25 Feb 2014 AMC- Market ended flat as Financials are showing weakness

25 Feb 2014 AMC- Market ended flat as Yellen's testimony looms

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: -0.1%

·         France's CAC: -0.1%

·         Spain's IBEX: + 0.5%

·         Portugal's PSI: + 0.5%

·         Italy's MIB Index: 0.0%

·         Irish Ovrl Index: + 1.6%

·         Greece ATHEX Composite: + 3.5%

Before Market Opens

S&P futures vs fair value: -2.50. Nasdaq futures vs fair value: -1.30.
The S&P 500 futures trade nearly three points below fair value.

Asian markets ended the Tuesday session on a mixed note. In economic data, Hong Kong's trade deficit narrowed to HKD20.00 billion from HKD54.40 billion, the Philippines' trade deficit narrowed to $695 million from $941 million, and Thailand's trade deficit widened to $2.5 billion from $285 million. Also of note, Japan's Corporate Services Price Index ticked up 0.8% year-over-year (1.2% expected, 1.1% prior). 

·         Japan's Nikkei gained 1.4%, climbing to a four-week high. Heavyweight Softbank rallied 4.1% on reports it is looking to take a stake in South Korean based Line Corp. 

·         Hong Kong's Hang Seng shed 0.3%, falling for a third consecutive session. Financials were pressured as HSBC gave up 2.7% after its earnings miss. On the upside, casino stocks outperformed with Sands China rallying 4.6% following yesterday's report Las Vegas Sands will invest $10 billion in a Japan casino. 

·         China's Shanghai Composite lost 2.0%, pressing lower for a fourth session as the PBOC drained CNY100 million worth of liquidity. Property shares were a drag with Poly Real Estate down 1.5%. 

Core European indices trade lower across the board with Great Britain's FTSE (-1.0%) leading the retreat. Elsewhere, Spain's IBEX (+0.2%) outperforms after Prime Minister Mariano Rajoy said the country will eliminate its income tax on individuals earning EUR12,000 or less. In addition, the country's government plans to reform its laws on corporate restructuring.

Participants received several economic data points. Germany's fourth quarter GDP was left unrevised at 0.4% quarter-over-quarter, as expected. Great Britain's BBA Mortgage Approvals came in at 50,000 (47,900 expected, 47,100 prior) and the CBI Distributive Trades Survey jumped to 37 from 14 (15 expected). French Business Survey held steady at 100, as expected. Italy's retail sales slipped 0.3% month-over-month (0.4% expected, 0.0% prior) while the year-over-year reading fell 2.6% (0.2% expected, 0.2% previous). Separately, Consumer Confidence ticked down to 97.5 from 98.0 (98.5 consensus). Spain's PPI fell 1.8% year-over-year (-0.7% expected, 0.6% previous). 

·         Germany's DAX is lower by 0.5% with Fresenius Medical Care leading the slide. The stock trades lower by 6.7% after the company cut its profit forecast. On the upside, household products manufacturer Beiersdorf outperforms with a gain of 1.6%. 

·         In France, the CAC holds a loss of 0.6%. Telecom provider Vivendi is the weakest member, down 3.3%, after reporting disappointing earnings. L'Oreal is the top index performer, trading higher by 1.3%. 

·         Great Britain's FTSE trades down 1.0% as miners weigh. Anglo American, Fresnillo, and Rio Tinto are all down near 3.0% apiece. Supplier of construction materials CRH outperforms with a gain of 4.0%.

Market Internals

Market Internals -Technical-
The Dow closed down 27 (-0.17%) at 16180, the S&P 500 closed down 2 (-0.13%) at 1845, and the Nasdaq closed down 5 (-0.13%) at 4288. Action came on mixed volume (NYSE 633 mln vs. avg. of 704; NASDAQ 1982 mln vs. avg. of 1875), with decliners outpacing advancers (NYSE 1434/1652, NASDAQ 1042/1566) and new highs outpacing new lows (NYSE 133/19, NASDAQ 143/20).

Relative Strength: 
Greece-GREK +3.70%, Biotechnology-XBI +2.40%, Nuclear Energy-NLR +1.58%, Lithium-LIT +1.40%, Retail-XRT +1.28%, Livestock-COW +1.17%, Spain-EWP +0.68%, Austria-EWO +0.57%, Israel-EIS +0.45%, Japanese Yen-FXY +0.29%. 

