17 Oct 2013 AMC- IBM's drag on Dow overrun by the bulls...

17 Oct 2013 AMC- IBM's drag on Dow overrun by the bulls...

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: + 0.1%

·         Germany's DAX: -0.4%

·         France's CAC: -0.1%

·         Spain's IBEX: + 0.4%

·         Portugal's PSI: + 0.1%

·         Italy's MIB Index: -0.4%

·         Irish Ovrl Index: -0.2%

·         Greece ATHEX Composite: + 1.2%

 

Before Market Opens

S&P futures vs fair value: -6.00. Nasdaq futures vs fair value: -12.50.
The S&P 500 futures trade lower by 0.2%.

Markets across Asia ended mixed after Congress announced an eleventh-hour deal that kicks the can down the road into early 2014. Japan's Nikkei (+0.8%) was among the leaders while India's Sensex (-0.6%) lagged as traders returned to work. Data out of the region saw China's foreign direct investment up 6.2% so far this year, Australia's NAB Quarterly Business Confidence improve to 3 (-1 previous), Hong Kong's unemployment rate hold steady at 3.3% (3.3% expected), and Singapore's trade surplus widen to SGD4.5 billion (SGD3.9 billion previous). 

·         In Japan, the Nikkei closed higher by 0.8% as trade rallied for the seventh straight day. Real estate and financials outperformed as Sumitomo Realty & Development gained 1.7% and Mitsubishi UFJ Financial added 1.1% to end among the leaders of their respective sectors. 

·         Hong Kong's Hang Seng shed 0.6% as trade slipped off the October highs. Energy shares were mixed as coal-based China Shenhua Energy surged 4.7% and PetroChina gave up 1.1%. 

·         In China, the Shanghai Composite slipped 0.2% as trade posted its lowest close of October. Stocks that have benefitted from the recently announced free-trade zone led the way lower as Shanghai Lujiazui tumbled 6.2% and Shanghai Oriental Pearl plunged the limit, 10%. 

Major European indices trade lower across the board with Italy's MIB (-0.7%) leading to the downside after Moody's commented on the country's banking system, saying the outlook remains ‘Negative.' Regional economic news was limited. Eurozone current account surplus expanded to EUR17.40 billion from EUR15.50 billion (EUR17.70 billion forecast). Great Britain's retail sales rose 0.6% month-over-month (0.4% expected, -0.8% prior) while the year-over-year reading increased 2.2% (2.1% forecast, 2.1% previous). Meanwhile, core retail sales rose 0.7% month-over-month (0.3% expected, -0.8% last) and improved 2.8% on a year-over-year basis (2.1% forecast, 2.3% prior). 

·         Great Britain's FTSE is off 0.3% as industrials lag. Meggitt and Weir Group trade lower by 1.5% and 2.9%, respectively. On the upside, media names trade among the leaders with ITV higher by 2.1% and British Sky Broadcasting holding a gain of 6.2%. 

·         In France, the CAC trades lower by 0.6% with utilities leading to the downside. GDF Suez is lower by 3.0% and Veolia Environnement trades with a loss of 1.9%. Food retailer Carrefour outperforms with a gain of 2.2%. 

·         Germany's DAX holds a loss of 0.7% as electricity provider E.ON leads to the downside with a loss of 2.3%. Chemical producers outperform with Lanxess and Linde up 1.7% and 0.2%, respectively.

After Hours


After Hours Summary: GOOG +8.1%, CMG +8.0%, CMG +8.0%, ISRG -8.1%, AMD -7.1% following earnings/guidance
After Hours Gainers: 

Companies trading higher in after hours in reaction to earnings: ZHNE +27.6%, ALGN +15.9%, GOOG +8.1%, CMG +8%, CPHD +5.5%, HCA +3.5%, CPSS +3%, COF +1.9%, LION +1.3%, LVS +0.3%, ATHN +0.1%

