17 June 2014 AMC - Market broke out higher as small caps led

17 June 2014 AMC - Market broke out higher as small caps led

Market Summary 

 European closing prices
European Markets Closing Prices European markets closed; stock markets across Europe performed as follows:

• UK's FTSE: + 0.2%
• Germany's DAX: + 0.4%
• France's CAC: + 0.6%
• Spain's IBEX: + 0.5%
• Portugal's PSI: + 0.1%
• Italy's MIB Index: + 0.1%
• Irish Ovrl Index: -0.3%
• Greece ASE General Index: -0.3%

Before Market Opens 

S&P futures vs fair value: -4.40. Nasdaq futures vs fair value: -4.80.
The S&P 500 futures trade four points below fair value.

Asian markets finished on a mixed note. The Reserve Bank of Australia released its minutes, which showed the recent strength of the Aussie dollar has posed some problems for the economy.

• In economic data: 
  • China's foreign direct investment grew 2.4% year-over-year (2.5% year-over-year expected) 
  • Hong Kong's unemployment rate held at 3.1%, as expected 

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• Japan's Nikkei ticked up 0.3% amid a quiet trade. Heavyweight Fast Retailing finished with an in-line gain of 0.3%. 
• Hong Kong's Hang Seng shed 0.4%, easing off its best levels of 2014. Casino stocks were pressured as Sands China lost 1.4% and Galaxy Entertainment fell 1.1%. 
• China's Shanghai Composite fell 0.9%, sliding off two-month highs. Financials weighed with ICBC giving up 1.3%. 

Major European indices trade little changed after surrendering their modest gains. Notably, Britain's inflation reading came in at a 4.5-year low, suggesting the Bank of England is likely to remain cautious with regards to hiking rates.

• In economic data: 
  • Swiss PPI ticked up 0.1% month-over-month (forecast 0.1%; previous -0.3%), while the year-over-year reading decreased 0.8% (forecast -0.8%; previous -1.2%) 
  • Great Britain CPI decreased 0.1% month-over-month (forecast 0.2%; previous 0.4%) and increased 1.6% year-over-year (forecast 1.7%; prior 2.0%). Core CPI increased 1.6% year-over-year (forecast 1.7%; previous 2.0%) 
  • Italian trade surplus narrowed to EUR3.51 billion from EUR3.89 billion (forecast EUR4.27 billion; previous EUR3.89 billion) 
  • German ZEW Economic Sentiment dropped to 29.8 from 33.1 (forecast 35.0), while ZEW Current Conditions improved to 67.7 from 62.1 (expected 62.6) 
  • Eurozone ZEW Economic Sentiment increased to 58.4 from 55.2 (forecast 59.6) 

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• Great Britain's FTSE trades up 0.1% with discretionary shares providing support. International Consolidated Airlines and Whitbread are up 1.0% and 3.0%, respectively. 
• In France, the CAC is higher by 0.1% as industrials contribute to the advance. Legrand and Schneider Electric are both up near 1.0%. On the downside, AXA and Credit Agricole display respective losses of 0.9% and 0.5%. 
• Germany's DAX is flat. Health care names Beiersdorf and Fresenius Medical Care outperform with gains of 0.5% and 0.8%, respectively. Deutsche Lufthansa lags, down 1.5%. 
• Italy's MIB holds a loss of 0.3%. Saipem is the weakest performer, down 2.8%. Telecom Italia, which trades lower by 1.7%, also weighs.

U.S. Equities

• Futures point to modest losses at the open as the DJIA and S&P 500 remain within striking distance of record highs and the Nasdaq holds near its best level in more than 16 years
• The VIX (12.65) finished yesterday's session near one-month highs
• Housing Starts (1001K actual v. 1028K expected)
• Building Permits (991K actual v. 1050K expected)
• CPI (0.4% actual v. 0.2% expected)
• Core CPI (0.3% actual v. 0.2% expected)

