16 Jul 2014 AMC - Market went higher once again on earnings

16 Jul 2014 AMC - Market went higher once again on earnings

Market Summary 

European Markets Closing

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

·         UK's FTSE: + 1.1%

·         Germany's DAX: + 1.4%

·         France's CAC: + 1.5%

·         Spain's IBEX: + 1.8%

·         Portugal's PSI: + 3.1%

·         Italy's MIB Index: + 3.2%

·         Irish Ovrl Index: + 1.3%

·         Greece ASE General Index: + 0.8%

Before Market Opens 

S&P futures vs fair value: +9.40. Nasdaq futures vs fair value: +30.00.
The S&P 500 futures trade nine points above fair value.

Asian markets ended on a mixed note with most moves contained to no more than 1.0%. China's GDP rose 7.5% year-over-year (consensus 7.4%, last 7.4%), but was unable to lift equities with some pointing to concerning figures in the Fixed Asset Investment report. Specifically, home sales fell 6.7% year-to-date, home sales prices were down 9.0%, and property construction was down 16.0% 

·         In remaining economic data: 

o    China's Fixed Asset Investment increased 17.3% year-over-year (expected 17.2%, previous 17.2%) and Industrial Production rose 9.2% year-over-year (consensus 9.0%, prior 8.8%). Also of note, Retail Sales jumped 12.4% year-over-year, as expected 

o    India's trade deficit widened to $11.76 billion from $11.23 billion (expected deficit of $6.50 billion) 

o    South Korea's Unemployment Rate ticked down to 3.6% from 3.7% 

o    Australia's MI Leading Index ticked up 0.1% month-over-month (previous 0.1%) 

o    New Zealand's CPI rose 0.3% quarter-over-quarter (expected 0.4%, prior 0.3%), while the year-over-year reading increased 1.6% (consensus 1.8%, previous 1.5%) 

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·         Japan's Nikkei shed 0.1% after spending the bulk of the session near its flat line. Financials lagged with T&D Holdings and MS&AD Insurance both losing close to 2.2%. Sumco Corp outperformed, climbing 3.3% 

·         Hong Kong's Hang Seng added 0.3%, ending near its early high with help from discretionary stocks. Want Want China Holdings gained 2.1% and Li & Fung advanced 1.0%. Insurers underperformed with China Life Insurance and Ping An Insurance down 1.2% and 0.8%, respectively 

·         China's Shanghai Composite shed 0.2% after maintaining a narrow range throughout the session. Industrials outperformed with Far East Cable and Jihua Group both surging 10.0% 

Major European indices trade higher across the board with Italy's MIB (+2.5%) in the lead. The index has shown relative strength even after Moody's affirmed its negative outlook on Italy's banking sector, citing deteriorating quality of assets and low profitability levels. 

·         Participants received several data points: 

o    Eurozone trade surplus narrowed to EUR15.30 billion from EUR15.20 billion (expected surplus of EUR16.30 billion) 

o    Great Britain's Average Earnings Index + Bonus ticked up 0.3% (expected 0.5%, previous 0.8%), while the Claimant Count fell 36,300 (expected -27,000, previous -32,800). Also of note, the Unemployment Rate ticked down to 6.5% from 6.6%, as expected 

o    Italy's trade surplus expanded to EUR3.68 billion from EUR3.52 billion (expected surplus of EUR3.23 billion) 

o    Spain's trade deficit narrowed to EUR1.98 billion from EUR2.20 billion (expected deficit of EUR2.10 billion) 

o    Swiss ZEW Expectations fell to 0.1 from 4.8 (expected 5.0) 

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·         Great Britain's FTSE is higher by 1.1% with most components trading in the green. Defense contractor Meggitt is the top performer, up 8.6%. Financials lag with Aberdeen Asset Management and RSA Insurance Group down 0.1% and 0.7%, respectively 

·         In France, the CAC trades up 1.5%. Credit Agricole and Societe Generale outperform with gains close to 3.0% apiece, while defense contractor Airbus lags. The stock is lower by 2.0% 

·         Germany's DAX sports an advance of 1.5% with 27 of its 30 components trading higher. Infineon Technologies leads with a gain of 3.8%, while K+S holds a loss of 0.7% 

·         Italy's MIB is higher by 2.5%. Telecom Italia is higher by 6.8% and Banco Popolare follows with an increase of 5.9%

In domestic economic news, the May net long-term TIC flows report showed a $19.40 billion inflow of foreign capital into U.S.-denominated assets to follow an outflow of $41.20 billion in the prior month.

