24 July 2014 AMC - Market facing resistance with industrials lagging

24 July 2014 AMC - Market facing resistance with industrials lagging

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: + 0.3%

·         Germany's DAX: + 0.4%

·         France's CAC: + 0.8%

·         Spain's IBEX: + 1.9%

·         Portugal's PSI: + 1.4%

·         Italy's MIB Index: + 2.0%

·         Irish Ovrl Index: -0.2%

·         Greece ASE General Index: + 2.1%

Before Market Opens 

S&P futures vs fair value: +3.40. Nasdaq futures vs fair value: +7.20.
The S&P 500 futures trade three points above fair value.

Markets in Asia ended on a mostly higher note. The Reserve Bank of New Zealand hiked its key rate 25 basis points to 3.50%, as expected. 

·         In economic data: 

o    China's HSBC Manufacturing PMI jumped to 52.0 from 50.7 (consensus 51.0) 

o    Japan's trade deficit narrowed to JPY822 billion from JPY909 billion (expected deficit of JPY643 billion) as exports fell 2.0% (expected 1.0%, previous -2.7%) and imports rose 8.4%, as expected. Separately, Manufacturing PMI slipped to 50.8 from 51.5 (expected 51.9) 

o    Hong Kong's trade deficit widened to $43.10 billion from $42.40 billion (expected deficit of $48.50 billion) 

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·         Japan's Nikkei lost 0.3% following today's trade data. Heavyweight Softbank pressured the index, falling 1.8%. 

·         Hong Kong's Hang Seng surged 0.7% to levels last seen in April 2011. Ping An Insurance rallied 3.7% on reports tier 1 investment banks have been gobbling up shares. 

·         China's Shanghai Composite climbed 1.3% to its best level in more than three months as trade reclaimed the 200-day moving average. Brokerage names continued to see strength as CITIC Securities added 2.6% and Haitong Securities gained 2.5%. 

Major European indices trade higher across the board after the release of a full slate of economic data: 

o    Eurozone Manufacturing PMI ticked up to 51.9 from 51.8 (expected 51.7), while Services PMI jumped to 54.4 from 52.8 (consensus 52.7) 

o    Germany's Manufacturing PMI rose to 52.9 from 52.0 (expected 52.0), while Services PMI jumped to 56.6 from 54.6 (consensus 54.5) 

o    Great Britain's Retail Sales rose 0.1% month-over-month (expected 0.3%, previous -0.5%), while the year-over-year reading increased 3.6% (consensus 3.9%, prior 3.7%). Core Retail Sales slipped 0.1% month-over-month (expected 0.3%, previous -0.5%), while the year-over-year reading jumped 4.0% (consensus 4.6%, prior 4.5%) 

o    French Manufacturing PMI slipped to 47.6 from 48.2 (expected 48.1), while Services PMI improved to 50.4 from 48.2 (expected 48.4) 

o    Italy's Retail Sales fell 0.7% month-over-month (consensus 0.4%, previous 0.3%), while the year-over-year reading slipped 0.5% (expected 1.0%, prior 2.7%). Separately, Consumer Confidence fell to 104.6 from 105.6 (consensus 105.0) 

o    Spain's Unemployment Rate eased to 24.5% from 25.9% (expected 25.2%) 

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·         Great Britain's FTSE is higher by 0.2%. Media stock Reed Elsevier leads with a gain of 4.3% after reporting better than expected results. Miners Anglo American and Fresnillo underperform with respective losses of 1.2% and 2.1%. 

·         Germany's DAX trades up 0.4% with financials providing support. Commerzbank sports an advance of 3.0% and Deutsche Bank is higher by 1.5%. BASF is the weakest component, down 1.3% after missing earnings estimates. 

·         In France, the CAC trades higher by 0.8%. Banks are also in the lead with BNP Paribas, Credit Agricole, and Societe Generale up between 2.1% and 3.6%. Oil services company Technip holds a loss of 8.6% after cutting its operating margin target. 

·         Spain's IBEX is higher by 1.7% with banks pacing the rally. Banco Popular, Bankia, BBVA, and Caixabank are up between 2.2% and 4.0%.

