24 June 2014 AMC - Market took profit as middle east is getting more chaotic

24 June 2014 AMC - Market took profit as middle east is getting more chaotic

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: + 0.2%

·         France's CAC: + 0.1%

·         Spain's IBEX: -0.1%

·         Portugal's PSI: -1.5%

·         Italy's MIB Index: -0.3%

·         Irish Ovrl Index: -0.2%

·         Greece ATHEX Composite: -2.1%

Before Market Opens 

S&P futures vs fair value: -3.20. Nasdaq futures vs fair value: -0.50.
The S&P 500 futures trade three points below fair value.

Asian markets finished the Tuesday session on a higher note. Japan's Prime Minister Shinzo Abe unveiled a plan to lower the corporate tax rate to below 30% in the coming years and pledged to reform the Government Pension Investment Fund. 

·         Japan's Nikkei added 0.1%, holding at five-month highs. Automakers were broadly lower with Honda Motor and Nissan Motor falling 1.4% and 1.0%, respectively. 

·         Hong Kong's Hang Seng rose 0.3%, bouncing off the 50- and 200-day moving averages. Utility Power Assets Holdings was the top performer, adding 1.9%. 

·         China's Shanghai Composite advanced 0.5%, posting its second gain in three days. Liquor-related names outperformed as Kweichow Moutai climbed 4.6% and Sichuan Swellfun Co climbed the daily limit, 10%. 

Major European indices trade in mixed fashion with Italy's MIB (-0.3%) showing relative weakness for the second day in a row. Bank of England Governor Mark Carney testified before the Treasury Select Committee, reiterating that the first rate hike will be data-dependent and gradual. Mr. Carney also pointed to recent wage data, saying it was softer than expected 

·         In economic data: 

o    Great Britain's BBA Mortgage Approvals came in at 41,800 (expected 41,300, previous 41,900) 

o    Germany's Ifo Business Climate Index slipped to 109.7 from 110.4 (expected 110.2) as Business Expectations ticked down to 104.8 from 106.2 (consensus 105.9) and Current Assessment held steady at 114.8 (expected 115.0) 

o    Italy's Wage Inflation rose 0.1% month-over-month (expected 0.0%, previous 0.0%) and the non-EU trade surplus expanded to EUR2.45 billion from EUR1.65 billion 

o    Swiss trade surplus expanded to CHF2.77 billion from CHF2.45 billion (expected surplus of CHF2.71 billion) 

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·         In France, the CAC is higher by 0.2% with utilities and industrials in the lead. GDF Suez and Schneider Electric hold respective gains of 1.5% and 0.8%. Financials lag with AXA, Credit Agricole, and Societe Generale down between 0.4% and 1.0%. 

·         Germany's DAX holds a loss of 0.1%. Bank shares are also showing relative weakness as Commerzbank and Muenchener Re trade lower by 1.1% and 0.6%, respectively. 

·         Great Britain's FTSE is lower by 0.1%. Sports Direct International is the weakest performer, down 4.0%. Homebuilder Barratt Developments underperforms for the second day in a row with a loss of 1.6%. 

·         Italy's MIB trades down 0.3% amid weakness in financials. BMPS has tumbled 7.6% as the bank sells shares to improve its capital position. Unicredit and Intesa Sanpaolo also underperform with respective losses of 1.7% and 1.4%.

U.S. Equities

·         Futures suggest some light selling at the open

·         A flat session yesterday has both the DJIA and S&P 500 stuck at record highs while the Nasdaq remains near its best level in more than 14 years

·         The VIX (10.98) attempts to climb off the lowest levels since February 2007

o    S&P Futures -2 @ 1951

o    Dow Futures -10 @ 16,830

o    Nasdaq Futures +1 @ 3795

Asia

·         Markets finished mostly higher across Asia

·         Japanese Prime Minister Shinzo Abe fired his ‘third arrow' after markets were closed, unveiling a plan to lower the corporate tax rate to below 30% in the coming years while also pledging to reform the Government Pension Investment Fund

