22 Oct 2013 AMC- Disappointing employment data... but... Market went up?!?!

22 Oct 2013 AMC- Disappointing employment data... but... Market went up?!?!

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: + 0.6%

·         Germany's DAX: + 0.9%

·         France's CAC: + 0.4%

·         Spain's IBEX: -0.3%

·         Portugal's PSI: -0.8%

·         Italy's MIB Index: + 0.6%

·         Irish Ovrl Index: -0.3%

·         Greece ATHEX Composite: + 0.5%

Before Market Opens

S&P futures vs fair value: +5.20. Nasdaq futures vs fair value: +12.70.
The S&P 500 futures trade higher by 0.3%.

Markets across Asia endured a mixed session as a sleepy trade took hold ahead of today's U.S. nonfarm payroll report. China's Shanghai Composite (-0.8%) was the notable mover in the region as shares slipped despite government data showing home prices climbed 9.1% year-over-year, gaining in 69 of 70 cities. Elsewhere, Japan's Nikkei (+0.1%) eked out a gain as shares benefited from the weaker yen. Thailand's SET (+0.6%) was the top performer in the region as shares recovered some of yesterday's 2.4% drop. Data from the region was quiet, limited to Taiwan's unemployment rate holding at 4.2%, and Malaysia's unemployment rate ticking up to 3.1% (3.0% previous). 

·         In Japan, the Nikkei added 0.1% as action holds just off the July/September highs. Toyota Motor and Canon were among the beneficiaries of the weaker yen, adding 1.1% and 0.6%, respectively. Meanwhile, shares of telecom provider Softbank continued their recent outperformance, advancing 1.9%. 

·         Hong Kong's Hang Seng shed 0.5% as action slipped off the October highs. Casino stocks were under pressure as Sands China and Galaxy Entertainment tumbled 4.9% and 4.5%, respectively, as traders booked profits following their recent run ups. Elsewhere, energy stocks posted solid gains with China Shenhua Energy gaining 1.4%. 

·         In China, the Shanghai Composite settled lower by 0.8% as telecom and financials lagged. Ping An slipped 2.3% and ZTE Corp. fell 1.7% to finish among the worst performers in their respective sectors. 

Major European indices hover near their best levels of the session, but the gains have been limited to no more than 0.5%. The first half of the session has been very quiet with few market-moving developments. Germany made a slight change to its growth forecast, hiking its 2014 GDP growth expectations to 1.7% from 1.6% while maintaining the 2013 forecast at 0.5%. Economic data was scarce as Great Britain's public sector net borrowing rose GBP9.4 billion (GBP10.3 billion expected, GBP10.8 billion prior) and Swiss trade surplus expanded to EUR2.49 billion from EUR1.85 billion (EU2.10 billion forecast). 

·         Germany's DAX is higher by 0.4% as Deutsche Post leads with a gain of 3.2%. SAP also trades among the top performers, up 2.1%. Utilities trade lower with E.ON and RWE down 1.0% and 0.2%, respectively. 

·         In France, the CAC trades with a gain of 0.5%. Consumer names have displayed strength as L'Oreal trades up 1.7% and Sanofi sports an advance of 1.6%. Utilities lag with GDF Suez and Veolia Environnement holding respective losses of 1.6% and 2.7%. 

·         Great Britain's FTSE trades up 0.3% with miners among the leaders. BHP Billiton is higher by 3.4% after boosting its full-year output estimate. On the downside, easyJet trades lower by 2.7% after Cantor Fitzgerald downgraded the stock. 

In domestic economic news, the August net long-term TIC flows report indicated an $8.9 billion outflow of foreign capital from U.S. denominated assets. This follows the prior month's $31.1 billion inflow.

Market Internals

Market Internals
The S&P 500 closed up 10 (+0.57%) at 1755, the Dow closed up 75 (+0.49%) at 15468, and the Nasdaq closed up 10 (+0.24%) at 3930. Action came on above average volume (NYSE 753 mln vs. avg. of 707; NASDAQ 1820 mln vs. avg. of 1621), with advancers outpacing decliners (NYSE 2257/836, NASDAQ 1393/1149) and new highs outpacing new lows (NYSE 428/5, NASDAQ 296/26).

