2 Jan 2014 AMC- Market dipped on the first trading session of the year

2 Jan 2014 AMC- Market dipped on the first trading session of the year

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: -0.5%

·         Germany's DAX: -1.6%

·         France's CAC: -1.6%

·         Spain's IBEX: -1.6%

·         Portugal's PSI: + 1.0%

·         Italy's MIB Index: -0.2%

·         Irish Ovrl Index: + 0.3%

·         Greece ATHEX Composite: + 3.6%

Before Market Opens

S&P futures vs fair value: -6.80. Nasdaq futures vs fair value: -16.00.
The S&P 500 futures remain seven points below fair value as cautious action in Europe weighs.

Asian markets ended mixed as most traders returned to work for their first day of the New Year. Notably, Thailand's SET (-5.2%) dropped to a 16-month low as political uncertainty continued fueling outflows. The SET is 25% below its May 2013 highs. In economic data of note, China's Manufacturing PMI ticked down to 51.0 from 51.4 (51.2 expected) while the HSBC Manufacturing PMI held steady at 50.5, as expected. Elsewhere, Hong Kong's retail sales increased 8.5% year-over-year (5.0% forecast, 6.3% previous). 

·         Japan's Nikkei was closed. 

·         Hong Kong's Hang Seng added 0.1% amid a sleepy trade. Internet gaming company Tencent Holdings led with a 2.0% gain, continuing its run into record territory. Heavy smog weighed on coal names as China Coal Energy and China Shenhua Energy lost 4.1% and 2.3%, respectively. 

·         China's Shanghai Composite slipped 0.3%. Brokerage stocks lagged with Citic Securities sinking 1.3%. 

Major European indices hover near their lows with France's CAC (-0.8%) pacing the retreat. Investors received several PMI readings from regional economies. Eurozone Manufacturing PMI held steady at 52.7, as expected. Germany's Manufacturing PMI ticked up to 54.3 from 54.2 (54.2 expected); Great Britain's Manufacturing PMI fell to 57.3 from 58.1 (58.0 forecast); and French Manufacturing PMI slipped to 47.0 from 47.1 (47.1 consensus). Elsewhere, Italy's Manufacturing PMI rose to 53.3 from 51.4 (51.8 expected) and Spain's Manufacturing PMI improved to 50.8 from 48.6 (49.9 consensus).

In news of note, Latvia has formally entered the eurozone, expanding the single currency region to 18 members. 

·         Great Britain's FTSE trades lower by 0.1% as miners lag. Anglo American, BHP Billiton, and Rio Tinto are all down between 1.2% and 2.3%. On the upside, financials Ashtead Group and Prudential trade higher by 2.4% and 1.2%, respectively. 

·         Germany's DAX is lower by 0.5% as producers of basic materials lead to the downside. K+S trades down 3.1% and ThyssenKrupp sports a loss of 1.8%. 

·         In France, the CAC displays a loss of 0.8% with growth-sensitive names underperforming. Alstom and Technip are down close to 1.8% apiece. Advertiser Publicis Groupe outperforms with a gain of 1.5%.

Market Internals

Market Internals -Technical-
The S&P 500 closed down 16 (-0.89%) at 1832, the Dow closed down 135 (-0.82%) at 16441, and the Nasdaq closed down 34 (-0.8%) at 4143. Action came on slightly below average volume (NYSE 611 mln vs. avg. of 691; NASDAQ 1635 mln vs. avg. of 1719), with decliners outpacing advancers (NYSE 1056/2085, NASDAQ 954/1674) and new highs outpacing new lows (NYSE 90/31, NASDAQ 102/10).

Relative Strength: 
Junior Gold Miners-GDXJ +5.31%, Silver Miners-SIL +4.26%, Clean Energy-PBW +2.35%, Platinum-PPLT +2.34%, Volatility-VXX +2.09%, Greece-GREK +0.89%, Japanese Yen-FXY +0.53%, Peru-EPU +0.4%, Chinese Yuan-CYB +0.21%.

Relative Weakness: 
Thailand-THD -9.02%, South Korea-EWY -4.69%, India-INP -4.16%, South Africa-EZA -3.86%, Emerging Markets-EEM -3.84%, Gasoline-UGA -3.15%, Oil-USO -3.09%, Commodities-GSG -2.58%, Cocoa-NIB -2.54%, Shipping-SEA -2.13%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: Stocks Begin 2014 on Lower Note
After gaining nearly 30.0% in 2013, the S&P 500 exhibited a bit of a hangover in its first session of 2014. The benchmark index fell 0.9% as all ten sectors registered losses.

