13 Feb 2014 AMC - Market reversed a bearish open, led by Russells

13 Feb 2014 AMC - Market reversed a bearish open, led by Russells

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: + 0.6%

·         France's CAC: + 0.2%

·         Spain's IBEX: + 0.2%

·         Portugal's PSI: + 0.6%

·         Italy's MIB Index: -0.2%

·         Irish Ovrl Index: -0.2%

·         Greece ATHEX Composite: -0.5%

Before Market Opens

S&P futures vs fair value: -9.70. Nasdaq futures vs fair value: -20.80.
The S&P 500 futures remain near their lows, trading ten points below fair value.

Markets across Asia ended in the red as sellers managed to gain the upper hand after a few days of solid gains. Reports out of China suggest Beijing is targeting 7.5% growth in 2014. Elsewhere, both Bank of Korea and Bank of Indonesia kept their benchmark interest rates unchanged at 2.50% and 7.50%, respectively. Both decisions were expected. In other news from the region, the Australian economy lost 3,700 jobs (+15,300 expected), causing the unemployment rate to climb back up to 6.0% (5.9% expected, 5.8% previous). 

·         Japan's Nikkei slumped 1.8% as the yen strengthened. Heavyweight Softbank fell 3.5% as traders booked profits following its recent run up. 

·         Hong Kong's Hang Seng lost 0.5%, slipping for the first time in three days. Lenovo shed 0.6% after warning the recent Motorola Mobility purchase from Google may be a near-term headwind to earnings. 

·         China's Shanghai Composite fell 0.6%, registering its first loss in five days. Real estate shares were weak with Poly Real Estate sliding 2.0% after reporting a dip in sales. 

Major European indices trade lower across the board with Italy's MIB (-1.3%) leading the retreat. The leader of Italy's Democratic Party, Matteo Renzi, is expected to respond to Prime Minister Enrico Letta's comments from yesterday. To recap, the country's largest party is pushing to replace Prime Minister Letta with Mr. Renzi, but yesterday's comments from the prime minister indicated he will not go down easily. Mr. Renzi, who is said to favor an early election, will live stream his party's leadership meeting around 9:00 ET.

Economic data was limited. Germany's CPI fell 0.6% month-over-month (-0.6% prior) while the year-over-year reading increased 1.3% (1.3% previous). Both figures met expectations. Elsewhere, Swiss PPI was unchanged month-over-month (-0.1% expected, 0.0% prior) while the year-over-year reading slipped 0.3% (-0.4% consensus, -0.4% last). 

·         Germany's DAX is lower by 0.4% as 24 of its 30 components trade lower. Materials lag with HeidelbergCement and K+S both down near 1.9%. Utilities outperform with RWE up 2.0%. 

·         In France, the CAC trades down 0.5%. Financials are under pressure with BNP Paribas and Credit Agricole down 4.2% and 1.0%, respectively. On the upside, Renault is higher by 5.7% following upbeat results. 

·         Great Britain's FTSE holds a loss of 0.9%. Rolls-Royce Holdings and Tate & Lyle hold respective losses of 16.9% and 15.1% after both issued disappointing forecasts. Imperial Tobacco is higher by 4.6% following its in-line results. 

·         Italy's MIB trades lower by 1.3% with banks pressuring the index. Intesa Sanpaolo, Mediobanca, and UniCredit hold losses close to 2.5% apiece.

Asia

·         Markets across Asia ended in the red as sellers managed to gain the upper hand after a few days of solid gains 

·         Reports out of China suggest Beijing is targeting 7.5% growth in 2014

·         Both Bank of Korea and Bank Indonesia kept their benchmark interest rates unchanged at 2.50% and 7.50%, respectively. Both decisions were as expected

·         The Australian economy lost -3.7K jobs (+15.3K expected), causing the unemployment rate to climb back up to 6.0% (5.9% expected, 5.8% previous) 

·         Japan's Nikkei (-1.8%) slumped as the yen strengthened 

·         Hong Kong's Hang Seng (-0.5%) slipped for the first time in three days

·         China's Shanghai Composite (-0.6%) fell for the first time in five days

