22 April 2014 AMC- S&P500 heading for 7th consecutive gains

22 April 2014 AMC- S&P500 heading for 7th consecutive gains

Market Summary 

 

European Markets Closing Prices

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

·         UK's FTSE: + 0.9%

·         Germany's DAX: + 2.0%

·         France's CAC: + 1.2%

·         Spain's IBEX: + 1.4%

·         Portugal's PSI: + 1.8%

·         Italy's MIB Index: + 1.5%

·         Irish Ovrl Index: + 1.4%

·         Greece ATHEX Composite: + 1.0%

 Before Market Opens

S&P futures vs fair value: -1.20. Nasdaq futures vs fair value: +6.50.
The S&P 500 futures trade one point below fair value.

Asian markets ended a quiet Tuesday session on a mixed note. In news, Reuters reported that Japan's Nippon Life Insurance Company will raise its yen-denominated bond holdings during the upcoming year.

In economic data, Japan's Leading Index improved to 108.9 from 108.5 (expected 108.5); Hong Kong's CPI and Unemployment rate held steady at their respective 3.9% year-over-year and 3.1%; and Australia's CB Leading Index ticked up 0.3% (prior 0.2%). 

·         Japan's Nikkei lost 0.9%, slumping into the close with exporters on the defensive. Alps Electric and Konica Minolta both lost near 4.0%. 

·         Hong Kong's Hang Seng shed 0.1%, ending little changed. Large cap names lagged with Lenovo Group and Bank of China falling3.3% and 1.4%, respectively. 

·         China's Shanghai Composite posted a modest gain of 0.3% with help from financials. China Vanke advanced 1.0%. 

Major European indices trade near their best levels of the session with Germany's DAX (+1.5%) in the lead. There was no economic data reported today. Among news of note, European Central Bank member Benoit Coeure said the central bank has room to cut rates and that euro appreciation has factored into low eurozone inflation. 

·         France's CAC is higher by 0.9% with insurer AXA in the lead. The stock trades higher by 2.7%. On the downside, Danone is the weakest performer, down 0.9%. 

·         Great Britain's FTSE trades up 1.0% as most components display gains. Drug makers lead after AstraZeneca held buyout talks with Pfizer. AstraZeneca, GlaxoSmithKline, and Shire hold gains between 4.3% and 7.0%. 

·         Germany's DAX holds an advance of 1.5%. Bayer and Merck lead with respective gains of 2.8% and 2.6%. Adidas lags, down 0.6%.

U.S. Equities

·         Equity futures point to little change at the open as they look to extend their win streak to six days

·         The current streak has seen the S&P 500 tack on ~3.1% as trade holds just 20 handles off its record-high close

·         The VIX (13.25) finished yesterday's session near three-month lows

o    S&P Futures unch @ 1865

o    Dow Futures +9 @ 16,380

o    Nasdaq Futures +7 @ 3558

Asia

·         Markets ended mixed across Asia with most of the major averages booking losses

·         Japan's Nikkei (-0.9%) led to the downside as traders displayed some caution ahead of earnings season

·         Hong Kong's Hang Seng (-0.1%) slipped amid a lackluster session while China's Shanghai Composite (+0.3%) rallied on word the People's Bank of China cut its reserve requirement ratio by as much as -200bps for rural banks

·         India's Sensex (unch) slipped off record highs

Market Internals

Market Internals -Technical-
The Nasdaq closed up 40 (+0.97%) at 4161, the S&P 500 closed up 8 (+0.41%) at 1880, and the Dow closed up 65 (+0.4%) at 16514. Action came on below average volume (NYSE 666 mln vs. avg. of 721; NASDAQ 1728 mln vs. avg. of 2000), with advancers outpacing decliners (NYSE 2287/838, NASDAQ 1911/739) and new highs outpacing new lows (NYSE 128/4, NASDAQ 70/12). 

Relative Strength: 
Coffee-JO +8.62%, Biotechnology-XBI +4.37%, Biotechnology-IBB +3.1%, Egypt-EGPT +2.99%, Junior Gold Miners-GDXJ +2.73%, Clean Energy-PBW +2.64%, Germany-EWG +1.29%, Vietnam-VNM +1.2%, Austria-EWO +1.06%, Sweden-EWD +1.06%.

