28 Jan 2014 AMC- Market bouncing off its support level despite Apple sunk and ahead of the FOMC Statements

28 Jan 2014 AMC- Market bouncing off its support level despite Apple sunk

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: + 0.6%

·         France's CAC: + 1.0%

·         Spain's IBEX: + 1.2%

·         Portugal's PSI: + 1.7%

·         Italy's MIB Index: + 0.9%

·         Irish Ovrl Index: + 1.6%

·         Greece ATHEX Composite: -1.9%

Before Market Opens

S&P futures vs fair value: +5.60. Nasdaq futures vs fair value: -11.30.
The S&P 500 futures trade roughly six points above fair value.

Markets across Asia ended mostly lower amid a rather subdued session. China's SHIBOR continued to climb with the two-week rate surging 71.5bps to 6.807%. Elsewhere, the Reserve Bank of India surprised, hiking its repo rate 25 basis points to 8.00% (7.75% expected).

Economic data was limited as Japan's Corporate Services Price Index rose 1.3% year-over-year (1.1% forecast, 1.2% prior), Australia's CB Leading Index ticked up 0.2% month-over-month (0.5% previous), and NAB Business Confidence held at 6. 

·         Japan's Nikkei edged lower by 0.2% in a quiet trade. Sony lost 2.7% after seeing its rating cut to junk at Moody's. 

·         Hong Kong's Hang Seng shed 0.1%. Lenovo continued to whipsaw traders, surging 5.9%. Hang Lung Properties led to the downside, off 2.8%. 

·         China's Shanghai Composite ticked up 0.3% as the People's Bank of China injected more liquidity. Shanxi Coal was the standout, surging 14% on its first trading day. 

Major European indices have retreated from their best levels of the session. Spain's IBEX (+0.9%) leads while Great Britain's FTSE (+0.2%) lags for the second day in a row.

Investors received several data points. Great Britain's GDP rose 0.7% quarter-over-quarter (0.8% last) while the year-over-year reading increased 2.8% (1.9% prior). Both figures met expectations. Separately, Index of Services rose 0.8% (0.7% expected, 0.8% prior). Elsewhere, Germany's Import Price Index was unchanged month-over-month (0.2% consensus, 0.1% last), French Consumer Confidence ticked up to 86 from 85 (85 expected), and Italian Consumer Confidence rose to 98.0 from 96.4 (97.0 consensus) while wage inflation was unchanged month-over-month (0.0% prior).

Among news, Standard & Poor's commented on the eurozone, saying the region has not made much progress in delinking sovereigns from vulnerable banks. 

·         Great Britain's FTSE is higher by 0.2%. Financials are among the leaders while industrials and energy companies lag. Aberdeen Asset Management, Hargreaves Lansdown, and Lloyds Banking Group are up between 2.6% and 3.5%. On the downside, BG Group and Petrofac are both down near 1.0%. 

·         Germany's DAX holds an advance of 0.2% as exporters display strength. BMW, Daimler, and Volkswagen are all up between 0.8% and 1.2%. Chemical company K+S is the weakest component, down 2.1%. 

·         In France, the CAC trades up 0.3%. Steelmaker ArcelorMittal leads with a gain of 3.3% while financials outperform as well. BNP Paribas, Credit Agricole, and Societe Generale are up between 1.1% and 2.0%. 

·         Spain's IBEX is higher by 0.9% with support from banks. Bankia and CaixaBank hold gains close to 4.2% apiece. 

In domestic economic news, the November Case-Shiller 20-city Home Price Index rose 13.7% while a 13.8% increase had been expected by the Briefing.com consensus. This follows the previous month's increase of 13.6%.

Market Internals

Market Internals -Technical-
The S&P 500 closed up 11 (+0.61%) at 1793, the Dow closed up 91 (+0.57%) at 15929, and the Nasdaq closed up 14 (+0.35%) at 4098. Action came on mixed volume (NYSE 609 mln vs. avg. of 683; NASDAQ 1867 mln vs. avg. of 1771), with advancers outpacing decliners (NYSE 2325/782, NASDAQ 1761/860) and mixed new highs/lows  (NYSE 27/42, NASDAQ 42/24).

Relative Strength: 
U.S. Home Construction-ITB +3.81%, Natural Gas-UNG +3.47%, Biotechnology-XBI +3.01%, Junior Gold Miners-GDXJ +2.74%, Social Media-SOCL +2.49%, South Africa-EZA +2.32%, Spain-EWP +2.04%, Indonesia-IDX +2.00%, Italy-EWI +1.99%, Singapore-EWS +1.88%.

