31 Jul 2014 AMC - Market lost 2%, one of the worst drop in 2014

31 Jul 2014 AMC - Market lost 2%, one of the worst drop in 2014

Market Summary 

 European Markets Closing Prices

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

·         UK's FTSE: -0.6%

·         Germany's DAX: -1.9%

·         France's CAC: -1.5%

·         Spain's IBEX: -2.1%

·         Portugal's PSI: -3.1%

·         Italy's MIB Index: -1.5%

·         Irish Ovrl Index: -1.4%

·         Greece ASE General Index: -2.2%

Before Market Opens 

S&P futures vs fair value: -13.80. Nasdaq futures vs fair value: -33.00.
The S&P 500 futures trade 14 points below fair value.

Markets in Asia ended on a mostly lower note, while indices in China and Hong Kong outperformed. Bangko Sentral ng Pilipinas hiked its key rate 25 basis points to 3.75% to fend off an uptick in inflation. 

·         In economic data: 

o    Japan's Average Cash Earnings increased 0.4% year-over-year (expected 0.7%, previous 0.6%), while Housing Starts fell 9.5% year-over-year (consensus -11.5%, previous -15.0%) 

o    Australia's Building Approvals fell 5.0% month-over-month (expected -2.0%, previous 10.3%), while Private Sector Credit rose 0.7% month-over-month (consensus 0.4%, previous 0.4%). Separately, Import Price Index declined 3.0% quarter-over-quarter (expected -1.3%, previous 3.2%) 

o    Hong Kong's Retail Sales fell 6.9% year-over-year (expected -5.1%, previous -4.1%) 

o    Singapore's Unemployment Rate held steady at 2.0%, as expected 

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·         Japan's Nikkei shed 0.2%, slipping off six-month highs as traders booked profits following four days of gains. Fujifilm shed 0.8% following its earnings miss. 

·         Hong Kong's Hang Seng inched up 0.1% to its best levels in more than three and a half years as buyers remained in control for an eighth session. The recent rally has come on the back of strength in the property sector with China Overseas Land & Development leading today's advance with a 4.6% gain. 

·         China's Shanghai Composite gained 0.9%, rallying to its best level of 2014. Mining stocks saw robust gains as Zijin Mining Group and Zhongjin Goldcorp climbed 7.1% and 9.0%, respectively. 

Major European indices trade lower across the board with Spain's IBEX (-2.1%) leading the retreat. Germany and Russia have reportedly engaged in discussions to broker a diplomatic solution to the situation in Ukraine with Russia pushing for the international community to recognize Crimea's independence. 

·         Participants received several data points: 

o    Eurozone CPI rose 0.4% year-over-year (expected 0.5%, previous 0.5%), while Core CPI increased 0.8% (consensus 0.8%, prior 0.8%). Separately, the Unemployment Rate ticked down to 11.5% from 11.6% (expected 11.6%) 

o    Germany's Unemployment declined by 12,000 (expected -5,000, previous 7,000), while the Unemployment Rate held steady at 6.7%, as expected 

o    Great Britain's Nationwide HPI rose 10.6% (expected 11.3%, previous 6.0%) 

o    France's Consumer Spending rose 0.9% month-over-month (expected 0.1%, previous 0.7%), while PPI was unchanged month-over-month (consensus -0.1%, previous -0.5%) 

o    Italy's Monthly Unemployment Rate slipped to 12.3% (expected 12.6%, previous 12.5%), while CPI ticked down 0.1% month-over-month (expected 0.1%, previous 0.1%). Also of note, PPI ticked up 0.1% month-over-month (consensus -0.1%, previous -0.1%) 

o    Spain's Current Account deficit narrowed to EUR580 million from EUR1.60 billion 

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·         Great Britain's FTSE is lower by 0.3% with financials on the defensive. 3i Group, St James's Place, and Lloyds Banking are down between 2.6% and 3.2%. On the upside, Royal Dutch Shell is higher by 3.8% after beating earnings expectations. 

