11 Oct 2013 AMC - Market rallied over potential deal on shutdown!

11 Oct 2013 AMC - Market rallied over potential deal on shutdown!

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: + 0.9%

·         Germany's DAX: + 0.5%

·         France's CAC: 0.0%

·         Spain's IBEX: + 0.1%

·         Portugal's PSI: + 2.0%

·         Italy's MIB Index: + 0.2%

·         Irish Ovrl Index: -0.3%

·         Greece ATHEX Composite: -1.3%

Before Market Opens 

S&P futures vs fair value: -2.50. Nasdaq futures vs fair value: -6.50.
The S&P 500 futures trade lower by 0.1%.

It was a sea of green across Asia as all of the major bourses ended in the green, buoyed by yesterday's surge on Wall Street. China's Shanghai Composite (+1.7%) was the leader after PBOC Governor Zhou Xiaochuan reiterated recent comment from Premier Li Kiqiang that growth in the Middle Kingdom would remain above 7.5%. Data and news out of the region was rather quiet, causing most of the indices to trade in tight intraday ranges. 

·         Japan's Nikkei gained 1.5% as shares rallied for a fourth day. Exporters continued to see strength as Nikon Corp. posted an in-line advance of 1.5%. 

·         In Hong Kong, the Hang Seng finished higher by 1.2% as trade rallied to its best close in a week. Life insurers outperformed after a China Securities Journal report indicated Beijing was planning to raise investment caps on real estate projects China Life Insurance and PICC Group both added more than 1%. 

·         China's Shanghai Composite settled higher by 1.7% as shares posted their biggest gain in a month. Solid auto sales for the month of September provided a boost for SAIC and Chongqing Changan Automobile, which saw gains of 3.9% and 10.0%, respectively. 

Major European indices trade mostly higher but markets in Italy (-0.1%) and Spain (-0.3%) lag after Mario Monti threatened to withdraw his party from the Italian coalition government should Prime Minister Enrico Letta fail to implement structural reforms. Economic data was limited as Germany's CPI was unchanged month-over-month (0.0% expected, 0.0% prior) while the year-over-year reading climbed 1.4% (1.4% forecast, 1.4% last). Separately, WPI rose 0.7% month-over-month (-0.1% expected, -0.6% previous). Great Britain's CB Leading Index rose 1.2% month-over-month (0.7% last). Elsewhere, French current account deficit narrowed to EUR3.10 billion from EUR3.30 billion. Also of note, Spain's CPI slipped 0.2% month-over-month (-0.2% forecast, 0.3% prior) while the year-over-year reading ticked up 0.3% (0.3% expected, 1.5% last). 

·         In France, the CAC is little changed as financials trade in mixed fashion. Credit Agricole is higher by 0.1% and Societe Generale trades down 1.0%. 

·         Germany's DAX trades higher by 0.2% with health care names in the lead. Fresenius SE and Merck are both up near 1.6%. Utilities lag with E.ON and RWE down 4.5% and 2.9%, respectively. 

·         In Great Britain, the FTSE trades up 0.6% as bank shares provide leadership. Aberdeen Asset Management, Barclays, and Standard Life are all up between 1.7% and 2.9%.

Market Internals

Market Internals -Technical-
The Nasdaq closed up 31 (+0.83%) at 3792, the Dow closed up 111 (+0.73%) at 15237, and the S&P 500 closed up 11 (+0.63%) at 1703. Action came on mixed volume (NYSE 635 mln vs. avg. of 693; NASDAQ 1689 mln vs. avg. of 1594), with advancers outpacing decliners (NYSE 2277/815, NASDAQ 1869/663) and new highs outpacing new lows (NYSE 183/27, NASDAQ 159/17). 

Relative Strength: 
Coffee-JO +2.62%, Clean Energy-PBW +2.49%, Regional Banks-KRE +1.98%, Egypt-EGPT +1.85%, Mexico-EWW +1.75%, U.S. Home Construction-ITB +1.72%, Homebuilders-XHB +1.68%, Israel-EIS +1.46%, Australia-EWA +1.33%, Columbia Index-GXG +1.11%. 

Relative Weakness: 
Junior Gold Miners-GDXJ -3.02%, Volatility-VXX -1.62%, Silver Miners-SIL -1.46%, Chile-ECH -1.37%, Corn-CORN -1.11%, Biotechnology-XBI -1.09%, Greece-GREK -0.61%, Russia-RSX -0.59%, Indonesia-IDX -0.41%, Emerging Markets Small Cap-EWX -0.38%.

