20 Aug 2014 AMC - Market ended higher despite hawkish FOMC minutes
Market Summary
European markets are now closed; stock markets across Europe performed as follows:
- UK's FTSE: -0.4%
- Germany's DAX: -0.2%
- France's CAC: -0.4%
- Spain's IBEX: + 0.3%
- Portugal's PSI: -0.4%
- Italy's MIB Index: -0.2%
- Irish Ovrl Index: -0.7%
- Greece ASE General Index: + 1.0%
Before Market Opens
S&P futures vs fair value: -3.40. Nasdaq futures vs fair value: -5.80.
The S&P 500 futures trade three points below fair value.
Markets finished mixed across Asia. Reserve Bank of Australia Governor Glenn Stevens testified in front of the House of Representatives' Standing Committee on Economics and noted rates are likely to remain unchanged for the foreseeable future.
Asia
The S&P 500 futures trade three points below fair value.
Markets finished mixed across Asia. Reserve Bank of Australia Governor Glenn Stevens testified in front of the House of Representatives' Standing Committee on Economics and noted rates are likely to remain unchanged for the foreseeable future.
- In economic data:
- Japan's trade deficit narrowed to JPY1.02 trillion from JPY1.07 trillion (expected deficit of JPY770 billion) as imports rose 2.3% (consensus -1.7%) and exports increased 3.9% (forecast 3.8%). Separately, All Industries Activity Index slipped 0.4% month-over-month (consensus -0.2%; prior 0.6%)
- Australia's MI Leading Index ticked down 0.1% month-over-month (prior 0.1%)
- Japan's Nikkei registered a fractional gain as trade ticked higher for an eighth session. Heavyweights Softbank and KDDI Corp. provided support as both added 1.0%.
- Hong Kong's Hang Seng added 0.2%, finishing at its best level since May 2008. Bank of China HK jumped 3.6% following its earnings beat.
- China's Shanghai Composite shed 0.2%, slipping from eight-month highs. Real estate shares were pressured with Vanke and Poly Real Estate down 2.0% and 1.1%, respectively.
- Economic data was limited:
- Germany's PPI ticked down 0.1% month-over-month (expected 0.1%; prior 0.0%), while the year-over-year reading fell 0.8% (consensus -0.7%; last -0.7%)
- Great Britain's CBI Industrial Trends Orders jumped to 11 from 2 (expected 4)
- Great Britain's FTSE is lower by 0.5% amid broad weakness. Homebuilders are among the weakest performers with Barratt Developments and Persimmon both down near 2.1%. Royal Mail outperforms with a solid gain of 1.9%.
- In France, the CAC holds a loss of 0.7%. Consumer and telecom names underperform with Carrefour, Kering, Orange, and Vivendi down between 1.0% and 1.4%. Publicis Groupe is the top performer, up 0.6%.
- Germany's DAX trades down 0.8% with 26 of 30 components showing losses. Infineon Technologies and Continental are among the weakest performers with losses close to 2.0% apiece. Deutsche Boerse outperforms with an increase of 0.8%.
- Equity futures point to small losses at the open as sellers look to put in the second loss in nine days
- The Nasdaq ended yesterday's session at its best levels since April 2000 while the S&P 500 and DJIA finished within striking distance of all-time highs
- The VIX (12.21) holds at its lowest levels of August
- MBA Mortgage Index (+1.4%)
- S&P Futures -2 @ 1975
- Dow Futures -11 @ 16,870
- Nasdaq Futures unch @ 4034
- Markets finished mixed across Asia
- Reserve Bank of Australia Governor Glenn Stevens testified in front of the House of Representatives' Standing Committee on Economics and noted rates are likely to remain unchanged for the foreseeable future
- Japan posted a wider than expected trade deficit (JPY1.02 trln actual v. JPY0.77 trln expected)
- Japan's Nikkei (UNCH) put in a fractional gain as trade ticked higher for an eighth session
- Hong Kong's Hang Seng (+0.2%) finished at its best level since May 2008
- China's Shanghai Composite (-0.2%) slipped off eight-month highs
- India's Sensex (-0.4%) slid off record highs as sellers took control for the first time in seven days
- Australia's ASX (+0.2%) ended at a six-year high
Market Internals
Market Internals -Technical-
The Dow closed up 60 (+0.35%) at 16979, the S&P 500 closed up 5 (+0.25%) at 1987, and the Nasdaq closed down 1 (-0.02%) at 4526. Action came on below average volume (NYSE 529 mln vs. avg. of 659; NASDAQ 1392 mln vs. avg. of 1667), with mixed advancers/decliners (NYSE 1583/1527, NASDAQ 1017/1686) and new highs outpacing new lows (NYSE 148/17, NASDAQ 75/41).