Relative Strength: 
Junior Gold Miners-GDXJ +6.28%, Silver Miners-SIL +4.30%, Copper Miners-COPX +2.64%, U.S. Home Construction-ITB +2.53%, Mexico-EWW +2.49%, Homebuilders-XHB +2.36%, South Africa-EZA +2.02%, Middle East and Africa-GAF +1.86%, Switzerland-EWL +1.75%, New Zealand-ENZL +1.73%. 

Relative Weakness: 
Natural Gas-UNG -2.12%, Oil-USO -1.47%, Social Media-SOCL -1.45%, Corn-CORN -1.13%, Gasoline-UGA -1.09%, Vietnam-VNM -0.31%, Hong Kong-EWH -0.29%, Indonesia-IDX -0.08%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: Stocks Climb Despite Weakness in Technology
The S&P 500 (+0.6%) registered its fifth consecutive advance despite seeing some volatility during the first half of the session. 

Equity indices opened in positive territory after the September nonfarm payrolls report missed expectations (148K actual, 183K Briefing.com consensus). While the disappointing report underscored the subpar condition of the labor market, participants did not appear too concerned with the news knowing the Federal Reserve has pledged to maintain its loose monetary policy until conditions improve notably. 

The market's response to the jobs report was a reflection of the belief that the Fed would not reduce the size of its asset purchases in the immediate term. On that note, Treasuries and gold rallied while the dollar sold off. The 10-yr yield fell nine basis points to a three-month low of 2.52% while gold futures jumped 1.9% to $1340.20 per troy ounce. Elsewhere, the Dollar Index lost 0.6%, ending at its lowest level since early February. 

Nine of ten sectors posted gains while technology (-0.2%) underperformed after enduring some late-morning weakness. The tech sector fell from highs to lows during the first 90 minutes of the session as momentum names like Facebook (FB 52.68, -1.18), LinkedIn (LNKD 244.95, -4.84), andYelp (YELP 69.41, -1.65) sold off. Netflix (NFLX 322.52, -32.47) also displayed weakness, reversing sharply from an earnings-driven gain of almost 10.0%. 

Also of note, Apple (AAPL 519.87, -1.49) shed 0.3% after its latest product refresh event was met with a sell-the-news reaction after the stock rallied 5.1% over the past week. 

Even though the tech sector briefly pressured the Nasdaq into the red, the S&P was underpinned by several influential groups like consumer discretionary (+0.7%) and energy (+0.7%). Interestingly, the energy sector rallied even as crude oil fell 1.4% to $98.30 per barrel. 

Three of four countercyclical sectors outperformed as consumer staples, health care, and utilities advanced 1.4%, 0.9%, and 1.3%, respectively. Trading volume was in-line with average as just over 750 million shares changed hands on the floor of the New York Stock Exchange. 

Looking back at today's remaining data, private payrolls added only 126,000 jobs in September after adding an upwardly revised 161,000 (from 152,000) in August. The consensus expected private payrolls to increase by 183,000. Aggregate wages rose 0.2% in September as hourly earnings increased 0.1% and the average workweek remained at 34.5 hours. While that is not as strong as we would like, it is enough to keep consumption spending moving upward. The unemployment rate fell to 7.2% from 7.3%. 

The August net long-term TIC flows report indicated an $8.9 billion outflow of foreign capital from U.S. denominated assets. This follows the prior month's $31.1 billion inflow. 

Separately, construction spending increased 0.6% in August following a big upward revision (1.4% from 0.6%) in July. The Briefing.com consensus expected construction spending to increase 0.4%. 

Tomorrow, the weekly MBA Mortgage Index will be reported at 7:00 ET while September export prices ex-agriculture and import prices ex-oil will be released at 8:30 ET. The day's data will be topped off with the 9:00 ET release of the August FHFA Housing Price Index. On the earnings front,Boeing (BA 122.48, +1.01), Caterpillar (CAT 89.17, +1.47), and WellPoint (WLP 88.43, +0.83) will report their results before the opening bell.

