4 Dec 2013 AMC- Volatile session in market as ADP proved better than expected, ISM Non-Manufacturing contracted and New Home Sales jumped.
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: -0.9%
·
France's CAC: -0.6%
·
Spain's IBEX: -0.7%
·
Portugal's PSI: -1.2%
·
Italy's MIB Index: -0.3%
·
Irish Ovrl Index: -0.5%
·
Greece ATHEX Composite: -0.8%
Before Market Opens
S&P futures vs fair value:
-6.50. Nasdaq futures vs fair value: -9.80.
The S&P 500 futures trade 0.4% below fair value.
Major Asian indices ended mostly lower, but China's Shanghai Composite (+1.3%) stood out following the announcement of plans to create up to 18 new free-trade zones. In addition, the Ministry of Commerce said 12 other agreements have been finalized while six more are being negotiated. Regional economic data was limited to just a handful of releases. China's HSBC Services PMI ticked down to 52.5 from 52.6 and India's HSBC Services PMI ticked up to 47.2 from 47.1. Elsewhere, Australia's GDP rose 0.6% quarter-over-quarter (0.8% forecast, 0.7% prior) while the year-over-year reading reflected growth of 2.3% (2.6% expected, 2.4% last). Separately, the AIG Services Index improved to 48.9 from 47.9.
The S&P 500 futures trade 0.4% below fair value.
Major Asian indices ended mostly lower, but China's Shanghai Composite (+1.3%) stood out following the announcement of plans to create up to 18 new free-trade zones. In addition, the Ministry of Commerce said 12 other agreements have been finalized while six more are being negotiated. Regional economic data was limited to just a handful of releases. China's HSBC Services PMI ticked down to 52.5 from 52.6 and India's HSBC Services PMI ticked up to 47.2 from 47.1. Elsewhere, Australia's GDP rose 0.6% quarter-over-quarter (0.8% forecast, 0.7% prior) while the year-over-year reading reflected growth of 2.3% (2.6% expected, 2.4% last). Separately, the AIG Services Index improved to 48.9 from 47.9.
·
In
Japan, the Nikkei closed
lower by 2.2% as only 10 of 225 components registered gains. Exporters lagged
as Sony, Kyocera, and Yamaha lost between 3.4% and 3.9%. Nisshin Steel Holdings
outperformed with a gain of 1.5%.
·
Hong
Kong's Hang Seng lost 0.8% as
energy and financials underperformed. PetroChina fell 1.6% and China Resources
Land settled lower by 1.9%.
·
In
China, the Shanghai Composite
settled higher by 1.3% with shipping stocks displaying strength. China Shipping
Development and Shanghai International Port Group both surged the limit,
10.0%.
Core European averages trade notably
lower for the second consecutive day with Germany's DAX (-1.2%) pacing the
retreat. Regional indices began the session with modest gains as they looked to
rebound from yesterday's sharp decline. However, the early strength has morphed
into modest weakness as indices in Great Britain, Germany, and France hover
near their lows. Investors received several economic data points. Eurozone GDP
ticked up 0.1% quarter-over-quarter while the year-over-year reading fell 0.4%,
as expected. Separately, retail sales declined 0.2% month-over-month (0.3%
forecast, -0.6% last) while the year-over-year reading ticked down 0.1% (0.9%
consensus, 0.3% prior). Also of note, Services PMI increased to 51.2 from 50.9
(50.9 forecast). Elsewhere, Germany's Services PMI rose to 55.7 from 54.5 (54.5
consensus). Great Britain's Services PMI slipped to 60.0 from 62.5 (62.0
expected). Italian Services PMI fell to 47.2 from 50.5 (50.2 forecast). French
Services PMI ticked down to 48.0 from 48.9 (48.8 expected). Swiss industrial
orders declined 2.3% (2.0% forecast, -4.3% last).
·
Great
Britain's FTSE is lower by 0.6%
with financials leading. Aberdeen Asset Management, Barclays, and Standard
Chartered are all down between 2.4% and 6.3%. On the upside, miners Antofagasta
and Rio Tinto outperform with respective gains of 0.7% and 1.1%.
·
In
France, the CAC trades down
0.9%. Bank shares are also responsible for a good portion of the decline as BNP
Paribas, Credit Agricole, and Societe Generale hold losses between 1.7% and
2.7%.
·
Germany's DAX holds a loss of 1.1%. Producers of basic
materials lag with BASF, HeidelbergCement, and ThyssenKrupp down between 1.9%
and 2.4%.
Market Internals
Market Internals -Technical-
The Nasdaq closed up 1 (+0.02%) at 4038, the S&P 500 closed down 2 (-0.13%) at 1793, and the Dow closed down 25 (-0.16%) at 15890. Action came on slightly above average volume (NYSE 756 mln vs. avg. of 698; NASDAQ 1836 mln vs. avg. of 1763), with decliners outpacing advancers (NYSE 1176/1901, NASDAQ 1075/1482) and mixed new highs/lows (NYSE 63/93, NASDAQ 87/20).