Leaders and Laggards

Technical Updates

Commentaries 

Closing Market Summary: Stocks Climb While Debt Ceiling Battle Continues
The S&P 500 added 0.6% to extend its weekly gain to 0.8%. The Nasdaq outperformed with an advance of 0.8%, but finished the week with a loss of 0.4%. 

Stocks climbed amid morning reports indicating a new proposal has been put forth by Republicans that would end the government shutdown and avoid a Treasury default. However, the subsequent White House meeting failed to produce a concrete agreement and Senator Orrin Hatch, who took part in the meeting, said the president expressed some concern over the duration of the proposed debt limit extension. Senator Hatch also said President Obama articulated the need for new revenues to be part of a long-term deficit reduction. In the end, the two sides did not appear to be much closer to an agreement as the shutdown is set to enter its third week. 

Even though a solution to the deadlock has yet to be found, equities cheered the mere presence of some form of discussion. All ten sectors registered gains with energy (+1.0%) ending in the lead. The sector posted a solid gain even as crude oil fell 1.0% to $101.92 per barrel. 

Meanwhile, the other commodity-related sector—materials--underperformed as miners weighed. The Market Vectors Gold Miners ETF (GDX 23.05, -0.50) fell 2.1% while gold futures tumbled 2.1% to $1269.80 per troy ounce. Most of the decline in gold took place about an hour before the opening bell with the yellow metal falling more than $20 in under two minutes. 

Elsewhere among cyclical sectors, discretionary shares (+0.8%) finished ahead of the broader market with homebuilders contributing to the strength. The iShares Dow Jones US Home Construction ETF (ITB 21.91, +0.37) advanced 1.7% as all major builders rallied. 

Also of note, the financial sector (+0.6%) ended in-line with the S&P after JPMorgan Chase (JPM 52.51, -0.01) and Wells Fargo (WFC 41.43, -0.01) reported their quarterly results. JPMorgan Chase beat on earnings and revenue while Wells Fargo reported a bottom-line beat on below-consensus revenue. 

Treasuries ended unchanged with the benchmark 10-yr yield at 2.69%. 

Trading volume was on the light side as 634 million shares changed hands on the floor of the New York Stock Exchange. 

Looking back at today's economic data, the University of Michigan Consumer Sentiment Index dropped to 75.2 in the preliminary October reading from 77.5 in September. The Briefing.com consensus expected the index to fall to 74.5. 

The drop in the index was most likely due to negative feedback from the government shutdown and the debate over the debt ceiling. If the government reopens soon and the debt ceiling is not breached, consumer sentiment is likely return to its September levels by the end of the month. 

There is no economic data scheduled to be reported on Monday. 

Commodities

Closing Commodities: Gold Ends 2.2% Lower For The Week, Silver Falls 2.3%

·         Precious metals sold off sharply in early morning pit trade, with Dec gold falling by over $25 to a session low of $1259.60 per ounce and Dec silver plunging to a session low of $20.95 per ounce. The drop caused the CME Group to halt trading in the December gold futures contract for about 10 seconds

·         Gold traded as high as $1289.30 per ounce before the move and settled the session with a 2.2% loss at $1268.40 per ounce, bringing losses for the week to 3.2%

·         Silver spent the remainder of the session trading near the $21.20 per ounce level and eventually settled 2.9% lower at $21.25 per ounce, booking a 2.3% loss for the week

·         Nov crude oil also spent all of today's floor trade in negative territory, with some of the weakness coming on the sell-off in precious metals. The energy component brushed a session low of $100.60 per barrel at pit trade open but managed to inch slightly higher as the session progressed. It settled with a 1.0% loss at $101.94 per barrel, or 1.8% lower than last Friday's closing price

·         Nov natural gas, on the other hand, chopped around in positive territory within a five cent range between $3.74 and $3.79 per MMBtu. It eventually settled 1.3% higher at $3.77 per MMBtu, booking a solid 7.4% gain for the week

NYMEX Energy Closing Prices

  Nov crude oil fell $1.06 to $101.94/barrel 

·         Crude oil spent all of today's floor trade in negative territory, touching a session low of $100.60 at pit trade open. It managed to inch slightly higher and settled with a 1.0% loss. Today's drop brought losses for the week to 1.8%. 

  Nov natural gas rose 5 cents to $3.77/MMBtu 

·         Natural gas, on the other hand, chopped around in positive territory in a five cent range between $3.74 and $3.79. It eventually settled 1.3% higher, booking a solid 7.4% gain for the week. 

