13 June 2014 AMC - Market ended flat for the week

13 June 2014 AMC - Market ended flat for the week

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: -1.0%

·         Germany's DAX: -0.3%

·         France's CAC: -0.2%

·         Spain's IBEX: + 0.2%

·         Portugal's PSI: -0.2%

·         Italy's MIB Index: 0.0%

·         Irish Ovrl Index: -1.4%

·         Greece ATHEX Composite: -2.8%

Before Market Opens 

S&P futures vs fair value: +2.20. Nasdaq futures vs fair value: +15.50.
The S&P 500 futures trade two points above fair value.

Asian markets finished the week on a mixed note. As expected, the Bank of Japan raised its economic assessment on foreign economies to ‘recovering' from ‘started to recover.' The central bank made no changes to its policy stance, which was also in line with expectations. 

·         In economic data: 

o    China's Industrial Production rose 8.8% year-over-year, as expected, while Fixed Asset Investment increased 17.2% year-over-year (consensus 17.1%, prior 17.3%), and Retail Sales jumped 12.5% year-over-year (expected 12.1%, previous 11.9%). 

o    The Bank of Japan made no changes to its policy stance, as expected. Separately, Capacity Utilization fell 2.2% month-over-month (prior 0.4%) and Industrial Production declined 2.8% month-over-month (expected -2.5%, prior -2.5%). 

o    New Zealand's FPI came in at 0.6% month-over-month (previous 0.6%), while Business NZ PMI fell to 52.7 from 54.4. 

o    Singapore's Unemployment Rate slipped to 2.0% from 2.1% (consensus 2.1%). Separately, Retail Sales fell 0.7% month-over-month (expected -3.4%, prior -4.0%). 

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·         Japan's Nikkei climbed 0.8% thanks to support from growth-sensitive names. Japan Steel Works and Nisshin Steel gained 3.8% and 7.6%, respectively. 

·         Hong Kong's Hang Seng rallied 0.6% amid strength in energy names. China Petroleum & Chemical and CNOOC both added just under 2.0%. Want Want China Holdings lagged, shedding 0.4%. 

·         China's Shanghai Composite gained 0.9%, ending on its high. Avic Heavy Machinery jumped the limit, 10.0%. 

European markets trade lower across the board with Great Britain's FTSE (-1.1%) leading the slide. Bank of England Governor Mark Carney spoke shortly after yesterday's New York session, saying the first rate hike may come sooner than the markets expected. The remarks have shifted expectations for the first hike to late 2014 from Q1 2015. 

·         Participants received several data points: 

o    Eurozone trade surplus expanded to EUR15.80 billion from EUR15.40 billion (EUR15.90 billion). 

o    Great Britain's CB Leading Index rose 0.5% month-over-month (prior 0.3%). 

o    Germany's CPI slipped 0.1% month-over-month, while the year-over-year reading rose 0.9%. Both figures matched expectations. 

o    French Nonfarm Payrolls decreased 0.1% quarter-over-quarter, as expected. 

o    Spain's CPI was unchanged month-over-month, as expected. 

o    Italy's CPI slipped 0.1% month-over-month, as expected. 

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·         In France, the CAC is lower by 0.6% amid weakness in financials. AXA, Credit Agricole, and Societe Generale are down between 1.6% and 2.4%. Technip outperforms, up 1.3%.

·         Germany's DAX holds a loss of 0.6%. Deutsche Lufthansa is continuing its recent weakness, trading lower by 3.2%. Utilities outperform with E.ON and RWE up 1.4% and 1.2%, respectively. 

·         Great Britain's FTSE trades down 1.1%. Homebuilders weigh amid expectations of a rate hike taking place sooner than previously thought. Barratt Developments and Presimmon are down 5.8% and 6.7%, respectively.

