9 Oct 2013 AMC- Janet Yellen nominated as the first Fed Chair Woman!!

9 Oct 2013 AMC- Janet Yellen nominated as the first Fed Chair Woman!!

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: -0.4%

·         Germany's DAX: -0.5%

·         France's CAC: -0.2%

·         Spain's IBEX: + 1.3%

·         Portugal's PSI: + 1.1%

·         Italy's MIB Index: + 1.0%

·         Irish Ovrl Index: -0.7%

·         Greece ATHEX Composite: + 0.1%

Before Market Opens

S&P futures vs fair value: +4.20. Nasdaq futures vs fair value: +10.50.
The S&P 500 futures trade higher by 0.2%.

Markets across Asia saw a mixed session as India's Sensex (+1.3%) led and Hong Kong's Hang Seng (-0.6%) lagged. The Sensex was a leader as India's trade deficit narrowed to INR431 billion (INR690 billion previous). Elsewhere, Japan's Nikkei (+1.0%) posted a solid gain thanks to the weaker yen and the latest Bank of Japan Monetary Policy minutes showing the central bank has once again upgraded its economic assessment. The minutes pointed to a moderate recovery, noting exports and industrial production have seen a pickup along with inflation. Data from the rest of the region was light limited to the downtick in Australia's Westpac Consumer Sentiment (-2.1%). 

·         In Japan, the Nikkei closed higher by 1.0% as action regained the 50- and 100-day moving averages. Exporters posted solid gains as Toyota Motor jumped 3.0% and Nikon added 2.2%. Meanwhile, shares of Yahoo Japan were under pressure for a second session as sellers remained in control on word the company would eliminate vendor fees on its shopping/auction sites. The stock fell 3.7%. 

·         Hong Kong's Hang Seng shed 0.6% amid a quiet trade. Shares of heavyweight Tencent Holdings lost 2.9%, sliding off yesterday's record high. 

·         In China, the Shanghai Composite added 0.6% as buyers remained in control for a fourth straight session. Transport stocks were strong as Sinotrans Air Transportation Development climbed the daily limit, 10%. 

Major European indices hover near their highs with peripheral indices leading as Italy's MIB and Spain's IBEX both trade with gains of more than 1.0%. In headlines of note, Germany's Finance Minister Wolfgang Schaeuble reiterated Chancellor Angela Merkel's position that the new government is unlikely to make significant changes to Germany's policy course with respect to the rest of the European Union. Economic data was limited to just a handful of reports. Germany's industrial production increased 1.4% month-over-month (1.0% expected, -1.1% prior). Elsewhere, Great Britain's industrial production fell 1.1% month-over-month (0.4% expected, 0.1% prior) while the year-over-year reading declined 1.5% (-0.6% forecast, -1.1% previous). Separately, manufacturing production fell 1.2% month-over-month (0.4% expected, 0.2% prior) and the year-over-year reading ticked down 0.2% (1.0% forecast, -0.3% previous). Also of note, the trade deficit narrowed to GBP9.63 billion from GBP9.94 billion (GBP9.00 billion expected). 

·         In Great Britain, the FTSE is little changed as financials lead while miners lag. Barclays and Standard Chartered are both up near 1.2% while Randgold Resources and Vedanta Resources hold respective losses of 1.3% and 4.1%. 

·         Germany's DAX is higher by 0.2% with utilities in the lead. E.ON is higher by 2.9% and RWE trades up 2.0%. Chemical producers lag with K+S, Lanxess, and Linde down between 1.3% and 1.6%. 

·         In France, the CAC sports a gain of 0.5%. Bank shares are among the outperformers with BNP Paribas and Credit Agricole up 2.5% and 3.1%, respectively. Producers of basic materials trade lower with Cie de St-Gobain and Lafarge both down near 3.0%. 

·         Elsewhere, Italy's MIB and Spain's IBEX hold respective gains of 1.1% and 1.2% with bank shares pacing the advance. Italy's Banco Popolare is higher by 5.6% and Spain's CaixaBank outperforms with a gain of 3.2%.

Market Internals

Market Internals -Technical-
The Dow closed up 27 (+0.18%) at 14803, the S&P 500 closed up 1 (+0.06%) at 1656, and the Nasdaq closed down 17 (-0.46%) at 3678. Action came on above average volume (NYSE 732 mln vs. avg. of 700; NASDAQ 2167 mln vs. avg. of 1629), with decliners outpacing advancers (NYSE 1468/1573, NASDAQ 1092/1424) and new lows outpacing new highs (NYSE 29/87, NASDAQ 31/51).