• S&P Futures -4 @ 1925
• Dow Futures -39 @ 16,663
• Nasdaq Futures -5 @ 3767

Asia

• Markets finished mixed across Asia
• The Reserve Bank of Australia minutes showed the recent strength of the Aussie dollar has posed some problems for the economy 
• China's foreign direct investment grew 2.4% YTDoY (2.5% YTDoY expected) 
• Hong Kong's unemployment rate held at 3.1% (3.1% expected)
• Japan's Nikkei (+0.3%) ticked higher amid a quiet trade
• Hong Kong's Hang Seng (-0.4%) eased off its best levels of 2014
• China's Shanghai Composite (-0.9%) slide off two-month highs 
• India's Sensex (+1.3%) finished just off record highs
• Australia's ASX (-0.2%) fell to a two-month low

Market Internals

Market Internals -Technical-
The Nasdaq closed up 16 (+0.37%) at 4337, the S&P 500 closed up 4 (+0.22%) at 1942, and the Dow closed up 27 (+0.16%) at 16808. Action came on below average volume (NYSE 586 mln vs. avg. of 661; NASDAQ 1681 mln vs. avg. of 1772), with advancers outpacing decliners (NYSE 1931/1190, NASDAQ 1810/847) and new highs outpacing new lows (NYSE 149/11, NASDAQ 97/23).

Relative Strength:
Clean Energy-PBW +3.09%, Broker-Dealers-IAI +2.28%, Regional Banks-KRE +1.82%, Banks-KBE +1.7%, Heating Oil-UHN +1.46%, India-INP +1.25%, Turkey-TUR +1.04%, Poland-EPOL +0.93%, Taiwan-EWT +0.78%, Greece-GREK +0.51%.

Relative Weakness:
Volatility-VXX -3.46%, Egypt-EGPT -2.98%, Coffee-JO -1.77%, Cotton-BAL -1.52%, Columbia Index-GXG -1.33%, Chile-ECH -1.22%, Latin America 40-ILF -1.13%, Australia-EWA -0.98%, Shipping-SEA -0.97%, Rare Earths-REMX -0.94%
.

Leaders and Laggards

Technical Updates

Briefing's Commentaries

Closing Market Summary: Small Caps Lead Stocks Higher Ahead of FOMC
The stock market ended the Tuesday session on a modestly higher note with participants gearing up for the latest policy directive from the FOMC, which will be released on Wednesday afternoon.

Small- and mid-cap stocks led the way with the Russell 2000 and S&P Mid Cap 400 climbing 0.7% and 0.8%, respectively. Meanwhile, the S&P 500 added 0.2% with five sectors posting gains.

Overall, cyclical groups did the bulk of the grunt work as five of six growth-sensitive sectors advanced. Financials (+0.9%) seized the lead at the start of the session and never looked back. Top-weighted components like Bank of America (BAC 15.59, +0.31) and Morgan Stanley (MS 32.50, +0.79) posted respective gains of 2.0% and 2.5%, while the entire sector extended its June advance to 1.9%.

Financials notwithstanding, gains in other areas were much more subdued as the second-best sector of the day—consumer discretionary—added just 0.3%. Retailers contributed to the strength with the SPDR S&P Retail ETF (XRT 86.28, +0.74) climbing 0.9%, while shares of Netflix (NFLX 443.65, +13.39) jumped 3.1% amid reports indicating lawmakers are finalizing a proposal that would ban internet fast lanes.

Also of note, the technology sector (+0.2%) contributed to the outperformance of the Nasdaq Composite (+0.4%), but it is worth mentioning that the bulk of the strength came from high-beta chipmakers. The PHLX Semiconductor Index jumped 0.7% as 25 of its 30 components finished in the green.

Although most growth-oriented sectors posted gains, that was not the case with the energy space (-0.2%). The sector trimmed its loss into the close, but could not turn positive as its top-weighted listing—ExxonMobil (XOM 102.42, -0.50) weighed. Shares of ExxonMobil fell 0.5%, while crude oil slumped into the pit close, diving 0.6% to $106.28/bbl.

Meanwhile, the other commodity-related sector, materials (+0.2%), received support from steelmakers and miners. The Market Vectors Steel ETF (SLX 46.55, +0.41) rose 0.9% and Market Vectors Gold Miners ETF (GDX 24.12, +0.14) added 0.6% even as gold futures retreated.