Commodities

Closing Commodities: Crude Oil Slides Lower As Downward Trend Continues

·         Precious metals rose sharply in early morning pit trade as the dollar index fell on weaker-than-anticipated September nonfarm payrolls data. The report showed that 148K new jobs were added vs the 183K Briefing.com consensus, adding to expectations that the Federal Reserve will not reduce the pace of its asset purchases in the near-term

·         Dec gold lifted from its session low of $1312.90 per ounce and settled 2.0% higher at $1342.50 per ounce

·         Dec silver also came off its session low of $22.06 per ounce, rising as high as $22.83 per ounce. It settled at $22.79 per ounce, or 2.3% higher

·         Nov crude oil, however, extended yesterday's losses despite the weaker dollar index. The energy component pulled back from its session high of $100.30 per barrel and slipped into negative territory in morning floor action. It continued to trend lower and settled 1.4% lower at $98.32 per barrel

·         Nov natural gas fell deeper into negative territory following inventory data for the week ending Oct 11 that showed a build of 77 bcf when a build of 78-80 bcf was anticipated. It retreated from its session high of $3.65 per MMBtu and brushed a session low of $3.57 per MMBtu moments before settling with a 2.5% loss at $3.58 per MMBtu

COMEX Metals Closing Prices

  Dec gold rose $26.70 to $1342.50/ounce 

·         Gold rallied in early morning pit trade as the dollar index fell on weaker-than-anticipated September nonfarm payrolls data. The report showed that 148K new jobs were added vs 183K Briefing.com consensus, adding to expectations that the Federal Reserve will not reduce the pace of its asset purchases in the near-term. The yellow metal lifted from its session low of $1312.90 and settled just below its session high of $1344.70, booking a 2.0% gain. 

  Dec silver rose $0.51 to $22.79/ounce 

·         Silver also came off its session low of $22.06 and popped into positive territory on the payrolls data. It rose as high as $22.83 and settled with a 2.3% gain. 

  Dec copper rose 4 cents to $3.34/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Dec corn fell 6 cents to $4.38/bushel 

·         Dec wheat rose 2 cents to $7.01/bushel 

·         Nov soybeans fell 1 cent to $13.01/bushel 

·         Dec ethanol settled unchanged at $1.68/gallon 

·         Jan sugar (#16 (U.S.)) rose 0.30 of a penny to 22.30 cents/lbs

NYMEX Energy Closing Prices

  Nov crude oil fell $1.40 to $98.32/barrel 

·         Crude oil extended yesterday's losses despite a weaker dollar index. The energy component pulled back from its session high of $100.30 and fell into negative territory in morning pit trade. It trended lower for the remainder of the session and settled just above its session low of $98.15, booking a 1.4% loss. 

  Nov natural gas fell 9 cents to $3.58/MMBtu 

·         Natural gas fell deeper into negative territory following inventory data for the week ending October 11. Inventories showed a build of 77 bcf when a build of 78-80 bcf was anticipated. Natural gas retreated from its session high of $3.65 and brushed a session low of $3.57 moments before settling with a 2.5% loss. 

  Nov heating oil fell 1 cent to $3.00/gallon 

  Nov RBOB gasoline fell 3 cents to $2.62/gallon

Treasuries

Yields Slide to Three-Month Lows: 10-yr: +24/32..2.518%..USD/JPY: 98.10..EUR/USD: 1.3782

·         Treasuries finished on their highs as this morning's disappointing nonfarm payroll report (148K actual v. 183K expected) sparked a stampede into the complex.

·         In terms of points, a +1 05/32 advance had the long bond out in front. The bid pressured the 30y down -7bps to below 3.610%, and caused it to close below its 100 dma for the first time in more than five months. 

·         The 10y led as a -9.5bp move dropped its yield to 2.512% at the cash close. Today's bid pushed the benchmark yield to its lowest close since July 22 while also dropping action below the 100 dma. Click here to see an intraday yields chart.

·         A flatter curve took hold as the 2-10-yr spread narrowed to 221bps, its tightest in three months. 

·         Precious metals ended on their best levels with gold +$25 @ $1341 and silver +$0.45 @ $22.75. 

