29 Oct 2013 AMC- Both Dow and S&P500 closed at their high!

29 Oct 2013 AMC- Both Dow and S&P500 closed at their high!

Market Summary 

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

·         UK's FTSE: + 0.7%

·         Germany's DAX: + 0.5%

·         France's CAC: + 0.6%

·         Spain's IBEX: + 1.3%

·         Portugal's PSI: + 0.6%

·         Italy's MIB Index: + 2.3%

·         Irish Ovrl Index: + 0.1%

·         Greece ATHEX Composite: -2.1%

Before Market Opens

S&P futures vs fair value: +3.80. Nasdaq futures vs fair value: +10.50.
The S&P 500 futures trade higher by 0.1%.

Major Asian markets ended mostly higher but Japan's Nikkei (-0.5%) and China's Shanghai Composite (-0.2%) underperformed. In China, the PBoC said money market liquidity remains adequate while liquidity management would be stable for the remainder of the year. The one-month Shanghai Interbank Offered Rate fell almost 32 basis points to 6.16% while the two-week rate increased nearly 6 basis points to 6.45%. In other central bank news, the Reserve Bank of India hiked its repurchase rate by 25 basis points to 7.75% while cutting the marginal standing facility rate by 25 basis points to 8.75%. The rate hike was aimed at curtailing inflation while the MSF cut is expected to bring down the cost of short-term funds for banks. In regional economic data, Japan's household spending increased 3.7% year-over-year (0.5% forecast, -1.6% previous) while retail sales rose 3.1% year-over-year (1.9% expected, 1.1% prior). Separately, the unemployment rate slipped to 4.0% from 4.1%, as expected. Elsewhere, South Korea's current account surplus expanded to $6.57 billion from $5.68 billion. 

·         In Japan, the Nikkei lost 0.5% as heavy industrials lagged. Hitachi Construction, Kawasaki Heavy Industries, and Komatsu lost between 5.7% and 8.1%. On the upside, Tokyo Electric Power Co gained 3.5% to halt its recent slide. 

·         Hong Kong's Hang Seng added 0.2% as financials displayed strength. Bank of China and Bank of Communications advanced 2.3% and 1.8%, respectively. Internet and gaming names lagged as Tencent Holdings fell 3.4%. 

·         In China, the Shanghai Composite shed 0.2% as listings associated with the newly-opened free trade zone lagged. Shanghai Waigaoqiao Free Trade Zone Development tumbled 8.0%. Financials displayed strength with China Vanke climbing 1.4%. 

Core European indices hold modest gains while peripheral markets outperform with Italy's MIB (+1.7%) in the lead. The index outperforms even after the statistics agency said Italy is expected to register a contractionary GDP reading for the third quarter, which would mark the 9th consecutive contraction. Also of note, Troika officials are expected to arrive in Greece today to demand new measures in exchange for a EUR2 billion aid package. Investors received a handful of economic releases as Great Britain's BoE consumer credit increased GBP410 million (GBP700 million expected, GBP620 million prior) while net lending to individuals rose GBP1.40 billion (GBP2.50 billion expected, GBP1.70 billion last). Separately, mortgage approvals increased 67,000 (66,000 forecast, 63,000 prior) and mortgage lending rose GBP1.00 billion (GBP1.20 billion expected, GBP1.10 billion prior). French consumer confidence remained unchanged at 85, as expected. Spain's retail sales rose 2.2% year-over-year (-1.1% forecast, -4.8% prior). 

·         Germany's DAX is higher by 0.2% as exporters contribute to the gain. Daimler and Volkswagen are lower by 0.8% and 0.2%, respectively. Chemical producers lag with Lanxess and Linde both down near 1.0%. 

·         In France, the CAC trades up 0.5% with banks pacing the advance. Credit Agricole holds an advance of 1.4% and Societe Generale is higher by 1.7%. Michelin underperforms with a loss of 3.8% after missing earnings expectations. 

·         Great Britain's FTSE holds a gain of 0.6%. Energy producers are among the leaders after BP reported strong results. Shares of BP trade higher by 4.5%. Miners lag with Fresnillo and Randgold Resources both down near 2.0%. 

·         Italy's MIB is higher by 1.7% as 38 of 40 components register gains. Saipem leads with a gain of 5.5%. UniCredit has also displayed strength, trading higher by 4.0%. 

