12 Feb 2014 AMC- Market took a short breather after 4 consecutive bullish run

12 Feb 2014 AMC- Market took a short breather after 4 consecutive bullish run

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: 0.0%

·         Germany's DAX: + 0.7%

·         France's CAC: + 0.5%

·         Spain's IBEX: -0.1%

·         Portugal's PSI: -0.4%

·         Italy's MIB Index: + 1.3%

·         Irish Ovrl Index: + 1.2%

·         Greece ATHEX Composite: + 2.6%

Before Market Opens

S&P futures vs fair value: -1.00. Nasdaq futures vs fair value: -1.00.
The S&P 500 futures trade one point below fair value.

Markets rallied across Asia, supported by yesterday's strong gains on Wall Street. Participants received a full slate of economic news. China's trade surplus expanded to $31.86 billion from $25.60 billion ($23.65 billion forecast) as imports grew 10.0% (3.0% expected, 8.3% prior) and exports increased 10.6% (2.0% consensus, 4.3% previous). Japan's Core Machinery Orders plunged 15.7% month-over-month (-4.1% expected, 9.3% previous) while the year-over-year reading increased 6.7% (17.6% consensus, 16.6% prior). Separately, Tertiary Industry Activity Index slipped 0.4% month-over-month (-0.2% expected, 0.8% previous) and M2 money stock rose 4.4% year-over-year (4.2% consensus, 4.3% prior). India's industrial production fell 0.6% year-over-year (-1.0% expected, -2.1% previous) while CPI decreased to 8.8% from 9.9% (9.4% expected). Elsewhere, Australia's Westpac Consumer Sentiment fell 3.0% (-1.7% last) and New Zealand's electronic card retail sales increased 6.1% year-over-year (5.5% previous).

Among news of note, Nikkei news quoted Bank of Japan member Takahide Kiuchi, who said additional easing would lead to costs outweighing the benefits. Separately, BoJ Governor Haruhiko Kuroda said the central bank needs to take action if inflation appears to be slowing. 

·         Japan's Nikkei climbed 0.6%, rising to its best level in one and a half weeks. Nissan Motor added 3.6% as its earnings topped estimates. Exporters benefitted from the weak yen with Panasonic adding 1.7%. 

·         Hong Kong's Hang Seng rallied 1.5% to a three-week high. Property developers posted strong gains after a Shanghai Securities News report suggested land sales revenues in major Chinese cities were up +140% year-over-year. China Overseas Land and China Resources Land surged 7.5% and 4.7%, respectively. 

·         China's Shanghai Composite added 0.3% and recaptured its 50-day moving average. Financials lagged with Shanghai Pudong Development Bank shedding 0.4%. 

European indices trade higher with Italy's MIB (+1.0%) in the lead. Interestingly, Italian equities display solid gains despite Prime Minister Enrico Letta facing increasing pressure to resign, making way for the leader of the Democratic Party, Matteo Renzi. Mr. Letta is expected to hold a press conference after 11:00 ET. Elsewhere, Bank of England Governor Mark Carney delivered the latest inflation report and said the central bank sees the potential to keep its key interest rate at 0.50% even after the 7.0% unemployment threshold is hit.

Participants received several economic data points. Eurozone Industrial production fell 0.7% month-over-month (-0.3% consensus, 1.6% prior) while the year-over-year reading increased 0.5% (1.8% expected, 2.8% previous). Great Britain's CB Leading Index slipped 0.1% month-over-month (0.5% last). French current account deficit narrowed to EUR1.20 billion from EUR1.90 billion (EUR1.60 billion prior). 

·         Great Britain's FTSE is higher by 0.1% as miners outperform. Antofagasta, Glencore Xstrata, and Rio Tinto are up between 1.7% and 2.2%. Energy names lag with Royal Dutch Shell and Tullow Oil down 1.4% and 4.9%, respectively. 

·         In France, the CAC trades up 0.5% with financials in the lead. BNP Paribas, Credit Agricole, and Societe Generale display gains between 1.7% and 5.4%. Publicis Groupe is the weakest performer, down 1.8%. 

·         Germany's DAX holds an advance of 0.7%. Fresenius Medical Care leads with a gain of 2.1% while utilities E.ON and RWE lag. The two hold respective losses of 0.2% and 0.7%.

·         Italy's MIB is higher by 1.0% amid broad strength. Banca Popolare di Milano Scarl and Unicredit are both up near 2.0%.