U.S. Equities

·         Equity futures point to little change at the open as the major averages contend with their first three-day losing streak since the beginning of April

·         The current slide has dropped both the DJIA and S&P 500 off record highs, and has prevented the Nasdaq from putting in its best print in more than 16 years

·         Volatility has begun to creep back into the markets with the VIX (12.56) climbing off levels last seen in March 2013

·         PPI (-0.2% actual v. 0.2% expected)

·         Core PPI (-0.1% actual v. 0.1% expected)

o    S&P Futures -1 @ 1922

o    Dow Futures -13 @ 16,665 

o    Nasdaq Futures +3 @ 3767

Asia

·         Markets ended mixed across Asia

·         Japan's Nikkei (+0.8%) gained after the Bank of Japan kept policy unchanged while upgrading its assessment of overseas economies

·         China's Shanghai Composite (+0.9%) rallied to one and a half-month highs in response to the in-line industrial production (8.8% YoY) and fixed asset investment (17.2%) data

·         Hong Kong's Hang Seng (+0.6%) piggybacked the move on the Mainland and ended just off its best levels of 2014

·         India's Sensex (-1.4%) tumbled off record highs as rising oil prices weighed

·         Australia's ASX (-0.4%) fell to a two-month low 

Market Internals

Market Internals -Technical-
The S&P 500 closed up 6 points (+0.3%) at 1936, Nasdaq closed up 13 (+0.3%) at 4311, and the Dow closed up 42 (+0.3%) at 16776. Action came on below average volume (NYSE 563 mln vs. avg. of 667; NASDAQ 1630 mln vs. avg. of 1802), with advancers outpacing decliners (NYSE 1789/1327, NASDAQ 1342/1289) and new highs outpacing new lows (NYSE 104/13, NASDAQ 60/19). 

Relative Strength: 
offee-JO +2.0%, Sugar-SGG +1.9%, Social Media-SOCL +1.8%, Semiconductor-SMH +1.6%, China-FXI +1.5%, Metals & Mining-XME +1.5%, Cocoa-NIB +1.5%, Telecom-IYZ +1.4%, Oil&Gas Expl.&Prod.-XOP +1.2%, Thailand-THD +1.2%, Hong Kong-EWH +0.9%, British Pound Sterling-FXB +0.8% 

Relative Weakness: 
Greece-GREK -2.0%, Volatility-VXX -1.7%, India-INP -1.6%, S. Korea-EWY --1.1%, Platinum-PPLT -0.9%, Chile-ECH -0.9%, Turkey-TUR -0.6%, Rare Earth Strategic Metals-REMX -0.5%, Mexico-EWW -0.5%

Leaders and Laggards

Technical Updates

Commentaries 

Closing Market Summary: Stocks End Down Week on Higher Note
The major averages posted modest Friday gains, but the advance was not strong enough to pull the key indices back into the green for the week. The S&P 500 added 0.3%, narrowing its weekly loss to 0.7%, while the Nasdaq (+0.3%) ended the week lower by 0.3%.

The tech-heavy Nasdaq outperformed in the morning thanks to early strength among chipmakers and high-beta listings. The strength in microchip manufacturers resulted from upbeat sales and gross margin guidance issued by Intel (INTC 29.87, +1.91). The largest chipmaker soared 6.8%, while the 30-stock PHLX Semiconductor Index added 1.0%.

In addition, the index was also boosted by high-growth stocks after Priceline.com (PCLN 1189.30, -36.70) agreed to acquire OpenTable (OPEN 104.48, +34.05) for $103/share, representing a 46.2% premium. The news also stirred takeover speculation around the likes of GrubHub (GRUB 36.00, +2.35) and Yelp (YELP 74.92, +9.08). The two names surged 7.0% and 13.8%, respectively.

Accordingly, the technology sector (+0.7%) finished in a position of relative strength, but the largest S&P 500 group ceded its top spot to the energy space (+1.0%) during afternoon action. Meanwhile, other heavily-weighted sectors like consumer discretionary (unch), financials (unch), and health care (unch) could not keep up.

The energy sector was underpinned by top components Chevron (CVX 127.26, +1.15) and ExxonMobil (XOM 102.65, +0.99), while crude oil added 0.3% ($106.86/bbl). The sector was the only group that ended the week on a higher note (+1.7%) with the advance supported by a 4.1% gain in crude oil amid continued tensions in Iraq.

