Tuesday 21 January 2014

17 Jan 2014 AMC - Market went flat to downside as big names like GE and Intel lagged, however Visa and Amex pulled held Dow up ahead of Martin Luther King's Day


17 Jan 2014 AMC - Market went flat to downside as big names like GE and Intel lagged, however Visa and Amex pulled held Dow up ahead of Martin Luther King's Day
Market Summary 




 European Markets Closing Prices

European markets are now closed; stock markets across Europe performed as follows:
·         UK's FTSE: + 0.2%
·         Germany's DAX: + 0.3%
·         France's CAC: + 0.2%
·         Spain's IBEX: + 0.1%
·         Portugal's PSI: + 0.3%
·         Italy's MIB Index: + 0.5%
·         Irish Ovrl Index: + 0.5%
·         Greece ATHEX Composite: -0.2%
Before Market Opens 


S&P futures vs fair value: -1.80. Nasdaq futures vs fair value: -8.00.
Markets across Asia ended mostly lower as trade slipped following some disappointing earnings reports on Wall Street. News and data was mostly absent, limited to the Japanese government upped its economic assessment for the first time in four months. 
·         Japan's Nikkei (-0.1%) slipped amid a lackluster trade. Mitsubishi Motors was a notable outperformer, surging 10.1% as traders covered their short bets. 
·         Hong Kong's Hang Seng (+0.6%) outperformed despite selling off into the close. Casino stocks led the way as Galaxy Entertainment jumped 5.3% and Sands China rallied 3.5%. Recent outperformer Lenovo slumped 4.0% as traders booked profits. 
·         China's Shanghai Composite (-0.9%) posted its lowest close in over five months as worries over the onslaught of IPOs set to hit the market persist. Neway Valve jumped 43.4% during today's debut. 
The major European bourses hover little changed. A quiet day for data saw U.K. retail sales blow past estimates (2.6% MoM actual v. 0.5% MoM expected) while France's budget deficit widened to EUR87.0 bln (EUR80.0 bln expected, EUR86.1 bln previous). Making headlines were comments from French President Francois Hollande, suggesting the euro is too high. 
·         Britain's FTSE trades flat as some recent selling has wiped away the early gains. Royal Dutch Shell trades down 2.2% after lowering its guidance. 
·         Germany's DAX is up 0.1% amid a sleepy trade. Utilities lag as RWE and E.ON trade down 2.0% and 0.7%, respectively. 
·         France's CAC is unchanged as trade has dipped back to the flat line. Automaker Renault sports a gain of 2.9% as momentum carries over from yesterday's strong monthly sales report. 


Market Internals











Market Internals -Technical-
The Dow closed up 42 (+0.25%) at 16459, the S&P 500 closed down 7 (-0.38%) at 1839, and the Nasdaq closed down 21 (-0.50%) at 4198. Action came on above average volume (NYSE 876 mln vs. avg. of 681; NASDAQ 2072 mln vs. avg. of 1748), with decliners outpacing advancers (NYSE 1341/1762, NASDAQ 1076/1533) and new highs outpacing new lows (NYSE 184/21, NASDAQ 171/17).

Relative Strength: 
Junior Gold Miners-GDXJ +5.91%, Vietnam-VNM +3.61%, Silver Miners-SIL +3.14%, Platinum-PPLT +2.85%, Heating Oil-UHN +1.60%, Hong Kong-EWH +1.53%, Cotton-BAL +1.35%, Peru-EPU +1.34%, Brazilian Real-BZF +0.81%, British Pound-FXB +0.31%.

Relative Weakness: 
Turkey-TUR -2.85%, Cocoa-NIB -2.20%, Sugar-SGG -2.06%, Poland-EPOL -1.95%, Greece-GREK -1.84%, Natural Gas-UNG -1.83%, New Zealand-ENZL -1.74%, Clean Energy-PBW -1.45%, U.S. Home Construction-ITB -1.35%, Belgium-EWK -1.28%.




Leaders and Laggards




Technical Updates














Commentaries 




The broader market ended the week on a down note, undercut by a spate of uninspiring earnings results and guidance from some widely-held companies that put a damper on the bullish sentiment seen in the middle of the week.

