4 Mar 2014 AMC- Market broke into new high as Russia calls its army back from military exercise

4 Mar 2014 AMC- Market broke into new high as Russia calls its army back from military exercise

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: + 1.7%

·         Germany's DAX: + 2.5%

·         France's CAC: + 2.5%

·         Spain's IBEX: + 2.5%

·         Portugal's PSI: + 2.5%

·         Italy's MIB Index: + 3.6%

·         Irish Ovrl Index: + 0.5%

·         Greece ATHEX Composite: + 1.0%

Before Market Opens

Asia

·         Markets finished mixed across Asia

·         The Reserve Bank of Australia held its key rate steady at 2.50%, as expected

·         Traders remain on the lookout for headlines emerging from China's National People's Congress meetings; although, no major announcements are expected

·         Japan's Nikkei (+0.5%) gained as the yen weakened

·         Hong Kong's Hang Seng (+0.7%) led the region higher

·         China's Shanghai Composite (-0.2%) eased for the first time in five sessions

S&P futures vs fair value: +16.90. Nasdaq futures vs fair value: +38.20.
The S&P 500 futures trade 17 points above fair value.

Asian markets ended mostly higher with India's Sensex (+1.3%) in the lead. Investors received several economic data points. Japan's Monetary Base expanded 55.7% year-over-year (54.2% expected, 51.9% prior) while average cash earnings slipped 0.2% year-over-year (0.3% consensus, 0.5% previous). South Korea's CPI ticked up 0.3% month-over-month (0.4% expected, 0.5% prior) while the year-over-year reading increased 1.0% (1.1% consensus, 1.1% previous). The Reserve Bank of Australia kept its key interest rate at 2.50%, as expected. Separately, Building Approvals rose 6.8% year-over-year (2.0% expected, -1.3% prior), and the current account deficit narrowed to $10.10 billion from $12.50 billion ($10.00 billion expected).

Although the Reserve Bank of Australia made no policy changes, the statement included comments suggesting the exchange rate remains relatively high when compared to historical standards. 

·         Japan's Nikkei gained 0.5% after starting the session on the lows. Growth-sensitive names outperformed with Sumitomo Realty & Development and Tokyo Tatemono up 3.6% and 4.2%, respectively. 

·         Hong Kong's Hang Seng advanced 0.7% thanks to a boost from heavyweight components. PetroChina and Tencent Holdings gained 1.9% and 1.7%, respectively. Belle International lagged, falling 3.5%. 

·         China's Shanghai Composite shed 0.2% after spending the entire session in the red. Harbin Hatou Investments fell 5.2%. 

Major European indices trade higher across the board with Italy's MIB (+2.5%) seeing the largest gain. Economic data was limited to just three data points. Eurozone PPI slipped 0.3% month-over-month (-0.1% expected, 0.2% prior) while the year-over-year reading fell 1.4% (-1.3% consensus, -0.8% last); Great Britain's Construction PMI fell to 62.6 from 64.6 (63.0 expected); and Spain's unemployment fell 1,900 (+74,200 expected, +113,100 prior).

Among news of note, European Central Bank President Mario Draghi testified before the European Parliament, saying inflation remains well below the ECB's target. However, Mr. Draghi refused to comment in detail on monetary policy ahead of Thursday's policy meeting. 

·         Great Britain's FTSE is higher by 1.4%. Ashtead Group leads with a gain of 11.1% after reporting strong results. On the downside, Fresnillo holds a loss of 9.6% after reporting disappointing quarterly results. 

·         Germany's DAX trades up 2.1% with all 30 names trading in the green. Financials lead with Commerzbank and Deutsche Boerse holding respective gains of 4.6% and 2.9%. 

·         In France, the CAC holds an advance of 2.1%. Technip leads with a gain of 2.7% with bank shares not far behind. BNP Paribas and Credit Agricole are both up near 2.6%. 

·         Italy's MIB is higher by 2.5%. Banco Popolare, UniCredit and Telecom Italia display gains between 3.8% and 8.1%.

