30 Jan 2014 AMC- Market bounces off support level

30 Jan 2014 AMC- Market bounces off support level

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: -0.1%

·         Germany's DAX: + 0.4%

·         France's CAC: + 0.6%

·         Spain's IBEX: + 0.7%

·         Portugal's PSI: -0.3%

·         Italy's MIB Index: + 0.4%

·         Irish Ovrl Index: -0.9%

·         Greece ATHEX Composite: + 2.6%

Before Market Opens

S&P futures vs fair value: +10.50. Nasdaq futures vs fair value: +34.00.
The S&P 500 futures trade almost 11 points above fair value.

Major Asian markets ended lower across the board with Japan's Nikkei (-2.5%) leading the decline. Sentiment during the Asian session remained cautious after China's HSBC Manufacturing PMI ticked down to 49.5 from 49.6 (49.6 expected). Furthermore, HSBC said the country's labor market shed jobs at the fastest rate since March 2009.

Also of note, Japan's retail sales rose 2.6% year-over-year (3.8% consensus, 4.1% prior) and the foreign bonds buying report indicated net sales of JPY357.00 billion (-JPY289.50 billion prior). Australia's import price index fell 0.6% quarter-over-quarter (1.0% consensus, 6.1% prior) while the export price index slipped 0.5%, as expected (4.2% prior). Separately, HIA New Home Sales declined 0.4% month-over-month (7.5% previous). Elsewhere, The Reserve Bank of New Zealand left its key interest rate unchanged at 2.50%, as expected. Separately, building consents rose 7.6% month-over-month (-5.0% forecast, 12.5% last) and visitor arrivals ticked up 0.2% month-over-month (3.3% prior). 

·         Japan's Nikkei fell 2.5% but held near four-month lows. Exporters were victimized by the strong yen as Nikon tumbled 5.6% and Toyota Motor sank 2.3%. 

·         Hong Kong's Hang Seng slipped 0.5% in a holiday-shortened session. PC maker Lenovo Group continued its volatile trade, plunging 8.2% after announcing it would pay $2.9bln for Google's Motorola Mobility. 

·         China's Shanghai Composite slid 0.8% as traders booked recent gains ahead of the Lunar New Year. Coal-based names saw sizable losses as Shaanxi Coal and China Shenhua Energy fell 4.3% and 1.6%, respectively. 

Major European indices trade little changed while Italy's MIB (+0.4%) outperforms. Investors received several data points today but most notably, Germany's CPI fell 0.6% month-over-month (-0.4% prior, 0.4% last) while the year-over-year reading increased 1.3% (1.5% forecast, 1.4% prior). Also of note, the unemployment declined by 28,000 (-5,000 expected, -19,000 prior) but the unemployment rate held steady at 6.8% (6.9% consensus).

Reviewing other data, Eurozone Consumer Confidence ticked up to -12.0 from -14.0, as expected. Separately, Business and Consumer Survey rose to 100.9 from 100.4 (101.0 forecast) and industrial sentiment declined to -4.0 from -3.4 (-3.0 expected). Great Britain's mortgage approvals increased 72,000 (73,000 forecast, 71,000 last) while mortgage lending came in at GBP1.70 billion (GBP1.00 billion expected, GBP1.10 billion last). Spain's GDP rose 0.3% quarter-over-quarter (0.3% forecast, 0.1% prior) while the year-over-year reading ticked down 0.1% (0.0% expected, -1.1% last). Elsewhere, Swiss KOF Leading Indicators ticked up to 1.98 from 1.95 (2.00 expected). Among news of note, Bank of England Governor Mark Carney spoke about the country's economic progress, saying the recovery still has a long way to go before a rate hike is introduced. 

·         Germany's DAX is lower by 0.1% with exporters lagging again. BMW and Volkswagen are both down near 0.6%. On the upside, Infineon Technologies outperforms with a gain of 3.5% after issuing an upbeat outlook. 

