19 June 2014 AMC - Market held flat after FOMC statements

19 June 2014 AMC - Market held flat after FOMC statements

Market Summary 

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

• UK's FTSE: + 0.4%
• Germany's DAX: + 0.7%
• France's CAC: + 0.7%
• Spain's IBEX: + 0.7%
• Portugal's PSI: + 0.5%
• Italy's MIB Index: + 0.9%
• Irish Ovrl Index: + 1.4%
• Greece ATHEX Composite: + 1.3%

Before Market Opens 

S&P futures vs fair value: +1.30. Nasdaq futures vs fair value: +2.50.
The S&P 500 futures trade one point above fair value.

Asian markets ended the session on a mixed note with China's Shanghai Composite (-1.6%) diving into the close amid comments from Moody's, indicating the rating agency expects the country's property market downturn to be pronounced with potential impact on GDP.

• Participants received several data points: 
  • Japan's foreign bonds buying report pointed to net purchases in the amount of JPY638.20 billion (previous JPY1.33 trillion). Separately, All Industries Activity Index fell 4.3% month-over-month (expected -3.7%, previous 1.5%) 
  • South Korea's PPI was unchanged on a month-over-month (previous -0.2%) and year-over-year (previous -0.3%) basis. 
  • New Zealand's GDP expanded 1.0% quarter-over-quarter (expected 1.2%, prior 1.0%) 

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• Japan's Nikkei gained 1.6%, closing on its session high. Nippon Sheet Glass surged 16.9% in reaction to an upgrade at Nomura. Pacific Metals was the weakest performer, falling 3.4%. 
• Hong Kong's Hang Seng slipped 0.1%, ending little changed. Property names saw considerable losses with Bank of China, China Resources Land, and China Overseas Land & Investment down between 2.6% and 6.5%. 
• China's Shanghai Composite fell 1.6%, settling near its low. China Vanke lost 1.4%. Technology names also lagged with Inspur Software and China National Software both down near 10.0%. 

Major European indices hover near their best levels of the session with gains close to 1.0%. Bank of England member Martin Weale said there is no case for a rate hike at the moment, but the situation could change later this year.

• Economic data was limited: 
  • Great Britain's Retail Sales slipped 0.5% month-over-month, as expected (prior 1.0%), while the year-over-year reading increased 3.9% (expected 4.3%, previous 6.5%). Also of note, Core Retail Sales ticked down 0.5% month-over-month (expected -0.6%, previous 1.7%), while the year-over-year reading rose 4.7% (consensus 4.8%, prior 7.4%). Separately, CBI Industrial Trends Orders rose to 11 from 0 (expected 3). 
  • The Swiss National Bank held its key interest rate unchanged at 0.0%. 

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• Great Britain's FTSE is higher by 0.8%. Rolls-Royce Holdings leads with a gain of 5.9% after announcing a buyback in the amount of GBP1 billion. Drugmaker Shire is the weakest performer, down 0.5%. 
• Germany's DAX holds an advance of 0.8%. Exporters BMW and Daimler are among the leaders with respective gains of 0.5% and 0.3%. On the downside, K+S lags with a loss of 1.1%. 
• In France, the CAC trades up 1.0% as growth-sensitive names lead. Cie de St-Gobain is higher by 2.7% and Vinci sports an advance of 1.7%.

U.S. Equities

• Equity futures point to a flat open
• Yesterday's dovish leaning FOMC Statement and accompanying Yellen press conference propelled the S&P 500 to a record high
• The DJIA finished just a stone throw away from its own all-time high peak and the Nasdaq ended just below its best levels in six years
• The VIX (10.61) was dropped to its lowest level since February 2007
• Initial Claims (312K actual v. 313K expected)
• Continuing Claims (2561K actual v. 2638K expected)

• S&P Futures +1 @ 1950
• Dow Futures +9 @ 16,827
• Nasdaq Futures +4 @ 3800

Asia

• Markets were mixed across Asia
• Japan's Nikkei (+1.6%) surged to a four and a half-month high thanks to the dovish Fed commentary
• China's Shanghai Composite (-1.6%) did not see the same result as the continued onslaught of IPOs coming to market weighed. Also making headlines was a cautious piece from Moody's voicing concerns over China's property market
• Hong Kong's Hang Seng (-0.1%) slipped amid a cautious trade
• India's Sensex (-0.2%) eased off record highs 
• Australia's ASX (+1.6%) rallied back to near six-year highs