Relative Weakness: 
Volatility-VXX -4.05%, Columbia Index-GXG -0.87%, Heating Oil-UHN -0.81%, Thailand-THD -0.76%, Peru-EPU -0.76%, Russia-RSX -0.69%, Greece-GREK -0.60%, Technology-XLK -0.60%, Livestock-COW -0.46%, Corn-CORN -0.23%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: S&P 500 Snaps Three-Day Skid
The stock market halted its three-day slide on Tuesday as the S&P 500 gained 0.6%. The tech-heavy Nasdaq (+0.4%) also finished in the green, but couldn't keep pace with the S&P 500 as Apple (AAPL 506.50, -44.00) weighed following its quarterly report.

Although the largest tech company beat on earnings and revenue, investors were not pleased by below-consensus iPhone sales. In addition, disappointing guidance for the second quarter also factored into the stock's 8.0% loss.

The remainder of the technology sector (-0.7%) was a bit more mixed as large-cap names like Google (GOOG 1123.01, +21.78), Oracle (ORCL 37.10, +0.61), and Intel (INTC 24.90, +0.18) posted solid gains while Seagate (STX 51.52, -6.53) tumbled 11.3% after missing earnings estimates.

Outside of technology, most other cyclical groups finished ahead of the broader market. Financials (+1.3%) ended in the lead while the materials (+0.5%) sector was the only cyclical underperformer. U.S. Steel (X 25.34, -0.11) lost 0.4% after reporting mixed earnings.

Elsewhere, the discretionary sector advanced 0.8% with help from homebuilders after DR Horton (DHI 23.00, +2.06) reported better-than-expected results. The stock surged 9.8% while the broader iShares Dow Jones US Home Construction ETF (ITB 24.52, +0.90) jumped 3.8%.

Also of note, the industrial sector (+0.9%) rallied as transports provided support. The Dow Jones Transportation Average gained 1.1%, finishing just above its 50-day moving average.

On the countercyclical side, consumer staples (+0.7%) and health care (+1.3%) took part in the broad rally while telecom services (UNCH) and utilities (+0.4%) lagged.

Treasuries ended little changed despite showing early losses. The benchmark 10-yr yield settled at 2.75%.

Participation was well below average as only 609 million shares changed hands at the NYSE. So far in January, only six sessions have generated above-average volume with five taking place on days when the market ended lower.

Today's economic data included three reports. 

·         Durable goods orders fell 4.3% in December after increasing a downwardly revised 2.6% (from 3.4%). The Briefing.com consensus expected durable goods orders to increase 2.1%. Boeing (BA 137.09, -0.27) reported solid aircraft orders in December, and that was expected to carry overall durable goods orders higher for the month. Yet, the official Census data showed aircraft orders, defense and nondefense, down 16.7%. A large portion of the decline was due to seasonal adjustments that naturally occur in December. Excluding transportation, durable goods orders fell 1.6% which was well below the 0.6% gain expected by the consensus. These orders were revised down from an originally reported 1.2% gain in November to a 0.1% increase. 

·         The November Case-Shiller 20-city Home Price Index rose 13.6% while a 13.8% increase had been expected by the Briefing.com consensus. This followed the previous month's increase of 13.6%. 

·         The January Conference Board's Consumer Confidence Index increased to 80.7 from a downwardly revised 77.5 (from 78.1) in December. The Briefing.com consensus pegged the Consumer Confidence Index at 77.5. The strengthening in consumer confidence stands in contrast to what the preliminary reading for the January University of Michigan Consumer Sentiment Index showed. That index dropped on weakness in the labor market, increased volatility in equity prices, and higher gasoline prices. 

Tomorrow, the weekly MBA Mortgage Index will be reported at 7:00 ET while the FOMC will release its latest policy directive at 14:00 ET. 

·         Nasdaq Composite -1.9% YTD 

·         Russell 2000 -2.1% YTD 

·         S&P 500 -3.0% YTD 

·         Dow Jones Industrial Average -3.9% YTD

Commodities

Closing Commodities: Natural Gas Gains Almost 6%, Ending Just Under $5/MMBtu

·         Crude oil rose alongside the broader market today, lifting from a session low of $96.21 per barrel set at pit trade open. Prices advanced to a session high of $97.66 per barrel by late morning action and traded in a consolidative fashion slightly below that level for the remainder of floor trade. The energy component eventually settled with a 1.7% gain at $97.43 per barrel.

