25 Jul 2014 AMC - Market fall as some heavy weights lags
Market Summary
European markets are now closed; stock markets across Europe performed as follows:
- UK's FTSE: -0.4%
- Germany's DAX: -1.5%
- France's CAC: -1.8%
- Spain's IBEX: + 0.3%
- Portugal's PSI: -0.3%
- Italy's MIB Index: -0.9%
- Irish Ovrl Index: -0.3%
- Greece ASE General Index: + 3.3%
Before Market Opens
S&P futures vs fair value: -4.30. Nasdaq futures vs fair value: -18.50.
The S&P 500 futures trade four points below fair value.
The major Asian markets ended the week on a higher note.
Asia
S&P futures vs fair value: -4.30. Nasdaq futures vs fair value: -18.50.
The S&P 500 futures trade four points below fair value.
The major Asian markets ended the week on a higher note.
- In economic data:
- Japan's National CPI increased 3.6% year-over-year (previous 3.7%), while National Core CPI rose 3.3%, as expected. Separately, Tokyo CPI jumped 2.8% year-over-year (prior 3.0%) and Tokyo Core CPI climbed 2.8% (consensus 2.7%, prior 2.8%)
- South Korea's Consumer Confidence slipped to 105 from 107
- New Zealand's ANZ Business Confidence slipped to 39.7% from 42.8%
- Singapore's Industrial Production rose 0.4% year-over-year (expected 1.3%, previous -1.9%)
- Japan's Nikkei rose 1.1%, closing at a six-month high. Robotics maker Fanuc climbed 5.3% after providing a strong outlook.
- Hong Kong's Hang Seng added 0.3%, finishing at its best level since April 2011. Retail-related names were strong with Belle International and China Resources Enterprises tacking on 4.9% and 2.0%, respectively.
- China's Shanghai Composite added 1.0%, gaining for a fourth straight day and ending at levels last seen in the middle of April. Financials saw solid gains with Agricultural Bank of China up 2.1% and Industrial & Commercial Bank of China higher by 1.2%.
- Participants received several data points:
- Eurozone M3 Money Supply increased 1.5% year-over-year (expected 1.1%, previous 1.0%), but Private Loans fell 1.7% year-over-year (consensus -1.8%, prior -2.0%)
- Germany's Ifo Business Climate Index fell to 108.0 from 109.7 (expected 109.4) as Current Assessment slipped to 112.9 from 114.8 (consensus 114.5) and Business Expectations ticked down to 103.4 from 104.8 (expected 104.5). Separately, GfK Consumer Climate ticked up to 9.0 from 8.9 (expected 8.9)
- Great Britain's GDP rose 0.8% quarter-over-quarter, while the year-over-year reading increased 3.1%. Separately, Index of Services rose 1.0%. All three figures matched expectations
- Italy's Wage Inflation came in at 0.1% month-over-month (previous 0.1%)
- Spain's PPI rose 0.4% year-over-year (previous -0.4%)
- Great Britain's FTSE is lower by 0.1% with British Sky Broadcasting leading the slide. The stock is lower by 5.0% after the company announced the acquisitions of Sky Italia and Sky Deutschland. Royal Bank of Scotland outperforms with a gain of 13.7% after reporting upbeat earnings.
- Germany's DAX holds a loss of 0.6% with 20 of 30 components in the red. Health care names lag with Bayer and Henkel down 1.0% and 1.5%, respectively. On the upside, Commerzbank is higher by 2.5%.
- In France, the CAC is lower by 0.9%. Consumer name LVMH Moet Hennessy has tumbled 6.7% in reaction to disappointing results. Financials outperform with BNP Paribas and Credit Agricole up 0.9% and 1.6%, respectively.
- Spain's IBEX outperforms with a gain of 0.5% amid strength in bank shares. Banco Popular, CaixaBank, and Banco Santander are up between 0.8% and 3.3%.
