Consumer Credits expanded double digit 5 months in a row..

7 Oct 2013 AMC - Consumer Credits expanded double digit 5 months in a row..

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: -0.3%

·         Germany's DAX: -0.4%

·         France's CAC: 0.0%

·         Spain's IBEX: -0.4%

·         Portugal's PSI: -0.5%

·         Italy's MIB Index: + 0.7%

·         Irish Ovrl Index: -0.2%

·         Greece ATHEX Composite: + 2.5%

Before Market Opens

S&P futures vs fair value: -13.00. Nasdaq futures vs fair value: -22.80.
Equity futures point to a heavy open as the weekend budget/debt ceiling negotiations failed to make any meaningful progress. The overnight weakness has the major averages on track to erase virtually all of Friday's gains with the S&P 500 likely to see yet another test of 1680 support that is aided by the 50-day moving average.

Markets across Asia were broadly lower as the lack of progress in U.S. budget/debt ceiling negotiations weighed. Japan's Nikkei (-1.2%) lagged the rest of the region thanks to the lack of clarity in U.S. budget negotiations, and the stronger yen. Only the Philippines' PSEi (+0.8%) saw a gain as shares continued their recent strength following last week's sovereign upgrade by Moody's. Chinese banks remained shuttered for Golden Week, but will reopen tomorrow.

·         In Japan, the Nikkei closed -1.2% as shares fell for the fifth time in seven days. Real estate shares were under pressure as Mitsui Fudosan and Sumitomo Realty & Development gave up 2.0% and 2.8%, respectively. 

·         In Hong Kong, the Hang Seng finished -0.7% as shares slipped for a second day. Real estate names were weak with Sun Hung Kai giving up 2.6%.

·         In China, the Shanghai Composite was closed.

In Europe, all of the major bourses trade in the red as Germany's DAX (-1.0%) paces the decline. Interestingly, debt markets across the region are firm with the core slightly outperforming the periphery. A modest bid has the 10-yr Bund and Gilt yields off 4 bps apiece at 1.800% and 2.700%, respectively. 

·         In Britain, the FTSE is -0.8% as just a handful of names trade in the green. Commodity-related names are under pressure with Lonmin and Royal Dutch Shell off 2.6% and 1.5%, respectively. 

·         In France, the CAC is -0.6% as trade continues to climb off its worst levels. Consumer goods and financials are lagging as LVMH Louis Vuitton Hennessy and Credit Agricole both trade down 1.4% to lead their respective sectors lower. 

·         In Germany, the DAX is -0.9% as only a couple of names are seeing gains. Financials are the worst performers with Commerzbank and Deutsche Bank both down 1.9%. Utilities lead as RWE and E.ON sport gains of 5.0% and 3.6%, respectively.   

Market Internals

Market Internals -Technical-
The Nasdaq closed down 37 (-0.98%) at 3770, the Dow closed down 136 (-0.90%) at 14936, and the S&P 500 closed down 14 (-0.85%) at 1676. Action came on below average volume (NYSE 595 mln vs. avg. of 695; NASDAQ 1417 mln vs. avg. of 1576), with decliners outpacing advancers (NYSE 667/2421, NASDAQ 657/1883) and new highs outpacing new lows (NYSE 51/45, NASDAQ 82/22).

Relative Strength: 
Volatility-VXX +7.64%, Greece-GREK +5.06%, Natural Gas-UNG +3.32%, Cocoa-NIB +3.23%, Silver-SLV +2.87%, Gold Miners-GDX +1.65%, Japanese Yen-FXY +0.61%, Vietnam-VNM +0.59%, Egypt-EGPT +0.50%, British Pound-FXB +0.46%.

Relative Weakness: 
Cotton-BAL -3.65%, Social Media-SOCL -2.41%, Biotechnology-XBI -2.39%, Indonesia-IDX -2.37%, Biotechnology-IBB -2.22%, Japan-EWJ -1.87%, Thailand-THD -1.82%, Rare Earths-REMX -1.79%, Australia-EWA -1.76%, Pacific Index-VPL -1.72%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Summary
It was a poor start to the week for the equity market and the same thing could be said for politics in Washington. The two were inextricably linked today 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: 

·         the House does not have the votes to pass a clean continuing resolution

·         the votes are not in the House to pass a clean debt limit increase; 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. The bottom-line for the market, however, is 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.

Even though conventional wisdom holds that a deal will get done and that a worst-case scenario will be averted, the market is nonetheless mindful that a similarly-held position in 2011 didn't stop the S&P 500 from falling 17% between July 22 and August 8 that year.

Not surprisingly, volume was on the light side today as the incentive to participate was taken away by Washington's woes.

An absence of buyers paved a path to a sizable decline when the opening bell rang. Shortly after the start of trading, the Dow, Nasdaq, and S&P 500 dropped 152, 34, and 16 points, respectively. They would soon attract some buying interest with the S&P 500 holding support in the 1675/1674 area. The opening losses would eventually be cut in half, but the rebound effort ran out of steam. The major indices were then range-bound for the majority of today's session until they rolled over again in the final hour on a wave of late selling pressure that transpired without a specific news catalyst.

