31 Oct 2013 AMC- Market starting to take a some profits off the highs

31 Oct 2013 AMC- Market starting to take a some profits off the highs

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: + 0.3%

·         France's CAC: + 0.6%

·         Spain's IBEX: + 1.3%

·         Portugal's PSI: -1.1%

·         Italy's MIB Index: + 1.0%

·         Irish Ovrl Index: + 1.2%

·         Greece ATHEX Composite: + 1.3%

Before Market Opens

S&P futures vs fair value: +0.10. Nasdaq futures vs fair value: -1.50.
The S&P 500 futures hover just above fair value.

Markets across Asia were broadly lower as only India's Sensex (+0.6%) and Thailand's SET (+0.8%) saw gains. The gain in the Sensex (+0.6%) was noteworthy as the index climbed to a fresh all-time high. The Bank of Japan opined overnight, opting to keep policy on hold. The inaction did not resonate well with the Nikkei (-1.2%) as a stronger yen pressured the index. Markets in China (-0.9%) and Hong Kong (-0.4%) were lower despite efforts from the People's Bank of China to provide liquidity into the system. The PBOC injected CNY16 bln into the system through 14-day reverse repo, causing short-term rates to tumble. The 2w rate paced the decline, plunging 84 basis points to 5.51%. Data from the region showed Australian building approvals surged 14.4% month-over-month (2.9% expected) and import prices jumped 6.1% quarter-over-quarter (3.5% expected). Elsewhere, Japan's average cash earnings data was released overnight, posting a better than expected 0.1% year-over-year (-0.5% expected). 

·         In Japan, the Nikkei settled lower by 1.2% as trade gave up Wednesday's gains. Shipping stocks were the worst performers as Nippon Yusen and Mitsui OSK Lines tumbled 8.3% and 6.6%, respectively. Elsewhere, Honda Motor sank 1.3% after failing to change its full-year earnings guidance. 

·         Hong Kong's Hang Seng shed 0.4% as trade lingers near the September/October highs. Casino stocks lagged following yesterday's outperformance as Sands China fell 2.2% and Galaxy Entertainment shed 2.0%. Energy names were also weak as China Shenhua Energy and PetroChina lost 1.7% and 1.3%, respectively. 

·         In China, the Shanghai Composite lost 0.9% as financials led the way lower. Bank of China Communications fell 1.9% while Citic Securities slipped 1.7%. 

Core European indices are little changed while Spain's IBEX outperforms with a gain of 1.0%. In Germany, a member of the SPD party indicated an agreement has been reached with Angela Merkel's CSU/CDU alliance on a coalition government. Economic data was plentiful as Eurozone unemployment jumped to 12.2% from 12.0% (12.0% expected) while CPI came in at 0.7% year-over-year (1.1% expected, 1.1% prior). Separately, core CPI increased 0.8% year-over-year (1.0% forecast, 1.0% last). Following the disappointing data, European Central Bank governing council member Ewald Nowotny said the ECB will provide more liquidity to the eurozone. Moving to other data points, Germany's retail sales slipped 0.4% month-over-month (0.4% expected, -0.2% prior) while the year-over-year reading reflected an uptick of 0.2% (1.0% forecast, 0.4% prior). Separately, GfK Consumer Climate slipped to 7.0 from 7.1 (7.2 expected) and the import price index was unchanged month-over-month (0.1% forecast, 0.1% prior). Great Britain's Nationwide HPI rose 1.0% month-over-month (0.7% consensus, 0.9% last). French consumer spending slipped 0.1% month-over-month (0.3% expected, -0.3% previous) while PPI ticked up 0.3% month-over-month (0.2% forecast, 0.3% last). Italy's CPI slipped 0.3% month-over-month (0.4% expected, -0.3% prior) while the year-over-year reading rose 0.7% (1.2% forecast, 0.9% last). PPI was unchanged month-over-month (0.1% expected, 0.1% last) and the year-over-year reading fell 1.8% (-2.1% forecast, -2.1% prior). Spain's government budget surplus expanded to EUR3.30 billion from a deficit of EUR2.40 billion (EUR2.50 billion surplus expected) while business confidence slipped to -14 from -12 (-11 consensus). 

