20 Feb 2014 AMC- Market regain losses as Materials and Healthcare led

20 Feb 2014 AMC- Market regain losses as Materials and Healthcare led

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: -0.4%

·         France's CAC: + 0.3%

·         Spain's IBEX: + 0.1%

·         Portugal's PSI: -0.3%

·         Italy's MIB Index: + 0.1%

·         Irish Ovrl Index: 0.0%

·         Greece ATHEX Composite: -0.5%

Before Market Opens

S&P futures vs fair value: +2.40. Nasdaq futures vs fair value: -11.00.
The S&P 500 futures have erased their losses and now trade two points above fair value.

Markets across Asia finished mostly in the red amid disappointing economic data. China's HSBC Flash Manufacturing PMI eased to 48.3 from 49.5 (49.4 expected), representing a seven-month low for the series. Elsewhere, Japan posted a record trade deficit (JPY1.82 trillion actual versus JPY1.56 billion expected) as imports swelled 25.0% year-over-year (21.8% expected) and exports climbed 9.5% year-over-year (12.6% consensus). The lone bit of good news came from Singapore where GDP grew at 5.5% year-over-year (5.3% expected) thanks to a boost from manufacturing. 

·         Japan's Nikkei fell 2.2%, slipping back below its 200-day moving average as sellers took charge in response to the disappointing trade data. Companies with strong ties to China were hit hard with Komatsu off 3.2% and Fanuc down 2.6%. 

·         Hong Kong's Hang Seng lost 1.2%, falling for the first time in five sessions. The index dropped below its 200-day moving average amid widespread losses. Lenovo sank 4.5%, Tencent Holdings lost 3.1%, and Bank of Communication eased 2.7%. 

·         China's Shanghai Composite shed 0.2%, giving up its early gains. Oil giant Sinopec was a notable outperformer, up the limit, 10%, on reports it is looking for a buyer of a 30% stake in its retail oil business. 

Major European indices hover in the red with Germany's DAX (-1.3%) pacing the slide. Participants received several economic data points, which were mostly disappointing. Eurozone Manufacturing PMI fell to 53.0 from 54.0 (54.0 expected) while Services PMI ticked up to 51.7 from 51.6 (51.9 consensus). Germany's Manufacturing PMI fell to 54.7 from 56.5 (56.3 expected) while Services PMI increased to 55.4 from 53.1 (53.4 forecast). Separately, PPI ticked down 0.1% month-over-month (0.2% expected, 0.1% prior) while the year-over-year reading fell 1.1% (-0.8% forecast, -0.5% previous). French Manufacturing PMI dropped to 48.5 from 49.3 (49.6 expected) while Services PMI tumbled to 46.9 from 48.9 (49.4 consensus). Also of note, CPI fell 0.6% month-over-month (-0.3% consensus, 0.4% previous). Great Britain's CBI Industrial Trends Orders improved to 3 from -2 (5 expected). 

·         Great Britain's FTSE is lower by 0.4% as miners lag. Anglo American, Fresnillo, and Rio Tinto are down between 2.1% and 3.6%. Utilities outperform with Centrica and United Utilities Group up 1.6% and 0.4%, respectively. 

·         In France, the CAC holds a loss of 0.4%. Software company Gemalto is the weakest performer, down 7.0%. On the upside, oil company Technip outperforms with a gain of 8.2%. 

·         Germany's DAX trades down 1.3%. Henkel is the weakest index member, trading lower by 5.1% after issuing a disappointing forecast. Utilities outperform with E.ON and RWE both up near 1.0% apiece.

