29 Jul 2014 AMC - Market headed down as FOMC statement looms

29 Jul 2014 AMC - Market headed down as FOMC statement looms

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: + 0.6%

·         France's CAC: + 0.4%

·         Spain's IBEX: + 0.1%

·         Portugal's PSI: -1.4%

·         Italy's MIB Index: + 0.7%

·         Irish Ovrl Index: + 0.8%

·         Greece ASE General Index: -1.5%

Before Market Opens 

S&P futures vs fair value: +3.60. Nasdaq futures vs fair value: +8.70.
The S&P 500 futures trade four points above fair value.

Markets in Asia ended on a mostly higher note. 

·         In economic data: 

o    Japan's Retail Sales fell 0.6% year-over-year (expected -0.5%, previous -0.4%), while Household Spending dropped 3.0% year-over-year (expected -3.8%, prior -8.0%). Separately, the Unemployment Rate ticked up to 3.7% from 3.5% (consensus 3.5%) 

o    South Korea's Current Account surplus narrowed to $6.32 billion from $7.47 billion 

o    Australia's HIA New Home Sales rose 1.2% month-over-month (previous -4.3%) 

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·         Japan's Nikkei rallied 0.6% to a six-month high. Nissan Motor gained 1.9% following its earnings beat. 

·         Hong Kong's Hang Seng gained 0.9%, advancing for a sixth straight session, and finishing at levels last seen in November 2010. Property stocks saw robust gains with Sun Hung Kai Properties and Cheung Kong Holdings up 4.4% and 2.9%, respectively. 

·         China's Shanghai Composite added 0.2%, climbing to a seven-month high with shares rallying for the sixth session in a row. Technology shares led with China National Software adding 5.3%. 

Major European indices trade higher across the board with Italy's MIB (+1.3%) in the lead. 

·         Economic data was limited: 

o    Germany's Import Price Index ticked up 0.2% month-over-month, as expected (previous 0.0%) 

o    Great Britain's Mortgage Approvals came in at 67,000 (expected 63,000, previous 62,000), while Mortgage Lending rose GBP2.10 billion (consensus GBP1.90 billion, previous GBP2.30 billion). Separately, Net Lending to Individuals increased GBP2.50 billion (expected GBP2.60 billion, previous GBP3.00 billion) and BoE Consumer Credit increased GBP420 million (expected GBP800 million, previous GBP720 million) 

o    Spain's Retail Sales ticked up 0.2% year-over-year (expected 1.1%, previous 0.5%) 

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·         Great Britain's FTSE is higher by 0.6% with support from GKN. The auto parts supplier has jumped 6.4% after beating earnings estimates. On the flip side, BP is lower by 1.5% after missing revenue estimates. Peer Petrofac holds a loss of 1.0%. 

·         Germany's DAX sports an advance of 0.8%. Financials outperform with Deutsche Boerse and Muenchener Re up 1.9% and 0.7%, respectively. 

·         France's CAC trades up 0.9%. Tire maker Michelin is higher by 3.3% after reporting a 13% increase in its first-half profit. Carmaker Renault holds a loss of 3.1% after disappointing with its sales figures. 

·         Italy's MIB outperforms with a gain of 1.3%. Banca di Milano Scarl, Banco Popolare, BMPS, and Unicredit display gains between 1.5% and 3.2%.

U.S. Equities

·         Futures indicate a firm open

·         The DJIA and S&P 500 remain within striking distance of all-time highs while the Nasdaq holds just off its best level in more than 16 years

·         The VIX (12.56) contends with resistance near 13.00

o    S&P Futures +4 @ 1977

o    Dow Futures +45 @ 16,961

o    Nasdaq Futures +8 @ 3968 

Asia

·         Markets gained across most of Asia

·         Japanese data was mixed as household spending (-3.0% YoY actual v. -3.7% YoY expected) beat and retail sales (-0.6% YoY actual v. -0.4% YoY expected) missed

·         Australia's HIA New Home Sales climbed 1.2% MoM

·         Japan's Nikkei (+0.6%) rallied to a six-month high

·         Hong Kong's Hang Seng (+0.9%) advanced for a sixth straight session to finish at levels last seen in November 2010

·         China's Shanghai Composite (+0.2%) climbed to a seven-month high as shares rallied for a sixth session

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

Market Internals

Market Internals -Technical-
The S&P 500 closed down 9 (-0.45%) at 1970, the Dow closed down 70 (-0.42%) at 16912, and the Nasdaq closed down 2 (-0.05%) at 4443. Action came on mixed volume (NYSE 615 mln vs. avg. of 649; NASDAQ 1960 mln vs. avg. of 1664), with mixed advancers/decliners  (NYSE 1241/1877, NASDAQ 1366/1322) and new highs outpacing new lows (NYSE 106/50, NASDAQ 71/61).