Relative Strength: 
Indonesia-IDX +3.55%, India-INP +2.94%, Greece-GREK +2.87%, Egypt-EGPT +2.41%, Japan-EWJ +2.35%, Coal-KOL +1.27%, Timber-CUT +0.63%, Broker-Dealers-IAI +0.53%, Corn-CORN +0.51%, Financial Services-IYG +0.47%.

Relative Weakness: 
Biotechnology-XBI -4.43%, Volatility-VXX -3.48%, Clean Energy-PBW -2.20%, Copper-JJC -2.13%, Biotechnology-IBB -2.11%, British Pound-FXB -0.78%, Switzerland-EWL -0.72%, Netherlands-EWN -0.72%, Swiss Franc-FXF -0.67%, Chile-ECH -0.59%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: Major Averages Mixed Amid Yellen Nomination
The S&P 500 added 0.1%, but was unable to regain its 100-day moving average (1,662) 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 (14,728) 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 70.89, +0.61), IBM (IBM 181.32, +2.60), and Goldman Sachs (GS 154.44, +1.39). 

On a related note, the financial sector (+0.3%) finished ahead of the remaining cyclical groups while other growth-sensitive areas were a bit more mixed. 

The materials space advanced 0.2% with aluminum manufacturer Alcoa (AA 8.10, +0.16) gaining 2.0% after reporting better-than-expected earnings on a 1.2% decline in revenue. Miners contributed to the sector's strength as the Market Vectors Gold Miners (GDX 23.92, +0.10) added 0.4%. 

On the downside, the discretionary sector (-0.4%) lagged throughout the session as quick service restaurants displayed weakness after Yum! Brands (YUM 66.48, -4.82) reported disappointing earnings and made cautious comments about its operating environment going forward. 

Elsewhere, much of the Nasdaq underperformance was the result of significant losses among biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 194.50, -4.20) lost 2.1% to extend its week-to-date loss to 8.5%. In turn, this weighed on the health care sector (-0.2%), which was the only countercyclical group ending in negative territory. 

Treasuries registered modest losses with the benchmark 10-yr yield rising three basis points to 2.67%. 

Trading volume was right in-line with average as 732 million shares changed hands on the floor of the NYSE. 

The Minutes from the latest Federal Open Market Committee meeting reflected much of what has already been communicated to the markets by the regional Fed presidents. Once again, several participants took note of tighter financial conditions while others pointed out rising fiscal risks associated with the stalemate in Washington. 

Most notably, the Minutes revealed that most FOMC participants expected the Fed to begin scaling back the pace of its asset purchases this year with purchases being concluded in the middle of 2014. 

Separately, the weekly MBA Mortgage Index rose 1.3% to follow last week's downtick of 0.4%. 

Tomorrow, weekly initial claims will be reported at 8:30 ET while September import/export prices and the September Treasury Budget will not be released due to the partial government shutdown.

Commodities

Closing Commodities: Precious Metals Fall, Gold Closes Above $1300

·         Precious metals traded lower today as the dollar index rose on news that President Obama will nominate Janet Yellen as the next Chair of the Federal Reserve

·         Dec gold slumped to a session low of $1294.60 per ounce and settled at $1307.10 per ounce, booking a loss of 1.3%

·         Dec silver dipped as low as $21.75 per ounce in morning floor trade. It eventually settled with a 2.5% loss at $21.89 per ounce

·         Nov crude oil also fell on the stronger dollar index and on the largest weekly increase in crude oil inventories since Sept 2012

·         The EIA reported that for the week ending Oct. 4, crude oil inventories had a build of 6.81 mln barrels when a much smaller build of 1.55 mln barrels was anticipated. The energy component retreated from its session high of $103.29 per barrel set at pit trade open and eventually settled 1.8% lower at $101.62 per barrel

·         Nov natural gas fell for the first time in four sessions, dipping to a session low of $3.67 per MMBtu. It closed at $3.68 per MMBtu, booking a loss of 0.8%

CBOT Agriculture and Ethanol Closing Prices

·         Dec corn rose 2 cents to $4.44/bushel 

·         Dec wheat fell 3 cents to $6.90/bushel 

·         Nov soybeans fell 2 cents to $12.87/bushel 

·         Nov ethanol rose 3 cents to $1.72/gallon

COMEX Metals Closing Prices

  Dec gold fell $17.80 to $1307.10/ounce 

·         Gold spent all of today's floor trade in negative territory while the dollar index rose on news that President Obama will nominate Janet Yellen as the next Chair of the Federal Reserve. The yellow metal slumped to a session low of $1294.60 and settled slightly above the $1300 level, booking a loss of 1.3%. 