 

Market Internals

Market Internals -Technical-
The Nasdaq closed up 75 (+1.75%) at 4352, the S&P 500 closed up 28 (+1.53%) at 1874, and the Dow closed up 228 (+1.41%) at 16396. Action came on above average volume (NYSE 837 mln vs. avg. of 709; NASDAQ 1932 mln vs. avg. of 2273), with advancers outpacing decliners (NYSE 2598/537, NASDAQ 2162/476) and new highs outpacing new lows (NYSE 302/10, NASDAQ 282/12).

Relative Strength: 
Clean Energy-PBW +4.94%, Greece-GREK +4.62%, Russia-RSX +4.09%, Egypt-EGPT +3.64%, Turkey-TUR +3.47%, Poland-EPOL +3.47%, Broker-Dealers-IAI +3.24%, Smart Grid Infrastructure-GRID +2.85%, Natural Gas-UNG +2.81%, Nuclear Energy-NLR +2.69%.

Relative Weakness: 
Volatility-VXX -6.57%, Coffee-JO -5.94%, 20+ Year Treasuries-TLT -1.5%, Gold-GLD -1.24%, Oil-USO -1.23%, Peru-EPU -0.93%, Japanese Yen-FXY -0.88%, Swiss Franc-FXF -0.45%, Canadian Dollar-FXC -0.16%, Chinese Yuan-CYB -0.04%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: S&P 500 Sets New Record While Ukraine Remains in Focus
Equity indices enjoyed a broad-based rally on Tuesday that sent the S&P 500 (+1.5%) and the Russell 2000 (+2.7%) to new closing record highs.

Stocks surged out the gate after index futures received a considerable bid around 1:00AM ET. The overnight strength came about after it was reported that Russian President Vladimir Putin called back the troops that were conducting exercises on the country's border with Ukraine. Mr. Putin commented on the tense situation, saying Russia is not aiming to annex the Crimean peninsula and that military force is a choice of last resort.

Mr. Putin's comments were followed by a response from Secretary of State John Kerry who visited Kiev today. Secretary Kerry called on Russia to refrain from using force and said the United States is not seeking a confrontation, but if Russia does not deescalate, then the U.S. will be forced to increase pressure on Russia. Less than 30 minutes after the comments from Secretary Kerry, Russia's Foreign Ministry said the introduction of any potential sanctions will be met with a response that is "not necessarily symmetrical."

The overnight developments were viewed positively by market participants who rushed into risk while shedding some of the safe-haven assets that were in strong demand yesterday: 

·         Treasuries spent the entire session in a steady retreat with the 10-yr yield ending at its session high (+9 bps at 2.69%); 

·         Gold futures fell 0.9% to $1337.80/ozt; and 

·         Crude oil lost 1.6%, ending at $103.34/bbl. 

In turn, the risk rally translated into solid gains for all ten sectors. The three largest S&P 500 groups—financials (+2.0%), technology (+1.5%), and health care (+1.9%)—paced the advance while most of the remaining groups added at least 1.0% with utilities (+0.8%) as the lone exception.

Elsewhere, industrials (+1.7%) also factored into the advance thanks to big gains among transports. All 20 members of The Dow Jones Transportation Average (+2.2%) finished in the green with airlines and railroads blazing the trail. Union Pacific (UNP 183.85, +4.34) and Delta Air Lines(DAL 34.45, +1.86) settled higher by 2.4% and 5.7%, respectively.

Although stocks spent the entire session in a steady push to new highs, a brief dip took place in the afternoon amid reports indicating Russia tested an intercontinental ballistic missile in the Astrakhan region. While the initial headline lacked detail, subsequent reports indicated the test was planned in accordance with international laws and that U.S. officials received an early notice.

The afternoon reports did not derail the rally, allowing the S&P 500 to settle just below its best level of the day.

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while the February ADP Employment Change will be announced at 8:15 ET. The ISM Services report for February will cross the wires at 10:00 ET while the Federal Reserve will release its March Beige Book at 14:00 ET. 