·         In France, the CAC trades down 0.1%. Consumer names appear among the laggards with Carrefour, Pernod Ricard, and L'Oreal down between 1.2% and 3.2%. Utilities display strength with Electricite de France and Veolia Environnement both up near 1.2%. 

·         Great Britain's FTSE sports a loss of 0.2%. Old Mutual, Standard Chartered, and Prudential are down between 1.5% and 2.8%. British Sky Broadcasting is the top performer, trading higher by 3.2%. 

·         Italy's MIB trades up 0.4% with heavyweights Banco Popolare, Fiat, and Telecom Italia in the lead. The three hold gains between 1.6% and 3.2%.

Market Internals

Market Internals -Technical-
The Nasdaq closed up 72 (+1.77%) at 4123, the S&P 500 closed up 20 (+1.13%) at 1794, and the Dow closed up 110 (+0.70%) at 15849. Action came on mixed volume (NYSE 641 mln vs. avg. of 681; NASDAQ 1946 mln vs. avg. of 1776), with advancers outpacing decliners (NYSE 2380/745, NASDAQ 1970/652) and new highs outpacing new lows(NYSE 74/46, NASDAQ 82/21).

Relative Strength: 
Social Media-SOCL +4.36%, Internet Composite-FDN +3.45%, Biotechnology-IBB +2.95%, Vietnam-VNM +2.65%, Indonesia-IDX +2.62%, Biotechnology-XBI +2.32%, Cloud Computing-SKYY +2.04%, Greece-GREK +2.03%, Malaysia-EWM +1.73%, India-INP +1.58%.

Relative Weakness: 
Natural Gas-UNG -9.28%, Junior Gold Miners-GDXJ -3.69%, Silver-SLV -2.79%, Platinum-PPLT -2.29%, Gold-GLD -2.20%, Swiss Franc-FXF -0.91%, Japanese Yen-FXY -0.55%, British Pound-FXB -0.46%, Egypt-EGPT -0.39%, Sweden-EWD -0.35%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: Nasdaq Leads Broad Bounce
The major averages finished the Thursday session near their highs as the volatile week continued. The Nasdaq surged 1.8% while the S&P 500 gained 1.1% as all ten sectors ended in the green. As a result of the advance, the S&P 500 will enter Friday's session with a slim week-to-date gain of 0.2% while the Nasdaq remains lower by 0.1% for the week.

Stocks jumped out of the gate and continued climbing steadily into the early afternoon. The S&P 500 notched a session high of 1798.77 just before 13:00 ET, and spent the rest of the trading day near that level. The upbeat start to the session was aided by overnight gains in index futures which rallied while the Japanese yen weakened. The futures market received an additional boost an hour before the cash open when it was reported that fourth quarter GDP rose 3.2%, per the advance estimate.

The Nasdaq Composite spent the entire session in the lead with the likes of Amazon.com (AMZN 403.01, +18.81), Google (GOOG 1135.39, +28.47), Facebook (FB 61.08, +7.55), and Qualcomm (QCOM 73.26, +2.14) providing support. Amazon.com and Google rallied ahead of their earnings while Facebook and Qualcomm posted respective gains of 14.1% and 3.0% after reporting better-than-expected results.

Biotechnology also factored into the outperformance of the Nasdaq as the iShares Nasdaq Biotechnology ETF (IBB 249.96, +7.16) rose 3.0%. In turn, this underpinned the health care space (+1.8%), which ended in the lead.

Similar to health care, other heavily-weighted sectors like consumer discretionary (+1.7%), financials (+1.3%), and technology (+1.5%) ended ahead of the broader market.

Elsewhere, the energy sector (+0.2%) finished behind the remaining groups as Dow component ExxonMobil (XOM 93.99, -1.12) lagged after missing on earnings.

Speaking of the Dow (+0.7%), the price-weighted index was unable to keep pace with the broader market as 3M (MMM 128.05, -2.20) and Boeing (BA 126.53, -3.25) weighed. 3M lost 1.7% after reporting in-line earnings on below-consensus revenue while Boeing fell 2.5% after cautious guidance overshadowed its earnings beat.

