16 Jan 2014 AMC- Russells broke all time high as Citi misses earnings, dragging the Financials down

16 Jan 2014 AMC- Russells broke all time high as Citi misses earnings, dragging the Financials down

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: -0.2%

·         France's CAC: -0.3%

·         Spain's IBEX: -0.7%

·         Portugal's PSI: -0.4%

·         Italy's MIB Index: -0.9%

·         Irish Ovrl Index: -0.3%

·         Greece ATHEX Composite: -1.0%

Before Market Opens

S&P futures vs fair value: -5.00. Nasdaq futures vs fair value: -7.00.
The S&P 500 futures trade five points below fair value.

Markets across Asia ended mixed amid a choppy trade. Participants received several economic data points but Australia's employment data received the most attention after registering a decline (-22,600 actual versus +10,300 expected). The unemployment rate, however, held at 5.8%. Elsewhere, Japan's Core Machinery Orders surged 9.3% month-over-month (1.2% expected) while Tertiary Industry Activity was light at 0.6% month-over-month (0.8% expected). Separately, CGPI ticked up 0.3% month-over-month (0.3% consensus, 0.1% prior) while the year-over-year reading rose 2.5% (2.6% expected, 2.7% last). 

·         Japan's Nikkei shed 0.4% as action pressed back below the 15,800 level. Heavyweight Fast Retailing lost 2.4% as shares remained under pressure after peaking around Christmas.

·         Hong Kong's Hang Seng edged higher by 0.4% amid a sleepy trade. PC maker Lenovo led the charge, up 5.0%, as shares continued to see momentum following last week's positive shipments report. Coal-based China Shenhua Energy lost 2.3% as pollution levels remained off the charts. 

·         China's Shanghai Composite finished flat as action held at five-month lows. Financials underperformed as Bank of China shed 0.4% and China Construction Bank gave up 0.8%.

Major European indices trade little changed after the release of eurozone and German inflation data. Eurozone CPI ticked up 0.3% month-over-month while the year-over-year reading climbed 0.8%. Both figures met expectations. Core CPI rose 0.3% month-over-month (0.0% forecast, 0.0% last) while the year-over-year reading increased 0.7% (0.9% consensus, 0.9% prior). Germany's CPI rose 0.4% month-over-month while the annualized reading pointed to an increase of 1.4%. Both figures were in-line with expectations. Also of note, Italy's trade surplus narrowed to EUR3.09 billion from EUR4.06 billion (EUR3.88 billion consensus).

In news, Bundesbank president Jens Weidmann commented on the current state of the eurozone, saying France is a decisive element of the single-currency area and that it needs to live up to its duties as one of the largest economies in the region. Mr. Weidmann also said he would not object to a second term at the Bundesbank. 

·         Great Britain's FTSE is higher by 0.1% with miners providing support. Anglo American, Antofagasta, BHP Billiton, and Fresnillo are up between 3.7% and 4.4%. Associated British Foods lags after reporting disappointing results. The stock trades lower by 4.3%. 

·         Germany's DAX holds a loss of 0.1% as financials lag. Commerzbank and Deutsche Bank are lower by 1.2% and 1.0%, respectively. 

·         In France, the CAC is lower by 0.2%. Retailer Carrefour trades lower by 3.4% despite reporting in-line results. Electrical equipment supplier Legrand outperforms with a gain of 4.0%. 

In domestic economic news, the November net long-term TIC flows report indicated a $29.3 billion outflow of foreign capital from U.S. denominated assets. This followed the prior month's $28.7 billion inflow.

Market Internals

Market Internals -Technical-
The Dow closed down 65 (-0.39%) at 16417, the S&P 500 closed down 2 (-0.13%) at 1846, and the Nasdaq closed up 4 (+0.09%) at 4219. Action came on mixed volume (NYSE 641 mln vs. avg. of 678; NASDAQ 1857 mln vs. avg. of 1744), with advancers outpacing decliners (NYSE 1779/1310, NASDAQ 1308/1286) and new highs outpacing new lows (NYSE 201/23, NASDAQ 196/15).

Relative Strength: 
Vietnam-VNM +4.8%, Thailand-THD +2.71%, Copper Miners-COPX +2.38%, Biotechnology-XBI +2.04%, Sugar-SGG +1.86%, Cotton-BAL +1.81%, Silver Miners-SIL +1.70%, Peru-EPU +0.99%, Canada-EWC +0.56%, Switzerland-EWL +0.56%.

Relative Weakness: 
Turkey-TUR -2.63%, Indonesia-IDX -1.91%, Mexico-EWW -1.21%, Latin America 40-ILF -1.10%, Greece-GREK -1.08%, Gasoline-UGA -1.08%, Retail-RTH -0.87%, Bank and Brokerage-RKH -0.83%, Regional Banks-KRE -0.82%, Retail-XRT -0.80%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: Stocks End Mixed
Equities finished the Thursday session on a mixed note as the Dow Jones Industrial Average (-0.4%) and S&P 500 (-0.1%) settled in the red while the Nasdaq posted a slight gain of 0.1%.