U.S. Equities

·         Futures suggest a strong open. Early action has been buoyed by solid earnings reports, attempted M&A, and better than expected Chinese data

·         Bank of America (BAC), CSX (CSX), and Intel (INTC) posted notable beats while only Yahoo! (YHOO) was unable to live up to analyst estimates 

·         An attempted mega deal in the media space is making headlines as Time Warner (TWX) rejected 20th Century Fox's (FOXA) $85 per share offer

·         MBA Mortgage Index (-3.6%)

·         PPI (0.4% actual v. 0.2% expected)

·         Core PPI (0.2% actual v. 0.2% expected)

·         Net Long-Term TIC Flows (+$19.4 bln)

o    S&P Futures +8 @ 1976

o    Dow Futures +62 @ 17,050

o    Nasdaq Futures +26 @ 3939

Asia

·         Markets gained across much of Asia

·         Better than expected Chinese data provided support as GDP (7.5% QoY actual v. 7.4% QoY expected, 7.4% QoY previous), industrial production (9.2% YoY actual v. 9.0% YoY expected, 8.8% YoY previous), and fixed asset investment (17.3% YTDoY actual v. 7.2% YTDoY expected) all outpace estimated

·         Interestingly, China's Shanghai Composite (-0.2%) was unable to stay out of the red while Hong Kong's Hang Seng (+0.3%) eked out a slim gain

·         Japan's Nikkei (-0.1%) slipped amid an uneventful session

·         India's Sensex (+1.3%) rallied on the back of infrastructure plays after the space received a Reserve Bank of India exemption on long-term bonds. The Sensex was able to shrug off news India's trade deficit widened slightly to $11.76 bln ($11.23 bln previous) despite a 10.2% YoY increase in exports

Market Internals

Leaders and Laggards

Technical Updates

Briefing's Commentaries

Closing Market Summary: Stocks Climb Amid Strength in Technology
The stock market ended the Wednesday session on an upbeat note, but the key indices made the bulk of their move during the opening hour, while the intraday underperformance of small-cap stocks kept the market from overtaking its early high. The S&P 500 advanced 0.4%, while the Russell 2000 (-0.3%) slid below its 100-day moving average (1157.38), ending right below the 50-day moving average (1151.46).

The relative weakness among small caps was a continuation of a trend that has been in effect since the start of the month. Today's decline widened the July loss in the Russell 2000 to 3.5%, while the S&P 500 ended the session up 1.1% for the month.

Unlike small caps, the S&P 500 spent the entire session in the green, drawing strength from heavily-weighted sectors like energy (+1.6%), technology (+1.0%), and industrials (+0.5%).

Interestingly, the consumer discretionary sector (+0.3%) could not finish among the leaders even with Time Warner's (TWX 83.13, +12.12) 17.1% surge after rejecting an $80 billion ($85 per share) cash and stock buyout offer from 21st Century Fox (FOXA 33.00, -2.19).

Of the three leading groups, the tech sector opened in the lead with its top-weighted component—Apple (AAPL 94.78, -0.54)—providing support after announcing plans to develop business applications with IBM (IBM 192.36, +3.87). Shares of IBM rose 2.1%, settling near their early high, while Apple lost 0.6% after being up as much as 1.9% at the start.

Even though Apple surrendered its entire gain, the tech sector built on its early strength. Chipmakers picked up the slack with the PHLX Semiconductor Index rising 1.1% thanks to better than expected earnings from Intel (INTC 34.65, +2.94). The industry leader soared 9.3% after beating estimates, boosting its guidance, and adding $20 billion to its buyback program.

Staying on the earnings theme, Yahoo! (YHOO 33.79, -1.82) tumbled 5.1% after missing the Capital IQ consensus estimate by one cent on revenue that was also below estimates.

While the tech sector spent the session near its opening high, energy (+1.6%) took the lead during afternoon action. Similar to the sector, crude oil advanced steadily, climbing 1.3% to $101.18/bbl.