Treasuries ended near the middle of their range with the 10-yr yield up two basis points at 2.70%.

Trading volume was below average as 641 million shares changed hands at the NYSE.

Today's economic data included initial claims, fourth quarter GDP, and the pending home sales report for December. 

·         Most notably, GDP increased 3.2% in the fourth quarter, according to the advance estimate. That was down from a 4.1% gain in the third quarter but slightly above the Briefing.com consensus estimate of a 3.0% increase. Despite the above-consensus reading, the report was actually a disappointment. Real final sales, which our model was tracking to be near a 4.0% gain, only increased 2.8%. That was the largest increase since a 3.4% gain in Q1 2012, but it was within the same trends that we have been seeing for the past couple of years. Contrary to the headline numbers, there has been no real acceleration in growth over the last few quarters. 

·         Weekly initial claims unexpectedly spiked to 348,000 from an upwardly revised 329,000 (from 326,000) while the Briefing.com consensus expected the claims level to fall to 325,000. 

·         Pending home sales for December tumbled 8.7%, which was worse than the 0.2% decrease forecast by the Briefing.com consensus. The reading followed last month's revised decrease of 0.3% (from +0.2%). 

Tomorrow, December Personal Income, Personal Spending, Core PCE Prices, and the fourth quarter Employment Cost Index will all be released at 8:30 ET while the final reading of the University of Michigan Consumer Survey for January will be reported at 9:55 ET. 

·         Nasdaq Composite -1.3% YTD 

·         Russell 2000 -2.0% YTD 

·         S&P 500 -2.9% YTD 

·         Dow Jones Industrial Average -4.4% YTD

Commodities

Closing Commodities: Natural Gas Futures Drop 8%

·         Precious metals traded lower today as the dollar index climbed on this morning's GDP data. According to the advance reading, GDP rose 3.2% in Q4, while the Briefing.com consensus estimate called for a 3.0% increase.

·         Feb gold brushed a session low of $1237.50 per ounce in morning action and traded in a consolidative fashion just above that level for the remainder of the session. Unable to gain momentum, it settled with a 1.6% loss at $1241.90 per ounce.

·         Mar silver dipped to a session low of $18.97 per ounce and eventually settled at $19.13 per ounce, or 2.1% lower.

·         Mar crude oil, on the other hand, gained strength on the GDP data. The energy component touched a session high of $98.59 per barrel moments before equity markets opened and spent the remainder of the session trading just below that level. It settled with a 1.0% gain at $98.25 per barrel.

·         Mar natural gas erased most of yesterday's 10% gain as it tumbled on forecasts for milder weather and inventory data. The EIA reported that inventories for the week ending Jan 24 showed a draw of 230 bcf when a draw of 231-236 bcf was anticipated. Priced touched a session high of $5.30 per MMBtu in late morning pit trade but slipped again in afternoon action. Natural gas dipped to a session low of $4.98 per MMBtu moments before settling at $5.02 per MMBtu, or 7.6% lower.

COMEX Metals Closing Prices

  Feb gold rose fell $20.01 to $1241.90/oz 

·         Gold fell for the third time in four sessions as the dollar index climbed on this morning's GDP data. According to the advance reading, GDP rose 3.2% in Q4, while the Briefing.com consensus estimate called for a 3.0% increase. The precious metal brushed a session low of $1237.50 in morning action and spent the remainder of the session trading in a consolidative fashion just above that level. Unable to gain momentum, it settled with a 1.6% loss. 

  Mar silver fell $0.42 to $19.13/oz 

·         Silver also spent today's floor trade in negative territory, with prices dipping as low as $18.97. It eventually settled the session with a 2.1% loss. 