Relative Weakness: 
Turkey-TUR -4.03%, Indonesia-IDX -2.97%, Junior Gold Miners-GDXJ -2.86%, Steel-SLX -2.11%, Silver Miners-SIL -2.04%, Metals and Mining-XME -1.88%, Cotton-BAL -1.82%, China 25 Index-FXI -1.73%, Columbia Index-GXG -1.66%, BRICs-EEB -1.55%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: Stocks Slip Amid Weakness in Financials
The stock market spun its wheels during the Tuesday session, ending essentially where it started. The S&P 500 shed 0.1% after spending the bulk of day within a striking distance of its flat line.

Equity indices tried to build on the relative strength of the two consumer sectors, but the rally attempts were stifled by the daylong underperformance of the top three groups.

Financials (-0.6%), health care (-0.2%), and technology (-0.3%) lagged from the opening bell and slumped to lows during the final hour of action. Since the three sectors account for more than 46.0% of the entire S&P 500, their underperformance acted as a headwind.

In the financial sector, Morgan Stanley (MS 29.71, -0.60) was the weakest performer among the majors while JPMorgan Chase (JPM 57.03, -1.00) fell 1.7% after announcing plans to eliminate jobs in its mortgage banking unit. In addition, the financial giant said it has observed a lower level of client activities across most investment banking units so far this year.

Elsewhere, the technology sector succumbed to the pressure exerted by some of its top components. Apple (AAPL 522.06, -5.49) lost 1.0% while Cisco Systems (CSCO 21.84, -0.28), Facebook (FB 69.85, -0.93), and Qualcomm (QCOM 74.91, -0.52) fell between 0.7% and 1.3%.

Unlike the traditional tech space, biotechnology remained strong. The iShares Nasdaq Biotechnology ETF (IBB 273.23, +1.15) added 0.4%, extending its year-to-date advance to 20.3%. Despite the strength, health care ended among the laggards.

On the upside, the consumer discretionary sector (+0.5%) finished in the lead after Home Depot (HD 80.98, +3.11) reported an earnings beat on below-consensus revenue. The company guided fiscal-year 2015 results below analyst estimates, but boosted its dividend 21.0% to $0.47 per share. On a related note, most homebuilders rallied while Toll Brothers (TOL 38.25, -0.09) shed 0.2% despite beating on earnings. The broader iShares Dow Jones US Home Construction ETF (ITB 25.55, +0.28) rose 1.1%.

Homebuilders received a measure of support from lower rates as the 10-yr yield slipped four basis points to 2.70%. Participation was well below average with only 633 million shares changing hands at the NYSE.

Today's economic data included three reports: 

·         The Conference Board's Consumer Confidence Index slipped to 78.1 in February from a downwardly revised 79.4 (from 80.7) while the Briefing.com consensus pegged the index at 80.8. Typically, confidence mirrors trends in stock prices, gasoline costs, employment levels, and media reports. There has been increased volatility among these indicators, but overall trends have been moving sideways. The slight drop in confidence, which is still above the December level (77.5), is likely nothing more than consumers reacting to the recent volatility. 

·         The December Housing Price Index from the FHFA increased 0.8%, which followed an uptick of 0.1% observed in November. 

·         The Case-Shiller 20-city Home Price Index for December rose 13.4% while a 13.6% increase had been expected by the Briefing.com consensus. This followed the November increase of 13.7%. 

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while New Home Sales for January will be reported at 10:00 ET. 

·         Nasdaq Composite +2.7% YTD 

·         Russell 2000 +1.1% YTD 

·         S&P 500 -0.2% YTD 

·         Dow Jones Industrial Average -2.4% YTD

Commodities

Closing Commodities: Natural Gas Settles 0.2% Higher; Apr Crude Ends Below $102/Barrel

·         Apr gold came off its session low of $1333.70 per ounce set moments after equity markets opened and managed to break into positive territory. It continued to trend higher and settled at $1342.70 per ounce, booking a gain of 0.4%.

·         Mar silver also lifted from its session low of $21.75 per ounce and rose as high as $22.00 per ounce. However, it was unable to push out of negative territory and settled with a 0.4% loss at $21.96 per ounce.