·         India's Sensex (-1.3%) erased all of February's gains

·         Australia's ASX (UNCH) gave up its early gains, finishing unchanged

 

Market Internals

Market Internals -Technical-
The Nasdaq closed up 39 (+0.94%) at 4241, the S&P 500 closed up 11 (+0.58%) at 1830, and the Dow closed up 64 (+0.40%) at 16028. Action came on mixed volume (NYSE 626 mln vs. avg. of 704; NASDAQ 2100 mln vs. avg. of 1856), with advancers outpacing decliners (NYSE 2289/810, NASDAQ 1899/716) and new highs outpacing new lows (NYSE 147/21, NASDAQ 134/21).

Relative Strength: 
Junior Gold Miners-GDXJ +6.25%, Natural Gas-UNG +6.11%, Silver Miners-SIL +4.45%, Clean Energy-PBW +2.75%, Basic Materials-IYM +2.37%, Poland-EPOL +2.04%, Vietnam-VNM +1.92%, Brazilian Real-BZF +1.58%, Germany-EWG +1.52%, Indonesia-IDX +1.13%.

Relative Weakness: 
Coffee-JO -1.88%, Sugar-SGG -1.29%, Japan-EWJ -0.87%, Volatility-VXX -0.72%, Eastern Europe-ESR -0.68%, India-INP -0.67%, Russia-RSX -0.61%, U.S. Dollar-UUP -0.55%, Pacific Index-VPL -0.51%, Cocoa-NIB -0.49%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: Stocks End on Highs Despite Shaky Start
The stock market rallied steadily throughout the trading day despite starting the session on a lower note. Small caps led the way with the Russell 2000 climbing 1.3% while the S&P 500 advanced 0.6%.

The benchmark index was down as much as 0.6% at the start of the session after overnight weakness in the futures market set the stage for a lower open. The losses in futures coincided with a wave of yen strength that once again stoked fears about potential forced unwinds of the yen-based carry trade. Adding to the early weakness was a disappointing retail sales report for January.

Even though stocks opened lower, the S&P 500 found support at its 50-day moving average in the 1810 area. The index also drew strength from the retreat in the yen as the dollar/yen pair climbed off its low just under the 101.75 level.

Strikingly, the rally in equities continued even as the dollar/yen pair spent the afternoon in a narrow range while Treasuries never surrendered their morning gains. In fact, the 10-yr note extended its morning advance, sending its yield lower by six basis points to 2.73%.

It should be noted that the advance in equities took place amid below average volume, which could have exacerbated movements in some prices. Only 627 million shares changed hands at the NYSE floor versus a 200-day average of 717 million.

All ten sectors posted gains with materials (+1.0%) and utilities (+1.2%) ending in the lead. The rate-sensitive utilities sector benefited from the retreat in yields while materials drew strength from steelmakers and miners. The Market Vectors Steel ETF (SLX 47.05, +0.44) gained 0.9% while Market Vectors Gold Miners ETF (GDX 25.87, +1.10) jumped 4.4%. On a related note, gold futures rose 0.4% to $1300.40/ozt, ending above the $1300.00 mark for the first time since early November.

Elsewhere, the largest S&P 500 sector, technology (+0.9%) shook off the disappointing guidance provided by Cisco Systems (CSCO 22.27, -0.58), and rallied on the back of chipmakers. NVIDIA (NVDA 17.36, +0.53) gained 3.2% in reaction to its above-consensus results while the broader PHLX Semiconductor Index settled higher by 1.2%.

Other heavily-weighted groups were mixed with respect to the broader market. Health care (+0.8%) outperformed while consumer discretionary (+0.4%), energy (+0.4%), financials (+0.4%), and industrials (+0.2%) lagged.

Looking back at the economic data: 

·         Retail sales fell 0.4% in January after declining a downwardly revised 0.1% (from +0.2%) in December. The Briefing.com consensus expected no growth in January. The report was discouraging and many are going to point to extreme winter weather conditions as the primary cause for the larger-than-expected decline. That scenario holds some truth as sectors that are normally affected by weather conditions such as motor vehicle sales (-2.1%) and restaurants (-0.6%) saw significant pullbacks. However, spending in general was weaker across the board. That could signal that the spending out of savings that occurred in December was a one-time event related to the holidays and not the start of a new trend. 