There were some buying efforts on Friday that controlled the fallout, but generally speaking there wasn't a lot of conviction among buyers with the exception of some specific stocks. Those exceptions tended to reside in the price-weighted Dow Jones Industrial Average, which outperformed the other major indices on Friday.

American Express (AXP 90.97, +3.19), which came up shy of consensus earnings estimates but spotlighted encouraging card member spending, was instrumental in the Dow's outperformance. It joined with Visa (V 232.18, +10.41) -- the highest-priced stock in the Dow -- to effectively account for all of the Dow's gains. Remarkably, 21 out of the 30 Dow components ended lower on Friday.

Intel (INTC 25.85, -0.69) and General Electric (GE 26.58, -0.62) were among the Dow laggards. Both companies reported their results for the fourth quarter, yet neither wowed investors. Intel missed by a penny and said it expected FY14 revenues to be approximately flat. GE was in-line with expectations and said things were improving, albeit in a mixed environment.

Morgan Stanley (MS 33.40, +1.40), which beat by eight cents, and Schlumberger (SLB 90.21, +1.60), which beat by two cents, enjoyed positive outings that provided a measure of support for the broader market and their respective sectors.

Be that as it may, every S&P 500 sector closed in the red on Friday. The energy sector (-0.05%) was the relative strength leader while the consumer staples sector (-0.8%) was the biggest laggard. The latter was afflicted by a big earnings warning out of Elizabeth Arden (RDEN 27.96, -6.54).

Other notable companies warning they expect to fall short of earnings expectations included Con-way (CNW 40.59, -0.81), Royal Dutch Shell (RDS.a 70.57, -1.17), and UPS (UPS 99.91, -0.58). The warning from UPS drew a lot of attention, yet the company came back nicely from a loss of more than three points during the day as investors seemed to warm to the notion that its shortfall was tied to the bad weather and the operational challenges of meeting increased demand during the holiday selling period.

The earnings news was the focal point throughout the day. There were some early economic releases, but they didn't have much bearing on today's proceedings. Overall, the economic news was good enough not to create any newfound concerns about the economic recovery. 

·         December housing starts slipped 9.8% to an annualized rate of 999,000 units, but the two-month average for starts was the highest since March 2008.
·         Industrial production jumped 0.3%, which was the fifth consecutive month industrial production increased.
·         The preliminary reading for the University of Michigan Consumer Sentiment report for January dipped to 80.4 from 82.5, but the downturn wasn't enough to cause any real concerns 
Today was an options expiration day, so volume was heavier than usual with 880 mln shares having traded at the NYSE versus 641 mln on Thursday.

For the week, the S&P 500 declined 0.2%, the Dow Jones Industrial Average gained 0.1%, and the Nasdaq Composite increased 0.6%.

As a reminder, the stock and bond markets will be closed on Monday in observance of Martin Luther King, Jr. Day. 

·         Dow Jones Industrial Average -0.7% YTD
·         S&P 500 -0.5% YTD
·         Nasdaq Composite +0.5% YTD
·         Russell 2000 +0.4% YTD


Commodities










Closing Commodities: Natural Gas Rises 6.7% During The Week
·         Precious metals traded higher today despite an advance by the dollar index. Feb gold rose to a session high of $1254.60 per ounce after trading as low as $1242.70 per ounce in early morning pit trade. It settled 1.0% higher at $1251.80 per ounce, booking a 0.4% gain for the week.
·         Mar silver lifted from a session low of $20.12 per ounce and peaked at $20.42 per ounce by late morning action. It eventually settled 1.2% higher at $20.30 per ounce, gaining 0.3% over the week.
·         Feb crude oil also traded in positive territory. It pulled back from a session high of $94.94 per barrel set at pit trade open to a session low of $93.94 per barrel. However, it quickly recovered back above the $94 per barrel level and settled with a 0.4% gain at $94.33 per barrel. Today's advance brought gains for the week to 1.8%.
·         Feb natural gas, on the other hand, spent today's floor trade in the red. It rallied to a session high of $4.39 per MMBtu after trading as low as $4.30 per MMBbt but lost momentum heading into the close and closed 1.4% lower at $4.33 per MMBtu. Despite the loss, natural gas gained 6.7% over the week.



