24 March 2014 AMC- Market ended down as Treasury yields getting flatter

24 March 2014 AMC- Market ended down as Treasury yields getting flatter

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: -1.7%

·         France's CAC: -1.4%

·         Spain's IBEX: -1.4%

·         Portugal's PSI: -1.2%

·         Italy's MIB Index: -1.7%

·         Irish Ovrl Index: -1.4%

·         Greece ATHEX Composite: -0.1%

Before Market Opens

S&P futures vs fair value: +3.40. Nasdaq futures vs fair value: +7.50.
The S&P 500 futures trade three points above fair value.

Markets across Asia ended broadly higher with only Thailand's SET (-0.8%) seeing losses. The gains came despite China's Flash Manufacturing PMI (48.1 versus expected 48.7, prior 48.5) missing estimates as a PBOC official suggested Beijing would implement stimulus measures to aid growth. 

·         Japan's Nikkei jumped 1.8%, rallying off six-week lows. Exporters saw solid gains as the yen weakened in early trade. Sony climbed 2.3% and Toyota Motor tacked on 1.7%. 

·         Hong Kong's Hang Seng surged 1.9% on stimulus hopes. China Life Insurance jumped 3.9% and China Construction Bank climbed 3.2%. 

·         China's Shanghai Composite gained 0.9%, finishing at its best level in three weeks. Poly Real Estate added 3.5% to lead real estate shares higher while Hebei Iron & Steel gained the limit, 10%, on reports the Chinese government is looking to establish free trade zones in Beijing, Hebei, and Tianjin. 

Major European indices trade lower across the board with Spain's IBEX (-0.7%) leading the retreat. Participants received several PMI readings today. Eurozone Manufacturing PMI slipped to 53.0 from 53.2 (expected 53.0) while Services PMI fell to 52.4 from 52.6 (consensus 52.6). Germany's Manufacturing PMI disappointed, falling to 53.8 from 54.8 (expected 54.6) while Services PMI retreated to 54.0 from 55.9 (forecast 55.5) while French Manufacturing PMI surprised, improving to 51.9 from 49.7 (consensus 49.8) while Services PMI increased to 51.4 from 47.2 (forecast 47.5).

Among news of note, leaders gathered at the G7 nuclear summit in The Hague are expected to discuss the situation in Ukraine during the conference. 

·         Great Britain's FTSE is lower by 0.1% with consumer names pacing the slide. Barratt Developments, International Consolidated Airlines, and William Hill display losses between 1.8% and 2.0%. Financials are holding up relatively well with HSBC and Lloyds Banking Group up 0.2% and 1.3%, respectively. 

·         In France, the CAC is down 0.2% with financials trading in mixed fashion. BNP Paribas and Societe Generale are lower by 1.3% and 2.0%, respectively, while Credit Agricole trades higher by 1.8%. Consumer names Danone and Pernod Ricard outperform with respective gains of 0.5% and 0.3%. 

·         Germany's DAX holds a loss of 0.3% with heavyweights displaying weakness. Bayer, Deutsche Bank, and Deutsche Lufthansa are all down between 1.1% and 1.8%. On the upside, exporters BMW and Volkswagen trade higher by 1.8% and 0.4%, respectively. 

·         Spain's IBEX is lower by 0.7%. Banco de Sabadell, Bankinter, and Bankia hold losses between 1.6% and 2.4%.

U.S. Equities

·         Futures point to a firm open

·         The S&P 500 remains within striking distance of all-time highs while the Nasdaq sits just off its best level in 15 years

·         Traders continue to watch the VIX (15.00), which has been consolidating in the 14.00 area

o    S&P Futures +5 @ 1862

o    Dow Futures +33 @ 16,254

o    Nasdaq Futures +13 @ 3652

Asia

·         Markets across Asia ended broadly higher with only Thailand's SET (-0.8%) seeing losses

·         The gains came despite China's Flash Manufacturing PMI (48.1 actual v. 48.7 expected, 48.5 previous) missing estimates as a PBOC official suggested Beijing would implement stimulus measures to aid growth

·         Singapore‘s inflation rate slowed 0.4% YoY (1.4% YoY previous)

·         Taiwan's unemployment rate held at 4.1%

·         Japan's Nikkei (+1.8%) rallied off six-week lows

·         Hong Kong's Hang Seng (+1.9%) rallied on stimulus hopes for the Mainland

·         China's Shanghai Composite (+0.9%) finished at its best level in three weeks

·         India's Sensex (+1.4%) closed at all-time highs

·         Australia's ASX (+0.2%) eked out a gain

Market Internals

Market Internals -Technical-
The Nasdaq closed down 50 (-1.18%) at 4226, the S&P 500 closed down 9 (-0.49%) at 1857, and the Dow closed down 26 (-0.16%) at 16277. Action came on mixed volume (NYSE 714 mln vs. avg. of 731; NASDAQ 2263 mln vs. avg. of 2035), with decliners outpacing advancers (NYSE 1161/1953, NASDAQ 684/1970) and new highs outpacing new lows (NYSE 65/19, NASDAQ 43/35).