·         Apr crude oil spent its entire floor session in the red, dipping to a session low of $101.02 per barrel in morning action. It pushed to a session high of $101.95 per barrel and eventually settled with a 0.9% loss at $101.86 per barrel.

·         Apr natural gas slipped to a session low of $4.53 per MMBtu in early morning action but quickly recovered into positive territory. It advanced to a session high of $4.77 per MMBtu ahead of the close but lost momentum and settled just 0.2% higher at $4.67 per MMBtu.

COMEX Metals Closing Prices

  Apr gold rose $4.80 to $1342.70/oz 

·         Gold came off its session low of $1333.70 set moments after equity markets opened and managed to break into positive territory. It continued to trend higher and settled with a 0.4% gain. 

  Mar silver fell $0.08 to $21.96/oz 

·         Silver also lifted from its session low of $21.75 and rose as high as $22.00. However, it did not find buying support to push out of negative territory and settled with a 0.4% loss.

  Mar copper fell 1 cent to $3.26/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         May corn rose 3 cents to $4.61/bushel 

·         May wheat settled unchanged at $6.17/bushel 

·         May soybeans rose 12 cents to $13.86/bushel 

·         Mar ethanol rose 8 cents to $2.23/gallon 

·         May sugar (#16 (U.S.)) rose 0.05 of a penny to 22.20 cents/lbs

NYMEX Energy Closing Prices

  Apr crude oil fell $0.95 to $101.86/barrel 

·         Crude oil spent its entire floor session in negative territory, dipping to a session low of $101.02 in morning action. It pushed to a session high of $101.95 and eventually settled with a 0.9% loss. 

  Apr natural gas rose 1 cent to $4.67/MMBtu 

·         Natural gas fell to a session low of $4.53 in early morning action but quickly recovered into positive territory. It advanced to a session high of $4.77 ahead of the close but lost momentum and settled just 0.2% higher.

  Apr heating oil fell 1 cent to $3.04/gallon 

  Apr RBOB fell 4 cents to to $2.97/gallon

Treasuries

Treasuries Finish on Highs: 10-yr: +11/32..2.698%..USD/JPY: 102.11..EUR/USD: 1.3742

·         Treasuries finished on session highs, helped by a solid bid that persisted throughout the morning. Click here to see an intraday yields chart.

·         This morning's disappointing consumer confidence (78.1 actual v. 80.8 expected, 79.4 previous) propelled maturities to their best levels, where they would spend the majority day.

·         Action saw little response to the solid $32 bln 2y note auction, which drew 0.340% and a strong 3.60x bid/cover. A strong indirect takedown (34.3%) helped offset the slightly disappointing direct bid (19.2%). 

·         Yields across most of the curve shed -5bps. 

·         The 5y was once again unable to break out above 1.550% resistance, posting its lowest close in a week (1.510%). 

·         A solid bid dropped the 10y -5bps to 2.700%. The benchmark yield had flirted with 2.750% resistance several times over the past month, but ended today's session at a two-week low. 

·         A similar story at the long end saw the 30y shed -5bps to 3.661%. The yield on the long bond ended today's session below its 200 dma (3.670%) for the first time since the beginning of February. 

·         A flatter curve took hold as the 2-10-yr spread tightened to 238bps. 

·         Precious metals went off near their best levels with gold +$5 @ $1343 and silver -$0.08 @ $21.97. 

·         Data: MBA Mortgage Index (7) and new home sales (10). 

·         Auction: $35 bln 5y note auction. 

·         Fed Speak: Boston's Rosengren discusses his economic outlook (12 noon) and Cleveland's Pianalto gives "Reflections on 35 Years with the Federal Reserve System" (19:30).

Next Day In View 

Economic Commentary

Economic Summary: Consumer Confidence misses expectations; New Home sales tomorrow at 10:00
Economic Data Summary:

·         December Case Schiller 20 City Index 13.4% vs Briefing.com consensus of 13.6%; November was 13.7%

·         December FHFA Housing Price Index 0.8% vs Briefing.com consensus of ; November was revised to -0.1% from 0.1%

·         February Consumer Confidence 78.1 vs Briefing.com consensus of 80.8; January was revised to 79.4 from 80.7

o    The Conference Board's Consumer Confidence Index slipped to 78.1 in February from a downwardly revised 79.4 (from 80.7) in January. The Briefing.com consensus pegged the index at 80.8. Typically, confidence mirrors trends in stock prices, gasoline costs, employment levels, and media reports. There has been increased volatility among these indicators, but overall trends have been moving sideways. 