In domestic economic news, the August Case-Shiller 20-city Home Price Index rose 12.8% while a 12.4% increase had been expected by the Briefing.com consensus. This follows the previous month's revised increase of 12.3% (from 12.0%).

 

Market Internals

Market Internals -Technical-
The Dow closed up 111 (+0.72%) at 15680, the S&P 500 closed up 10 (+0.56%) at 1772, and the Nasdaq closed up 12 (+0.31%) at 3952. Action came on mixed volume (NYSE 683 mln vs. avg. of 709; NASDAQ 1808 mln vs. avg. of 1656), with advancers outpacing decliners (NYSE 1874/1181, NASDAQ 1502/1037) and new highs outpacing new lows (NYSE 232/6, NASDAQ 214/18). 

Relative Strength: 
Clean Energy-PBW +1.86%, India-INP +1.82%, Italy-EWI +1.74%, Semiconductors-SMH +1.53%, U.S. Home Construction-ITB +1.38%, Wind Energy-FAN +1.38%, China 25 Index-FXI +1.31%, Oil and Gas Exploration-XOP +1.07%, Egypt-EGPT +0.92%, Thailand-THD +0.9%. 

Relative Weakness: 
Junior Gold Miners-GDXJ -4.5%, Silver Miners-SIL -3.06%, Sugar-SGG -2.13%, Greece-GREK -2.1%, Indonesia-IDX -1.26%, Lithium-LIT -1.2%, Australia-EWA -1.11%, Cocoa-NIB -1.1%, New Zealand-ENZL -0.98%, Australian Dollar-FXA -0.96%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: Equities Climb as Dow Jones Leads
The S&P 500 registered its fourth consecutive advance, climbing 0.6% to extend its October gain to 5.4%. The Dow Jones Industrial Average (+0.7%) outperformed the benchmark index while the Nasdaq (+0.3%) lagged after starting the session in-line with the S&P. 

The tech-heavy Nasdaq posted a modest advance of 0.3% after the exchange experienced an intraday data dissemination issue that prevented index quotes from being sent out for nearly an hour. However, the issue was isolated to the index while individual components traded normally. 

One of the components that contributed to the Nasdaq's underperformance was Apple (AAPL 516.68, -13.20). The largest tech stock lost 2.5% after its below-consensus gross margin guidance overshadowed its earnings beat on above-consensus revenue. 

Despite Apple's relative weakness, the technology sector (+0.5%) ended in-line with the broader market, bolstered in part by the 2.7% gain in the shares of IBM (IBM 182.12, +4.77). Big Blue rallied after the company's Board of Directors authorized an additional $15 billion for its share buyback program. Chipmakers also contributed to the sector's strength as the PHLX Semiconductor Index advanced 1.5%. 

Outside of technology, consumer discretionary (+0.6%) and energy (+0.7%) were the only other outperformers among cyclical sectors while financials, industrials, and materials ended with gains of 0.3% apiece. 

The discretionary sector received support from homebuilders as all major builders posted gains while the iShares Dow Jones US Home Construction ETF (ITB 23.43, +0.32) rose 1.4%. Meanwhile, the energy sector was underpinned by BP (BP 45.90, +2.18) and Valero (VLO 40.21, +0.76) after both reported solid quarterly results. 

Among countercyclical groups, utilities (+0.1%) lagged while consumer staples (+0.9%), health care (+0.7%), and telecom services (+1.5%) outperformed. Among earnings of note, Pfizer (PFE 31.25, +0.51) settled higher by 1.7% after beating bottom-line estimates by two cents on in-line revenue. 

Treasuries ended on their highs as the 10-yr yield slipped two basis points to 2.50%. 

With just two sessions left in October, the S&P is on track to post a solid monthly advance of 5.3%. While the month-to-date gain is impressive, the S&P 500's performance over the past 15 sessions has been even more eye-popping. Since October 8, the index has gained more than 7.0%. Investors will receive the latest policy statement from the Federal Open Market Committee tomorrow, but the markets are expecting the FOMC decision to be a non-event. 

Trading volume was on the light side as just over 680 million shares changed hands on the floor of the New York Stock Exchange. Today's economic data was plentiful, but did little to suggest the Federal Reserve will be eager to curtail the pace of its asset purchases in the near term.

The Conference Board's Consumer Confidence Index plummeted in October, falling from an upwardly revised 80.2 (from 79.7) to 71.2 (73.1 Briefing.com consensus). The entire decline in confidence can be attributed to the reaction to the government shutdown and near-default by the U.S. Treasury. 