Relative Strength:
Junior Gold Miners-GDXJ +3.32%, Silver-SLV +3.15%, India-INP +3.03%, Copper-JJC +2.32%, Social Media-SOCL +2.13%, Gold-GLD +1.70%, Indian Rupee-ICN +1.26%, Mexico-EWW +0.79%, Vietnam-VNM +0.77%, China 25 Index-FXI +0.53%.
Relative Weakness:
Wind Energy-FAN -2.13%, New Zealand-ENZL -1.69%, Austria-EWO -1.67%, Coffee-JO -1.39%, Middle East and Africa-GAF -1.29%, Australian Dollar-FXA -1.17%, Netherlands-EWN 1.05%, 20+ Year Treasuries-TLT -0.95%, Retail-XRT -0.89%, MLP Index-AMJ -0.87%.
Leaders and Laggards
Technical Updates
Briefing's Commentaries
Closing Market Summary: Stocks End
Little Changed Following Roller Coaster Ride
The S&P 500 shed 0.1%, registering its fourth consecutive decline. Today's session proved to be a bit of a roller coaster ride for stocks as the S&P 500 opened in the red, rallied into positive territory, fell to fresh lows, and regained the bulk of its losses into the close.
For the second day in a row, the early weakness coincided with heavy selling in Europe. In addition, bonds and risk assets were pressured by a better-than-expected ADP Employment report, which indicated employment in the nonfarm private business sector rose by 215K in November (160K Briefing.com consensus). The report increased expectations for a strong nonfarm payrolls report on Friday, and re-invited speculation about the Fed's tapering timeline. Treasuries sold off following the data, sending the 10-yr yield higher by five basis points to 2.83%.
The opening losses were followed by a swift reversal after below-consensus ISM Services (53.9 actual versus 55.0 expected) for November and a ho-hum composite home sales report for September (354K actual versus 432K consensus) and October (444K actual versus 420K expected) raised some doubts about the sustainability of the economic improvement. This calmed some of the tapering fears, and helped the major indices regain their flat lines. Contributing to the rebound, were rumors suggesting Democrats and Republicans reached a budget agreement.
The budget deal rumors faded shortly thereafter while equity indices responded with a fade of their own. The S&P 500 tumbled to fresh lows, but was able to springboard off the 1,779 level and rally back to its flat line.
In large part, the late-afternoon rebound was powered by three sectors—financials (+0.2%), technology (+0.2%), and materials (+0.5%)—that outperformed throughout the session. Outside of the three, only the utilities sector (+0.2%) finished with a gain.
Notably, the materials sector received all-around support from most of its components. Steelmakers and miners outperformed as the Market Vectors Steel ETF (SLX 47.99, +0.39) gained 0.8% and Market Vectors Gold Miners ETF (GDX 21.22, +0.65) jumped 3.2%. On a related note, gold futures spiked 2.0% to $1244.60 per troy ounce.
The other commodity-linked sector, energy (-0.4%), ended among the laggards while crude oil added 1.2% to $97.19 per barrel.
Today's trading volume was just above average as more than 756 million shares changed hands on the floor of the New York Stock Exchange.
Looking at today's remaining economic data, the October trade deficit fell to $40.6 billion from an upwardly revised $43.0 billion. In large part, the decline was due to significant gains in sales of artwork (+$0.50 billion), gem diamonds (+$0.40 billion), and jewelry (+$0.40 billion). The Briefing.com consensus expected the trade deficit to fall to $40.5 billion.
Separately, the weekly MBA Mortgage Index tumbled 12.8% to follow last week's downtick of 0.3%.
Tomorrow, November Challenger Job Cuts will be reported at 7:30 ET while weekly initial claims and the second estimate of third quarter GDP will be released at 8:30 ET. The day's data will be topped off with the 10:00 ET release of October Factory Orders.
The S&P 500 shed 0.1%, registering its fourth consecutive decline. Today's session proved to be a bit of a roller coaster ride for stocks as the S&P 500 opened in the red, rallied into positive territory, fell to fresh lows, and regained the bulk of its losses into the close.
For the second day in a row, the early weakness coincided with heavy selling in Europe. In addition, bonds and risk assets were pressured by a better-than-expected ADP Employment report, which indicated employment in the nonfarm private business sector rose by 215K in November (160K Briefing.com consensus). The report increased expectations for a strong nonfarm payrolls report on Friday, and re-invited speculation about the Fed's tapering timeline. Treasuries sold off following the data, sending the 10-yr yield higher by five basis points to 2.83%.