·         Great Britain's FTSE is lower by 0.4% as energy names pace the decline. Petrofac trades down 2.3% and Royal Dutch Shell holds a loss of 4.8% after reporting disappointing results. 

·         Germany's DAX is higher by 0.2% as exporters outperform. BMW, Daimler, and Volkswagen are all up between 1.1% and 2.4%. Deutsche Boerse is the weakest index component, down 3.2%. 

·         In France, the CAC holds a modest gain of 0.5% as banks lead. BNP Paribas, Credit Agricole, and Societe Generale are all up between 2.6% and 2.8%. Energy producer Technip is the weakest index component, down 8.7% after missing third-quarter profit estimates. 

·         In Spain, the IBEX is higher by 1.0% as financials lead. Banco de Sabadell and Banco Popular Espanol hold respective gains of 4.7% and 7.1%.

Market Internals

Market Internals -Technical-
The Dow closed down 73 (-0.47%) at 15546, the S&P 500 closed down 7 (-0.38%) at 1757, and the Nasdaq closed down 11 (-0.28%) at 3920. Action came on above average volume (NYSE 907 mln vs. avg. of 715; NASDAQ 2185 mln vs. avg. of 1770), with decliners outpacing advancers (NYSE 1214/1864, NASDAQ 974/1576) and new highs outpacing new lows (NYSE 139/26, NASDAQ 108/45). 

Relative Strength: 
Greece-GREK +2.2%, New Zealand-ENZL +1.06%, Thailand-THD +0.81%, Vietnam-VNM +0.74%, U.S. Dollar-UUP +0.68%, Internet Composite-FDN +0.57%, Egypt-EGPT +0.57%, U.S. Health Care-IHF +0.53%, Semiconductors-SMH +0.44%, Wind Energy-FAN +0.36%.

Relative Weakness: 
Junior Gold Miners-GDXJ -5.34%, Silver Miners-SIL -3.80%, Brazilian Real-BZF -2.34%, Nordic 30-GXF -2.22%, Chile-ECH -2.04%, Indian Rupee-ICN -2.04%, U.S. Home Construction-ITB -2.00%, Indonesia-IDX -2.00%, Coffee-JO -1.76%, Platinum-PPLT -1.66%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: Stocks End October on Lower Note
The S&P 500 ended with a modest loss of 0.4%, trimming its October gain to 4.5%. Small caps displayed notable weakness during morning trade, but the Russell 2000 ended not far behind the S&P with a loss of 0.5%.

Equity indices spent most of the session near their respective flat lines even after more than 250 companies reported their quarterly results between yesterday's close and today's opening bell. Trading volume was subdued until the last 30 minutes of action when a surge in trading activity sent equity indices to lows while pushing the final NYSE volume tally over 900 million shares.

The benchmark index displayed early weakness as the broader market followed in the footsteps of the financial sector (-1.1%), which slipped out of the gate and spent the entire session in the red. Financials finished at the bottom of the leaderboard while also ending the month behind the remaining nine sectors with an October gain of 3.2%.

Following the early dip, the S&P returned to its flat line, where it hovered until selling accelerated during the final hour.

Only the consumer discretionary space posted a gain (+0.2%) with media names providing support after Time Warner Cable (TWC 120.15, +3.27) reported better-than-expected results. Homebuilders did not take part in the rally as the iShares Dow Jones US Home Construction ETF (ITB 22.52, -0.46) lost 2.0%.

Elsewhere, the energy sector outperformed (-0.2%), receiving support from Exxon Mobil (XOM 89.62, +0.81) after the Dow component reported results ahead of analyst expectations.

Among other earnings of note, Facebook (FB 50.20, +1.20) posted a gain of 2.4% after enduring some after-hours drama yesterday. The social media stock jumped as high as 14.0% in reaction to its solid quarter, but relinquished the gain after company management said during the conference call that a decline in daily traffic among younger users has been observed.