·         Data: MBA Mortgage Index (7), import/export prices (8:30), and the FHFA Home Price Index (9).

Next Day In View 

Economic Commentary

After Government Delays, September Shows A Middling Employment Situation
Nonfarm payrolls added 148,000 new jobs in September after adding an upwardly revised 193,000 (from 169,000) in August. The Briefing.com consensus expected payrolls to increase by 183,000. Private payrolls added only 126,000 jobs in September after adding an upwardly revised 161,000 (from 152,000) in August. The consensus expected private payrolls to increase by 183,000. The best word to describe the employment situation is settled. We know from the initial claims trends that employers have reduced the number of workers that they are laying off, but the payroll numbers show that employers are not actively hiring new workers. Employers are simply settled with their current labor needs and see no reason given the meek economy to increase hiring. It is unknown if the uncertainty surrounding the looming government shutdown played a role in the lack of private hiring in September. The October data will be biased from the shutdown, so the data supporting the trends in the private sector will not be completely available until the November report is released in December. Still, the report had more positives than negatives, from a purely economic standpoint. Aggregate wages rose 0.2% in September as hourly earnings increased 0.1% and the average workweek remained at 34.5 hours. While that is not as strong as we would like, it is enough to keep consumption spending moving upward. Labor gains were seen in every sector except for leisure and hospitality, which declined by 13,000. That suggests steady, albeit anemic, growth across the entire economy. Government payrolls increased by 22,000, which came entirely from state and local areas. A large and unexpected increase in local government education jobs in August, which were assumed to have been caused by an earlier-than-normal start to the school year, did not reverse in September. This sector actually advanced again in September, suggesting that the seasonal biases were not the cause in August and that there has been an improvement in the overall health of the state and local sector. The unemployment rate fell to 7.2% in September from 7.3% in August. The decline was due to more workers finding jobs as opposed to the statistical aberrations that occurred in the past when the unemployment rate declined from a drop in the labor force.


Construction Spending Shows Solid Growth in August
Construction spending increased 0.6% in August following a big upward revision (1.4% from 0.6%) in July. The Briefing.com consensus expected construction spending to increase 0.4%. Total private construction spending increased 0.7% in August, down from a 1.9% increase in July. Private residential construction rose 1.2% in August. The majority of the gain was a result of a 1.8% increase in spending on new structures. That was in-line with the 2.2% increase in the number of units under construction reported in the August housing starts data. Spending on home improvement increased a modest 0.2%. Nonresidential construction spending increased 0.1% in August after increasing 3.7% in July. It is encouraging that nonresidential construction demand remained positive after such a large gain in July. A normal payback period develops following an outsized monthly gain. Sector wise, lodging (1.5%) and office (1.6%) were major contributors to nonresidential construction growth. Spending at power and manufacturing both declined 0.1% in August. Public construction spending increased 0.4% in August.

On other news.... 

Apple confirms iPad Air; features Retina Display and 64-bit Apple-designed A7 chip(514.63 -6.73)
Co confirmed the iPad Air, the latest generation of its category defining device, featuring a 9.7-inch Retina display in a new thinner and lighter design. Precision-engineered to weigh just one pound, iPad Air is 20 percent thinner and 28 percent lighter than the fourth generation iPad, and with a narrower bezel the borders of iPad Air are dramatically thinner. iPad Air with Wi-Fi models will be available in silver or space gray starting on Friday, November 1, for a suggested retail price of $499 (US) for the 16GB model, $599 (US) for the 32GB model, $699 (US) for the 64GB model and $799 (US) for the 128GB model. iPad Air with Wi-Fi + Cellular will be available starting on Friday, November 1 for a suggested retail price of $629 (US) for the 16GB model, $729 (US) for the 32GB model, $829 (US) for the 64GB model and $929 (US) for the 128GB model. iPad 2 is available at $399 (US) for the 16GB Wi-Fi model and $529 (US) for the 16GB Wi-Fi + 3G model for either AT&T or Verizon.