- Equity futures suggest small losses at the open
- Both the DJIA and S&P 500 linger near record highs
- Durable Orders (0.7% actual v. 0.3% expected)
- Durable Orders ex-transportation (0.8% actual v. 0.7% expected)
- S&P Futures -4 @ 1977
- Dow Futures -26 @ 16,972
- Nasdaq Futures -14 @ 3958
- Markets finished mixed across Asia
- Japanese data saw Tokyo Core CPI hold CPI at 2.8% YoY (2.7% YoY expected) while the less closely followed National CPI eased to 3.3% YoY (3.3% YoY expected, 3.4% YoY previous)
- Japan's Nikkei (+1.1%) closed at a six-month high
- Hong Kong's Hang Seng (+0.3%) finished at its best level since April 2011
- China's Shanghai Composite (+1.0%) gained for a fourth straight day and ended at levels last seen in the middle of April
- India's Sensex (-0.6%) eased off record highs
- Australia's ASX (-0.1%) held near its best levels in more than six years
Market Internals
Market Internals -Technical-
The Dow closed down 123 (-0.72%) at 16960, the Nasdaq closed down 23 (-0.5%) at 4450, and the S&P 500 closed down 10 (-0.49%) at 1978. Action came on below average volume (NYSE 555 mln vs. avg. of 655; NASDAQ 1581 mln vs. avg. of 1663), with decliners outpacing advancers (NYSE 1057/2068, NASDAQ 868/1818) and new highs outpacing new lows (NYSE 92/45, NASDAQ 56/58).
Relative Strength:
Junior Gold Miners-GDXJ +4.69%, Silver Miners-SIL +3.29%, Volatility-VXX +3%, Gold Miners-GDX +2.84%, Bank and Brokerage-RKH +2.14%, Greece-GREK +1.41%, Peru-EPU +0.58%, Sweden-EWD +0.51%, New Zealand-ENZL +0.43%, Spain-EWP +0.4%.
Relative Weakness:
Eastern Europe-ESR -2.32%, Cloud Computing-SKYY -2.31%, Semiconductors-SMH -1.88%, Natural Gas-UNG -1.65%, France-EWQ -1.61%, Russia-RSX -1.6%, Netherlands-EWN -1.49%, Oil and Gas Exploration-XOP -1.45%, Retail-RTH -1.45%, Germany-EWG -1.41%
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Leaders and Laggards
Technical Updates
Commentaries
Closing Market Summary: Stocks Slump Amid Disappointing Earnings
The stock market capped the trading week with losses across the major averages. The S&P 500 fell 0.5% to surrender its weekly gain, while the Dow Jones Industrial Average (-0.7%) and Russell 2000 (-0.9%) underperformed. The two indices posted respective losses of 0.8% and 0.6% for the week.
Equity indices were pressured from the get-go after several heavyweights disappointed the market with their earnings and/or guidance, which led to some broader profit-taking. After the opening slide was complete, the major averages began inching higher, but were knocked to fresh lows in short order when it was reported that European Council President Herman Van Rompuy suggested the next round of sanctions against Russia should target oil (but not gas) companies.
The retreat in equities signaled the presence of underlying concerns that a new round of economic sanctions could have a boomerang effect on the global economy. For its part, oil futures responded by spiking off their lows to end little changed at $102.10/bbl.
Eight of ten sectors finished in the red with the consumer discretionary space (-1.2%) at the bottom of the leaderboard. The sector, and Nasdaq Composite (-0.5%), were pressured by shares of Amazon.com (AMZN 324.01, -34.60), which fell 9.7% in reaction to a bottom-line miss and cautious guidance. Other retailers did not escape unscathed with theSPDR S&P Retail ETF (XRT 84.33, -1.00) sliding 1.2%.
Elsewhere among cyclical groups, the top-weighted S&P 500 sector—technology (-0.2%)—ended ahead of the broader market despite a 3.6% drop in Visa (V 214.77, -7.97). The payment processor reported better than expected earnings, but its guidance was a point of concern for investors.
Deeper in the tech sector, high-beta chipmakers displayed broad losses after Freescale Semiconductor (FSL 19.98, -2.11), Maxim Integrated (MXIM 29.38, -3.56), and KLA-Tencor (KLAC 71.60, -1.42) reported disappointing results. The trio lost between 1.9% and 10.8%, while the PHLX Semiconductor Index fell 2.0%.