·         In France, the CAC holds a loss of 1.1%. Alcatel-Lucent is the weakest component, down 6.3%, after reporting disappointing earnings. Financials also lag with AXA, Credit Agricole, and Societe Generale down between 2.1% and 4.1%. 

·         Germany's DAX trades down 1.3%. Adidas and Deutsche Lufthansa hold respective losses of 14.5% and 5.2% after reporting disappointing earnings. Health care names outperform with Fresenius SE up 4.0% after beating earnings estimates. 

·         Spain's IBEX holds a loss of 2.1%. Santander and Telefonica, both of which have a large exposure to Latin America, weigh with losses close to 1.7% apiece after Argentina's default. Drug maker Grifols is the weakest component, down 10.5% after reporting disappointing results.

U.S. Equities

·         Equity futures are under pressure as some uneasiness takes hold after Argentina defaulted on its debt for the second time in 13 years

·         Initial Claims (302K actual v. 310K expected)

·         Continuing Claims (2539K actual v. 2525K expected)

·         Employment Cost Index (0.7% actual v. 0.4% expected)

o    S&P Futures -14 @ 1951

o    Dow Futures -119 @ 16,702 

o    Nasdaq Futures -31 @ 3937

Asia

·         Markets ended mostly lower across Asia

·         Japan's average cash earnings (0.4% YoY actual v. 0.7% YoY expected) missed

·         Australia's building approvals (-5.0% MoM actual v. -1.0% MoM expected) and import prices (-3.0% QoQ actual v. -1.4% QoQ expected) both fell short of estimates

·         Bangko Sentral ng Pilipinas hiked its key rate 25bps to 3.75% (3.5% previous, 3.63% expected) to fend off an uptick in inflation

·         Japan's Nikkei (-0.2%) slipped off six-month highs 

·         Hong Kong's Hang Seng (+0.1%) inched up to its best levels in more than three and a half years 

·         China's Shanghai Composite (+0.9%) finished at its best level of 2014

·         Australia's ASX (+0.2%) ended at its best level in more than six years

Market Internals

Market Internals -Technical-
The Nasdaq closed down 93 (-2.09%) at 4370, the S&P 500 closed down 39 (-2%) at 1931, and the Dow closed down 317 (-1.88%) at 16563. Action came on above average volume (NYSE 909 mln vs. avg. of 657; NASDAQ 2093 mln vs. avg. of 1678), with decliners outpacing advancers (NYSE 309/2888, NASDAQ 441/2267) and new lows outpacing new highs(NYSE 27/110, NASDAQ 27/116).

Relative Strength: 
Volatility-VXX +8.46%, Coffee-JO +7.34%, Natural Gas-UNG +1.49%, Egypt-EGPT +1.25%, Agriculture-DBA +0.56%, Cocoa-NIB +0.48%, Swiss Franc-FXF +0.05%.

Relative Weakness: 
Greece-GREK -3.39%, Spain-EWP -3.22%, Biotechnology-XBI -3.2%, Clean Energy-PBW -3.08%, Indonesia-IDX -3.03%, Junior Gold Miners-GDXJ -2.96%, Rare Earths-REMX -2.83%, Taiwan-EWT -2.6%, Oil Services-OIH -2.52%, Italy-EWI -2.45%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries

Closing Market Summary: Stocks Surrender July Gains
The stock market punctuated July with a broad-based retreat that sent the S&P 500 lower by 2.0% with all ten sectors ending in the red. The benchmark index posted a monthly decline of 1.5%, while the Russell 2000 (-2.3%) underperformed to end the month lower by 6.1%.

To get a better feel for what led to today's retreat, we'd like to look back to Wednesday, when the market had ample reason to rally, but did not. Instead, it ended basically flat after a sloppy day of trading where good news was marveled at -- Q2 GDP and earnings results -- but not acted on with any real conviction from buyers. A spike in long-term rates and worries the Fed could raise the fed funds rate sooner than expected (a worry the FOMC directive didn't refute in unequivocal fashion) garnered most of the blame for the lackluster response.