Asia

·         Markets across Asia finished mostly in the red as data disappointed

·         China's HSBC Flash Manufacturing PMI eased to 48.3 (49.4 expected, 49.5 previous), a seven-month low

·         Japan posted a record trade deficit (JPY1.82 trln actual v. JPY1.56 bln expected, JPY1.26 bln previous) as imports swelled +25% YoY and exports climbed +9.5% YoY

·         The lone bit of good news came from Singapore, where GDP grew at 5.5% YoY (5.3% YoY expected), boosted by manufacturing

·         Japan's Nikkei (-2.2%) slipped back below the 200 dma as sellers took charge following in response to the disappointing trade data 

·         Hong Kong's Hang Seng (-1.2%) fell for the first time in five sessions, dropping below its 200 dma

·         China's Shanghai Composite (-0.2%) gave up its early gains, and closed on the lows

·         India's Sensex (-0.9%) ended its four-day winning streak

·         Australia's ASX (+0.1%) eked out a gain as shares rallied for the tenth time in eleven sessions

Market Internals

Market Internals -Technical-
The Nasdaq closed up 30 (+0.70%) at 4268, the S&P 500 closed up 11 (+0.60%) at 1840, and the Dow closed up 93 (+0.58%) at 16133. Action came on slightly below average volume (NYSE 660 mln vs. avg. of 699; NASDAQ 1838 mln vs. avg. of 1857), with advancers outpacing decliners (NYSE 2039/1059, NASDAQ 1840/771) and new highs outpacing new lows (NYSE 136/24, NASDAQ 136/17). 

Relative Strength: 
Junior Gold Miners-GDXJ +6.44%, Gold-GLD +4.06%, Silver Miners-SIL +3.45%, Egypt-EGPT +3.24%, Biotechnology-XBI +2.66%, Clean Energy-PBW +2.21%, Eastern Europe-ESR +1.91%, Israel-EIS +1.86%, Indonesia-IDX +1.80%, Turkey-TUR +1.65%.

Relative Weakness: 
Volatility-VXX -3.69%, Vietnam-VNM -1.87%, Sugar-SGG -1.13%, Columbia Index-GXG -1.05%, China 25 Index-FXI -0.83%, Japan-EWJ -0.61%, Natural Gas-UNG -0.59%, Social Media-SOCL -0.54%, MLP Index-AMJ -0.53%, Mexico-EWW -0.50%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Commodities

Closing Commodities: Natural Gas Prices Slip 1.6%

·         Apr gold extended yesterday's losses while the dollar index rose as investors digested yesterday's FOMC minutes. The minutes indicated that some officials said there should be a ‘clear presumption' in support of continued tapering in $10 bln increments.

·         The yellow metal brushed a session low of $1311.10 per ounce in early morning pit trade and eventually settled with a 0.2% loss at $1317.30 per ounce.

·         Mar silver also traded in negative territory, with prices trending near the $2.70 per ounce level. Unable to gain momentum, it settled at $21.68 per ounce, or 0.2% lower.

·         Apr crude oil spent most of its floor session in the red. Prices slipped to a session low of $102.40 per barrel following inventory data that showed a build of 0.973 mln barrels when a build of 2.0-2.3 mln barrels was anticipated.

·         The energy component briefly rose above the unchanged line to a session high of $103.04 per barrel but settled with a 0.1% loss at $102.77 per barrel.

·         Mar natural gas fell to a session low of $5.88 per MMBtu following inventory data that showed a draw of 250 bcf when a larger draw of 251-257 bcf was anticipated. Prices reversed to a session high of $6.32 per MMBtu in early afternoon action but retreated back into negative territory heading into the close.

·         Natural gas eventually settled 1.6% lower at $6.05 per MMBtu.

COMEX Metals Closing Prices

  Apr gold fell $3.30 to $1317.30/oz 

·         Gold extended yesterday's losses while the dollar index rose as investors digested yesterday's FOMC minutes. The minutes indicated that some officials said there should be a ‘clear presumption' in support of continued tapering in $10 bln increments. The yellow metal brushed a session low of $1311.10 in early morning pit trade and eventually settled with a 0.2% loss. 

  Mar silver fell $0.17 to $21.68/oz 

·         Silver also traded in negative territory, with prices trending near the $2.70 level. Unable to gain momentum, it settled with a 0.8% loss. 

