has seen action hold in a 20 cent range with most of that taking place near the 80.40 flat line. Click here to see a daily Dollar Index chart.

·         EURUSD is +5 pips at 1.3530 as trade drifts towards the close. A quiet day for news and data out of the Eurozone has seen action confined to a 40 pip range during U.S. trade. The 1.3500 area continues to provide near-term support. 

·         GBPUSD is +25 pips at 1.5975 as trade presses session highs. A steady bid has developed following the sell-the-news reaction to the Bank of England holding both its key rate and asset purchase programs unchanged at 0.50% and GBP375 bln, respectively. The pair dipped to 1.5920 following the decision, but buyers have been in control ever since as they look to test what is now resistance in the 1.6000 area. 

·         USDCHF is +10 pips at .9110 as trade ticks higher for a third session. The ability to clear the .9130 level sets up a likely test of .9200 resistance that is aided by the 50 dma.

·         USDJPY is +80 pips at 98.15 as trade holds at its best level in a week and a half. The current three-day win streak has action testing resistance in the area that is seeing additional help from the 50 and 100 dma. 

·         AUDUSD is +10 pips at .9455 as action has erased its early losses and reversed into positive territory. The hard currency dipped to a low of .9390 following today's weak Australian employment data, but support at the level was able to hold with action now threatening the September highs (.9500). 

·         USDCAD is flat at 1.0390 amid a choppy trade. Overnight action saw the pair hit a one-month high of 1.0420 before testing support from the 50 and 100 dma in the 1.0375 region. Canadian data out tomorrow includes employment change, the unemployment rate, and the Bank of Canada Business Outlook Survey.

Jason's Commentaries


News really screw everything up...... right after posting my DMA, the news that GOP is going to talk to Obama came out and rallied everyone... the indices futures spiked to more than 1% before market open. The speculation carried throughout the trading session and landed the market to a 323 points gain on the Dow, the largest range day in 3 months... The GOP deal aims to increase the debt ceiling for 6 weeks but it did not end the government shutdown which were subsequently rejected by Obama. But some optimism was still lingering as both parties were at least talking to each other. The optimism also influenced the European market to end much higher. 

All sectors gained at least 1.5%, with Utilities being the weakest leader and Financials being the strongest leader. While looking ahead, we're expecting earnings from JP Morgan and Wells Fargo, 2 of the largest banks in US. Internals were showing strength in the broader market and it's definitely a strong convergence bullish day. However, if the deal fails to pull through, we might see some large movement bearish day today. And also noting today is the last trading day ahead of the long weekend in US, there might be some upward forces supporting the market up. 

On the technical perspective, we are having the Dow bouncing off key support levels and S&P500 bouncing off its trendline. I reckon there might be some major profit taking if there is no deal being struck at the white house today. Another likely market moving factor today will be the earnings of the big banks today. It's going to be on helluva volatile day today. 

Market Call: FLAT and VOLATILE

Date: 11 Aug 2013