·         Mar natural gas also rose today on weather forecasts calling for colder-than-average temperatures. It brushed a session high of $4.95 per MMBtu in late afternoon floor action after trading as low as $4.75 per MMBtu earlier in the session. It settled with a solid 5.8% gain at $4.94 per MMBtu.

·         Precious metals traded lower ahead of tomorrow's FOMC announcement.The FOMC began a two-day meeting, the final under Ben Bernanke, with most expecting the Committee to trim the Fed's monthly asset purchases to $65 bln from the current $75 bln.

·         Mar gold dipped to a session low of $1248.20 per ounce in morning action and eventually settled with a 1.0% loss at $1250.50 per ounce.

·         Mar silver pulled back from its session high of $19.78 per ounce set in early morning floor trade. It brushed a session low of $19.45 per ounce and settled at $19.50 per ounce, booking a loss of 1.5%.

COMEX Metals Closing Prices

  Feb gold fell $12.50 to $1250.50/oz 

·         Gold traded lower ahead of tomorrow's FOMC announcement. The FOMC began a two-day meeting, the final under Ben Bernanke, with most expecting the Committee to trim the Fed's monthly asset purchases to $65 bln from the current $75 bln level. The yellow metal dipped to a pit session low of $1248.20 in morning action and eventually settled with a 1.0% loss. 

  Mar silver fell $0.30 to $19.50/oz 

·         Silver also traded in negative territory, with prices pulling back from a session high of $19.78 set in early morning floor trade. It brushed a session low of $19.45 and settled slightly above that level, booking a loss of 1.5%.

  Mar copper fell 4 cents to $3.22/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Mar corn settled unchanged at $4.32/bushel 

·         Mar wheat rose 2 cents to $5.66/bushel 

·         Mar soybeans fell 3 cents to $12.85/bushel 

·         Feb ethanol rose 3 cents to $1.79/gallon 

·         Mar sugar (#16 (U.S.)) rose 0.09 of a penny to 20.44 cents/lbs

NYMEX Energy Closing Prices

  Mar crude oil rose $1.65 to $97.43/barrel 

·         Crude oil rose alongside equities markets today, lifting from a session low of $96.21 set at pit trade open. Prices advanced to a session high of $97.66 by late morning action and traded in a consolidative fashion slightly below that level for the remainder of the session. The energy component eventually settled with a 1.7% gain. 

  Mar natural gas rose 27 cents to $4.94/MMBtu 

·         Natural gas rose on weather forecasts for colder-than-average temperatures. It brushed a session high of $4.95 in late afternoon floor action after trading as low as $4.75 earlier in the session and settled with a solid 5.8% gain. 

  Mar heating oil rose 2 cents to $2.99/gallon 

  Mar RBOB settled unchanged at $2.64/gallon

 

Treasuries

Treasuries Firm Ahead of Tomorrow's FOMC Meeting: 10-yr: +01/32..2.753%..USD/JPY: 102.87..EUR/USD: 1.3666

·         Treasuries finished with small gains as a light bid developed ahead of tomorrow's FOMC meeting. Click here to see an intraday yields chart.

·         The meeting will be the final under the leadership of Chairman Ben Bernanke, and is widely expected to produce another $10 bln taper of the central bank's bond-buying scheme.

·         Today's action saw the complex press the lows ahead of the cash open, but a sharp rally into positive territory ensued after the weak durable orders report (-4.3% actual v. 2.1% expected). 

·         Trade would chop around near the highs during early morning trade before retesting the lows in response to the consumer confidence beat (80.7 actual v. 77.5 expected). 

·         A steady bid persisted throughout the remainder of the session with trade seeing a muted response to the average $32 bln 2y note auction. 

·         The auction drew 0.380% and an average 3.30x bid/cover. Indirect bidders saw a stronger than usual 28.4% takedown, hoping offset the slightly weak 22.3% bid from directs. Primary dealers ended up with 49.3% of the supply. 

·         Buyers concentrated their efforts on the belly of the curve as the 5y shed -3.4bps to finish @ 1.554%. The yield closed on its 50 dma while seeing its lowest close since December 18, the day of the last Fed taper. 

·         A modest bid in 10s dropped the benchmark yield -2bps to 2.746%. Traders will continue to watch current levels as key support rests in the vicinity. 