Typically, confidence levels are influenced by equity trends, oil prices, labor conditions, and media reports. Other than the negative media attention on the shutdown, all of the typical components moved in a positive direction in October. If these trends continue in November, the Consumer Confidence Index should slowly return to at least September levels. 

Separately, September retail sales declined 0.1% to follow an August increase of 0.2% (-0.1% Briefing.com consensus). The headline decline in retail sales masked an otherwise strong report, especially considering that private payroll growth was much weaker than expected. 

The entire decline in sales was the result of a 2.2% drop in motor vehicle demand. Motor vehicle manufacturers already showed that August sales were boosted by calendar effects stemming from an extra weekend and the Labor Day holiday. With those biases removed, sales were set to decline substantially in September, which translated into the 2.2% drop in motor vehicle sales. 

Total business inventories increased 0.3% in August after increasing 0.4% in July (+0.2% Briefing.com consensus). 

Also of note, September producer prices fell 0.1% after increasing 0.3% in August (+0.2% Briefing.com consensus). That was the first monthly decline since prices fell 0.7% in April. 

Food prices unexpectedly declined 1.0% in September after increasing 0.5% in August. A 17.9% drop in fresh and dry vegetables prices contributed to most of the September decline. Those prices increased 26.9% in August. 

Tomorrow, the weekly MBA Mortgage Index will be reported at 7:00 ET, October ADP Employment Change will be released at 8:15 ET, and September CPI will cross the wires at 8:30 ET. In addition, the FOMC will release its latest policy statement at 14:15 ET. On the earnings front, General Motors (GM 36.06, +0.26), Comcast (CMCSA 47.71, -0.52), and Exelon (EXC 28.05, -0.02) will report their results ahead of the opening bell.

Commodities

Closing Commodities: Crude Slides 0.4% Lower After A Four Day Run

·         Dec gold chopped around in negative territory today as a stronger dollar index pressured prices. The yellow metal brushed a session high of $1352.90 per ounce in late morning pit trade but was unable to sustain the momentum. It settled 0.5% lower at $1345.30 per ounce, slightly above its session low of $1342.40 per ounce

·         Dec silver spent most of the session trading near the unchanged line after lifting from a session low of$22.38 per ounce set in early morning pit trade. It eventually settled with a 0.1% loss at $22.49 per ounce

·         Dec crude oil fell for the first time in four sessions as the dollar index advanced. The energy component traded as low as $97.82 per barrel and settled with a 0.4% loss at $98.26 per barrel

·         Dec natural gas retreated back into negative territory after touching a session high of $3.67 per MMBtu in early morning pit trade. It settled 0.8% lower at $3.63 per MMBtu.

NYMEX Energy Closing Prices

  Dec crude oil fell $0.43 to $98.26/barrel 

·         Crude oil fell for the first time in four sessions as a stronger dollar index put pressure on prices. The energy component brushed a session low of $97.82 and settled slightly below its session high of $98.49, booking a loss of 0.4%. 

  Dec natural gas fell 3 cents to $3.63/MMBtu 

·         Natural gas advanced to a session high of $3.67 in early morning pit trade but quickly retreated back into negative territory. It brushed a session low of $3.61 and settled with a 0.8% loss. 

  Dec heating oil settled unchanged at $2.96/gallon 

  Dec RBOB gasoline fell 2 cents to $2.59/gallon

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Dec corn rose 2 cents to $4.32/bushel 

·         Dec wheat rose 1 cent to $6.82/bushel 

·         Nov soybeans rose 8 cents to $12.79/bushel 

·         Dec ethanol fell 2 cents to $1.66/gallon 

·         Jan sugar (#16 (U.S.)) fell 0.25 of a penny to 21.83 cents/lbs

COMEX Metals Closing Prices

  Dec gold fell $6.60 to $1345.30/ounce 

·         Gold traded lower today as a stronger dollar index pressured prices. The yellow metal brushed a session high of $1352.90 in late morning pit trade but was unable to sustain the momentum. It slipped to a session low of $1342.40 and settled with a 0.5% loss. 

  Dec silver fell $0.03 to $22.49/ounce 

·         Silver lifted from its session low of $22.38 set in early morning pit trade and spent most of the session chopping around near the unchanged line. It eventually settled 0.1% lower.