Relative Strength: 
Biotechnology-XBI +3.28%, Telecommunications-IYZ +3.22%, Natural Gas-UNG +1.54%, Biotechnology-IBB +1.14%, South Korea-EWY +1.09%, Hong Kong-EWH +1.01%, Heating Oil-UHN +0.92%, Japan-EPP +0.16%, Netherlands-EWN +0.06%, Indian Rupee-ICN +0.05%.

Relative Weakness: 
Thailand-THD -2.39%, Junior Gold Miners-GDXJ -2.34%, Poland-EPOL -2.29%, Sugar-SGG -2.14%, Base Metals-DBB -2.11%, Russia-RSX -2.05%, Greece-GREK -1.91%, Eastern Europe-ESR -1.88%, Grains-JJG -1.82%, Transportation-IYT -1.31%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries

Closing Market Summary: Stocks Slip Amid Escalating Sanctions Against Russia
The stock market ended the Tuesday session on a lower note after generally upbeat earnings took the back seat to geopolitical concerns. The S&P 500 (-0.5%) and Nasdaq Composite (-0.1%) ended on their lows, while the Russell 2000 (+0.3%) displayed relative strength.

Once again, market participants were focused on quarterly reports in the early going, but geopolitical worries overshadowed the impact of mostly better than expected earnings. Specifically, equities retreated after it was reported that European EU officials have prepared the new set of sanctions against Russia. The imposition of new sanctions may pique concerns about a boomerang effect on the global economy, and Europe in particular, but it is worth noting that the Russian ruble and Market Vectors Russia ETF (RSX 23.85, -0.50) strengthened in reaction to the news.

The reports of forthcoming sanctions were followed by afternoon headlines from Washington indicating the Treasury Department has added VTB, the Bank of Moscow, and Russian Agriculture Bank to the sanction list. After the news crossed the wires, the RSX and the ruble dropped to fresh lows, as did the S&P 500.

Nine of ten sectors registered losses with the industrial space (-1.2%) spending the day at the bottom of the leaderboard. The sector was pressured by transport stocks after UPS (UPS 98.86, -3.80) reported disappointing results and guided lower. For its part, the Dow Jones Transportation Average logged its fourth consecutive loss, tumbling 1.4% with 17 of its 20 components ending in the red.

Unlike the industrial sector, other cyclical groups fared a bit better. Financials (-0.6%) and materials (-0.7%) lagged, while consumer discretionary (-0.3%) and technology (-0.2%) displayed relative strength.

In the discretionary sector, Honda Motor (HMC 36.02, +0.84) advanced 2.4% after reporting a slim earnings beat. The carmaker underpinned the sector, which also drew strength from retailers. The SPDR S&P Retail ETF (XRT 84.24, 0.00) ended flat.

Elsewhere, the relative strength of the technology sector kept the broader market from sliding deeper into the red. High-beta chipmakers contributed to the outperformance with the likes of AMD (AMD 3.79, +0.06), Broadcom (BRCM 37.99, +0.27), and Taiwan Semiconductor (TSM 20.55, +0.18) adding between 0.7% and 1.6%.

Similarly, biotech companies also rallied with the iShares Nasdaq Biotechnology ETF (IBB 254.78, +2.87) ending higher by 1.1%. Meanwhile, the health care sector settled flat.

On the upside, only one sector finished in the green. Telecom services (+2.2%) rallied after Windstream (WIN 11.83, +1.30) was cleared by the Internal Revenue Service to spin off its assets into a publically-traded REIT. Peers AT&T (T 36.59, +0.94) and Verizon (VZ 51.97, +0.39) gained 2.6% and 0.8%, respectively on speculation they could also explore conversions into REITs.

On the fixed income side, Treasuries ended the session with modest gains that pressured the 10-yr yield lower by two basis points to 2.46%.

Participation was on the light side with 615 million shares changing hands at the NYSE.

Economic data was limited to the Case-Shiller 20-city Index and the Consumer Confidence report: 

·         The Case-Shiller 20-city Home Price Index for May rose 9.3%, while a 10.0% increase had been expected by the Briefing.com consensus 

o    This followed the previous month's increase of 10.8% 

·         The Conference Board's Consumer Confidence Index spiked to 90.9 in July from an upwardly revised 86.4 (from 85.2), while the Briefing.com consensus pegged the Index at 85.6

o    Consumer confidence is now at its highest level since October 2007 

o    The Present Situation Index increased to 88.3 from 86.3 and the Expectations Index rose to 92.7 from 86.4 

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET, while the ADP Employment Change for July (Briefing.com consensus 215K) will be reported at 8:15 ET. The advance reading of Q2 GDP will be released at 8:30 ET (consensus 3.2%), while the FOMC will reveal its latest policy statement at 14:00 ET. 