Relative Weakness: 
Oil-USO -1.7%, Middle East and Africa-GAF -1.65%, Indonesia-IDX -1.28%, Brazilian Real-BZF -1.11%, Chile-ECH -0.93%, Turkey-TUR -0.88%, Steel-SLX -0.39%, Gold-GLD -0.37%, Commodities-GSG -0.33%, Oil and Gas Exploration-XOP -0.22%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: S&P 500 Posts Sixth Consecutive Gain
Equity indices strung together a daylong rally on Tuesday, giving the S&P 500 its sixth consecutive advance. Some selling during the final hour of action pressured the indices from their highs, but they still ended with the bulk of their gains. The benchmark index added 0.4% with eight sectors finishing in the green, while the Nasdaq (+1.0%) outperformed throughout the session.

Although the stock market began the day on a flat note, the major averages quickly took the lead from two heavily-weighted sectors—consumer discretionary (+0.8%) and health care (+1.0%)—that displayed strength out of the gate.

The health care sector spent the entire session in the lead due, in part, to the relative strength of biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 234.72, +7.38) jumped 3.3% to post its third consecutive gain. M&A activity also contributed to the sector's outperformance as Allergan (AGN 163.65, +21.65) surged 15.3% after Valeant (VRX 135.41, +9.40) proposed a merger for $48.30 in cash and 0.83 shares of Valeant for each share of Allergan.

Elsewhere, the discretionary space was underpinned by a solid 7.0% gain in the shares of Netflix (NFLX 372.90, +24.41), which spiked in reaction to above-consensus earnings. The remainder of the sector held up nearly as well with homebuilders (ITB +0.8%) and retailers rallying (XRT +1.2%), while quick-service restaurants appeared unaffected by disappointing earnings from McDonald's (MCD 99.32, -0.35). The fast food giant reported bottom-line results $0.03 below the Capital IQ consensus estimate as comparable sales in the U.S. declined 1.7% during the first quarter.

Among other earnings of note, Dow components Travelers (TRV 86.89, +0.49) and United Technologies (UTX 119.19, +0.89) reported better than expected earnings, while their respective sectors ended in mixed fashion. Financials (+0.7%) settled among the leaders after lagging through the first half of action, whereas the industrial sector (+0.01%) kept pace with the S&P 500 during early afternoon action, but slumped into the close.

Even though the industrial sector ended well below its session high, that was not the case with transports as the Dow Jones Transportation Average advanced 0.6% to a fresh all-time high. Delta Air Lines (DAL 34.95, +1.01) gained 3.0% ahead of its quarterly report, which is expected ahead of Wednesday's opening bell.

On the downside, consumer staples (-0.1%) and energy (-0.2%) were the only two sectors ending in the red.

The Treasury market displayed gains overnight, but slumped shortly after the New York open, before reclaiming its losses into the close. The 10-yr yield ended at 2.72%.

Participation was on the light side as just over 665 million shares changed hands at the NYSE floor.

Today's economic data featured just two reports: 

·         Existing home sales fell 0.2% in March to 4.59 million SAAR from an unrevised 4.60 million SAAR in February. The Briefing.com consensus expected existing home sales to remain at 4.60 million SAAR. Over the past three months, existing home sales have averaged only 4.603 million SAAR, down from an average of 4.94 million SAAR in Q4 2013. Initially, the decline in sales was attributed to extreme weather conditions at the beginning of 2014. However, weather conditions returned more or less to normal in March and sales failed to rebound. A more likely explanation for the recent downward trend is that rising prices combined with higher mortgage rates have caused affordability conditions to weaken. As a result, first-time home buyers, who are needed to drive stable growth, only accounted for 30% of total purchases. In March 2012, first time buyers accounted for 33% of total sales. 

·         The February Housing Price Index from the FHFA increased 0.6%, which followed a revised uptick of 0.4% observed during the prior month. 

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET and New Home Sales for March (Briefing.com consensus 455K) will be reported at 10:00 ET. 

·         S&P 500 +1.7% YTD

·         Dow Jones Industrial Average -0.4% YTD

·         Nasdaq Composite -0.4% YTD

·         Russell 2000 -0.6% YTD

Commodities

Closing Commodities: Crude Oil Falls 1.9%, Ends Below $102/Barrel

·         June gold fell for a third consecutive session after pulling back from a session high of $1293.10 per ounce set in early morning action. It dipped to $1275.80 per ounce, its lowest level since early February 2014, and settled with a 0.6% loss at $1281.10 per ounce.