The stock market began the day on the defensive after two influential sectors, consumer discretionary (-0.5%) and financials (-0.6%), were hit with a one-two punch of selling interest. The early weakness knocked the S&P 500 back to Wednesday's opening levels, but the index did not stay near its session low for long as the outperformance of consumer staples (+0.01%), energy (+0.1%), and health care (+0.2%) helped it climb back to its opening level.

Retailers were in focus once again this morning after Best Buy (BBY 26.83, -10.74) lowered its guidance due to disappointing holiday sales. The stock, which surged 236.5% in 2013, plunged 28.6% while the broader SPDR S&P Retail ETF (XRT 83.35, -0.67) lost 0.8%, widening its January decline to 5.4%.

Elsewhere, the financial sector sold off even after BB&T (BBT 38.73, -0.05), BlackRock (BLK 317.78, +5.03), Goldman Sachs (GS 175.17, -3.58), and PNC (PNC 80.93, +2.09) reported above-consensus results. Another large sector member, Citigroup (C 52.60, -2.39), fell 4.4% after missing on earnings and revenue.

Also of note, the industrial sector (-0.5%) lagged as transports retreated after rail operator CSX (CSX 27.24, -1.99) fell short of its earnings estimates. Shares of CSX tumbled 6.8% while the Dow Jones Transportation Average lost 0.6%.

The remaining three cyclical sectors—energy (+0.1%), materials (+0.1%), and technology (-0.1%)—ended little changed.

Over on the countercyclical side, all four sectors—consumer staples (+0.01%), health care (+0.2%), telecom services (+0.4%) and utilities (+0.7%)—finished ahead of the S&P 500.

Notably, biotechnology contributed to the outperformance of health case and the Nasdaq Composite as the iShares Nasdaq Biotechnology ETF (IBB 246.38, +3.24) gained 1.3%.

Treasuries ended on their highs with the 10-yr yield down five basis points at 2.84%.

Trading volume was well below average as only 641 million shares (versus 200-day average of 716 million) changed hands at the NYSE floor.

Investors received several economic data points today: 

·         Weekly initial claims fell to 326,000 from a downwardly revised 328,000 (from 330,000) while the Briefing.com consensus expected the claims level to increase to 333,000. Since the end of November, the initial claims data have been plagued with biases from poor seasonal adjustments. According to the Department of Labor, those problems have now ended, and the data are giving an accurate read of current labor market trends. The continuing claims level increased to 3.030 million from a downwardly revised 2.856 million (from 2.865 million). 

·         December consumer prices increased an in-line 0.3% after a flat November reading. The move in consumer prices was primarily the result of an upward swing in energy prices. After two months of declines, energy prices rose 2.1%. The gain contributed to a 3.1% increase in gasoline prices. Food prices increased 0.1% for a second consecutive month. Excluding food and energy, core CPI increased 0.1%, down from a 0.2% increase in November. The consensus expected core CPI to increase 0.2%. 

·         The January NAHB Housing Market Index fell to 56 from 58. Today's report was below the reading of 57 expected by the Briefing.com consensus. 

·         The January Philadelphia Fed Survey rose to 9.4 from 6.4 while economists polled by Briefing.com expected a reading of 8.0. 

Tomorrow, December Housing Starts and Building Permits will be released at 8:30 ET while December Industrial Production and Capacity Utilization will be reported at 9:15 ET. The day's data will be topped off with the 9:55 ET release of the preliminary University of Michigan Sentiment survey for January. 

·         Nasdaq +1.0% YTD 

·         Russell 2000 +0.9% YTD 

·         S&P 500 -0.1% YTD 

·         DJIA -1.0% YTD

Commodities

Closing Commodities: Natural Gas Rises 1.6%, Crude Oil Falls 0.3%

·         Feb gold traded slightly higher today, rising to a session high of $1244.90 per ounce in morning pit action. It spent the remainder of the session trading near the $1240 per ounce level and settled with a 0.1% gain at $129.90 per ounce

·         Mar silver advanced to a session high of $20.22 per ounce in morning floor trade but retreated back into negative territory. Unable to regain momentum, it settled at $20.06 per ounce, or 0.3% lower

·         Feb crude oil chopped around in the red for most of today's floor trade, dipping to a session low of $93.60 per barrel. Unable to get much momentum, it settled 0.3% lower at $93.91 per barrel

·         Feb natural gas traded higher today, rising to a session high of $4.49 per MMBtu. However, prices were under pressure following a smaller-than-expected weekly draw in inventories of 287 bcf when consensus called for a draw of 299 to 301 bcf. Natural gas brushed a session low of $4.34 per MMBtu and eventually settled with a 1.6% gain at $4.39 per MMBtu

 COMEX Metals Closing Prices

  Feb gold rose $0.90 to $1239.90/oz 

·         Gold traded slightly higher today, rising to a session high of $1244.90 in morning pit action. It spent most of the session trading near the $1240 level and settled with a 0.1% gain.

