28 Aug 2014 AMC - Market recovered from bearish start as Russian Troops enter Ukraine
Market Summary
European markets are now closed; stock markets across Europe performed as follows:
- UK's FTSE: -0.4%
- Germany's DAX: -1.1%
- France's CAC: -0.7%
- Spain's IBEX: -1.1%
- Portugal's PSI: -1.1%
- Italy's MIB Index: -2.0%
- Irish Ovrl Index: + 0.2%
- Greece ASE General Index: -0.9%
Before Market Opens
S&P futures vs fair value: -8.40. Nasdaq futures vs fair value: -13.00.
The S&P 500 futures trade eight points below fair value.
Asian markets ended the session on a mostly lower note.
S&P futures vs fair value: -8.40. Nasdaq futures vs fair value: -13.00.
The S&P 500 futures trade eight points below fair value.
Asian markets ended the session on a mostly lower note.
- In economic data:
- Australia's HIA New Home Sales fell 5.7% month-over-month (prior 1.2%), while Private New Capital Expenditure increased 1.1% quarter-over-quarter (consensus -0.3%; prior -2.5%)
- Hong Kong's Retail Sales fell 3.1% year-over-year (expected -2.5%; last -6.9%)
- Japan's Nikkei lost 0.5%, sliding to a one-week low. Exporters continued to see profit-taking with Toyota Motor and Komatsu down 0.9% and 0.6%, respectively.
- Hong Kong's Hang Seng slid 0.7% to register its third consecutive decline. Real Estate Developers were pressured as China Overseas Land & Investment fell 3.1% and China Resources Land gave up 2.7%.
- China's Shanghai Composite fell 0.6% to a three-week low as the wave of upcoming IPOs sparked selling. Energy shares outperformed with Sinopec advancing 1.5%.
- Economic data was plentiful:
- Eurozone Business and Consumer Survey fell to 100.6 from 102.1 (expected 101.5). Loan creation remained problematic as M3 Money Supply expanded 1.8% year-over-year (expected 1.5%; prior 1.6%), while Private Loans fell 1.6% (consensus -1.5%; last -1.8%)
- Germany's Claimant Count increased by 2,000 (expected -5,000; prior -11,000), while the Unemployment Rate held steady at 6.7%, as expected
- Great Britain's CBI Distributive Trades Survey jumped to 37 from 21 (expected 27)
- Italy's Retail Sales were unchanged month-over-month (expected -0.2%; prior -0.6%), while Business Confidence fell to 95.7 from 99.1 (expected 99.3)
- Spain's GDP growth was left unrevised at 0.6% quarter-over-quarter, as expected. Separately, CPI fell 0.5% (expected -0.2%; last -0.3%)
- Great Britain's FTSE is lower by 0.2% with miners on the defensive. Anglo American, Antofagasta, and Rio Tinto are down between 2.0% and 3.5%. Consumer names outperform with Diageo and WM Morrison Supermarkets up 0.4% and 1.8%, respectively.
- In France, the CAC holds a loss of 0.5% with 38 of its 40 components in the red. Financials are among the laggards with BNP Paribas, Credit Agricole, and Societe Generale down between 0.8% and 2.2%. Essilor International has jumped 4.6% in reaction to better than expected results.
- Germany's DAX trades down 1.2%. Adidas and Deutsche Lufthansa weigh with respective losses of 2.3% and 3.2%, while Fresenius Medical Care leads with a gain of 0.7%.
