3 Dec 2013 AMC- Market went down due to weakness in European Markets

3 Dec 2013 AMC- Market went down due to weakness in European Markets

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: -1.0%

·         Germany's DAX: -1.9%

·         France's CAC: -2.7%

·         Spain's IBEX: -1.4%

·         Portugal's PSI: -0.6%

·         Italy's MIB Index: -2.0%

·         Irish Ovrl Index: -2.1%

·         Greece ATHEX Composite: -0.6%

Before Market Opens

S&P futures vs fair value: -5.50. Nasdaq futures vs fair value: -2.80.
The S&P 500 futures continue to hover near their lows (-0.3%).

Major Asian markets ended the session on a lower note, but Japan's Nikkei (+0.6%) and China's Shanghai Composite (+0.7%) withstood the region-wide pressure and closed on their respective highs. The outperformance took place even after China's Non-Manufacturing PMI slipped to 56.0 from 56.3, and amid reports the government may set the 2014 GDP growth target at 7.0% versus 7.5% in 2013. Looking at remaining data, Japan's monetary base rose 52.5% year-over-year (47.2% expected, 45.8% prior) and average cash earnings ticked up 0.1% year-over-year (-0.2% last). Elsewhere, Australia's third quarter current account deficit widened to AUD12.70 billion from AUD12.10 billion (AUD11.60 billion expected) and retail sales rose 0.5% month-over-month (0.4% forecast, 0.9% previous). Also of note, the Reserve Bank of Australia left its key interest rate unchanged at 2.50%, as expected. The decision to maintain its current policy course was coupled with a statement that was very similar to remarks made in November. The central bank views the Australian dollar as ‘still uncomfortably high' even though AUDUSD has slid from 0.9530 to 0.9120 since early November. 

·         In Japan, the Nikkei closed higher by 0.6% as cyclical names led the way. Nippon Paper Industries and Nippon Sheet Glass jumped 5.7% and 4.4%, respectively. SoftBank also finished among the leaders, gaining 4.4%. 

·         Hong Kong's Hang Seng ended lower by 0.5% as retailer Li & Fung paced the decline with a 1.9% loss. Casino and gaming names outperformed as Sands China rose 2.5% and Galaxy Entertainment gained 1.6%. 

·         In China, the Shanghai Composite settled higher by 0.7% with the entire gain coming in the final two hours of the session. Financials displayed strength with China Vanke climbing 1.1%. 

Major European indices trade broadly lower with France's CAC (-1.7%) leading the region lower. The weakness has been attributed to participants taking some money off the table ahead of Friday's November nonfarm payrolls report in the U.S., which could speak in favor of tapering in the near term. Among news of note, European Commissioner Olli Rehn said that he is skeptical of the impact of Italy's privatization plans. Mr. Rehn also mentioned that Italy had not respected its debt cut objectives. Economic data was limited. Eurozone PPI fell 0.5% month-over-month (-0.2% forecast, 0.2% prior) while the year-over-year reading decreased 1.4% (-1.0% expected, -0.9% last). Great Britain's construction PMI jumped to 62.6 from 59.4 (59.0 consensus). Elsewhere, Spain's unemployment claims decreased 2,500 after increasing by 87,000 last month (+44,300 expected). Also of note, Norway's core retail sales fell 1.0% month-over-month (0.2% expected, 0.7% prior). 

·         Great Britain's FTSE is lower by 0.7% as miners weigh after Rio Tinto (-0.7%) announced plans to cut its capital spending in half. Antofagasta and Randgold Resources are down 5.5% and 3.0%, respectively. 

·         Germany's DAX holds a loss of 1.1% as 28 of 30 components trade lower. Deutsche Lufthansa is the weakest performer, down 3.2%. On the upside, Fresenius SE and Fresenius Medical both display gains close to 1.2%. 

·         In France, the CAC trades down 1.7% with exporter Renault (-4.1%) leading the slide. Telecom provider Orange also appears among the laggards, down 3.4%.

Market Internals

Market Internals -Technical-
The Dow closed down 94 (-0.59%) at 15915, the S&P 500 closed down 6 (-0.32%) at 1795, and the Nasdaq closed down 8 (-0.2%) at 4037. Action came on near average volume (NYSE 770 mln vs. avg. of 696; NASDAQ 1756 mln vs. avg. of 1761), with decliners outpacing advancers (NYSE 1205/1893, NASDAQ 996/1591) and mixed new highs/lows (NYSE 50/87, NASDAQ 93/30).