Stocks were pressured from the opening bell as cautious action in Europe weighed on the early sentiment. In all likelihood, the slide caught a number of participants off guard given the understanding that the first few days of a new year are known to have a favorable bias with inflows into IRA accounts, bonus money being put to work, and new money coming off the sidelines. That did not happen today as sellers maintained control throughout the trading day.

Three cyclical sectors—energy (-1.3%), industrials (-1.3%), and technology (-1.1%)—slipped behind the broader market at the open and their underperformance weighed for the remainder of the session.

The energy sector followed in the lead of crude oil as the energy component tumbled 3.0% to $95.49/bbl. Meanwhile, industrials were pressured by defense contractors and transports. The PHLX Defense Index lost 1.3% while The Dow Jones Industrial Average fell 1.5%.

Elsewhere, the technology sector struggled to gain traction as its largest component, Apple (AAPL 553.13, -7.89), weighed after Wells Fargo downgraded the stock to ‘Market Perform' from ‘Outperform.' Chipmakers also lagged, sending the PHLX Semiconductor Index lower by 1.4%.

Even though three large sectors pressured the broader market throughout the day, there was some relative strength in other heavily-weighted groups. On that note, consumer discretionary (-0.5%), financials (-0.6%), and health care (-0.6%) outperformed.

Notably, the financial sector owed some its outperformance to Bank of America (BAC 16.10, +0.53), which gained 3.4% after Citigroup upgraded the stock to ‘Buy' from ‘Neutral.' JPMorgan Chase (JPM 58.21, +0.11) also bucked the downtrend, climbing 0.2%.

Treasuries rallied throughout the day as the benchmark 10-yr yield slid from 3.04% to 2.99%.

Trading volume was on the light side as just over 610 million shares changed hands on the floor of the New York Stock Exchange.

Today's economic data was limited to three reports, but neither had much of a trading impact: 

·         Weekly initial claims dipped to 339,000 from an upwardly revised 341,000 (from 338,000) while the Briefing.com consensus estimate was pegged at 333,000. Notably, there was no indication from the Department of Labor that seasonal adjustments continued creating difficulties. 

·         Construction spending in November rose 1.0% while the Briefing.com consensus expected an increase of 0.8%. The November gain followed an upwardly revised 0.9% increase (from 0.8%) in October. Total private construction, paced by a 1.9% increase in residential spending, was up 2.2% and led the overall advance. Nonresidential private spending jumped 2.7%, paced by gains in the commercial (+4.7%), office (+4.6%), power (+3.3%), and manufacturing (+1.2%) spaces. 

·         The December ISM Index checked in at 57.0, which was pretty much in-line with the Briefing.com consensus estimate of 56.9. The December reading was the second highest reading for the year, trailing only the 57.3 reading seen in November. 

There is no economic data on tomorrow's schedule.

·         Nasdaq -0.8% YTD

·         DJIA -0.8% YTD

·         S&P 500 -0.9% YTD

·         Russell 2000 -1.1% YTD

Commodities

Closing Commodities: Crude Oil Falls Below $96; Settles 3% Lower
Feb crude oil extended losses for a third consecutive session as a stronger dollar index and reports that Libyan protesters have agreed to reopen a key oil field weighed on prices. The energy component trended lower after pulling back from its session high of $97.66 per barrel set at pit trade open. It fell below the $96 per barrel level and settled with a 3.0% loss at $95.49 per barrel. 

Feb natural gas chopped around in positive territory today. It dipped to a session low of $4.27 per MMBtu in early afternoon pit action but quickly regained momentum. It settled with a 2.1% gain at $4.32 per MMBtu, just below its session high of $4.33 per MMBtu. 

Precious metals traded higher today despite the stronger dollar index. Feb gold brushed a session low of $1216.90 per ounce in early morning floor trade and spent the remainder of the session trading in a consolidative pattern slightly above the $1220 per ounce level. It eventually settled at $1225.40 per ounce, booking a gain of 1.9%. Mar silver chopped around near the $20.10 per ounce level. It settled 3.9% higher at $20.13 per ounce.

COMEX Metals Closing Prices

  Feb gold rose $22.70 to $1225.40/oz 

·         Gold traded higher today despite a stronger dollar index. The yellow metal brushed a session low of $1216.90 in early morning floor trade and spent the remainder of the session trading in a consolidative pattern slightly above the $1220 level. It eventually settled with a 1.9% gain. 

