16 May 2014 AMC - Market displayed strength towards the end of the closing bell after bearish start
Market Summary
European
Markets Closing Prices
European
markets are now closed; stock markets across Europe performed as follows:
·
UK's FTSE: + 0.2%
·
Germany's DAX: -0.3%
·
France's CAC: + 0.3%
·
Spain's IBEX: + 1.1%
·
Portugal's PSI: + 0.1%
·
Italy's MIB Index: + 1.1%
·
Irish Ovrl Index: -0.2%
·
Greece ATHEX Composite: -3.2%
Before Market Opens
S&P futures vs fair value:
-1.00. Nasdaq futures vs fair value: +1.50.
S&P futures trade two points below fair value.
Asian markets ended the session mixed amid a mostly uneventful trade.
S&P futures trade two points below fair value.
Asian markets ended the session mixed amid a mostly uneventful trade.
o Narendra Modi was declared the winner of
the Indian election by a landslide.
o Hong Kong's GDP slowed to 2.5% YoY (2.9%
YoY previous).
o Singapore's trade surplus expanded to
SGD4.2 billion (SGD2.3 billion previous).
-----
·
Japan's Nikkei
(-1.4%) was pressured as the yen strengthened. Toyota Motor shed 2.4% and
Sony gave up 3.4%.
·
Hong Kong's Hang Seng
(-0.1%) slipped amid a quiet trade. Real estate shares were weak as China
Resources Land and China Overseas Land & Investment both fell 1.8%.
·
China's Shanghai
Composite (+0.1%) eked out a gain. Property stocks recovered some of their
recent losses as China Vanke and Poly Real Estate both added 1.6%.
·
India's Sensex (+0.9%)
rallied to a record high, but finished well off its best levels.
Financials saw strong gains as State Bank of India and ICICI both surged
at least 5%.
The major European bourses are mixed
as the periphery outperforms.
o French nonfarm payrolls posted an in-line -0.1%
QoQ.
o The eurozone's trade surplus expanded to EUR15.2
bln (EUR17.0 billion expected, EUR15.2 billion previous).
o Italy's trade surplus widened to EUR3.87
billion from EUR2.63 billion (expected surplus of EUR2.47 billion).
·
Britain's FTSE trades
-0.2%. Financials are bid with Standard Charter and HSBC Holdings up +1.8% and
+1.1%, respectively.
·
Germany's DAX holds a
loss of -0.3%. Automakers are under pressure with Bayerische Motoren Werks off
-2.6%.
·
France's CAC is little
changed. Automaker Renault is seeing notable selling pressure as shares trade
lower by -3.5%.
U.S. Equities
·
Equity futures point to
small gains at the open
·
Yesterday's selling
dropped the S&P 500 and DJIA to their lowest levels in a week
·
Housing Starts (1072K
actual v. 975K expected)
·
Building Permits (1080K
actual v. 1008K expected)
o S&P Futures +2 @ 1869
o Dow Futures +7 @ 16,428
o Nasdaq Futures +5 @ 3568
Asia
·
Markets finished mixed
across Asia
·
Narendra Modi was
declared the winner of the Indian election by a landslide
·
Hong Kong's GDP slowed
to 2.5% YoY (2.9% YoY previous)
·
Singapore's trade
surplus expanded to SGD4.2 bln (SGD2.3 bln previous)
·
Japan's Nikkei (-1.4%)
was pressured as the yen strengthened
·
Hong Kong's Hang Seng
(-0.1%) slipped amid a quiet trade
·
China's Shanghai
Composite (+0.1%) eked out a gain
·
India's Sensex (+0.9%)
rallied to a record high, but finished well off its best levels
·
Australia's ASX (-0.6%)
held just off six-year highs
Market Internals
Market Internals -Technical-
The Nasdaq closed up 21 (+0.52%) at 4091, the S&P 500 closed up 7 (+0.37%) at 1878, and the Dow closed up 45 (+0.27%) at 16491. Action came on mixed volume (NYSE 763 mln vs. avg. of 717; NASDAQ 1614 mln vs. avg. of 1963), with advancers outpacing decliners (NYSE 2102/1017, NASDAQ 1604/1040) and mixed new highs/lows (NYSE 82/36, NASDAQ 11/81).
Relative Strength:
India-INP +5.05%, Thailand-THD +1.96%, Indian Rupee-ICN +1.92%, Asia-AAXJ +1.55%, Smart Grid Infrastructure-GRID +1.52%, Retail-XRT +1.46%, Technology-Software-IGV +1.09%, Homebuilders-XHB +1.05%, Cloud Computing-SKYY +1.02%.