Even though the tech sector finished ahead of the broader market, other heavily-weighted sectors like energy (-0.8%) and financials (-0.6%) prevented the S&P 500 from staging an afternoon recovery.
The financial sector settled just behind the S&P 500, which was fitting as both the economically-sensitive sector and the benchmark index ended the week unchanged. Insurer Chubb (CB 89.62, -3.14) was a notable underperformer, falling 3.4% in reaction to a lowered full-year outlook on the back of a disappointing second quarter and larger than expected insurance payouts.
Although the market ended near its lows, that was not the case for El Pollo Loco (LOCO 24.03, +9.03), which made its debut today. The newcomer soared 60.2% after its IPO priced at $15.00 per share and opened at $19.00.
Treasuries rallied into the early afternoon and the 10-yr note settled on its high with the benchmark yield down four basis points at 2.47%.
Participation was well below average with under 558 million shares changing hands at the NYSE, suggesting there was no ‘rush for the exits' taking place.
On the economic front, the durable orders report for June surpassed estimates (+0.7% versus Briefing.com consensus 0.3%), but shipments of goods declined 1.0%, which will be a negative for Q2 GDP.
Monday's data will be limited to the Pending Home Sales report for June (Briefing.com consensus -0.8%), which will be released at 10:00 ET.
- S&P 500 +7.0% YTD
- Nasdaq Composite +6.5% YTD
- Dow Jones Industrial Average +2.3% YTD
- Russell 2000 -1.5% YTD
Commodities
Closing Commodities: Precious Metals Book Weekly Losses Despite Rising on Ukraine, Gaza Tension
Precious metals climbed higher today on further geopolitical tension in Ukraine and Gaza. Headlines indicated that Russia's foreign minister reiterated his belief that the U.S. shares blame for the bloodshed in Ukraine. In addition, chatter circulated that Israel has officially rejected a ceasefire proposal.
Aug gold rose $12.80 to $1303.00/oz
Sep silver rose $0.23 to $20.64/oz
Sep copper fell 3 cents to $3.24/lbs
CBOT Agriculture and Ethanol/ICE Sugar Closing Prices
NYMEX Energy Closing Prices
Treasuries
Precious metals climbed higher today on further geopolitical tension in Ukraine and Gaza. Headlines indicated that Russia's foreign minister reiterated his belief that the U.S. shares blame for the bloodshed in Ukraine. In addition, chatter circulated that Israel has officially rejected a ceasefire proposal.
- Despite strength in the dollar index, Aug gold came off its session low of $1293.30 per ounce and rose as high as $1303.80 per ounce. It settled 1.0% higher at $1303.00 per ounce, booking a 0.5% loss for the week.
- Sep silver traded as high as $20.65 per ounce after lifting from a session low of $20.42 per ounce. It settled with a 1.1% gain at $20.64 per ounce, cutting weekly losses to 1.1%.
- Sep crude oil chopped around near the unchanged line after trading as low as $100.95 per barrel in early morning action. The energy component touched a session high of $102.53 per barrel and settled 4 cents higher at $102.10 per barrel, booking a 0.1% gain for the week.
- Aug natural gas fell deeper into negative territory as it retreated from its session high of $3.82 per MMBtu. It brushed a session low of $3.76 per MMBtu and settled 1.8% lower at $3.78 per MMBtu, bringing losses for the week to 4.3%.
- Gold climbed higher today on continued geopolitical tension over Ukraine and Gaza. Headlines indicated Russia's foreign minister reiterated his belief that the U.S. shares blame for the bloodshed in Ukraine. The yellow metal came off its session low of $1293.30 and touched a session high of $1303.80 moments before settling with a 1.0% gain. Despite today's advance, gold booked a 0.5% loss for the week.
- Silver also traded in positive territory, trading as high as $20.65. It settled with a 1.1% gain, cutting weekly losses to 1.1%.