  Mar copper fell 1 cent to $3.28/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Mar corn rose 2 cents to $4.56/bushel 

·         Mar wheat fell 4 cents to $6.16/bushel 

·         Mar soybeans rose 4 cents to $13.59/bushel 

·         Mar ethanol fell 3 cents to $2.07/gallon 

·         May sugar (#16 (U.S.)) rose 0.06 of a penny to 21.89 cents/lbs

NYMEX Energy Closing Prices

  Apr crude oil fell $0.07 to $102.77/barrel 

·         Crude oil spent most of today's floor trade in negative territory. Prices slipped to a session low of $102.40 following inventory data that showed a build of 0.973 mln barrels when a build of 2.0-2.3 mln barrels was anticipated. The energy component briefly rose above the unchanged line to a session high of $103.04 but settled with a 0.1% loss. 

  Mar natural gas fell 10 cents to $6.05/MMBtu 

·         Natural gas fell to a session low of $5.88 following inventory data that showed a draw of 250 bcf when a draw of 251-257 bcf was anticipated. Prices reversed to a session high of $6.32 in early afternoon action but retreated back into negative territory heading into the close. Natural gas eventually settled 1.6% lower. 

  Mar heating oil rose 4 cents to $3.18/gallon 

  Mar RBOB rose 3 cents to $2.85/gallon

Treasuries

30y Closes at 3.726%, a One-Month High: 10-yr: -04/32..2.755%..USD/JPY: 102.33..EUR/USD: 1.3720

·         Treasuries ended with modest losses, closing just off their worst levels of the session. Click here to see an intraday yields chart.

·         The complex saw overnight gains as data out of China and Japan disappointed, but steady selling over the course of the morning dropped maturities into the red. 

·         Treasuries saw some light buying following the tame CPI (0.1% actual v. 0.2% expected) and in-line claims data before drifting into the Philly Fed release. 

·         The Philly Fed miss (-6.3 actual v. 7.4 expected) brought sellers out of the woodwork, causing yields to run to session highs. 

·         In all, yields saw an 8bp range from their overnight lows to session highs. 

·         Selling continued to have the biggest impact on yields in the belly as the 5y added +3.2bps and finished @ 1.544%. Today's close was the highest in a week, and has action testing resistance in the 1.550% area. 

·         The 10y tacked on +2bps, ending the day @ 2.754%. Today's selling ran the benchmark yield back above its 100 dma (2.747%), and has action flirting with the 2.750% resistance level. 

·         Selling ran the 30y up +1.9bps to 3.726%. The yield on the long bond ended the day at a one-month high. 

·         Little change along the curve saw the 2-10-yr spread hold @ 241.5bps.

·         Precious metals went off on their highs with gold +$2 @ $1322 and silver -$0.03 @ $21.82. 

·         Data: Existing home sales (10). 

·         Fed Speak: STL's Bullard continues his discussion on the "U.S. Economy and Monetary Policy" (13:10).

Next Day In View 

Economic Commentary

Economic Summary: CPI and Jobless Claims roughly in line with expectations today
Economic Data Summary:

·         Weekly Initial Claims 336K vs Briefing.com consensus of 335K; Last Week was 339K

·         Weekly Continuing Cliams 2.981 M vs Briefing.com consensus of 2.973 M ; Last Week was 2.953 M

o     The increase in the index was largely the result of the initial claims level returning to normal levels following unusual seasonal biases in the data. That component added 0.24 percentage points to the January increase in the index after reducing growth by 0.34 percentage points in December. Since eight of the 10 components of the index are known prior to the release, the difference between the actual and the consensus is generally small. T

·         January CPI 0.1% vs Briefing.com consensus of 0.2%; December was 0.3%

·         January Core CPI 0.1% vs Briefing.com consensus of 0.1%; December was 0.1%

o     The increase was a result of higher natural gas prices (3.6%), which offset a 1.0% decline in gasoline costs. Food prices rose 0.1% after being unchanged in December. Excluding food and energy, core CPI increased 0.1% for a second consecutive month in January. That is what the consensus expected. A sharp increase in producer tobacco prices from the November PPI (+3.6%) finally passed through to the consumer. Consumer tobacco prices were up 0.7% in January, which was the largest monthly increase since July. Outside of tobacco, there were no real outliers. 