·         S&P 500 +6.6% YTD 

·         Nasdaq Composite +6.4% YTD 

·         Dow Jones Industrial Average +2.0% YTD 

·         Russell 2000 -1.8% YTD

Commodities

Closing Commodities: Oil and gold end the day lower

·         Aug gold fell into negative territory after trading as high as $1310.30 per ounce in morning action as the dollar index strengthened. The yellow metal brushed a session low of $1295.50 per ounce and eventually settled with a 0.4% loss at $1298.20 per ounce. 

·         Sep silver also pulled back from its session high of $20.79 per ounce set in early morning pit trade and brushed a session low of $20.50 per ounce. It inched slightly higher heading into the close and settled 1 cent higher at $20.58 per ounce.

·         Sep crude oil extended yesterday's losses as the stronger dollar index weighed on prices. The energy component spent its entire floor session in the red, trading as low as $100.32 per barrel. Unable to gain buying support, it settled at $100.91 per barrel, or 0.8% lower. 

·         Sep natural gas dipped to a session low of $3.74 per MMBtu in morning action and chopped around slightly below the unchanged level. Buyers stepped in during the last hour of floor trade and took prices up as high as $3.83 per MMBtu. Natural gas settled at $3.82 per MMBtu, or 1.3% higher.

COMEX Metals Closing Prices

  Aug gold fell $5.00 to $1298.20/oz 

·         Gold fell into negative territory after trading as high as $1310.30 in morning action as the dollar index strengthened. The yellow metal brushed a session low of $1295.50 and eventually settled with a 0.4% loss. 

  Sep silver rose $0.01 to $20.58/oz 

·         Silver also pulled back from its session high of $20.79 set in early morning pit trade and brushed a session low of $20.50. It inched slightly higher heading in the close and settled 1 cent above the unchanged line. 

  Sep copper fell 2 cents to $3.22/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Sep corn fell 6 cents to $3.62/bushel 

·         Sep wheat fell 14 cents to $5.21/bushel 

·         Aug soybeans fell 7 cents to $12.29/bushel 

·         Sep ethanol fell 1 cent to $2.08/gallon 

·         Sep sugar (#16 (U.S.)) rose 0.07 of a penny to 24.65 cents/lbs

NYMEX Energy Closing Prices

  Sep crude oil fell $0.77 to $100.91/barrel 

·         Crude oil extended yesterday's losses as a stronger dollar index weighed on prices. The energy component spent its entire floor session in the red, trading as low as $100.32. Unable to gain buying support, it settled with a 0.8% loss. 

  Sep natural gas rose 5 cents to $3.82/MMBtu 

·         Natural gas dipped to a session low of $3.74 in morning action and chopped around slightly below the unchanged level. However, buyers stepped in during the last hour of floor trade and took prices up as high as $3.83, leaving natural gas to settle with a 1.3% gain. 

  Sep heating oil rose 1 cent to $2.90/gallon 

  Sep RBOB rose 1 cent to $2.86/gallon

Treasuries

Yields Fall as Consumer Confidence Hits Seven-Year High: 10-yr: +06/32..2.459%..USD/JPY: 102.09..EUR/USD: 1.3410

·         Treasuries finished near their highs, supported by today's strong 5y note auction. Click here to see an intraday yields chart.

·         Maturities ticked to their best levels of the day ahead of the cash open before surrendering those gains in response to the strongest consumer confidence reading (90.9 actual v. 85.6 expected, 85.2 previous) in seven years. 

·         Post-data selling dropped maturities back onto their respective breakeven lines ahead of the 5y auction. 

·         The auction drew 1.720% and a solid 2.81x bid/cover. Strong bids from both indirects (48.2%) and directs (25.9%) left primary dealers with just 25.9% of the supply. A post-auction bid developed, running maturities back near their highs into the cash close.

·         A solid bid dropped the 30y -4bps to 3.222%. The yield on the long bond settled at its lowest level in 13 months. 

·         The 10y fell -2.9bps to 2.462%. Today's bid produced the lowest close for the benchmark yield in two months, and puts the May closing low of 2.438% in jeopardy. 

·         In the belly, the 5y slipped -1.7bps to 1.686%. Many traders continue to monitor the 1.650% level as both the 50 and 100 dma aid support in the area. 