Market Internals

Market Internals -Technical-
The Nasdaq closed up 10 (+0.24%) at 4201, the S&P 500 closed down 0.5 (-0.03%) at 1819, and the Dow closed down 31 (-0.19%) at 15964. Action came on mixed volume (NYSE 628 mln vs. avg. of 705; NASDAQ 1905 mln vs. avg. of 1846), with advancers outpacing decliners (NYSE 1771/1344, NASDAQ 1405/1203) and new highs outpacing new lows (NYSE 112/18, NASDAQ 123/18).

Relative Strength: 
Coffee-JO +3.6%, Sugar-SGG +3.22%, Vietnam-VNM +1.68%, Chile-ECH +1.58%, Platinum-PPLT +1.47%, Copper Miners-COPX +1.19%, Hong Kong-EWH +1.18%, Agriculture-DBA +0.87%, British Pound-FXB +0.85%, United Kingdom-EWU +0.78%.

Relative Weakness: 
Junior Gold Miners-GDXJ -4.37%, Silver Miners-SIL -2.6%, Volatility-VXX -2.08%, Natural Gas-UNG -1.7%, Latin America 40-ILF -1.14%, Turkey-TUR -0.92%, Lithium-LIT -0.86%, Brazilian Real-BZF -0.76%, Sweden-EWD -0.75%, Nordic 30-GXF -0.66%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: Stocks End Flat After Four Days of Gains
Equity indices took a bit of a breather on Wednesday after the S&P 500 surged nearly 4.5% in the six sessions since February 3. The benchmark index shed less than a point while the Dow Jones Industrial Average slipped 0.2%.

Overall, the session was very quiet as the key averages respected narrow ranges. The S&P 500 spent the bulk of the trading day near its flat line while the Nasdaq (+0.2%) outperformed.

Similar to the major averages, most individual sectors never deviated too far from their unchanged levels. The largest S&P 500 sector, technology (+0.3%), finished in the lead thanks to chipmakers. Intel (INTC 24.55, +0.08) added 0.3% while the broader PHLX Semiconductor Index rose 0.9%.

Outside of technology, consumer discretionary (+0.1%) and industrials (+0.2%) were the only other advancers among cyclical groups. Defense contractors outperformed (PHLX Defense Index +0.5%) while Deere (DE 86.90, -0.56) fell 0.6% despite beating on earnings and revenue.

Also of note, two of yesterday's leaders—energy (-0.4%) and materials (-0.3%)—finished among today's laggards. However, the pair still fared a bit better than the consumer staples sector, which lost 0.5% as tobacco names lagged after Lorillard (LO 47.47, -2.48) reported disappointing earnings.

Other countercyclical groups were little changed with telecom services (+0.3%) ending modestly higher while health care (-0.1%) and utilities (-0.1%) finished in the red.

Treasuries posted their third day of losses as the 10-yr yield rose three basis points to 2.76%. Interestingly, the retreat in one safe-haven asset was accompanied by an increase in another. Gold futures saw their fourth day of gains, climbing 0.4% to $1294.90/ozt.

Today's participation was well below average as less than 630 million shares changed hands at the NYSE.

Economic data was limited to just two reports: 

·         The weekly MBA Mortgage Index slipped 2.0% to follow last week's uptick of 0.4%. 

·         January Treasury Budget showed a deficit of $10.40 billion, which followed the prior month's surplus of $2.90 billion. The Briefing.com consensus expected the deficit to hit $10.00 billion. 

Among overseas news of note, Italian Prime Minster Enrico Letta held a press conference amid increasing calls for his resignation, making way for the leader of the Democratic Party, Matteo Renzi. In his remarks, Mr. Letta asked for ‘clarity,' saying, ‘He who wants to replace me must be clear about his intentions.' Even though the political future of Italy remains uncertain, Italian stocks appeared unconcerned with the situation as the MIB gained 1.3%.

Tomorrow, weekly initial claims and January retail sales will be reported at 8:30 ET while the December Business Inventories report will cross the wires at 10:00 ET. Also of note, Fed Chair Janet Yellen was scheduled to appear before the Senate Banking Committee for the second part of the semiannual testimony on monetary policy, but the hearing has been postponed due to weather.