·         Japan's Nikkei (+0.1%) held at five-month highs

·         Hong Kong's Hang Seng (+0.3%) bounced off the 50 and 200 dma

·         China's Shanghai Composite (+0.5%) posted its second gain in three days

·         India's Sensex (+1.4%) posted its first advance in five days

·         Australia's ASX (-0.4%) gave back most of yesterday's gains 

Market Internals

Market Internals
The Dow closed down 119 (-0.70%) at 16818, the S&P 500 closed down 13 (-0.64%) at 1950, and the Nasdaq closed down 18 (-0.42%) at 4350. Action came on mixed volume (NYSE 635 mln vs. avg. of 667; NASDAQ 1835 mln vs. avg. of 1744), with decliners outpacing advancers (NYSE 1153/1991, NASDAQ 776/1869) and new highs outpacing new lows (NYSE 194/23, NASDAQ 77/28).

Relative Strength: 
Volatility-VXX +3.57%, Livestock-COW +1.62%, Natural Gas-UNG +1.50%, Russia-RSX +1.50%, Eastern Europe-ESR +1.26%, South Korea-EWY +1.08%, Biotechnology-IBB +1.02%, 20+ Year Treasuries-TLT +1.01%, Vietnam-VNM +0.78%, Chile-ECH +0.56%.

Relative Weakness: 
Junior Gold Miners-GDXJ -4.74%, Oil and Gas Exploration-XOP -3.85%, Greece-GREK -3.17%, Silver Miners-SIL -2.48%, Egypt-EGPT -2.47%, Clean Energy-PBW -2.33%, Energy-XLE -2.10%, Turkey-TUR -1.57%, Australia-EWA -1.38%, Middle East and Africa-GAF -1.34%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries

Closing Market Summary: Stocks End Lower Following Intraday Reversal
The stock market ended the Tuesday session on a lower note despite seeing early strength. The Dow Jones Industrial Average and S&P 500 posted respective losses of 0.7% and 0.6%, while the Nasdaq Composite shed 0.4%.

Equity indices displayed modest losses at the start, but were quick to regain their flat lines after a pair of economic data points surprised to the upside. Briefly, the New Home Sales report for May came in well ahead of estimates (504K versus Briefing.com consensus 440K), while the Consumer Confidence report (85.2) registered its highest reading since early 2008.

The economic news gave a boost to the consumer discretionary sector (-0.2%) and especially homebuilders. DR Horton (DHI 23.89, +0.29) and Toll Brothers (TOL 36.56, +0.43) both jumped 1.2%, while the iShares Dow Jones US Home Construction ETF (ITB 24.36, +0.21) advanced 0.9%. For its part, the discretionary sector fell into the red during the afternoon when the overall market reversed and surrendered its gain.

Before looking at the afternoon reversal, we'd like to point out that the discretionary space was just one of three influential sectors that slumped into the close.

The largest S&P 500 sector—technology (-0.5%)—saw intraday strength that was fueled by gains among chipmakers after Micron (MU 32.50, +1.24) reported better than expected earnings. The stock settled higher by 4.0%, while the PHLX Semiconductor Index lost 0.7% after being up as much as 0.7%.

Elsewhere, the health care sector (unch) surged out of the gate in reaction to positive cystic fibrosis treatment trial data from Vertex Pharmaceuticals (VRTX 93.53, +26.92). VRTX surged 40.4%, while the iShares Nasdaq Biotechnology ETF (IBB 255.48, +2.57) narrowed its gain to 1.0% after being up more than 2.0% intraday.

The intraday gains among three of the four largest sectors were not enough to prevent the key indices from tumbling into the red. The afternoon turnaround occurred shortly after the Wall Street Journal reported that a Syrian fighter jet struck targets in western Iraq, killing 50 people. The news was followed by broad-based selling activity that saw the energy sector (-2.0%) lead to the downside.