Relative Strength: 
Coffee-JO +2.69%, Greece-GREK +2.19%, Grains-JJG +2.09%, India-INP +1.96%, Corn-CORN +1.6%, China 25 Index-FXI +1.59%, South Africa-EZA +1.55%, Malaysia-EWM +1.19%, Nuclear Energy-NLR +0.84%, 20+ Year Treasuries-TLT +0.71%.

Relative Weakness: 
Junior Gold Miners-GDXJ -6.7%, Silver Miners-SIL -5.45%, Biotechnology-XBI -4.02%, Social Media-SOCL -2.66%, Eastern Europe-ESR -0.64%, Columbia Index-GXG -0.56%, Thailand-THD -0.52%, Turkey-TUR -0.46%, Peru-EPU -0.45%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: Biotechnology Leads Stocks Lower
The stock market kicked off the new trading week on a cautious note with the Nasdaq leading the retreat. The tech-heavy index lost 1.2% while the S&P 500 fell 0.5% with eight sectors ending in the red. For its part, the Dow Jones Industrial Average (-0.2%) held up relatively well.

Equity indices began the session in the green, but quickly slumped into the red as biotechnology continued its recent woes while other momentum names displayed broad weakness. Late-afternoon buying lifted the key averages off their lows, but the Nasdaq could only reclaim a portion of its loss.

The iShares Nasdaq Biotechnology ETF (IBB 239.23, -6.78) settled lower by 2.8% after testing its 100-day moving average (235.61) for the first time since early November. Today's loss widened the ETF's March decline to 9.5%, but the high-flying industry group remains up 5.4% so far in 2014.

The underperformance of biotechnology pressured the health care sector (-1.4%), which spent the entire session behind the other nine groups. Health care was not the only influential sector weighing on the broader market as the consumer discretionary space (-1.0%) lagged throughout the session while technology (-0.4%) did not overtake the broader market until the late afternoon.

Momentum names did their part in keeping the two sectors on the defensive. Amazon.com (AMZN 351.85, -8.77) and Netflix (NFLX 378.90, -27.09) pressured the discretionary space, posting respective losses of 2.4% and 6.7%, while Facebook (FB 64.10, -3.14), Google (GOOG 1157.93, -25.11), and LinkedIn (LNKD 188.14, -8.58) contributed to the early weakness in technology.

Speaking of technology, the sector led the market lower in the morning, but was able to finish the day ahead of the S&P 500 thanks to the relative strength of top-weighted names. Apple (AAPL 539.19, +6.32), IBM (IBM 188.25, +1.58), and Microsoft (MSFT 40.50, +0.34) gained between 0.9% and 1.2% with Apple's strength coming amid reports indicating the company is working on a content distribution agreement with Comcast (CMCSA 50.30, +0.30). In all likelihood, the news exacerbated today's loss in the shares of Netflix.

Even though heavily-weighted sectors lagged, the broader market was prevented from registering additional losses by the relative strength among consumer staples (-0.1%), energy (-0.1%), and financials (-0.2%). Elsewhere, telecom services (+0.3%) and utilities (+0.2%) posted modest gains, but the pair carries little sway over the broader market since it accounts for just 5.5% of the S&P 500.

Treasuries posted modest gains after climbing off their overnight lows. The benchmark 10-yr yield slipped two basis points to 2.73% after hovering near 2.78% ahead of the opening bell.

Participation was in line with average as roughly 714 million shares changed hands at the NYSE.

There was no notable economic data reported today, but some news of note came out of the G7 meeting at The Hague where the G7 nations issued a joint statement, saying they are suspending their participation in the G8 until "Russia changes course."

Tomorrow, the Case-Shiller 20-city Index (Briefing.com consensus 13.3%) for January and the January FHFA Housing Price Index will be released at 9:00 ET while March Consumer Confidence (consensus 78.2) and New Home Sales for February (consensus 445K) will be reported at 10:00 ET. 