  Dec copper rose 1 cent to $3.28/lbs

Treasuries

5y Auction Ignites Bid, Most Maturities End Higher: 10-yr: +02/32..2.511%..USD/JPY: 98.16..EUR/USD: 1.3740

·         Treasuries across most of the complex ended on their highs as a post-auction bid flushed yields to session lows into the cash close. Click here to see an intraday yields chart. 

·         The complex spent the early part of the session fluctuating between gains and losses following today's mixed economic data. Retail sales (-0.1%) and core PPI (0.1%) posted in-line readings while Case-Shiller 20-city Index (12.8%) and business inventories (0.3%) topped estimates and consumer confidence missed (71.2). 

·         This afternoon's in-line $35 bln 5y note auction drew 1.300% (when issued 1.302%) and a 2.65x bid/cover (12-auction average 2.70x) as a solid indirect bid (45.9%) helped offset a weak direct takedown (12.2%). Primary dealers were left with 41.9% of the supply. 

·         Buying had the biggest impact on the belly of the curve as the 5y slid 1.5bps to 1.265% and closed at its lowest level in more than four months. 

·         A -0.5bp decline caused the 10y to edge down to 2.507%. Traders continue to monitor the 2.450%/2.500% support level that dates back to late-June. 

·         The long bond lagged as a lower close ran the 30y up +2bps to 3.622%. Participants will be watching the 3.650% area closely as it provides some near-term resistance. 

·         A slightly flatter curve developed as the 2-10-yr spread tightened to 219bps. 

·         Precious metals were mixed with gold -$7 @ $1345 and silver flat near $22.55. 

·         Data: MBA Mortgage Index (7), ADP Employment Change (8:15), CPI, Core CPI (8:30), and the FOMC rate decision (14:15). 

·         Auction: $29 bln 7y notes.

Next Day In View 

Economic Commentary

Economic Summary: Retail Sales decline in line with expectations; headline PPI shows unexpected decline; consumer confidence below expectations; Fed decision tomorrow at 14:00
Economic Data Summary:

·         September Retail Sales -0.1% vs Briefing.com consensus of -0.1%; August was 0.2%

·         September Retail Sales Ex-Auto 0.4% vs Briefing.com consensus of 0.2%; August was 0.1%

o     The entire decline in sales was the result of a 2.2% drop in motor vehicle demand. Motor vehicle manufacturers already showed that August sales were boosted by calendar effects stemming from an extra weekend and the Labor Day holiday. With those biases removed, sales were set to decline substantially in September, which translated into the 2.2% drop in motor vehicle sales. Excluding motor vehicle sales, retail sales increased a solid 0.4% in September after increasing 0.1% in August. 

·         September PPI -0.1% vs Briefing.com consensus of 0.2%; August was 0.3%

·         September Core PPI 0.1% vs Briefing.com consensus of 0.1%; August was 0.0%

o     That was in-line with the weakness reported in the gasoline and crude pricing data. About a third of the increase in energy prices was caused by a 6.0% increase in home heating oil. Food prices unexpectedly declined 1.0% in September after increasing 0.5% in August. A 17.9% drop in fresh and dry vegetables prices contributed to most of the September decline. Those prices increased 26.9% in August. Excluding food and energy, core prices increased 0.1% in September after being unchanged in August. The consensus expected these prices to increase 0.1%. 

·         August Case Schiller 20 City Index 12.8% vs Briefing.com consensus of 12.4%; July was revised to 12.3% from 12.0%

·         August Business Inventories 0.3% vs Briefing.com consensus of 0.2%; July was 0.4%

·         October Consumer Confidence 71.2 vs Briefing.com consensus of 73.1; September was revised to 80.2 from 79.7

o     Typically, confidence levels are influenced by equity trends, oil prices, labor conditions, and media reports. Other than the negative media attention on the shutdown, all of the typical components moved in a positive direction in October. If these trends continue in November, the Consumer Confidence Index should slowly return to at least September levels.

Upcoming Economic Data:

·         Weekly MBA Mortgage Applications due out Wednesday at 7:00 (Briefing.com consensus of ; Last Week was -0.6%)

·         October ADP Employment Change due out Wednesday at 8:15 (Briefing.com consensus of 125K; September was 166K)

·         September CPI due out Wednesday at 8:30 (Briefing.com consensus of 0.1%; August was 0.1%)

·         September Core CPI due out Wednesday at 8:30 (Briefing.com consensus of 0.1%; August was 0.1%)

Upcoming Fed/Treasury Events:

·         The Treasury is expected to auction off $96 bln in new debt next week. The results for each of the remaining of each auction will be announced at 13:00

o    Tuesday: $35 bln in 5 year notes

o    Wednesday: $29 bln in 7 year notes/

·         The Federal Reserve will begin a two day meeting on Tuesday. The policy announcement will be made Wednesday at 14:00 (no press conference or econ projections).