  Dec silver fell $0.56 to $21.89/ounce 

·         Silver also traded in the red, dipping as low as $21.75 in morning floor trade. It eventually settled with a 2.5% loss. 

  Dec copper fell 6 cent to $3.23/lbs

NYMEX Energy Closing Prices

  Nov crude oil fell $1.90 to $101.62/barrel 

·         Crude oil fell today as weak inventory data and a stronger dollar index pressured prices. The EIA reported that for the week ending Oct. 4, crude oil inventories had a build of 6.81 mln barrels when consensus called for a much smaller build of 1.55 mln barrels. This was the largest weekly increase since Sept 2012. The energy component retreated from its session high of $103.29 set at pit trade open and settled with a 1.8% loss. 

  Nov natural gas fell 3 cents to $3.68/MMBtu 

·         Natural gas fell for the first time in four sessions, dipping to a session low of $3.67. It closed just above that level, booking a loss of 0.8%. 

  Nov heating oil fell 1 cent to $3.02/gallon 

  Nov RBOB gasoline fell 1 cent to $2.62/gallon

Treasuries

Treasuries Slip as Range-Bound Trade Persists: 10-yr: -06/32..2.661%..USD/JPY: 97.37..EUR/USD: 1.3519

·         Treasuries booked modest losses as selling persisted throughout the session. Click here to see an intraday yields chart. 

·         The complex printed fresh lows following today's average $21 bln 10y reopening.

·         Auction Internals: 2.657% (2.666% when issued), a light 2.58x bid/cover, 38.6% indirect bids, 21.2% direct bids, 41.2% went to primary dealers.

·         Today's FOMC minutes marked the lows, even as they provided nothing new in terms of policy. 

·         A volatile session upfront saw the 4w bill yield settle +1.7bps at 0.281% with 0.218%/0.309% providing the range.

·         Maturities in the belly ended little changed with the 10y +1.4bps, closing on the upper bound of its 2.600%/2.650% range that has held for the past two weeks. 

·         The 30y lagged (+2.9bps to 3.724%). 

·         Selling swung the yield curve steeper with the 2-10-yr spread widening to 228.5bps. 

·         Precious metals were weak: gold -$17 @ $1307, silver -$0.50 @ 21.95. 

·         Tomorrow's Data: Initial and continuing claims (8:30). Import/export prices and the Treasury budget will be delayed as a result of the government shutdown. 

·         Tomorrow's Auction: $13 bln 30-yr reopening. 

·         Tomorrow's Fed Speak: Governor Tarullo will speak at the Bretton Woods 2013 International Council meeting in Washington D.C.; STL's Bullard will give opening remarks at the St. Louis Fed's Fall Conference (9:45); SF's Williams will be in Boise, ID to speak before local business leaders (14:30); and KC's George will be in Oklahoma City, OK for the unveiling of an exhibit honoring Oklahoma Senator Robert Owen's role in the formation of the Federal Reserve System (18:30).

Next Day In View 

Economic Commentary

Economic Summary: FOMC Minutes show that the members who wanted a taper, wanted a small amount; Jobless Claims tomorrow at 8:30
Economic Data Summary:

·         Weekly MBA Mortgage Applications +1.3% vs Briefing.com consensus of ; Last Week was -0.4%

·         August Wholesale Inventories were delayed due to government shutdown

Fed/Treasury Events Summary:

·         As mentioned earlier, several news services are reporting that President Obama will nominate Janet Yellen as Federal Reserve Chair today at 3 pm. This had been expected by most market participants. 

·         The FOMC minutes were released from the September meeting. Some key points include:

o    A number of participants thought that risk-management considerations called for a cautious approach and that, in light of the ambiguous cast of recent readings on the economy, it would be prudent to await further evidence of progress before reducing the pace of asset purchases. The participants who spoke in favor of moderating the pace of securities purchases at this meeting also cited the incoming data, but viewed those data as broadly consistent with the Committee's outlook for the labor market at the time of the June FOMC meeting when the contingent expectation that the pace of asset purchases would be reduced later in the year was first presented to the public.

o    Most of the participants leaning toward a downward adjustment in the pace of asset purchases also indicated that they favored a relatively small reduction to signal the Committee's intention to proceed cautiously.

o    Longer-term interest rates rose over the intermeeting period, while equity prices were fairly volatile but ended the period modestly higher. The move in interest rates appeared to be importantly influenced by shifting expectations about monetary policy.  However, the survey also suggested that primary dealers marked up somewhat the odds that the FOMC would begin to cut the pace of asset purchases at its September meeting, a result generally in line with other surveys of market participants.