·         Russell 2000 +1.7% YTD 

·         Nasdaq Composite +1.2% YTD 

·         S&P 500 +0.5% YTD 

·         Dow Jones Industrial Average -1.8% YTD

Commodities

Closing Commodities: Gold Falls 1.8%; Crude Oil Fall Modestly, Ending Below $100/Barrel

·         Precious metals spent all of today's floor trade in negative territory. Apr gold pulled back from its session high of $1324.50 per ounce set in early morning action and brushed a session low of $1308.50 per ounce. The yellow metal eventually settled 1.8% lower at $1311.40 per ounce. 

·         May silver dipped to a session low of $19.97 per ounce. It settled at $20.31 per ounce, or 1.2% lower.

·         May crude oil chopped around in positive territory for most of today's pit action. The energy component dipped to a session low of $99.34 per barrel in late morning pit trade after trading as high as $100.29 per barrel earlier in the session. It settled with a 0.1% gain at $99.57 per barrel. 

·         Apr natural gas fell for a third consecutive session after slipping into negative territory from its session high of $4.33 per MMBtu set at floor trade open. It touched a session low of $4.26 per MMBtu and settled with a 0.7% gain at $4.28 per MMBtu.

COMEX Metals Closing Prices

  Apr gold fell $24.40 to $1311.40/oz 

·         Gold spent all of today's floor trade in negative territory. It pulled back from its session high of 1324.50 set in early morning action and brushed a session low of $1308.50. The yellow metal eventually settled 1.8% lower. 

  May silver fell $0242 to $20.31/oz 

·         Silver also traded in the red, dipping to a session low of $19.97. It settled with a 1.2% loss. 

  May copper settled unchanged at $2.95/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         May corn rose 12 cents to $4.91/bushel 

·         May wheat rose 21 cents to $7.13/bushel 

·         May soybeans rose 17 cents to $14.26/bushel 

·         Apr ethanol rose 12 cents to $2.97/gallon 

·         May sugar (#16 (U.S.)) rose 0.13 of a penny to 21.88 cents/lbs

NYMEX Energy Closing Prices

  May crude oil rose $0.09 to $99.57/barrel 

·         Crude oil chopped around in positive territory for most of today's pit trade. Prices dipped to a session low of $99.34 in late morning action after trading as high as $100.29 earlier in the session. The energy component settled with a 0.1 % gain. 

  Apr natural gas fell 3 cents to $4.28/MMBtu 

·         Natural gas fell for a third consecutive session after slipping into negative territory from its session high of $4.33 set at pit trade open. It touched a session low of $4.26 and settled with a 0.7% gain. 

  May heating oil settled unchanged at $2.91/gallon 

  May RBOB fell 1 cent to $2.89/gallon

Treasuries

Curve Flattens to Levels Last Seen in Fall 2009: 10-yr: +04/32..2.733%..USD/JPY: 102.23..EUR/USD: 1.3839

·         Treasuries ended mixed. Click here to see an intraday yields chart.

·         The complex saw overnight selling as markets in Asia posted strong gains, but bottomed during the European session and grinded higher throughout U.S. trade as equities came under pressure. 

·         Upfront, yields ticked higher by a couple of bps. The 2y tacked on 1.2bps to finish @ 0.441%. Traders will be watching the January highs (0.450%) closely as a breakout would produce a test of the 0.500% mark, which was last seen in September. 

·         The 5y added +1.9bps, ending @ 1.734%. Selling has action probing the key 1.725% area, which corresponds with trendline resistance off the September highs. 

·         The 10y shed -1.7bps to finish @ 2.733%. Today's session saw the benchmark yield close on the 50 dma after action once again failed to breakout above 2.800%. Some participants have begun to shift their focus towards the 2.600% area as that level has held up since late-October. 

·         Outperformance continued at the long end as the 30y slid -3.7bps to 3.572%. Today's bid puts the 3.550% level in focus with a breakdown setting up a potential move into the 3.150% region. 

·         A flatter curve prevailed as the 5-30-yr spread tightened to 184bps, a level last seen in the fall of 2009. 

·         Precious metals went off on their lows with gold -$26 @ $1310 and silver -$0.32 @ $19.99. 

·         Data: Case-Shiller 20-city Index, FHFA Housing Price Index (9), consumer confidence, and new home sales (10). 

·         Auction: $32 bln 2y notes. 

