15 April 2014 AMC- Market advanced once again despite Asia and Europe in the red

15 April 2014 AMC- Market advanced once again despite Asia and Europe in the red

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: -1.8%

·         France's CAC: -0.9%

·         Spain's IBEX: -0.8%

·         Portugal's PSI: -1.7%

·         Italy's MIB Index: -2.3%

·         Irish Ovrl Index: -1.1%

·         Greece ATHEX Composite: -1.7%

Before Market Opens

S&P futures vs fair value: +3.90. Nasdaq futures vs fair value: +13.00.
The S&P 500 futures trade four points above fair value.

Asian markets ended on a mixed note with markets in China (-1.4%) and Hong Kong (-1.6%) underperforming after an NDRC researcher said China's first quarter GDP (to be released this evening) is likely to miss to the 7.5% target. Also of note, the minutes from the latest RBA meeting maintained their neutral stance, reiterating that a period of stable rates is a prudent approach.

Economic data was limited to just a few releases. China's M2 Money Stock increased 12.1% year-over-year (expected 13.0%, prior 13.1%), while New Loans rose to CNY1.05 trillion from CNY645 billion (expected CNY1.00 trillion). India's Wholesale Price Index jumped 5.7% year-over-year (expected 5.3%, prior 4.68%). Singapore's Retail Sales rose 3.0% month-over-month (prior 0.6%), while the year-over-year reading fell 9.5% (previous 0.1%). 

·         Japan's Nikkei gained 0.6%, receiving support from growth-sensitive names. Toho Zinc and Nippon Electric Glass surged 6.9% and 4.9%, respectively. SoftBank also outperformed, climbing 3.4%. 

·         Hong Kong's Hang Seng lost 1.6%, retreating steadily throughout the session. China Petroleum & Chemical Corp and Lenovo Group lost 3.9% and 3.1%, respectively. 

·         China's Shanghai Composite fell 1.4% after being pressured by financials. Industrial & Commercial Bank of China lost 1.1%, while China Vanke tumbled 2.1%. 

Major European indices are little changed while Italy's MIB (-0.8%) lags. Participants received several data points. Eurozone trade surplus narrowed to EUR13.90 billion from EUR14.70 billion, as expected. Germany's ZEW Economic Sentiment fell to 43.2 from 46.6 (expected 45.0), while the Current Conditions component improved to 59.5 from 51.3 (consensus 51.8). Great Britain's CPI rose 0.2% month-over-month, while the year-over-year reading increased 1.6%. Both figures met expectations. Also of note, Input PPI fell 6.5% year-over-year (consensus -6.1%, prior -5.8%), while output PPI increased 0.5% year-over-year (expected 0.3%, previous 0.6%).

Among news of note, Russian President Vladimir Putin and President Obama spoke on the phone last evening regarding the situation in Ukraine, but the call did not produce much in terms of results. 

·         Germany's DAX is lower by 0.5% with Merck leading the weakness. The drug maker holds a loss of 1.3%. On the upside, utility network provider RWE is higher by 0.5%. 

·         Great Britain's FTSE holds a loss of 0.1%. Miner Rio Tinto is among the weakest performers, down 2.4%. Utility names outperform, with National Grid and United Utilities Group both up near 2.0%. 

·         France's CAC is higher by 0.2%. Consumer names Danone, L'Oreal, and Pernod Ricard outperform with gains between 1.2% and 2.7%. On the downside, ArcelorMittal holds a loss of 1.7%. 

·         Italy's MIB trades down 0.8%. BMPS leads the retreat with a loss of 8.9% amid reports the bank will need to raise more capital than originally planned. 

The February net long-term TIC flows report indicated an $85.70 billion inflow of foreign capital into U.S. denominated assets. This followed the prior month's revised $7.70 billion inflow.

U.S. Equities

·         Equity futures point to decent gains at the open, with strength in KO (+1.2%) and JNJ (+2.1%) helping following earnings

·         March CPI M/M +0.2% vs +0.1% Briefing.com consensus; March Core CPI +0.2% vs +0.1% Briefing.com consensus 

·         April Empire Manufacturing 1.29 vs 7.5 Briefing.com consensus; March 5.6

o    S&P Futures +4.20 @ 1828.70

o    Dow Futures +32 @ 16,128

o    Nasdaq Futures +8.75 @ 3479.00

Asia

·         Asian markets ended mixed. Japan's Nikkei +0.6%, China's Shanghai Composite -1.4%, and Hong Kong's Hang Seng -1.6%. 