·         May silver touched a session high of $19.52 per ounce moments after floor trade opened but slipped into the red and to a session low of $19.30 per ounce in late morning action. It managed to rise back above the unchanged line and settled with a 0.1% gain at $19.36 per ounce.

·         June crude oil traded lower ahead of tomorrow's inventory data. It fell deeper into the red after retreating from its session high of $102.70 per barrel set moments after pit trade began. The energy component brushed a session low of $101.47 per barrel in late morning action and settled with a 1.9% loss at $101.67 per barrel.

·         May natural gas, on the other hand, traded higher after lifting from its session low of $4.69 per MMBtu in morning action. It eventually settled at its session high of $4.74 per MMBtu, booking a gain of 1.1%.

COMEX Metals Closing Prices

  June gold fell $7.10 to $1281.10/oz 

·         Gold fell for a third consecutive session after pulling back from a session high of $1293.10 set in early morning action. It dipped to  $1275.80, its lowest level since early February 2014, and settled with a 0.6% loss. 

  May silver rose $0.02 to $19.36/oz 

·         Silver touched a session high of $19.52 moments after floor trade opened but slipped into the red and to a session low of $19.30 in late morning action. It managed to rise back above the unchanged line and settled with a 0.1% gain. 

  May copper rose 1 cent to $3.05/lbs

 CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         May corn rose 7 cents to $4.96/bushel 

·         May wheat rose 4 cents to $6.72/bushel 

·         May soybeans fell 19 cents to $14.81/bushel 

·         May ethanol rose 4 cents to $2.25/gallon 

·         July sugar (#16 (U.S.)) fell 0.05 of a penny to 24.45 cents/lbs lbs

NYMEX Energy Closing Prices

  June crude oil fell $1.98 to $101.67/barrel 

·         Crude oil fell deeper into negative territory after retreating from its session high of $102.70 set moments after floor trade began. It brushed a session low of $101.47 in late morning action and settled with a 1.9% loss. 

  May natural gas rose 5 cents to $4.74/MMBtu 

·         Natural gas, on the other hand, traded in the black after lifting from its session low of $4.69 in morning action. It eventually settled with a 1.1% gain at its session high. 

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

  June RBOB settled unchanged at $3.04/gallon

Treasuries

Treasuries Finish Mixed: 10-yr: -01/32..2.716%..USD/JPY: 102.60..EUR/USD: 1.3801

·         Treasuries finished mixed amid a subdued session. Click here to see an intraday yields chart.

·         The complex pared its overnight gains as U.S. equity markets saw a strong bid at the open. 

·         Trade slipped into the red after the improvement in the FHFA Housing Price Index (0.6%), and dipped to its worst levels following the in-line existing home sales (4.59M actual v. 4.6M expected). 

·         A late-morning bid would drop yields back onto their respective flat lines ahead of the disappointing $32B 2y note auction. 

·         The auction drew 0.447% and an in-line 3.35x bid/cover. Both indirect (23.3%) and direct (18.9%) takedowns were light, leaving primary dealers with 47.8% of the supply.

·         A choppy post-auction trade took hold, causing yields to hover in a tight range over the remainder of the session.

·         Outperformance at the long end pushed the 30y down -2.2bps to 3.503%. The yield on the long bond approached 3.550% resistance during this morning's sell off, but was unable to puncture the level. 

·         The 10y edged up +0.5bps to 2.726%. The benchmark yield settled today's session on its 200 dma. 

·         The 5y lagged, climbing +2.3bps to 1.746%. Selling in six of the past seven sessions has caused the yield to climb +20bps, setting up a potential retest of the September/March highs near 1.800%. 

·         A flatter curve took hold as the 5-30-yr spread narrowed to 175.5bps, its flattest since the fall of 2009. 

·         A mixed session for precious metals saw gold slip -$5 to $1283 and silver add +$0.06 to $19.41. 

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

·         Auction: $35 bln 5y notes.