Fed/Treasury Events Summary:

·         Fed Board Member Daniel Taruillo gives speech says 'suggested that monetary policy action cannot be taken off the table as a response to the build-up of broad and sustained systemic risk'

Upcoming Economic Data:

·         Weekly MBA Mortgage Applications due out Wednesday at 7:00 (Briefing.com consensus of ; Last Week was -4.1%)

·         January New Home Sales due out Wednesday at 10:00 (Briefing.com consensus of 400K; December was 414K)

Upcoming Fed/Treasury Events:

·         Boston Fed President Eric Rosengren (dove, non-voter) to speak tomorrow at 12:00

·         The Treasury will auction off new debt this week.  The results of each auction below will be announced at 13:00

o    Wednesday:$35 bln in 5 years notes

o    Thursday: $29 bln in 7 year notes.

On other news.... 

News

·         AT&T (T) / Netflix (NFLX) considering deal for broadband users, according to reports out

·         Chevron (CVX) considering options for US midstream business, according to reports

·         Comcast (CMCSA) and Time Warner Cable (TWC) Senate hearing date set for March 26th, according to reports

·         JPMorgan Chase (JPM) plans to eliminate 1000's more jobs, according to reports

·         Walt Disney (DIS) has increased single day passes to $99, up 21% from 2011, according to reports

·         Japan may soon commit to nuclear energy, according to reports

Currencies 

Dollar Holds Little Changed: 10-yr: +11/32..2.702%..USD/JPY: 102.15..EUR/USD: 1.3741

·         The Dollar Index holds little changed near 80.15 amid a mostly uneventful session. Click here to see a daily Dollar Index chart.

·         Aside from a quick spike to session highs following this morning's disappointing consumer confidence report, the greenback has spent the majority of the day stuck near 81.10.

·         EURUSD is +10 pips @ 1.3745 as action lingers near the best levels of 2014. The single currency has been trapped in a tight range between 1.3700/1.3775 for the past week as bulls and bears battle for control. The latest European Union Economic projections were released this morning, and suggest growth of 1.8% in 2015 (1.7% previous) while inflation slows to 1% in 2014 before ticking back up to 1.3% in 2015. 

·         GBPUSD is +30 pips @ 1.6685 as a modest bid persists for a second session. Sterling has been supported by this morning's better than expected BBA Mortgage Approvals and CBI Realized Sales data, which continue the run of mostly better than expected data to emerge from the UK. A close above 1.6750 would mark the best in more than five years.

·         USDCHF is -35 pips @ 102.15 as trade flirts with its worst close in over two months. Participants continue to keep a close eye on the .8840 area as a breakdown would drop action to levels last seen in November 2011. 

·         USDJPY is -35 pips @ 102.15 as action posts its first notable loss in over a week. Early action probed the upper bound of the 101.50/102.50 range that has been in place for much of February; however, bulls remain unable to produce a breakout. Minor support rests in the 101.75 area, and is helped by the 100 dma (101.71). 

·         AUDUSD is -15 pips @ .9020 amid a mostly uneventful session. The hard currency has managed to shrug off concerns of a slowing of the Chinese economy, but has struggled to retake the .9050 level. 

·         USDCAD is +30 pips @ 1.1085 as trade claws back some of yesterday's losses. Today's session has been rather lackluster with U.S. trade limited to just a 20 pip range.

Jason's Commentaries


The market was really volatile last night. Went down first, then went up then went down again. Seems that I'm right that the market is heading into a volatile session. It just lack the strength to continue going higher as of now. Internals doesn't really favours both bulls and bears last night while the VIX closed at 13.67. The main laggard of the session was financials, losing 0.6%. JP Morgan lagged the most as it's going to cut additional 1000 jobs. That is really a bad news. Though making profit, perhaps the banks are forecasting some rough times to come? If financials continue to lag in this manner, we might turn down pretty quickly. Right now on the technical side we're still at the high of the S&P500 and Russells. Without much catalyst, we might not break higher. Morever, Yellen is going to testify at 10am ET. The market might gyrate pretty much tonight. Stay safe ppl!  

Market Call: ABSTAIN

Date: 26 Feb 2014