·         China's M2 Money Stock increased 12.1% year-over-year (expected 13.0%, prior 13.1%), while New Loans rose to CNY1.05 trillion from CNY645 billion (expected CNY1.00 trillion).

·         India's Wholesale Price Index jumped 5.7% year-over-year (expected 5.3%, prior 4.68%).

·         Singapore's Retail Sales rose 3.0% month-over-month (prior 0.6%), while the year-over-year reading fell 9.5% (previous 0.1%). 

·         According to an NDRC researcher, China's first quarter GDP (to be released this evening) is likely to miss to the 7.5% target. 

·         The Reserve Bank of Australia released the minutes from its latest meeting, but the reaction in the foreign exchange market was muted. The central bank maintained its neutral stance in the minutes, reiterating that a period of stability in rates is the most prudent policy approach.

Market Internals

Market Internals -Technical-
The S&P 500 closed up 12 (+0.68%) at 1843, the Dow closed up 89 (+0.55%) at 16263, and the Nasdaq closed up 11 (+0.29%) at 4034. Action came on above average volume (NYSE 770 mln vs. avg. of 727; NASDAQ 2244 mln vs. avg. of 2051), with advancers outpacing decliners (NYSE 1902/1219, NASDAQ 1264/1379) and new highs outpacing new lows (NYSE 65/62, NASDAQ 21/127). 

Relative Strength: 
Oil and Gas Exploration-XOP +1.66%, Utilities-XLU +1.38%, Energy-XLE +1.34%, Oil Services-OIH +1.32%, Realty Majors-ICF +1.3%, Egypt-EGPT +1.24%, Singapore-EWS +1.05%, Taiwan-EWT +0.54%, Spain-EWP +0.1%, Indian Rupee-ICN +0.1%.

Relative Weakness: 
Coffee-JO -5.8%, Junior Gold Miners-GDXJ -3.7%, Vietnam-VNM -3.51%, Greece-GREK -3.07%, Turkey-TUR -2.82%, Eastern Europe-ESR -2.81%, Russia-RSX -2.73%, Silver Miners-SIL -2.38%, Steel-SLX -1.65%, Platinum-PPLT -1.62%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: Stocks Post Gains Despite Seeing Intraday Weakness
The major averages finished the session on a modestly higher note, but not before heavy selling pressure sent the Nasdaq Composite (+0.3%) for a test of its 200-day moving average. The S&P 500, meanwhile, added 0.7% with all ten sectors posting gains.

Equities climbed at the open with the advance built on the relative strength of biotechnology and other momentum names. Despite the solid early gains in those areas, the market began fading from its high as multiple reports pointed to an escalation of tensions in Ukraine. Specifically, a skirmish reportedly took place at the Kramatorsk airbase, but there were inconsistencies with regard to the number of injured. Some reports put the number of casualties between four and 11, while others said there were no casualties. After these reports made the rounds, Ukraine's acting President Oleksandr Turchynov was quoted by Interfax as saying the airfield has been retaken from pro-Russian militants.

With participants watching the news from Ukraine, stocks continued their retreat into the early afternoon, while bonds rallied. The defensive sentiment was also present in the foreign exchange market, where the yen strengthened to 101.50 against the dollar.

Strikingly, equity indices notched their lows just after 13:00 ET and spent the next three hours in a sharp rally back into the green in a move that was accompanied by the return of yen weakness that sent the dollar/yen pair to 101.85.

The rally in equities and the dollar/yen pair seemed to follow reports from Nikkei, suggesting sources think Japan will lower its economic outlook in its upcoming April 17 report. Such a headline presumably fueled some speculation that the downgrade will ultimately invite more policy stimulus from Japan, which was music to the ears of a market that has cheered accommodative monetary policy for quite some time.

As a result of the afternoon rally, the S&P 500 returned to its morning high, while the Nasdaq clawed its way back into the green. Like the Nasdaq, biotechnology climbed off its lows, but the iShares Nasdaq Biotechnology ETF (IBB 217.61, +2.24) was unable to reclaim its 200-day moving average. The biotech ETF added 1.0%, while the broader health care sector advanced 1.1%. Contributing to the sector's strength were shares of Johnson & Johnson (JNJ 99.20, +2.06), which added 2.1% after the company beat on earnings.