Also of note, the industrial sector finished among the leaders with support from transport stocks. The Dow Jones Transportation Average gained 0.6% with 16 of its 20 components ending in the green. Rail operator CSX (31.19, +0.04) tacked on 0.1% following its one-cent beat.

On the downside, the health care sector (-0.3%) was the weakest group as biotechnology weighed. The iShares Nasdaq Biotechnology ETF (IBB 248.52, -3.91) lost 1.6% on top of yesterday's 2.2% decline sparked by comments from Fed Chair Yellen who identified the group as one of the areas where valuations have been stretched.

Social media stocks were also mentioned in that group and the likes of Pandora Media (P 26.13, -0.47), Twitter (TWTR 37.43, -0.45), and Zynga (ZNGA 3.02, -0.08) lost between 1.4% and 2.6%.

Outside of health care, consumer staples (-0.1%) and financials (-0.1%) also finished in the red. In the financial sector, Bank of America (BAC 15.50, -0.31) reported above-consensus results, but its shares fell 2.0% as investors questioned the quality of the beat.

Treasuries saw losses in the early morning, but climbed into positive territory during the session. The 10-yr note added four ticks to send its yield lower by two basis points to 2.53%.

Participation was on the light side with 660 million shares changing hands at the NYSE.

Economic data included the MBA Mortgage Index, PPI, net long-term TIC flows, Industrial Production, and the NAHB Housing Market Index: 

·         The weekly MBA Mortgage Index fell 3.6% to follow last week's uptick of 1.9% 

·         Producer prices increased 0.4% in June after declining 0.2% in May, while the Briefing.com consensus expected an increase of 0.2% 

o    A 2.1% surge in energy prices was the main catalyst for the strong increase in producer prices. That was the largest monthly increase in energy costs since February 2013. Gasoline prices increased 6.4% in June 

o    Food prices declined 0.2% for a second consecutive month 

·         Excluding food and energy, core prices were up 0.2% after declining 0.1% in May, while the consensus expected these prices to increase 0.2% 

·         The May net long-term TIC flows report showed a $19.40 billion inflow of foreign capital into U.S.-denominated assets to follow an outflow of $41.20 billion in the prior month 

·         Industrial production increased 0.2% in June after increasing a downwardly revised 0.5% (from 0.6%) in May, while the Briefing.com consensus expected an increase of 0.4% 

o    Relatively strong manufacturing surveys did not translate into strong manufacturing production growth. Manufacturing production increased only 0.1%, down from a 0.4% gain in May and the slowest increase since production declined 1.0% in January 

o    Capacity utilization levels remained at 79.1% for the second consecutive month 

·         The July NAHB Housing Market Index rose to 53 from 49, while the Briefing.com consensus expected an uptick to 50 

Tomorrow, weekly initial claims (Briefing.com consensus 311K), June Housing Starts (consensus 1.02 million), and Building Permits (consensus 1.04 million) will be released at 8:30 ET, while the Philadelphia Fed survey (consensus 12.5) for July will be reported at 10:00 ET. 

·         S&P 500 +7.2% YTD 

·         Nasdaq Composite +6.0% YTD 

·         Dow Jones Industrial Average +3.4% YTD 

·         Russell 2000 -1.1% YTD

Commodities

Closing Commodities: Crude Rises 1.3% To Over $101/Barrel

·         Aug gold rose for the first time in four sessions despite strength in the dollar index.

·         The yellow metal came off its session low of $1295.80 per ounce set in early morning pit action and traded as high as $1304.20 per ounce. It settled at $1299.90 per ounce, booking a gain of 0.2%. 

·         Sep silver, on the other hand, spent its entire session in the red. It touched a session low of $20.63 per ounce in early morning action and eventually settled with a 0.6% loss at $20.77 per ounce.

·         Aug crude oil traded higher on bullish inventory data released earlier today.

·         The EIA reported that for the week ending July 11, inventories fell by 7.5 mln barrels when a smaller draw of 2.1-2.8 mln barrels was expected.

·         The energy component advanced to a session high of $101.46 per barrel and eventually settled with a 1.3% gain at $101.18 per barrel.

·         Aug natural gas also rose today, climbing as high as $4.15 per MMBtu in morning action. It settled 0.5% higher at $4.12 per MMBtu.