Treasuries ended modestly lower with the 10-yr yield up one basis point at 2.55%.

In overseas news of note, eurozone unemployment (12.2% actual versus 12.0% expected) and CPI (0.7% actual versus 1.1% consensus) came in well-below estimates, which stoked expectations for additional liquidity provisions from the European Central Bank. On that note, governing council member Ewald Nowotny said the ECB will ensure a smooth transition once long-term refinancing operations come to an end. The euro was under pressure throughout the session, falling over 150 pips against the dollar to 1.3584.

Investors received just two economic data points today. Weekly initial claims decreased to 340,000 from 350,000 (Briefing.com consensus 335,000). This initial claims report represented the first clean reading for the labor market since August as issues with California's numbers have now been ironed out. Unfortunately, the report reflected a modest increase in layoff levels over the past couple of months.

An initial claims reading of 340,000 is enough to keep the unemployment rate steady but not enough to drive steady payroll gains above 200,000. The continuing claims level increased to 2.881 million from a downwardly revised 2.859 million (from 2.874 million). The consensus pegged the continuing claims level at 2.850 million.

Separately, the October Chicago PMI registered its largest one-month spike in more than 30 years, jumping to 65.9 from 55.7 (Briefing.com consensus 55.0). We are skeptical that the sharp increase is legitimately showing vast improvement in the manufacturing sector. Most of the Federal Reserve regional manufacturing surveys were either flat or softened slightly from lost demand due to the government shutdown. In contrast, the manufacturers in the Chicago region recorded their strongest activity since March 2011.

Tomorrow, the October ISM Index will be released at 10:00 ET. 

·         Nasdaq +29.8% YTD 

·         Russell 2000 +29.5% YTD 

·         S&P 500 +23.2% YTD 

·         DJIA +18.6% YTD

Commodities

Closing Commodities: Silver Ends The Day Over 5% Lower

·         The dollar index gained strength following yesterday's FOMC statement which was viewed as slightly more hawkish than was anticipated and fueled assumptions of a tapering in the December meeting. The move higher weighed on the commodities space, especially precious metals

·         Dec gold fell as low as $1318.70 per ounce and settled with a 1.9% loss at $1323.50 per ounce

·         Dec silver dropped even harder, falling to a session low of $21.73 per ounce. Like gold, it was unable to gain momentum and settled 5.1% lower at $21.86 per ounce

·         Dec crude oil fell for a third consecutive session. It brushed a session high of $97.03 per barrel moments after equity markets opened but quickly retreated back into negative territory. Despite chopping around near the break-even line in late afternoon pit action, it settled with a 0.4% loss at $96.37 per barrel

·         Dec natural gas pulled back from its session high of $3.65 per MMBtu set at pit trade open and spent the remainder of the session in the red. It fell as low as $3.56 per MMBtu following inventory data that showed a build of 38 bcf when a build of 36-43 bcf was anticipated. It eventually settled with a 1.1% loss at $3.58 per MMBtu

COMEX Metals Closing Prices

  Dec gold fell $25.40 to $1323.50/ounce 

·         Gold trended lower in negative territory today as the dollar index rose following yesterday's FOMC statement which was viewed as slightly more hawkish than was expected. The yellow metal fell as low as $1318.70 as the statement fueled assumptions of a tapering in the December meeting. Unable to gain momentum, gold settled with a 1.9% loss. 

  Dec silver fell $1.12 to $21.86/ounce 

·         Silver dropped even harder, falling to a session low of $21.73 in early morning floor trade. Like gold, it was unable to erase much of the loss and settled 5.1% lower. 