CBOT Agriculture and Ethanol/ICE Sugar Closing Prices
·         Mar corn fell 3 cents to $4.24/bushel 
·         Mar wheat fell 9 cents to $5.63/bushel 
·         Mar soybeans rose 1 cent to $13.16/bushel 
·         Feb ethanol fell 4 cents to $1.89/gallon 
·         Mar sugar (#16 (U.S.)) rose 0.03 of a penny to 20.28 cents/lbs



COMEX Metals Closing Prices
  Feb gold rose $11.90 to $1251.80/oz 
·         Gold traded higher today despite an advance by the dollar index. The yellow metal rose to a session high of $1254.60 after trading as low as $1242.70 in early morning pit trade. It settled 1.0% higher, booking a 0.4% gain for the week. 
  Mar silver rose $0.24 to $20.30/oz 
·         Silver also trended higher for most of today's floor trade. Prices lifted from a session low of $20.12 and peaked at $20.42 by late morning action. Silver eventually settled 1.2% higher, gaining 0.3% over the week. 
  Mar copper settled unchanged at $3.34/lbs

 






 NYMEX Energy Closing Prices
  Feb crude oil rose $0.42 to $94.33/barrel 
·         Crude oil traded higher despite a stronger dollar index. It pulled back from a session high of $94.94 set at pit trade open to a session low of $93.94. However, it quickly recovered back above the $94 level and settled with a 0.4% gain. Today's advance brought gains for the week to 1.8%. 
  Feb natural gas fell 6 cents to $4.33/MMBtu 
·         Natural gas, on the other hand, spent today's floor trade in the red. It rallied to a session high of $4.39 after trading as low as $4.30 but gave up the momentum heading into the close and settled 1.4% lower. Despite the loss, natural gas gained 6.7% over the week. 
  Feb heating oil rose 4 cents to $3.02/gallon 
  Feb RBOB rose 3 cents to $2.62/gallon

Treasuries


10y Posts Lowest Close in Five Weeks : 10-yr: +05/32..2.822%..USD/JPY: 104.26..EUR/USD: 1.3528
The Week in Review 
·         Treasuries saw a mixed week as selling took place up front while buyers were in control at the long end. Click here to see an intraweek yields chart.
·         Congress passed a $1.1 trln spending bill that will fund the government through the end of September. It was the first budget agreed upon by Congress in almost four years, and the first by a bi-partisan Congress in 27 years. 
·         Data mostly outpaced estimates as Empire Manufacturing (12.5 actual v. 3.5 expected), housing starts (999K actual v. 986K expected), Philly Fed (9.4 actual v. 8.0 expected), and retail sales (0.2% actual v. 0.0% expected) topped forecasts. 
·         There were some misses as building permits (986K actual v. 1000K expected), Michigan Sentiment (80.4 actual v. 83.0 expected), and the NAHB Housing Market Index (56 actual v. 57 expected) fell short.
·         CPI posted an in-line 0.3% while PPI was hot at 0.4% (0.3%). 
·         The latest Fed Beige Book crossed the wires on Wednesday, and showed the U.S. economy expanded at a ‘moderate' pace from late-November into the end of 2013
·         Up front, the 2y and 3y ticked lower over the course of the week with both adding +2bps. The 2y ticked up to almost 38bps, and will remain on many traders' radars in the coming weeks as another debt ceiling debate nears in Congress ahead of the February 7 deadline
·         A flat week in for the 5y saw the yield settle @ 1.630%. Buying early in the week dropped the yield below 1.600% before mid-week selling provided a test of 1.700% resistance. 
·         Action in 10s dropped the benchmark yield -3bps to 2.827%, its lowest level in five weeks. A breakdown of current levels puts the 2.700/2.750% area in focus.
·         Buying at the long end dropped the 30y -5bps as action pressed to its lowest level since early-November. Recent developments put the 3.700% level in play. 
·         Cuve flattening took hold as the 2-10-yr spread tightened to 244.5bps
The Week Ahead 
·          Markets are closed on Monday in observance of Martin Luther King, Jr. Day
·         There is no data on Tuesday. 
·         Wednesday will see just the weekly MBA Mortgage Index (7). 
·         Thursday's data is the most anticipated of the week as initial and continuing claims (8:30), FHFA Housing Price Index (9), existing home sales, and leading indicators (10) are due out.
·         Data is absent on Friday.

