3 Jun 2014 AMC - Market ended flat once again ahead of employment data

3 Jun 2014 AMC - Market ended flat once again ahead of employment data

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: -0.3%

·         France's CAC: -0.3%

·         Spain's IBEX: -0.5%

·         Portugal's PSI: -0.5%

·         Italy's MIB Index: -0.6%

·         Irish Ovrl Index: -0.1%

·         Greece ATHEX Composite: -0.9%

Before Market Opens 

S&P futures vs fair value: -5.20. Nasdaq futures vs fair value: -14.00.
The S&P 500 futures trade five points below fair value.

Asian markets finished the Tuesday session on a generally higher note, but China's Shanghai Composite lagged (-0.04%) after returning from a three-day weekend. In news, Bank of Japan Governor Haruhiko Kuroda addressed the Japanese parliament, saying he expects inflation to reach the 2.0% target around fiscal year 2015, but it's still too early to begin discussing an exit plan. Elsewhere, The Reserve Bank of Australia and the Reserve Bank of India both held their key interest rates unchanged at 2.50% and 8.00%, respectively. 

·         In other economic data: 

o    China's HSBC Manufacturing PMI fell to 49.4 from 49.7 (expected 49.7), while the state Non-Manufacturing PMI improved to 55.5 from 54.8. 

o    Japan's Monetary Base expanded 45.6% year-over-year (expected 51.2%, prior 48.5), while Average Cash Earnings ticked up 0.9% year-over-year (consensus 0.6%, previous 0.7%). 

o    Australia's current account deficit narrowed to AUD5.70 billion from AUD11.70 billion (expected deficit of AUD7.00 billion) and Retail Sales ticked up 0.2% month-over-month, as expected. 

o    Hong Kong's Retail Sales fell 9.8% year-over-year (expected -4.9%, prior -1.3%). 

o    South Korea's CPI ticked up 0.2% month-over-month (expected 0.1%, previous 0.1%), while the year-over-year reading rose 1.7% (consensus 1.6%, prior 1.5%). 

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·         Japan's Nikkei (+0.7%) spent the day in the green, but closed on its lows. Tokyo Electric Power Co was a standout, surging 6.5%. On the downside, Konami lost 1.5%. 

·         Hong Kong's Hang Seng (+0.9%) was underpinned by energy and utility names. China Resources Power, CNOOC, and Kunlun Energy advanced between 2.2% and 4.9%. 

·         China's Shanghai Composite (-0.04%) surrendered its gain into the close. China National Software & Services lost 6.1%. 

Major European indices trade lower across the board. Among news of note, Spain's Prime Minister Mariano Rajoy said the cabinet is nearing the approval of a pro-growth plan that should not impact the budget. 

·         Participants received several data points: 

o    Eurozone CPI rose 0.5% year-over-year (consensus 0.7%, previous 0.7%), while the year-over-year reading increased 0.7% (expected 0.9%, prior 1.0%). Separately, the Unemployment Rate slipped to 11.7% from 11.8% (consensus 11.8%). 

o    Great Britain's Construction PMI slipped to 60.0 from 60.8 (expected 60.8), while Nationwide HPI rose 0.7% month-over-month (consensus 0.6%, previous 1.2%). 

o    Italy's Monthly Unemployment Rate held steady at 12.6% (expected 12.7%), while the Quarterly Unemployment Rate rose to 12.7% from 12.5% (consensus 12.7%). 

o    Spain's Unemployment fell 111,900 (expected -112,300, previous -111,600). 

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·         Great Britain's FTSE is lower by 0.6% amid weakness in discretionary shares. Barratt Developments, G4S, and William Hill are all down near 1.8%. EasyJet outperforms, trading higher by 1.5%. 

·         Germany's DAX holds a loss of 0.4%. Financials weigh as Deutsche Bank, Commerzbank, and Muenchener Re display losses between 0.8% and 3.6%. Utilities are showing relative strength with E.ON and RWE both up near 0.4%. 

·         In France, the CAC is lower by 0.2%. Publicis Groupe is the weakest performer, down 2.1%.