The opening losses were followed by a swift reversal after below-consensus ISM Services (53.9 actual versus 55.0 expected) for November and a ho-hum composite home sales report for September (354K actual versus 432K consensus) and October (444K actual versus 420K expected) raised some doubts about the sustainability of the economic improvement. This calmed some of the tapering fears, and helped the major indices regain their flat lines. Contributing to the rebound, were rumors suggesting Democrats and Republicans reached a budget agreement.
The budget deal rumors faded shortly thereafter while equity indices responded with a fade of their own. The S&P 500 tumbled to fresh lows, but was able to springboard off the 1,779 level and rally back to its flat line.
In large part, the late-afternoon rebound was powered by three sectors—financials (+0.2%), technology (+0.2%), and materials (+0.5%)—that outperformed throughout the session. Outside of the three, only the utilities sector (+0.2%) finished with a gain.
Notably, the materials sector received all-around support from most of its components. Steelmakers and miners outperformed as the Market Vectors Steel ETF (SLX 47.99, +0.39) gained 0.8% and Market Vectors Gold Miners ETF (GDX 21.22, +0.65) jumped 3.2%. On a related note, gold futures spiked 2.0% to $1244.60 per troy ounce.
The other commodity-linked sector, energy (-0.4%), ended among the laggards while crude oil added 1.2% to $97.19 per barrel.
Today's trading volume was just above average as more than 756 million shares changed hands on the floor of the New York Stock Exchange.
Looking at today's remaining economic data, the October trade deficit fell to $40.6 billion from an upwardly revised $43.0 billion. In large part, the decline was due to significant gains in sales of artwork (+$0.50 billion), gem diamonds (+$0.40 billion), and jewelry (+$0.40 billion). The Briefing.com consensus expected the trade deficit to fall to $40.5 billion.
Separately, the weekly MBA Mortgage Index tumbled 12.8% to follow last week's downtick of 0.3%.
Tomorrow, November Challenger Job Cuts will be reported at 7:30 ET while weekly initial claims and the second estimate of third quarter GDP will be released at 8:30 ET. The day's data will be topped off with the 10:00 ET release of October Factory Orders.
·
Nasdaq +33.7% YTD
·
Russell 2000 +32.0%
YTD
·
S&P 500 +25.7%
YTD
·
DJIA +21.3 YTD
Commodities
Closing Commodities: Precious Metals Rally in Afternoon Floor Trade; Silver Gains 4%
Precious metals rose along with other commodities today as the dollar index slipped further into negative territory. Both Feb gold and Mar silver lifted from their respective session lows of $1217.20 per ounce and $19.15 per ounce and trended higher as floor trade progressed. Both metals gained further momentum in afternoon action and pushed to new session highs. Gold settled 2.2% higher at $1220.70 per ounce while silver closed at $19.83 per ounce, booking a solid 4.0% gain.
Jan crude oil extended gains for a fourth consecutive session as it gained support from strong inventory data and the weaker dollar index. The EIA reported this morning that for the week ending Nov 29, crude oil inventories had a draw of 5.585 mln barrels when consensus was between a draw of 0.5 mln and a build of 0.3 mln barrels. The energy component dipped to a session low of $96.30 per barrel in late morning pit trade but quickly regained momentum. It rose to a session high of $97.54 per barrel and settled with a 1.2% gain at $97.18 per barrel.
Jan natural gas, however, extended yesterday's losses after pulling back from a session high of $4.01 per MMBtu set during morning floor action. It slipped into negative territory as it headed into the close and settled 0.3% lower at $3.96 per MMBtu.
NYMEX Energy Closing Prices
Jan crude oil rose $1.14 to $97.18/barrel
·
Crude oil extended gains
for a fourth consecutive session, gaining support from better-than-anticipated
inventory data and a weaker dollar index. The EIA reported that for the week
ending Nov 29, crude oil inventories had a draw of 5.585 mln barrels when
consensus was between a draw of 0.5 mln and a build of 0.3 mln barrels. The
energy component dipped to a session low of $96.30 in late morning pit trade
but quickly regained momentum. It advanced to a session high of $97.54 and
settled with a 1.2% gain.
Jan natural gas fell 1 cent to $3.96/MMBtu
·
Natural gas extended
yesterday's losses after pulling back from a session high of $4.01 set in
morning pit trade. It slipped into negative territory as it headed into the
close and settled 0.3% lower.
Jan heating oil fell 1 cent to $3.06/gallon
Jan
RBOB gasoline settled unchanged at $2.72/gallon
CBOT Agriculture and Ethanol/ICE Sugar Closing
Prices
·
Mar
corn rose 6 cents to
$4.37/bushel
·
Mar
wheat fell 7 cents to
$6.62/bushel
·
Jan
soybeans rose 9 cents to
$13.28/bushel
·
Jan
ethanol rose 11 cents to
$1.87/gallon
·
Jan
sugar (#16 (U.S.)) settled
unchanged at 20.10 cents/lbs
COMEX Metals Closing Prices
Feb gold rose $26.50 to $1220.70/ounce
·
Gold rose along with
other commodities today as the dollar index slipped further into negative
territory. The yellow metal came off its session low of $1217.20 and trended
higher as the session progressed. It shot up to a session high of $1251.50 and
eventually settled with a 2.2% gain.