  Mar silver rose $0.75 to $20.13/oz 

·         Silver also rose for the first time in three sessions with prices chopping around the $20.10 level. It eventually settled 3.9% higher. 

  Mar copper fell 2 cents to $3.38/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Mar corn fell 1 cent to $4.21/bushel 

·         Mar wheat fell 8 cents to $5.97/bushel 

·         Mar soybeans fell 19 cents to $12.71/bushel 

·         Feb ethanol rose 3 cents to $1.82/gallon 

·         Mar sugar (#16 (U.S.)) fell 0.31 of a penny to 20.05 cents/lbs

NYMEX Energy Closing Prices

  Feb crude oil fell $2.97 to $95.49/barrel 

·         Crude oil extended losses for a third consecutive session as a stronger dollar index and reports that Libyan protesters have agreed to reopen a key oil field weighed on prices. The energy component pulled back from its session high of $97.66 set at pit trade open and trended lower for the remainder of the session. It fell below the $96 level and settled with a 3.0% loss. 

  Feb natural gas rose 9 cents to $4.32/MMBtu 

·         Natural gas chopped around in positive territory today. It dipped to a session low of $4.27 in early afternoon floor action but quickly regained momentum. It settled just below its session high of $4.33, booking a 2.1% gain. 

  Feb heating oil fell 8 cents to $2.99/gallon 

  Feb RBOB fell 9 cents to $2.70/gallon

Treasuries

Treasuries Kickoff 2014 with Gains: 10-yr: +11/32..2.989%..USD/JPY: 104.75..EUR/USD: 1.3651

·         Treasuries booked moderate gains during the first trading day of 2014. Click here to see an intraday yields chart.

·         Today's bid was paced at the long end as the 30y bond tacked on +28/32, dropping its yield -4.5bps to 3.919%. Early selling ran the 30y up to 3.967%, but the selling exhausted before hitting the 4.000% mark. 

·         Buying of 10s dropped the benchmark yield back below the 3.000% level. The 10y ended -4.1bps @ 2.985% after early weakness provided a test of 3.040%. 

·         A more modest bid dropped the 5y -3.2bps to 1.716%. The yield once again tested 1.750% resistance, but was unable to penetrate the level. 

·         A flatter curve developed as the 2-10-yr spread narrowed to 259.5bps. 

·         Precious metals were strong with gold +$22 @ $1224 and silver +$0.66 @ $20.03. 

·         Tomorrow's Data: Auto/truck sales (14). 

·         Fed Speak: Fed Chairman Ben Bernanke will be in Philadelphia, PA to take part in "Chairman Bernanke Presentation" (14:30). Fed Governor Stein will also be in Philadelphia, moderating a panel on "Shadow Banking" (10:15) while Philly's Plosser discusses "The Global Economy and Economic Institutions: Transitioning From a Low Interest Rate Environment" (10:15) at the same conference.

Next Day In View 

Economic Commentary

Economic Summary: ISM a tick higher than expectations; Construction spending beats expectations; Bernanke to speak tomorrow at 14:30
Economic Data Summary:

·         Weekly Initial Claims 339K vs Briefing.com consensus of 333K; Last Week was revised to 341K from 338K

·         Weekly Continuing Claims 2.833 M vs Briefing.com consensus of 2.875 M ; Last Week was revised to 2.931K from 2.932 K

o    There weren't any major surprises in the initial claims reading for the week ending December 28. According to the Department of Labor, claims dipped to 339,000 from an upwardly revised 341,000 in the prior week (from 338,000). The Briefing.com consensus estimate was pegged at 333,000. 

·         November Construction Spending 1.0% vs Briefing.com consensus of 0.8%; October was revised to 0.9% from 0.8%

o    Total private construction, paced by a 1.9% increase in residential spending, was up 2.2% and led the overall advance. Nonresidential private spending jumped 2.7%, paced by gains in the commercial (+4.7%), office (+4.6%), power (+3.3%), and manufacturing (+1.2%) spaces. 

·         December ISM Index 57.0 vs Briefing.com consensus of 56.9; November was 57.3

o    The December reading is the second highest reading for the year, trailing only the 57.3 reading seen in November. The message of the ISM report is that manufacturing activity continues in an expansion phase and is in fine working order. To that end, the new orders index increased to 64.2 from 63.6 -- the highest since April 2010 -- and the employment index rose to 56.9 from 56.5 -- the highest since June 2011.