U.S. Equities

·         Equity futures point to a firm open with both the S&P 500 and DJIA at/near record highs

·         Earnings season remains in full throttle with 3M (MMM), AT&T (T), Caterpillar (CAT), Ford Motor (F), and General Motors (GM) among the notables to report 

·         Initial Claims (284K actual v. 302K expected)

·         Continuing Claims (2500K actual v. 2533K expected)

o    S&P Futures +3 @ 1984

o    Nasdaq Futures +25 @ 17,050

o    Dow Futures +11 @ 3986

Asia

·         Markets gained across most of Asia

·         China's HSBC Flash Manufacturing PMI (52.0 actual v. 51.2 expected, 50.7 previous) outpaced estimates

·         Japan's trade deficit widened to JPY1.08 trln (JPY1.11 trln expected, JPY0.86 trln) on a 2% drop in exports and 8.4% increase in imports

·         Japan's Nikkei (-0.3%) lagged the region following today's trade data 

·         Hong Kong's Hang Seng (+0.7%) surged to levels last seen in April 2011

·         China's Shanghai Composite (+1.3%) climbed to its best level in more than three months as trade reclaimed the 200 dma

·         India's Sensex (+0.5%) extended its winning streak to eight while ending in record territory

·         Australia's ASX (+0.2%) gained for an eleventh session as action climbed to its best level in more than six years

Market Internals

Market Internals -Technical-
The S&P 500 closed up 1 (+0.05%) at 1988, the Dow closed down 3 (-0.02%) at 17084, and the Nasdaq closed down 2 (-0.04%) at 4472. Action came on slightly below average volume (NYSE 619 mln vs. avg. of 656; NASDAQ 1753 mln vs. avg. of 1664), with decliners outpacing advancers (NYSE 1474/1656, NASDAQ 1216/1456) and new highs outpacing new lows (NYSE 206/21, NASDAQ 75/30).

Relative Strength: 
Greece-GREK +2.7%, Egypt-EGPT +2.01%, Natural Gas-UNG +1.97%, Spain-EWP +1.94%, Italy-EWI +1.85%, Coffee-JO +1.8%, Copper-JJC +1.76%, Coal-KOL +1.39%, Social Media-SOCL +1.35%, China 25 Index-FXI +1.34%.

Relative Weakness: 
U.S. Home Construction-ITB -3.43%, Junior Gold Miners-GDXJ -3.21%, Cotton-BAL -3.18%, Silver-SLV -2.49%, Homebuilders-XHB -2.15%, New Zealand-ENZL -0.72%, Vietnam-VNM -0.64%, Japan-EWJ -0.49%, Israel-EIS -0.44%, Indonesia-IDX -0.4%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries

Closing Market Summary: Stocks End Flat Despite Upbeat Earnings
The stock market maintained a narrow trading range on Thursday before ending the session essentially where it began. The S&P 500 added less than a point, while the small-cap Russell 2000 (-0.2%) underperformed.

Equity indices displayed early strength thanks in part to an overnight boost from better than expected economic data in China and Europe. Specifically, China's HSBC Manufacturing PMI surged to an 18-month high (52.0 from 50.7), while Eurozone Manufacturing PMI (51.9; expected 51.7) and Services PMI (54.4; expected 52.7) also surpassed estimates.

In addition to upbeat data from overseas, participants received a batch of better than expected earnings, but the market had a difficult time building on its early gain. The S&P 500 surrendered its opening advance during the initial minutes, but was able to follow that with a rally to a fresh record high (1991.39). The index could not hold that level into the afternoon and slipped back to its flat line by the close.

None of the sectors were able to distinguish themselves with several groups spending time atop the leaderboard. When it was all said and done, consumer staples (+0.4%), utilities (+0.4%) and consumer discretionary (+0.3%) occupied the top three spots.

The staples sector drew strength from beverage stocks with Dr Pepper Snapple (DPS 60.98, +2.54) surging 4.4% in reaction to its bottom-line beat. Peer PepsiCo (PEP 91.91, +1.09) advanced 1.2% after being upgraded to ‘Buy' from ‘Hold' at Stifel Nicolaus.

