18 March 2014 AMC- Market rallied again as Putin said Russia does not want to breakup Ukraine and wants a partnership with the West

18 March 2014 AMC- Market rallied again as Putin said Russia does not want to breakup Ukraine and wants a partnership with the West

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: + 0.6%

·         Germany's DAX: + 0.7%

·         France's CAC: + 1.0%

·         Spain's IBEX: + 0.8%

·         Portugal's PSI: + 0.9%

·         Italy's MIB Index: + 0.9%

·         Irish Ovrl Index: + 0.3%

·         Greece ATHEX Composite: + 0.3%

 

Before Market Opens

S&P futures vs fair value: +4.70. Nasdaq futures vs fair value: +7.50.
The S&P 500 futures trade almost five points above fair value.

Most Asian markets finished in the green as trade was buoyed by yesterday's strong gains on Wall Street. In economic data, the pace of appreciation in China's House Price Index slowed to 8.7% year-over-year (9.6% previous) with prices seeing month-over-month gains in 57 of 70 cities. Also of note, China and New Zealand will begin Chinese yuan/New Zealand dollar direct trading tomorrow.

The latest Reserve Bank of Australia minutes were released overnight, with members noting the Aussie dollar remains too strong. 

·         Japan's Nikkei climbed 0.9%, gaining for the first time in five days. Heavyweight Softbank added another 3.2% as momentum carried over from the weekend news indicating Alibaba will IPO in the United States. 

·         Hong Kong's Hang Seng rose 0.5%, snapping a four-day skid. Internet gaming company Tencent Holdings jumped 5.8% as trades moved into the beaten down name following last week's slide that came on reports Beijing was looking into online payments. 

·         China's Shanghai Composite ticked up 0.1%, marking its third advance in four days. Property shares lagged with Poly Real Estate and China Vanke giving up 3.1% and 1.6%, respectively. 

Major European indices hover near their highs after surging out of the red. The sharp move followed comments from Vladimir Putin, who said Russia does not want to see a break-up of Ukraine. Italy's MIB is leading the charge with a 1.2% gain as it hovers at a three-year high.

Economic data was scarce. Germany's ZEW Economic Sentiment fell to 46.6 from 55.7 (53.0 expected) while the Current Conditions component improved to 51.3 from 50.0 (52.0 forecast). Eurozone ZEW Economic Sentiment worsened to 61.5 from 68.5 (67.3 forecast). Italian trade surplus narrowed to EUR370 million from EUR3.61 billion (EUR2.47 billion forecast).

Also of note, the German Constitutional Court confirmed the legality of the European Stability Mechanism. 

·         Great Britain's FTSE is higher by 0.3% with Coca-Cola Hellenic Bottling Company in the lead. The consumer stock is higher by 2.4%. Mining stocks are mixed, but Fresnillo and Randgold Resources appear among the laggards. The two names hold respective losses of 4.4% and 2.0%. 

·         Germany's DAX trades up 0.7% with support from financials. Commerzbank is higher by 1.8% and Deutsche Bank trades up 1.0%. Deutsche Telekom is the weakest index component, trading lower by 0.2%. 

·         In France, the CAC holds an advance of 1.0% with Renault in the lead. The carmaker is higher by 3.9% after announcing better-than-expected sales. Steelmaker ArcelorMittal lags with a loss of 0.7%. 

·         Italy's MIB is higher by 1.2% with financials in the lead. BMPS and Unicredit trade higher by 4.4% and 1.0%, respectively.

 

U.S. Equities

·         Equity futures point to solid gains at the open

·         Early action indicated a lower start, but futures lifted to their best levels of the morning as Russian President Vladimir Putin indicated Russia does not want to breakup Ukraine and that it wants a partnership with the West

·         Housing Starts (907K actual v. 915K expected)

·         Building Permits (1018K actual v. 955K expected)

·         CPI (0.1% actual v. 0.2% expected)

·         Core CPI (0.1% actual v. 0.1% expected)

o    S&P Futures +6 @ 1857

o    Dow Futures +60 @ 16,226

o    Nasdaq Futures +11 @ 3662

Asia

·         Markets finished green across most of Asia as trade was buoyed by yesterday's strong gains on Wall Street

