13 May 2014 AMC - Market ended flat after huge rally on Monday. Dow and S&P500 sets new high

13 May 2014 AMC - Market ended flat after huge rally on Monday. Dow and S&P500 sets new high

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: + 0.3%

·         Germany's DAX: + 0.5%

·         France's CAC: + 0.3%

·         Spain's IBEX: + 0.2%

·         Portugal's PSI: -0.7%

·         Italy's MIB Index: -1.1%

·         Irish Ovrl Index: -0.6%

·         Greece ATHEX Composite: -0.3%

Before Market Opens 

S&P futures vs fair value: +1.90. Nasdaq futures vs fair value: +4.00.
The S&P 500 futures trade two points above fair value.

Asian markets ended mostly higher despite the release of disappointing data from China. Meanwhile, Chinese indices held up well despite the data as speculation about potential easing encouraged investors to demand risk assets; however, it is worth noting government officials have pushed back against additional easing on multiple occasions in recent months.

In economic data: 

o    China's Retail Sales increased 11.9% year-over-year (consensus 12.2%, previous 12.2%), Industrial Production rose 8.7% year-over-year (expected 8.9%, prior 8.8%), and Fixed Asset Investment jumped 17.3% year-over-year (forecast 17.7%, prior 17.6%). 

o    Australia's House Price Index jumped 1.7% quarter-over-quarter (expected 2.9%, prior 3.8%), while Home Loans fell 0.9% month-over-month (consensus 1.1%, previous 2.3%). 

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·         Japan's Nikkei rallied 2.0% as 204 of its 225 components posted gains. Industrial names ended among the leaders with Isuzu Motors, Shimizu and Fujikura up between 6.4% and 7.8%. 

·         Hong Kong's Hang Seng added 0.4% and was underpinned by property names. China Resources Land, China Overseas Land, and Sino Land jumped between 3.4% and 5.3%. On the downside, consumer names Want Want China Holdings and Li & Fung lost 1.3% and 1.1%, respectively. 

·         China's Shanghai Composite shed 0.1%, lagging amid weakness in some energy names. Shenyang Jinshan Energy and Yunnan Coal Energy fell 10.0% and 5.1%, respectively.

Major European indices trade mostly higher, while Italy's MIB (-1.0%) lags. Investors received several data points including a disappointing ZEW survey from Germany, but the sharp decline was attributed to low expectations about the economy's ability to remain on the pace that was set during the first quarter. 

o    Eurozone ZEW Economic Sentiment fell to 55.2 from 61.2 (expected 63.5). 

o    Germany's ZEW Economic Sentiment tumbled to 33.1 from 43.2 (expected 41.0), while ZEW Current Conditions improved to 62.1 from 59.5 (consensus 60.5). Separately, Wholesale Price Index ticked up 0.2% month-over-month (expected -0.1%, previous 0.0%). 

o    French Current Account deficit widened to EUR1.50 billion from EUR1.40 billion. 

o    Italy's CPI rose 0.2% month-over-month, while the year-over-year reading increased 0.6%. Both figures met expectations. 

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·         Great Britain's FTSE is higher by 0.1% with consumer names in the lead. Barratt Developments, Persimmon, and ITV are all up between 1.8% and 2.9%. On the downside, easyJet is lower by 4.5% following cautious guidance. 

·         In France, the CAC trades up 0.2%. Airbus Group leads with a gain of 6.0% after beating earnings estimates. Financials lag with BNP Paribas and Societe Generale down 0.6% and 1.5%. 

·         Germany's DAX holds an advance of 0.6% as 21 of 30 components trade in the green. Steelmaker ThyssenKrupp leads with a gain of 4.9% after raising its profit outlook. Utilities lag with E.ON and RWE down 1.4% and 0.5%, respectively. 

·         Italy's MIB trades down 1.0% as Telecom Italia weighs. The stock holds a loss of 4.7% after reporting disappointing earnings.