On other news.... 




Earnings/Guidance

·         American Express (AXP) misses by $0.04, reports revs in-line
·         BNY Mellon (BK) reports EPS in-line
·         Capital One (COF) misses by $0.12, beats on revs; Net interest margin of 6.73 percent, down 16 basis points 
·         Comerica (CMA) beats by $0.03 
·         Con-way (CNW) guides Q4 EPS well below consensus
·         Elizabeth Arden (RDEN) (halted, will resume trade at 16:50) lowers Q2 guidance; withdraws FY14 EPS and rev outlook, expected to be below prior guidance
·         General Electric (GE) reports EPS in-line, revs in-line; 2014 framework remains unchanged
·         Intel (INTC) misses by $0.01, reports revs in-line; guides Q1 revs in-line; reaffirms FY14 revs guidance
·         Morgan Stanley (MS) beats by $0.08, misses on revs
·         M&T Bank (MTB) misses by $0.13
·         Sallie Mae (SLM) misses by $0.12; co expects to initiate EPS guidance for 2014 upon resolution of its separation plan; the co expects full-year 2014 private education loan originations of $4 billion
·         Schlumberger (SLB) beats by $0.02, reports revs in-line
·         SunTrust Banks (STI) beats by $0.08, beats on revs
·         UPS (UPS) guides FY14 EPS +10-15% to ~$5.03-5.26 vs. $5.49 consensus
News

·         Apple (AAPL) iPhone China Mobile (CHL) getting weak response so far, according to reports
·         Apple (AAPL) and Samsung (SSNLF) expected to ship 80-90 mln tablets in 2014, according to reports
·         Con Edison (ED) increases quarterly dividend 2.4% to $0.63 from $0.615 per share
·         IBM (IBM) plans to spend $1.2 bln to expand investment in cloud services, according to reports
·         Johnson & Johnson (JNJ): FDA panel votes against recommending approval Janssen Pharmaceuticals' sNDA for XARELTO
·         Microsoft (MSFT): Xbox Wire blog states Xbox One was the number one selling console in the U.S. in December
·         Schlumberger (SLB) declares 28% increase in quarterly dividend to $0.40/share
·         Sysco (SYY) lower in after hours; Reuters reporting Florida AG and other states are reviewing Sysco /US Foods deal
·         T-Mobile US (TMUS) and Sprint (S): Sprint has financing proposals from banks for T-Mobile bid, according to reports
·         Standard & Poors announces changes to U.S. indices: TSCO to replace LIFE in the S&P 500; ALGN to replace RRTS in the S&P MidCap 400, RRTS to replace ALGN in the S&P SmallCap 600; BCC to replace VPHM in the S&P SmallCap 600





Currencies 




Dollar Flirts with Best Close Since Mid-September: 10-yr: +03/32..2.832%..USD/JPY: 104.30..EUR/USD: 1.3525
·         The Dollar Index sits on session highs near 81.25 as action contends with its best close since the middle of SeptemberClick here to see a daily Dollar Index chart.
·         Today's bid has the greenback higher for the third time in four sessions, and brings trade closer to a retest of the 200 dma (81.59). 
·         EURUSD is -95 pips @ 1.3525 as sellers have managed to penetrate important support in the 1.3550/1.3600 area. Today's selling has dropped the single currency to levels last seen around Thanksgiving while also pushing action below both the 50 and 100 dma. The inability to quickly retake support puts the 1.3400/1.3450 level in play. Eurozone data due out on Monday includes German PPI and Spanish home prices. 
·         GBPUSD is +55 pips @ 1.6410 as trade has slipped off its best levels the session. This morning's strong U.K. retail sales report ran sterling as high as 1.6460, but some afternoon selling has dropped action off its best levels of the day as sellers emerged at the resistance level. The 1.6300 support level remains key, and is aided by the 50 dma. 
·         USDCHF is +70 pips @ .9115 as trade tests its best level in two months following the tame Swiss PPI number. Resistance in the .9100 area remains under close watch, but bulls will not breathe easy unless they are able to retake the 200 dma (.9234). 
·         USDJPY is flat @ 104.30 as action has held in a tight 25 pip range for the entire session. The pair has seen little response to the Japanese government upping its economic assessment for the first time in four months as it looks likes traders are opting to remain on the sidelines until next week's Bank of Japan rate decision. 
·         AUDUSD is -50 pips @ .8770 as trade presses the lowest level since August 2010 ahead of China's GDP, industrial production, and fixed asset investment data, which are scheduled to cross the wires over the weekend. 
·         USDCAD is +40 pips @ 1.0970 as trade looks likely to put in its best close since September 2009. Traders remain fixated on the psychologically important 1.1000 level as stops are likely to rest at the round number.