  Mar silver fell $0.07 to $20.06/oz 

·         Silver advanced to a session high of $20.22 in morning floor trade but retreated back into negative territory. Unable to regain momentum, it settled with a 0.3% loss.

  Mar copper fell 2 cents to $3.34/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Mar corn rose 1 cent to $4.27/bushel 

·         Mar wheat rose 4 cents to $5.72/bushel 

·         Mar soybeans fell 3 cents to $13.15/bushel 

·         Feb ethanol rose 2 cents to $1.93/gallon 

·         Mar sugar (#16 (U.S.)) fell 0.03 of a penny to 20.25 cents/lbs

 NYMEX Energy Closing Prices

·         Feb crude oil fell $0.25 to $93.91/barrel

·         Feb natural gas rose 7 cents to $4.39/MMBtu

·         Feb heating oil settled unchanged at $2.98/gallon 

·         Feb RBOB fell 3 cents to $2.59/gallon

Treasuries

Treasuries Post Solid Gains: 10-yr: +12/32..2.849%..USD/JPY: 104.30..EUR/USD: 1.3614

·         Treasuries closed on their best levels of the session, propelled by this morning's tame CPI report (0.3%). 

·         Today's bid halted the two-day skid, and has longer dated yields near their lowest levels of 2014. Click here to see an intraday yields chart.

·         The 30y shed -3.3bps to close @ 3.773%. The 3.750% area is noteworthy as it represents the midpoint of the 3.550/3.950% range that has held up since the beginning of July. 

·         A modest bid in 10s dropped the benchmark yield -4.1bps to 2.843%. Today's action led to a close on the 50 dma, something that has not been breached since early-November. 

·         Buying in 5s erased virtually all of yesterday's uptick in yield. The 5y dropped -3bps to 1.643% after yesterday's selling failed to cause a breakout above 1.700%. Support in the 1.550% area remains on the radar. 

·         The 2y slipped -2.4bps to 0.383% as action pressed back below 0.400%. Many traders are keeping a watchful eye on the front of the curve as the February 7 debt ceiling deadline nears. 

·         Buying flattened the yield curve as the 2-10-yr spread tightened to 246bps. 

·         Precious metals ended mixed with gold +$3 @ $1241 and silver -$0.06 @ $20.07. 

·         Data: Housing starts, building permits (8:30), industrial production, capacity utilization (9:15), and Michigan Sentiment (9:55).

Next Day In View 

Economic Commentary

Economic summary: CPI in line with expectations; Jobless claims fall; Philadelphia Fed tops expectations
Economic Data Summary:

·         Weekly Initial Claims 326K vs Briefing.com consensus of 333K; Last Week was revised to 328K from 330K

·         Weekly Continuing Claims 2.835 M vs Briefing.com consensus of 2.853 M ; Last Week was revised to 2.856 M from 2.865 M

o    Acccording to the Department of Labor, those problems have now ended, and the data are giving an accurate read of current labor market trends. The drop to 326,000 is what we expected to occur when the biases were over. Claims will likely remain around 330,000. The continuing claims level increased to 3.030 mln for the week ending January 4 from a downwardly revised 2.856 mln (from 2.865 mln) for the week ending December 28. The consensus expected the continuing claims level to fall to 2.835 mln. 

·         December CPI 0.3% vs Briefing.com consensus of 0.3%; November was 0.0%

·         December Core CPI 0.1% vs Briefing.com consensus of 0.2%; November was 0.2%

o    . The gain was attributed to 3.1% increase in gasoline prices. Food prices increased 0.1% in December for a second consecutive month. Excluding food and energy, core CPI increased 0.1% in December, down from a 0.2% increase in November. The consensus expected core CPI to increase 0.2%. Tobacco prices, which were instrumental in the upward move in the December PPI, increased 0.6%. That suggests the gain in the PPI was due to an unexpected supply disruption and not a tax or some other automatic pass-through to consumers. 

·         November Net Long Term TIC Flows -$29.3 bln vs Briefing.com consensus of ; October was revised to $28.7 bln from $35.4 bln

·         Janurary Philadelphia Fed 9.4 vs Briefing.com consensus of 8.0; December was revised to 6.4 from 7.0

o     The increase in shipments, however, came at a cost. New orders growth dipped, from 12.9 to 5.1, which means that shipments growth was a result of another month of contracting backorders (-1.0 in January). The employment index strengthened to 10.0 in January from 4.4 in December 2013. A sharp contraction in hours worked (-5.3 from 4.8 in December), however, will mitigate some of the potential income growth from the gains in payrolls.