That inability to rally on a batch of good economic and earnings news left the stock market increasingly vulnerable to a larger pullback in the event any bad news came its way. Sure enough, there were some overnight headlines that rattled weak-handed positions: 

·         Eurozone CPI was up just 0.4% year-over-year in July (expected 0.5%), triggering renewed worries about deflation 

·         Argentina was deemed to be in default on its bond payments 

·         Portuguese bank Banco Espirito Santo reported a big net loss for the first half of the year that wiped out its capital buffer and drove its stock price down 50%, reminding investors that there are still issues present in the European banking system 

With the sentiment taking a turn for the worse, a batch of poor quarterly results from a handful of global players contributed to the slide. Samsung kicked things off overnight with below-consensus earnings that sent the stock lower by 3.7% in Seoul. Things did not get much better during the European session with Adidas and Deutsche Lufthansa posting respective earnings-driven losses of 15.4% and 6.4% in Frankfurt. The DAX Index, meanwhile, lost 1.9%.

Back in the U.S., market participants received a set of earnings that did not quite live up to the high standard that was set during the first two weeks of the reporting period with earnings growth pushing 9.0%, according to S&P Capital IQ.

On that note, 3D Systems (DDD 50.13, -5.94), Mosaic (MOS 46.11, -1.07), Beazer Homes (BZH 15.35, -1.95), and Ocwen Financial (OCN 30.17, -4.49), registered losses between 2.3% and 13.0% after disappointing with their results. Furthermore, even above-consensus earnings from the likes of Akamai Technologies (AKAM 59.02, -1.71), MasterCard(MA 74.15, -1.76), and Yelp (YELP 67.16, -8.44) were met with selling activity.

The ten economic sectors registered losses between 1.7% (utilities) and 2.4% (energy). Rate-sensitive telecom services (-2.3%) and utilities outperformed in the early going as participants sought cover in the defensively-oriented sectors, but the two groups could not avoid being engulfed in the selling activity.

Elsewhere, the top-weighted sector—technology (-2.0%)—suffered from broad pressure. Influential listings like Apple (AAPL 95.60, -2.55), Google (GOOGL 579.55, -15.89), Facebook (FB 72.65, -2.03), and Qualcomm (QCOM 73.72, -2.32) lost between 2.6% and 3.1%, while chipmakers also tumbled. Notably, Micron (MU 30.55, -1.98) plunged 6.1% amid cautious comments from Goldman Sachs, while the broader PHLX Semiconductor Index fell 2.1%.

Biotechnology did not fare much better with the iShares Nasdaq Biotechnology ETF (IBB 250.83, -6.42) sliding 2.5%. For its part, the health care sector lost 2.0%, surrendering its entire monthly gain.

Only technology and telecom services were able to post July gains of 1.4% and 2.6%, respectively, while the utilities sector lost 6.9% for the month.

Treasuries ended flat after regaining their early morning losses. The 10-yr yield settled at 2.56%.

The selloff invited above-average participation with more than 900 million shares changing hands at the NYSE.

Economic data included Initial Claims, the Employment Cost Index, and the Chicago PMI report: 

·         The initial claims level increased to 302,000 from a downwardly revised 279,000 (from 284,000) 

o    The Briefing.com consensus expected the initial claims level to increase to 310,000 

·         The Employment Cost Index increased 0.7% in Q2 2014, up from a 0.3% increase in the first quarter, while the Briefing.com consensus expected an increase of 0.4% 

o    Wages and salaries rose 0.6% in the second quarter, up from a 0.3% increase in Q1 

o    Benefits spending rose 1.0% and is up 2.5% year-over-year 

·         Manufacturing activities in the Chicago region softened significantly in July as the Chicago PMI fell to 52.6 from 62.6 in June 

o    The Briefing.com consensus expected a more modest decline to 61.8 

Tomorrow's session will be full of economic data starting with the 8:30 ET release of the Nonfarm Payrolls report for July (Briefing.com consensus 220K). Personal Income/Spending (consensus 0.4%) data and Core PCE Prices (expected 0.2%) will also be reported at 8:30 ET, while the final reading of the Michigan Sentiment survey for July (consensus 82.0) will cross the wires at 9:55 ET. Finally, the July ISM Index (consensus 55.9) and June Construction Spending (expected 0.3%) will both be reported at 10:00 ET. 