U.S. Equities
Asia
- Futures point to a heavy open
- Reports out of Eastern Europe suggest Russian troops have entered Ukraine
- The S&P 500 closed above 2000 for a second straight session
- Initial Claims (298K actual v. 302K expected)
- Continuing Claims (2527K actual v. 2520K expected)
- GDP - Second Estimate (4.2% actual v. 4.0% expected)
- GDP Deflator - Second Estimate (2.1% actual v. 2.0% expected)
- S&P Futures -7 @ 1990
- Dow Futures -60 @ 17,033
- Nasdaq Futures -14 @ 4059
- Markets fell across most of Asia
- Australia's private capital expenditure (1.1% QoQ actual v. -0.6% QoQ expected) topped estimates
- The Philippines' GDP expanded 1.9% QoQ
- Japan's Nikkei (-0.5%) slid to a one-week low
- Hong Kong's Hang Seng (-0.7%) saw a third straight day of selling
- China's Shanghai Composite (-0.6%) fell to a three-week low as the wave of upcoming IPOs sparked selling
- India's Sensex (+0.3%) ended at an all-time high
- Australia's ASX (-0.5%) fell off six-year highs
Market Internals
Market Internals -Technical-
The Nasdaq closed down 12 (-0.26%) at 4558, the Dow closed down 42 (-0.25%) at 17080, and the S&P 500 closed down 3 (-0.17%) at 1997. Action came on below average volume (NYSE 478 mln vs. avg. of 650; NASDAQ 1193 mln vs. avg. of 1619), with decliners outpacing advancers (NYSE 1327/1780, NASDAQ 920/1769) and new highs outpacing new lows (NYSE 134/10, NASDAQ 43/41).
Relative Strength:
Volatility-VXX +1.58%, Junior Gold Miners-GDXJ +1.54%, Grains-JJG +1.34%, Gold Miners-GDX +1.34%, Livestock-COW +1.29%, Egypt-EGPT +0.86%, Columbia Index-GXG +0.54%, Australian Dollar-FXA +0.24%, Peru-EPU +0.19%, Japanese Yen-FXY +0.19%.
Relative Weakness:
Eastern Europe-ESR -3.56%, Brazilian Real-BZF -3.44%, Russia-RSX -3.11%, Poland-EPOL -2.88%, Steel-SLX -2.33%, Copper Miners-COPX -2.13%, Austria-EWO -1.74%, Copper-JJC -1.47%, Biotechnology-XBI -1.44%, Cotton-BAL -1.26%
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Leaders and Laggards
Technical Updates
Briefing's Commentaries
losing Market Summary: Stocks Register Slim Losses Amid Anemic Volume
The stock market ended the Thursday session on a modestly lower note, but a late-morning rebound lifted the indices off their lows. The S&P 500 shed 0.2% with seven sectors ending in the red.
This morning, European equities and U.S. futures slumped around 6:00 ET after Ukraine's President Petro Poroshenko was quoted as saying Russian forces have invaded an area southeast of Donetsk. The news pressured the markets, but a brief uptick took place after a correction to reports indicated Ukraine's President did not use the word "invade," but rather said Russian troops "entered" Ukraine. The change in wording did not change the fact that Russian troops are reportedly on Ukraine's soil, which caused a flight to safety. As a result, Germany's 10-yr Bunds rallied, dropping the yield to a new record low of 0.87% before a slight rebound to 0.89%. Gold futures were also in demand with the metal climbing 0.7% to $1291.70/ozt.
Similarly, U.S. Treasuries saw demand in the morning, but the 10-yr note surrendered a portion of its gain as the session wore on. The 10-yr note added five ticks to send its yield lower by two basis points to 2.34%.
All ten sectors displayed losses at the start, but materials (+0.04%), telecom services (unch) and utilities (+0.7%) were able to recover before the close. The materials sector benefitted from strength among miners with Market Vectors Gold Miners ETF (GDX 26.46, +0.35) gaining 1.3%.
Meanwhile, the remaining sectors ended in the red, but only financials (-0.4%) and industrials (-0.3%) settled behind the broader market. Even though the financial sector underperformed, today's loss narrowed its August gain to 3.5% versus a 3.4% advance for the S&P 500. Bank of America (BAC 16.01, -0.19) was the weakest performer among the majors, sliding 1.2%.
Elsewhere, the top-weighted sector—technology (-0.2%)—was pressured by influential components like Facebook (FB 73.86, -0.77), Google (GOOGL 580.32, -2.68), and Oracle (ORCL 41.27, -0.37), while the largest sector member—Apple (AAPL 102.25, +0.12)—posted a modest gain. Chipmakers also displayed strength with the PHLX Semiconductor Index climbing 0.3%.