Relative Weakness:
Coffee-JO -4.92%, Greece-GREK -2.85%, Volatility-VXX -2.32%, Sugar-SGG -1.66%, Agriculture-DBA -0.91%, Silver Miners-SIL -0.9%, Austria-EWO -0.62%, Germany-EWG -0.41%, Netherlands-EWN -0.39%, Canada-EWC -0.29%.
Leaders and Laggards
Technical Updates
Commentaries
Late Surge Leads to Positive Close
The stock market lumbered and slumbered through most of Friday's session, but it woke up late in the day and ended on an upbeat note. The major indices all scored modest gains, the most notable of which was the Russell 2000, which ducked into correction territory again with an early 0.7% decline only to come rallying back to finish Friday up 0.6% and out of the "correction zone."
There wasn't a specific news catalyst behind the late surge. The explanation that it was related to options expiration activity can't be dismissed and it would fit in line with other explanations that included short-covering activity, the ability of the Russell 2000 to fight back once again from a notable decline, and renewed buying interest in some of the market's most influential sectors that had been lagging for most of the day.
The financial sector is a case in point. It was down 0.5% with about an hour to go in the trading session and it finished the day up 0.1%. Similarly, the technology sector, which was nearly flat entering the final hour, ended the session up 0.6%. The energy sector (-0.3%) was the only sector to end with a loss.
The major indices had been confined to tight trading ranges for most of the session as big moves were reserved largely for individual stocks like J.C. Penney (JCP 9.69, +1.32), which rallied after the embattled retailer reported better than expected earnings results and guidance.
The telecom services sector (+1.4%) was the only sector that had been showing any notable strength throughout the day. That was owed primarily to Verizon (VZ 49.07, +1.11), which benefited from the disclosure that Berkshire Hathaway established a new position in the stock during the first quarter. Otherwise, there wasn't a lot of movement of note in the remaining sectors until the final 90 minutes.
That was true for the Treasury market, too. There wasn't a lot of movement there despite the report that housing starts surged 13.2% in April to a seasonally adjusted annual rate of 1.072 mln units (Briefing.com consensus 975,000) while building permits rose 8.0% to 1.08 mln (Briefing.com consensus 1.008 mln).
The Treasury market's steady state after the report, and a weaker than expected University of Michigan Consumer Sentiment report for May, looked to be a distraction for equity traders who were still trying to make sense of Thursday's big drop in yield in the 10-yr note. Some late selling activity, though, had the 10-yr probing its worst levels of the day as stocks were staging a rally heading into the close. The 10-yr note, which had been down four ticks for most of the day, was down nine ticks and yielding 2.52% when the closing bell rang.
Thanks to the late burst of buying interest, the Nasdaq was able to finish the week with a gain. The S&P 500, however, just missed.
Trading volume at the NYSE hit 763 mln shares on Friday, which was the heaviest all week. That was not surprising given the low totals earlier in the week and the kicker provided by the monthly options expiration.
The coming week could be characterized by low volume again. There isn't much on either the economic or earnings calendars and the Memorial Day holiday will be waiting at the end of the week.
The stock market lumbered and slumbered through most of Friday's session, but it woke up late in the day and ended on an upbeat note. The major indices all scored modest gains, the most notable of which was the Russell 2000, which ducked into correction territory again with an early 0.7% decline only to come rallying back to finish Friday up 0.6% and out of the "correction zone."
There wasn't a specific news catalyst behind the late surge. The explanation that it was related to options expiration activity can't be dismissed and it would fit in line with other explanations that included short-covering activity, the ability of the Russell 2000 to fight back once again from a notable decline, and renewed buying interest in some of the market's most influential sectors that had been lagging for most of the day.
The financial sector is a case in point. It was down 0.5% with about an hour to go in the trading session and it finished the day up 0.1%. Similarly, the technology sector, which was nearly flat entering the final hour, ended the session up 0.6%. The energy sector (-0.3%) was the only sector to end with a loss.
The major indices had been confined to tight trading ranges for most of the session as big moves were reserved largely for individual stocks like J.C. Penney (JCP 9.69, +1.32), which rallied after the embattled retailer reported better than expected earnings results and guidance.
The telecom services sector (+1.4%) was the only sector that had been showing any notable strength throughout the day. That was owed primarily to Verizon (VZ 49.07, +1.11), which benefited from the disclosure that Berkshire Hathaway established a new position in the stock during the first quarter. Otherwise, there wasn't a lot of movement of note in the remaining sectors until the final 90 minutes.
That was true for the Treasury market, too. There wasn't a lot of movement there despite the report that housing starts surged 13.2% in April to a seasonally adjusted annual rate of 1.072 mln units (Briefing.com consensus 975,000) while building permits rose 8.0% to 1.08 mln (Briefing.com consensus 1.008 mln).