·         Janurary NAHB Housing Market Index 56 vs Briefing.com consensus of 57; December was 58

Fed/Treasury Events Summary:

·         Ben Bernanke spoke today and gave a summary of monetary policy and Fed actions during the financial crisis.

Upcoming Economic Data:

·         December Housing Starts due out Friday at 8:30 (Briefing.com consensus of 986K; November was 1.091 M )

·         December Building Permits due out Friday at 8:30 (Briefing.com consensus of 1.000 M ; November was 1.007 M )

·         December Industrial Production due out Friday at 9:15 (Briefing.com consensus of 0.3%; November was 1.1%)

·         December Capacity Utilization due out Friday at 9:15 (Briefing.com consensus of 79.3%; November was 79.0%)

·         January Michigan Sentiment due out Friday at 9:55 (Briefing.com consensus of 83.0; December was 82.5)

·         November JOLTS - Job Openings due out Friday at 10:00 (Briefing.com consensus of ; October was 3.925 M )

Upcoming Fed/Treasury Events:

·         Richmond Fed President Jeffrey Lacker (not a voting FOMC member, hawkish) to speak tomorrow at 12:30

On other news.... 

Intel misses by $0.01, reports revs in-line; guides Q1 revs in-line

American Express misses by $0.04, reports revs in-line

Currencies 

Dollar Hovers Near 81.00: 10-yr: +13/32..2.844%..USD/JPY: 104.27..EUR/USD: 1.303

·         The Dollar Index hovers little changed near 81.00 as action was able to recover from this morning's sell off. 

·         The early weakness dropped trade onto 80.80 support, but buyers emerged at the level in defense of the 50 and 100 dma. Click here to see a daily Dollar Index chart.

·         EURUSD is -5 pips @ 1.3600 as action continues to press key support in the area. The 1.3560 level will be key as the lower bound of the support band rests in the area and is helped by the 100 dma. A German High Court ruling over the constitutionality of the European Central Bank's Outright Monetary Transactions is tentatively scheduled for tomorrow.

·         GBPUSD is -25 pips @ 1.6345 amid a rather uninspiring day for the pair. Today's weakness comes amid yet another quiet day for data and news out of the UK, and has trade set to close at its lowest levels of 2014. Sterling has been a laggard so far in 2014 as the boost to the UK economy that came from the London Games begins to dissipate. British data out tomorrow is limited to retail sales. 

·         USDCHF is -30 pips @ .9055 as trade struggles to retake resistance in the .9100 area that is helped by the 100 dma (.9074). The pair has been pressured throughout the afternoon despite comment from Swiss National Bank Chairman Thomas Jordan suggesting, "the higher-ranking monetary policy goal of price stability does not allow for any increase in interest rates for the foreseeable future." Support rests in the .9000 area, and is helped by the 50 dma. Swiss PPI is due out tomorrow. 

·         USDJPY is -20 pips @ 104.35 as sellers look to retake control after two days of gains. Action saw an early test of the 105.00 resistance level, but steady selling over the course of the day has trade sitting just off the lows. Minor support rests in the 104.00 area with 103.00 being the more important level. 

·         AUDUSD is -105 pips @ .8810 as trade remains on track to close at its lowest level since August 2010. The hard currency tumbled to a low of .8777 following the disappointing Aussie employment change, but has steadily trimmed those losses over the course of the day. A move into the .8400 level is forthcoming if previous support in the .8880 area is not quickly recaptured.

·         USDCAD is -10 pips @ 1.0920 during what has been a lackluster session for the pair. Action holds just off the best level in over four years.

Jason's Commentaries


In a clearly divergent market, Russells led the market higher, while Dow decided to cause some drag to the indices. The main laggard for the market last night is apparently the Financials. The main drag came from Citi, which misses their top and bottom line, even a satisfactory earnings from Goldman is unable to keep the Financials afloat. The main leader is the Utilities. After the market closes, Amex and Intel came out with their disappointing earnings, missing their bottomline while keeping their topline guidance. It seems that the 2 main Dow component is going to cause some serious drag in the Dow tomorrow. Volumes were rather healthy but the internals were clearly divergent. On the Technical perspective, I reckon the market is still bullish in the near term, that is assuming the earnings doesn't such. However, it seems that only Bank of America has performed well.. But the rest of the Financials like JP Morgan, Wells Fargo, Goldman Sachs are able to produce only satisfactory results. As the earnings season carry on, we'll have the Techs announcing their earnings soon, which will have a serious impact on the Nasdaq. So stay safe and have a sideways market tomorrow =D   

Market Call: FLAT to downside

Date: 17 Jan 2014