Mar silver rose $0.77 to $19.83/ounce
·
Silver outperformed the
commodities space today as it lifted from its session low of $19.15 set moments
after pit trade opened. It gained further momentum in afternoon action and settled
just below its session high of $19.86, booking a solid 4.0% gain.
Mar
copper rose 8 cents to $3.25/lbs
Treasuries
Treasuries Slide as Strong ADP
Report Ignites Taper Fears: 10-yr: -14/32..2.838%..USD/JPY: 102.27..EUR/USD
1.3586
·
Treasuries ended with
moderate losses after today's strong ADP Employment report (215K
actual v. 160K expected) ignited the selling. Click here to see an intraday
yields chart.
·
The complex managed to
look past mixed new home sales data [September (354K actual v. 4321K expected)
and October (444K actual v. 420K expected)] and the disappointing ISM Services
number (53.9 actual v. 55.0 expected) as the ADP report ignited fears a
strong nonfarm payroll report on Friday may cause the Fed to scale back its
bond-buying program in the coming meetings.
·
Today's
Beige Book provided more of the same with the Fed noting, "The economy continued to expand
at a modest to moderate pace from early October through mid-November."
·
A +5.1bp advance ran the
5y up to 1.442%, causing action to close at a three and a half-week
high. This area will be under close watch over the coming days with a
breakout sparking a move into the 1.650% region.
·
The 10y climbed +6.6bps
on the session with trade settling @ 2.841%. Today's action saw the benchmark
yields bust through key resistance in the 2.800% area. The inability of the 10y
to slip back below that level quickly would put the September highs near 3.000%
back in focus.
·
At the long end, the 30y
rallied +6.8bps. Today's close matched that from two weeks ago, marking
the highest since August 2011. The recent high print for the 30y occurred
on November 21, and registered 3.938%.
·
Aggressive
selling swung the yield curve steeper with the 2-10-yr spread widening to
255bps.
·
Precious metals posted
solid gains with gold +$26 @ $1247 and silver +$0.77 @ $19.84.
·
Data: Challenger Job Cuts (7:30), initial and
continuing claims, GDP - Second Estimate (8:30), and factory orders (10).
·
Fed
Speak: ATL's Lockhart will be
in Ft. Lauderdale, FL to discuss the economy and monetary policy (8:15) before
Dallas' Fisher speaks on "Federal Reserve Operations and Economic
Update" in College Station, TX (13:15).
Next Day In View
Economic Commentary
Economic Summary: ADP blows past
estimates; Trade deficit in line with expectations; October New Home sales top
expectations; Q3 GDP (second estimate) tomorrow; ECB tomorrow at 7:45
Economic Data Summary:
Economic Data Summary:
·
Weekly MBA Mortgage
Applications -12.8% vs Briefing.com consensus of ; Last Week was -0.3%
·
November
ADP Employment Change 215K vs Briefing.com consensus of 160K; October was
revised to 184K from 130K
o Goods producing +40,000
o Service providing +176,000
·
October Trade Balance
-$40.6 bln vs Briefing.com consensus of -$40.5 bln; September was revised to
-$43.0 bln from -$41.8 bln
o Exports jumped 2.2% in October, from
$132.3 bln in September to $135.3 bln. Unfortunately, the pickup in export
demand may not be stable. Nearly half of the increase in exports was attributed
to a large gain in sales of artwork (+$0.5 bln), gem diamonds (+$0.4 bln), and
jewelry (+$0.4 bln) that likely occurred on account of the high-end and well
publicized Christie's and Sotheby's auctions.
·
September New Home Sales
354K vs Briefing.com consensus of 432K; August was 421K
·
October
New Home Sales 444K vs Briefing.com consensus of 420K; September was 354K
o There is no doubt that demand spiked in October.
However, levels simply returned to the average for January to June. This was
not a strengthening in the overall housing market but the end of a
late-summertime lull.Supply at current sales levels fell to 4.9 months in
October from 6.4 months in September. Normal periods of housing sales activity
generally support 6.0 months' inventory. The dip continues to show that
inventory levels are tight, but not as constrained as they were throughout 2012
and the early parts of 2013.