·         February Philadelphia Fed -6.3 vs Briefing.com consensus of 7.4; January was 9.4

o     Manufacturers commented to the Philly Fed that severe winter storms affected the region and reduced business activity. If this is true, then the contraction should not last long. We are hesitant to blame all of the weakness on the weather. Poor economic data have been reported for the last two months, and evidence suggests that the overall economy is to blame for the sluggishness and not necessarily the weather.

·         January Leading Indicators 0.3% vs Briefing.com consensus of 0.4%; December was 0.1%

Upcoming Economic Data:

·         January Existing Home Sales due out Friday at 10:00 (Briefing.com consensus of 4.70 M ; December was 4.87 M )

Upcoming Fed/Treasury Events:

·         Saint Louis Fed President (non a voting FOMC member, typically dovish) to speak Friday at 13:10

Other International Events of Interest

·         Eurozone Flash Manufacturing PMI dipped to 53.0 (54.2 expected, 54.0 previous) while the Services number edged up to 51.7 (51.9 expected, 51.6 previous)

On other news.... 

·         Facebook (FB) confirms purchase of WhatsApp for ~$16 bln in 8K filing

Currencies 

Dollar Fights for Second Day of Gains: 10-yr: -06/32..2.760%..USD/JPY: 102.30..EUR/USD: 1.3710

·         The Dollar Index holds on session highs near 80.40 as trade drifts higher during what has been a quiet trade. Click here to see a daily Dollar Index chart.

·         Action during U.S. trade has been limited to a 15 cent range with bulls attempting to hold control for a second session. 

·         The greenback saw initial selling in response to both sets of data that were released this morning, but the weakness was short-lived as bulls were able to maintain the upper hand.

·         EURUSD is -25 pips @ 1.3705 as trade continues to press support in the area. Weighing on the single currency was today's mostly disappointing Flash Manufacturing and Services PMI data. 

·         GBPUSD is -25 pips @ 1.6650 as light selling resumes for a fourth day. Traders will be watching 1.6600 support over the next couple of sessions as action slips off levels last seen in the fall of 2011. Britain's retail sales and public sector net borrowing are due out tomorrow. 

·         USDCHF is +15 pips @ .8900 amid a mostly uneventful day for the pair. Action during U.S. hours has been limited to a tight 15 pip rage. 

·         USDJPY is flat @ 102.30 as trade has managed to recover its early losses. The pair slumped to 101.65 in response to the record Japanese trade deficit, but has lifted throughout the day as money finds its way into risk assets. The latest Bank of Japan minutes will be released tonight. 

·         AUDUSD is -10 pips @ .8985 as the overnight losses have dissipated. The hard currency dove below .8940 after the disappointing Chinese HSBC Flash Manufacturing PMI crossed the wires, but buyers emerged at the support level and the pair has recovered almost all of its post-data losses. The .9100 level has provided a lid on action since early December.

·         USDCAD is +25 pips @ 1.1105 as buyers remain in control for a second session. The two-day advance has the bulls looking for a retest of the January highs, which coincide with levels last seen in July 2009. Canadian data out tomorrow includes CPI and retail sales.

Jason's Commentaries


Another sharp rebound in the market last night, with some headline news from Facebook, acquiring Whatsapp for $19b. Philly Fed registered a nasty contraction. However, market just rallied back to the high once again. Market suffered a short retracement at the start of the market then after 15 minutes, the market rallied all the high and stayed up all the way to the closing. The healthcare and the materials sector were the main leaders in the market. Volumes were below 700m shares and it seems to me that the market is likely to consolidate at the top for a while before breaking up higher. The chances of the market retracing to approx 1810 on the S&P500 is pretty high as well. In short,I am still bullish in the medium term. But in the short term(approx 2weeks) will be sideways to down. Then I'll probably long again later by March.

Market Call: FLAT

Date: 21 Feb 2014