·         The pace of appreciation in China's House Price Index slowed to 8.7% YoY (9.6% YoY previous) with prices seeing MoM gains in 57 of 70 cities

·         China and New Zealand will begin Chinese yuan/New Zealand dollar direct trading tomorrow 

·         The latest Reserve Bank of Australia minutes were released overnight, with members noting the Aussie dollar remains too strong

·         Japan's Nikkei (+0.9%) gained for the first time in five days

·         Hong Kong's Hang Seng (+0.5%) snapped a four-day skid

·         China's Shanghai Composite (+0.1%) gained for the third time in four days

·         India's Sensex (+0.1%) held near all-time highs

·         Australia's ASX (+0.5%) bounced off the 50 and 100 dma

Market Internals

Market Internals -Technical-
The Nasdaq closed up 53 (+1.25%) at 4333, the S&P 500 closed up 13 (+0.72%) at 1872, and the Dow closed up 89 (+0.55%) at 16336. Action came on below average volume (NYSE 568 mln vs. avg. of 707; NASDAQ 1821 mln vs. avg. of 2009), with advancers outpacing decliners (NYSE 2382/745, NASDAQ 1998/638) and new highs outpacing new lows (NYSE 141/11, NASDAQ 119/18). 

Relative Strength: 
Russia-RSX +4.67%, Biotechnology-XBI +3.55%, Turkey-TUR +2.96%, Eastern Europe-ESR +2.85%, Biotechnology-IBB +2.64%, BRICs-EEB +2.36%, Grains-JJG +2.33%, Austria-EWO +2.1%, Oil and Gas Exploration-XOP +1.89%, Clean Energy-PBW +1.87%.

Relative Weakness: 
Volatility-VXX -3.94%, Junior Gold Miners-GDXJ -2.3%, Silver-SLV -1.57%, Gold Miners-GDX -1.38%, Silver Miners-SIL -0.99%, Canadian Dollar-FXC -0.74%, Singapore-EWS -0.32%, Vietnam-VNM -0.27%, British Pound-FXB -0.26%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: Stocks and Treasuries End Near Highs
The major averages finished the Tuesday session with solid gains, but outside of a few pockets of considerable relative strength, most sectors could be classified as reluctant participants in the daylong rally. Small caps led the way with the Russell 2000 climbing 1.5% while the S&P 500 advanced 0.7% with nine sectors posting gains.

This morning, equity indices were on track for a lower start to the session, but that changed in a hurry when comments from Russian President Vladimir Putin began making the rounds. Although Mr. Putin did not provide any groundbreaking insight, European markets and equity futures rallied when he said Russia does not want to see a break-up of Ukraine.

The comments also gave a boost to risk sentiment in the foreign exchange market, sending the dollar/yen pair from a morning low of 101.33 to 101.80. Interestingly, the yen weakness was short-lived as the currency pair slid to a fresh session low (101.29) over the next five hours while equity indices built on their opening gains thanks to the outperformance of three heavily-weighted sectors—energy (+0.8%), health care (+1.2%), and technology (+1.4%)—that account for just a shade over 41.0% of the entire S&P 500.

The energy sector drew strength from Dow component Chevron (CVX 116.24, +1.17), which gained 1.0% after being added to the US Focus List at Credit Suisse, while also receiving a boost from the 1.7% gain in crude oil ($99.69/bbl).

Elsewhere, the health care sector was underpinned by companies specializing in biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 262.22, +6.75) surged 2.6%, which also factored into the outperformance of the tech-heavy Nasdaq Composite.

Speaking of the Nasdaq, the index got a big boost from shares of Microsoft (MSFT 39.55, +1.50), which rallied 3.9% in reaction to widespread reports indicating the company will release its Office suite for the Apple (AAPL 531.40, +4.66) iPad.

Strikingly, outside of the three influential sectors, the remaining groups could never catch up with the broader market. Most notably, the financial sector (+0.5%) lagged throughout the session, ending behind most of the remaining growth-sensitive groups.

On the countercyclical side, health care was the only outperformer while consumer staples (+0.2%), utilities (-0.2%), and telecom services (+0.66%) lagged.