Companies trading higher in after hours in reaction to news: GAIA +6.6% (announced divestiture of its non-branded entertainment media distribution business to Cinedigm (CIDM) for $51.5 million), CPE +2.6% (co's subsidiary entered into an agreement with W&T Offshore (WTI) to sell its interests in the Medusa field and Medusa Spar and substantially all of its Gulf of Mexico shelf assets, for total cash consideration of $100 mln), CF +1.5% (increased quarterly dividend 150% to $1.00 per share), MFRM +0.9% (40 North Management discloses 7.8% active stake in 13D filing; up from 5.29% reported on 08/06),

After Hours Losers: 

Companies trading lower in after hours in reaction to earnings: ACTG -12.1%, ISRG -8.1%, AMD -7.1%, BGS -3.1%, RMBS -2.4%, SYK -1.8%, SXT -0.6%, GHL -0.1%, VMI -0.1%

Companies trading lower in after hours in reaction to news: VLCCF -12.8% (announced public offering of common shares), CIDM -7.8% (announced public offering of ~7.9 mln shares of Class A common stock), EVEP -5.3% (announced public offering of 5 mln of its common units representing limited partner interests), CMLP -4.0% (announced public offering of 14 mln common units), OMER -2.7% (filed universal shelf registration statement to replace expiring universal shelf registration statement), EPR -2.2% (announced 3 mln share offering), UAL-1.4% (co expects to record special charges of $177 mln during Q3 of 2013)

Market Internals

Market Internals -Technical-
The S&P 500 closed up 12 (+0.67%) at 1733, the Nasdaq closed up 24 (+0.62%) at 3863, and the Dow closed down 2 (-0.01%) at 15372. Action came on above average volume (NYSE 758 mln vs. avg. of 699; NASDAQ 1903 mln vs. avg. of 1605), with advancers outpacing decliners (NYSE 2569/527, NASDAQ 1716/820) and new highs outpacing new lows (NYSE 326/20, NASDAQ 256/22). 

Relative Strength: 
Junior Gold Miners-GDXJ +5.77%, Silver Miners-SIL +5.70%, Greece-GREK +4.05%, U.S. Home Construction-ITB +3.13%, Platinum-PPLT +2.92%, Peru-EPU +2.42%, Switzerland-EWL +2.20%, Bank and Brokerage-RKH +2.06%, United Kingdom-EWU +1.83%, Thailand-THD +1.66%. 

Relative Weakness: 
Volatility-VXX -5.52%, Gasoline-UGA -2.27%, Oil-USO -1.46%, U.S. Dollar-UUP -1.11%, Coffee-JO -1.10%, Egypt-EGPT -0.29%, Eastern Europe-ESR -0.27%, China 25 Index-FXI -0.25%, Hong Kong-EWH -0.15%, Chile-ECH -0.04%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: S&P 500 Marks Fresh Record High While Dollar Slides
The major averages ended today's session on a mixed note as the Dow shed just over two points while the S&P 500 added 0.7% to notch a fresh all-time high at 1,733.45.

With the third quarter earnings season heating up, the Dow Jones Industrial Average was victimized by disappointing results from two market-moving names. Goldman Sachs (GS 158.32, -3.93) and IBM (IBM 174.83, -11.90) ended with respective losses of 2.4% and 6.4% after both reported bottom-line beats on light revenue. Goldman Sachs missed top-line estimates by roughly $500 million while IBM reported revenue $1 billion below analyst expectations.

Shares of IBM weighed on the technology sector (-0.2%) while financials (+0.9%) were able to shake off Goldman's weakness with help from American Express (AXP 80.23, +3.91). The Dow component jumped 5.1% following its earnings beat.

Among other notable Dow earnings, UnitedHealth Group (UNH 71.37, -3.82) fell 5.1% after reporting in-line results and Verizon (VZ 48.90, +1.65) gained 3.5% on above-consensus earnings.

Thanks to Verizon's strength, the telecom services sector (+1.9%) ended in the lead while other countercyclical groups—consumer staples (+1.0%), health care (+0.9%), and utilities (+1.6%)—also outperformed the broader market.

Elsewhere, the energy sector added 0.2% despite a 1.6% drop in crude oil. The energy component ended at $100.64 per barrel. Among other commodities, gold futures jumped 2.8% to $1318.60 per troy ounce.