Market Internals

Market Internals -Technical-
The S&P 500 closed up 3 (+0.13%) at 1959, the Dow closed up 15 (+0.09%) at 16921, and the Nasdaq closed down 4 (-0.08%) at 4359. Action came on slightly below average volume (NYSE 636 mln vs. avg. of 655; NASDAQ 1716 mln vs. avg. of 1752), with mixed advancers/decliners (NYSE 1788/1341, NASDAQ 1195/1459) andnew highs outpacing new lows (NYSE 278/13, NASDAQ 128/28).

Relative Strength:
Junior Gold Miners-GDXJ +7.06%, Silver Miners-SIL +6.82%, Sugar-SGG +2.20%, Grains-JJG +1.86%, Corn-CORN +1.77%, Japan-EWJ +1.75%, Peru-EPU +1.58%, Australia-EWA +1.06%, Pacific Index-VPL +1.05%, Chile-ECH +0.63%.

Relative Weakness:
Vietnam-VNM -1.61%, Natural Gas-UNG -1.51%, India-INP -1.40%, Broker-Dealers-IAI -1.31%, 20+ Year Treasuries-TLT -1.28%, Russia-RSX -1.19%, Clean Energy-PBW -1.01%, Social Media-SOCL -0.99%, China 25 Index-FXI -0.91%, Egypt-EGPT -0.86%
.

Leaders and Laggards

Technical Updates

Briefing's Commentaries

Closing Summary: Stock Market Takes a Back Seat
It was some day in the capital markets on Thursday. The major stock indices managed to hold fairly steady in what was a seesaw day of trading; longer-dated Treasuries experienced a notable reversal that left the 10-yr note down 12 ticks and yielding 2.63% while the front of the curve remain propped up with buying interest; commodity prices were higher with precious metals prices moving up sharply; and the US Dollar Index was down 0.3%

A 3.6% jump in gold prices to $1318.00/troy ounce and the weakness at the back end of the Treasury curve were cited as expressions of inflation concerns with market participants acting uneasy about the Fed's seemingly complacent view of inflation.

The explanation was not entirely out of bounds, but it also wasn't above reproach given that the dollar failed to bounce and the front of the Treasury curve held up just fine. Accordingly, it is too early to say if there were genuine inflation concerns today.

Nonetheless, it was a line of thinking that left equity investors reluctant to make any big moves outside of some individual story stocks like Coach (COH 35.69, -3.50), which issued a sales warning, and Kroger (KR 49.66, +2.39), which reported better than expected earnings and gave reassuring guidance.

Broadly speaking, the moves that were made fit the bill of a more cautious mindset than the one that prevailed following Wednesday's FOMC announcement and press conference. The best-performing sectors today were the utilities (+0.9%) and consumer staples (+0.6%) sectors. Energy (+0.6%) also fared well in the face of rising oil prices that were helped along by the weaker dollar and continued rumblings about the destabilizing situation in Iraq

Relative weakness in the technology (-0.2%) and financial (-0.2%) sectors acted as a restraint on the S&P 500 which ultimately managed to close near its best level of the day. In the process of doing so, it also established another new closing high.

Alas, there wasn't as much fear and loathing in the equity market as there was cheer and loafing. The buy-the-dip mentality shined through again in an otherwise laborious day of trading that saw the stock market take a back seat to other capital markets.

Aside from the advertised inflation concerns, longer-dated Treasuries also got pinched by a batch of encouraging economic data:

• Initial claims for the week ending June 14 (the week in which the household survey for the June employment report was conducted) dipped by 6,000 to 312,000
• The Philadelphia Fed Index for June increased to 17.8 from 15.4 in May, paced by broad-based gains in its various components; and
• The Leading Indicators Index for May increased 0.5% on top of a 0.3% increase in the prior month

Trading volume picked up on Thursday with 636 mln shares changing hands at the NYSE versus 614 mln on Wednesday. Volume should be even higher on Friday with the S&P rebalancing at the close.