·         Nasdaq Composite +0.6% YTD

·         S&P 500 -1.6% YTD

·         Russell 2000 -2.5% YTD

·         Dow Jones Industrial Average -3.7% YTD

Commodities

Closing Commodities: Crude Oil Closes 0.4% Higher, Above $100/Barrel

·         Precious metals traded higher despite a slightly stronger dollar index. Apr gold rose for a fourth consecutive session, advancing to a three month session high of $1296.40 per ounce in early afternoon pit trade. It settled with a 0.4% gain at $1294.90 per ounce.

·         Mar silver rose to a session high of $20.39 per ounce in morning action. It eventually settled at $20.33 per ounce, booking a gain of 0.9%.

·         Mar crude oil traded in positive territory but pulled back from its session high of $101.38 per barrel following inventory data that showed a build of 3.267 mln barrels for the week ending Feb 7. Consensus called for a smaller build of 2.6-3.0 mln barrels. The energy component trended lower for the remainder of the session and settled with a 0.4% gain at $100.38 per barrel.

·         Mar natural gas rose to a session high of $5.01 per MMBtu in morning action after trading as low as $4.78 per MMBtu earlier in the session. However, prices reversed in the last hour of floor trade, leaving natural gas to settle just 0.4% higher at $4.83 per MMBtu.

COMEX Metals Closing Prices

  Apr gold rose $5.20 to $1294.90/oz 

·         Gold rose for a fourth consecutive session despite a slightly stronger dollar index. The yellow metal touched a three month high of $1296.40 in early afternoon pit trade and settled just below that level, booking a gain of 0.4%. 

  Mar silver rose $0.18 to $20.33/oz 

·         Silver traded in positive territory, advancing to a session high of $20.39 in morning floor action. It eventually settled with a 0.9% gain. 

  Mar copper rose 4 cents to $3.26/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Mar corn fell 2 cents to $4.40/bushel 

·         Mar wheat fell 3 cents to $5.86/bushel 

·         Mar soybeans fell 13 cents to $13.23/bushel 

·         Mar ethanol rose 1 cent to $1.98/gallon 

·         May sugar (#16 (U.S.)) rose 0.19 of a penny to 21.57 cents/lbs

NYMEX Energy Closing Prices

  Mar crude oil rose $0.43 to $100.38/barrel 

·         Crude oil traded in positive territory today but pulled back from its session high of $101.38 following inventory data that showed a build of 3.267 mln barrels for the week ending Feb 7. Consensus called for a smaller build of 2.6-3.0 mln barrels. The energy component trended lower for the remainder of the session and settled with a 0.4% gain. 

  Mar natural gas rose 2 cents to $4.83/MMBtu 

·         Natural gas rose to a session high of $5.01 in morning action after trading as low as $4.78 earlier in the session. However, it lost momentum in the last hour of floor trade and settled just 0.4% higher. 

  Mar heating oil fell 1 cent to $3.01/gallon 

  Mar RBOB rose 1 cent to $2.76/gallon

Treasuries

Treasuries Slide for Sixth Time in Seven Days: 10-yr: -11/32..2.762%..USD/JPY: 102.48..EUR/USD: 1.3592

·         Treasuries finished with moderate losses as sellers remained in control for the sixth time in seven sessions. Click here to see an intraday yields chart.

·         Today's weakness was not unexpected as sellers usually take the upper hand on days that are lacking tradable news and data. 

·         The $24 bln 10y note auction was average, drawing 2.795% (2.800% when issued) and a light 2.54x bid/cover. A strong 49.7% indirect bid mitigated some of the damage from the weak 16.2% direct bid. 

·         Selling ran yields up close to +4bps across the curve. 

·         A +4.2bp gain ran the 5y up to 1.567%. Traders will be watching resistance in the 1.600% area over the coming days. 

·         The 10y added +4.4bps to finish at 2.763%. The benchmark yield is now up +19bps from its February 3 low while closing at its highest level in over two weeks. 

·         Slight outperformance at the long end saw the 30y tack on +3.8bps to 3.723%. 

·         A steeper curve persisted with the 2-10-yr spread widening to 241.5bps. 

·         Precious metals finished little changed with gold +$1 @ $1291 and silver +$0.06 @ $20.22.

·         Data: Initial and continuing claims, retail sales (8:30), and business inventories (10). 

·         Auction: $16 bln 30y bonds. 

·         Fed Speak: Fed Chair Janet Yellen's testimony in front of the Senate Banking Committee has been postponed due to the inclement weather in the D.C. area.