Part of the surge in gold could be attributed to significant greenback weakness. The Dollar Index (79.66, -0.81) ended near its lowest level of the year as global investors perceived the Congressional deal to extend the debt ceiling as a temporary fix, rather than a solution to an issue that is sure to re-emerge in the first months of 2014.

In addition, the need to revisit the debt ceiling battle in a few months means the Federal Reserve will be less likely to taper its asset purchases during the early months of next year.

Treasuries finished near their highs with the 10-yr yield down seven basis points at 2.59%. Notably, the 4-week yield tumbled 12.5 basis points to 0.01% as default fears receded following the deal on Capitol Hill. The short-term yield was trading as high as 0.35% just a few days ago.

Trading volume was a bit above average as 758 million shares changed hands on the floor of the New York Stock Exchange.

On the economic front, computer problems in California kept the initial claims level elevated for a second week in a row. The weekly initial claims level fell to 358,000 from a slightly downwardly revised 373,000 (from 374,000) for the week ending October 5. The Briefing.com consensus expected the initial claims level to fall to 330,000.

Separately, the manufacturing sector in the Philadelphia region remained strong in October. The Philadelphia Fed's Business Outlook Survey fell to 19.8 from 22.3 in September. The Briefing.com consensus expected the index to fall to 7.0. Unlike what happened in the New York Fed's Empire Manufacturing Sector, the manufacturing outlook in the Philly region was not affected by the government shutdown.

There is no economic data scheduled to be reported tomorrow. 

·         DJIA +17.3% YTD 

·         S&P 500 +21.5% YTD 

·         Nasdaq +27.9% YTD 

·         Russell 2000 +29.8% YTD

Commodities

Closing Commodities: Gold And Silver Hold Gains; Crude Oil Ends Below $101/Barrel

·         Commodities traded in a mixed fashion today, while the dollar index slumped as the temporary Congressional deal to extend the debt ceiling gave rise to speculation that a taper to the Federal Reserve asset purchases will be less likely

·         Adding to the dollar's weakness was a downgrade of U.S. debt by Chinese rating agency DagongDec gold extended yesterday's gains as it got a boost from the weaker dollar index. The yellow metal hit a session high of $1324.20 per ounce and settled at $1322.60 per ounce, booking a 3.2% gain

·         Dec silver also traded higher, brushing a session high of $22.20 per ounce in early morning pit trade. It eventually settled with a 2.8% gain at $21.97 per ounce

·         Nov crude oil, on the other hand, traded in negative territory as investors reacted to a build in stockpiles reported by the API and Genscape, an energy intelligence company. The EIA did not release its scheduled inventory report due to the government shutdown, but the API said that oil stocks at Cushing, Oklahoma rose by 0.291 mln barrels last week.

·         Genscape reported they rose by 0.837 mln barrels. The energy component brushed a session low of $100.03 per barrel and settled with a 1.6% loss at $100.63 per barrel

·         Nov natural gas fell for a third consecutive session, brushing a session low of $3.73 per MM

Treasuries

Treasuries Gain as Congress Kicks the Can into 2014: 10-yr: +18/32..2.596%..USD/JPY: 97.89..EUR/USD: 1.3675

·         Treasuries saw solid gains after Congress was able to muster together an eleventh hour deal that funds the government through January 15 while extending the debt limit until February 7. Click here to see an intraday yields chart.

·         Today's bid had the biggest impact up front as the 4w tumbled -12.5bps to 0.01% as U.S. default fears have subsided. Just a couple days ago the 4w was yielding 0.35%. 

·         It was a tale of two maturities in the belly of the curve as light buying dropped the 2y -2bps to 0.318% while an aggressive bid pushed the 10y down -8.5bps to 2.587%. Today's close in the 10y was notable as it was the lowest since early August, and the first below the 100 dma in more than five months. 

·         At the long end, the 30y fell 6.5bps to 3.657%, and settled on support that dates back to the beginning of July. 

·         A flatter curve developed as the 2-10-yr spread narrowed to 227bps. 

·         Precious metals saw solid gains with gold +$37 @ $1319 and silver +$0.45 @ 21.80. 

·         Data: Leading indicators data is delayed as a result of the government shutdown.