·         S&P 500 +4.5% YTD 

·         Nasdaq Composite +4.6% YTD 

·         Dow Jones Industrial Average -0.1% YTD 

·         Russell 2000 -3.7% YTD

Commodities

Closing Commodities: Crude Oil Falls Over 2%, Nat Gas Rises On Inventory Data

·         Dec gold fell deeper into negative territory after pulling back from a session high of $1295.30 per ounce set at the open of floor trade. It brushed a session low of $1281.90 per ounce moments before settling with a 1.1% loss at $1283.10 per ounce. 

·         Sep silver touched a session high of $20.70 per ounce in early morning action but retreated into the red. Unable to regain momentum, it settled 0.9% lower at $20.41 per ounce, just above its session low of $20.40 per ounce. 

·         Sep crude oil fell below the $100 per barrel level today, extending losses for a fourth consecutive session. It traded as low as $98.05 per barrel and settled with a 2.1% loss at $98.12 per ounce. 

·         Sep natural gas rallied into positive territory from its session low of $3.76 per MMBtu after inventory data showed a build of 88 bcf vs expectations for a build of 90-93 bcf. It climbed to a session high of $3.89 per MMBtu and settled at $3.84 per MMBtu, or 1.6% higher.

NYMEX Energy Closing Prices

  Sep crude oil fell $2.15 to $98.12/barrel 

·         Crude oil fell below the $100 level today, extending losses for a fourth consecutive session. It traded as low as $98.05 and settled with a 2.1% loss. 

  Sep natural gas rose 6 cents to $3.84/MMBtu 

·         Natural gas rallied into positive territory from its session low of $3.76 following inventory data that showed a build of 88 bcf vs expectations for a build of 90-93 bcf. It climbed to a session high of $3.89 and settled with a 1.6% gain. 

  Sep heating oil fell 1 cent to $2.89/gallon 

  Sep RBOB fell 2 cents to $2.80/gallon

COMEX Metals Closing Prices

  Dec gold fell $13.80 to $1283.10/oz 

·         Gold pulled back from a session high of $1295.30 set at the open of floor trade and fell deeper into negative territory. It brushed a session low of $1281.90 moments before settling with a 1.1% loss. 

  Sep silver fell $0.18 to $20.41/oz 

·         Silver touched a session high of $20.70 in early morning action but retreated into the red. Unable to regain momentum, it settled just above its session low of $20.40, booking a loss of 0.9%. 

  Sep copper fell 1 cent to $3.23/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Sep corn fell 5 cents to $3.57/bushel 

·         Sep wheat rose 3 cents to $5.31/bushel 

·         Nov soybeans settled unchanged at $10.81/bushel 

·         Sep ethanol fell 5 cents to $1.99/gallon 

·         Sep sugar (#16 (U.S.)) rose 0.11 of a penny to 24.79 cents/lbs

Treasuries

Treasuries Erase Early Losses, Finish Flat: 10-yr: -02/32..2.562%..USD/JPY: 102.85..EUR/USD: 1.3387

·         Treasuries ended little changed after erasing their early losses. Click here to see an intraday yields chart.

·         Macro concerns included Argentina's second default in just more than 12 years and Portugal's Banco Espirito Santo missing earnings estimates and announcing it needs more capital. 

·         The complex saw some selling ahead of the mixed initial (302K actual v. 310K expected) and continuing (2539K actual v. 2525K expected) claims data, and slumped to its worst levels of the day as the numbers were digested. 