·
November ISM Services 53.9
vs Briefing.com consensus of 55.0; October was 55.4
Upcoming Economic Data:
·
November Challenger Job
Cuts due out Thursday at 7:30 (Briefing.com consensus of ; October was -4.2%)
·
Weekly Initial Jobless
Claims due out Thursday at 8:30 (Briefing.com consensus of 330K; Last Week was
316K)
·
Weekly Continuing
Jobless Claims due out Thursday at 8:30 (Briefing.com consensus of 2.850 M ;
Last Week was 2.776 M )
·
Third
Quarter GDP Second Esimate due out Thursday at 8:30 (Briefing.com consensus of
3.0%; Second quarter was 2.8%)
·
Third
Quarter GDP Deflator - Second Estimate due out Thursday at 8:30 (Briefing.com
consensus of 1.9%; Second quarter was 1.9%)
·
October Factory Orders
due out Thursday at 10:00 (Briefing.com consensus of -1.0%; September was 1.7%)
Upcoming Fed/Treasury Events:
·
Fed Beige Book due out
today at 14:00
·
Atlanta Fed President
Dennis Lockhart (not a voting FOMC member, moderate) to speak tomorrow at 8:15
·
Dallas Fed President
Richard Fisher (2014 voter, hawkish) to speak tomorrow at 13:15
Other International Events of
Interest
·
Today's data was mostly
disappointing as eurozone retail sales (-0.2% MoM actual v. 0.2% MoM expected),
Italian Services PMI (47.2 actual v. 51.2 expected, 50.5 previous), and the
UK's Services PMI (60.0 actual v. 62.1 expected, 62.5 previous) all missed
estimates.
·
BoE rate decision
tomorrow at 7:00
·
ECB
rate decision tomorrow at 7:45 followed by a press conference by Mario Draghi
at 8:30
On other news....
October New Home Sales 444K vs 420K
Briefing.com consensus
November ISM Services 53.9 vs 55.0 Briefing.com
consensus; October 55.4
Retail November Same Store Sales
Preview— Black Thriday vs Online
A handful of retailers report November sales tomorrow (Thursday December 5) before the open. ZUMZ and GPS tomorrow after the close. COST / RAD will report prelim Qtrly sales with November results.
November retail calendar was four weeks and included Thanksgiving (week later shift but still within November period), Black Thriday, Veterans Day and Hanukkah. Faced with shortnened holiday season, retailers have tried to jump-start sales with early promotions and early store openings. Results have been somewhat mixed - the National Retail Federation reported 3.0% y/y decline in Thanksgiving weekend sales while ComScore reported +3% in online sales. Shoppertrak reported Thanksgiving weekend brick-and-mortar retail sales +1% (+2.3% on Thursday/Friday) but traffic decreased by 4% (+2.8% on Thursday/Friday). ICSC/ Goldman data continues to suggest Nov comps +3.5-4.5%, while Redbook November-to-date sales were slightly lower than initially targeted (+3.9% vs +4.1% tgt). Going forward: Retailers face the critical (and shortened) holiday season. The December period will be five weeks ending January 4, 2014. Redbook already gave prelim projections for comps +4.4%.
Most retailers have recently reported Q3 results and will not be updating guidance. COST / RAD will report prelim Qtrly sales with November results (WAG reported Q1 sales with comps before the open). A handful of names are scheduled to report earnings this month including Pier 1 Imports (PIR - updated guidance last year), Aeropostale (ARO) / Guess (GES) / Wet Seal (WTSL) report after the close, Francesca's (FRAN) and Jos. A. Bank (JOSB) report Dec 5 before the open, Ulta Salon (ULTA)/Pacific Sunwear (PSUN)/Zumiez (ZUMZ) report Dec 5 after the close, American Eagle (AEO) Dec 6 before the open.
Headed into results, the retail sector is underperforming. Several potential catalysts are hitting the group including Express (EXPR -22%) earnings miss/downside guidance, disappointing J. C. Penney (JCP -3.7%) Nov update, Walgreens (WAG -2%) comps miss, cautious WSJ story on retail inventory. The SPDRdest Retail (XRT) is down 1.2% on the day, Retail HOLDRS Trust (RTH) -1.0%, Consumer Dis Spdr (XLY) -0.5% vs S&P500 index (SPX) -0.5%. Majority of retail names are in the red: EXPR -22.5% (earnings/guidance), SHLD -7.8% (ESL Partners decreases stake; cautious Cleveland comments), BIG -6.5%, BEBE -5%, JCP -4.4% (following Nov update), DXLG -4.1%, LB -3.9%, ARO -3.5%, CACH -3%, BONT-3%, BBW -2.7%, ALCS -2.7%, APP -2.5%, AEO -2.4%, PSUN -2.5%, RAD -2.5%, KIRK -2.4%, KSS -2.3%, GES -2.5%, LULU -2%, PIR -2%, WTSL -1.9%, SKX -1.9%, FOSL -1.8%, BBBY -1.8%, ZQK -1.6%, GPS -1.4%, ANN -1.5%, URBN -1.5%, NWY -1.4%, COLM -1.3%, ROST -1.4%, DECK -1.5%, BKE -1.3%, JNY -1.3%, JWN -1.2%, XRT -1.1%, CATO-1%, SSI -1%, TCS -1%, PERY -0.9%, SMRT -0.9%, RTH -0.9%, WSM -0.9%, KORS -0.8%, GIL -0.7%, SHOS -0.7%, FRAN -0.7%, VNCE -0.7%, COST -0.6%, NKE -0.6%, HBI -0.6%, WMT -0.6%, DDS -0.6%, FRED -0.5%, XLY -0.5%, ANF -0.5%, TJX -0.4%, PVH -0.4%, CHS -0.4%, DLTR -0.4%, TUES -0.4%... A few are trading higher: CBK +7.7%, CTRN+0.8%, TUMI +0.7%, BWS +0.3%, ZUMZ +0.2% (CROX RL BBY CONN TGT flat).