Natural gas inventory data follow-up
Working gas in storage was 3,654 Bcf as of Friday, October 11, 2013, according to EIA estimates. This represents a net increase of 77 Bcf from the previous week. Stocks were 115 Bcf less than last year at this time and 57 Bcf above the 5-year average of 3,597 Bcf. In the East Region, stocks were 95 Bcf below the 5-year average following net injections of 46 Bcf. Stocks in the Producing Region were 99 Bcf above the 5-year average of 1,113 Bcf after a net injection of 24 Bcf. Stocks in the West Region were 54 Bcf above the 5-year average after a net addition of 7 Bcf. At 3,654 Bcf, total working gas is within the 5-year historical range.




Currencies 

Dollar Slumps to Lowest Level in Nine Months: 10-yr: +24/32..2.517%..USD/JPY: 98.05..EUR/USD: 1.3787
The Dollar Index spent the overnight session straddling the flat line, but has been under significant pressure throughout U.S. trade. The greenback saw a sharp drop from 79.70 to 79.40 in response to this morning's lackluster jobs report, and ticked back up to 79.50 before pushing lower for the remainder of the session. Action is currently holding on session lows near 79.20, and is on track to post its lowest close in almost nine months. Click here to see a daily Dollar Index chart.

·         EURUSD is +115 pips at 1.3790 with action testing its best levels in nearly two years. The single currency is now up more than 1000 pips since its July lows with almost 300 of those pips coming in just the past four days. A move through the 1.3900 level sets up a potential test of 1.4100. Eurozone data is limited to Belgian NBB Business Climate. 

·         GBPUSD is +95 pips at 1.6240 as trade presses the October highs. Many traders have the 1.6300 level on their radars as a breakout above the level will produce the best close since September 2011. The latest Bank of England MPC asset purchase facility and official bank rate votes will cross tomorrow along with BBA Mortgage Approvals. 

·         USDCHF is -80 pips at .8940 as trade probes the February 2012 lows. Today's trade has action staring at its worst close in almost two years as bulls are unable to mount any sort of rally. 

·         USDJPY is -10 pips at 98.05 as the range bound trade (97.00/99.00) that has been in place over the past month persists. An early bid had the pair probing its 50 and 100 dma, but those gains were unable to hold as sellers flexed their muscles following today's jobs report. 

·         AUDUSD is +55 pips at .9705 as buyers remain in control for the eighth time in ten days. The hard currency has run roughly 800 pips off its late-August lows, and is now within a handful of pips of its 200 dma (.9750). Australia's CB Leading Index, CPI, and Trimmed Mean CPI are due out tonight. 

·         USDCAD is -20 pips at 1.0285 as trade continues to press support in the area. Trendline support off the September 2012 lows continues to help the 200 dma (1.0260) ahead of tomorrow's Bank of Canada rate decision. Analysts are expecting no change from the current 1.00%, and will be parsing the accompanying Statement closely.

Jason's Commentaries


The non-farm payrolls came in disappointing... 148k jobs added to the economy compared to 185k jobs added to the economy, unemployment rate drops from 7.3% to 7.2%. And market went higher on higher volumes? This is definitely one hella divergence over here... Prolly the fact that next week is the Oct's employment report and the earnings has so far been outstanding... market is maintaining its bullishness. The correction that I'm expecting has not arrived it. S&P500 broke a new high once again, with the TRIN and the VIX showing some divergence. I wonder how long would this uptrend last. 

The market started with a bullish upbeat despite the employment report came in disappointing. After 45 mins into the opening bell, the market dropped sharply suddenly, led by the Nasdaq Composite which provided some drag to the S&P500 and the Dow Jones. Afterwhich, the market fought back most of its drop at 1015am ET. 

On the technical perspective, S&P500 broke it's trendline and it's likely to go higher. The bullish driver, Nasdaq Composite, is starting to lose some steam. As Netflix got sold off by Carl Icahn after the closing bell. 

There will be many of the key industrial players announcing earnings tomorrow like Boeing, Caterpillar, General Dynamics, Northrop Grumman before the market opens tomorrow. If the earnings is as well as Lockheed Martin, we might have another good up day tomorrow. Tomorrow it will just be dependent on the earnings of these companies to provide some good movements in the market.

Market Call: Flat to downside

Date: 23 Oct 2013