Weekly Analysis
Week 1



Technical Updates


















Briefing's Commentaries


Weekly Wrap The broader market ended the week on a down note, undercut by a spate of uninspiring earnings results and guidance from some widely-held companies that put a damper on the bullish sentiment seen in the middle of the week. There were some buying efforts on Friday that controlled the fallout, but generally speaking there wasn't a lot of conviction among buyers with the exception of some specific stocks.

Those exceptions tended to reside in the price-weighted Dow Jones Industrial Average, which outperformed the other major indices on Friday.

American Express
 (AXP 90.97, +3.19), which came up shy of consensus earnings estimates but spotlighted encouraging card member spending, was instrumental in the Dow's outperformance. It joined with Visa (V 232.18, +10.41) -- the highest-priced stock in the Dow -- to effectively account for all of the Dow's gains. Remarkably, 21 out of the 30 Dow components ended lower on Friday.

Intel (INTC 25.85, -0.69) and General Electric (GE 26.58, -0.62) were among the Dow laggards. Both companies reported their results for the fourth quarter, yet neither wowed investors. Intel missed by a penny and said it expected FY14 revenues to be approximately flat. GE was in-line with expectations and said things were improving, albeit in a mixed environment.

Morgan Stanley (MS 33.40, +1.40), which beat by eight cents, andSchlumberger (SLB 90.21, +1.60), which beat by two cents, enjoyed positive outings that provided a measure of support for the broader market and their respective sectors.

Be that as it may, every S&P 500 sector closed in the red on Friday. The energy sector (-0.05%) was the relative strength leader while the consumer staples sector (-0.8%) was the biggest laggard. The latter was afflicted by a big earnings warning out of Elizabeth Arden (RDEN 27.96, -6.54).

Other notable companies warning they expect to fall short of earnings expectations included Con-way (CNW 40.59, -0.81), Royal Dutch Shell(RDS.a 70.57, -1.17), and UPS (UPS 99.91, -0.58). The warning from UPS drew a lot of attention, yet the company came back nicely from a loss of more than three points during the day as investors seemed to warm to the notion that its shortfall was tied to the bad weather and the operational challenges of meeting increased demand during the holiday selling period.

The earnings news was the focal point throughout the day and the week. There were some early economic releases, but they didn't have much bearing on Friday's proceedings. Overall, the economic news was good enough not to create any newfound concerns about the economic recovery. 

·         December housing starts slipped 9.8% to an annualized rate of 999,000 units, but the two-month average for starts was the highest since March 2008. 
·         Industrial production jumped 0.3%, which was the fifth consecutive month industrial production increased. 
·         The preliminary reading for the University of Michigan Consumer Sentiment report for January dipped to 80.4 from 82.5, but the downturn wasn't enough to cause any real concerns 
Friday was an options expiration day, so volume was heavier than usual with 880 mln shares having traded at the NYSE versus 641 mln on Thursday.

The early sense of things so far is that the fourth quarter wasn't a slam-dunk quarter despite the incoming signs of improving economic activity that were seen during the quarter.  Furthermore, there hasn't been a lot of table pounding either with respect to the first quarter and the year ahead.

The latter is owed in part to the fact that the financial companies factored prominently on this week's earnings calendar and they don't typically provide specific earnings guidance.  The coming week will provide some more clarity on the outlook when a larger number of industrial and technology companies report their results.