The only sector to escape today's weakness was the telecom services sector (+0.6%). All other sectors traded lower with the growth-sensitive cyclical sectors bearing the brunt of the selling pressure. The consumer discretionary (-1.4%), financial (-1.2%), and materials (-1.2%) sectors were the biggest losers.

In terms of market cap size, the small-cap Russell 2000 (-1.1%) and S&P 400 mid-cap (-1.1%) averages were the hardest hit, although the blue chip averages were not far behind, demonstrating that today's selling was broad-based.

The standout performer today was the CBOE Volatility Index (19.24, +2.50). It surged 15% to a three-month high as participants were positioning for an increase in near-term volatility.

The Consumer Credit report for August was the lone economic release today. The report, which is compiled by the Federal Reserve, showed consumer credit increased $13.6 bln (Briefing.com consensus $11.8 bln) versus a prior increase of $10.4 bln. Like most other consumer credit reports, though, this one was also glossed over given its dated nature and history of seeing large revisions.

The August trade balance report and the JOLTS - Job Openings report were due to be released on Tuesday, but they will be delayed on account of the partial government shutdown which is looking like it will enter its eighth day on Tuesday.

Commodities

Closing Commodities: Crude Oil Declines 0.7%, Nat Gas Surges 3.4% On Weather Outlook/GoM

·         Nov crude oil traded lower today as production in the Gulf of Mexico resumed after the U.S. National Hurricane Center downgraded Tropical Storm Karen to a Tropical Depression. Prices dipped as low as $101.86 per barrel in early morning pit trade and later brushed a session high of $103.74 per barrel

·         The energy component pulled back slightly in afternoon floor action and settled 0.7% lower at $103.03 per barrel

·         Nov natural gas, on the other hand, extended Friday's gains as forecasts called for warmer weather. It lifted from a session low of $3.57 per MMBtu and rose to a session high of $3.66 per MMBtu in late morning action. Natural gas eventually settled with a solid 3.4% gain at $3.63 per MMBtu

·         Precious metals rose on a weaker dollar index and a continued stalemate over a budget/debt ceiling deal

·         Dec gold popped to a session high of $1329.50 per ounce shortly after equity markets opened and settled with a 1.1% gain at $1324.90 per ounce

·         Dec silver came off its session low of $21.91 per ounce and touched a session high of $22.50 per ounce by late morning pit action. It booked a 1.1% gain as it closed at $22.38 per ounce.

NYMEX Energy Closing Prices

  Nov crude oil fell $0.75 to $103.03/barrel 

·         Crude oil traded lower today as production in the Gulf of Mexico resumed after the U.S. National Hurricane Center downgraded Tropical Storm Karen to a Tropical Depression. The energy component managed to lift off its session low of $101.86 set in early morning pit trade and brushed a session high of $103.74. It pulled-back slightly in afternoon floor action and settled with a 0.7% loss. 

  Nov natural gas rose 12 cents to $3.63/MMBtu 

·         Natural gas extended Friday's gains, lifting on forecasts for warmer weather. Prices lifted from a session low of $3.57 and rose as high as $3.66 in late morning action. Natural gas eventually settled with a solid 3.4% gain. 

  Nov heating oil rose 1 cent to $3.01/gallon 

  Nov RBOB gasoline rose 2 cents to $2.63/gallon

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Dec corn rose 6 cents to $4.49/bushel 

·         Dec wheat rose 9 cents to $6.95/bushel 

·         Nov soybeans settled unchanged at $12.96/bushel 

·         Nov ethanol rose 1 cent to $1.69/gallon 

·         Nov sugar (#16 (U.S.)) rose 0.20 of a penny to 21.20 cents/lbs

COMEX Metals Closing Prices

  Dec gold rose $14.70 to $1324.90/ounce 

·         Gold rose for the first time in three sessions as it gained support from a weaker dollar index and a continued stalemate over a budget/debt ceiling deal. The U.S. government remains in a partial shutdown as no deal has been reached over the weekend. The yellow metal popped to a session high of $1329.50 shortly after equity markets opened and settled slightly below that level, booking a gain of 1.1%. 

  Dec silver rose $0.63 to $22.38/ounce 

·         Silver also traded higher today. It came off its session low of $21.91 and touched a session high of $22.50 by late morning pit action. It eventually settled with a 2.9% gain. 