Once again, participation in today's affair was well below average with just 479 million shares changing hands at the NYSE floor, which undercut Monday's total for the lowest tally of the year. The lack of activity reflected the preference to stick to the sidelines ahead of a three-day weekend that could bring new developments on the geopolitical front.
Economic data included the second revision to Q2 GDP, Initial Claims, and the Pending Home Sales report:
The stock market ended the Thursday session on a modestly lower note, but a late-morning rebound lifted the indices off their lows. The S&P 500 shed 0.2% with seven sectors ending in the red.
This morning, European equities and U.S. futures slumped around 6:00 ET after Ukraine's President Petro Poroshenko was quoted as saying Russian forces have invaded an area southeast of Donetsk. The news pressured the markets, but a brief uptick took place after a correction to reports indicated Ukraine's President did not use the word "invade," but rather said Russian troops "entered" Ukraine. The change in wording did not change the fact that Russian troops are reportedly on Ukraine's soil, which caused a flight to safety. As a result, Germany's 10-yr Bunds rallied, dropping the yield to a new record low of 0.87% before a slight rebound to 0.89%. Gold futures were also in demand with the metal climbing 0.7% to $1291.70/ozt.
Similarly, U.S. Treasuries saw demand in the morning, but the 10-yr note surrendered a portion of its gain as the session wore on. The 10-yr note added five ticks to send its yield lower by two basis points to 2.34%.
All ten sectors displayed losses at the start, but materials (+0.04%), telecom services (unch) and utilities (+0.7%) were able to recover before the close. The materials sector benefitted from strength among miners with Market Vectors Gold Miners ETF (GDX 26.46, +0.35) gaining 1.3%.
Meanwhile, the remaining sectors ended in the red, but only financials (-0.4%) and industrials (-0.3%) settled behind the broader market. Even though the financial sector underperformed, today's loss narrowed its August gain to 3.5% versus a 3.4% advance for the S&P 500. Bank of America (BAC 16.01, -0.19) was the weakest performer among the majors, sliding 1.2%.
Elsewhere, the top-weighted sector—technology (-0.2%)—was pressured by influential components like Facebook (FB 73.86, -0.77), Google (GOOGL 580.32, -2.68), and Oracle (ORCL 41.27, -0.37), while the largest sector member—Apple (AAPL 102.25, +0.12)—posted a modest gain. Chipmakers also displayed strength with the PHLX Semiconductor Index climbing 0.3%.
Once again, participation in today's affair was well below average with just 479 million shares changing hands at the NYSE floor, which undercut Monday's total for the lowest tally of the year. The lack of activity reflected the preference to stick to the sidelines ahead of a three-day weekend that could bring new developments on the geopolitical front.
Economic data included the second revision to Q2 GDP, Initial Claims, and the Pending Home Sales report:
- Second quarter GDP was revised up to 4.2% in the second estimate from 4.0% in the advance estimate, while the Briefing.com consensus expected no revisions
- Most notably, real final sales grew at a much faster rate in the second quarter (2.8%) than what was originally reported (2.3%)
- Personal consumption spending was left unrevised at 2.5%
- The initial claims level fell to 298,000 from an upwardly revised 299,000 (from 298,000), while the Briefing.com consensus pegged the claims level at 302,000
- Pending home sales for July rose 3.3%, which was better than the 0.5% increase forecast by the Briefing.com consensus
- The reading followed last month's revised decrease of 1.3% (from -1.1%)
- Nasdaq Composite +9.1% YTD
- S&P 500 +8.0% YTD
- Dow Jones Industrial Average +3.0% YTD
- Russell 2000 +0.3% YTD
Commodities
Closing Commodities: Commodities close mostly higher
- Copper futures ended today's session at its LoD, ended 5 cents lower at $3.13/lb
- Gold and silver consolidated in afternoon activity.