·         Nasdaq Composite +4.2% YTD 

·         Russell 2000 +3.9% YTD 

·         S&P 500 +1.4% YTD 

·         Dow Jones Industrial Average -1.1% YTD

Commodities

Closing Commodities: Crude Oil, Gold And Silver All End Lower

·         WTI crude oil, gold and silver futures all remained weak during today's trade

·         Meanwhile, copper and natural gas futures held onto strength and closed with a nice gain

·         Apr gold finished today's session 0.9% lower at $1337.80/oz, while May silver lost 1.3% to $21.21/oz

·         Apr natural gas futures traded in positive territory all session today and ended 3.5% higher at $4.48/MMBtu

·         Apr crude oil fell 1.6% to $103.34/barrel

COMEX Metals Closing Prices

·         Apr gold fell $12.60 to $1337.80/oz

·         May silver fell $0.28 to $21.21/oz

·         May copper rose 4 cents to $3.21/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         May corn rose 13 cents to $4.85/bushel

·         May wheat rose 9 cents to $6.43/bushel

·         May soybeans rose 13 cents to $14.23/bushel

·         Apr ethanol rose 2 cents to $2.28/gallon

·         May sugar (#16 (U.S.)) fell 0.27 of a penny to 21.78 cents/lbs

 NYMEX Energy Closing Prices

·         Apr crude oil fell $1.66 to $103.34/barrel

·         Apr natural gas rose 15 cents to $4.48/MMBtu

·         Apr heating oil fell 5 cents to $3.03/gallon

·         Apr RBOB fell 4 cents to to $2.98/gallon

Treasuries

Yields Climb Throughout the Day: 10-yr: -24/32..2.690%..USD/JPY: 102.25..EUR/USD: 1.3739

·         Treasuries closed on their lows as sellers held control throughout the session. Click here to see an intraday yields chart.

·         Sellers gained control in overnight trade as headlines crossed the wires indicating a de-escalation in Ukraine with Russian President Vladimir Putin indicating there were no plans to annex Crimea. 

·         Yields drifted higher over the course of the session, which is what tends to happen on days when data is absent.

·         Selling ran longer dated yields up +8bps. 

·         The 30y bond sank -1 16/32, posting its biggest drop of 2014. The selling caused the yield on the long bond to climb +8.1bps to 3.638%.

·         The 10y surged +8.4bps to 2.691%. The benchmark yield reclaimed its 200 dma (2.649%), and is now testing minor resistance in the 2.670%/2.700% region. A push through that level puts the more important 2.750% region in play. 

·         The 5y added +6.8bps to finish the day @ 1.529%. Today's jump has the yield back near the upper end of the 1.450%/1.550% range that has been in place since the beginning of February. 

·         Aggressive selling swung the yield curve steeper as the 2-10-yr spread widened to 236bps.

·         Precious metals were unable to gain traction as gold fell -$14 to $1336 and silver shed -$0.26 to $21.22. 

·         Data: MBA Mortgage Index (7), ADP Employment Change (8:15), ISM Services (10), and the Fed's Beige Book (14). 

·         Fed Speak: Dallas' Fisher will take place in a discussion in Mexico City (19:00) and SF's Williams will speak on the purpose of the Federal Reserve (20:30).

Next Day In View 

Economic Commentary

Economic Summary: No data today; stocks surge on news that Russia has called back troops; ADP tomorrow at 8:15

Upcoming Economic Data:

·         Weekly MBA Mortgage Applications due out Wednesday at 7:00 (Last Week was -8.5%)

·         February ADP Employment Change due out Wednesday at 8:15 (Briefing.com consensus of 150K; January was 175K)

·         February ISM Services due out Wednesday at 10:00 (Briefing.com consensus of 53.5; January was 54.0)

Upcoming Fed/Treasury Events:

·         Richmond Fed President Jeff Lacker (not a voting FOMC member, hawkish) to speak today at 16:15

·         Dallas Fed President Richard Fisher (voting member, hawkish) to speak tomorrow at 19:00

·         San Francisco President John Williams (not a voting FOMC member, moderate) to speak tomorrow at 20:30

·         Fed Beige Book to be released Wednesday at 14:00

Other International Events of Interest

·         There were reports that  that Russia has called back the troops that were conducting exercises on the country's southwestern border.

·         The Reserve Bank of Australia kept its key interest rate at 2.50%, as expected. Separately, Building Approvals rose 6.8% year-over-year (2.0% expected, -1.3% prior), and the current account deficit narrowed to $10.10 billion from $12.50 billion ($10.00 billion expected). 

On other news.... 