  Nov heating oil fell 4 cents to $3.03/gallon 

  Nov RBOB gasoline fell 4 cents to $2.66/gallon

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Dec corn fell 6 cents to $4.33/bushel 

·         Dec wheat rose 7 cents to $6.92/bushel 

·         Nov soybeans fell 21 cent to $12.67/bushel 

·         Nov ethanol fell 1 cent to $1.72/gallon 

·         Jan sugar (#16 (U.S.)) fell 0.12 of a penny to 21.88 cents/lbs

COMEX Metals Closing Prices

  Dec gold fell $28.60 to $1268.40/ounce 

·         Gold sold off sharply in early morning pit trade, falling by over $25 to a session low of $1259.60. The drop caused the CME Group to halt trading in the December gold futures contract for about 10 seconds. The yellow metal traded as high as $1289.30 before the move and settled the session with a 2.2% loss, bringing losses for the week to 3.2%. 

  Dec silver fell $0.64 to $21.25/ounce 

·         Silver plunged alongside gold, falling to a session low of $20.95. It then spent the remainder of the session trading near the $21.20 level and eventually settled 2.9% lower, booking a 2.3% loss for the week. 

  Dec copper rose 2 cents to $3.27/lbs

 

 

Treasuries

Treasuries See Weekly Losses on Hopes of Budget/Debt Deal: 10-yr: unch..2.685%..USD/JPY: 98.49..EUR/USD: 1.3549
The Week in Review

·         Treasuries saw modest losses this week as hopes Congress would be able to reach a deal to hike the debt ceiling and end the government shutdown caused money to move out of the safety of the complex and into riskier assets. Click here to see an intraweek yields chart. 

·         The complex traded in a tight range early in the week, but leaked lower as talk of a potential deal began to make the rounds. 

·         Selling had the biggest impact on the very front end of the curve as fears of an October 17 default caused firms like Blackrock, Fidelity, and JP Morgan to sell their short-term paper. 

·         The 4w yield ended +13bps for the week at 0.254% after hitting a high of more than 0.320%. 

·         The late-week selling caused the 10y to see an upside breakout of its 2.600%/2.650% range that had been in place over the past two weeks. The benchmark yield finished the week +5bps at 2.682%. 

·         Slight outperformance could be found in the 30y, which closed the week +2bps at 3.735%. 

·         Curve steepening took hold over the course of the week as the 2-10-yr spread widened to 233.5 bps. 

·         Auction Results: Tuesday's $30 bln 3y note auction drew 0.710% and a light 3.05x bid/cover as a solid showing from indirect bidders (34.4%) provided support. Primary dealers ended up with 45.9% of the supply. Wednesday's $21 bln 10y reopening drew 2.657% (2.666% when issued) and a disappointing 2.58x bid/cover. A slightly stronger than average showing from indirect bidders (38.6%) helped offset the light direct takedown (21.2%). Primary dealers were left with 41.2% of the supply. Thursday's $13 bln 30y bond 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. 

·         There is no data on Monday. The U.S. Treasury market is closed in observance of Columbus Day. 

On other news.... 

Earnings/guidance of interest: 

·         JPM is up over 2% in the premarket after reporting Q3 EPS of $1.42, ex-$7.2 bln after tax litigation reserve and $992 after tax reserve release, vs. the $1.29 CIQ Consensus (GAPP EPS was a loss if $0.17/share); reported rev fell 8% to $23.1 bln vs. the $23.6 bln Capital IQ Consensus; the call starts at 8:30 

·         INFY is +5% at a 6 month high after Q2 results; co raised FY14 sales guidance

·         POT (-1%) has pared premarket losses after guiding Q3 EPS to $0.41 vs. the $0.46 consensus  

·         SWY misses by $0.06, beats on revs; intends to exit the Chicago market  

·         LRN sees FY14 revenue in the range of $905-925 mln, CapitalIQ consensus $928 mln

·         SGI warns for Q1: sees Q1 EPS of $0.02-0.04 vs $0.09 CapitalIQ Consensus Estimate; revs $147 mln vs $165.50 mln Capital IQ Consensus Estimate   

·         GPS reports Sep same store sales -3.0% vs +1.8% RetailMetrics consensus

·         ZAGG sees Q3 revs of $50.0 mln vs $53.98 mln Capital IQ Consensus Estimate  

Earnings Preview for the week of October 14 - 18
Of the companies reporting earnings for the week of October 14 - 18 some of the bigger names include:

·         Monday:

o    Pre Market - KMG

o    After Hours - PKG, BRO

·         Tuesday:

o    Pre Market - C, JNJ, KO, OMC, DPZ

o    After Hours - INTC, CSX, YHOO, IBKR, LLTC

·         Wednesday:

o    Pre Market - BAC, PEP, ABT, USB, PNC, BK, SWK, BLK, GWW, MAT, ASML, STJ, WSO, KEY, NTRS, CMA

o    After Hours - IBM, AXP, EBAY, KMP, CCK, STLD, SNDK, URI, NE, SLM, ALB, UFPI, XLNX, HNI, EPB

·         Thursday:

o    Pre Market - UNH, VZ, PM, GS, UNP, NUE, TSM, DHR, PPG, SVU, BAX, BBT, DOV, DGX, BTU, FITB, BX, SON, APH, ADS

o    After Hours - GOOG, COF, LVS, SYK, AMD, HUBG, CMG, VMI, ISRG, WERN, CYT, KALU, PBCT

·         Friday:

o    Pre Market - GE, SLB, HON, MS, BHI, GPC, IR, PH, TXT, STI, IPG, LH

Currencies 

Dollar Hovers Flat: 10-yr: +01/32..2.682%..USD/JPY: 98.53..EUR/USD: 1.3544
The Dollar Index holds flat at 80.40, slipping back to the breakeven line after reports suggested President Obama had rejected Republican Senators' proposal to raise the debt ceiling for six weeks and end the government in exchange for discussions over spending cuts. The Index climbed to session highs near 80.55 on hopes a deal could be reached, but has given up those small gains on word the plan had been rejected. Click here to see a daily Dollar Index chart.

·         EURUSD is +15 pips at 1.3540 has trade has given up most of its overnight gains. The single currency tested the 1.3600 level, but was unable to reclaim the area as sellers stepped in to defend eight-month highs. Eurozone industrial production will cross the wires on Monday.Eurogroup meetings will begin in Brussels. 

·         GBPUSD is -20 pips at 1.5950 as today's selling has reversed yesterday's gains. Action has checked up on minor support in the 1.5900/1.5950 region has data out of the UK has stalled; however, a test of the 50 dma (1.5770) cannot be ruled out. 

·         USDCHF is +10 pips at .9120 as trade climbs for the fifth time in six days. The recent advance comes after critical support in the .9000 area was able to withstand a barrage of selling at the beginning of October. A breakout above .9140 sets up a likely test of the 50 dma (.9205), and a potential test of .9300 resistance that is helped by both the 100 and 200 dma. Switzerland's PPI is due out on Monday. 

·         USDJPY is +25 pips at 98.55 as buyers remain in control for a fourth session. The four-day winning streak comes after the pair was able to survive a test of its 200 dma (96.90), and has action looking to retake the 50 and 100 dma that aid resistance at these levels. A move through 99.00 likely sets up a test of the September highs near 100.50. Bank of Japan Governor Kuorda will speak Saturday evening in Washington D.C. Japanese banks are closed Monday for Health-Sports Day. 

·         AUDUSD is flat at .9460 amid a choppy trade. The pair has been limited to just a 30 pip range in U.S. trade with action stalling near the September highs. Australian data is limited to home loans. China's trade balance is scheduled to cross on Saturday while CPI and PPI are due out late Sunday. 

·         USDCAD is -30 pips at 1.0365 as action presses session lows. The pair has been offered since this morning's mixed Canadian employment data. Employment change fell short of estimates with a 11.9K print (15.3K print expected), but the unemployment rate dipped to 6.9% (7.1% expected, 7.1% precious). The weakness has the pair probing both its 50 and 100 dma, which help 1.0340/1.0360 support. Canadian banks are closed Monday for Thanksgiving.

Weekly Analysis
Week 38



Technical Updates








 Briefing's Commentaries


Week in Review: Stocks Dance to Washington's Tune 

On Monday, the S&P 500 fell 0.9% as the equity market began the week on a shaky note and the same thing could have been said for politics in Washington. The two were inextricably linked as stock market participants were put off by some revelations from House Speaker Boehner over the weekend that made it sound as if partisan positions are hardening and not easing the closer we get to the October 17 debt limit deadline. In particular, Mr. Boehner told ABC's George Stephanopolous that: (1) the House does not have the votes to pass a clean continuing resolution; (2) the votes are not in the House to pass a clean debt limit increase; (3) and the US is on a path to default because President Obama won't negotiate over the debt ceiling. Mr. Boehner's viewpoints were decried by his opponents as reckless rhetoric, but the bottom-line for the market, however, was that nothing has been done yet with respect to the budget and debt ceiling. That understanding in turn left many participants sticking to the sidelines on concern that a deal may wait until the last minute. 

Tuesday's session saw the S&P 500 continue its slide with a 1.2% retreat. Once again, the budget/debt ceiling impasse in Washington was largely to blame. The Nasdaq Composite was the biggest loser of the day, slumping 2.0% on the back of pronounced weakness in many of the market's favorite momentum stocks. The cracks in leading names like LinkedIn (LNKD 226.62, -0.93), Priceline.com (PCLN 1010.63, -2.56), Tesla (TSLA 178.70, +5.77) and Facebook (FB 49.11, +0.06) provided an added cue for buyers to stick mostly to the sidelines. 