U.S. Equities

·         Equity futures point to a flat open

·         Yesterday, both the DJIA and S&P 500 posted record-high closes

·         The VIX (12.23) holds at a four-month low

·         Retail Sales (0.1% actual v. 0.3% expected)

·         Retail Sales ex-auto (0.0% actual v. 0.6% expected)

·         Import Prices ex-oil (0.0%)

·         Export Prices ex-ag. (-1.2%)

o    S&P Futures +1 @ 1894

o    Dow Futures +18 @ 16,673

o    Nasdaq Futures +4 @ 3612 

Asia

·         Markets finished mostly higher across Asia, supported by yesterday's strong gains on Wall Street

·         Japan's Nikkei (+2.0%) rallied to a one-week high with the help of the weaker yen

·         China's Shanghai Composite (-0.1%) slipped following the disappointing industrial production (8.7% YoY actual v. 8.9% YoY expected) and fixed asset investment (17.3% actual v. 17.7% expected) data while Hong Kong's Hang Seng (+0.4%) managed to shrug off the news and post a modest gain

·         India's Sensex rallied to another record-high as exit polls continue to point to the Bharatiya Janta Party winning a majority in the election

·         Australia's ASX (+1.4%) ended less than 1% off its best level in six years despite the Home Price Index (1.7% QoQ actual v. 3.0% QoQ expected) and home loans (-0.9% MoM actual v. -0.1% MoM expected) misses

Market Internals

Market Internals
The Dow closed up 20 (+0.12%) at 16715, the S&P 500 closed up 1 (+0.04%) at 1897, and the Nasdaq closed down 14 (-0.33%) at 4130. Action came on below average volume (NYSE 591 mln vs. avg. of 718; NASDAQ 1747 mln vs. avg. of 1986), with decliners outpacing advancers (NYSE 1399/1745, NASDAQ 909/1768) and new highs outpacing new lows (NYSE 147/20, NASDAQ 59/39). 

Relative Strength: 
Sugar-SGG +3.52%, Copper Miners-COPX +1.77%, Israel-EIS +1.74%, Egypt-EGPT +1.66%, Chile-ECH +1.36%, Japan-EWJ +1.35%, Eastern Europe-ESR +1.25%, Oil-USO +1.23%, Platinum-PPLT +1.16%, Cocoa-NIB +1.09%. 

Relative Weakness: 
Peru-EPU -2.12%, Greece-GREK -1.47%, Regional Banks-KRE -1.28%, Coffee-JO -1.24%, Natural Gas-UNG -1.22%, Italy-EWI -1.2%, Austria-EWO -1.15%, Russel 2000-IWM -0.98%, Biotechnology-XBI -0.96%, Belgium-EWK -0.84%.

Leaders and Laggards

 

Technical Updates

Briefing's Commentaries

Closing Market Summary: Stocks End Flat After S&P 500 Tests 1,900
The major averages ended the Tuesday session on a mixed note despite showing early strength. The S&P 500 added less than a point, while the Russell 2000 lost 1.0%.

Equity indices began the trading day on an upbeat note even though the April Retail Sales report that was released ahead of the open missed expectations. The report pointed to soft consumer spending, but had little effect on equities as the disappointing figures suggested there is little need as of yet to worry that the first rate hike from the Fed will come sooner rather than later.

With the data out of the way, the S&P 500 rallied out of the gate, charging past the 1,900 mark for the first time ever. Even though the index was able to creep above that psychological level during the first hour of action, it could not hold its high as the underperformance of small caps weighed on the overall sentiment. Furthermore, the lack of concerted leadership from either the cyclical or the countercyclical side contributed to the caution that was exhibited by market participants.

The four top-weighted sectors were mixed when compared to the S&P 500. Consumer discretionary (-0.3%) and financials (-0.1%) lagged throughout the session, while health care (+0.2%) and technology (+0.1%) registered modest gains after displaying some intraday volatility.

The health care sector posted a slim gain even as biotechnology ended on lows. The iShares Nasdaq Biotechnology ETF (IBB 230.51, -1.41) fell 0.6% after being up nearly 1.0% during the first hour of action.