  Mar copper fell 1 cent to $3.23/lbs

CBOT Agriculture and Ethanol Closing Prices

·         Mar corn rose 6 cents to $4.34/bushel 

·         Mar wheat rose 2 cents to $5.53/bushel 

·         Mar soybeans rose 7 cents to $12.76/bushel 

·         Mar ethanol rose 3 cents to $1.82/gallon

NYMEX Energy Closing Prices

  Mar crude oil rose $0.95 to $98.25/barrel 

·         Crude oil rose above the $98 level following this morning's GDP data. According to the advance estimate, GDP rose 3.2% in Q4, while the Brieifng.com consensus estimate called for a 3.0% increase. The energy component touched a session high of $98.59 moments before equity markets opened and spent the remainder of the session trading just below that level. It eventually settled with a 1.0% gain. 

  Mar natural gas fell 41 cents to $5.02/MMBtu 

·         Natural gas, on the other hand, erased most of yesterday's 10% gain following inventory data and forecasts for milder weather. The EIA reported that inventories for the week ending Jan 24 showed a draw of 230 bcf when a draw of 231-236 bcf was anticipated. Prices touched a session high of $5.30 in late morning pit trade but slipped to a session low of $4.98 in afternoon action. Natural gas eventually settled with a 7.6% loss. 

  Mar heating oil rose 1 cent to $3.03/gallon 

  Mar RBOB settled unchanged at $2.67/gallon

Treasuries

Yields See Slight Uptick: 10-yr: -04/32..2.702%..USD/JPY: 102.75..EUR/USD: 1.3546

·         Treasuries ended near their best levels of U.S. trade. Click here to see an intraday yields chart.

·         Some modest selling developed in overnight trade, and persisted into late-morning trade as GDP (3.2% actual v. 3.0% expected) posted a headline beat. 

·         Maturities ignored the huge drop in pending home sales (-8.7% actual v. -0.2% expected) as trade held near the lows into the $35 bln 5y note auction. 

·         The 5y auction was average, drawing 1.572% and a 2.59x bid/cover as both indirect (44.5%) and direct (10.7%) bidders saw takedowns relatively in-line with their 12-auction averages. 

·         Action drifted to session lows as a result of the auction as sellers took charge ahead of the $29 bln 7y auction.

·         The day's second auction (7y) saw better results, drawing 2.190% and a solid 2.65x bid/cover. Indirect (47.7%) and direct (19.9%) bids exceeded their 12-auction averages, leaving primary dealers with just 32.4% of the supply.

·         A steady bid developed in response to the 7y auction, dropping yields to their lows (although still higher for the day) into the cash close. 

·         Selling was pretty well dispersed across the complex as most yields ended the day up +1/+2bps.

·         Notable was the outperformance upfront that saw yields 2y and in slide -2bps. 

·         The 5y added +2bps to finish the day @ 1.512%. The yield bounced off its 100 dma (1.489%), but continues to test the 1.500% support level. 

·         The 10y tacked on +1.8bps, ending the day @ 2.693%. Traders continue to monitor support in the 2.700% area as a breakdown puts the 2.500% support area in play. 

·         A +1.3bp uptick at the long end saw the 30y settle @ 3.635%. The 3.600% area remains key as support is aided by the 200 dma. 

·         A slightly steeper curve developed as the 2-10-yr spread widened to 234bps.

·         Precious metals struggled throughout the session as gold slumped $19 to $$1243 and silver tumbled $0.40 to near $19.15. 

·         Data: Personal income and spending, PCE Prices - Core, Employment Cost Index (8:30), Chicago PMI (9:45), and Michigan Sentiment - Final (9:55).

Next Day In View 

Economic Commentary

Economic Summary: Q4 GDP tops expectations; Jobless claims rise unexpectedly; Pending home sales fall faster than expected; China HSBC PMI shows contraction
Economic Data Summary:

·         Weekly Initial Claims 348K vs Briefing.com consensus of 325K; Last Week was revised to 329K from 326K

·         Weekly Continuing Claims 2.991 M vs Briefing.com consensus of 3.000 M ; Last Week was revised to 3.007 M from 3.056 M

o     The Department of Labor stated that there were no unusual factors in the claims data. However, extreme cold over the past couple of weeks combined with the Martin Luther King, Jr., holiday may have contributed to some of the gain. We anticipate claims falling back toward 330,000 over the next week or two.