Relative Strength: 
Oil-USO +2.46%, Volatility-VXX +2.29%, Gasoline-UGA +1.88%, Thailand-THD +1.8%, Corn-CORN +1.35%, Platinum-PPLT +1.31%, Egypt-EGPT +1.05%, Malaysia-EWM +0.83%, New Zealand-ENZL +0.81%, Emerging Markets Small Cap-EWX +0.65%.

Relative Weakness: 
Junior Gold Miners-GDXJ -3.3%, Turkey-TUR -2.4%, Peru-EPU -2.33%, South Africa-EZA -2.08%, Wind Energy-FAN -1.99%, Smart Grid Infrastructure-GRID -1.83%, Biotechnology-IBB -1.81%, France-EWQ -1.62%, Rare Earths-REMX -1.59%, Middle East and Africa-GAF -1.55%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: Cyclical Sectors Lead Stocks Lower
The S&P 500 settled lower by 0.3% as equities saw a continuation of yesterday's selling. The benchmark index opened the session in negative territory as a cautious trade in Europe contributed to the early losses. However, an afternoon bid lifted indices off their lows, leading to just a modest decline.

Several reports attributed the notable weakness in Europe to participants reducing their risk exposure in anticipation of Friday's U.S. nonfarm payrolls report. Although the Federal Reserve has made it clear the strength of the labor market will play a large part in its tapering decision, the decision will also have to factor in the 2.0% inflation target, which remains elusive. Both PCE and core PCE prices hover near 1.0%.

The opening losses were followed by a rebound, but only the Nasdaq was able to make a short-lived appearance in positive territory, seeing help from its largest component, Apple (AAPL 566.32, +15.09). The largest tech stock jumped 2.7% following news China Mobile (CHL 53.75, +0.13) began accepting iPhone pre-orders. Another Nasdaq member, Tesla (TSLA 144.70, +20.53), also displayed strength, surging 16.5% after Morgan Stanley named the stock its ‘Top Pick.'

U.S. stocks tumbled to fresh lows two hours after the opening bell as their European counterparts weakened into the close. The selling pressured five of ten sectors while consumer staples (+0.5%), energy (+0.3%), technology (+0.4%), telecom services (+0.2%), and utilities (+0.6%) escaped with modest gains.

Notably, the energy sector advanced as crude oil futures (+$2.32 to $96.14/bbl) shot up on news OPEC might curb output in 2014 to ensure oil prices stay near $100/bbl.

On the downside, the materials (-1.2%) sector finished behind the remaining groups. Steel stocks were mixed, but the largest steelmaker, ArcelorMittal (MT 16.89, -0.40), underperformed with a loss of 2.3%. Miners also weighed as the Market Vectors Gold Miners ETF (GDX 20.57, -0.33) lost 1.6%. Also of note, Rio Tinto (RIO 52.38, +0.01) announced plans to cut its capital spending in half by 2015; however, the reaction was muted.

Other cyclical sectors did not fare much better as consumer discretionary, financials, and industrials lost between 0.7% and 0.9%. Elsewhere, health care (-0.8%) was the only laggard among countercyclical groups as biotechnology weighed. The iShares Nasdaq Biotechnology ETF (IBB 220.66, -4.07) lost 1.8%.

Today's weakness caused the CBOE Volatility Index (VIX 14.55, +0.32) to end at a seven-week high after being trapped between 11.99% and 14.36% since October 17.

Treasuries ended modestly higher with the 10-yr yield down two basis points at 2.78%.

Trading volume was just above average as 770 million shares changed hands on the floor of the NYSE.

There was no economic data of note released today.

Tomorrow, the weekly MBA Mortgage Index will be reported at 7:00 ET and November ADP Employment Change will cross the wires at 8:15 ET. The October trade balance will be released at 8:30 ET while new home sales for September and October will be announced at 10:00 ET. Also at 10:00 ET, investors will receive the ISM Services Index for November. The busy day of data will be topped off with the 14:00 ET release of the Federal Reserve's December Beige Book. 

·         Nasdaq +33.7% 

·         Russell 2000 +32.3% 

·         S&P 500 +25.9% 

·         DJIA +21.5%

Commodities

Closing Commodities: Crude Oil Rises Above $96, Books 2.4% Gain
Jan crude oil extended gains for a third consecutive session as it gained support from a weaker dollar index. In addition, reports indicated that TransCanada's (TRP) 700K barrel-per-day Gulf Coast pipeline is expected to begin service to Texas on January 3rd. The energy component lifted from its session low of $93.67 per barrel set moments after pit trade opened and trended higher for the remainder of the session. It settled 2.4% higher at $96.04 per barrel, just below its session high of $96.19 per barrel. 