During the early afternoon, President Obama addressed the volatile situation in Iraq where a breakaway militant group of Al-Qaeda has taken control of parts of the country. Mr. Obama said that he will review his options over the coming days, but any potential U.S. action will have to be supported by the leaders of Iraq.

The sharp rise in oil prices over this week weighed on transport stocks, but the Dow Jones Transportation Average (+0.8%) bounced today after falling nearly 3.0% between Monday's close and today's opening bell. In turn, the strength underpinned the industrial sector (+0.4%).

Like the six cyclical sectors, countercyclical groups ended on a mixed note. Consumer staples (unch) and health care (unch) underperformed, while telecom services (+0.5%) and utilities (+0.7%) posted gains.

Treasuries registered slim losses with the 10-yr yield climbing one basis point to 2.60%.

Light participation continued plaguing the market with just over 560 million shares changing hands at the NYSE.

Economic data was limited to May PPI and the latest Michigan Consumer Sentiment survey: 

·         The Producer Price Index for May declined 0.2%. That was lower than the Briefing.com consensus estimate, which called for an increase of 0.6%. The downturn in May was attributed to a 0.2% decline in the indexes for final demand services and final demand goods. Excluding food and energy, core PPI declined 0.1%, which was also lower than the 0.1% increase projected by the Briefing.com consensus estimate. Notably, there weren't any strong indications of pipeline pricing pressures. Within intermediate demand, prices for processed goods fell by 0.1%, the index for unprocessed goods was unchanged, and prices for services declined by 0.4%. 

·         The preliminary reading for the University of Michigan Consumer Sentiment report for June dipped to 81.2 from the final reading of 81.9 for May. The June figure was the lowest reading since March and it fell short of the Briefing.com consensus estimate, which was pegged at 82.9. The shortfall was not a major deviation, yet it still qualifies as a disappointment when taking into account that stock markets were generally behaving well and employment conditions were improving during the survey period. 

On Monday, the Empire Manufacturing survey for June (Briefing.com consensus 12.8) will be released at 8:30 ET, while April Net Long-Term TIC Flows will cross the wires at 9:00 ET. In addition, May Industrial Production (consensus 0.5%) and Capacity Utilization (consensus 78.9%) will be announced at 9:15 ET, while the NAHB Housing Market Index for June (consensus 46) will be reported at 10:00 ET. 

·         S&P 500 +4.8% YTD 

·         Nasdaq Composite +3.2% YTD 

·         Dow Jones Industrial Average +1.2% YTD 

·         Russell 2000 -0.2% YTD 

Commodities

Closing Commodities: Crude Rises 0.3%, But 4.1% On The Week

·         Aug gold chopped around near the break-even line today, trading in a tight range between $1272.20 per ounce and $1275.70 per ounce.

·         Unable to gain traction, it settled unchanged at $1274.10 per ounce, booking a gain of 1.7% for the week.

·         July silver lifted from its session low of $19.50 per ounce set moments after floor trade opened and trended higher to a session high of $19.67 per ounce.

·         It settled 0.6% higher at $19.65 per ounce, bringing gains for the week to 3.4%.

·         July crude oil brushed a session low of $106.37 per barrel in early morning action and rose to a session high of $107.22 per barrel in afternoon pit trade.

·         It eventually settled 0.3% higher at $106.85 per barrel, booking a gain of 4.1% for the week.

·         July natural gas spent most of today's floor session in the red.

·         It dipped to a session low of $4.72 per MMBtu and eventually settled with a 0.4% loss at $4.74 per MMBtu, cutting gains for the week to 0.6%.