·         Fourth Quarter GDP - Adv 3.2% vs Briefing.com consensus of 3.0%; Fourth Quarter was 4.1%

·         Fourth Quarter Chain Deflator - Adv 1.3% vs Briefing.com consensus of 1.2%; Fourth Quarter was 2.0%

o    . In our opinion, the gain was actually a disappointment. Real final sales, which our model was tracking to be near a 4.0% gain, only increased 2.8%. That was the largest increase since a 3.4% gain in Q1 2012, but it was within the same trends that we have been seeing for the past couple of years. Contrary to the headline numbers, there has been no real acceleration in growth over the last few quarters. Part of the disappointment came from the residential investment sector. After posting double digit gains each quarter since Q2 2012, residential investment spending fell 9.8%. That came at the same time that new home starts reached the million mark. While the details are not yet known, the pullback may have been due to a combination of weaker sales numbers, which lowered realtor fees, and a decline in home improvement spending. Government spending declined 4.9% in the fourth quarter after increasing 0.3% in Q3 2013. The drop was entirely due to a 12.6% decline in federal spending

·         December Pending Home Sales -0.7% vs Briefing.com consensus of -0.2%; November was 0.2%

Upcoming Economic Data:

·         December Personal Incoime due out Friday at 8:30 (Briefing.com consensus of 0.2%; November was 0.2%)

·         December Personal Spending due out Friday at 8:30 (Briefing.com consensus of 0.2%; November was 0.5%)

·         December PCE Price -- Core due out Friday at 8:30 (Briefing.com consensus of 0.1%; November was 0.1%)

·         Fourth Quarter Employment Cost Index due out Friday at 8:30 (Briefing.com consensus of 0.4%; Third Quarter was 0.4%)

·         January Chicago PMI due out Friday at 9:45 (Briefing.com consensus of 58.0; December was 60.8)

·         January Michigan Sentiment -- Final due out Friday at 9:55 (Briefing.com consensus of 80.4; December was 80.4)

Upcoming Fed/Treasury Events:

·         The Treasury is scheduled to auction off $102 bln in new debt this week.  Remaining auctions include:

o    Thursday 11:30 AM -- $35 bln in 5 year notes

o    Thursday 1:00 PM  -- $29 bln in 7 year notes

Other International Events of Interest

·         The major Asian bourses ended lower as sellers took control in the face of the Fed's latest $10 bln taper of its bond-buying program and the downtick in China's HSBC Final Manufacturing PMI (49.5 actual v. 49.6 expected, 49.6 previous). 

On other news.... 

Earnings/Guidance

·         3M (MMM) reports EPS in-line, misses on revs; reaffirms FY14 guidance

·         Altria (MO) misses by $0.01, misses on revs; guides FY14 EPS in-line

·         AutoNation (AN) beats by $0.07, misses on revs; authorizes an additional $250 mln stock repurchase

·         Citrix Systems (CTXS) beats by $0.06, reports revs in-line; guides Q1 below consensus; guides FY14 below consensus; CEO Templeton returning from leave of absence but will retire within next year

·         Colgate-Palmolive (CL) beats by $0.01, reports revs in-lin

·         ConocoPhillips (COP) beats by $0.08

·         Eli Lilly (LLY) reports EPS in-line, beats on revs; reaffirms FY14 guidance

·         Exxon Mobil (XOM) misses by $0.01, misses on revs

·         Facebook (FB) beats by $0.04, beats on revs

·         Harley-Davidson (HOG) reports EPS in-line, misses on revs; guides FY14 shipments +7-9%, Q1 +5%

·         Hershey Foods (HSY) reports EPS in-line, beats on revs; guides FY14 in-line

·         Murphy Oil (MUR) misses on bottom line

·         Northrop Grumman (NOC) beats by $0.18, beats on revs; guides FY14 above consensus

·         PulteGroup (PHM) beats by $0.12, reports revs in-line

·         Qualcomm (QCOM) beats by $0.08, misses on revs; guides Q2 below consensus; raises FY14 EPS in-line, reaffirms FY14 revs guidance