Overall, one could say there was some risk aversion in the stock market on Thursday, but there wasn't risk avoidance. To that end, the CBOE Volatility Index (VIX 10.65, +0.04) was up a scant 0.4% after plummeting 12% on Wednesday and money rotated within the market as opposed to rotating out of it completely.

• S&P 500 YTD +6.0%
• Dow Jones Industrial Average YTD +2.1%
• Nasdaq Composite YTD +4.4%
• Russell 2000 YTD +1.8%

Commodities

Closing Commodities: Precious Metals Post Big Gains, Silver +4.6%, Gold +3.3%

• Aug gold rose above the $1300 per ounce level today as the dollar index traded lower following yesterday's dovish FOMC news.
• Fed Chair Janet Yellen confirmed that the Fed would remain actively involved and that rates would stay low for the foreseeable future.
• She noted that the Fed did not see any pricing pressures and that it viewed equities as being fairly valued.
• The yellow metal lifted from its session low of $1286.40 per ounce and advanced as high as $1317.40 per ounce before it settled with a 3.3% gain at $1314.30 per ounce.
• July silver also gained strength on the weaker dollar index. It rose as high as $20.83 per ounce after coming off its session low of $20.00 per ounce set at floor trade open. It eventually settled with a solid 4.6% gain at $20.67 per ounce.
• Aug crude oil dipped to a session low of $105.11 per barrel but recovered into positive territory in morning action. It rose to a session high of $106.39 per barrel and eventually settled with a 0.4% gain at $106.05 per barrel.
• July natural gas, on the other hand, fell today after inventory data showed a build of 113 bcf when a smaller build of 110-112 bcf was anticipated. It retreated back into the red after touching a session high of $4.70 per MMBtu and settled with a 1.7% loss ta its session low of $4.58 per MMBtu.

NYMEX Energy Closing Prices

Aug crude oil rose $0.46 to $106.05/barrel 

• Crude oil dipped to a session low of $105.11 but recovered into positive territory in morning action. It rose to a session high of $106.39 and eventually settled with a 0.4% gain.

July natural gas fell 8 cents to $4.58/MMBt 

• Natural gas, on the other hand, fell today after inventory data showed a build of 113 bcf when a smaller build of 110-112 bcf was anticipated. It retreated back into the red after touching a session high of $4.70 and settled with a 1.7% loss at its session low. 

July heating oil rose 1 cent to $3.05/gallon 

July RBOB rose 3 cents to $3.13/gallon

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

• July corn rose 9 cents to $4.50/bushel 
• July wheat rose 8 cents to $5.94/bushel 
• July soybeans rose 12 cents to $14.21/bushel 
• July ethanol fell 1 cent to $2.04/gallon 
• Sep sugar (#16 (U.S.)) rose 0.49 of a penny to 25.85 cents/lbs

COMEX Metals Closing Prices

Aug gold rose $41.90 to $1314.30/oz 

• Gold rose above the $1300 level today as the dollar index traded lower following yesterday's dovish FOMC news. Fed Chair Janet Yellen confirmed that the Fed would remain actively involved and that rates would stay low for the foreseeable future. She noted that the Fed did not see any pricing pressures and that it viewed equities as being fairly valued. The yellow metal lifted from its session low of $1286.40 and advanced as high as $1317.40 before it settled with a 3.3% gain. 

July silver rose $0.90 to $20.67/oz 

• Silver also gained strength on the weaker dollar index. It rose as high as $20.83 after coming off its session low of $20.00 set at floor trade open. It eventually settled with a solid 4.6% gain. 

July copper rose 2 cents to $3.08/lbs

Treasuries

On other news.... 

Currencies 
Dollar Ticks Off the Lows, Stays Red: 10-yr: -12/32..2.630%..USD/JPY: 101.95..EUR/USD: 1.3607