U.S. Equities

·         S&P futures point to modest losses at the open, putting the current three-day win streak in jeopardy

·         Both the DJIA and S&P 500 finished yesterday's session in record territory while the Nasdaq remains ~3% off its best level in more than 16 years

·         The VIX (11.58) remains near its lowest levels since March 2013

o    S&P Futures -4 @ 1918

o    Dow Futures -28 @ 16,694

o    Nasdaq Futures -11 @ 3717 

Asia

·         Markets ended mostly higher across Asia

·         Japan's Nikkei (+0.7%) rallied to a two-month following reports Japanese pension funds are looking to up their equity exposure to 20% from 12%

·         Hong Kong's Hang Seng (+0.9%) led as traders were greeted by an improved Chinese Non-Manufacturing PMI (55.5 actual v. 54.8 previous) as they returned to work following the extended holiday weekend Not all the data was good as China's HSBC Final Manufacturing PMI (49.4 actual v. 49.7 expected, 49.7 previous) reading missed.

·         On the Mainland, China's Shanghai Composite (UNCH) finished flat 

·         Australia's ASX (-0.7%) slipped off its best levels in nearly six years after the Reserve Bank of Australia held its key rate steady at 2.50%, as expected

·         India's Sensex (+0.7%) closed in record territory  

Market Internals

Market Internals -Technical-
The Dow closed down 21 (-0.13%) at 16722, the Nasdaq closed down 3 (-0.07%) at 4234, and the S&P 500 closed down 1 (-0.04%) at 1924. Action came on slightly below average volume (NYSE 644 mln vs. avg. of 686; NASDAQ 1575 mln vs. avg. of 1863), with decliners outpacing advancers (NYSE 1204/1932, NASDAQ 1010/1596) and new highs outpacing new lows (NYSE 162/29, NASDAQ 60/57).

Relative Strength: 
Social Media-SOCL +1.89%, Thailand-THD +1.81%, Semiconductors-SMH +1.24%, Silver Miners-SIL +1.24%, Cotton-BAL +1.2%, Russia-RSX +1.11%, Indonesia-IDX +0.91%, Junior Gold Miners-GDXJ +0.9%, China 25 Index-FXI +0.89%, Vietnam-VNM +0.74%.

Relative Weakness: 
Coffee-JO -1.83%, Grains-JJG -1.37%, Clean Energy-PBW -1.26%, 20+ Year Treasuries-TLT -1.23%, Corn-CORN -0.98%, Greece-GREK -0.82%, Italy-EWI -0.79%, New Zealand-ENZL -0.6%, Australia-EWA -0.57%, South Africa-EZA -0.55%.

Leaders and Laggards

 

Technical Updates

Briefing's Commentaries

Closing Market Summary: S&P 500 Ends Flat While Small-Caps Underperform Again
The stock market finished the Tuesday session on a modestly lower note, but small-cap stocks underperformed once again. The Russell 2000 slipped 0.2%, while the S&P 500 snapped its three-day win streak, shedding less than a point.

Equity indices faced an uphill climb from the opening bell, but the S&P 500 was able to cut the bulk of its losses during the initial 45 minutes of action; however, the early rebound attempt was stonewalled by the underperformance of small-caps. With high-beta names unable to gain any significant traction, the benchmark index returned to its earlier low. The S&P 500 then staged another recovery, which placed it right below its flat line by the close.

To be sure, the (nearly) flat finish reflected a lack of concerted sector leadership during the trading day. On the cyclical side, energy (+0.3%) and financials (+0.1%) posted modest gains, while the remaining four sectors lost between 0.1% and 0.3%.

Interestingly, the industrial sector (-0.2%) settled just behind the broader market, masking the relative weakness among transport stocks. The Dow Jones Transportation Average fell 0.8%, but that was likely a function of some profit taking after the bellwether complex surged 3.1% over the past two weeks. Airlines were able to withstand the selling pressure as four of five carriers posted gains with JetBlue Airways (JBLU 10.05, +0.23) leading the way. The stock advanced 2.3%.

Elsewhere, the four countercyclical groups finished mixed with health care (+0.2%) and utilities (+0.3%) posting slim gains, while consumer staples (-0.3%) and telecom services (-1.0%) ended in the red.

The somewhat sloppy session lured some investors into demanding portfolio insurance, which sent the CBOE Volatility Index (VIX 11.79, +0.21) higher by 1.8%. Despite the uptick, the near-term volatility measure ended the day not far above its 2014 low (11.29%), which was notched yesterday.

Even though volatility protection was in demand, the safety of the Treasury market was not. On that note, the 10-yr note spent the session in a steady retreat, falling 19 ticks, which sent its yield higher by seven basis points to 2.60%.

Today's participation marked an improvement from recent days, but remained below average as 644 million shares changed hands at the NYSE floor.