For its part, the utilities sector erased its week-to-date loss, but could only narrow its July decline to 3.4%. Despite the recent weakness, the rate-sensitive group holds a year-to-date gain of 12.5% versus a 7.6% increase for the S&P 500.

Elsewhere, the discretionary space was supported by retailers. Under Armour (UA 69.55, +8.92) spiked 14.7% to a new record high after delivering an above-consensus quarterly report, while the SPDR S&P Retail ETF (XRT 85.33, +0.55) rallied 0.7%. The strength among retailers outweighed the broad losses among homebuilders.

The industry group was pressured by a disappointing report from a major builder—DR Horton (DHI 21.94, -2.86)—and the June New Home Sales report, which fell short of expectations (406K; Briefing.com consensus 475K). The iShares Dow Jones US Home Construction ETF (ITB 23.38, -0.83) lost 3.4%.

Other high-beta groups like biotechnology and chipmakers did not fare much better. The iShares Nasdaq Biotechnology ETF (IBB 255.45, -3.89) tumbled 1.5%, while the health care sector (-0.2%) lagged throughout the session.

For its part, the PHLX Semiconductor Index lost 0.8% with Qualcomm (QCOM 76.17, -5.43) registering the largest drop. The stock fell 6.7% after its below-consensus Q4 earnings guidance overshadowed better than expected results.

Meanwhile, another tech stock—Facebook (FB 74.98, +3.69)—soared 5.2% after beating earnings and revenue expectations.

Treasuries retreated, making the bulk of their move ahead of the New York open. The 10-yr note lost 11 ticks, sending its yield higher by four basis points to 2.51%.

Participation was below average with a bit over 615 million shares changing hands at the NYSE.

Economic data was limited to initial claims and the New Home Sales report for June: 

·         The initial claims level fell to 284,000 from an upwardly revised 303,000 (from 302,000), while the Briefing.com consensus expected an increase to 308,000 

o    The drop in claims brought the overall level to its lowest point since February 2006 and pressured the four-week moving average to its lowest level since May 2006 

o    The Department of Labor said there were no special factors associated with the report, but did note that claims tend to be volatile around this time of the year 

·         New home sales fell 8.1% in June to 406,000 from a downwardly revised 442,000 (from 504,000) in May, while the Briefing.com consensus expected a reading of 475,000 

o    Sales were also revised lower for April (408,000 from 425,000) and March (403,000 from 410,000) 

o    Median new home prices increased 5.3% y/y in June to $273,500 

Tomorrow, the Durable Orders report (Briefing.com consensus 0.3%) will be released at 8:30 ET. On the earnings front, AbbVie (ABBV 54.08, -0.40), LyondellBasell (LYB 102.42, -0.08), and American Electric Power (AEP 54.01, +0.04) will report their results ahead of the opening bell. 

·         S&P 500 +7.6% YTD 

·         Nasdaq Composite +7.1% YTD 

·         Dow Jones Industrial Average +3.1% YTD 

·         Russell 2000 -0.6% YTD

Commodities

Closing Commodities: Natural Gas Futures Gain 2.4 On Inventory Data

·         Aug gold fell below $1300 per ounce following economic data that showed the initial claims level fell to 284K from an upwardly revised 330K (from 302K), its lowest level since Feb 2006. The Briefing.com consensus called for an increase to 308K.

·         The yellow metal traded as low as $1287.50 per ounce after pulling back from a session high of $1300.80 per ounce set in morning action and eventually settled with a 1.1% loss at $1290.20 per ounce.

·         Sep silver trended lower after retreating from a session high of $20.96 per ounce set in morning pit trade. It eventually settled at its session low of $20.41 per ounce, booking a loss of 2.8%. 

·         Sep crude oil pulled back from a session high of $103.17 per barrel set at floor trade open as the dollar index erased overnight losses. The energy component trended lower for the remainder of the session and settled at $102.06 per barrel, or 1.0% lower. 

·         Aug natural gas, on the other hand, traded in positive territory as it gained strength on bullish inventory data. Prices rallied to a session high of $8.89 per MMBtu after the EIA reported that for the week ending July 18, natural gas inventories showed a build of 90 bcf vs expectations for a build of 95-96 bcf.