·         Fed Speak: ATL's Lockhart gives his economic outlook (16) and Philly's Plosser discusses the economy and monetary policy (19).

Next Day In View 

Economic Commentary

Economic summary: No US data today; Housing data tomorrow; Fisher to speak today at 13:45

Fed/Treasury Events Summary:

·         Fed Governor Jeremy Stein did not comment on policy in his speech.

Upcoming Economic Data:

·         January Case Schiller 20 City Index due out Tuesday at 9:00 (Briefing.com consensus of 13.3%; December was 13.4%)

·         January FHFA Housing Price Index due out Tuesday at 9:00 (Briefing.com consensus of ; December was 0.8%)

·         March Consumer Confidence due out Tuesday at 10:00 (Briefing.com consensus of 78.2; February was 78.1)

·         February New Home Sales due out Tuesday at 10:00 (Briefing.com consensus of 445K; January was 468K)

Upcoming Fed/Treasury Events:

·         Dallas Fed President Richard Fisher (voting FOMC member, hawkish) to speak today at 13:45

·         Atlanta Fed President Dennis Lockhart (not a voting FOMC member, typically moderate) to speak tomorrow at 16:00

·         Philadelphia Fed President Charles Plosser (voting FOMC member, typically hawkish) to speak tomorrow at 19:00

Other International Events of Interest

·         The gains came despite China's Flash Manufacturing PMI (48.1 actual v. 48.7 expected, 48.5 previous) missing estimates as a PBOC official suggested Beijing would implement stimulus measures to aid growth.

On other news.... 

Currencies 

Dollar Reverses into Negative Territory: 10-yr: +04/32..2.730%..USD/JPY: 102.17..EUR/USD: 1.3840

·         Aggressive afternoon selling has dropped the Dollar Index into negative territory with trade now pressing session lows below 79.80. Click here to see a daily Dollar Index chart.

·         The afternoon weakness has action slipping off one-month highs, and comes after early buying failed short of 80.50 resistance. 

·         EURUSD is +65 pips @ 1.3860 as trade holds near its best levels of the session. Today's strength in the single currency comes despite the mostly disappointing Flash Manufacturing and Services PMI data from the region, and has action testing resistance in the 1.3850 region. Any move through the 1.3950 area will represent the best print since October 2011. Germany's Ifo Business Climate is due out tomorrow. 

·         GBPUSD is +35 pips @ 1.6520 as buyers look to end the five-day skid. Aside from the recent 40 pip run to session highs near 1.6535, most of today's action has been locked in a tight 30 pip range between 1.6470/1.6500 amid the lack of news and data out of the UK. British data out tomorrow includes BBA Mortgage Approvals, CBI Realized Sales, CPI, PPI input, and RPI. 

·         USDCHF is -25 pips @ .8800 as trade presses session lows. The pair saw an early bid after the IMF indicated the Swiss National Bank could resort to negative rates if the franc became too strong, but action failed near .8850/.8875 resistance and is now on the lows. 

·         USDJPY is -10 pips @ 102.15 as trade holds near the lows. The pair saw an early test of the 102.50 level, but sellers stepped in to defend resistance helped by both the 50 and 100 dma. Many traders have opted to avoid the pair until the 101.50/102.50 trading range is broken. 

·         AUDUSD is +60 pips @ .9135 as trade holds just off its best levels of the session. The hard currency has been bid throughout the session despite China's disappointing HSBC Flash Manufacturing PMI as Chinese stimulus hopes have provided support.Current action is probing resistance in the area helped by the 200 dma while a breakout puts .9300 in play. 

USDCAD is -30 pips @ 1.1195 as sellers look likely to remain in control for a second session. Near-term support rests in the 1.1150 region.






Jason's Commentaries


As the treasury yields getting flatter, the market completed it Down Friday Down Monday. Not exactly a very bullish thing to see. Volumes were at 729m shares traded on the NYSE and the bears are outpacing the bears by 2: 1. The market started with an upbeat however started to sell off straight as Nasdaq lagged. The sell-off stopped at approx 11am ET as short covering occurs. The main laggard of the session are the Consumer discretionary while the Utilities are the only sector in green. As we do not have much economic data coming out, I believe we might be consolidating for a while more. However as Nasdaq is leading the drop, we are likely to see a short term bearishness. There is a good chance that the market will bounce a little due to short covering today. However, we're likely to end up in red for the rest of the week.     

Market Call: FLAT

Date: 25 March 2014