The yellow metal slipped 0.3% to $1271.80/ozt, but still ended above its pre-CPI levels. Gold traded at $1265 ahead of the report and fell to $1260 immediately after, before spending the remainder of the day in a slow climb.

On the fixed income side, Treasuries fell to lows following this morning's data and continued their retreat into the close. The 10-yr yield rose five basis points to 2.65%.

Participation was well below average with less than 600 million shares changing hands at the NYSE.

Economic data was limited to May housing starts/building permits and CPI:

• Housing starts fell 6.5% in May to 1.001 million from a downwardly revised 1.071 million (from 1.072 million) in April. The Briefing.com consensus expected housing starts to fall to 1.028 million. Multifamily construction fell 7.6% to 376,000. There is still room for more declines over the next few months. The bigger concern was the trend in single-family construction. That type of construction is normally stable, but these starts fell 5.9% in May to 625,000. That was the lowest level since 589,000 single-family homes were started in February. Hopefully, this was just a one-month blip but it warrants closer evaluation. 
• Consumer prices increased 0.4% in May, up from a 0.3% increase in April. That was the largest increase since February 2013. The Briefing.com consensus expected the CPI to increase 0.2%. 
  • Contrary to the trends in the PPI, both food and energy prices contributed positively to overall consumer price growth in May. 
  • Food prices increases accelerated in May. After increasing by 0.4% for each of the last three months, prices rose 0.5% in May. That was the largest increase since August 2011. Food at home prices rose 0.7%, the biggest increase since July 2011. 
  • Energy prices increased 0.9% in May on a 2.3% increase in electricity costs and a 0.7% increase in gasoline costs. Some of this gain was due to seasonal credits that temporarily lowered electricity prices in California in April and returned to normal in May. 
• Excluding food and energy, core CPI increased 0.3% in May after increasing 0.2% in both March and April. That was the largest increase in core prices since August 2011. The consensus expected these prices to increase 0.2%. 

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET, while Q1 Current Account Balance (Briefing.com consensus -$97.80 billion) will cross the wires at 8:30 ET. Lastly, the FOMC will release its latest policy directive at 14:00 ET.

• S&P 500 +5.1% YTD 
• Nasdaq Composite +3.9% YTD 
• Dow Jones Industrial Average +1.4% YTD 
• Russell 2000 +1.0% YTD

Commodities

Closing Commodities: WTI Crude Oil Ends Lower

• Crude oil sold off this afternoon and finished the day near its low for the day. July crude closed $0.60 lower at $106.28/barrel
• Gold consolidated in afternoon trade following its morning rally and finished the day $3.50 lower at $1271.80/oz
• Silver, on the other hand, continued to inch higher and ended today's session one penny higher at $19.73/oz.
• Natural gas hit a new HoD of $4.74 early in afternoon trade. It has since pulled back and finished one cent higher at $4.71/MMBtu
• Copper fell as low as $3.04.lb this morning and finished one cent higher at $3.06/lb

NYMEX Energy Closing Prices

• July crude oil fell $0.60 to $106.28/barrel
• July natural gas rose 1 cent to $4.71/MMBtu
• July heating oil rose 1 cent to $3.00/gallon
• July RBOB rose 2 cents to $3.09/gallon

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

• July corn fell 2 cents to $4.39/bushel
• July wheat rose 2 cents to $5.82/bushel
• July soybeans fell 24 cents to $13.98/bushel
• July ethanol fell 2 cents to $2.14/gallon
• Sep sugar (#16 (U.S.)) fell 0.07 of a penny to 25.39 cents/lbs

COMEX Metals Closing Prices

• Aug gold fell $3.50 to $1271.80/oz
• July silver rose $0.01 to $19.73/oz
• July copper rose 1 cent to $3.06/lbs

Treasuries

3y Nears 1.000%, Highest Since May 2011: 10-yr: -14/32..2.650%..USD/JPY: 102.15..EUR/USD: 1.3542