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         July corn rose 2 cents to $4.47/bushel 

·         July wheat settled unchanged at $5.85/bushel 

·         July soybeans rose 10 cents to $14.27/bushel 

·         July ethanol rose 2 cents to $2.15/gallon 

·         Sep sugar (#16 (U.S.)) fell 0.11 of a penny to 25.45 cents/lbs

NYMEX Energy Closing Prices

·         July crude oil rose $0.31 to $106.85/barrel

·         July natural gas fell 2 cents to $4.74/MMBtu

·         July heating oil settled unchanged at $2.99/gallon

·         July RBOB fell 2 cents to $3.06/gallon

Treasuries

Yield Curve Flattens: 10-yr: unch..2.601%..USD/JPY: 101.99..EUR/USD: 1.3541
The Week in Review

·         Treasuries endured a mixed week as selling took place up front while buyers were in control at the long end. Click here to see an intraweek yields chart.

·         A quiet start to the week in terms of data and disappointing average Treasury auctions led to weakness in the first half of the week, but buyers emerged in longer dated maturities as data disappointed towards week's end. 

·         Participants took note of Thursday's late-day comments from Bank of England Governor Mark Carney, which suggested a rate hike could occur sooner than markets are anticipating. Those words caused some decent-sized selling up front and in the belly on Friday despite the cooler than expected PPI (-0.2% actual v. 0.2% expected) and Michigan Sentiment (81.2 actual v. 82.9 expected) miss.

·         The rest of the week's data saw retail sales (0.3% actual v. 0.7% expected) fall short of estimates and both wholesale inventories (1.1% actual v. 0.3% expected) and business inventories (0.6% actual v. 0.4% expected) post larger than anticipated builds. 

·         This week's Treasury auctions started off weak, but concluded with a superb 30y reopening on Thursday.

·         The $13 bln 30y reopening drew 3.444% and a strong 2.69x bid/cover (12-auction average 2.35x). The 51.7% takedown by indirect bidders was the strongest since 2006 while the 21.7% direct takedown was well above the 12-auction average (21.7%). Primary dealers were left with just 26.6% of the supply.  

·         Wednesday's $21 bln 10y reopening drew 2.648% (WI 2.631%) and a solid 2.88x bid/cover; however indirect bids (36.0%) were light while direct bids (19.4%) were in-line with their 12-auction averages. Primary dealers ended up with 44.6% of the supply. 

·         Tuesday saw an average $28 bln 3y note auction. The auction drew 0.930% (WI 0.927%) and a slightly better than average 3.41x bid/cover. A light indirect bid (26.4%) was partially offset by the solid direct bid (19.4%). Primary dealers were stuck with 54.2% of the supply.

·         Selling upfront ran the 2y up +4bps to 0.451%. The yield ended the week near its highest levels of 2014, and is now just more than a handful of bps below the September 2013 peak (0.530%) that was brought on by fears of a debt ceiling breach.

·         The 3y surged +8bps to 0.928%. Action is just a couple of bps below the September 2013 highs (0.970%), which was last bested in May 2011.

·         The 5y ticked up +2bps to 1.696%. Trade ended the week just off one and a half-month highs.

·         The 10y slipped -1bp to 2.604%. The 2.600% area remains under close watch as it had served has key support from early-February through May.   

·         At the long end, the 30y shed -3bps to 3.412%. Action pushed back below the 50 dma (3.441%) and ended the week on key trendline resistance off the 2014 highs.

·         A flatter curve took hold as the 2-10-yr spread narrowed to 215.5bps and the 10-30-yr spread tightened to 171.5bps. 

The Week Ahead

·         Monday's data is heavy as Empire Manufacturing (8:30), Net Long-Term TIC Flows (9), industrial production, capacity utilization (9:15), and the NAHB Housing Market Index (10) are due out.

·         Tuesday will see housing starts, building permits, and CPI (8:30). 

·         Data continues to flow on Wednesday as the weekly MBA Mortgage Index (7) and current account balance (8:30) are released. The FOMC will announce its latest rate decision (14).

·         Data concludes for the week on Thursday as initial and continuing claims (8:30), Philly Fed, and leading indicators (10) are scheduled.

·         There is no data on Friday.

On other news.... 




Currencies 

Dollar Drifts Little Changed: 10-yr: unch..2.598%..USD/JPY: 102.00..EUR/USD: 1.3533

·         The Dollar Index clings to small gains as action holds near 80.65. Click here to see a daily Dollar Index chart.