  Dec copper settled unchanged at $3.30/lbs

Treasuries

Treasuries Eke Out a Gain: 10-yr: +03/32..2.634%..USD/JPY: 96.90..EUR/USD: 1.3576
Treasuries finished with modest gains as the complex was able to withstand steady selling over the course of the day and finish in the green. The complex saw an overnight persist into the U.S. open as Congressional leaders failed to make progress in budget/debt ceiling negotiations. Selling developed shortly after the U.S. equity open as rumors of a potential debt ceiling agreement found their way into the marketplace, and persisted throughout the remainder of the session. Outperformance came from the long bond as a half point advance dropped its yield 3 bps to 3.702%. Elsewhere, the benchmark 10-yr yield ended the day down less than 2 bps at 2.634% after an early bid failed to break 2.600% support. The very front of the curve lagged as selling produced an advance of almost 3 bps in the 1-month yield to 0.145%. This marked the highest close for the yield since late-November. A flatter yield curve took hold with the 2-10-yr spread narrowing to 228.5 bps. Elsewhere, precious metals were strong as gold climbed $12 to $1322 and silver added $0.55 to near $22.30. Tuesday's trade balance and JOLTS - Job Openings will be delayed due to the government shutdown. Treasury will auction $30 bln 3-yr notes. Fed speak begins with Cleveland's Pinalto in Pittsburgh, PA discussing monetary policy and the economy (12:25). Philly's Plosser will be in Johnstown, PA, giving his economic outlook (12:30).

Next Day In View 

Economic Commentary

Double-Digit Expansion in Consumer Credit Continued in August
Consumer credit increased by $13.6 bln in August, up from a $10.4 bln increase in July. The Briefing.com consensus expected consumer credit to increase by $11.8 bln. That was the fifth consecutive double-digit monthly gain. Consumer credit is a volatile measure that often goes through substantial revisions before the final data are released three months later. It was unusual that the consumer credit data for July was not revised. Revolving credit declined by 0.9 bln in August to $848.9 bln. Credit declined by $1.8 bln in July. Nonrevolving credit increased by $14.5 bln to $2188.0 bln in August. That was up from a $12.3 bln increase in July. Nonrevolving credit has expanded for the past 24 consecutive months and 38 out of the last 39 months.



On other news.... 

Currencies 

Dollar Nears Eight-Month Lows: 10-yr: +04/32..2.631%..USD/JPY: 96.88..EUR/USD: 1.3578

The Dollar Index holds on session lows near 79.95 amid a rather uneventful trade. The Index has been locked in a tight 10 cent range for the majority of the session, and will mark its worst finish in eight months with a closing print below 79.85. Click here to see a daily Dollar Index chart. 

·         EURUSD is +20 pips at 1.3575 amid a lackluster trade as news flow and data have been light. Traders continue to look to the 1.3550 level for near-term support with a close above 1.3620 being the best since February. Germany's trade balance and factory orders data will cross the wires tomorrow. 

·         GBPUSD is +80 pips at 1.6090 as trade has managed to recover half of Friday's losses after surviving an early test of 1.6000 support. The 1.6300 level remains on may traders' radars as a breakout would produce the best print of 2013. Britain's BRC Retail Sales Monitor is due out tonight. 

·         USDCHF is -35 pips at .9035 as action lingers near 19-month lows. The .9000 area remains in focus as support there has held up since the fall of 2011. Swiss data due out tomorrow includes CPI and retail sales. 

·         USDJPY is -50 pips at 96.95 as sellers remain in control for the fourth time in five days. Today's weakness has the pair on track to post its first sub-97.00 close since the beginning of August, but all eyes remain on the 200-day moving average (96.65). Japan's current account balance is due out this evening. 

·         AUDUSD is +10 pips at .9435 as action holds just off session highs. Trade should see a bit of a pickup tomorrow as Chinese markets reopen after their week-long hiatus. Australian data includes ANZ Job Advertisements and NAB Business Confidence. 

·         USDCAD is +10 pips at 1.0310 as trade drifts towards the close. The 1.0340 area has served as resistance for much of the past two weeks with bulls needing to retake both the 50- and 100-day moving averages near 1.0370 before they can breathe easy. Canada's trade balance will be released tomorrow.

Jason's Commentaries


Nasdaq led the drop last night with a near 1% loss while the Dow Jones lost 0.9% and S&P500 lost 0.85%. What a start to the week. The market started last night with a huge drop and reversed quickly likely due to short covering. Then it remained flat throughout the session until the last hour when everything starts to sell off once again. Fortunately, we can see that the volumes were below 600m shares traded on the NYSE. The internals showing some sort of divergence, possibly pricing in ahead of the FOMC minutes coming out on Wednesday, 2pm ET. Consumer discretionary sunk last night with a drop of -1.41% drop, following by Materials, -1.22% and Financials,-1.15%. It was a sea of red last night. On the technical perspective, we're looking at both Dow Jones and S&P500 reaching their support level of 14,900 and 1675 respectively. I believe that market would not sell off much any further as at current economic circumstances, the Fed will be forced not to make any changes to their QE policy, possible even increasing their QE plans. Consumer Credits expanded 5 months consecutively already. That's bad... possible another credit bubble coming up..

Market Call: FLAT

Date: 8 Oct 2013