Jan natural gas, on the other hand, fell for the first time in nine sessions, unable to hold on to mid-day gains. Prices advanced to a session high of $4.01 per MMBtu in late morning pit trade but retreated back into the red. Natural gas brushed a session low of $3.94 per MMBtu and eventually settled at $3.97 per MMBtu, or 0.5% lower. 

Feb gold advanced to a session high of $1225.80 per ounce in morning pit action after trading as low as $1214.60 per ounce earlier in the session. However, the yellow metal was unable to hold the gain and retreated back into the red as it headed towards the close. It eventually settled 0.1% lower a t$1220.70 per ounce. 

Mar silver extended yesterday's losses, trading in the red for its entire floor session. Prices dipped to a session low of $18.98 per ounce after pulling back from a session high of $19.22 per ounce set at pit trade open. Unable to gain much momentum, silver settled with a 1.2% loss at $19.06 per ounce.

COMEX Metals Closing Prices

  Feb gold fell $1.30 to $1220.70/ounce 

·         Gold advanced to a session high of $1225.80 in morning pit action after trading as low as $1214.60 earlier in the session. However, the yellow metal was unable to hold the gain and retreated back into the red ahead of the close. It eventually settled 0.1% lower. 

  Mar silver fell $0.24 to $19.06/ounce 

·         Silver extended yesterday's losses as it traded in the red for its entire floor session. It dipped to a session low of $18.98 after pulling back from a session high of $19.22 set at pit trade open. Unable to gain much momentum, it settled with a 1.2% loss. 

  Mar copper fell 1 cent to $3.17/lb

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Mar corn rose 6 cents to $4.31/bushel 

·         Mar wheat rose 6 cents to $6.69/bushel 

·         Jan soybeans fell 2 cents to $13.19/bushel 

·         Jan ethanol rose 4 cents to $1.76/gallon 

·         Jan sugar (#16 (U.S.)) fell 0.04 of a penny to 20.10 cents/lbs

NYMEX Energy Closing Prices

  Jan crude oil rose $2.21 to $96.04/barrel 

·         Crude oil rose for a third consecutive session as it gained support from a weaker dollar index. In addition, reports indicated that TransCanada's (TRP) 700,000 barrel-per-day Gulf Coast pipeline is expected to begin service to Texas on January 3rd. The energy component lifted from its session low of $93.67 set moments after pit trade opened and trended higher for the remainder of the session. It settled just below its session high of $96.19, booking a solid 2.4% gain. 

  Jan natural gas fell 2 cents to $3.97/MMBtu 

·         Natural gas fell for the first time in nine sessions as it was unable to hold on to mid-day gains. Prices advanced to a session high of $4.01 in late morning pit trade but retreated back into the red. Natural gas brushed a session low of $3.94 and eventually settled with a 0.5% loss. 

  Jan heating oil rose 2 cents to $3.04/gallon 

  Jan RBOB gasoline rose 4 cents to $2.72/gallon

Treasuries

Treasuries Post Modest Gains: 10-yr: +05/32..2.779%..USD/JPY: 102.36..EUR/USD: 1.3589

·         Some afternoon selling dropped Treasuries off their highs, but the complex still managed to finish with modest gains.

·         Treasuries began ticking higher amid weakness in European equities, and saw a steady bid over the course of the morning as U.S. equity markets opened heavy and grinded lower. However, the complex put in its top around midday, and light selling persisted into the close. Click here to see an intraday yields chart.

·         Today's bid has the biggest impact on yields in belly of the curve with 5y shedding -3bps to end @ 1.391%. 

·         The 10y probed the key 2.800% level in overnight action before ticking down to 2.760% in U.S. trade. The benchmark yield closed the day down -2.6bps @ 2.775%. 

·         At the long end, the 30y slipped -2.3bps, closing @ 3.837%. Participants continue to monitor the 3.940% area as a breakout above that level would produce the highest print since August 2011. 

·         Today's bid flattened the yield curve with the 2-10-yr spread tightening to 249bps. 

·         Precious metals lost ground as gold fell -$1 to $1221 and silver shed -$0.20 to near $19.10. 

·         Tomorrow's Data: MBA Mortgage Index (7), ADP Employment Change (8:15), the trade balance (8:30), two months of new home sales, ISM Services (10), and the Fed's Beige Book (14).