·         A quiet U.S. session has seen action stuck in a 10 cent range between 80.60/80.70.

·         EURUSD is -15 pips @ 1.3535 as trade pushes lower for the fifth time in six days following the European Central Bank action. Support in the 1.3500 area remains in focus. Eurozone data due out Monday is limited to CPI.

·         GBPUSD is +45 pips @ 1.6970 as trade flirts with its best close since August 2009. Today's bid comes following yesterday's late-day comments from Bank of England chief Mark Carney suggesting a rate cut may come sooner than markets are anticipating. Crossing the wires today was news S&P raised its U.K. outlook to ‘Stable' from ‘Negative,' but the announcement has had little impact on trade.

·         USDCHF is +20 pips @ .9005 as trade contends with its best close in four months. A quiet calendar in Switzerland has left the franc at the mercy of the euro. 

·         USDJPY is +25 pips @ 102.00 as buyers take control for the first time in four sessions. Overnight, the Bank of Japan held both its key rate and asset purchase programs unchanged while upgrading its assessment of overseas economies. Also making headlines were comments from Prime Minister Shinzo Abe indicating the Japanese government is planning to lower the corporate tax rate to below 30%. Support in the 101.50 area remains key and is guarded by the 200 dma.

·         AUDUSD is -25 pips @ .9395 as trade slips off two-month highs. Today's weakness in the hard currency comes following in-line industrial production and fixed asset investment data out of China ans has sellers in control for just the second time in nine days. 

USDCAD is flat @ 1.0855 amid a lackluster trade. Action has been trapped in a tight 25 pip range despite the big manufacturing production (-0.1% actual v. 0.9% expected) miss. Canada's foreign securities purchases will cross the wires on Monday. Support in the 1.0825/1.0850 area remains key





Weekly Analysis
Week 1



Technical Updates

Briefing's Commentaries


Week in Review: Taking Profits

The stock market finished the Monday session on a modestly higher note, but the S&P 500 (+0.1%) could not keep pace with the Russell 2000 (+0.9%). Similar to the Russell 2000, the Nasdaq (+0.3%) displayed relative strength, while the Dow Jones Industrial Average (+0.1%) settled just ahead of the S&P 500. Equity indices climbed out of the gate with the early sentiment boosted by a set of acquisitions in three influential sectors; however, the intraday strength did not last as participants opted to take some money off the table after the Dow Jones Transportation Average surrendered its morning gain after outpacing the broader market over the past few weeks.

The market ended the Tuesday affair on a mixed note. Small caps underperformed with the Russell 2000 slipping 0.2%, while the S&P 500 shed less than a point with six sectors registering losses. The key indices entered the session after enjoying a big rally that sent the S&P 500 higher by 4.2% over the previous three weeks alone. That advance was predicated on the strength of small caps and transport stocks as the Russell 2000 and the Dow Jones Transportation Average entered the session with respective gains of 7.1% and 4.9% since May 20. Fittingly, with small --cap stocks and transports showing relative weakness, the broader market slumped out of the gate, but spent the remainder of the session in a steady climb back to unchanged. The underperformance of the Dow Jones Transportation Average (-0.1%) caused the industrial sector (-0.2%) to end the session near the bottom of the leaderboard.

On Wednesday, the market ended on a lower note with the Dow Jones Industrial Average (-0.6%) and Russell 2000 (-0.5%) leading the slide. The S&P 500 lost 0.4% with nine sectors in the red. Stocks spent the duration of the session in the red, while the Nasdaq (-0.1%) made a momentary appearance in the green. The tech-heavy index outperformed thanks to relative strength among chipmakers. However, the Nasdaq slumped back towards its low into the close as dip buyers were reluctant to step in and lift the overall market. With the major averages overextended on a short-term basis, the market was ready to take a step back at the sound of the first concerning headline and Wednesday's comments from the World Bank did the trick. Specifically, the World Bank cut its 2014 global growth outlook to 2.8% from 3.2%, while also revising projections for several major economies. For instance, the growth forecast for the U.S. was lowered to 2.1% from 2.8%, while China's GDP expectations were taken down to 7.6% from 7.7%.