COMEX Metals Closing Prices

  Aug gold rose $2.70 to $1299.90/oz 

·         Gold rose for the first time in four sessions despite strength in the dollar index. The yellow metal came off its session low of $1295.80 set in early morning pit action and traded as high as $1304.20. It settled just below the $1300 level, booking a gain of 0.2%. 

  Sep silver fell $0.12 to $20.77/oz 

·         Silver, on the other hand, spent its entire floor session in the red. It touched a session low of $20.63 in early morning action and eventually settled with a 0.6% loss. 

  Sep copper fell 4 cents to $3.21/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Sep corn rose 4 cents to $3.78/bushel 

·         Sep wheat fell 1 cent to $5.38/bushel 

·         Aug soybeans rose 6 cents to $11.87/bushel 

·         Sep ethanol settled unchanged at $2.00/gallon 

·         Sep sugar (#16 (U.S.)) fell 0.05 of a penny to 24.50 cents/lbs

NYMEX Energy Closing Prices

  Aug crude oil rose $1.32 to $101.18/barrel 

·         Crude oil traded higher following bullish inventory data released earlier today. The EIA reported that for the week ending July 11, inventories fell by 7.5 mln barrels when a smaller draw of 2.1-2.8 mln barrels was anticipated. The energy component advanced to a session high of $101.46 and eventually settled with a 1.3% gain. 

  Aug natural gas rose 2 cents to $4.12/MMBtu 

·         Natural gas also rose today, climbing as high as $4.15 in morning action. It brushed a session low of $4.11 and settled with a 0.5% gain. 

  Aug heating oil rose 1 cent to $2.86/gallon 

  Aug RBOB fell 2 cents to $2.88/gallon 
Treasuries

Treasuries End Mixed: 10-yr: +03/32..2.535%..USD/JPY: 101.72..EUR/USD: 1.3522

·         Treasuries finished mixed amid a subdued trade. Click here to see an intraday yields chart.

·         Ranges were tight throughout the session, limited to 4ps across most of the curve.

·         Maturities held small gains ahead of the cash open, but slid to their lows following this morning's hot PPI (0.4% actual v. 0.2% expected). 

·         However, that would mark the top in yields as the encouraging Net Long Term TIC Flows ($19.4 bln) and weak industrial production (0.2% actual v. 0.4% expected) and capacity utilization (79.1% actual v. 79.2% expected) data sparked some buying. 

·         The NAHB Housing Market Index (53 actual v. 50 expected) outpaced estimates, but was unable to inspire selling. 

·         Fed Chair Janet Yellen took her semi-annual testimony to the House Financial Services Committee, but her appearance failed to garner the attention of yesterday's testimony before the Senate Banking Committee. 

·         Action pressed to its best levels of the session in early afternoon trade, but the release of the Fed's upbeat Beige Book sparked some light selling.

·         The Beige Book suggested "economic activity continued to expand since the previous report" and that "most districts were optimistic about the outlook for growth."

·         Outperformance at the long end saw the 30y shed -1.8bps to 3.348%. Current levels will remain in focus as support there is all that stands in the way of a retest of the May lows.

·         The 10y fell -1.1bps to 2.538%. The yield probed the 50 dma (2.570%) for a second straight session, but was unable to retake the level. 

·         In the belly, the 5y lagged with a +0.8bp advance to 1.699%. Resistance in the 1.680%/1.700% area defends the recent highs near 1.750%. 

·         A flatter curve took hold as the 5-30-yr spread narrowed to 165bps. 

·         Precious metals ended mixed with gold +$2 @ $1299 and silver -$0.11 @ $20.78. 

·         Data: Initial and continuing claims, housing starts, building permits (8:30), and the Philly Fed (10)

·         Fed Speak: STL's Bullard discusses the U.S. economy and monetary policy (13:35).

On other news.... 

Fed Beige Book Summary

·         All twelve Federal Reserve Districts indicated that economic activity continued to expand since the previous report. The pace of economic growth was characterized as moderate in New York, Chicago, Minneapolis, Dallas, and San Francisco, while the remaining Districts reported modest expansion. Compared to the previous reporting period, Boston and Richmond noted a slightly slower pace of growth. Most Districts were optimistic about the outlook for growth.

·         Overall consumer spending increased in every District. 