Upcoming Economic Data:

·         Weekly Initial Claims due out Thursday at 8:30 (Briefing.com consensus of 318K; Last Week was 308K)

·         Weekly Continuing Claims due out Thursday at 8:30 (Briefing.com consensus of 2.903 M ; Last Week was 2.925 M )

·         September Export Prices Ex-Ag due out Thursday at 8:30 --- will be delayed due to Government shutdown

·         September Import Prices Ex-oil due out Thursday at 8:30  --- will be delayed due to Government shutdown

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

Upcoming Fed/Treasury Events:

·         Saint Louis Fed President James Bullard (voting FOMC member, typically dovish) to speak tomorrow at 9:45

·         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

Other International Events of Interest

·         India reported a trade deficit of $6.70 billion (-$16.40 billion expected, -$10.90 billion prior) on $27.68 billion in exports and $34.44 billion in imports. 

Key Excerpts from FOMC Minutes

·         The information reviewed for the September 17--18 meeting suggested that economic activity continued to increase at a moderate rate. Private-sector employment rose further in July and August, but the unemployment rate was still elevated. Total consumer price inflation picked up in recent months but continued to be modest, and measures of longer-run inflation expectations remained stable.

·         Improvements in housing-sector activity appeared to slow, possibly reflecting the rise in mortgage rates since the spring.

·         Longer-term interest rates rose over the intermeeting period, while equity prices were fairly volatile but ended the period modestly higher. The move in interest rates appeared to be importantly influenced by shifting expectations about monetary policy.  However, the survey also suggested that primary dealers marked up somewhat the odds that the FOMC would begin to cut the pace of asset purchases at its September meeting, a result generally in line with other surveys of market participants.

·         Credit flows to nonfinancial businesses remained solid in the face of higher longer-term interest rates.

·         The staff reported on potential risks to financial stability, including those highlighted by the rise in yields and volatility on longer-term fixed-income securities since the spring.

·         The staff's forecast for real GDP over the medium term also was revised down somewhat, reflecting higher projected paths for both longer-term interest rates and the foreign exchange value of the dollar, along with slightly lower projected paths for equity and home prices. The staff still anticipated that the pace of expansion in real GDP this year would only moderately exceed the growth rate of potential output but continued to forecast that real GDP would accelerate in 2014 and 2015, supported by an eventual easing in the effects of fiscal policy restraint on economic growth, increases in consumer and business sentiment, further improvements in credit availability and financial conditions, and accommodative monetary policy.

·         The staff viewed the uncertainty around the forecast for economic activity as similar to its normal level over the past 20 years. However, the risks were viewed as skewed to the downside, reflecting concerns about the economic effects of the recent tightening in U.S. financial market conditions, the resolution of federal fiscal policy issues in the coming months, the economic and financial stresses in the EMEs, and the ability of the U.S. economy to weather potential future adverse shocks. The staff did not see the uncertainty around its outlook for inflation as unusually high, and the risks were viewed as balanced.

·         A number of participants thought that risk-management considerations called for a cautious approach and that, in light of the ambiguous cast of recent readings on the economy, it would be prudent to await further evidence of progress before reducing the pace of asset purchases. The participants who spoke in favor of moderating the pace of securities purchases at this meeting also cited the incoming data, but viewed those data as broadly consistent with the Committee's outlook for the labor market at the time of the June FOMC meeting when the contingent expectation that the pace of asset purchases would be reduced later in the year was first presented to the public. Moreover, they highlighted what they saw as meaningful cumulative progress in labor market conditions since the purchase program began. Those participants generally were satisfied that investors had come to understand the data-dependent nature of the Committee's thinking about asset purchases, and, because they judged that the conditions laid out in June had been met, they believed that the credibility of the Committee would best be served by announcing a downward adjustment in asset purchases at this meeting.

·         Most of the participants leaning toward a downward adjustment in the pace of asset purchases also indicated that they favored a relatively small reduction to signal the Committee's intention to proceed cautiously.

On other news.... 