·         Some light buying developed ahead of the big Chicago PMI (52.6 actual v. 61.8 expected) miss, which caused trade to rally back to the unchanged line into the lunchtime hour.

·         Maturities drifted little changed over the remainder of the session. 

·         Up front, the 2y slipped -2bps to 0.539%. The bid dropped the yield off its highest levels since May 2011. 

·         In the belly, the 5y eased -0.6bps to 1.763%. Early selling caused action to probe the 1.800% level, but trade was unable to put in the highest close of 2014. 

·         The 10y ticked up +0.2bps to 2.556%. The benchmark yield was up +15bps off Tuesday's close as action tested the 100 dma (2.610%) before closing on the 50 dma. 

·         A +0.1bp advance saw the 30y finish @ 3.311%. The yield on the long bond threatened resistance guarded by the 50 dma (3.372%) before settling little changed. 

·         A steeper curve won out as the 2-10-yr spread widened to 201.5bps. 

·         Precious metals finished near their lows with gold -$10 @ 1285 and silver -$0.14 @ $20.45. 

·         Data: Nonfarm payrolls, nonfarm private payrolls, unemployment rate, hourly earnings, average workweek, personal income and spending, PCE prices- core (8:30), Michigan Sentiment - Final (9:55), ISM Index, construction spending (10), auto/truck sales (14).

On other news.... 

Currencies 

Dollar Trades Flat: 10-yr: -01/32..2.563%..USD/JPY: 102.87..EUR/USD: 1.3390

·         The Dollar Index trades flat near 81.45 as a quiet session grinds towards the close. Click here to see a daily Dollar Index chart.

·         Today's session has seen a tight 20 cent range with action confined to a 10 cent spread during U.S. trade. 

·         EURUSD is -5 pips @ 1.3390 as trade steadies near eight-month lows. The single currency has been limited to a 30 pip range over the course of today's session with action seeing little reaction to the mixed data. The 1.3400 level remains key, and is likely to be challenged by the bulls. Eurozone data scheduled for tomorrow includes Italian and Spanish Manufacturing PMI. 

·         GBPUSD is -30 pips @ 1.6880 as selling persists for the 11th time in 12 days. Today's New Home Price Index miss was the latest cause for concern as action tested the 100 dma (1.6857) before seeing a small bounce. The current skid has wiped out close to 300 pips and has trade testing support. British data out tomorrow is limited to Manufacturing PMI.

·         USDCHF is flat @ .9085 as trade lingers near six-month highs. An early bid probed .9100 for a second straight session, but trade was once again unable to hold the level. Swiss banks are closed tomorrow for Independence Day. 

·         USDJPY is +5 pips @ 102.85 as the bulls fight to put in a tenth consecutive day of gains. The current rally has been inspired by another batch of disappointing data out of Japan that has fueled speculation the Bank of Japan may need to do more to get the economy on solid ground. Any positive close will be the best since early-April. Bank of Japan Governor Haruhiko Kuroda will speak in Tokyo.

·         AUDUSD is -30 pips @ .9295 as action presses lower for the fifth time in six days. Today's weakness comes following the building approvals and import prices misses, and has the hard currency on track for its first sub-100 dma since February. The .9250 area provides the next level of support. Australia's PPI will cross the wires this evening. China's Manufacturing PMI and HSBC Final Manufacturing PMI are due out tonight.

·         USDCAD is -10 pips @ 1.0890 as action slips off one and a half-month highs. The pair probed the 1.0925 level in early trade, but slipped back into the red as traders digested the better than expected Canadian GDP (0.4% MoM actual v. 0.3% MoM expected) figure.