At the moment, the market is having some difficulty finding its way and has the semblance of being at a 'T' intersection, not knowing which way to turn.  That indecision has led to some choppy trading action.  The guidance from corporate America in the coming week may very well offer some navigational clues.  

For the week that just concluded, the S&P 500 declined 0.2%, the Dow Jones Industrial Average gained 0.1%, and the Nasdaq Composite increased 0.5%.

As a reminder, the stock and bond markets will be closed on Monday in observance of Martin Luther King, Jr. Day.


Next Week In View



Economic Commentaries


Economic Summary: Housing Starts top expectations; IP in line with estimates; Michigan Sentiment misses the mark
Economic Data Summary:
·         December Housing Starts 999K vs Briefing.com consensus of 986K; November was 1.091 M
·         December Building Permits 986K vs Briefing.com consensus of 1.000 M ; November was 1.007 M
o    One of the theories for the weak December employment number was that December 2013 was brutally cold compared to previous years and that kept workers at home. If that story is true, we would have expected the cold weather temperatures to negatively impact the housing starts number. That didn't happen. Instead, housing starts -- while down from November -- posted their best two-month average since March 2008. The underlying trends are encouraging. 
·         December Industrial Production 0.3% vs Briefing.com consensus of 0.3%; November was 1.1%
·         December Capacity Utilization 79.2% vs Briefing.com consensus of 79.3%; November was 79.0%
o    . That gain was in-line with the regional Fed manufacturing surveys. Motor vehicle production increased 1.6% in December after increasing 3.6% in November. Total motor vehicle assemblies rose to 11.80 mln SAAR from 11.53 mln in November. That was the most motor vehicle assemblies since March 2006. Most of the increase in assemblies was due to higher car production. Car assemblies increased to 4.64 mln SAAR from 4.41 mln SAAR. Truck assemblies increased to 7.16 mln SAAR from 7.12 mln SAAR. 
·         January Michigan Sentiment 80.4 vs Briefing.com consensus of 83.0; December was 82.5
o     The drop in sentiment is most likely the result of uncertainty in the labor department. More than one million unemployed workers lost their unemployment insurance benefits following the expiration of the emergency benefits plan. At the same time, job growth in December came in well below expectations. The subsequent drop in the unemployment rate was spurred by workers leaving the labor force as opposed to an increase in employment. Other factors that normally affect sentiment were also down over the last couple of weeks. 
·         November JOLTS - Job Openings vs (October was 3.925 M)
Upcoming Economic Data:
·         Weekly MBA Mortgage Applications due out Wednesday at 7:00 (Last Week was 11.9%)
Upcoming Fed/Treasury Events:
·         Richmond Fed President Jeffrey Lacker (not a voting FOMC member, hawkish) to speak today at 12:30
Other International Events of Interest
·         A quiet day for data saw U.K. retail sales blow past estimates (2.6% MoM actual v. 0.5% MoM expected) while France's budget deficit widened to EUR87.0 bln (EUR80.0 bln expected, EUR86.1 bln previous) 



Jason's Commentaries

The market generally went down on Friday night despite the long weekend ahead of the Martin Luther King's day. Dow was the only indices that ended up on Friday as Visa performed well which eventually dragged American Express up. Intel and GE were amongst the 2 laggard that dragged most stocks. Apple did not have a good day either, dragging down the tech sector as well. The indices started the day lower(except for Dow Jones), and attempted to close the gap, however, failed the retracement and continued to go down more. Volumes were exceptionally high, at 847m shares traded on the NYSE. Internals were pointing to the downside as well. Within the market, staples and industrials were the main laggard. On the technical side, it's apparent that the market is going to go through a sideways and volatile market during this earning seasons. Right now, the market is totally focusing on the earnings season and the attention has shifted from Financials to Tech and industrials. Names like Microsoft, IBM, United Technologies, General Dynamics will be releasing their earnings. The financials are having a lacklustre earnings and GE has started the industrial earnings with poor earnings. With such factors, the market will be definitely very volatile.


Market Call: UP
Date:21 Jan 2014

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