Equities ended the Thursday session on a broadly lower note after spending the entire trading day in the red. The S&P 500 fell 0.7% with eight sectors posting losses, while the Nasdaq (-0.8%) underperformed. Stocks slumped out of the gate following some disappointing economic data and reports of skirmishes in northern Iraq. The disappointing economic news pertained to the retail sector as retail sales increased just 0.3% (Briefing.com consensus 0.7%), while core retail sales, which closely match the consumption component of GDP, slipped 0.1% in May. Separately, reports of intensifying battles in northern Iraq led by a breakaway militant group of Al-Qaeda raised concerns about the oil supply. The headlines out of Iraq put a bid in the oil market (+2.1% to $106.54/bbl) while also creating a residual concern that higher energy prices will be an added tax on consumers who, broadly speaking, continue to be pinched by limited wage growth. Fittingly, the worries translated into relative weakness for the consumer discretionary sector (-1.3%), which ended at the bottom of the leaderboard. The Dow Jones Transportation Average was also pressured by the developments, falling 2.0%.

Next Week In View





Economic Commentaries

Economic Summary: PPI shows unexpected decline in May; Michigan Sentiment misses the mark
Economic Data Summary:

·         May PPI -0.2% vs Briefing.com consensus of 0.2%; April was 0.6%

·         May Core PPI -0.1% vs Briefing.com consensus of 0.1%; April was 0.5%

o    The Producer Price Index for May declined 0.2%. That was lower than the Briefing.com consensus estimate, which called for an increase of 0.2%. The downturn in May was attributed to a 0.2% decline in the indexes for final demand services and final demand goods. Excluding food and energy, core PPI declined 0.1%, which was also lower than the 0.1% increase projected by the Briefing.com consensus estimate.

·         June Michigan Sentiment 81.2 vs Briefing.com consensus of 82.9; May was 81.9

o    The shortfall was not a major deviation, yet it still qualifies as a disappointment when taking into account that stock markets were generally behaving well and employment conditions were improving during the survey period.

o    It appears that consumer expectations acted as the drag on the overall number. The Consumer Expectations Index fell to 72.2 from 73.7, whereas the Current Conditions Index jumped to 95.4 from 94.5. As a reminder, sentiment does not have nearly as much impact on consumption as income growth does.

Upcoming Economic Data:

·         June Empire Manufacturing due out Monday at 8:30 (Briefing.com consensus of ; May was 19.0)

·         April Net Long-Term TIC Flows due out Monday at 9:00 (Briefing.com consensus of ; March was $4.0 bln)

·         May Industrial Production due out Monday at 9:15 (Briefing.com consensus of ; April was -0.6%)

·         May Capacity Utilization due out Monday at 9:15 (Briefing.com consensus of ; April was 78.6%)

·         June NAHB Housing Market Index due out Monday at 10:00 (Briefing.com consensus of ; May was 45)

Other International Events of Interest

·          Japan's Nikkei (+0.8%) gained after the Bank of Japan kept policy unchanged while upgrading its assessment of overseas economies

Jason's Commentaries

Despite the gains made at the earlier part of the week, the market started to take profit off the table, ending the week flat. We started the market with some bearish sentiment, led by the Russells. However by 10am ET, the market start recovering its losses and started making gains. However, the gains were not sustainable which ended the day flat by closing bell. The main leader of the market on Friday was Utilities and Technology as HPQ and Intel soared more than 5% on Friday. On top of that, the energy sector also performed pretty well as well. The other sectors closed flat for the day. In the technical perspective, the market might be hitting a retracement. However, We're having the FOMC statements on Wednesday, I reckon the market might be pushing the market up higher today to price in for the FOMC. On the weekly Tecnicals, we might be heading down this week as there are some nasty bearish candlesticks pattern forming. This week is going to be very very unpredictable...

Market Call: FLAT to upside

Date: 16 June 2014