Elsewhere, energy (+1.3%) and financials (+0.9%) spent the entire day trading ahead of the broader market, which facilitated the afternoon rebound.

Also of note, the utilities sector (+1.3%) ended ahead of the remaining groups after climbing steadily throughout the session. The rate-sensitive sector extended its year-to-date gain to 11.8%, which speaks to the overall cautious posture that has been exhibited by the market so far in 2014.

Treasuries posted gains, but retreated from their midsession highs during the afternoon rally in equities. The benchmark 10-yr yield slipped three basis points to 2.62%.

Participation was a bit above average as 771 million shares changed hands at the NYSE floor.

Reviewing today's data: 

·         Consumer prices increased 0.2% in March, up from a 0.1% gain in February. The Briefing.com consensus expected the CPI to increase 0.1%. Excluding food and energy, core prices increased 0.2% in March and ended a string of three consecutive months of 0.1% gains. The consensus expected these prices to increase 0.1%. The surprises in both the headline and core indices were mainly the result of stronger-than-expected housing costs. The shelter index increased 0.3% in March and accounted for two-thirds of the gain in the core consumer price index. Housing costs increased 2.7% over the last 12 months, which was the largest yearly increase since March 2008. As expected, drought conditions in the west contributed to stronger-than-normal growth in food prices. Food costs increased 0.4% for a second consecutive month. Year-over-year, food prices are up 1.2%, which is the largest yearly gain since August 2012. 

·         The Empire Manufacturing Survey for April registered a reading of 1.3, which was down from the prior month's reading of 5.6. Economists polled by Briefing.com expected the survey to improve to 7.5. 

·         The April NAHB Housing Market Index rose to 47 from 46 while the Briefing.com consensus expected the reading to increase to 50. 

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET, while March Housing Starts will be announced at 8:30 ET. March Industrial Production and Capacity Utilization will both be reported at 9:15 ET, while the day's data will be topped off with the Federal Reserve's Beige Book for April. The report will be released at 14:00 ET. 

·         S&P 500 -0.3% YTD 

·         Dow Jones Industrial Average -1.9% YTD 

·         Nasdaq Composite -3.4% YTD 

·         Russell 2000 -3.7% YTD

Commodities

Closing Commodities: Precious Metals Take A Hit, Gold Ends Below $1300

·         June gold slid to a session low of $1284.40 per ounce in early morning action on economic data showing the consumer price index rising 0.2% in March, up from a 0.1% gain in February. 

·         The Briefing.com consensus expected the CPI to increase to 0.1%. The yellow metal then inched slightly higher for the remainder of the session and settled at $1299.90 per ounce, or 2.1% lower.

·         May silver also traded in the red today. It slumped to a session low of $19.22 per ounce moments after pit trade opened and eventually settled with a 2.6% loss at $19.48 per ounce.

·         May crude traded in negative territory ahead of tomorrow's release of EIA inventory data. In addition, reports indicated that a tanker was due to load 1 mln barrels of oil at the recently reopened Hariga oil port in eastern Libya. The energy component brushed a session low of $103.02 per barrel as floor trade opened and touched a session high of $104.05 per barrel by mid-morning action. It eventually settled with a 0.4% loss at $103.68 per barrel.

·         May natural gas rose to a session high of $4.63 per MMBtu in morning action but slipped to $4.53 per MMBtu in early afternoon floor trade. It then consolidated near the unchanged line and settled at $4.57 per MMBtu, or 0.2% higher.

COMEX Metals Closing Prices

  June gold fell $27.80 to $1299.90/oz 

·         Gold slid to a session low of $1284.40 in early morning action as data showed that the consumer price index rose 0.2% in March, up from a 0.1% gain in February. The Briefing.com consensus expected the CPI to increase 0.1%. The yellow metal then inched slightly higher for the remainder of the session and cut losses to 2.1%. 

  May silver fell $0.53 to $19.48/oz 

·         Silver also traded in the red. It slumped to a session low of $19.22 moments after pit trade opened and eventually settled with a 2.6% loss. 