In all likelihood, the noteworthy dive was a function of profit taking, considering the sector trimmed its quarter-to-date gain to 10.6%. For comparison, no other sector shows an increase of more than 4.9% for the second quarter.

Meanwhile, the second-best sector of the second quarter-utilities—ended in the lead, climbing 0.3%.

Treasuries settled on their highs after spending the entire session in positive territory. The benchmark 10-yr yield fell five basis points to 2.58%.

Participation remained light with 635 million shares changing hands at the NYSE floor.

Economic data featured the April Case-Shiller 20-city Index, April FHFA Housing Price Index, New Home Sales for May, and the June Consumer Confidence report: 

·         The Case-Shiller 20-city Home Price Index for April rose 10.8%, while an 11.6% increase had been expected by the Briefing.com consensus. This followed the previous month's increase of 12.4%. 

·         The April Housing Price Index from the FHFA was unchanged, which followed an unrevised uptick of 0.7% observed during the prior month. 

·         New home sales increased 18.6% in May to 504,000 from a downwardly revised 425,000 (from 433,000). The Briefing.com consensus expected new home sales to increase to 440,000. 

o    Sales topped 500,000 for the first time since May 2008. 

o    The spike in new home sales coincided with a large decline in mortgage rates. As rates turn higher, it could dent future sales growth. 

·         The Conference Board's Consumer Confidence Index increased to 85.2 in June from a downwardly revised 82.2 (from 83.0). The Briefing.com consensus expected the index to increase to 84.0. 

o    The index climbed to its highest point since the recession began in January 2008. 

o    A surging stock market and general improvements in overall employment conditions were enough to offset higher gasoline/oil prices and drive consumer confidence to a 6-year high. 

Tomorrow, the weekly MBA Mortgage Index will be reported at 7:00 ET, while Durable Orders for May (Briefing.com consensus 0.4%) and the third estimate of Q1 GDP (consensus -1.8%) will cross the wires at 8:30 ET. 

·         S&P 500 +5.5% YTD 

·         Nasdaq Composite +4.2% YTD 

·         Dow Jones Industrial Average +1.5% YTD 

·         Russell 2000 +0.8% YTD

Commodities

Closing Commodities: Crude Oil Eases, Falls 0.2%, Gold Rises Modestly

·         Aug gold touched a session low of $1317.20 per ounce in late morning pit trade after retreating from a session high of $1323.70 per ounce.

·         The yellow metal eventually settled with a 0.2% gain at $1321.20 per ounce.

·         July silver traded in a tight range between $20.93 per ounce and $21.07 per ounce today and closed at $21.05 per ounce, or 0.6% higher.

·         Aug crude oil extended yesterday's losses despite trading in positive territory in morning action.

·         The energy component touched a session high of $106.51 per barrel but dipped to a session low of $105.68 per barrel in afternoon floor trade and settled with a 0.2% loss at $106.01 per barrel.

·         July natural gas trended higher today. It lifted from its session low of $4.47 per MMBtu and rose as high as $4.56 per MMBtu before settling with a 1.8% gain at $4.53 per MMBtu.

NYMEX Energy Closing Prices

  Aug crude oil fell $0.17 to $106.01/barrel 

·         Crude oil extended yesterday's losses despite trading in positive territory in morning action. The energy component touched a session high of $106.51 but dipped to a session low of $105.68 in afternoon floor trade and settled with a 0.2% loss. 

  July natural gas rose 8 cents to $4.53/MMBtu 

·         Natural gas, on the other hand, trended higher today. It lifted from its session low of $4.47 and rose as high as $4.56 before settling with a 1.8% gain. 

  Aug  heating oil rose 1 cent to $3.05/gallon 

  Aug  RBOB rose 2 cents to $3.10/gallon

COMEX Metals Closing Prices

  Aug gold rose $2.80 to $1321.20/oz 

·         Gold touched a session low of $1317.20 in late morning pit trade after retreating from a session high of $1323.70. The yellow metal eventually settled with a 0.2% gain. 