Following October results, the retail sector pulled back after the open and closed in the red. The SPDRdest Retail (XRT) was -1.2% on the day, Retail HOLDRS Trust (RTH) -1.8%, Consumer Dis Spdr (XLY) -2.1% vs S&P500 index (SPX) -1.3%.
Some cos that beat October Same-Store Sales estimates include:
A handful of retailers report November sales tomorrow (Thursday December 5) before the open. ZUMZ and GPS tomorrow after the close. COST / RAD will report prelim Qtrly sales with November results.
November retail calendar was four weeks and included Thanksgiving (week later shift but still within November period), Black Thriday, Veterans Day and Hanukkah. Faced with shortnened holiday season, retailers have tried to jump-start sales with early promotions and early store openings. Results have been somewhat mixed - the National Retail Federation reported 3.0% y/y decline in Thanksgiving weekend sales while ComScore reported +3% in online sales. Shoppertrak reported Thanksgiving weekend brick-and-mortar retail sales +1% (+2.3% on Thursday/Friday) but traffic decreased by 4% (+2.8% on Thursday/Friday). ICSC/ Goldman data continues to suggest Nov comps +3.5-4.5%, while Redbook November-to-date sales were slightly lower than initially targeted (+3.9% vs +4.1% tgt). Going forward: Retailers face the critical (and shortened) holiday season. The December period will be five weeks ending January 4, 2014. Redbook already gave prelim projections for comps +4.4%.
Most retailers have recently reported Q3 results and will not be updating guidance. COST / RAD will report prelim Qtrly sales with November results (WAG reported Q1 sales with comps before the open). A handful of names are scheduled to report earnings this month including Pier 1 Imports (PIR - updated guidance last year), Aeropostale (ARO) / Guess (GES) / Wet Seal (WTSL) report after the close, Francesca's (FRAN) and Jos. A. Bank (JOSB) report Dec 5 before the open, Ulta Salon (ULTA)/Pacific Sunwear (PSUN)/Zumiez (ZUMZ) report Dec 5 after the close, American Eagle (AEO) Dec 6 before the open.
Headed into results, the retail sector is underperforming. Several potential catalysts are hitting the group including Express (EXPR -22%) earnings miss/downside guidance, disappointing J. C. Penney (JCP -3.7%) Nov update, Walgreens (WAG -2%) comps miss, cautious WSJ story on retail inventory. The SPDRdest Retail (XRT) is down 1.2% on the day, Retail HOLDRS Trust (RTH) -1.0%, Consumer Dis Spdr (XLY) -0.5% vs S&P500 index (SPX) -0.5%. Majority of retail names are in the red: EXPR -22.5% (earnings/guidance), SHLD -7.8% (ESL Partners decreases stake; cautious Cleveland comments), BIG -6.5%, BEBE -5%, JCP -4.4% (following Nov update), DXLG -4.1%, LB -3.9%, ARO -3.5%, CACH -3%, BONT-3%, BBW -2.7%, ALCS -2.7%, APP -2.5%, AEO -2.4%, PSUN -2.5%, RAD -2.5%, KIRK -2.4%, KSS -2.3%, GES -2.5%, LULU -2%, PIR -2%, WTSL -1.9%, SKX -1.9%, FOSL -1.8%, BBBY -1.8%, ZQK -1.6%, GPS -1.4%, ANN -1.5%, URBN -1.5%, NWY -1.4%, COLM -1.3%, ROST -1.4%, DECK -1.5%, BKE -1.3%, JNY -1.3%, JWN -1.2%, XRT -1.1%, CATO-1%, SSI -1%, TCS -1%, PERY -0.9%, SMRT -0.9%, RTH -0.9%, WSM -0.9%, KORS -0.8%, GIL -0.7%, SHOS -0.7%, FRAN -0.7%, VNCE -0.7%, COST -0.6%, NKE -0.6%, HBI -0.6%, WMT -0.6%, DDS -0.6%, FRED -0.5%, XLY -0.5%, ANF -0.5%, TJX -0.4%, PVH -0.4%, CHS -0.4%, DLTR -0.4%, TUES -0.4%... A few are trading higher: CBK +7.7%, CTRN+0.8%, TUMI +0.7%, BWS +0.3%, ZUMZ +0.2% (CROX RL BBY CONN TGT flat).