• Treasuries closed on their lows. Click here to see an intraday yields chart.
• The complex hovered little changed into the cash open, but sellers emerged following the hot CPI (0.4% actual v. 0.2% expected) print. 
• Disappointing housing starts (1001K actual v. 1028K expected) and building permits (991K actual v. 1050K expected) numbers were overlooked as the hot CPI number took center stage ahead of tomorrow's FOMC rate decision.
• The 3y tacked on +3.7bps to 0.989%, and holds an eyelash below its first 1.000% print since May 2011. 
• A +5.3bp advance ran the 5y up to 1.753%. Today's close marked the highest since early April, and has action flirting with resistance in the area that guards the 2014 highs (1.800%). 
• The 10y lagged, adding +5.8bps to 2.655%. The benchmark yield climbed back above trendline resistance and the 50 dma before closing on the 100 dma. 
• At the long end, the 30y rallied +4.9bps to 3.446%. Resistance in the 3.500% area will have to hold in order for the bull case to remain intact.
• A steeper developed as the 2-10-yr spread widened to 217bps.
• Precious metals ended mixed with gold -$4 @ $1271 and silver +$0.01 @ 19.72. 
• Data: MBA Mortgage Index (7), current account balance (8:30), and the FOMC rate decision (14).

On other news.... 

U.S. farmers sees corn crop conditions improve; corn futures now at 4-month low as prices slide lower
Yesterday, at the close of U.S. equity markets, the USDA released its weekly crop progress, which showed mixed results. Corn condition improved slightly,while soybeans crop condition slightly worsened. Wheat remain unchanged.

Crop conditions came in mixed (this is for crop in good/excellent conditions--  the top two ratings mixed together)

• Corn crop condition improved to 76%, up from 75% in the prior week
• Soybean crop conditions fell to 73%, from 74% in the prior week
• Winter wheat crop conditions remained unchanged

• Corn emerged is at 97% now (all corn is planted)
• Soybeans emerged is at 83% (92% of U.S. soybean crop is now planted)
• Spring wheat emerged is at 91% (all spring wheat is planted)
• Currently, 16% of the winter wheat is now harvested

Agricultural weather highlights from the USDA this morning, which notes how a farmers crop (planting, emergence, condition) may be affected in these regions: Tuesday, June 17, 2014

• In the West, rain and high elevation snow are boosting moisture reserves across northern portions of the Rockies and Intermountain region, while drought continues to impact pastures, crops, and water reserves from California into the Four Corners region
• On the Plains, mostly dry weather is promoting fieldwork and crop development. Long-term drought persists in key central and southern winter wheat areas, though recent rain has improved summer crop prospects. For example, 63% of Kansas' winter wheat was rated poor to very poor as of June 15, while the state's corn crop was only 9% poor to very poor (and 50% good to excellent)
• In the Corn Belt, locally heavy showers and thunderstorms are easing soil moisture deficits in Iowa and northern Illinois. Elsewhere, dry, warm weather is promoting corn and soybean development.
• In the South, mostly dry weather is promoting winter wheat harvesting and other seasonal fieldwork after recent rain-induced delays. Seasonal showers continue to ease dryness in southern Florida.

Currencies 

Dollar Firms as CPI Tops Estimates: 10-yr: -13/32..2.644%..USD/JPY: 102.15..EUR/USD: 1.3540