- Dec gold closed $7 higher at $1290.50/oz, while Sept silver rose $0.11 at $19.52/oz
- WTI crude oil inched higher in today's session, ending $0.62 higher at $94.51/barrel (Oct contract)
- Natural gas recovered off its LoD, moving back above $4/MMBtu, ending at $4.04/MMBtu, up 4 cents.
COMEX Metals Closing Prices
- Dec gold rose $7 to $1290.50/oz
- Sep silver rose $0.11 to $19.52/oz
- Sep copper fell 5 cents to $3.13/lb
- Sep corn rose 6 cents to $3.62/bushel
- Sep wheat rose 9 cents to $5.56/bushel
- Nov soybeans rose 6 cents to $10.29/bushel
- Sep ethanol rose 3 cents to $2.19/gallon
- Nov sugar (#16 (U.S.)) fell 0.38 of a penny to 25.63 cents/lb
NYMEX Energy Closing Prices Oct crude oil rose $0.04 to
- Oct crude oil rose $0.62 to $94.51/barrel
- Sep natural gas rose 4 cents to $4.04/MMBtu
- Oct heating oil fell 1 cent to $2.85/gallon
- Oct RBOB rose 1 cent at $2.59/gallon
Treasuries
Treasuries Gain as Uneasiness in Eastern Europe Outweighs Strong Data: 10Y: +04/32..2.339%..USD/JPY: 103.65..EUR/USD: 1.3184
- Treasuries finished with modest gains, supported by accusations made by Ukraine President Petro Poroshenko that Russian troops have entered the eastern portion of his country. Click here to see an intraday yields chart.
- The complex drifted little changed for much of the overnight session before an aggressive bid developed in response to the reports out of Eastern Europe.
- Maturities climbed to their best levels of the session as the reported Russian troop presence outweighed the upwardly revised Q2 GDP - Second Estimate (4.2% actual v. 4.0% expected, 4.0%, previous).
- Action hovered near the highs into the strong pending home sales (+3.3% actual v. +0.5% expected) data before some selling emerged.
- The weakness did not last long as action rallied back onto the highs ahead of the average $29 bln 7Y note auction.
- The auction drew 2.045% and an in-line 2.57x bid/cover. Indirect (48.8%) and direct (20.4%) bids were close to their 12-auction averages. Primary dealers ended up with just 30.8% of the supply.
- Post-auction selling pushed maturities to their worst level of U.S. trade, but buyers emerged in defense of those levels and sparked a rally into the cash close.
- Up front, the 2Y eased -1.2bps to 0.504%. The yield remains near key resistance in the 0.500% area.
- In the belly, the 5Y slipped -0.7bps to 1.631%. Traders continue to monitor resistance in the 1.650% area that is defended by both the 50 and 100 dma.
- The 10Y slid -2.7bps to 2.334%. The benchmark yield finished at its lowest level since June 2013.
- At the long, the 30Y fell -3.7bps to 3.072%. Today's bid pushed action to its lowest levels since May 2013.
- A flatter curve developed as the 2-10-yr spread tightened to 183bps.
- Precious metals gained with gold climbing $9 to $1292 and silver firming $0.14 to $19.54.
- Data: Personal income and spending, PCE Prices - Core (8:30), Chicago PMI (9:45), and Michigan Sentiment - Final (9:55).
On other news....
Currencies
Dollar Firms Amid Choppy Trade: 10Y: +02/32..2.340%..USD/JPY: 103.72..EUR/USD: 1.3180
- The Dollar Index drifts on session highs near 82.50. Click here to see a daily Dollar Index chart.
- A choppy trade for the greenback has kept action locked in a tight 15 cent range during U.S. trade.
- EURUSD is -15 pips @ 1.3180 as action continues to test the recent lows. The single currency has seen a relatively tame session considering the generally weak economic data from the region and reports of Russian troop movements in eastern Ukraine. Eurozone data expected tomorrow includes CPI Flash Estimate, the unemployment rate, and German retail sales.