Elsewhere, the tech sector was kept from pulling away from its flat line by the mixed performance among momentum names. LinkedIn (LNKD 147.67, -4.63) and Yelp (YELP 55.53, -1.07) lost 3.0% and 1.9%, respectively, while chipmakers also struggled, sending the PHLX Semiconductor Index lower by 0.8%.

Even though the top four sectors did not show much strength, the S&P 500 never dipped too far below its flat line as energy (+0.3%), industrials (+0.2%), and consumer staples (+0.2%) outperformed throughout the session. Notably, the industrial sector was underpinned by transports as the Dow Jones Transportation Average (+0.5%) climbed to a fresh all-time high.

On the fixed income side, Treasuries surged after the disappointing Retail Sales report and continued their advance into the afternoon. As a result, the benchmark 10-yr yield fell five basis points to 2.61%.

For the second day in a row, participation was well below average, with less than 600 million shares changing hands at the NYSE.

Economic data featured Retail Sales, Import/Export Prices for April, and March Business Inventories: 

·         Retail sales increased 0.1% in April after increasing an upwardly revised 1.5% (from 1.2%) in March. The Briefing.com consensus expected retail sales to increase 0.3%. Expectations of strong GDP growth in the second quarter were predicated on the unleashing of pent-up demand from weather-related delays. So far, that has not happened. Instead, sales growth trended in-line with income gains. The April Employment report showcased a 0.2% increase in aggregate earnings, which translated into a 0.1% increase in retail sales. Excluding transportation, retail sales were flat after increasing an upwardly revised 1.0% (from 0.7%) in March. The consensus expected these sales to increase 0.6%. 

·         Export prices, excluding agriculture, fell 1.2% in March after increasing 0.8% in the prior reading. Excluding oil, import prices were unchanged, which followed last month's uptick of 0.3%. 

·         Business inventories increased 0.4% in March after increasing an upwardly revised 0.5% (from 0.4%) in February. The Briefing.com consensus expected business inventories to increase 0.4%. Total inventories consist of manufacturer, merchant wholesaler, and retailers. Both manufacturers (0.1%) and wholesalers (1.1%) were known prior to the release. Only retailer inventories, which were flat after falling 0.1% in February, were unknown. 

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET, while April PPI and Core PPI will be reported at 8:30 ET. 

·         S&P 500 +2.7% YTD 

·         Dow Jones Industrial Average +0.8% YTD 

·         Nasdaq Composite -1.1% YTD 

·         Russell 2000 -3.4% YTD

Commodities

Closing Commodities: Gold Ends Modestly Lower, Crude Gains 1.1%

·         June gold erased most of its early morning losses as it popped from its session low of $1290.00 per ounce following retail sales economic data.

·         Retail sales increased 0.1% in April after increasing an upwardly revised 1.5% (from 1.2%) in March. The Briefing.com consensus expected retail sales to increase 0.3%.

·         The yellow metal touched a session high of $1299.00 per ounce in late morning action and spent the remainder of the session chopping around near the unchanged line. It eventually settled 0.1% lower at $1294.70 per ounce.

·         July silver came off its session low of $19.47 per ounce in early morning action and brushed a session high of $19.62 per ounce. It also consolidated near the unchanged level in afternoon floor trade and settled with a 0.1% loss at $19.53 per ounce.

·         June crude oil extended yesterday's gains as investors awaited tomorrow's EIA inventory data. The energy component came off its session low of $100.85 per barrel set moments after equity markets opened. It rallied slightly heading into the close and settled at $101.73 per barrel, or 1.1% higher.

·         June natural gas fell for a fifth consecutive session. It trended lower after pulling back from its session high of $4.44 per MMBtu set in early morning pit trade and settled with a 1.6% loss at $4.36 per MMBtu.

 NYMEX Energy Closing Prices

  June crude oil rose $1.13 to $101.73/barrel 

·         Crude oil extended yesterday's gains as investors awaited tomorrow's EIA inventory data. The energy component came off its session low of $100.85 set moments after equity markets opened and trended higher. It rallied slightly heading into the close and settled with a 1.1% gain. 