·         Natural gas then chopped around near the $3.84 per MMBtu level and settled with a 2.4% gain at $3.87 per MMbtu.

COMEX Metals Closing Prices

  Aug gold fell $14.30 to $1290.20/oz 

·         Gold fell below $1300 today as better-than-anticipated economic data pressured prices. Data showed that the initial claims level fell to 284K from an upwardly revised 303K (from 302K), its lowest level since February 2006. The Briefing.com consensus called for an increase to 308K. The yellow metal traded as low as $1287.50 after pulling back from a session high of $1300.80 set in morning action and eventually settled with a 1.1% loss. 

  Sep silver fell $0.59 to $20.41/oz 

·         Silver trended lower after retreating from a session high of $20.96 set in morning pit trade and eventually settled at it session low, booking a loss of 2.8%. 

  Sep copper rose 6 cents to $3.27/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Sep corn fell 1 cent to $3.61/bushel 

·         Sep wheat fell 1 cent to $5.29/bushel 

·         Aug soybeans rose 7 cents to $12.08/bushel 

·         Sep ethanol settled unchanged at $2.01/gallon 

·         Sep sugar (#16 (U.S.)) rose 0.18 of a penny to 24.53 cents/lbs

NYMEX Energy Closing Prices

  Sep crude oil fell $1.06 to $102.06/barrel 

·         Crude oil pulled back from a session high of $103.17 set at floor trade open as the dollar index erased overnight losses. The energy component trended lower for the remainder of the session and settled with a 1.0% loss. 

  Aug natural gas rose 9 cents to $3.85/MMBtu 

·         Natural gas traded higher as it gained strength on bullish inventory data. Prices rallied to a session high of $3.89 after the EIA reported that for the week ending July 18, natural gas inventor showed a build of 90 bcf when a build of 95-96 bcf was anticipated. Natural gas then chopped around near the $3.84 level and settled with a 2.4% gain. 

  Aug heating oil fell 1 cent to $2.87/gallon 

  Aug RBOB fell 2 cents to $2.84/gallon



Treasuries

10y Retakes 2.50%: 10-yr: -13/32..2.512%..USD/JPY: 101.81..EUR/USD: 1.3461

·         Treasuries finished near their worst levels of the session. Click here to see an intraday yields chart.

·         Maturities held small losses into the cash open and were sent to their worst levels of the day as initial claims (284K actual v. 303K expected) slid to their lowest level in almost eight and half years. 

·         New home sales (406K actual v. 475K expected) fell short of estimates, but trade saw little response to the miss. 

·         The complex would drift near the lows into this afternoon's $15 bln 10y TIPs auction, and held at those levels following the in-line results. 

·         The auction drew 0.249% and a 2.49x bid/cover. Indirect bidders took down 53.1% of the supply while direct bidders bought 10.3%. 

·         The 2y ticked up +2.4bps to 0.496%. The yield tested key support near 0.450% before moving up to 0.500% resistance. 

·         In the belly, the 5y added +5bps to 1.700% and ended at its highest level in two and a half weeks. A finish above 1.755% would be the highest since early-April.

·         The 10y rallied +4.5bps to 2.509%. The benchmark yield closed at a one-week high, causing many to shift their focus towards 2.550% resistance and the 50 dma. 

·         At the long end, the 30y climbed +4.2bps to 3.300%. Today's selling ran the yield off 13-month lows, setting up a test of 3.350% resistance. 

·         A steeper curve developed with the 2-10-yr spread widening to 201.5bps. 

·         Precious metals were pressured as gold fell -$12 to $1293 and silver shed -0.58 to $20.41. 

·         Data: Durable orders (8:30).

On other news.... 

Currencies 

Dollar Holds at Best Levels Since February: 10-yr: -12/32..2.511%..USD/JPY: 101.82..EUR/USD: 1.3466

·         The Dollar Index trades little changed near 80.85. Click here to see a daily Dollar Index chart.

·         A quiet U.S. session has seen action stuck in a tight 10 cent range for much of the day. 