• The Dollar Index holds on session highs near 80.65 as a choppy trade persists ahead of tomorrow's FOMC rate decision. Click here to see a daily Dollar Index chart.
• The Index hovered little changed near 80.50 before this morning's hotter than expected CPI print put a bid behind the greenback, and lifted trade to 80.65.
• However, a sleepy session would follow as action has spent most of the day trapped in a five cent range. 
• EURUSD is -35 pips @ 1.3535 as trade tests the recent lows. The single currency firmed in early trade despite the disappointing ZEW Economic Sentiment and German ZEW Economic Sentiment numbers before coming under pressure following this morning's U.S. economic data releases. Support in the 1.3500 area remains under close watch.
• GBPUSD is -25 pips @ 1.6955 as sellers take control for the first time in five days. Tame CPI, PPI Input, and RPI readings failed to derail the early bid, but sellers emerged as trade saw an unsuccessful attempt at reclaiming 1.7000. The Bank of England's MPC asset purchase facility and rate votes will be released tomorrow.
• USDCHF is +25 pips @ .8995 as action contends with four-month highs. Early selling was unable to penetrate support in the .8950 area as buyers stepped in to defend the 200 dma. Swiss data scheduled for tomorrow is limited to ZEW Economic Expectations. 
• USDJPY is +30 pips @ 102.10 as trade looks likely to post its best close in a week. Today's bid has run the pair back above the 50 dma and has action probing the 100 dma. The 102.40 area provides the first level of resistance. The latest Bank of Japan minutes will accompany the trade balance. 
• AUDUSD is -65 pips @ .9335 as sellers remain in control for a third day. The hard currency has been under pressure throughout the session as the dovish Reserve Bank of Australia minutes weigh. A breakdown of the 50 dma (.9320) puts the key .9225/.9250 area in play. Australia's CB Leading Index is due out tonight.
• USDCAD is +20 pips @ 1.0860 as trade sees another bounce off support. A lackluster session has kept the pair in a tight 25 pip range. Canada's wholesale sales will cross the wires tomorrow.

Next Week In View




Economic Commentaries

Economic Summary: Housing Starts slightly below estimates; CPI slightly hotter than expected; FOMC decision tomorrow at 14:00, followed by Janet Yellen press conference at 14:30
Economic Data Summary:

• May Housing Starts 1001K vs Briefing.com consensus of 1028K; April was revised to 1071K from 1072K
• May Building Permits 991K vs Briefing.com consensus of 1050K; April was revised to 1059K from 1080K
• Multifamily construction is highly volatile and, at 407,000, construction levels were running much hotter than both the 3-month and 12-month averages. Construction was expected to return to its longer-term trend and weigh down the starts level. That happened in May. Multifamily construction fell 7.6% to 376,000. There is still room for more declines over the next few months. The bigger concern was the trend in single-family construction. That type of construction is normally stable, but these starts fell 5.9% in May to 625,000. 
• May CPI 0.4% vs Briefing.com consensus of 0.2%; April was 0.3%
• May Core 0.3% CPI vs Briefing.com consensus of 0.3%; April was 0.2%
•  Food prices increases accelerated in May. After increasing by 0.4% for each of the last three months, prices rose 0.5% in May. That was the largest increase since August 2011. Food at home prices rose 0.7%, the biggest increase since July 2011. Energy prices increased 0.9% in May on a 2.3% increase in electricity costs and a 0.7% increase in gasoline costs. Some of this gain was due to seasonal credits that temporarily lowered electricity prices in California in April and returned to normal in May. Excluding food and energy, core CPI increased 0.3% in May after increasing 0.2% in both March and April. 

Upcoming Economic Data:

• Weekly MBA Mortgage Applications due out Wednesday at 7:00 (Briefing.com consensus of ; Last Week was +10.3%)
• First Quarter Current Account Balance due out Wednesday at 8:30 (Briefing.com consensus of -$97.8 bln; Fourth Quarter was -$81.8 bln)

Upcoming Fed/Treasury Events:

• The Fed is scheduled to start a two day meeting Tuesday.  The decision will be announced Wednesday at 14:00 including supplemental economic projections.  The Janet Yellen press conference will be held at 14:30.

Other International Events of Interest

• German ZEW Economic Sentiment dropped to 29.8 from 33.1 (forecast 35.0), while ZEW Current Conditions improved to 67.7 from 62.1 (expected 62.6) 

Jason's Commentaries

The futures decided to take a tanker before the market open while i was cutting my hair... but the moment i finished cutting my hair after market open, it started rallying all the way up high. The main leader in the market was the financials and the small cap last night. The rest of the market was totally flat. Volumes were low as expected, the market makers uses the Financials to push up the prices while the market is awaiting the FOMC statement. It's going to be a volatile session tonight while the FOMC statements are being released at 2pm ET. Ain't gonna make a call for today's session.








Market Call: Abstained

Date: 18 June 2014