·         The weekly initial claims level increased to 339,000 from an unrevised 331,000 while the Briefing.com consensus expected an increase to 335,000. The claims data have shown some choppiness, likely the result of volatility from the extreme winter weather conditions. In general, claims have not deviated from its 330,000 - 340,000 trend. These levels normally support payroll growth in the neighborhood of 185,000 - 200,000 jobs per months. 

·         Business inventories increased 0.5% in December after increasing 0.4% in November while the Briefing.com consensus expected an increase of 0.4%.Total inventories consist of manufacturers, merchant wholesalers, and retails. Both manufacturers (0.5%) and wholesaler (0.3%) inventories were announced prior to the total inventory release. The only unknown was retailer inventories, which increased 0.6% in December after increasing 0.8% in November. 

Tomorrow, January export prices ex-agriculture and import prices ex-oil will be released at 8:30 ET while Industrial Production and Capacity Utilization for January will be announced at 9:15 ET. The day's data will be topped off by a 9:55 ET release of the preliminary Michigan Consumer Sentiment survey for February. 

·         Nasdaq Composite +1.5% YTD 

·         S&P 500 -1.0% YTD 

·         Russell 2000 -1.3% YTD 

·         Dow Jones Industrial Average -3.3% YTD

Commodities

Closing Commodities: Natural Gas Rises 8%, Closed Above $5/MMBtu

·         Precious metals trended higher today, gaining support on a weaker dollar index following retail sales and initial claims data released this morning. Retail sales fell 0.4% in January after declining a downwardly revised 0.1% (from +0.2%) in December (Briefing.com consensus expected no growth). The weekly initial claims level increased to 339,000 from an unrevised 331,000 (Briefing.com consensus called for an increase to 335,000).

·         Apr gold gained for a fifth consecutive session, rising above the $1300 per ounce level for the first time since November. It lifted from its session low of $1291.80 per ounce and eventually settled with a 0.4% gain at $1300.40 per ounce.

·         Mar silver came off its session low of $20.20 per ounce set in early morning pit trade. It broke into positive territory in late morning action and settled at $20.39 per ounce, or 0.3% higher. Mar crude oil lifted from its session low of $99.84 per barrel set at pit trade open and advanced to a session high of $100.66 per barrel. However, it slipped back into the red as it headed into the close and settled 0.1% lower at $100.28 per barrel.

·         Mar natural gas rose for a third consecutive session as it gained support from better-than-anticipated inventory data. Inventories for the week ending Feb 7 declined by 237 bcf, while expectations called for a draw of 228-233 bcf. The energy component trended higher after lifting from a session low of $4.92 per MMBtu set in early morning action and settled with a 7.9% gain at $5.21 per MMBtu, or just below its session high of $5.24 per MMBtu.

COMEX Metals Closing Prices

  Apr gold rose $5.50 to $1300.40/oz 

·         Gold gained for a fifth consecutive session, rising above the $1300 level for the first time since November. The yellow metal gained support on a weaker dollar index following retail sales and initial claims data released this morning. Retail sales fell 0.4% in January after declining a downwardly revised 0.1% (from +0.2%) in December (Briefing.com consensus expected no growth). The weekly initial claims level increased to 339,000 from an unrevised 331,000 (Briefing.com consensus called for an increase to 335,000). Gold lifted from its session low of $1291.80 and eventually settled with a 0.4% gain. 

  Mar silver rose $0.06 to $20.39/oz 

·         Silver also trended higher today after coming off its session low of $20.20 set in early morning pit trade. It broke into positive territory in late morning action and settled with a 0.3% gain. 

  Mar copper fell 1 cent to $3.25/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Mar corn settled unchanged at $4.40/bushel 

·         Mar wheat rose 8 cents to $5.94/bushel 

·         Mar soybeans rose 20 cents to $13.43/bushel 

·         Mar ethanol rose 4 cents to $2.02/gallon 

·         May sugar (#16 (U.S.)) fell 0.06 of a penny to 21.51 cents/lbs

NYMEX Energy Closing Prices

  Mar crude oil fell $0.10 to $100.28/barrel 

·         Crude oil came off its session low of $99.84 set at pit trade open and advanced to a session high of $100.66. However, it slipped back into the red as it headed into the close and settled 0.1% lower. 