  May copper fell 6 cents to $2.99/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         May corn rose 1 cent to $5.04/bushel 

·         May wheat rose 23 cents to $7.01/bushel 

·         May soybeans rose 26 cents to $15.02/bushel 

·         May ethanol fell 8 cents to $2.26/gallon 

·         July sugar (#16 (U.S.)) settled unchanged at 24.34 cents/lbs .99/lbs

NYMEX Energy Closing Prices

  May crude oil fell $0.37 to $103.68/barrel 

·         Crude oil traded in the red ahead of tomorrow's release of inventory data by the EIA. In addition, reports indicated that a tanker was due to load 1 mln barrels of oil today at the recently reopened Hariga oil port in eastern Libya. The energy component brushed a session low of $103.02 as floor trade opened and touched a session high of $104.05 by mid-morning action. It eventually settled with a 0.4% loss. 

  May natural gas rose 1 cent to $4.57/MMBtu 

·         Natural gas rose to a session high of $4.63 in morning pit trade but slipped to $4.53 in early afternoon floor trade. It then consolidated near the unchanged line and settled 0.2% higher. 

  May heating oil rose 1 cent to $2.99/gallon 

  May RBOB settled unchanged at $3.04/gallon

Treasuries

Treasuries Get Boost from Safe-Haven Flows

·         Treasuries got the benefit of a safe-haven trade on Tuesday that coincided with stock market volatility and rising geopolitical concerns with respect to matters in Ukraine

·         Buying efforts were concentrated at the back end of the curve

o    10-yr note yield tested the range low at 2.601% as stocks were dropping to their worst levels of the day around 1:00 p.m. ET (-110 for the Dow; -77 for the Nasdaq; and -14 for the S&P 500) but settled up six ticks with its yield at 2.627%

o    30-yr bond +16/32 with its yield falling to 3.463% -- the lowest close since June 2013

·         5-30 spread narrowed to 185 bps from 188 bps on Monday

·         Treasuries fell off their best levels as stocks came barreling back in an afternoon recovery rally that gathered some strong momentum after the Nasdaq tested and held support at its 200-day moving average

o    The Nasdaq Composite was up 6 points as of this posting

·         Precious metals struggled all day

o    Gold prices dropped 1.9% to $1302.20/oz.

o    Platinum was off 1.9% to $1440.10/oz.

o    Silver declined 2.4% to $19.54/oz.

·         Economic data were mixed 

o    March CPI was up 0.2% (Briefing.com consensus +0.1%) and core CPI, which excludes food and energy, was up 0.2% (Briefing.com consensus +0.1%). Year-over-year, CPI is up 1.5% and core CPI is up 1.7%. Both remain below the Fed's 2.0% inflation target.

o    Empire Manufacturing for April dipped to 1.3 (Briefing.com consensus 7.5) from 5.6 in March, reflecting a deceleration in manufacturing activity in the New York Fed region.

o    The NAHB Housing Market Index for April edged up to 47 (Briefing.com consensus 50) from a downwardly revised 46 (from 47) in March

o    Net Long-Term TIC Flows for February were up $85.7 bln versus a prior increase of $7.7 bln

·         US Dollar Index was firm, up 0.1% to 79.81, although some volatility in the dollar-yen cross appeared to contribute to some of the volatility in the stock market. That pair hit 101.507 at its low, but bounced to 101.84. Renewed weakness in the yen occurred in conjunction with the afternoon rally effort in the stock market.

·         There was no real reaction to Fed speak today since no new monetary policy ground was broken

·         Wednesday Data: MBA Mortgage Index (7 ET); Housing Starts and Building Permits (08:30); Industrial Production and Capacity Utilization (09:15); Crude Inventories (10:30); and Fed's Beige Book (14:00)

o    First quarter GDP, Industrial Production, Fixed Asset Investment and Retail Sales data from China will be released overnight

·         Fed speak: Fed Chair Yellen to speak at Economic Club of New York (12:25 ET)

Next Day In View 

Economic Commentary

Economic Summary: CPI hotter than expected; NAHB housing market data misses estimates; Housing starts tomorrow at 8:30
Economic Data Summary:

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

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

o     The shelter index increased 0.3% in March and accounted for two-thirds of the gain in the core consumer price index. Housing costs increased 2.7% over the last 12 months, which was the largest yearly increase since March 2008. As expected, drought conditions in the west contributed to stronger-than-normal growth in food prices. Food costs increased 0.4% for a second consecutive month. Year-over-year, food prices are up 1.2%, which is the largest yearly gain since August 2012.