NYMEX Energy Closing Prices

  Nov crude oil fell $1.66 to $100.63/barrel 

·         Crude oil traded in negative territory today as investors reacted to a build in stockpiles reported by the API and energy intelligence company Genscape. The EIA did not release its scheduled inventory report due to the government shutdown, but the API said that oil stocks at Cushing, Oklahoma rose by 0.291 mln barrels last week, while Genscape reported they rose by 0.837 mln barrels. Crude oil brushed a session low of $100.03 after trading as high as $101.23 earlier in the session. It eventually settled with a 1.6% loss. 

  Nov natural gas fell 1 cent to $3.76/MMBtu 

·         Natural gas fell for a third consecutive session, brushing a session low of $3.73. Unable to rise above the unchanged line, it settled 0.3% lower. 

  Nov heating oil fell 5 cents to $2.99/gallon 

  Nov RBOB gasoline fell 5 cents to $2.65/gallon

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Dec corn rose 1 cent to $4.43/bushel

·         Dec wheat rose 5 cents to $6.86/bushel

·         Nov soybeans rose 14 cents to $12.92/bushel

·         Nov ethanol fell 2 cents to $1.79/gallon

·         Jan sugar (#16 (U.S.)) fell 0.02 of a penny to 21.98 cents/lbs

COMEX Metals Closing Prices

  Dec gold rose $40.60 to $1322.60/ounce 

·         Gold extended yesterday's gains as the dollar index fell deeper into negative territory on speculation that the temporary Congressional deal to extend the debt ceiling may delay a taper to the Federal Reserve asset purchases. Adding to gold's strength was a downgrade of U.S. debt by Chinese rating agency Dagong. The yellow metal hit a session high of $1324.20 and settled just below that level, booking a 3.2% gain. 

  Dec silver rose $0.60 to $21.97/ounce 

·         Silver also traded higher today, trading as high as $22.20 in early morning pit trade. It eventually settled with a 2.8% gain. 

  Dec copper fell 1 cent to $3.30/lbs

Next Day In View 

Economic Commentary

Economic Summary: Jobless Claims fall as computer problems persist; Philly Fed easily tops expectations; dovish Evans says Fed now is not the time to remove accommodation
Economic summary: Economic Data Summary:

·         Weekly Initial Claims 358K vs Briefing.com consensus of 330K; Last Week was 374K

·         Weekly Contiuing Claims 2.859 M vs Briefing.com consensus of 2.900 M ; Last Week was 2.905 M

o     Glitches following a conversion to a new computer system caused an enormous backlog unemployment benefit applications in the beginning of September. California is continuing to process those applications, which is inflating the headline initial claims level. The Department of Labor stated that unemployment trends from California have not changed. That means the higher-than-normal claims levels will likely fall soon and the headline level should return toward 300,000. Claims filed by nonfederal workers disrupted by the government shutdown were unchanged from last week. 

·         October Philadelphia Fed 19.8 vs Briefing.com consensus of 7.0; September was 22.3

o     Unlike what happened in the New York Fed's Empire Manufacturing Sector, the manufacturing outlook in the Philly region was not affected by the government shutdown. In fact, it could be argued that the situation improved in October even though the headline index fell slightly. The New Orders Index increased to 27.5 in October from 21.2 in September. That was the highest level since March 2011. At the same time, unfilled orders increased to 9.1 from 4.3. 

Fed/Treasury Events Summary:

·         Dallas Fed President Richard Fisher (2014 voter, hawkish) said "The Federal Reserve is limited in its power to make what took place in New York happen for our nation, and unless the fiscal authorities get their act together, looking to the Fed to solve the nation's economic ills through ever-expansive monetary policy might well make the situation worse."

·         Chicago Fed President Charlie Evans (2013 voter, dove) said "It is not yet time to remove accommodation. The data are still not definitive enough to say that now is time to adjust the QE3 flow purchase rate. And we are a long way from seeing an unemployment rate below 6-1/2 percent in the context of inflation moving surely toward our target. Accordingly, I expect our overall stance of monetary policy to remain highly accommodative for some time to come."