Economic data was limited to April factory orders, which increased 0.7% following an upwardly revised 1.5% (from 1.1%) increase in March. The Briefing.com consensus expected an increase of 0.5%.

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET, while the ADP Employment Change for May (Briefing.com consensus 200,000) will cross the wires at 8:15 ET. The April Trade Balance (consensus -$41.30 billion) and Q1 Productivity (consensus -2.5%) and Unit Labor Costs (consensus 4.8%) will be reported at 8:30 ET, while the May ISM Services Index (consensus 55.5) will be released at 10:00 ET. The day's data will be topped off with the 14:00 ET release of the Fed's Beige Book for June. 

·         S&P 500 +4.1% YTD 

·         Dow Jones Industrial Average +0.9% YTD 

·         Nasdaq Composite +1.4% YTD 

·         Russell 2000 -3.1% YTD

Commodities

Closing Commodities: Crude Oil Ends 0.2% Higher; Gold Closes Flat

·         Aug gold chopped around near the unchanged level for most of today's floor trade.

·         It dipped to a session low of $1240.20 per ounce in morning action and eventually settled with a 60 cent gain at $1244.60 per ounce.

·         July silver pulled back from its session high of $18.88 per ounce set at pit trade open and touched a session low of $18.71 per ounce.

·         It then consolidated near the unchanged level and settled at $18.76 per ounce, or 0.1% higher.

·         July crude oil touched a session low of $102.26 per barrel in morning pit trade but recovered into positive territory.

·         It settled 0.2% higher at $102.68 per barrel.

·         July natural gas pulled back to a session low of $4.61 per MMBtu after trading as high as $4.66 per MMBtu in morning action.

·         It settled at $4.62 per MMBtu, booking a gain of 0.2%.

COMEX Metals Closing Prices

  Aug gold rose $0.60 to $1244.60/oz 

·         Gold chopped around near the unchanged level for most of today's floor trade. It dipped to a session low of $1240.20 in morning action and settled with a 60 cent gain. 

  July silver rose $0.01 to $18.76/oz 

·         Silver pulled back from its session high of $18.88 set at pit trade open and touched a session low of $18.71. It then traded in a consolidative fashion near the break-even lline and settled with a 0.1% gain. 

  July copper fell 3 cents to $3.14/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         July corn fell 8 cents to $4.57/bushel

·         July wheat fell 8 cents to $6.12/bushel 

·         July soybeans fell 20 cents to $14.82/bushel 

·         June ethanol fell 5 cents to $2.29/gallon 

·         July sugar (#16 (U.S.)) fell 0.13 of a penny to 25.25 cents/lbs

NYMEX Energy Closing Prices

·         July crude oil rose $0.25 to $102.68/barrel 

·         July natural gas rose 1 cent to $4.62/MMBtu 

·         July heating oil fell 1 cent to $2.87/gallon 

·         July RBOB settled unchanged at $2.95/gallon

 




Treasuries

Treasuries See Fourth Day of Losses: 10-yr: -19/32..2.591%..USD/JPY: 102.50..EUR/USD: 1.3622

·         Treasuries closed on their lows as trade pushed lower for a fourth session. Click here to see an intraday yields chart.

·         The complex held modest losses into the cash open with steady selling causing yields to grind higher throughout the session. 

·         Yields tested session highs in response to the strong factory orders (0.7% actual v. 0.5% expected) before seeing a pause at those levels into the lunchtime hour and then running higher in afternoon trade. 

·         A +4bp advance ran the 5y up to 1.636% where trade settled at a three-week high. Today's selling caused action to break out above the 100 dma before settling on resistance defended by the 50 dma. 

·         The 10y climbed +5.9bps to 2.593%. The benchmark yield has rallied almost +20 bps amid the four-day losing streak, and is now testing what was previously key support in the 2.600% area. 

·         At the long end, the 30y tacked on +5.8bps to 3.435%. Current levels are home to trendline resistance off the 2014 highs.

·         Selling swung the curve steeper as the 2-10-yr spread widened to 219.5bps and the 5-30-yr spread grew to 180bps. 

·         Precious metals saw gains with gold up +$2 to $1246 and silver higher by $0.07 to near $18.81. 

·         Data: MBA Mortgage Index (7), ADP Employment Change (8:15), trade balance, productivity-rev., unit labor costs (8:30), ISM Services (10), and the Fed's Beige Book (14).