• The Dollar Index holds at its best levels U.S. trade as action probes the 80.35 level. Click here to see a daily Dollar Index chart.
• Overnight selling dropped the greenback to a one-month low of 80.20 as overseas markets digest yesterday's dovish FOMC Statement and accompanying Yellen press conference before this morning's Philly Fed beat put the bottom in. 
• EURUSD is +20 pips @ 1.3605 as trade fights to hold onto its gains. The single currency probed the 1.3640 level in early action, but has slipped over the course of the day. Support in the 1.3500 area remains key. Eurozone data includes the current account balance and German PPI. 
• GBPUSD is +50 pips @ 1.7040 as action climbs to its best levels since October 2008. Today's strength comes after a retail sales number with tough comparisons matched estimates and CBI Industrial Order Expectations posted better than expected results. Sterling continues to be the currency of choice as expectations remain in place for the Bank of England to be the first major Western central bank to hike rates and exit the crisis. British data is limited to public sector net borrowing. 
• USDCHF is -20 pips @ .8940 as trade slides to a two-week low. Overnight, the Swiss National Bank held its Libor Rate at less than 0.25% while also maintaining its EURCHF1.20 floor, but trade instead chose to track the euro rather than react to the day's developments. Trade bottomed at .8910 support, and has been working its way higher throughout the day. 
• USDJPY is flat at 101.95 as trade has clawed back its losses. Early selling dropped action to a one-week low of 101.75, but buyers emerged in defense of support in the area.
• AUDUSD is -5 pips @ .9390 as trade presses session lows. The hard currency looked to be the winner following the Fed taper as an early bid had action on track for its best close since November; however, selling over the course of the U.S. session has pushed trade into the red. 
• USDCAD is -20 pips @ 1.0815 as trade looks likely to put in its lowest close since early January. A breakdown of the 1.0850 level puts the 200 dma (1.0777) in focus. Canada's CPI and retail sales are due out tomorrow.

Next Week In View




Economic Commentaries

Economic Summary: Philadelphia Fed tops expectations; LEI and jobless claims roughly in line with expectations
Economic Data Summary:

• Weekly Initial Claims 312K vs Briefing.com consensus of 313K ; Last Week was revised to 318K from 317K
• Weekly Continuing Claims 2.561 M vs Briefing.com consensus of 2.638K ; Last Week was revised to 2.615 M from 2.614 M
• The drop would imply an acceleration in payroll growth and an overall improvement in labor market conditions. The continuing claims level fell to 2.561 mln for the week ending June 7 from an upwardly revised 2.615 mln (from 2.614 mln) for the week ending May 31. That is the first time the continuing claims level fell below 2.600 mln since October 2007. The consensus expected the continuing claims level to increase to 2.638 mln. 
• June Philadelphia Fed 17.8 vs Briefing.com consensus of 13.4; May was 15.4
• That translated into a slightly stronger shipments index, up to 15.5 from 14.2. Importantly, unfilled order levels ended a contraction and increased to 11.5 in June from -2.5 in May. The gain in unfilled orders will help keep upward pressure on shipments if new orders growth dips in the coming months. There were big gains in employment conditions. The Number of Employees Index increased to 11.9 in June from 7.8 in May. The average workweek increased to 7.3 from 2.9.
• May Leading Indicators 0.5% vs Briefing.com consensus of 0.5%; April was revised to 0.3% from 0.4%
• Since 8 of the 10 components of the index are known prior to the release, the difference between the actual and consensus is generally small. In this case, the consensus and the Conference Board were likely on the same page with expectations for manufacturer orders of consumer goods and nondefense capital goods excluding aircraft. The acceleration in the Leading Indicators in May was the result of a rebound in the initial claims level and a stronger ISM report.

Upcoming Economic Data:

• May Existing Home Sales due out Monday at 10:00 (Briefing.com consensus of ; April was 4.65 M )

Other International Events of Interest

• China's Shanghai Composite (-1.6%) did not see the same result as the continued onslaught of IPOs coming to market weighed. Also making headlines was a cautious piece from Moody's voicing concerns over China's property market

Jason's Commentaries

Right after FOMC statements, the market held flat with a increase in volumes of 623m shares traded on the NYSE, it might be showing that the market might be starting to take off profits. While on Friday, there is no news coming out in the states, the economic news wouldn't be a big factor moving the market. The market started the day with bearishness, and heading down all the way till mid day and starting to reverse all the way till the closing bell, ending the day with a doji. Energy and Utilities led the day and it seems that the market is turning defensive. It wouldn't surprise me if the market might consolidate in a volatile fashion in the short term. Perhaps the sell in May is not coming true. And most importantly, if May did not sell off, we might be in for a big crash this year...








Market Call: FLAT and volatile

Date: 20 June 2014