- GBPUSD is +5 pips @ 1.6580 as trade looks to put in a second day of small gains. Early action produced yet another test of 1.6600, but a close above the level looks unlikely. Tomorrow's British data is limited to the Nationwide Home Price Index.
- USDCHF is little changed near .9150. Traders have been more focused on EURCHF, which early this morning crossed below 1.2050 for the first time since December 2012. The Swiss National Bank's EURCHF1.20 floor will be in focus over the days ahead. Switzerland's KOF Economic Barometer will cross the wires tomorrow.
- USDJPY is -15 pips @ 103.70 as trade presses lower for a second session. The 103.60 area remains of interest as a breakdown puts the 103.00 level in play. Japan's household spending and Tokyo Core CPI, preliminary industrial production, and retail sales are due out tonight.
- AUDUSD is +15 pips @ .9350 as trade contends with its best close in a month. Today's advance comes after a strong private capital expenditure reading, and has action testing resistance in the area helped by both the 50 and 100 dma.
- USDCAD is -15 pips @ 1.0850 as sellers remain in control for a third straight day. The pair has been weak throughout U.S. trade despite Canada's current account balance posting a wider than anticipated deficit. Canada's GDP and Raw Materials Price Index are scheduled for tomorrow.
Next Week In View
Economic Commentaries
Economic Data Summary:
- Weekly Initial Claims 298K vs Briefing.com consensus of 302K; Last Week was revised to 299K from 298K
- Weekly Continuing Claims 2.527 M vs Briefing.com consensus of 2.520 M ; Last Week was revised to 2.502 M from 2.500 M
- Over the past several weeks, the initial claims level has dropped from a range of 310,000 -- 320,000 to below 300,000. When claims are below 300,000, the economy is usually running at, or very near, full employment. During this time, the DOL has consistently stated that no special factors have biased the claims data. However, the industrial production numbers suggested the claims data were highly influenced by unseasonable increases in motor vehicle production.
- Q2 GDP - Second Estimate 4.2% vs Briefing.com consensus of 4.0%; First Quarter was revised 4.0%
- Q2 GDP Deflator - Second Estimate 2.1% vs Briefing.com consensus of 2.0%; First Quarter was revised to 2.0% from
- July Pending Home Sales +1.3% vs Briefing.com consensus of 0.5%; June was revised to -1.1% from
- July Personal Income due out Friday at 8:30 (Briefing.com consensus of 0.3%; June was 0.4%)
- July Personal Spending due out Friday at 8:30 (Briefing.com consensus of 0.1%; June was 0.4%)
- July PCE Prices - CORE due out Friday at 8:30 (Briefing.com consensus of 0.1%; June was 0.1%)
- August Chicago PMI due out Friday at 9:45 (Briefing.com consensus of 54.8; July was 52.6)
- August Michigan Sentiment - Final due out Friday at 9:55 (Briefing.com consensus of 80.0; July was 79.2)
- The Treasury is scheduled to auction off $29 bln in 7 year notes today at 13:00
- Eurozone M3 money supply (1.8% YoY actual v. 1.5% YoY expected) outpaced estimates while private loans (-1.6% YoY actual v. -1.5% YoY expected) fell short
Jason's Commentaries
The market started the day with a bearish tone as Ukraine announced that Russia troops entered Ukraine. That matter might escalate tension as the Euro and US is likely to impose more sanctions on Russia. Companies that have exposure in Russia is likely to be affected, especially the oil companies. With more instability in Middle East and Russia, it seems that the only peaceful regions are the Asia, Europe and US. With such instability, these countries are definitely gaining from it. The day ended with a light volume of 490m shares traded on the NYSE. Forming a hanging man on the indices. Utilities is the largest gainer once again, suggesting the market might be shifting focus to the defensive side. While the financials lost 0.3% last night. With such instability, the market is likely to consolidate for a while before forming another trend.
Market Call: FLAT to upside
Date: 29 Aug 2014