Other International Events of Interest

·         The Reserve Bank of India hiked its repurchase rate by 25 basis points to 7.75% while cutting the marginal standing facility rate by 25 basis points to 8.75%. 

·         The People's Bank of China said money market liquidity remains adequate while liquidity management would be stable for the remainder of the year. The one-month Shanghai Interbank Offered Rate fell almost 32 basis points to 6.16% while the two-week rate increased nearly 6 basis points to 6.45%. 

On other news.... 

Currencies 

Dollar Climbs to One-Week High: 10-yr: +02/32..2.513%..USD/JPY: 98.17..EUR/USD: 1.3743
The Dollar Index remains firm as action presses session highs near 79.65. Today's advance has the greenback on track to post a second day of gains, and has trade testing resistance in the 79.80 area. A close above that level would be a minor victory for the bulls, who would need to retake the 81.00 level before being able to breathe a bit easier. Click here to see a daily Dollar Index chart.

·         EURUSD is -40 pips at 1.3745 as action holds just off the worst levels of the day. The single currency saw a late-morning bid following comments from ECB member Ewald Nowotny in which he suggested the central bank would not cut rates and that countries in the region would be forced to deal with a stronger euro. However, trade stalled at the flat line and heavy selling emerged, dropping action onto the lows. Eurozone data is heavy as German unemployment change and Preliminary CPI accompany Spanish Flash GDP.

·         GBPUSD is -105 pips at 1.6030 as trade presses lower for a third session. A disappointing net lending to individuals (GBP1.4 bln actual v. GBP2.5 bln expected) print would push action below minor support in the 1.6150 region, leading to a cascade of selling over the remainder of the session. The 1.5950 area is setting up as decent support. 

·         USDCHF is +40 pips at .8995 as trade continues to climb off nearly two-year lows. A retaking of the 50 dma (.9145) would go a long way in restoring the confidence of the bulls. Switzerland's KOF Economic Barometer will cross the wires tomorrow. 

·         USDJPY is +50 pips at 98.20 as buyers are in control for a third day. The three-day advance comes after sellers were unable to break trade below the 200 dma (97.45) in each of the past five days, and now has action looking to test the 50 and 100 dma (98.40). Thursday's Bank of Japan rate decision looms large, but first Japan's preliminary industrial production crosses the wires tonight. 

·         AUDUSD is -95 pips at .9475 as trade pushes lower for the fourth time in five days. The weakness in the Aussie can be traced to overnight comments from Reserve Bank of Australia Governor Glenn Stevens, which suggested the hard currency is at "unusually high" levels. Support rests in the .9450/.9500 area. Australia's HIA New Home Sales are tentatively scheduled for release. 

·         USDCAD is +20 pips at 1.0465 as trade rallies for the fourth time in five days. The recent win streak has action nearing a test of 1.0475/1.0500 resistance, and comes after Canada's Raw Materials Price Index posted a cooler than anticipated -1.5% MoM (-0.4% MoM expected).

Jason's Commentaries


Was expecting the market to stay flat last night. As usual, Apple sunk after announcing upbeat earnings. What came in unexpected was IBM announced a $15b share buy back. That immediately jolt IBM up a 2.69% and got Dow to close its highest once again. Finally Dow caught up with the S&P500 and Nasdaq at the high. On top of IBM, we have AT&T and Google gainign 1.97% and 2.09% respectively. P&G also contributed to the gain in Dow with a 1.04%. The rest of the market remained mostly flat. The market started with a bullish bias throughout the session. Only Nasdaq lagged at the first 2 hours, then halted for a while before continuing trading after 1230pm ET. I've got a weird feeling that the market is pricing into to the FOMC minutes coming out at 2pm ET tonight. However, briefing.com mentioned that the market is expecting the FOMC minutes to be a non-event. We shall see about that later tonight. Volumes were standing at 679.1m shares traded on the NYSE, which is below average. Internals were pointing towards a bullish side. Consumer Staples and the Energy sector were the main leaders of the S&P500 while the rest of the sectors remained flat to the upside. 

Market Call: ABSTAIN

Date: 29 Oct 2013