Following October results, the retail sector pulled back after the open and closed in the red. The SPDRdest Retail (XRT) was -1.2% on the day, Retail HOLDRS Trust (RTH) -1.8%, Consumer Dis Spdr (XLY) -2.1% vs S&P500 index (SPX) -1.3%.
Some cos that beat October Same-Store Sales estimates include:
·
Drugstore
names Walgreen's (WAG)
and Rite Aid (RAD) already reported Oct sales. Comps exceeded expectations for the sixth
consecutive month.
·
L Brands (LB) Oct
comps were 8% vs 2.5% consensus. Co sees Q3 EPS at high end of previous guidance and reported Q3 net sales slightly above
consensus. The stock opened 1.2% higher but closed 2% lower.
·
Cato (CATO)
reported Oct comps of 3% vs -2.5% consensus, raised Q3 EPS guidance and reported Q3 sales in-line. Co said October
sales benefited from some cooler weather but continues to expect a difficult
sales environment through the fourth quarter.. The stock opened 0.7% and closed 1.5% higher.
·
Buckle (BKE)
reported Oct comps of 2.6% vs -1.8% consensus and prelim Q3 net sales slightly
below consensus (as usual co did not issue EPS guidance/commentary). The stock
opened 1% higher and ended up 1.9%.
·
Gap Inc (GPS)
reported Oct comps of 4% vs 0.6% consensus, issued upside Q3 EPS guidance and
reported Q3 sales above consensus.
·
Stein Mart (SMRT)
reported Oct comps of 5.4% vs 2.2% consensus and Q3 sales above consensus (as usual co did not issue EPS
guidance). The stock opened 0.7% higher and ended the day up 1.2%.
·
Costco (COST)
reported Oct comps of 3% vs 2.4% consensus (as usual no commentary). The stock
opened 0.5% but closed 1% lower.
Missed October Same-Store
Sales estimates:
·
PriceSmart (PSMT)
reported Oct comps of 8.8% vs 10% consensus (reported earnings Oct 30 after the
close) . The stock opened 0.6% but closed lower.
·
Zumiez Inc (ZUMZ)
reported Oct comps of 1.2% vs 1.4% consensus ( did not provide guidance). The
stock opened 0.8% but closed
in the red.
Fed Beige Book Summary
Reports from the twelve Federal Reserve Districts indicated that the economy continued to expand at a modest to moderate pace from early October through mid-November. Activity in the New York, Cleveland, Richmond, Atlanta, St. Louis, Minneapolis, and Dallas Districts grew at a moderate pace, while Philadelphia, Chicago, Kansas City, and San Francisco cited modest growth. Boston reported that economic activity continued to expand.
Manufacturing activity continued to expand in most Districts, with gains noted in the motor-vehicle and high-technology industries. Manufacturers in many Districts expressed optimism about near-term growth prospects. Demand for professional business services experienced stable to moderate growth, especially in computer technologies. Freight volume showed signs of strengthening. Reports on retail spending were positive. Looking forward to the holiday shopping season, retailers reported being hopeful, but cautious. Sales of new motor vehicles were reported as moderate to strong across much of the United States. Tourism increased in most reporting Districts, although the federal government shutdown had a negative impact in some areas. Residential real estate activity improved across many Districts, with multifamily construction experiencing moderate to strong growth. Some slowing in single-family home sales was attributed to seasonal factors. Activity in nonresidential real estate was stable or improved slightly across many Districts. Agricultural conditions were generally favorable. Mining activity was mixed, while natural gas production increased. Banking conditions were largely stable, with some improvement seen in loan demand. Several Districts reported an easing of lending standards.
Hiring showed a modest increase or was unchanged across Districts. Difficulty with finding qualified workers, especially for high-skilled positions, was frequently reported. Upward pressure on wages and overall price inflation were contained. Contacts in many Districts voiced concern about future cost increases attributable to the Affordable Care Act and other types of federal regulation.
Reports from the twelve Federal Reserve Districts indicated that the economy continued to expand at a modest to moderate pace from early October through mid-November. Activity in the New York, Cleveland, Richmond, Atlanta, St. Louis, Minneapolis, and Dallas Districts grew at a moderate pace, while Philadelphia, Chicago, Kansas City, and San Francisco cited modest growth. Boston reported that economic activity continued to expand.