Upcoming Economic Data:

·         September Leading Indicators due out Friday at 10:00 (Briefing.com consensus of 0.6%; August was 0.7%) -- will be delayed due to go Government shutdown

Upcoming Fed/Treasury Events:

·         Chicago Fed President Charlie Evans (voting FOMC member, typically dovish) to speak tomorrow at 14:00

·         Fed Governor Stein (voting FOMC member) to speak tomorrow at 16:30

Other International Events of Interest

·         China's Foreign Direct Investment narrowed to 6.20% from 6.37%. 

·         Great Britain's retail sales rose 0.6% month-over-month (0.4% expected, -0.8% prior) while the year-over-year reading increased 2.2% (2.1% forecast, 2.1% previous). Meanwhile, core retail sales rose 0.7% month-over-month (0.3% expected, -0.8% last) and improved 2.8% on a year-over-year basis (2.1% forecast, 2.3% prior). 

On other news.... 

Currencies 

Dollar Hits Eight-Month Low: 10-yr: +20/32..2.583%..USD/JPY: 97.85..EUR/USD: 1.3668
The Dollar Index has hovered on session lows near 79.70 throughout U.S. trade as several factors have weighed on the greenback. Congress kicking the can down the road until early 2014 coupled with Chinese rating agency Dagong cutting it U.S. sovereign rating to ‘A-‘ from ‘A' and prospects of Fed tapering not begging til next year have all weighed on the greenback. Today's weakness has the Index on track to post its worst close in more than eight months. Click here to see a daily Dollar Index chart.

·         EURUSD is +130 pips at 1.3665 as action remains on track to post its biggest gain in a month. Data and news flow out of the region were rather quiet with the single currency seeing little reaction headlines indicating former Italian Prime Mario Monti has resigned from his leadership role of the Centrist Party. Today's bid has the single currency nearing a test of the October highs near 1.3700, but 1.3620 would mark the best since November 2011. 

·         GBPUSD is +195 pips at 1.6150 as trade lifts off the 1.5950 support level. The pair has outperformed today as a better than expected retail sales number enticed an early bid. The 1.6300 area is setting up as a key level. 

·         USDCHF is -105 pips at .9025 as today's selling has wiped away roughly two weeks of gains. The .9000 level remains critical as support in the area dates back more than two years. 

·         USDJPY is -90 pips at 97.90 as trade pushes through the lower bound of the 98.00/99.00 range that had been in place over the past week. Today's selling has dropped the pair back below its 50 and 100 dma, and has traders shifting their focus to 97.00 support that is helped by the 200 dma. Bank of Japan Governor Haruhiko Kuroda will speak in Tokyo. 

·         AUDUSD is +75 pips at .9635 as trade rallies for the sixth time in seven days. A test of the 200 dma (.9765) is looking likely. Reserve Bank of Australia Governor Glenn Stevens will speak tonight in Sydney. Chinese data is heavy with GDP, industrial production, and fixed asset investment due out ahead of the National Bureau of Statistics' quarterly press conference. 

·         USDCAD is -40 pips at 1.0285 as trade presses to its lowest level in three weeks. The pair saw modest weakness early in the session, but dipped to its lows after Canada's foreign securities purchases showed a less than expected CAD2.0 bln (CAD7.21 bln previous). The 1.0250 area remains critical as trendline support off the September 2012 lows is aided by the 200 dma. Canadian data out tomorrow is limited to CPI and core CPI.

Jason's Commentaries


It seems that the market bullishness overcame the drag on United Health, IBM and Goldman Sach's poor earnings. Verizon, Abbott Lab and American Express managed to lead the market up last night, allowing the Dow to close flat and both S&P500 and Nasdaq to break their all time high once again. Volumes were strong at 760m shares traded on the NYSE, however there is some divergence that we can see on the TRIN. Everything else remains bullish. I suspect this bullishness is quite sustainable on the sentiment. Utilities were the main leader last night, followed by Staples. Treasuries is starting to make its gain once again after it is not going to be defaulted by the US Government. We're going to have a very quiet expiration Friday. Nasdaq is likely to be led higher by Google as it releases some outstanding earnings, spiking 6.1% to $960.  

Market Call: UP

Date: 17 Oct 2013