Treasuries erased their overnight gains in reaction to the comments from Vladimir Putin, but spent the session in a climb towards the early highs. The benchmark 10-yr yield ended at 2.67% after starting the New York session just north of 2.69%.

Despite the mixed sentiment signals emanating from the foreign exchange, Treasury, and stock markets, participants did not show much demand for volatility protection as indicated by the 7.2% decline in the CBOE Volatility Index (VIX 14.52, -1.12).

Trading volume was on the light side for the second day in a row with only 574 million shares changing hands at the NYSE floor.

Today's economic data included the February Housing Starts and Building Permits report and February CPI: 

·         Housing starts fell 0.2% in February to 907,000 from an upwardly revised 909,000 (from 880,000) in January. The Briefing.com consensus expected housing starts to increase to 915,000. After two months where starts surpassed one million, construction levels in January and February returned to their April - October 2013 pace. There wasn't much evidence of significant shocks from winter weather conditions. Building Permits rose to a seasonally adjusted annualized rate of 1,018,000, which was better than the Briefing.com consensus estimate of 955,000. 

·         Consumer prices edged up 0.1% in February after increasing 0.2% in January. The Briefing.com consensus expected the CPI to increase 0.2%. Energy costs, which provided a sizable boost to the PPI, fell 0.5% in February. A 1.7% decline in gasoline prices offset a 3.6% increase in natural gas costs. Food price growth, which had been very low and stable for the past several months, shot up 0.5% in February. That was the largest one-month increase since September 2011. Most of the food components rose more than their long-term trends. That included a 1.2% increase in meats, poultry, fish, and eggs. Excluding food and energy, core CPI increased 0.1% for a third consecutive month in February. That was exactly what the consensus expected. 

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while the fourth quarter current account balance (Briefing.com consensus -$87.60 billion) will be announced at 8:30 ET. Also of note, the Federal Open Market Committee will conclude its two-day meeting with the latest policy statement scheduled to be released at 14:00 ET. The statement will be followed by Janet Yellen's first press conference as Fed Chair, scheduled to begin at 14:30 ET. 

·         Russell 2000 +3.8% YTD 

·         Nasdaq Composite +3.8% YTD 

·         S&P 500 +1.3% YTD 

·         Dow Jones Industrial Average -1.5% YTD

Commodities

Closing Commodities: Gold Falls 1%, Silver Drops 2%

·         Precious metals traded lower today following comments from Vladimir Putin, who said Russia does not want to see a break-up of Ukraine and that it wants a partnership with the West.

·         In addition, investors await tomorrow's FOMC decision and Janet Yellen's first press conference as Fed Chief.

·         Apr gold extended yesterday's losses, falling to a session low of $1351.10 per ounce in early morning action. Despite trending slightly higher for the remainder of the session, the yellow metal settled with a 1.0% loss at $1359.00 per ounce.

·         May silver fell as low as $20.63 per ounce in early morning pit trade and brushed a session high of $20.92 per ounce. It eventually settled at $20.85 per ounce, or 2.0% lower.

·         Apr natural gas chopped around in negative territory between $4.45 and $4.50 per MMBtu. Unable to find buying support, it settled with a 1.5% loss at $4.46 per MMBtu.

·         Apr crude oil, on the other hand, rose alongside the equities market. It lifted from its session low of $98.16 per barrel set in early morning floor trade and trended higher for the remainder of the session. It settled 1.7% higher at $99.69 per barrel, just below its session high of $99.78 per barrel.

COMEX Metals Closing Prices

  Apr gold fell $14.10 to $1359.00/oz 

·         Gold extended yesterday's losses, falling to a session low of $1351.10 in early morning action. The move came in reaction to comments from Vladimir Putin, who said Russia does not want to see a break-up of Ukraine and that it wants a partnership with the West. In addition, investors await tomorrow's FOMC decision and Janet Yellen's first press conference as Fed Chief. Despite trending slightly higher for the remainder of the session, the yellow metal settled with a 1.0% loss. 

  May silver fell $0.42 to $20.85/oz 

·         Silver also traded in the red today. Prices fell as low as $20.63 in early morning pit trade and brushed a session high of $20.92. Silver eventually settled with a 2.0% loss. 