On other news.... 




Currencies 

Dollar Stuck Near Key 80.50 Level: 10-yr: -16/32..2.587%..USD/JPY: 102.53..EUR/USD: 1.3626

·         The Dollar Index holds small losses as trade tests the key 80.50 area. Click here to see a daily Dollar Index chart.

·         EURUSD is +30 pips @ 1.3625 as a choppy trade persists ahead of Thursday's European Central Bank rate decision. The single currency has spent much of the past two weeks locked in a tight range between 1.3575/1.3650 as a tug of war ensues as to whether or not the ECB will become the latest central bank to enter the universe of quantitative easing. While outright purchases are still on the table, a more likely path is a reduction in the central banks key rates. The 1.3600 support level remains in focus ahead of Thursday's decision. Eurozone data includes Italian and Spanish Services PMI. 

·         GBPUSD is +5 pips @ 1.6750 as a quiet trade takes hold. An early bid propelled sterling to a test of its 50 dma, but sellers emerged at the level after Manufacturing PMI was the latest UK data point to miss estimates. The 1.6700 support area remains in play ahead of Thursday's Bank of England rate decision. British data is limited to Services PMI. 

·         USDCHF is -20 pips @ .8960 as trade has given back most of yesterday's gains. The pair has struggled to regain the 200 dma over much of the past week as weakness has coincided with some recent strength in the euro. The pair has not closed above its 200 dma since September.

·         USDJPY is +15 pips @ 102.50 as trade ticks to a one-month high. Today's bid comes following reports Japanese pension funds are looking to up their equity exposure to 20% from 12%.

·         AUDUSD is +15 pips @ .9255 as action remains bid following the Reserve Bank of Australia's decision to hold its benchmark interest rate at 2.50%, as expected. The hard currency lifted to an overnight high near .9290, but trade was unable to retake the 50 dma. Support in the .9220 area has held since late-March. Australia's GDP is due out tonight.

·         USDCAD is +15 pips @ 1.0915 as trade threatens its best close in a month. Canada's trade balance will be released tomorrow ahead of the Bank of Canada rate decision.

Next Week In View





Economic Commentaries

Economic Summary: Factory Orders rise faster than expected in April; ADP tomorrow at 8:15
Economic Data Summary:

·         April Factory Orders 0.7% vs Briefing.com consensus of 0.5%; March was 1.1%

o    Durable goods orders were revised down from the advance report, up 0.6% in April from an originally reported 0.8% gain. March orders were revised up from an increase of 3.6% to 3.7%. Transportation orders increased 1.4% instead of the originally reported 1.0% decline. Aircraft orders fell 0.4%. Excluding transportation, durable goods orders increased 0.3%, up from an originally reported 0.1% gain.

Upcoming Economic Data:

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

·         May ADP Employment Change due out Wednesday at 8:15 (Briefing.com consensus of 200K; April was 220K)

·         April Trade Balance due out Wednesday at 8:30 (Briefing.com consensus of -$41.3 bln; March was -$40.4 bln)

·         First Quarter Producivity - Rev due out Wednesday at 8:30 (Briefing.com consensus of -2.5%; Q4 was -1.7%)

·         First Quarter Unit Labor Costs due out Wednesday at 8:30 (Briefing.com consensus of 4.8%; Q4 was 4.2%)

·         May ISM Services due out Wednesday at 10:00 (Briefing.com consensus of 55.5; April was 55.2)

Upcoming Fed/Treasury Events:

·         Kansas City Fed President Esther George (voting FOMC member, hawkish) to speak tomorrow at 13:50

Other International Events of Interest

·         Today's tame CPI Flash Estimate (0.5% YoY actual v. 0.7% YoY expected) increases speculation the European Central Bank will take some sort of action at Thursday's policy meeting

Jason's Commentaries

The market is waiting for something to happen... The volumes picked up at 650m shares, might be likely to be profit taking. The market had a bearish bias, which subsequently turned up by 1130am ET. The market is likely to consolidate for a while, waiting for the employment report to happen. ADP report is going to be released today, which the market might react on it today. However the main market mover will be on Friday. The main leader of the market last night was Energy while the staples were the lagging ones. Looking at the S&P500 components, major players like Google, Microsoft, Verizon were down more than 1% last night, being offset by the gain in the energy sector. I reckon today the market is likely to react on the technicals as Russells and Nasdaq is on the support level.

Market Call: FLAT to upside

Date: 4 June 2014