Manufacturing activity continued to expand in most Districts, with gains noted in the motor-vehicle and high-technology industries. Manufacturers in many Districts expressed optimism about near-term growth prospects. Demand for professional business services experienced stable to moderate growth, especially in computer technologies. Freight volume showed signs of strengthening. Reports on retail spending were positive. Looking forward to the holiday shopping season, retailers reported being hopeful, but cautious. Sales of new motor vehicles were reported as moderate to strong across much of the United States. Tourism increased in most reporting Districts, although the federal government shutdown had a negative impact in some areas. Residential real estate activity improved across many Districts, with multifamily construction experiencing moderate to strong growth. Some slowing in single-family home sales was attributed to seasonal factors. Activity in nonresidential real estate was stable or improved slightly across many Districts. Agricultural conditions were generally favorable. Mining activity was mixed, while natural gas production increased. Banking conditions were largely stable, with some improvement seen in loan demand. Several Districts reported an easing of lending standards.
Hiring showed a modest increase or was unchanged across Districts. Difficulty with finding qualified workers, especially for high-skilled positions, was frequently reported. Upward pressure on wages and overall price inflation were contained. Contacts in many Districts voiced concern about future cost increases attributable to the Affordable Care Act and other types of federal regulation.
Currencies
Dollar Presses 80.60 Support: 10-yr:
-15/32..2.848%..USD/JPY: 102.09..EUR/USD: 1.3590
The Dollar Index holds on session lows near 80.60 as trade once again tests the key support level. The greenback spiked to session highs near 80.90 following the strong ADP Employment report, but has slumped back onto the lows in afternoon trade. Click here to see a daily Dollar Index chart.
The Dollar Index holds on session lows near 80.60 as trade once again tests the key support level. The greenback spiked to session highs near 80.90 following the strong ADP Employment report, but has slumped back onto the lows in afternoon trade. Click here to see a daily Dollar Index chart.
·
EURUSD is little changed @ 1.3585 as traders await tomorrow's
European Central Bank rate decision. Recent chatter has suggested the ECB
is looking to take further measures to loosen policy, but it remains unclear if
tomorrow's meeting will provide the framework. The 1.3600 level will be watched
closely following the decision.
·
GBPUSD is -10 pips @ 1.6380 as trade has managed to
erase most of the early losses. Sterling came under pressure in early trade,
sliding to 1.6325, after Britain's Services PMI posted its worst reading since
July. However, buyers have managed to run the pair almost back to the unchanged
mark ahead of tomorrow's Bank of England rate decision. A pullback
from 28-month highs will put support in the 1.6200 region in focus. Britain's
Autumn Forecast Statement will cross the wires.
·
USDCHF is -20 pips @ .9020 as trade remains on pace to
post its worst close since the end of October. Today's weakness has pushed the
pair below the important .9050 support level, and sets up a retest of the
October lows near .8900 if that support is not retaken in a timely
matter.
·
USDJPY is -40 pips @ 102.10 as sellers remain in
control for a second session. Today's selling has the pair roughly 125 pips off
yesterday's highs with a breakdown of the 101.70 area setting up a test of
parity. Traders remain on the lookout for any new easing by the Bank of
Japan.
·
AUDUSD is -115 pips @ .9020 as action looks
likely to post its lowest close in three months. The hard currency has been
offered throughout the session as today's GDP miss has sparked
discussion of more RBA rate cuts. Australia's trade balance is due out tonight.
·
USDCAD is +40 pips @ 1.0685 as trade holds at
its best level since May 2010. The pair jumped to its best levels more than
three and a half years after the Bank of Canada held its Overnight Rate
at 1.00%, but noted downside risks to inflation. Traders virtually
ignored Canada's surprise trade surplus ($0.1 bln actual v. -$0.7 bln expected)
as the central bank garnered the attention. Canada's building permits will be
released tomorrow.
Jason's Commentaries
What a volatile Wednesday. This is starting to look like the day traders' market right now. Market started with a bearish bias as the Futures were down by 0.24% at the open. However, the bearish bias did not stay long and at 10am ET, the market decided to rally, on Dow it's 110 points in the span of 30 mins. The market did not manage to hold the high and started to lose all its gains in the next 2 hours, which is a 160 points on the Dow. By 130pm ET, market decided to rally another 120 points on the Dow again. Internals were mixed and it seems that it did indicated the volatility on the market last night. We've got the ADP report better than expect, ISM non-manfacturing contracted and New Home Sales jumped higher. On top of that, we've got retail reports coming out from the National Retail Association, having 3% better Thanksgiving sales while other sources cited mixed results.
The Materials and the Utilities are the 2 biggest gainers last night of 0.48% and 0.45% respectively, while the Industrials was the biggest laggard. HP once again gained another 2.29% and Microsoft gained a 1.64%. The bigger names in tech seems to be holding the highs. Possible tech bubble?
On the technicals side, I'm expecting a bounce in the market today as we're having nice support level on the S&P500 but Dow broke the 15900 support level. Given the strength in the Nasdaq, I reckon we're likely to hold the support today.
Market Call: FLAT to upside
Date: 8 Aug 2013
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