  May copper settled unchanged at $2.95/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         May corn rose 8 cents to $4.86/bushel 

·         May wheat rose 18 cents to $6.92/bushel 

·         May soybeans rose 28 cents to $14.19/bushel 

·         Apr ethanol rose 11 cents to $2.56/gallon 

·         May sugar (#16 (U.S.)) fell 0.02 of a penny to 21.93 cents/lbs

 NYMEX Energy Closing Prices

  Apr crude oil rose $1.64 to $99.69/barrel 

·         Crude oil rose alongside the equities market today. It lifted from its session low of $98.16 set in early morning pit trade and trended higher for the remainder of the session. It settled just below its session high of $99.78, booking a gain of 1.7%. 

  Apr natural gas fell 7 cents to $4.46/MMBtu 

·         Natural gas chopped around in negative territory between $4.45 and $4.50. Unable to find buying support, it settled with a 1.5% loss. 

  Apr heating oil rose 2 cents to $2.91/gallon

  Apr RBOB rose 2 cents to $2.90/gallon

Treasuries

Treasuries Eke Out a Gain: 10-yr: +06/32..2.672%..USD/JPY: 101.43..EUR/USD: 1.3931

·         Treasuries eked out small gains amid a mostly uneventful session as trade remained on hold ahead of tomorrow's FOMC rate decision. Click here to see an intraday yields chart.

·         The complex displayed a positive tone throughout the overnight session before headlines out of Russia sparked a flight into risk, and caused yields to run back up to their respective flat lines. 

·         Comments from Russian Prime Minister Vladimir Putin suggested Russia does not want to breakup Ukraine and that it wants a partnership with the West.

·         Trade saw little response this morning's data as CPI (0.1% actual v. 0.2% expected) was cooler than expected while housing starts (907K actual v. 915K expected) missed and building permits (1018K actual v. 955K expected) beat.

·         Net Long-Term TIC Flows increased +$7.3 bln (-$45.9 bln previous). 

·         Yields across the curve were confined to a tight 3bp range during U.S. action with buying focused on the belly of the curve. 

·         The 5y led the way lower, -2.6bps @ 1.548%. Today's bid pushed the yield back below its 50 dma, and dropped action back into the 1.450%/1.550% range that dominated throughout February. 

·         The 10y ended -1.8bps @ 2.681%. The benchmark yield closed on its 200 dma and holds at the midpoint of the 2.600%/2.800% range that has persisted over the past month and a half. 

·         The yield on the long bond slipped -0.3bps to 3.627%. Traders continue to monitor support in the 3.550% region, which has held up since last summer. 

·         Slight steepening along the yield curve saw the 2-10-yr spread widen to 232.5bps.

·         Precious metals saw losses with gold sliding -$17 to $$1356 and silver falling -$0.47 to $20.80. 

·         Data: MBA Mortgage Index (7) and the current account balance (8:30). The FOMC concludes a two-day meeting with participants expecting another trim to its asset purchase program (14). Fed Chair Janet Yellen will hold her first post-FOMC meeting press conference (14:30).

Next Day In View 

Economic Commentary

Economic Summary: Housing starts rise, but miss expectations; CPI cooler than expected; FOMC decision tomorrow at 14:00 followed by Janet Yellen press conference at 14:30
Economic Data Summary:

·         February Housing Starts 907K vs Briefing.com consensus of 915K; January was 880K

·         February Building Permits 1.018 M vs Briefing.com consensus of 955K; January was 937K

o    There isn't much evidence of significant shocks from winter weather conditions. Looking at the details, construction levels in the Northeast fell 37.5% in February, but that came after a 46.3% positive shock in January. Starts in the Midwest increased 34.5%, but are still below 2013 trends. Construction in the South increased 7.3% and fell 5.5% in the West. 

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

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

o    Food price growth, which had been very low and stable for the past several months, shot up 0.5% in February. That was the largest one-month increase since September 2011. Most of the food components rose more than their long-term trends. That included a 1.2% increase in meats, poultry, fish, and eggs. Excluding food and energy, core CPI increased 0.1% for a third consecutive month in February.