·         Activity in the nonfinancial services sector continued to grow across all Districts at a modest to moderate pace. Many Districts reported positive growth for professional and business services, including healthcare consulting, advertising, engineering, accounting, and technology. Overall, transportation activity rose at a moderate pace since the previous survey period. Broad-based demand for trucking and rail services across the Districts increased, and the Richmond District reported strong growth in port container traffic, with increases in both imports and exports. 

·         Manufacturing activity expanded in all twelve Districts. Contacts in the metal and auto industries generally reported positive growth, while manufacturers in the Philadelphia, Cleveland, Richmond, and Chicago Districts reported increased demand for their products from the energy sector.

·         Reports on real estate activity varied across the Districts. Many Districts reported low inventories and increasing home prices, but demand was mixed. Boston, New York, and St. Louis reported home sales were below year-ago levels, while Chicago noted a decrease in home sales since the last survey period. Home sales in other Districts remained steady or increased. Multi-family sales and leasing activity were robust in the New York and Dallas Districts. Residential construction rose for single-family homes in the Cleveland, Chicago, Kansas City, and San Francisco Districts, while New York, Richmond, Atlanta, Chicago, Minneapolis, and San Francisco reported increases for multifamily construction. Commercial construction activity generally strengthened across the Districts, due to higher demand and low vacancy rates.

·         Loan volumes rose across the nation, with slight to moderate increases reported in most Districts. Credit quality remained stable or improved slightly in most Districts, while San Francisco noted a slight decline. Credit standards were generally unchanged, although Richmond noted an easing of cost terms for well-qualified commercial and industrial borrowers, and Philadelphia and Chicago mentioned that competitive pressures were leading some financial institutions to take on higher credit risks.

·         Among Districts reporting on agriculture, heavy rains improved soil moisture levels in the Atlanta, Chicago, Minneapolis, Kansas City, and Dallas Districts, while drought conditions persisted in San Francisco. Most fall crops were reported in good or better condition, and expectations of higher production lowered crop prices. Profitability improved for livestock operators in the Atlanta, Minneapolis, and Kansas City Districts due to high cattle and hog prices. 

·         Oil production expanded in the Minneapolis, Kansas City, and Dallas Districts, while natural gas and coal production remained relatively steady in reporting Districts.

·         Labor market conditions improved, as all twelve Districts reported slight to moderate employment growth. Several Districts continued to report some difficulty finding workers for skilled positions. Aside from higher wages to attract talent for these skilled positions, wage pressures remained modest in most Districts. 

·         Price pressures were generally contained, with most Districts reporting slight to modest price increases for both inputs and finished goods. Several Districts noted higher prices for meat, dairy products, construction materials, and some metals (namely steel, copper, and nickel).

Currencies

Dollar Hits One-Month High: 10-yr: +02/32..2.542%..USD/JPY: 101.71..EUR/USD: 1.3523

·         The Dollar Index drifts on session highs near 80.55 following the release of the Fed's Beige Book. Click here to see a daily Dollar Index chart.

·         The Beige Book suggested "economic activity continued to expand since the previous report" and that "most districts were optimistic about the outlook for growth." 

·         The Dollar Index has held in a tight five cent range throughout U.S. trade, and looks likely to close at its best level in a month. 

·         EURUSD is -45 pips @ 1.3520 as moderate selling takes hold for a second session. The single currency has been pressing the lows for most of the afternoon, but was unable to see another leg lower on headlines S&P has downgraded Portugal's Espirito Santo to ‘B-‘ while keeping it on credit watch ‘negative.' Support in the 1.3500 area has held up since November. Eurozone data out tomorrow is limited to CPI.

·         GBPUSD is -10 pips @ 1.7130 as a lackluster trade nears the close. Sterling has been slightly offered throughout the day as this morning's disappointing British jobs report sets in. Action in July has spent most of the time stuck between 1.7100/1.7150. 

·         USDCHF is +30 pips @ .8985 as trade climbs to its best level in a month. Traders will be watching the .9000 level closely as any finish above the mark will be the best since the middle of February. 

·         USDJPY is +5 pips @ 101.70 as trade ticks higher for a third session. The pair saw an early test of the important 101.80 level, but sellers emerged in defense of resistance guarded by the 50 and 200 dma. 