·         At the long end, the 30y lagged, ending the session -0.8bps @ 3.672%. Today's advanced marked the six in the past eight sessions for the 30y bond, and has many traders eying the key 3.600% support level. 

·         A flatter curve took hold as the 2-10-yr spread tightened to 240bps. 

·         Precious metals hovered near their lows for most of the session as gold fell -$11 to $1252 and silver shed -$0.26 to near $19.53. 

·         Data: MBA Mortgage Index (7). The final FOMC rate decision under Chairman Ben Bernanke will take place (14). 

·         Auction: The previously scheduled $35 bln 5y note auction has been moved to Thursday at 11:30 am ET. Thursday's $29 bln 7y note auction will take place at 1pm ET, its scheduled time.

Next Day In View 

Economic Commentary

Economic Summary: Durable Orders show unexpected decline; Consumer Confidence tops expectations; Fed decision Wednesday at 14:00
Economic Data Summary:

·         December Durable Orders -4.3% vs Briefing.com consensus of 2.1%; November was revised to 2.6% from 3.5%

·         December Durable Goods Ex-Transportation -1.6% vs Briefing.com consensus of 0.6%; November was revised to 0.1% from 1.2%

o    Boeing (BA) reported solid aircraft orders in December, and that was expected to carry overall durable goods orders higher for the month. Yet, the official Census data showed aircraft orders, defense and nondefense, down 16.7%. A large portion of the decline was due to seasonal adjustments that naturally occur in December. Excluding transportation, durable goods orders fell 1.6% which was well below the 0.6% gain expected by the consensus. These orders were revised down from an originally reported 1.2% gain in November to a 0.1% increase

·         November Case Schiller 20 City Index 13.7% vs Briefing.com consensus of 13.8%; October was 13.6%

·         January Consumer Confidence 80.7 vs Briefing.com consensus of 77.5; December was revised to 77.5 from 78.1

o    The strengthening in consumer confidence stands in contrast to what the preliminary reading for the January University of Michigan Consumer Sentiment Index showed. That index dropped on weakness in the labor market, increased volatility in equity prices, and higher gasoline prices. 

Fed/Treasury Events Summary:

·         The Fed has begun its two day meeting, which is the last meeting with Ben Bernanke as Chairman. The statement will be released Wednesday at 14:00 (no press conference or econ projections at this meeting). Below are some prior comments from Fed officials:

o    Jan 15 -- Fed's Evans (non voter, dovish) said Fed decision to scale back QE was to rebalance policy mix, not lessen accomodation; said inflation remains too low; expects unemployment to fall to 6% or below by end of 2015; sees 2013 GDP growth of 2.75%. 

o    Jan 14 -- Dallas Fed President Richard Fisher (voting FOMC member, hawkish) said he will continue to vote for tapering; says will support taper even if stock market corrects; said does not see bubble in stocks and bonds. He said that he would have preferred to pull back our purchases by double the announced amount.

o    Jan 14 -- Philadelphia Fed President Charles Plosser (voting FOMC member, hawkish) spoke and said he is forecasting approx 3% growth in 2014; aid job market has performed better than expected; believes December report hit by cold weather.

o    Jan 10 -- Minneapolis Fed President Narayana Kocherlakota (voting FOMC member, dovish) said the Fed should do more to help economy based on low inflation and high unemployment. Briefing Note: Narayana Kocherlakota has been very dovish recently. His comments are in line with prior statements.  His comments were made prior to the jobs report.

o    Jan 07 -- Boston Fed President Eric Rosengren (non voter, dovish) said: Policymakers need to consider all the costs of a slow recovery, relative to the risk of taking actions that could hasten recovery."As the economy continues to improve, we should reduce and ultimately remove the unusual support that the Federal Reserve's monetary policy has provided," Rosengren added.  But this support should be removed only gradually.  "This recovery has already been too slow, and we do not want premature tightening of monetary policy to delay the return to more normal economic conditions."

Upcoming Economic Data:

·         Weekly MBA Mortgage Applications due out Wednesday at 7:00 (Briefing.com consensus of ; Last Week was 4.7%)

Upcoming Fed/Treasury Events:

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

o    Thursday 12:30 AM -- $35 bln in 5 year notes

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

Other International Events of Interest

·         The Reserve Bank of India surprised, hiking its repo rate 25bps to 8.00% (7.75% expected).

On other news.... 