·         January Net Long Term TIC Flows $7.3 bln vs Briefing.com consensus of ; December was -$45.9 bln

Fed/Treasury Events Summary:

·         The Fed has begun a two day meeting.  The statement will be released tomorrow at 14:00 along with economic projections.  Janet Yellen will host her first press conference as Fed Chair at 14:30

Upcoming Economic Data:

·         Weekly MBA Mortgage Applications due out Wednesday at 7:00 (Last Week was -2.1%)

·         Fourth Quarter Current Account Balance due out Wednesday at 8:30 (Briefing.com consensus of -$87.6 bln; Third Quarter was -$94.8 bln)

Other International Events of Interest

·         The pace of appreciation in China's House Price Index slowed to 8.7% YoY (9.6% YoY previous) with prices seeing MoM gains in 57 of 70 cities.

On other news.... 

Currencies 

Dollar Holds Steady: 10-yr: +05/32..2.677%..USD/JPY: 101.42..EUR/USD: 1.3925

·         The Dollar Index has spent the majority of the session hugging the flat line near 79.40. Click here to see a daily Dollar Index chart.

·         The quiet session comes as traders await tomorrow's FOMC meeting, which is likely to introduce another $10 bln taper to the Fed's QE program and features the first Janet Yellen press conference as Fed Chair. 

·         EURUSD is flat @ 1.3920 as trade hovers little changed for a second straight session. The single currency has shrugged off this morning's disappointing ZEW Economic Sentiment and German ZEW Economic Sentiment figures, and has been buoyed by comments from Russian President Vladimir Putin suggesting Russia does not want to breakup Ukraine and that it wants a partnership with the West. Any close in positive territory marks the best since October 2011. 

·         GBPUSD is -55 pips @ 1.6580 as trade presses to a five-week low. Early selling dropped sterling onto its 50 dma (1.6555), but buyers emerged to defend the level. A breakdown of the 50 dma sets up a possible test of the 100 dma (1.6407). Britain's claimant count change, unemployment, Bank of England MPC votes, and the Average Earnings Index will be released ahead of the annual budget. 

·         USDCHF is +5 pips @ .8740 as trade ticks higher for a second session. The two-day advance has the pair climbing off 29-month lows, and looking for a test of minor resistance near .8775/.8800. Swiss data is limited to ZEW Economic Expectations. Swiss National Bank Chairman Thomas Jordan will speak in Bern. 

·         USDJPY is -40 pips @ 101.40 as trade has reversed most of yesterday's losses. Today's action seems to indicate a scaling back of risk despite the exuberance that is being seeing in equities. A breakdown of 101.00 puts the 200 dma (100.36) and parity at risk. Japan's trade balance will cross the wires the tonight. Bank of Japan Governor Kuroda is scheduled to speak in Tokyo. 

·         AUDUSD is +40 pips @ .9125 as trade readies for its best close in three months. Today's bid has the hard currency higher for the fourth time in five sessions, and has action nearing a test of the 200 dma (.9147). A move through the 200 dma puts .9300 in play.

·         USDCAD is +80 pips @ 1.1135 as trade looks to put in its best close in one and a half months. The pair has been able to shake off the better than expected Canadian manufacturing sales (1.5% MoM actual v. 1.1% MoM expected) with trades instead focusing on the dovish comments from Bank of Canada Governor Poloz. Mr. Poloz indicated the central bank will have to reassess current policy if downside risks to inflation increase. Canada's wholesale sales data is scheduled for tomorrow.

Jason's Commentaries


Seems that the international pressure is working on Putin. By coming up with political posturing, Putin immediately gained the shock and awe factor in his government. Formerly from the KGB, this guy is definitely not a push over. Market reacted positively to this piece of news and went up. Another possible reason is that the market started to price into the the FOMC tonight at 2pm ET. Volumes were terrible, at 585.4m shares traded on the NYSE. Indicating that the rally has no strength and is likely to be a short cover. Since its gonna be the FOMC statement today, I'm going to abstain from the market call. 
Note to CT students, please read through this DMA and the previous ones for reference. 

Do the DMA for 21 March instead.

Market Call: ABSTAIN

Date: 19 March 2014