  July silver rose $0.13 to $21.05/oz 

·         Silver traded in a tight range between $20.93 and $21.07 today and closed with a 0.6% gain. 

  July copper settled unchanged at $3.15/lbs



Treasuries

Treasuries Finish Near Highs: 10-yr: +11/32..2.583%..USD/JPY: 101.92..EUR/USD: 1.3600

·         Treasuries closed near session highs, supported by aggressive post-2y auction buying. Click here to see an intraday yields chart.

·         Maturities held small gains into the cash open and ticked to their best levels of the morning following the disappointing Case-Shiller 20-city Index (10.8% actual v. 11.6% expected) and FHFA Housing Price Index (0.0% actual v. 0.7% previous). 

·         A choppy trade would persist into this morning's second round of data with action testing the overnight lows after new home sales (504K actual v. 440K expected) and consumer confidence (85.2 actual v. 84.0 expected) both outpaced estimates. 

·         However, maturities never gave up the flat line as a small bid developed ahead of the $30 bln 2y note auction.

·         The auction was average, drawing 0.511% (the highest since May 2011) and light 3.23x bid/cover as a tepid indirect bid (23.1%) was slightly offset by a solid direct takedown (27.4%). Primary dealers were left with 49.5% of the supply.

·         The average auction did little to dampen the spirit of the bulls as a post-auction bid lifted maturities to their best levels of the session.

·         The 30y erased -4.3bps to end @ 3.406%. Today's buying pushed the yield back below the 50 dma, but the bulls have yet to drop the yield back below key trendline resistance (3.380%) off the 2014 highs. 

·         The 10y shed -3.7bps to 2.586% to match its lowest close in June. Support at current levels will be key in the days ahead.

·         The 5y fell -2.5bps to 1.679%. A breakdown of this area purs both the 50 (1.642%) and 100 (1.615%) dma at risk. 

·         A flatter curve took hold as the 2-10-yr spread tightened to 213bps.

·         Precious metals gained with gold up +$3 @ $1322 and silver higher by +$0.08 @ $21.00.

·         Data: MBA Mortgage Index (7), durable orders, and GDP - Third Estimate (8:30). 

On other news.... 

Currencies 

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

Dollar Gives Up Early Gains: 10-yr: +08/32..2.595%..USD/JPY: 101.99..EUR/USD: 1.3605

·         Recent selling has dropped the Dollar Index back to the flat line near 80.30. Click here to see a daily Dollar Index chart.

·         Some early selling had action probing 80.20 support before this morning's strong new home sales and consumer confidence data sparked a run to session highs in the 80.40 area.

·         EURUSD is +10 pips @ 1.3615 as trade fights for a fourth gain in five sessions. The single currency saw little reaction to this morning's weak German Ifo Business Climate data, and has climbed back into positive territory on a spike coinciding with Italy's elimination from the World Cup. The 1.3650 area provides minor resistance that is helped by the 200 dma while the 1.3500 area is home to key support. Eurozone data set for tomorrow is limited to GfK German Consumer Climate. 

·         GBPUSD is -45 pips @ 1.6980 as trade slides off its best levels since October 2008. Sterling has been chopped lower following today's dovish Bank of England Inflation Report, which suggested rates are likely to remain ‘materially below' historic levels into 2017. Britain's CBI Realized Sales data is scheduled for tomorrow. 

·         USDCHF is -5 pips @ .8935 as action contends with its lowest close in two weeks. An early bid provided yet another test of the 200 dma (.8955), but trade has slipped off that level as the euro sees some afternoon bids. Support near .8900 is key and is helped by both the 50 (.8898) and 100 (.8876) dma. 

·         USDJPY is +10 pips @ 102.00 as action continues to hold in the tight range between 101.80/102.20 that has been in place for much of the past two weeks. The pair saw little reaction to Prime Minister Shinzo Abe's ‘Third Arrow' as much of the details had been leaked ahead of today's speech. Mr. Abe vowed to cut the corporate tax rate to less than 30% in the coming years while also pledging to make reforms to the country's pension fund. 