·         April Empire Manufacturing 1.3 vs Briefing.com consensus of 7.5; March was 5.6

·         February Net Long Term TIC Flows $85.7 bln vs Briefing.com consensus of ; January was revised to $7.7 bln from $7.3 bln

·         April NAHB Housing Market Index 47 vs Briefing.com consensus of 50; March was 47

Fed/Treasury Events Summary:

·         Fed Chair Janet Yellen said staff looking at short term funding risk; sees need for stronger capital requirements; bank liquidity needs strengthening.

Upcoming Economic Data:

·         Weekly MBA Mortgage Applications due out Wednesday at 7:00 (Briefing.com consensus of N/A; Last Week was -1.6%)

·         March Housing Starts due out Wednesday at 8:30 (Briefing.com consensus of 955K; February was 907K)

·         March Building Permits due out Wednesday at 8:30 (Briefing.com consensus of 1.003 M ; February was 1.018 M )

·         March Industrial Production due out Wednesday at 8:30 (Briefing.com consensus of 0.5%; February was 0.6%)

·         March Capacity Utilization due out Wednesday at 8:30 (Briefing.com consensus of 78.8%; February was 78.4%)

·         April Fed's Beige Book due out Wednesday at 8:30 (Briefing.com consensus of N/A; March was N/A)

Upcoming Fed/Treasury Events:

·         Philadelphia Fed President Charles Plosser (2014 voter, hawkish) to speak today at 15:00

·         Boston Fed President Eric Rosengren (not a voting FOMC member, dovish) to speak today at 16:00

·         Minneapolis Fed President Kocherlakota (voting FOMC member, dovish) to speak today at 20:00

·         Atlanta Fed President Dennis Lockhert (not a voting FOMC member, moderate) to speak tomorrow at 8:20

·         Fed Governor Jeremy Stein (voting FOMC member, dovish) to speak tomorrow at 8:30

·         Fed Chair Janet Yellen to speak again tomorrow at 12:15 at Economic Club of New York

·         Dallas Fed President Richard Fisher (voting FOMC member, hawkish) to speak tomorrow at 13:25

Other International Events of Interest

·         China's M2 Money Stock increased 12.1% year-over-year (expected 13.0%, prior 13.1%), while New Loans rose to CNY1.05 trillion from CNY645 billion (expected CNY1.00 trillion).

On other news.... 

Earnings/Guidance

·         Coca Cola (KO) is trading higher by 1.3% on in-line results, which may have been a relief relative to low expectations

·         Johnson & Johnson (JNJ) is higher by ~2% on Q1 beat; raised guidance

·         Nestle (NSRGY) reports Q1 sales below consensus

·         Roche Hldg (RHHBY) reports Q1 sales ahead of expectations 

·         Motorola Solutions (MSI) guides Q1 EPS and rev below consensus (EPS in-line with guidance); sells enterpreise business to Zebra (ZBRA) for $3.45 bln

·         Entergy (ETR) guides Q1 EPS well above consensus; raises FY14 EPS guidance, due in part to colder weather 

·         Infosys (INFY) beats by $3.03, reports revs in-line; raises dividend pay-out ratio to up to 40% of post-tax profits vs 30% prior

·         Comerica (CMA) beats by $0.01; co reports Q1 (Mar) earnings of $0.73 per share, $0.01 better than the Capital IQ Consensus Estimate of $0.72Pep Boys (PBY) reports Q4 (Jan) results, misses on revs

Currencies 









Jason's Commentaries


Now I'm starting to feel that the bounce is a little too much already. Both Nasdaq and Russells are rather unchanged for the past 2 sessions, however S&P500 and Dow Jones and bouncing off again. I believe the bounce in the Dow and the S&P500 is not sustainable. Despite strength given in the biotech sector, the Nasdaq is still very much unchanged. Considering the volatility, the Nasdaq and the Russells might lead the market down once again. Last night was a very volatile session once again. It started bullish, then the market lost all its gains and then gained all the losses back. This is really a day traders market. Volumes were at 788.1m shares traded on the NYSE, and the internals were pointing towards a bullish intent. Of which, the energy, utilities and healthcare sector was the largest gainers of the session. The biotech industry leads. We're likely to end the week higher but I got a strong feel that the market might head down further next week.   

Market Call: UP

Date: 16 April 2014