Upcoming Economic Data:

·         November Factory Orders due out Monday at 10:00 (Briefing.com consensus of ; October was -0.9%)

·         December ISM Services due out Monday at 10:00 (Briefing.com consensus of ; November was 53.9)

Upcoming Fed/Treasury Events:

·         Fed Governor Jeremy Stein (voting FOMC member, dovish) to speak tomorrow at 10:15

·         Philadelphia Fed President Charles Plosser (voting FOMC member, hawkish) to speak tomorrow at 10:15

·         Richmond Fed President Jeffrey Lacker (not a voting FOMC member, hawkish) to speak tomorrow at 13:30

·         Fed Chairman Ben Bernanke (term ends Jan 31) to speak tomorrow at 14:30

Other International Events of Interest

·         China's Shanghai Composite (-0.3%) slipped following the disappointing Manufacturing PMI (51.0 actual v. 51.3 expected, 51.4 previous) and in-line HSBC Final Manufacturing PMI (50.5).

·         Eurozone Manufacturing PMI held steady at 52.7, as expected. 

On other news.... 

General Electric awarded $572.5 mln Navy contract(27.50 -0.53)
Co was awarded a $572,500,000 three-year performance based logistics requirements contract, for the repair, replacement, and program support for 17 F414 engine (F/A-18 E, F and EA-18G aircraft) components. Work will be performed at Fleet Readiness Center Southeast, Jacksonville, Fla. (60 percent) and Lynn, Mass. (40 percent), and work is expected to be completed by Dec. 31, 2016.






Currencies 

Dollar Gains to Start 2014: 10-yr: +13/32..2.985%..USD/JPY: 104.64..EUR/USD: 1.3664
The Dollar Index trades just off its best levels of the session as action remains on track to record a gain for the first trading day of 2014. The Index climbed to session highs near 80.70 at the onset of U.S. trade, and has hovered near the highs throughout the session.. Current action is taking place near 80.55.Click here to see a daily Dollar Index chart.

·         EURUSD is -90 pips @ 1.3665 with action staging a sizable rally off the lows. The single currency dipped to a low of 1.3630 despite the mostly better than anticipated Manufacturing PMI data from the region, and has since managed to regain 1.3650 support. Eurozone data includes M3 money supply and Spanish unemployment change. 

·         GBPUSD is -130 pips @ 1.6435 as its five-day winning streak nears an end. Sellers have been in control throughout the session following Britain's Manufacturing PMI miss, with trading now testing support in the region. British data is heavy with Nationwide Home Price Index, Construction PMI, BOE Credit Conditions Survey, and net lending to individuals all scheduled for tomorrow. 

·         USDCHF is +85 pips @ .9000 as a strong bid persists for the second time in three sessions. Today's strength has the pair testing resistance in the area that is helped by the 50 dma (.9019). Switzerland's KOF Economic Barometer is due out tomorrow. 

·         USDJPY is -55 pips @ 104.65 as action presses session lows. An overnight bid ran action to nearly 105.50, its best since October 2008, but a significant reversal has taken place during U.S. trade. Minor support rests in the 104.50 area while more meaningful support comes into play near 103.50.Japanese banks remain closed for holiday. 

·         AUDUSD is +40 pips @ .8920 as action remains trapped in the tight .8850/.8950 range that has been in place since the middle of December. Today's session has seen the hard currency test both ends the range as neither bulls nor bears have been able to take control. China's Non-Manufacturing PMI will cross the wires tonight. 

·         USDCAD is +5 pips @ 1.0645 amid a somewhat volatile session. The pair saw an early test of 1.0575 support, but now trades just off its best levels of the session as bulls look to make another run at the key 1.0700 level.

Jason's Commentaries


It came in as a huge surprise to see such a downside movement in the market last night. The European market was the key factor to the bearish open and the US traders decided to profit take together which caused a bearish start which pretty much lasted throughout the session. Internals were divergent at first which turned convergent by mid-day towards the bearish side. VIX spiked 3.72% last night as well... On the technical notes, we're having some reversal patterns forming and i think it's likely to hold for one more day before find a bounce. On the major movers last night, Apple was one of the main dragging force which dragged the entire tech sector down, while Bank of America was one of the rare leading force to prevent the dip. Overall, the Utilities, Energy and the Industrials were the main laggard last night with 1.53% &, 1.42% and 1.40% respectively. 

Market Call: DOWN

Date: 3 Jan 2014