Next Week In View




Economic Commentaries

Economic Summary: Initial Claims rise but not as fast as expected; Chicago PMI well below expectations; NFP's tomorrow at 8:30
Economic Data Summary:

·         July Challenger Job Cuts 24.4% vs Briefing.com consensus of ; June was -20.2%

·         Weekly Initial Claims 302K vs Briefing.com consensus of 310K; Last Week was revised to 279K from 284K

·         Weekly Continuing Claims 2.539 M vs Briefing.com consensus of 2.525 M ; Last Week was revised to 2.508 M from 2.500 M

o    There is some concern, however, that the decline in claims is a result of poor seasonal adjustments surrounding the motor vehicle industry. Plants that are normally closed during this period for retooling may have been kept open so production can match newfound heightened demand.

·         Q2 Employment Cost Index 0.7% vs Briefing.com consensus of 0.4%; Q1 was 0.3%

o    Wages and salaries rose 0.6% in the second quarter, up from a 0.3% increase in Q1. Benefits spending rose 1.0% and is up 2.5% y/y. Private industry compensation levels increased 0.8% in the second quarter after increasing 0.3% in the first quarter. Wages and salaries were up 0.8% and benefits spending increased 1.1%. State and local government compensation increased 0.5% in the second quarter after increasing by the same rate in the first quarter.

·         July Chicago PMI 52.6  vs Briefing.com consensus of 61.8; June was 62.6

o    Production levels barely remained in an expansion as the related index plummeted from 70.1 in June to 51.4 in July. That size of a drop was odd considering new order levels, while notably weaker than the 65.1 reading in June, remained firm at 55.7. Backlogs, however, contracted for the first time since September 2013 as the related index fell to 45.2 from 55.4 in June. 

Upcoming Economic Data:

·         July Non-Farm Payrolls due out Friday at 8:30 (Briefing.com consensus of 220K; June was 288K)

·         July Nonfarm Private Payrolls due out Friday at 8:30 (Briefing.com consensus of 225K; June was 262K)

·         July Unemployment Rate due out Friday at 8:30 (Briefing.com consensus of 6.1%; June was 6.1%)

·         July Hourly Earnings due out Friday at 8:30 (Briefing.com consensus of 0.2%; June was 0.2%)

·         July Average Workweek due out Friday at 8:30 (Briefing.com consensus of 34.5; June was 34.5)

·         June Personal Income due out Friday at 8:30 (Briefing.com consensus of 0.4%; May was 0.4%)

·         June Personal Spending due out Friday at 8:30 (Briefing.com consensus of 0.4%; May was 0.2%)

·         June PCE Prices - CORE due out Friday at 8:30 (Briefing.com consensus of 0.2%; May was 0.2%)

·         July Michigan Sentiment - Final due out Friday at 9:55 (Briefing.com consensus of 82.0; June was 81.3)

·         July ISM Index due out Friday at 10:00 (Briefing.com consensus of 55.9; June was 55.3)

·         June Construction Spending due out Friday at 10:00 (Briefing.com consensus of 0.3%; May was 0.1%)

Other International Events of Interest

·         Some mixed data from the region saw eurozone Flash CPI (0.4% YoY actual v. 0.5% YoY expected) miss and the unemployment rate (11.5% actual v. 11.6% expected) beat
Better than expected German retail sales (1.3% MoM actual v. 1.1% MoM expected) and unemployment change (-12K actual v. -5K expected) have done little to help the DAX (-1.3%)

Jason's Commentaries


It's definitely one of the worst drop in 2014 this year. All indices lost at least a 1.88%. The entire market is in the sea of red. Volumes were at 926.7m shares on the NYSE. However, there's significant divergence in the market. Volumes were not strong enough to sell off so many stocks. It's likely to be the system traders being stopped out which causes this sudden huge drop. Needless to say, all sectors ended up in red. The worst loser is Energy and Healthcare. But all sectors were down more than 1.5% or more. A good sign to signal some divergence and topping signs in the market. However, the employment report is likely to be a game changer today. My guess it, the employment report is likely to report approx 200k jobs and market might use this as an excuse to rally and to cover their shorts. Good luck to the bears.







Market Call: UP

Date: 1 Aug 2014