·         AUDUSD is -40 pips @ .9380 as trade presses session lows. Today's weakness has erased all of yesterday's gains and has the hard currency sliding off its best levels since November. A breakdown of current levels puts the 50 dma (.9321) in play.

·         USDCAD is +5 pips @ 1.0735 as the bulls look to put in the first positive close in five sessions. Recent selling has dropped action to its lowest levels since early-January and has the pair flirting with key support in the 1.0700 area.

Next Week In View




Economic Commentaries

Economic Summary: New Home sales blow past estimates; Consumer Confidence also beats estimates; Plosser indicates the Fed may be reaching goals faster than expected
Economic Data Summary:

·         April Case Schiller 20 City Index 10.8% vs Briefing.com consensus of 11.6%; March was 12.4%

·         April FHFA Housing Price Index 0.0% vs Briefing.com consensus of ; March was 0.7%

·         May New Home Sales 504K vs Briefing.com consensus of 440K; April was revised to 425K from 433K

o    As rates turn higher, it could dent future sales growth. Demand was strong in all areas of the country, led by a 54.5% increase in sales in the Northeast and a 34.0% increase in the West. Supply levels fell to 4.5 months at the current sales pace from 5.3 months in April. That is the lowest level of supply since June 2013. The median sales price increased 6.9% y/y to $282,000.

·         June Consumer Confidence 85.2 vs Briefing.com consensus of 84.0; May was revised to 82.2 from 83.0

o    A surging stock market and general improvements in overall employment conditions were enough to offset higher gasoline/oil prices and drive consumer confidence a 6 year high.

Fed/Treasury Events Summary:

·         Philadelphia Fed President Charles Plosser (voting FOMC member, typically hawkish) made the following comments:

o    "I believe that we are closing in on our goals — perhaps faster than some people might think. So, while I supported the recent policy statement, I have growing concerns that we may have to adjust our communications in the not-too-distant future. Specifically, I believe the forward guidance in the statement may be too passive, given underlying economic conditions."

Upcoming Economic Data:

·         Weekly MBA Mortgage Applications due out Wednesday at 7:00 (Briefing.com consensus of ; Last Week was -9.2%)

·         May Durable Orders due out Wednesday at 8:30 (Briefing.com consensus of 0.4%; April was 0.6%)

·         May Durable Orders Ex-Transportation due out Wednesday at 8:30 (Briefing.com consensus of 0.4%; April was 0.3%)

·         Q1 GDP-Third Estimate due out Wednesday at 8:30 (Briefing.com consensus of -1.8%; Q4 was -1.0%)

·         Q1 GDP Deflator - Third Estimate due out Wednesday at 8:30 (Briefing.com consensus of 1.3%; Q4 was 1.3%)

Upcoming Fed/Treasury Events:

·         NY Fed President William Dudley (voting FOMC member, typically dovish) to speak today at 14:00

·         San Francisco Fed President John Williams (not a voting FOMC member, typically moderate) to speak at 18:30

Other International Events of Interest

·         Germany Ifo Business Climate (109.7 actual v. 110.3 expected, 110.4 previous)

Jason's Commentaries

The market certainly took a stunner move last night. The market rallied at the start with a clear divergence with the internals and held flat at the top till noon when the news in Iraq caused a sudden breakdown in the market, losing more than 150 points on the Dow. The sector that was hit most is the Energy sector, with a heavy exposure to the middle, crashed down 2.1% last night. While the industrials and the Materials were the next biggest hit sectors. Despite a slight gain in Healthcare in Utilities, the market ended up in a loss, which a lot more bearish that i thought. I would expect a correction to start and likely to be a short term correction.With the Final GDP and Core durable goods orders coming in bad and way below expectation... the market is going to use it as an excuse to take profit!








Market Call: DOWN

Date: 25 June 2014