  June natural gas fell 7 cents to $4.36/MMBtu 

·         Natural gas fell for a fifth consecutive session. It trended lower after pulling back from its session high of $4.44 set in early morning pit trade and settled with a 1.6 % loss. 

  June heating oil rose 3 cents to $2.95/gallon 

  June RBOB rose 1 cent to $2.93/gallon

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         July corn rose 3 cents to $5.02/bushel 

·         July wheat fell 5 cents to $7.10/bushel 

·         July soybeans rose 19 cents to $14.84/bushel 

·         June ethanol fell 1 cent to $2.13/gallon

·         July sugar (#16 (U.S.)) rose 0.01 of a penny to 24.44 cents/lbs

COMEX Metals Closing Prices

  June gold fell $1.20 to $1294.70/oz 

·         Gold erased most of its early morning losses as it popped from its session low of $1290.00 following retail sales economic data. Retail sales increased 0.1% in April after increasing an upwardly revised 1.5% (from 1.2%) in March. The Briefing.com consensus expected retail sales to increase 0.3%. The yellow metal touched a session high of $1299.00 in late morning action and spent the remainder of the session chopping around near the unchanged line. It eventually settled 0.1% lower. 

  July silver fell $0.02 to $19.53/oz 

·         Silver came off its session low of $19.47 in early morning action and brushed a session high of $19.62. It also consolidated near the breakeven level in afternoon floor trade and settled with a 0.1% loss. 

  July copper fell 2 cents to $3.13/lbs

Treasuries

Treasuries End Three-Day Skid: 10-yr: +13/32..2.614%..USD/JPY: 102.26..EUR/USD: 1.3700

·         Treasuries booked modest gains amid a mostly uneventful session. Click here to see an intraday yields chart.

·         The complex held small gains into the cash open, and raced to its best levels of the day following the disappointing retail sales data (0.1% actual v. 0.3% expected). 

·         An in-line business inventories report (0.4%) caused some light selling, but that weakness was quickly bought. 

·         Action over the remainder of the session would take place in a tight 1bp range as yields tested key support. 

·         When all was said and done, most yields finished lower by -3.8bps. 

·         The 5y closed @ 1.620% as trade slipped back below the 50 and 100 dma. Minor support at current levels is all that is preventing a slide back towards the 200 dma (1.539%).

·         The 10y settled @ 2.618% after early action failed to reclaim the 2.680% pivot. Key support in the 2.600% area remains under close watch as a breakdown would drop action to levels last seen in late-October. 

·         At the long end, the 30y eased to 3.454%. The yield on the long bond saw an early test of 3.500% resistance, but has slipped off the level. The May lows near 3.350% should be tracked closely as action over the past month has failed several times at the key resistance level. 

·         An unchanged curve saw the 5-30-yr spread hold @ 183.5bps. 

·         Precious metals saw light selling as gold fell -$3 to $1293 and silver shed -$0.03 to $19.51. 

·         Data: MBA Mortgage Index (7) and PPI (8:30).

On other news.... 




Currencies 

Dollar Rallies to Five-Week High: 10-yr: +13/32..2.613%..USD/JPY: 102.24..EUR/USD: 1.3701

·         The Dollar Index presses session highs near 80.15 as buyers remain in control for a fifth day. Click here to see a daily Dollar Index chart.

·         Today's bid has lifted the Index to a five-week high, and has action looking to reclaim the 100 dma. 

·         EURUSD is -60 pips @ 1.3700 as trade looks likely to put in its lowest close in nearly three months. The single currency has been under pressure following early comments from Germany's Bundesbank suggesting it would be open to ‘significant ECB stimulus' if inflation forecasts were revised lower at next month's meeting. A breakdown of support in the area puts the 200 dma (1.3620) in the crosshairs. Eurozone industrial production is due out tomorrow.

·         GBPUSD is -45 pips @ 1.6820 as trade presses session lows. A relatively quiet day for news and data has left sterling to take its cues from the euro. The 1.6750/1.6800 area provides the first level of support. Britain's Average Earnings Index, claimant count change, and unemployment rate will cross the wires before the Bank of England Inflation Report.