Earnings/Guidance

·         Air Products (APD) beats by $0.01, misses on revs; guides Q2 EPS below consensus; reaffirms FY14 EPS guidance

·         Apple (AAPL) beats by $0.45, reports revs in-line on lower than expected iPhone sales; guides Q2 revs below consensus; gross margin in-line 

·         Comcast (CMCSA) misses by $0.02, ex items, beats on revs; increases dividend and share repurchase

·         Corning (GLW) beats by $0.02, beats on revs

·         DR Horton (DHI) beats by $0.07, beats on revs

·         DuPont (DD) beats by $0.04, reports revs in-line; guides FY14 EPS in-line, revs below consensus; authorized a new $5 bln share repurchase program

·         Ford Motor (F) beats by $0.03, reports revs in-line; reaffirms FY14 guidance

·         Pfizer (PFE) beats by $0.03, beats on revs; guides FY14 EPS in-line, revs in-line

·         Plum Creek (PCL) beats by $0.03, beats on revs; guides Q1 EPS below consensus; guides FY14 EPS below consensus

·         Seagate Tech (STX) misses by $0.07, reports revs in-line

·         U.S. Steel (X) beats by $0.52, misses on revs

·         Zions Bancorp (ZION) misses by $0.01

Currencies 

Dollar Drifts Ahead of Tomorrow's FOMC Rate Decision: 10-yr: unch..2.757%..USD/JPY: 102.94..EUR/USD: 1.3657

·         The Dollar Index clings to small gains as an uneventful session nears the final hour of trade. Click here to see a daily Dollar Index chart.

·         Today's action has been limited to a tight 20 cent range for much of the U.S. session as trade nears the key 80.80 level ahead of tomorrow's FOMC rate decision. 

·         Tomorrow's meeting will be the final under the leadership of Fed Chairman Ben Bernanke. 

·         EURUSD is -20 pips @ 1.3650 as trade probes the 50 dma. The single currency remains on track for a third straight day of losses as action continues to struggle near 1.3700 resistance. Recent chatter has suggested the possibility of ECB easing policyat its February 6 meeting. Key support rests in the 1.3500 area. Eurozone data includes M3 money supply and German GfK Consumer Climate. 

·         GBPUSD is -15 pips @ 1.6570 amid a lackluster session for the pair. Buyers were in control early in anticipation of a strong GDP report, but trade slipped following the in-line 0.7% QoQ print. Action during U.S. trade has been limited to a 40 pip range. Britain's Nationwide Home Price Index is due out tomorrow. Bank of England Governor Mark Carney will speak in Edinburgh. 

·         USDCHF is +30 pips @ .8990 as light buying persists for a second session. Action has been rather sleepy, stuck in a 10 pip range since this morning's U.S. consumer confidence data.

·         USDJPY is +35 pips @ 102.90 as action probes resistance in the 103.00 area. Trade has quieted down considerably from this morning's frantic pace with much of U.S. trade taking place between 102.75/103.00. 

·         AUDUSD is +35 pips @ .8770 as action ticks higher for a second day. Early buying lifted the hard currency to .8820 before steady selling took hold in early morning trade. The pair has been grinding lower throughout the day, causing some to shift their focus back towards .8700. 

·         USDCAD is +45 pips @ 1.1160 as trade readies for its best close since July 2009. The pair has rallied more than 5% so far this year and remains one of the early stories of 2014.

Jason's Commentaries


As expected of the bounce. The market is starting to take their position off the table as FOMC statement is imminent. After a few days of heavy shorting, the market finally took a breather, with the hope of being able to turn positive for the 2014 January Barometer. However, we're pretty much off the January Barometer. If the FOMC decides to announce something unexpected, it might totally make or break the market. Currently the FOMC is tapering its QE program, dropping from $85b of assets purchasing program to $75b. I just hope that the FOMC will not announce more taper news else it will surely tank the market. 

Last night, the market started with a bullish intent but had an attempted reversal at 11am ET. By 12pm ET, the market continued going up till the closing bell. The Financials and the Healthcare sector were the strongest leaders last night with more than 1.34% and 1.33% gain respectively. Tech lost 0.6% as Apple weighs on its earnings. Beating on its EPS but missing its top line. On the internals, volumes were lower than average as it's likely to be a short covering session, though the rest of the internals were pointing to the upside. On the Technical side, we got all the indices bouncing off their support level. Once the support level is broken, we're going down... BIG TIME. Let's just pray that the market don't tank so fast...      

Market Call: ABSTAIN

Date: 29 Jan 2014