Next Day In View 

Economic Commentary

Economic Summary: MBA mortgage applications declined; Retail sales tomorrow at 8:30; Yellen to testify to Senate tomorrow at 10:30
Economic Data Summary:

·         Weekly MBA Mortgage Applications -2.0% vs Briefing.com consensus of ; Last Week was 0.4%

Upcoming Economic Data:

·         January Treasury Budget due out Today at 14:00 (Briefing.com consensus of -$10.0 bln; December was $2.9 bln)

·         Weekly Initial Claims due out Thursday at 8:30 (Briefing.com consensus of 335K; Last Week was 331K)

·         Weekly Continuing Claims due out Thursday at 8:30 (Briefing.com consensus of 2.975 M ; Last Week was 2.964 M )

·         January Retal Sales due out Thursday at 8:30 (Briefing.com consensus of 0.0%; December was 0.2%)

·         January Retal Sales Ex Auto due out Thursday at 8:30 (Briefing.com consensus of 0.1%; December was 0.7%)

·         December Business Inventories due out Thursday at 10:00 (Briefing.com consensus of 0.4%; November was 0.4%)

Upcoming Fed/Treasury Events:

·         Fed Chair Janet Yellen to testify to the Senate tomorrow at 10:30

·         The Treasury is expected to auction off $70 bln in new debt this week.  Results will be announced at 13:00. Remaining auctions include

o    Wednesday: $24 bln in 10 year note

o    Thursday: $16 bln in 30 year bonds

Other International Events of Interest

·         China's trade surplus expanded to $31.9 bln ($24.2 bln expected, $25.6 bln expected) as exports climbed 10.6% YoY and imports jumped 10.0% YoY

·         Japanese Finance Minister Taro Aso blamed the country's weakening current account surplus on the weak yen

·         Japan's core machinery orders tumbled -15.7% MoM (-4.1% MoM expected) and tertiary industry activity slid -0.4% MoM (-0.2% MoM expected)

On other news.... 

Currencies 

Dollar Drifts Little Changed: 10-yr: -10/32..2.758%..USD/JPY: 102.50..EUR/USD: 1.3590

·         The Dollar Index drifts little changed near 80.70 during what can only be described as a quiet session. Click here to see a daily Dollar Index chart.

·         Action since late this morning has been uneventful, to say the least, limited to a 5 cent range. 

·         EURUSD is -45 pips @ 1.3595 as selling persists for a second session. The single currency has pushed lower in response to headlines from ECB member Coeure, who once again reiterated the possibility of negative deposit rates. Also acting as a headwind to the euro is thepolitical uncertainty in Italy as calls are beginning to grow for the resignation of Prime Minister Enrico Letta. Key support rests in the 1.3500 area. 

·         GBPUSD is +135 pips @ 1.6585 as buyers remain in control for a fifth session. Today's advance developed in response to the Bank of England tweaking its forward guidance and has sterling threatening its late-January highs (1.6650), which correspond with levels last seen in the spring of 2011. Earlier this morning, the BOE removed the 7.0% unemployment threshold from its forward guidance, and replaced it with a ‘broad range' of indicators that will be used to determine when a rate hike will occur. 

·         USDCHF is +25 pips @ .9005 as action ticks higher for a second session. The bid has the pair threatening near-term resistance in the .9020 region. Swiss data is limited to PPI.

·         USDJPY is -10 pips @ 102.50 as trade has managed to shrug off the large drop in Japan's core machinery orders. Early selling dropped action on the 102.20 level, but buyers emerged in defense of the recent lows.

·         AUDUSD is -5 pips @ .9030 as trade pauses at one-month highs. The hard currency has been supported by the strong Chinese trade data as the overnight Westpac Consumer Sentiment number disappointed. Australian MI Inflation Expectations and employment data are due out tonight. 

·         USDCAD is -15 pips @ 1.0990 as trade presses lower for the ninth time in ten days. Traders continue to monitor the 1.0950 area, which provides the first level of support. Canada's New Home Price Index will cross the wires tomorrow.

Jason's Commentaries



Finally the market took a breather after running up for 4 days. The market started last night with some bullish intent however after the first half an hour, the market decided to let go and started going down quick and start around the neutral line last night. The main laggard index is the Dow jones last night, losing 0.19%. Volumes were at 639.4m shares traded on the NYSE. Internals were pointing to the bearish side. Industrials were the main leader last night of 0.57% and the staples lose 0.43%. it seems to me that the market is waiting for something to happen and likely to be the Yellen's testimony. Yellen final testimony is being postponed due to weather.    

Market Call: DOWN

Date: 13 Feb 2014