The Treasury market's steady state after the report, and a weaker than expected University of Michigan Consumer Sentiment report for May, looked to be a distraction for equity traders who were still trying to make sense of Thursday's big drop in yield in the 10-yr note. Some late selling activity, though, had the 10-yr probing its worst levels of the day as stocks were staging a rally heading into the close. The 10-yr note, which had been down four ticks for most of the day, was down nine ticks and yielding 2.52% when the closing bell rang.
Thanks to the late burst of buying interest, the Nasdaq was able to finish the week with a gain. The S&P 500, however, just missed.
Trading volume at the NYSE hit 763 mln shares on Friday, which was the heaviest all week. That was not surprising given the low totals earlier in the week and the kicker provided by the monthly options expiration.
The coming week could be characterized by low volume again. There isn't much on either the economic or earnings calendars and the Memorial Day holiday will be waiting at the end of the week.
·
S&P 500 +1.6%
·
Dow Jones Industrial
Average -0.5%
·
Nasdaq Composite -2.1%
·
Russell 2000 -5.4%
Commodities
Closing Commodities: Gold Rises A
Modest 0.4% On The Week, Crude Gains 2%
·
June gold fell to a
session low of $12870.70 per ounce following a strong Housing Starts and
Building Permits report for April. Starts jumped 13.2% to a seasonally adjusted
1.072 mln vs Briefing.com consensus of 975K. Building permits increased 8.0% to
1.08 mln while the Briefing.com consensus called for 1.008 mln.
·
The yellow metal managed
to erase most of the early morning loss and settled just 40 cents below the
unchanged line at $1293.30 per ounce, booking a gain of 0.4% for the week.
·
July silver also
declined on the economic data. It touched a session low of $19.25 per ounce in
early morning action and eventually settled at $19.33 per ounce, or 0.8% lower.
Despite today's weakness, it gained 1.2% over the week.
·
June crude oil trended
higher after lifting from its session low of $101.61 per barrel in morning
action. It touched a session high of $102.23 per barrel and settled 0.5% higher
at $102.01 per barrel, bringing gains for the week to 2.0%.
·
June natural gas spent
its entire floor trade in the red. It brushed a session high of $4.45 per MMBtu
and settled with a 1.1% loss at its session low of $4.41 per MMBtu. Today's
weakness brought losses for the week to 2.6%.
COMEX
Metals Closing Prices
June gold fell $0.40 to $1293.30/oz
·
Gold fell to a session
low of $1287.70 following a positive Housing Starts and Building Permits report
for April. Starts jumped 13.2% to a seasonally adjusted 1.072 mln vs
Briefing.com consensus of 975K. Building permits increased 8.0% to 1.08 mln
while the Briefing.com consensus called for 1.008 mln. The yellow metal managed
to erase most of the early morning loss and settled just 40 cents below the
unchanged line, booking a gain of 0.4% for the week.
July silver fell $0.16 to $19.33/oz
·
Silver also declined on
the economic data. It touched a session low of $19.25 in early morning action
and eventually settled with a 0.8 %loss. Despite today's weakness, it gained
1.2% over the week.
July
copper rose 1 cent to $3.15/lbs
CBOT
Agriculture and Ethanol/ICE Sugar Closing Prices
·
July
corn settled unchanged
at $4.84/bushel
·
July
wheat fell 3 cents to
$6.75/bushel
·
July
soybeans fell 4 cents to
$14.65/bushel
·
June
ethanol rose 6 cents to
$2.24/gallon
·
July
sugar (#16 (U.S.)) fell
0.12 of a penny to 24.31 cents/lbs
NYMEX
Energy Closing Prices
·
June
crude oil rose $0.55 to
$102.01/barrel
·
June
natural gas fell 5 cents to
$4.41/MMBtu
·
June
heating oil rose 1 cent to
$2.96/gallon
·
June
RBOB rose 1 cent to
$2.97/gallon
Treasuries
Heavy Buying Drops Yields to
Multi-Month Lows: 10-yr: -09/32..2.520%..USD/JPY: 101.55..EUR/USD: 1.3697
The Week in Review
The Week in Review
·
A solid bid across the
Treasury complex dropped yields to multi-month lows. Click here to see an intraweek yields
chart.
·
Economic data remained
mixed as retail sales (0.1% actual v. 0.3% expected), industrial production
(-0.6% actual v. 0.0% expected), capacity utilization (78.6% actual v. 79.2%
expected), Michigan Sentiment (81.8 actual v. 84.5 expected) and the NAHB
Housing Market Index (45 actual v. 48 expected) missed estimates while Empire
Manufacturing (19.0 actual v. 4.8 expected), housing starts (1072K actual v.