  Mar natural gas rose 38 cents to $5.21/MMBtu 

·         Natural gas rose for a third consecutive session as it gained support from stronger-than-anticipated inventory data. The EIA reported that for the week ending Feb 7, natural gas inventories declined by 237 bcf while expectations called for a draw of 228-233 bcf. The energy component trended higher after lifting from a session low of $4.92 set in early morning action and settled just below its session high of $5.24, booking a gain of 7.9%. 

  Mar heating oil rose 2 cents to $3.03/gallon 

  Mar RBOB rose 1 cent to $2.77/gallon

Treasuries

Treasuries Gain for Second Time in Eight Days: 10-yr: +14/32..2.733%..USD/JPY: 102.23

·         Treasuries finished near their best levels of the session, gaining for just the second time in eight days. Click here to see an intraday yields chart.

·         A small overnight bid persisted into U.S. trade before today's disappointing retail sales data (-0.4% actual v. 0.0% expected) produced another leg higher. 

·         Action would chop around those levels throughout the morning and into early afternoon trade. 

·         The $16 bln 30y bond auction drew 3.690% (3.700% when issued) and a weak 2.27x bid/cover. A solid 45.2% indirect takedown helped offset the disappointing 13.9% direct bid.

·         Post-auction buying would cause maturities to probe their highs with action holding those levels into the close. 

·         Aggressive buying dropped the 5y -6.1bps to 1.506%. Today's letup in yield has caused some to shift their focus back towards 1.450% support. 

·         The 10y lagged throughout the session, ending off -2.7bps @ 2.736%. The benchmark yield has stalled at 2.750% resistance over the past couple of sessions with action slipping back below the 100 dma (2.744%). 

·         A modest bid at the long end pushed the 30y down -3.7bps to 3.686%. 

·         A slightly steeper curve developed as the 2-10-yr spread widened to 242.5bps. 

·         Precious metals went off near their highs with gold +$6 @ $1301 and silver +$0.10 @ $20.44. 

·         Data: Import/export prices (8:30), industrial production, capacity utilization (9:15), and Michigan Sentiment (9:55).

Next Day In View 

Economic Commentary

Economic Summary: Retail Sales show unexpected decline due to weather factors; Jobless Claims rise; Janet Yellen Senate testimony postponed due to weather
Economic Data Summary:

·         Weekly Initial Claims 339K vs Briefing.com consensus of 335K; Last Week was 331K

·         Weekly Continuing Claims 2.953 M vs Briefing.com consensus of 2.975 M ; Last Week was 2.964 M

o     The claims data have shown some choppiness, likely the result of volatility from the extreme winter weather conditions. In general, claims have not deviated from its 330,000 - 340,000 trend. These levels normally support payroll growth in the neighborhood of 185,000 - 200,000 jobs per months. 

·         January Retal Sales -0.4% vs Briefing.com consensus of 0.0%; December was 0.2%

·         January Retal Sales Ex Auto 0.0% vs Briefing.com consensus of 0.1%; December was 0.7%

o    The report was discouraging and many are going to point to extreme winter weather conditions as the primary cause for the larger-than-expected decline.  That scenario holds some truth. Sectors that are normally affected by weather conditions such as motor vehicle sales, down 2.1%, and restaurants, down 0.6%, saw significant pullbacks. However, spending in general was weaker across the board. That could signal that the spending out of savings that occurred in December was a one-time event related to the holidays and not the start of a new trend. In fact, core sales - which exclude motor vehicle dealers, building materials and supply stores, and gasoline stations -- were down 0.3% in January after increasing a downwardly revised 0.1% (from 0.7%) in December. 