Summary of Weekly Petroleum Data for the Week Ending Oct 4, 2013
Production: U.S. crude oil refinery inputs averaged about 14.9 mln barrels per day (bpd) during the week ending October 4, 2013, 555 thousand bpd lower than the previous week's average. Refineries operated at 86.0% of their operable capacity last week. Gasoline production rose from the previous week, averaging 9.2 mln bpd. Distillate fuel production decreased last week to about 4.6 mln bpd.

Imports: U.S. crude oil imports averaged about 8.0 mln bpd last week, down by 320 thousand bpd from the previous week. Over the last four weeks, crude oil imports averaged just under 8.0 mln bpd, 5.5% below the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 576 thousand bpd. Distillate fuel imports averaged 139 thousand bpd last week.

Inventory: U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 6.8 mln barrels from the previous week. At 370.5 mln barrels, U.S. crude oil inventories are above the upper range for this time of year. Total motor gasoline inventories increased by 0.1 mln barrels last week and are at the top of the average range. Finished gasoline inventories increased, while gasoline blending component inventories decreased. Distillate fuel inventories decreased by 3.1 mln barrels last week and remain near the lower limit of the average range for this time of year.

Demand: Total products supplied over the last four-week period averaged 19.2 mln bpd, up by 3.7% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged about 8.8 mln bpd, up by 1.8% from the same period last year. Distillate fuel product supplied averaged 3.8 mln bpd over the last four weeks, down by 0.1% from the same period last year.






Currencies 

Dollar Hits Three-Week High: 10-yr: -03/32..2.650%..USD/JPY: 97.40..EUR/USD: 1.3515
The Dollar Index spiked to session highs near 80.55 as the latest FOMC minutes crossed the wires. The minutes provided nothing new, but that did not stop money from moving into the greenback on hopes the Fed would begin tapering its asset purchase program by the end of the year. Today's advance has action threatening its best close in three weeks. Click here to see a daily Dollar Index chart.

·         EURUSD is -75 pips at 1.3500 as action tests near-term support. These levels will be watched closely as a breach of the 1.3475 area sets up a potential move into 1.3400. Traders remain on the lookout for a German Constitutional Court ruling as to the validity of the ECB's European Stability Mechanism, which is expected to cross the wires in the coming days. Eurozone data is limited to French industrial production. ECB head Mario Draghi will speak tonight at Harvard University. 

·         GBPUSD is -155 pips at 1.5925 as sellers remain in control for the fourth time in five days. The 1.5900 level is setting up as an important level as a breakdown likely means a test of the 50 dma. The Bank of England opines tonight with markets expecting no change to the current 0.50% and GBP375 bln asset purchase program. 

·         USCHF is +80 pips at .9120 as action holds just off the highs. Today's surge has trade testing resistance in the .9100/.9130 area with a close north of there being the best since the middle of September. 

·         USDJPY is +55 pips at 97.40 as action continues its bounce off the 200 dma. Bulls have their sights set on reclaiming the 98.00 area, but both the 50 and 100 dma will look to cap action just above that level. Japanese data includes core machinery orders and Tertiary Industry Activity. 

·         AUDUSD is +15 pips at .9435 amid a rather uneventful trade. The pair has held in just a 30 pip range throughout the U.S. session with trade once again struggling as it approached the .9500 region. Australian data is heavy with MI Inflation Expectations, employment change, and the unemployment rate. 

·         USDCAD is +20 pips at 1.0390 as trade looks likely to see a third day of gains. The three-day win streak has run the pair above both its 50 and 100 dma, and has action on track to close at a one-month high. The late August/early September highs in the 1.0500/1.0550 area are quickly shifting into focus. Canada's New Home Price Index is due out tomorrow.

Jason's Commentaries


As expected, the market started with a flat day as the market waited for the release of the FOMC minutes. And on top of the FOMC minutes, Janet Yellen is nominated as the first Fed Chairwoman in history. Kinda legit... the first black president nominating the first Fed Chairwoman. Volumes were standing at 732m shares traded on the NYSE, VIX came down, internals showing mixed signal. However it seems that the market kinda like the FOMC minutes...Futures at 1am ET are up more than 0.4% already. On the technical perspective, it seems that the Dow Jones found some support at 14,800 and S&P500 managed to hold above 1650. 

The FOMC minutes is looking towards a tapering of the QE by 2013 and halting of QE by mid 2014. With Janet Yellen as the Fed Chief, I believe she will be likely to push the taper through. However, the market would have priced into the tapering already as the market came down significantly. It remains to be seen that whether would react negatively to the increasing possibility of QE taper. The coming 2 weeks will be really volatile... 

Market Call: FLAT

Date: 9 Oct 2013