  Dec copper fell 3 cents to $3.30/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Dec corn fell 2 cents to $4.28/bushel

·         Dec wheat fell 6 cents to $6.68/bushel

·         Jan soybeans fell 11 cents to $12.66/bushel

·         Dec ethanol settled unchanged at $1.66/gallon

·         Jan sugar (#16 (U.S.)) fell 0.01 of a penny to 21.63 cents/lbs

NYMEX Energy Closing Prices

  Dec crude oil fell $0.35 to $96.37/barrel 

·         Crude oil fell for a third consecutive session as a stronger dollar put pressure on the commodities space. The energy component brushed a session high of $97.03 moments after equity markets opened but quickly retreated back into the red. Despite chopping around near the unchanged line in late afternoon pit action, it settled with a 0.4% loss. 

  Dec natural gas fell 4 cents to $3.58/MMBtu 

·         Natural gas pulled back from its session high of $3.65 set at pit trade open and spent the remainder of the session in negative territory. It fell as low as $3.56 following inventory data that showed a build of 38 bcf when expectations called for a build of 36-43 bcf. It eventually settled with a 1.1% loss. 

  Dec heating oil fell 2 cents to $2.96/gallon 

  Dec RBOB gasoline fell 3 cents to $2.59/gallon

Treasuries

Late-Day Rally in Treasuries Erases Losses: 10-yr: -02/32..2.544%..USD/JPY: 98.29..EUR/USD: 1.3586

·         Treasuries ended little changed as a late-day rally ran maturities back to their respective flat lines. 

·         The complex saw an overnight bid after yesterday's FOMC meeting left some overseas investors uneasy, and the buying persisted into the U.S. open. 

·         A sharp selloff developed after Chicago PMI (65.9 actual v. 55.0 expected) blew past estimates, running yields to their highest levels in more than two weeks. 

·         Trade hovered on the lows for much of the session before a bid developed over the final hour, erasing most of the losses. 

·         Only the 10y settled more than 1bp from its respective flat line, finishing +1.5bps and at an eight-day high of 2.542%. The early weakness ran the yield above the 2.570% mark. Click here to see an intraday yields chart.

·         A flat session for the long bond saw the 30y end little changed at 3.631%. 

·         The 2-10-yr spread settled unchanged at 223bps despite violent intraday swings. 

·         Precious metals endured a heavy session as gold ended -$24 @ $1325 and silver finished -$1.04 @ $21.94. 

·         Tomorrow's Data: ISM Index (10) and auto/truck sales (14).

Next Day In View 

Economic Commentary

Economic Summary: Jobless claims higher than expected; Chicago PMI blows past estimates; 3 Fed speakers tomorrow
Economic Data Summary:

·         Weekly Initial Claims 340K vs Briefing.com consensus of 335K; Last Week was 350K

o    hose problems have now cleared. This initial claims report is the first clean reading for the labor market since August. Unfortunately, it shows the layoff level has modestly increased over the past couple of months. An initial claims reading of 340,000 is enough to keep the unemployment rate steady but not enough to drive steady payroll gains above 200,000. T

·         Weekly Continuing Claims 2.881 M vs Briefing.com consensus of 2.850 M ; Last Week was revised to 2.850 M from 2.874 M

·         October Chicago PMI 65.9 vs Briefing.com consensus of 55.0; September was revised to from 55.7

o    Most of the Federal Reserve regional manufacturing surveys were either flat or softened slightly from lost demand due to the government shutdown. In contrast, the manufacturers in the Chicago region recorded their strongest activity since March 2011. It is unknown why manufacturing trends in the Chicago region were so much different than the rest of the country. We will get a better feel for which surveys are more accurate when the national ISM report is released tomorrow.

Upcoming Economic Data:

·         October ISM Sales due out Friday at 10:00 (Briefing.com consensus of 55.0; September was 56.2)

Upcoming Fed/Treasury Events:

·         Saint Louis Fed President James Bullard (voting FOMC member, typically dovish) to speak tomorrow at 9:10

·         Minneapolis Fed President Narayana Kocherlakota (voting FOMC member, typically dovish) to speak tomorrow at 11:15

·         Richmond Fed Jeffrey Lacker (not a voting FOMC member, typically hawkish) to speak tomorrow at 12:00

Other International Events of Interest

·         Eurozone unemployment jumped to 12.2% from 12.0% (12.0% expected) while CPI came in at 0.7% year-over-year (1.1% expected, 1.1% prior). Separately, core CPI increased 0.8% year-over-year (1.0% forecast, 1.0% last). 