Upcoming Economic Data:

·         January Export Prices - Ex Ag due out Friday at 8:30 (Briefing.com consensus of ; December was 0.3%)

·         January Import Prices Ex-Oil due out Friday at 8:30 (Briefing.com consensus of ; December was -0.1%)

·         January Industrial Production due out Friday at 8:30 (Briefing.com consensus of 0.3%; December was 0.3%)

·         January Capacity Utalization due out Friday at 9:15 (Briefing.com consensus of 79.4; December was 79.2)

·         February Michigan Sentiment due out Friday at 9:55 (Briefing.com consensus of 80.2; January was 81.2)

Upcoming Fed/Treasury Events:

·         Today's Janet Yellen testimony has been postponed due to weather.  

·         The Treasury is expected to auction off $16 bln in 30 year bonds today.  Results will be announced at 13:00

Other International Events of Interest

·         Australia's employment fell 3,700 (+15,000 expected, -23,000 prior) as participation rate held steady at 64.5% (64.6% forecast). As a result, the unemployment rate increased to 6.0% from 5.8% (5.8% expected). Separately, MI Inflation Expectations came in at 2.3% (2.3% prior). 

·         Germany's CPI fell 0.6% month-over-month (-0.6% prior) while the year-over-year reading increased 1.3% (1.3% previous). Both figures met expectations. 

On other news.... 

Currencies 

Dollar Readies for Lowest Close of 2014: 10-yr: +14/32..2.734%..USD/JPY: 102.17..EUR/USD: 1.3672

·         The Dollar Index holds near its worst levels of the session as action presses the 80.30 level. Click here to see a daily Dollar Index chart.

·         Today's losses have dropped the Index below support in the 80.50 area, and has trade on track to post its lowest close of 2014. 

·         EURUSD is +80 pips @ 1.3670 as action holds just off session highs. Today's bid comes in the face of an uneventful day on the data front, and despite headlines indicating Italian Prime Minister Enrico Letta will submit his resignation tomorrow. GDP data from around the eurozone will cross the wires along with French industrial production. 

·         GBPUSD is +50 pips @ 1.6645 as action threatens its best close since May 2011. Traders continue to finger the Bank of England as the first central bank to hike rates coming out of the financial crisis with markets pricing in a hike in Q2 2015. 

·         USDCHF is -70 pips @ .8935 as trade probes key .8950 support. Recent action has stalled at resistance in the .9000/.9020 area with today's weakness dropping action back below the 50 dma (.8981). A breakdown of the .8950 area puts the December 2013 lows in play. 

·         USDJPY is -35 pips @ 102.15 as trade has recovered a large portion of the early losses. The pair sank to 101.70 following this morning's dismal U.S. retail sales data, but quickly recovered as buyers stepped in at the support level. Resistance in the 102.50/103.00 area remains key. 

·         AUDUSD is -40 pips @ .8985 as sellers remain in control for a second session following today's disappointing Australian jobs data. The hard currency saw an early test of support, but has seen a steady climb over the course of the session. Areas to watch include .8900/.8950 support and .9100 resistance. China's CPI and PPI are due out tonight. 

·         USDCAD is -35 pips @ 1.0965 as trade presses lower for the tenth time in eleven days. The selling that has taken hold over the course of February has the pair testing 1.0950 support. Canadian data out tomorrow is limited to manufacturing sales.

Jason's Commentaries


That certainly came out of no where. Futures were down 0.6% at the open then right after, the market reversed all the way to the closing bell. The bearishness at the start was probably caused by the Asia's movement which the US players think that it has nothing to do with US. Massive buying at the start to cause shorts to be covered then subsequently rallied to the close. Volumes were standing at 638.8m shares traded on the NYSE and the bulls apparently outpaced the bears. This is certainly one of the strongest reverse in 2014. The Utilities and the Materials were the main leaders of the session, gaining 1.09% and 0.86% respectively. Utilities has been on the rise due to the cold in US and a rally in natural gas confirms the consumption of utilities in the states. On other news, Time Warners and Comcast has agreed on a merger which probably rocked the market a little at the start of the trading session. On the technical perspective, I'm looking at the indices likely to face some resistance soon. Limited upside as volumes is dipping at 600+m shares traded on the NYSE. However, since it's Valentines' day today, We're likely to end higher this session. However, next week will likely be down.    

Market Call: FLAT

Date: 14 Feb 2014