CBOT Agriculture and Ethanol/ICE Sugar Closing Prices
- Sep corn rose 2 cents to $3.63/bushel
- Sep wheat rose 9 cents to $5.38/bushel
- Aug soybeans rose 4 cents to $12.12/bushel
- Sep ethanol rose 3 cents to $2.04/gallon
- Sep sugar (#16 (U.S.)) rose 0.01 of a penny to 24.54 cents/lbs
NYMEX Energy Closing Prices
- Sep crude oil rose $0.04 to $102.10/barrel
- Aug natural gas fell 7 cents to $3.78/MMBtu
- Aug heating oil rose 5 cents to $2.92/gallon
- Aug RBOB rose 2 cents to $2.86/gallon
Treasuries
30y Drops to 3.244%, 13-Month Low: 10-yr: +10/32..2.465%..USD/JPY: 101.80..EUR/USD: 1.3432
The Week in Review
- Treasuries finished the week mixed as selling took place up front while buyers were in control of longer dated maturities.
- A quiet economic calender saw mixed results as existing home sales (5.04 mln actual v. 5.00 mln expected) and durable orders (0.7% actual v. 0.3% expected) beat and new home sales (406K actual v. 475K expected) missed.
- CPI posted an in-line 0.3% print.
- Treasury held an in-line $15 bln 10y TIPs auction. 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%.
- Buying at the long end dropped the 30y -4bps to 3.244%. The yield ended the week at its lowest level in 13 months as action now tests support in the 3.200%3.250% area.
- The 10y shed -1bps to 2.469% as trade settled near its lowest levels since the end of May. Traders will have their eye on the 2.440% level into next week as a flush below there would produce the lowest close since June 2013, and put 2.200%/2.250% support on the radar.
- In the belly, the 5y tacked on +3bps to 1.676%. Action tested support in the 1.650% area that is guarded by the 50 and 100 dma early in the week, but was unable to penetrate the level.
- Up front, the 2y climbed +4bps to 0.484%. The 0.500% region will be in focus in the days ahead as a punch through there puts the September 2013 highs in play.
- A flatter curve won out as the 2-10-yr spread tightened to 198.5bps and the 5-30-yr spread narrowed to 157bps.
- Monday's data is limited to pending home sales (10). Treasury will auction $29 bln 2y notes. Click here to see an intraweek yields chart.
- Tuesday will see Case-Shiller 20-city Index (9) and consumer confidence (10). Treasury will hold a $35 bln 5y note auction.
- Data picks up on Wednesday with the weekly MBA Mortgage Index (7), ADP Employment Change (8:15), GDP-Adv. (8:30), and the FOMC rate decision (14). Treasury will auction $29 bln 7y notes.
- Data continues to flow on Thursday with Challenger Job Cuts (7:30), initial and continuing claims, Employment Cost Index (8:30), and Chicago PMI (9:45).
- Friday's data is the most anticipated of the week as 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) are due out.
On other news....
Currencies
Dollar Crosses 81.00: 10-yr: +10/32..2.465%..USD/JPY: 101.78..EUR/USD: 1.3435
- The Dollar Index drifts near session highs as trade fights for its first close above the 81.00 level since the beginning of February. Click here to see a weekly Dollar Index chart.
- Today's bid has the Index higher for the tenth time in twelve sessions, and has trade nearing the key 81.40 area.
- EURUSD is -30 pips @ 1.3430 as action contends with its lowest close since Veterans' Day. Weighing on the euro was today's disappointing German Ifo Business Climate survey, and reports European governments are considering further sanctions against Russia. Support near 1.3400 looms large.
- GBPUSD is -15 pips @ 1.6970 as trade presses lower for an eighth day. The losing streak has shaved off approximately 175 pips, and has trade testing support in the 1.6950/1.7000 area that is helped by the 50 dma.
- USDCHF is +20 pips @ .9045 as trade readies for its best close in almost six months. The .9100 area is setting up as a key level, but action will remain closely correlated to the euro.
- USDJPY is -5 pips @ 101.75 after surrendering its early gains. The pair threatened the 102.00 mark in response to this morning's CPI data, but has seen steady selling over the course of the U.S. session as the bears stepped in at the convergence of the 50, 100, and 200 dma. On the downside, the 101.00/101.25 area remains key.
- AUDUSD is -20 pips @ .9395 as selling takes hold for a second day. Support near .9350 remains in focus as the 50 dma also lurks in the vicinity.