·         AUDUSD is -5 pips @ .9360 as action continues to press support in the area that is helped by the 50 dma. U.S. trade has been rather choppy for the pair, limited to just 20 pips. Australian data out tonight includes the CB Leading Index and NAB Quarterly Business Confidence.

·         USDCAD is -5 pips @ 1.0750 as trade has seen a reversal off the highs. The pair climbed to nearly 1.0800 following the Bank of Canada rate decision (held @ 1.00%), but was knocked off the level as sellers stepped up to defend resistance and both the 50 and 200 dma. Notable were comments indicating the central bank believes any increase in inflation is temporary. Canada's foreign securities purchases will cross the wires tomorrow.

Next Week In View




Economic Commentaries

Economic Summary: PPI hotter than expected in June; IP below expectations
Economic Data Summary:

·         Weekly MBA Mortgage Applications -3.6% vs Briefing.com consensus of ; Last Week was 1.9%

·         June PPI 0.4% vs Briefing.com consensus of 0.2%; May was -0.2%

·         June Core PPI 0.2% vs Briefing.com consensus of 0.2%; May was -0.1%

o    A 2.1% surge in energy prices was the main catalyst for the strong increase in producer prices. That was the largest monthly increase in energy costs since February 2013. Gasoline prices increased 6.4% in June. Food prices declined 0.2% for a second consecutive month. Excluding food and energy, core prices were up 0.2% after declining 0.1% in May. The consensus expected these prices to increase 0.2%.

·         May Net Long Term TIC Flows $19.4 bln vs Briefing.com consensus of ; April was revised to -$41.2 bln from -$24.2 bln

·         June Industrial Production 0.2% vs Briefing.com consensus of 0.4%; May was revised to 0.5% from 0.6%

·         June Capacity Utilization 79.1 vs Briefing.com consensus of 79.2%; May was revised to from 79.1

o    Despite a 0.3% decline in motor vehicle and parts manufacturing, durable goods manufacturing production increased 0.4%. Total motor vehicle assemblies dipped to 11.64 mln SAAR from 11.74 mln SAAR in May. Auto assemblies increased to 4.33 mln SAAR from 3.94 mln SAAR while truck assemblies declined to 7.32 mln SAAR from 7.80 mln SAAR. Excluding motor vehicle and parts production, manufacturing production increased 0.2%. 

·         July NAHB Housing Market Index 53 vs Briefing.com consensus of 50; June was 49

Fed/Treasury Events Summary:

·         Janet Yellen testified before the House today. She reiterated her comments from yesterday.

Upcoming Economic Data:

·         Weekly Initial Claims due out Thursday at 8:30 (Briefing.com consensus of 311K; Last Week was 304K)

·         Weekly Continuing Claims due out Thursday at 8:30 (Briefing.com consensus of 2.563 M ; Last Week was 2.584 M)

·         June Housing Starts due out Thursday at 8:30 (Briefing.com consensus of 1.020 M ; May was 1.001 M )

·         June Building Permits due out Thursday at 10:00 (Briefing.com consensus of 1.037 M ; May was 991K)

·         July Philadelphia Fed due out Thursday at 10:00 (Briefing.com consensus of 12.5; June was 17.8)

Upcoming Fed/Treasury Events:

·         Dallas Fed President Richard Fisher (2014 voter, hawkish) to speak at 12:00

·         July Fed Beige Book due out Wednesday at 14:00.

Jason's Commentaries

While we're at the most volatile period of the year, the Q2 earnings period, where most S&P500 companies announces their earnings. The banks have been performing pretty well recently and for Wednesday, the market was being led by the Tech stocks. Microsoft, Intel, IBM and HP are the main moving factors. Aside from the Tech stocks, The energy sector fared pretty well as well. Volumes are healthy at 674m shares traded on the NYSE and everything looks pretty bullish to me. On the technicals, the Dow has hit a fresh high, S&P500 is approaching its all time high once again. Russells has been lagging. Seems that the small caps have been suffering for their earnings.As Yellen testified last night at 10am ET, the market went into a slight correction which recovered by mid day, pushed back higher by the last hour. And some profit taking on the last hour. It seems that the volatility will continue for a while as the major players are announcing their earnings.








Market Call: FLAT to upside

Date: 17 Jul 2014