·         Up front, the 2y eased -0.8bps to 0.535%. Early action caused the yield to print at its highest level since May 2011.

·         A flatter curve persisted as the 2-10-yr spread narrowed to 192.5bps and the 5-30-yr spread tightened to 153.5bps. 

·         Precious metals saw a mixed session as gold fell -$4 to $1299 and silver climbed +0.06 to $20.63. 

·         Data: MBA Mortgage Index (7), ADP Employment Change (8:15), GDP-Adv. (8:30), and the FOMC rate decision (14). 

·         Auction: $29 bln 7y notes.

On other news.... 

Currencies 

Dollar Sees Sixth Gain in Seven Sessions: 10-yr: +04/32..2.465%..USD/JPY: 102.13..EUR/USD: 1.3407

·         The Dollar Index trades on session highs near 80.20 as trade looks to put in its best close in almost six months. Click here to see a weekly Dollar Index chart.

·         The rally off the early July lows near 79.80 has many turning their focus towards the key 81.40 level. 

·         EURUSD is -30 pips @ 1.3410 as trade drops to an eight-month low. The single currency hovered little changed into the start of U.S. trade, but has seen a leg lower on headlines indicating European leaders have agreed on further Russian sanctions. A breakdown of the 1.3400 level puts the 1.3300/1.3350 support band in play. German preliminary CPI accompanies Spanish Flash CPI and Spanish Flash GDP. 

·         GBPUSD is -45 pips @ 1.6940 as sellers remain in control for the ninth time in ten sessions. Today's weakness comes following the slight net lending to individuals miss, and has pushed action to its lowest level in one and a half months. Many traders are taking note of today's downside breach of the 50 dma as action fights to hold minor support near 1.6900. 

·         USDCHF is +30 pips @ .9070 as action flirts with its best close in seven months. The recent ‘golden cross' has many looking for further upside with .9000 acting as support. Swiss data is limited to the KOF Economic Barometer. 

·         USDJPY is +30 pips @ 102.15 as buyers hold control for an eighth straight session. The current rally has action testing its best levels since the beginning of July as resistance and both the 100 and 200 dma come under pressure. Japan's preliminary industrial production will cross the wires tonight.

·         AUDUSD is -25 pips @ .9380 as trade slips for a third time in four days. Support near .9350 is guarded by the 50 dma. 

·         USDCAD is +55 pips @ 1.0850 as trade climbs to its best levels since the middle of June. Today's bid has allowed the pair to reclaim the 200 dma while testing key resistance in the area. Canada's Raw Materials Price Index is due out tomorrow.

Next Week In View




Economic Commentaries

Economic Summary: Consumer Confidence blows past estimates; Fed decision Wednesday at 14:00
Economic Data Summary:

·         May Case Schiller 20 City Index 9.3% vs Briefing.com consensus of 10.0%; April was 10.8%

·         July Consumer Confidence 90.9 vs Briefing.com consensus of 85.6; June was 85.2

o    Historically high equity prices, a reduction in gasoline costs, and improvements in labor conditions all worked in conjunction to boost confidence. However, there was some concern that confidence levels would remain stagnant because the similarly measured University of Michigan Consumer Sentiment Index declined slightly in its preliminary reading.

Upcoming Economic Data:

·         Weekly MBA Mortgage Applications due out Wednesday at 7:00 (Briefing.com consensus of ; Last Week was 2.4%)

·         July ADP Employment Change due out Wednesday at 8:15 (Briefing.com consensus of 215K; June was 281K)

·         Q2 GDP - Advance due out Wednesday at 8:30 (Briefing.com consensus of 3.2%; Q1- Final was -2.9%)

·         Q2 Chain Deflator - Advance due out Wednesday at 8:30 (Briefing.com consensus of 2.1%; Q1- Final was 1.3%)

Upcoming Fed/Treasury Events:

·         The Treasury will auction off new debt this week. Results of each auction will be at 13:00

o    Wednesday: $35 bln in 5 year notes

o    Thursday: $29 bln in 7 year note

·         The Fed will begin at two day policy meeting tomorrow.  Policy decision will be announced Wednesday at 14:00 (no press conference or econ projections).

Jason's Commentaries


It seems that the market decided to break down from their support levels and headed down last night ahead of the FOMC minutes. Industrials decided to lag again and Utilities was the second worst loser. Healthcare was the only sector that was up. The internals were all supporting the downside movements last night. However, i believe it was mostly the day traders moving the market. The other longer term traders are avoiding the market now as FOMC statements is coming. I believe the FOMC is likely to taper another $10b again to hit their year end target. Today is definitely not the day to be trading before the FOMC...







Market Call:Abstain

Date: 30 Jul 2014