The S&P 500 added 0.1% on Wednesday, but was unable to regain its 100-day moving average (1662) after flirting with that level throughout the afternoon. The tech-heavy Nasdaq underperformed throughout the session, sliding 0.5%. Equities began the session with slim gains amid reports President Obama was set to nominate Janet Yellen as the next Chairwoman of the Federal Reserve. However, given the expected nature of the announcement, the early boost faded quickly. The major averages appeared on their way to another losing session, but found support during late-morning trade when the Dow Jones Industrial Average tested its 200-day moving average for the first time this year. The price-weighted Dow built the subsequent rebound on the relative strength of top-weighted names like Nike (NKE 73.46, +0.02), IBM (IBM 186.16, +1.39), and Goldman Sachs (GS 160.00, +1.99). 

On Thursday, the S&P 500 jumped 2.2%, turning its October loss into a gain of 0.7%. 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 risk assets after House Republicans proposed extending the debt limit by six weeks in order to allow for a broader discussion on spending. However, the Republican plan did not call for ending the partial government shutdown, which was met with an initial pushback from the White House. The S&P 500 settled on its high and managed to regain both its 50- and 100-day moving averages even as the day ended without a clear response to the Republican proposal from the White House.16:13 ITI Iteris Holdings discloses departure of CFO, appointment of Craig Christensen as interim CFO (1.82 +0.02)
Co disclosed that on October 9, 2013, James Miele notified Iteris, Inc. of his intention to resign from his position as Vice President of Finance and Chief Financial Officer of the Company to pursue other opportunities. Mr. Miele's resignation will be effective on November 1, 2013. As of the effective date of Mr. Miele's resignation, Craig Christensen will assume the role of Interim Chief Financial Officer until a permanent replacement for Mr. Miele has been identified by the Company. Mr. Christensen, age 35, has served as the Company's Controller since April 2012.



Next Week In View



Economic Commentaries

Economic Summary: Michigan Sentiment tops expectations, but declined due to Government shutdown
Economic Data Summary:

·         September Retail Sales -- delayed due to Government shutdown

·         September Retail Sales Ex-Auto -- delayed due to Government shutdown

·         September PPI -- delayed due to Government shutdown

·         September Core PPI -- delayed due to Government shutdown

·         October Michigan Sentiment -prelim 75.2 vs Briefing.com consensus of 74.5; September-Final was 77.5

o    The drop in the index was most likely due to negative feedback from the government shutdown and the debate over the debt ceiling. If the government reopens soon and the debt ceiling is not breached, consumer sentiment will likely return to its September levels by the end of the month. 

·         August Business Inventories -- delayed due to Government shutdown

Upcoming Economic Data:

·         October Empire Manufacturing due out Tuesday at 8:30 (Briefing.com consensus of ; September was 6.3%)

Upcoming Fed/Treasury Events:

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

·         Fed Chairman Ben Bernanke to speak Monday at 21:00 in Mexico.

Other International Events of Interest

·         Germany's CPI was unchanged month-over-month (0.0% expected, 0.0% prior) while the year-over-year reading climbed 1.4% (1.4% forecast, 1.4% last). Separately, WPI rose 0.7% month-over-month (-0.1% expected, -0.6% previous). 

Jason's Commentaries

Totally did not expect the market to open on Columbus day which is a trading day for US. The Treasury market is closed in observance of the holiday. Market is rallying in expectation of the possible shutdown deals. Since Thursday, the Republicans have been proposing to Obama but there were no deals done through the weekend. Now we're in the midst of shutdown of 2 weeks already and market is getting panicky as we're approaching 17 Oct, before US might default their debts technically.

The market opened on Friday with a bullish bias last through the whole session and spiked up at the end of the trading session. Volumes were standing at 601m shares traded on the NYSE. Internals were point at some sort of divergence, Energy ended up being the strongest leader in the market. On the technicals side, we're looking at some bounce off support levels but likely to hit some resistance soon.

This has been a volatile week due to the shutdown and stuff... after the shutdown matters, we'll be for the tapering talk again as Janet Yellen will be sworn in as the first ever Fed Chairwoman. Then the market will get jitters all over. Seems that Oct is really a very volatile month with all these volatility going on...

Monday's futures started with 0.8% loss but reversed 1130am ET. Seems that we will end with a flat day.... 

Market Call: FLAT

Date:14 Oct 2013