News

·         Archer-Daniels (ADM) & Bunge (BG) have no significant impact from Ukraine crisis, according to reports

·         AutoNation (AN) total retail new vehicle unit sales in Feb 2014 increased 4% y/y

·         North Carolina Department of Environment and Natural Resources issues notices of violation for five more Duke Energy (DUK) facilities 

·         S&P moves J.C. Penney (JCP) outlook to 'Stable' from 'Negative' 

·         JPMorgan Chase (JPM) pays $400 mln to settle with Syncora over toxic mortgage-backed securities, according to reports

·         Legg Mason (LM) announces acquisition of QS Investors; financial terms not disclosed; acquisition expected be modestly accretive to co's earnings in the first year 

·         Marathon Oil (MRO) to acquire 50% interest in the Rift Basin Area in Ethiopia through its subsidiary, Marathon Ethiopia

·         Qualcomm (QCOM) raises quarterly dividend by 20% to $0.42 per share from $0.35 per share; Board approves $5.0 bln increase in co's stock repurchase authorization

·         Sony (SNE) has sold 6 mln PS4's as of Sunday, according to reports

·         Sprint (S) Chair plans to appeal to US antiturst officials over T Mobile (TMUS) deal, according to reports

Currencies 

Dollar Reclaims 80.00: 10-yr: -20/32..2.678%..USD/JPY: 102.19..EUR/USD: 1.3733

·         The Dollar Index clings to small gains near 80.15 as action presses its best levels of the session. Click here to see a daily Dollar Index chart.

·         The Index has seen little response to recent headlines crossing the wires suggesting Russia has test fired an intercontinental ballistic missile. 

·         Traders will continue to watch 80.50 resistance over the coming days as both the 50 and 100 dma aid the level. 

·         EURUSD is flat @ 1.3730 as trade has given up its early gains. The single currency saw yet another attempt at retaking 1.3800, but sellers remain persistent in their efforts to prevent the best close since November 2011. Eurozone data out tomorrow includes retail sales and Services PMI numbers from across the region. 

·         GBPUSD is +10 pips @ 1.6670 amid a mostly uneventful day for the pair. An overnight bid ran action to a near test of 1.6750, which corresponds with the highest levels since November 2009, but this morning's weak Construction PMI print helped drop trade off the level. Near-term support in the 1.6600/1.6650 area is now under close watch. British data is limited to Services PMI. 

·         USDCHF is +40 pips @ .8870 as buyers remain in control for a second session. The two-day advance has run the pair off its lowest close since November 2011, and has trade nearing resistance in the .8880 region. 

·         USDJPY is +70 pips @ 102.15 with the gain mitigating two days of losses. Today's bid comes as a result of the flight into risk assets, and has action moving towards the upper bound of the 101.50/102.50 range that has been in place since early February. 

·         AUDUSD is flat @ .8935 as a relatively quiet session has taken hold following the Reserve Bank of Australia's decision to keep its benchmark rate unchanged at 2.50%. The central bank remained on hold as it debates which of an uptick in inflation and a rising unemployment are the lesser of two evils. The .8900 area is home to key near-term support. Australia's GDP will cross the wires tomorrow. 

·         USDCAD is +40 pips @ 1.1110 as steady buying persists for a second session. Traders continue to keep an eye on the 1.1200 level ahead of tomorrow's Bank of Canada rate decision as a move through the level would mark the best print since July 2009. Expectations are for the central bank to hold its Overnight Rate steady at 1.00%.

Jason's Commentaries


What a rally last night in the market. All indices rose more than 1.4% while the strongest gainer is Russells, gaining more than 2%. Without a doubt, Russells, Nasdaq and S&P500 broke into new high ahead of the employment report on Friday and with Russia calling back its army from Crimea. I believe it's very likely to be a political posturing which reiterate Putin's power in the government. Russia will not enter the war. Putin just wanted to scare everyone. 

The banks are the strongest leader in the rally last night. With volumes above 800m shares traded on the NYSE, and all the internals pointing towards a bullish side. Tuesday was definitely bullish but a little overdone. I reckon this overdoing will cause some profit taking on Wednesday and on Thursday. If Friday tanks, the market has already priced in the movement. On the technical perspective, we're having new highs forming and we're definitely not going down anytime soon. 

Market Call: FLAT

Date: 5 Mar 2014