·         Germany's retail sales slipped 0.4% month-over-month (0.4% expected, -0.2% prior) while the year-over-year reading reflected an uptick of 0.2% (1.0% forecast, 0.4% prior). Separately, GfK Consumer Climate slipped to 7.0 from 7.1 (7.2 expected) and the import price index was unchanged month-over-month (0.1% forecast, 0.1% prior). 

On other news.... 

Currencies 

Dollar Retakes 80.00: 10-yr: -03/32..2.550%..USD/JPY: 98.26..EUR/USD: 1.3596
The Dollar Index holds on session highs near 80.20 as action remains on track to post its best close in over two weeks. The greenback was firm in the early going before catching a tailwind from the strong Chicago PMI reading (65.9 actual v. 55.0 expected). Trade has spent the entire afternoon drifting near the highs. Click here to see a daily Dollar Index chart. 

·         EURUSD is -140 pips at 1.3595 as action holds just off the lows. Weighing on the single currency as a boatload of disappointing data [(CPI Flash Estimate (0.7% YoY actual v. 1.1% YoY expected), the unemployment rate (12.2% actual v. 12.0% expected), French consumer spending (-0.1% MoM actual v. 0.2% MoM expected), German retail sales (-0.4% MoM actual v. 0.5% MoM expected), and GfK German Consumer Climate (7.0 actual v. 7.3 expected)] and comments from ECB member Ewald Nowotny suggesting the central bank will provide more liquidity once the Long-Term Refinancing Operations expire. Current levels will be watched closely as trade tests trendline support off the July lows. French and Italian banks are closed for All Saints Day. 

·         GBPUSD is +20 pips at 1.6055 as trade ticks higher amid a rather uneventful session. Sterling saw an early test of the 1.6000 level, but support there was able to hold as buyers stepped in at near yesterday's lows. British data is limited to Manufacturing PMI. 

·         USDCHF is +60 pips at .9050 as trade climbs for a fourth day. The .9150 area remains an important level for the bulls as it represents key resistance helped by the 50 dma. Switzerland's SVME PMI is due out tomorrow. 

·         USDJPY is -15 pips at 98.30 as trade drifts aimlessly following the Bank of Japan's decision to stand pat. Many traders remain on the sidelines as they await a breakout from the 97.00/99.00 range that has been in play over the past month. 

·         AUDUSD is -20 pips at .9460 as trade has reversed into the red. The hard currency saw a robust overnight bid develop following the surge in Australian building permits, but has been under pressure throughout U.S. trade. Australia's PPI will cross the wires tonight. Chinese data includes Manufacturing PMI and HSBC Final Manufacturing PMI. 

·         USDCAD is -50 pips at 1.0425 as sellers have taken control following the better than expected Canadian GDP (0.3% MoM actual v. 0.2% MoM expected). Traders will be fixated on 1.0400 support as both the 50 and 100 dma aid the level, but will set up a move into the 1.0300 region.

Jason's Commentaries


Last night we had a very volatile night as the Dow jones led the profit taking. Nasdaq and S&P500 did not lose as much as the Dow. The financials were the main laggard in last night's market with Citi, JP Morgan and BfA being the biggest laggard. We're likely to move into a short term reversal or profit taking soon. As the employment reports are coming soon, I reckon the market is starting to feel that it's starting to lose steam. Last night we have exceptionally high volume of over 900m shares traded on the NYSE. Internals were pointing towards the downside. On the technicals, we're on the 2nd day of the reversal. I reckon it's likely to be another flat and volatile day today, possibly a 3rd candle reversal. 

Market Call: FLAT to upside

Date: 1 Nov 2013