975K expected), and building permits (1080K actual v. 1008K expected) topped
expectations.
·
Up front, the 2y eased
-2bps to 0.359% as trade closed on support dating back to March.
·
The 5y fell -10bps to
1.548% as trade pressed to two-month lows. Support in the area will
remain in focus in the coming days as additional help is provided by the 200
dma.
·
A -12bp decline dropped
the 10y to 2.518%. This week's action saw the benchmark yield breakdown out of
the 2.600%/2.800% range that had been in place since the beginning of February. Action
now holds at the 2.500% level, which has held up for the past 11 months.
·
At the long end, the 30y
erased -13bps to 3.347%. The yield on the long bond dipped to 11-month
lows, and is now -62bps in 2014.
·
This
week's bid flattened the yield curve as the 5-30-yr spread narrowed to 180bps.
The Week Ahead
·
There is no data on
Monday. Dallas' Fisher and SF's Williams will discuss "The Role of the
Federal Reserve" (12:10).
·
Data remains absent on
Tuesday. Philly's Plosser gives his economic outlook (12:30).
·
Wednesday's data is
limited to the weekly MBA Mortgage Index (7) and the latest FOMC
minutes (14). Fed Chair Janet Yellen will receive an honorary degree
at the NYU Commencement. NY's Dudley discusses regional economic conditions
(10) and KC's George speaks on the U.S. economy (12:50).
·
Data picks up on
Thursday as initial and continuing claims (8:30), existing home sales,
and leading indicators (10) are released. Minny's Kocherlakota opines on
monetary policy and the economy (13:30).
·
Data concludes for the
week on Friday with new home sales (10). SF's Williams speaks
in front of the Association of Trade and Forfaiting conference (16).
On other news....
Currencies
Dollar Ticks Higher in Sleepy Trade:
10-yr: -06/32..2.504%..USD/JPY: 101.45..EUR/USD: 1.3698 -Technical-
·
The Dollar Index drifts
little changed near 80.05 as a sleepy session nears the final hour of trading. Click here to see a daily Dollar
Index chart.
·
Today's action has been
lackluster, limited to just a 10 cent range.
·
EURUSD is -15 pips @ 1.3695 as trade contends with its
lowest close in three months. An in-line French nonfarm payroll report saw
little response with trade coming under pressure amid uncertainty over the
state of Greece's coalition government. Support at current levels remains key. Bundesbank
President Jens Weidmann will speak Monday in Frankfurt.
·
GBPUSD is +35 pips @ 1.6825 as trade ticks higher for a
second session. A lack of data and news out of the UK has the bulls in charge
as speculation remains the Bank of England will be the first of the major
Western central banks to hike rates and emerge from the crisis. A run back
above 1.6850 would likely produce a retest of the recent highs near
1.7000.
·
USDCHF is +10 pips @ .8920 as buyers remain in control
for the seventh time in eight days. Resistance in the .8925 area is all that
stands in the way of a test of the 200 dma (.9000)
·
USDJPY is -10 pips @ 101.45 as trade flirts with its
lowest close since February. A sleepy session has seen trade limited to a tight
30 pip range amid the lack of news and data out of Japan. Japan's core
machinery orders will cross the wires Sunday evening.
·
AUDUSD is +10 pips @ .9365 as the range bound trade
(.9330/.9400) that has been in place for much of the past two weeks persists. A
breakdown through the range puts .9250 support and the 50 dma in the
crosshairs.
·
USDCAD is -10 pips @ 1.0870 as trade has seen little
response to the foreign securities purchases (-CAD1.23 bln v. CAD7.21 bln
expected) miss. Action continues to look heavy so a test of the 200 dma
(1.0723) cannot be ruled out. Canadian banks are closed Monday in
observance of Victoria Day.
Weekly Analysis
Week 1
Technical Updates
Briefing's Commentaries
Weekly Wrap It was another roller-coaster week for the equity market. The performance of the Russell 2000 was arguably the most indicative of that point. The small-cap index surged 2.4% on Monday and yet it ended the week down 0.4% after staging a closing rally on Friday in which it gained approximately 1.1% in the last two hours of trading.
The topsy-turvy action had its share of explanations that spanned from technical factors to an acknowledgment from leading hedge fund manager David Tepper that "it's nervous time" and one shouldn't be "too frickin' long right now." The biggest focal point perhaps was the Treasury market.