Next Day In View 

Economic Commentary

Economic Summary: No US data today; ADP tomorrow at 8:15

Upcoming Economic Data:

·         Weekly MBA Mortgage Applications due out Wednesday at 7:00 (Briefing.com consensus of ; Last Week was -0.3%)

·         November ADP Employment Change due out Wednesday at 8:15 (Briefing.com consensus of 160K; October was 130K)

·         October Trade Balance due out Wednesday at 8:30 (Briefing.com consensus of -$40.5 bln; September was -$41.8 bln)

·         September New Home Sales due out Wednesday at 10:00 (Briefing.com consensus of 432K; August was 421K)

·         October New Home Sales due out Wednesday at 10:00 (Briefing.com consensus of 420K; September was )

·         November ISM Services due out Wednesday at 10:00 (Briefing.com consensus of 55.0; October was 55.4)

Other International Events of Interest

·         The Nikkei caught a bid on speculation the Bank of Japan would announce more easing after a business survey showed inflation will grow at 1.4% over the next two years, missing the central bank's 2% target. 

·         China's Shanghai Composite advanced despite Non-Manufacturing PMI edging down to 56.0 (56.3 previous) and a Chinese think tank suggesting the Middle Kingdom's economy may only grow 7% in 2014. 

·         The Reserve Bank of Australia opined overnight, opting to keep its Cash Rate unchanged at 2.50%, as expected, but suggested the Australian dollar still remains too high. 

On other news.... 

Currencies 

Dollar Tests Key 80.50 Level: 10-yr: +06/32..2.776%..USD/JPY: 102.31..EUR/USD: 1.3590
The Dollar Index holds on session lows near 80.50 as trade tests key support in the area. The greenback has seen steady selling over the course of U.S. trade drop action off the 100 dma and onto the 50 dma. This area will be watched closely over the coming days as a breakdown would set up the potential for a retest of the October lows near 79.20. Click here to see a daily Dollar Index chart. 

·         EURUSD is +60 pips @ 1.3600 as trade looks for its best close since the end of October. Continued chatter of further easing by the ECB through another rate cut or by the implementation of QE has not acted as a headwind as the single currency has managed to climb approximately 300 pips off the early-November lows. Thursday's ECB rate decision will be key. Eurozone data out tomorrow includes retail sales as well as Services PMI numbers from around the region. 

·         GBPUSD is +50 pips @ 1.6405 as trade climbs for the 11th time in the past 15 sessions. Today's bid comes after Construction PMI posted its best reading in six years, and has trade printing at levels last seen in the fall of 2008. The 1.6700 area should be watched closely over the coming sessions. Britain's Services PMI is due out tomorrow. 

·         USDCHF is -55 pips @ .9030 as action holds just off the lows. Today's selling has the pair on track to post its worst close since late-October as trade slips below .9050 support. Look for a retest of the October lows near .8900 if support is not regained in a timely manner. 

·         USDJPY is -90 pips @ 102.00 with action seeing a sharp reversal off this morning's highs. The pair climbed to almost 103.50 in early trade as word spread the Bank of Japan is considering an expansion to its asset purchase program; however, sellers managed to take the upper hand and now have action on track to close at its lowest level in a week. Minor support rests in the 101.50 area with more important help residing near 100.00. 

·         AUDUSD is +20 pips @ .9125 after the Reserve Bank of Australia opted to keep its Cash Rate steady at 2.50%, as expected. In its Statement, the RBA reiterated the Aussie dollar remains too strong; however, the central bank failed to lower rates as it waits to see how the August rate cuts works its way through the system. Australia's GDP will cross the wires tonight. 

·         USDCAD is +5 pips @ 1.0650 as action fights for its best close in 40 months. The 1.0650/1.0700 area will be tracked closely as the Bank of Canada opines tomorrow. Markets expecting no change from the current 1.00%. Canadian data is limited to the trade balance.

Jason's Commentaries


While I'm in Bintan enjoying myself, I wasn't able to take profit off the table last night when the S&P500 punch through the 1790 support level. Market started with a bearish bias last night as European market started to profit take and caused the US market to head south. Only 1430 ET, the market started reboucing and held above 1790 for the 1790 level. Volumes were healthy at 762m shars traded on the NYSE and internals were all pointing towards a slight bearishness. On the technical note, we're having some sort of upside crucifix on the S&P500 and I believe it provide some sort of support for the market. However, we're on the 4th candle, which we're likely to continue going down for another day. Ahead of the employment report, good news might be bad news and bad news might be good news. In such situation, I'm going take my profit early =D

Market Call: FLAT

Date: 4 Dec 2013