·         Symantec (SYMC) beats by $0.09, beats on revs; guides Q4 EPS in-line, revs in-line

·         Thermo Fisher (TMO) beats by $0.05, beats on revs; guides FY14 above consensus, including LIFE acquisition (not comparable)

·         Time Warner Cable (TWC) beats by $0.08, reports revs in-line; raises quarterly dividend to $0.75/share from $0.65/share prior

·         UPS (UPS) reports EPS in-line, misses on revs; raises FY14 EPS slightly

·         Viacom (VIAB) beats by $0.04, misses on revs

·         Visa (V) beats by $0.04, reports revs in-line; reaffirms FY14 EPS and revenue guidance

·         Whirlpool (WHR) misses by $0.07, beats on revs; guides FY14 EPS in-line

Currencies 


Dollar Looks to Close at One-Week High: 10-yr: -03/32..2.704%..USD/JPY: 102.67..EUR/USD: 1.3551

• The Dollar Index presses session highs near 81.10 as trade readies to close at its best level in a week. Click here to see a daily Dollar Index chart.
• The bulls continue to set their sights on the 81.2081.40 region, which has provided a cap on trade since the middle of September. 
• EURUSD is -110 pips @ 1.3550 as trade presses lower for a fifth straight session. Today's weakness in the single currency came despite some better than expected data out of the region as yesterday's Fed taper seems to be the overriding force. Key supports rests at current levels (1.3550/1.3600) while a breakdown sets up a likely test of the 200 dma (1.3374). Eurozone data includes CPI Flash Estimate, the unemployment rate, French consumer spending, and German retail sales.
• GBPUSD is -85 pips @ 1.6480 as selling persists for a third session. Sterling has moved lower in the face of this morning's better than expected net lending to individuals and is now testing minor support in the 1.6450 area. The 1.6300 level remains important. 
• USDCHF is +90 pips @ .9030 as today's bid has action at its best level in a week and probing the 100 dma. Trade has spent most of the past four months locked in a tight 400 pip range between .8850/.9250, causing many to look elsewhere for opportunity. 
• USDJPY is +40 pips @ 102.65 as trade remains trapped between key support (102.00) and key resistance (103.00). Many participants will look elsewhere until the range bound trade is broken.  
• AUDUSD is +30 pips @ .8765 after another test of .8800 support failed. Tonight's PPI data will be watched closely as a tame number could spark more speculation of a Reserve Bank of Australia rate cut. Private sector credit will also be released. 
• USDCAD is flat @ 1.1165 amid a mostly sleepy session. Action has been limited to a 30 pip range after an early bid led to a print of 1.1199, the best since July 2009. Canadian data out tomorrow is limited to GDP.

Jason's Commentaries
HAPPY CHINESE NEW YEAR TO EVERYONE!!! EVEN IF IT'S THE CNY, IT'S NOT STOPPING ME WRITING MY DMA!


What a rallied in the market last night after the bounce off the support level. The market started off with a huge bullish intent which subsequently lost some momentum by 1pm ET. Then rallied off at 2pm ET again. Indices closed mostly 1% or more last night. The main leader that led the gain are Healthcare and Discretionary with 1.82% and 1.68% respectively. Some notable names that led the rally are Google, Merck and Pfizer. However, by looking at the internals, there's tonnes of divergence. It's actually not as bullish as it seems. VIX remains on the high side as well. On the technical perspective, Dow bounces off support at 15,700, S&P500 bounces off 1770 and Nasdaq bounces off 4070 level. Looking forward, we've got the January Barometer and the impending decision to raise the debt ceiling to worry about which will likely cause more gyration in the market. Futures are off 0.6% at 730am ET. I'm expecting today to be a volatile session. If S&P500 breaks 1770, we're going down... but if we're holding it strong, I think we're likely to head up more to 1800 on the S&P500.

Market Call: DOWN

Date: 31 Jan 2014