Longer-dated Treasury securities continued to defy most people's logic entering the year that they were destined to drop in price and move up in yield. The exact opposite has occurred. The yield on the 10-yr note, which stood just above 3.00% at the end of 2013, traded below 2.50% on Thursday before settling the week at 2.52%.
The explanations for the strength in the Treasury market this year are as multi-varied as the explanations are for the stock market's roller-coaster behavior. They include short covering, pension fund liability matching, a demographic-related asset shift, sovereign interest rate differentials, geopolitical worries, and economic growth concerns.
The economy was a frequent topic of conversation this week as the economic calendar featured a host of reports dealing with inflation, consumer spending, housing, and manufacturing activity.
The brief summation of that body of data is that it was mixed.
- April retail sales were weaker than expected, squashing arguments about there being pent-up demand
- PPI was higher than expected, piquing some inflation concerns that carried over with an in-line CPI report
- Weekly initial claims were just 297,000, which was the lowest since May 2007 and an encouraging sign for the labor market
- The Empire Manufacturing Survey for May showed a big jump in activity from the prior month, yet the Philadelphia Fed Index showed a deceleration
- The NAHB Housing Market Index for May showed a drop in builder confidence from April, yet housing starts for April rose 13.2% to a seasonally adjusted annual rate of 1.072 mln units; and
- Industrial production declined 0.6% in April, not only because warmer temperatures reduced utilities output, but because of a surprising 0.4% decline in manufacturing output
The stock market itself was left in a mixed state this week. To that end, five sectors ended the week up -- telecom services (+1.2%), information technology (+0.8%), health care (+0.5%), materials (+0.2%), and industrials (+0.07%) -- while five sectors ended the week down -- financials (-0.9%), consumer staples (-0.6%), utilities (-0.6%), energy (-0.6%), and consumer discretionary (-0.2%).
Note, too, that the sector performance provided some mixed signals as there was a mishmash of cyclical and countercyclical sectors on the upside and the downside.
Separately, one of the standouts for the week was the US Dollar Index. It tacked on 0.2% with the euro dropping 0.5% on the expectation that the ECB will soon be announcing new stimulus measures. To be sure, the need to implement new stimulus at this juncture isn't conveying a lot of confidence about the current state of economic affairs in the eurozone. In turn, disappointing earnings results and guidance from Wal-Mart (WMT), the world's largest retailer, didn't provide the most comforting thoughts either as it relates to the outlook for the US consumer and US economy.
All of that is at odds with the strong optimism entering the year that the US economy will hit escape velocity soon. It's still a reasonable hope, but it is still trailing the reality, and that is causing the market to move in erratic fashion.
Next Week In View
Economic Commentaries
Economic Summary: Housing Starts top
expectations; Michigan Sentiment misses the mark
Economic Data Summary:
Economic Data Summary:
·
April Housing Starts
1.072 M vs Briefing.com consensus of 975K; March was revised to 947K from 946K
·
April Building Permits
1.080 M vs Briefing.com consensus of 1.008 M ; March was revised to 1.000 M
from 990K
o In fact, since 1990, multifamily starts have topped
April's level only 3 times. Starts in the multifamily sector are unlikely to
remain at their April level and should weigh down the construction numbers in
May. Single family starts increased 0.8% in April to 649,000 from 644,000 in
March. That is a nice solid level considering an average of only 586,000 single
family homes were started in January and February, but it still remains well
below levels from November 2013 when 710,000 homes were started.
·
May Michigan Sentiment
81.8 vs Briefing.com consensus of 84.5; April was 84
o The Expectations Index fell to 73.2 from 74.7.
The decline in sentiment was a surprise, but the drop brought the index back
in-line with its 12-month average. There really has been no long-lasting up or
down trends in sentiment since 2012. It is likely that the volatile stock
market outweighed the improvements in the latest employment data.
Other International Events of
Interst
·
Japan's Industrial
Production increased 0.7% month-over-month (consensus 0.3%, prior 0.3%) while
Capacity Utilization rose 0.4% (last -2.6%)
Jason's Commentaries
The market started the day with a bearish intent, but somehow... the market decided to rally towards the closing bell which ended the day in the green. I reckon likely it's a short covering after a few down days and ahead of the FOMC minutes. I believe that the market is likely to price into the FOMC minutes as well. Expecting the volumes to be weak on Monday and Tuesday. The strongest leader on friday was discretionary and tech, both gaining 0.74% and 0.63% respectively. Divergence were quite apparent in the internals with a higher volumes due to expiration Friday. Today is gonna be a tough fight between the bulls and the bears. The bulls will be looking to price into FOMC while the bears will be looking to profit take off last Friday's session.
Market Call: FLAT to downside
Date:19 May 2014
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