·         USDCHF is +25 pips @ .8905 as steady buying persists for a fifth session. The recent win streak has run the pair above its 100 dma, and has action testing resistance in the .8925 area. A breakout will likely lead to a test of the 200 dma (.9004). Swiss data is limited to ZEW Economic Expectations. 

·         USDJPY is +10 pips @ 101.25 amid another lackluster day for the pair. Three days of small gains has trade testing the 50 dma, but traders remain more concerned with how the pair responds at the 102.50 pivot. 

·         AUDUSD is -10 pips @ .9350 as trade has held up relatively well despite the weak Australian and Chinese data. Trade over the past couple of sessions has struggled near the .9400 level, causing many to shift their focus back towards .9250 support. Traders should be on the lookout for the Reserve Bank of New Zealand Financial Stability Report as it may produce some volatility in the hard currency.

·         USDCAD is +20 pips @ 1.0915 as trade fights for its best close in a week. An absence of news and data out of Canada has seen trade default to today's broad based dollar strength.

Next Week In View





Economic Commentaries

Economic Summary: Retail sales miss expectations; Business Inventories in line; PPI tomorrow at 8:30
Economic Data Summary:

·         April Retail Sales 0.1% vs Briefing.com consensus of 0.3%; March was revised to 1.5% from 1.2%

·         April Retail Sales Ex-Auto 0.0% vs Briefing.com consensus of 0.6%; March was revised to 1.0% from 0.7%

o    The April Employment report showcased a 0.2% increase in aggregate earnings, which translated into a 0.1% increase in retail sales. Digging down deeper, core sales -- which exclude motor vehicle dealers, building materials and supplies stores, and gasoline stations -- declined 0.2% in April. These sales more closely match with the consumption component of GDP. The decline shows that consumers were more willing to boost their savings rate, which had fallen significantly in the first quarter, than continue to spend out of savings. Motor vehicle sales increased 0.6% in April after increasing 3.6% in March. The increase was unexpected considering motor vehicle manufacturers reported a monthly decline in unit demand. Excluding transportation, retail sales were flat after increasing an upwardly revised 1.0% (from 0.7%) in March.

·         April Export Prices Ex-Ag -1.2% vs (March was revised to 0.8% from 0.5%)

·         April Import Prices Ex-Oil 0.0% vs (March was 0.3%)

·         March Business Inventories 0.4% vs Briefing.com consensus of 0.4%; February was revised to 0.5% from 0.4%

o    Total inventories consist of manufacturer, merchant wholesaler, and retailers. Both manufacturers (0.1%) and wholesalers (1.1%) were known prior to the release. Only retailer inventories, which were flat after falling 0.1% in February, were unknown. Motor vehicle and parts dealer inventories fell 0.2%, its second consecutive monthly decline. 

Upcoming Economic Data:

·         Weekly MBA Mortgage Applications due out Wednesday at 7:00 (Briefing.com consensus of ; Last Week was 5.3%)

·         April PPI due out Wednesday at 8:30 (Briefing.com consensus of 0.2%; March was 0.5%)

·         April Core PPI due out Wednesday at 8:30 (Briefing.com consensus of 0.2%; March was 0.6%)

Other International Events of Interest

·         China's Shanghai Composite (-0.1%) slipped following the disappointing industrial production (8.7% YoY actual v. 8.9% YoY expected) and fixed asset investment (17.3% actual v. 17.7% expected) data while Hong Kong's Hang Seng (+0.4%) managed to shrug off the news and post a modest gain

Jason's Commentaries

As expected, the market ended flat last night as Nasdaq and Russells faced resistance. Volumes were unusually low at 604.1m shares traded on the NYSE. Internals were all showing divergence signals. The market is apparently waiting for something to happen. The main leader last night was Energy while Consumer discretionary ended with a 0.28% loss. It's a rather uneventful day. I believe that the market is moving based on Technicals right now. If the resistance at Nasdaq and Russells get broken, we're likely to head up for this week. However, if it fails to break, we're likely to go south... It's May afterall... 

Market Call: FLAT to upside

Date: 14 May 2014