·         EURUSD is +5 pips @ 1.3465 as a light bid surfaces for the first time in eight days. The single currency has been buoyed by the region's mostly better than expected PMI data, and has managed to shrug off headlines indicating Espirito Santo Financial Group is seeking protection from creditors. Support in the area remains under close watch. Eurozone data is heavy with M3 money supply, private loans, GfK German Consumer Climate, and German Ifo Business Climate all due out. 

·         GBPUSD is -55 pips @ 1.6985 as trade presses lower for a seventh day. Today's selling developed following the disappointing retail sales figure, and has dropped action onto support helped by the 50 dma. A close below 1.6960 would be the lowest in one and a half months. Britain's preliminary GDP will cross the wires tomorrow.

·         USDCHF is unchanged @ .9025 as trade holds at five and a half-month highs. U.S. trade has been lackluster with the pair trapped in a tight 10 cent range. 

·         USDJPY is +30 pips @ 101.85 as trade marches higher for a fifth session. Buyers have been in control since last night's wider than anticipated Japanese trade deficit, and have run action to a two-week high. The 50 dma helps resistance at the level. Japanese data set for tonight is limited to Tokyo Core CPI. 

·         AUDUSD is -25 pips @ .9415 as action presses the lows. The hard currency attracted early buyers after neighboring New Zealand hiked its key rate and China's Manufacturing PMI outpaced estimates; however, steady selling over the course of the session has trade sliding back towards .9350 support. 

·         USDCAD is +25 pips @ 1.0750 as trade ticks to its best levels of the day. The 1.0760 area is of particular interest as a close above there would be the best in a month.

Next Week In View




Economic Commentaries

Economic Summary: Jobless Claims drop below 300K; New Home sales miss expectations
Economic Data Summary:

·         Weekly Initial Claims 284K vs Briefing.com consensus of 308K; Last Week was revised to 303K from 302K

·         Weekly Continuing Claims 2.500 M vs Briefing.com consensus of 2.533 M ; Last Week was revised to 2.508 M from 2.507 M

o    The DOL stated that there were no special factors that caused the initial claims level to suddenly drop over the past couple weeks. Timing wise, though, the move coincides with the auto manufacturers' normal retooling period. It is possible that the fall in claims is simply a seasonal effect. A surge in motor vehicle demand over the past few months may have incentivized manufacturers to keep their plants open during historical shutdown periods in an effort to increase production and satiate demand. 

·         June New Home Sales 406K vs Briefing.com consensus of 475K ; May was revised to 442K from 504K

o     The drop in demand was not totally unexpected. Price gains in the new home sector have vastly outpaced price increases for existing homes. That has led to an upward move in the new home price premium and lower affordability conditions. Inventory levels increased 3.1% in June to 197,000, which represented 5.8 months' supply. 

Upcoming Economic Data:

·         June Durable Goods due out Friday at 8:30 (Briefing.com consensus of 0.3%; May was -0.9%)

·         June Durable Goods Ex-Transportation due out Friday at 8:30 (Briefing.com consensus of 0.7%; May was 0.0%)

Other International Events of Interest

·         Australia's CPI printed an in-line 0.5% MoM, which equates to a 3.0% YoY advance.

·         China's HSBC Flash Manufacturing PMI (52.0 actual v. 51.2 expected, 50.7 previous) outpaced estimates

·         Japan's trade deficit widened to JPY1.08 trln (JPY1.11 trln expected, JPY0.86 trln) on a 2% drop in exports and 8.4% increase in imports

Jason's Commentaries

It's pretty apparent that right now, the industrials are starting to slow down and they have been posing drag to the market. However, the strength coming from the Financials and Tech have been strong to counteract the drag by industrials. The main laggard came from Catepillar and Precision Parts, which lost more than 3%. The largest gainers last night was Utilities, with a gain of 0.3%. The trading session last night was highly volatile which ended up in the flat note. The internals were pointing towards a mixed sentiment. On the technical side, i reckon the market might head down soon for a correction, then stay sideways.








Market Call: FLAT to Downside

Date: 24 Feb 2014