- USDCAD is +70 pips @ 1.0815 as trade surges to its best level since the middle of June. Today's bid has run the pair above its 50 dma, and has action testing resistance guarded by the 200 dma.
Weekly Analysis
Week 1
Technical Updates
Briefing's Commentaries
Week in Review: Earnings in Focus
Things could have been better on Monday for the stock market and they could have been worse. They were worse in the early going as the major indices backpedaled quickly at the start of trading. The ostensible catalysts for the opening retreat were geopolitical concerns over Israel's ground assault in Gaza and the troublesome diplomatic dealings in the wake of Malaysian Air flight MH17 being shot down over eastern Ukraine last week. At their lows of the morning, the Dow, Nasdaq, and S&P 500 were down 126, 28, and 12 points, respectively. They would eventually battle back, though, to pare their losses, drawing encouragement from technical support holding at 1966 for the S&P 500 and a small sense of relief that remarks from President Obama did not include the imposition of any new sanctions against Russia.
The market finished the Tuesday session on an upbeat note with small caps pacing the rally. The Russell 2000 advanced 0.8%, while the S&P 500 added 0.5% with eight sectors ending in the green. Although geopolitical concerns factored into the modest retreat on Monday, the worries were cast aside on Tuesday after separatist forces in eastern Ukraine handed over black boxes from MH17 to Malaysian authorities and Secretary of State John Kerry began working on brokering a cease fire in Gaza. Furthermore, the sentiment was boosted by a slate of mostly better than expected earnings. Notably, Chipotle Mexican Grill (CMG) soared 11.8% after beating estimates and surpassing comparable restaurant sales growth expectations. However, McDonald's (MCD) painted a less upbeat picture with its stock falling 1.3% in reaction to below-consensus earnings and revenue.
Equities ended the Wednesday session on a mixed note. The tech-heavy Nasdaq displayed relative strength, climbing 0.4%, while the S&P 500 added 0.2% with five sectors settling in the green. For its part, the Dow Jones Industrial Average (-0.2%) spent the entire trading day below its flat line. The midweek affair started on a rather unassuming note in the absence of market-moving news or economic releases. With those pieces missing from the equation, participants turned their attention to quarterly earnings as another dose of better than expected results pushed the S&P 500 into record territory.
On Thursday, stocks maintained a narrow trading range before ending the session essentially where they 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.
Next Week In View
Economic Commentaries
Economic Summary: Durable Goods higher than expected
Economic Data Summary:
- June Durable Goods 0.7% vs Briefing.com consensus of 0.3%; May was revised to -1.0% from -0.9%
- June Durable Goods Ex-Transportation 0.8% vs Briefing.com consensus of 0.7%; May was revised to -0.1% from 0.0%
- Transportation orders increased 0.6% in June after falling 2.8% in May. Aircraft orders rose 10.1%, in-line with the orders reports from Boeing (BA). Those gains, however, were partially offset by a 2.1% decline in motor vehicle and parts orders.Excluding transportation, durable goods orders increased 0.8% following a negatively revised 0.1% (from 0.0%) decline for May. The consensus expected these orders to increase 0.7%.
- June Pending Home Sales due out Monday at 10:00 (May was +6.1%)
- Germany's Ifo Business Climate Index fell to 108.0 from 109.7 (expected 109.4) as Current Assessment slipped to 112.9 from 114.8 (consensus 114.5) and Business Expectations ticked down to 103.4 from 104.8 (expected 104.5). Separately, GfK Consumer Climate ticked up to 9.0 from 8.9 (expected 8.9)
Jason's Commentaries
Friday came in more bearish than i expected, largely contributed by some earnings of some heavy weights like Visa and Amazon, both went down, dragging the market together along with them. 8 out of the 10 sectors ended in the red. Moreover, the market took the opportunity to exit during the weekends in case some geopolitical situation were to rock the market during the weekend. As we're having the FOMC statements on Wednesday, the market is likely to price into the move. Friday started bearish and stayed at the bottom all the way till the closing bell. It seems that the market is not looking to close their short positions. While on the technical perspective, the market seems to be bouncing off the support levels soon. we're very likely to enter a sideways and volatile period.
Market Call: FLAT to upside
Date: 24 Feb 2014
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