Next Day In View 

Economic Commentary

Economic Summary: Existing Home Sales slightly below estimates; New home sales tomorrow at 10:00
Economic Data Summary:

·         February FHFA Housing Price Index 0.6% vs Briefing.com consensus of ; January was revised to 0.4% from 0.5%

·         March Existing Home Sales 4.55 M vs Briefing.com consensus of 4.60 M ; February was 4.60 M

o    If that was truly the case, sales should return to the November/December average of 4.85 mln SAAR in March. The underlying details were mixed, but lean toward the downside. The MBA Mortgage Purchase Applications Index increased 4.7% in March, but that still leaves it at its second lowest level since February 2012. 

Upcoming Economic Data:

·         Weekly MBA Mortgage Applications due out Tuesday at 7:00 (Briefing.com consensus of ; Last Week was 4.3%)

·         March New Home Sales due out Tuesday at 10:00 (Briefing.com consensus of 455K; February was 440K)

Upcoming Fed/Treasury Events:

·         Treasury Auctions (results released at 13:00)

o    Wednesday: $35 bln in 5 year notes

o    Thursday: $29 bln in 7 year notes

Other International Events of Interest

·         Hong Kong's Hang Seng (-0.1%) slipped amid a lackluster session while China's Shanghai Composite (+0.3%) rallied on word the People's Bank of China cut its reserve requirement ratio by as much as -200bps for rural banks

On other news.... 

Currencies 

Dollar Drifts Little Changed: 10-yr: -03/32..2.727%..USD/JPY: 102.61..EUR/USD: 1.3801

·         The Dollar Index hovers little changed amid a rather uneventful trade. Click here to see a daily Dollar Index chart.

·         Early weakness dropped the Index onto the 79.80 level before buyers emerged and ran action back up to the 79.95 flat line. 

·         EURUSD is +5 pips @ 1.3800 as action continues to press support in the area that is helped by the 50 dma. The single currency has spent much of the past week in the area as a sleepy trade took hold over the holidays. However, action should pick up tomorrow as Flash Manufacturing and Services PMI data from around the region will be released.

·         GBPUSD is +35 pips @ 1.6825 as trade looks likely to put in its best close since November 2009. Sterling continues to benefit from expectations the Bank of England will be the first major Western central bank to hike rates and emerge from the financial crisis. Tomorrow, the BOE's MPC votes accompany public sector net borrowing and CBI Industrial Order Expectations. 

·         USDCHF is flat @ .8850 as trade fights for a seventh day of gains. Early selling provided a test of the 50 dma (.8837), but support in the area was able to hold. Fluctuations in the pair remain a derivative of the euro thanks to the Swiss National Bank's EURCHF 1.2000 floor.

·         USDJPY is flat @ 102.60 as trade steadies following seven days of gains. A Nikkei report from last week has sparked this recent move into risk assets as it suggested the Bank of Japan may look to increase its asset purchase program due to the slowing of the Japanese economy. It should be noted that BOJ Governor Kuroda as twice pushed back against any such action, suggesting inflation is likely to rise as wage growth takes hold. The 102.50 area remains a key pivot. 

·         AUDUSD is +40 pips @ .9365 as buyers take control for the first time in four sessions. Notable were overnight comments from Australian Treasurer Hockey, which voiced concerns over the Reserve Bank of Australia's neutral stance on rates despite the strong Aussie dollar. Any close above .9415 would be the best in five months. Australia's CPI and Trimmed Mean CPI are due out tonight. Chinese data is limited to HSBC Flash Manufacturing PMI. 

·         USDCAD is +15 pips @ 1.1025 as action continues to test resistance in the area. Early action saw the pair dip into the red, but trade has managed to rebound despite the better than expected Canadian wholesale sales (1.1% actual v. 0.7% expected) data.

Jason's Commentaries


It seems that the April bulls are heading really strong and we're having the S&P500 near its high again. I wonder when will the bulls taking a rest... Ultimately, the market is hitting the high once again. A last push to make sure the market ends higher in April. The market started last night with a bullish intent and sustained it all the way till 230pm ET. Volumes are at 679.2m shares traded on the NYSE. However, we are having some divergence in the market. While crossreferencing to the sector performance, it's only a few huge gains in some stocks that drove the market up higher. On the broader market, it's relatively flat to the upside. On the technicals, we're having the market making its way back higher, I reckon the market will continue going up for a while more before hitting the resistance again.   

Market Call: FLAT

Date: 23 April 2014