Relative Strength:
Cotton-BAL +2.56%, Copper-JJC +2.44%, Base Metals-DBB +2.35%, Greece-GREK +2.17%, Sugar-SGG +1.78%, Industrials-XLI +1.06%, Hong Kong-EWH +0.98%, Australia-EWA +0.71%, Taiwan-EWT +0.56%, Japan-EPP +0.55%.
Relative Weakness:
Turkey-TUR -1.67%, Livestock-COW -1.51%, Grains-JJG -1.45%, Natural Gas-UNG -1.13%, Biotechnology-XBI -0.93%, Corn-CORN -0.92%, Austria-EWO -0.85%, Japanese Yen-FXY -0.83%, South Africa-EZA -0.82%, France-EWQ -0.81%.
Leaders and Laggards
Technical Updates
Briefing's Commentaries
Closing Market Summary: Blue Chips Post Gains Despite Afternoon Dip
The stock market ended the midweek session on a mixed note. Blue chip listings bolstered the Dow Jones Industrial Average (+0.4%) and S&P 500 (+0.3%), while the Russell 2000 (-0.4%) and Nasdaq Composite (-0.02%) underperformed.
Equity indices began the day in the red, but wasted no time regaining their flat lines. Small-cap stocks were not as fortunate as the Russell 2000 spent the day in the red.
Upon returning into positive territory, the key indices were confined to narrow ranges until the minutes from the July FOMC meeting crossed the wires. The minutes revealed that many officials saw recent job gains as a potential reason to bring forward the first fed funds rate hike; however, most officials showed preference for waiting for more evidence before changing their outlook on rates.
The minutes were followed by a retreat among equities, but the slide was not sustained. The S&P 500 was trading at a fresh session high within an hour of the release. Treasuries, meanwhile, slumped in reaction to the discussion on rates. The 10-yr note fell seven ticks with its yield climbing three basis points to 2.43%.
Eight sectors ended in the green with industrials (+1.0%) spending the entire session in the lead. The cyclical sector was supported by Dow components Boeing (BA 127.35, +1.77) and General Electric (GE 26.36, +0.31) as the two added 1.4% and 1.2%, respectively. Despite the strength in the two names, the broader PHLX Defense Index (+0.9%) ended just behind the sector. Similarly, transport stocks could not keep pace with the sector as the Dow Jones Transportation Average added 0.6%.
Also of note, shares of Hertz (HTZ 30.33, -1.23) endured quite the roller coaster ride. The stock settled at $31.56 yesterday, but fell all the way to $27.47 this morning after the company said it expects to fall short of its full-year guidance, which was withdrawn. The stock spent the bulk of the day inching off its low with a big boost coming after Carl Icahn disclosed a stake in the company and said he may seek a seat on the board. Hertz ended the session with a 3.9% decline.
The consumer discretionary sector (+0.5%) finished in second place after a handful of retailers reported their quarterly results. American Eagle (AEO 12.98, +1.39), Lowe's (LOW 52.33, +0.81), and PetSmart (PETM 70.52, +0.82) all reported better than expected results, while Target (TGT 60.33, +1.08) and Staples (SPLS 11.32, -0.30) met expectations, but issued cautious guidance. For its part, the SPDR S&P Retail ETF (XRT 87.68, +0.63) gained 0.7%.
Elsewhere, the financial sector (+0.3%) was the only outperformer of note, while the remaining sectors finished near their respective flat lines. Bank of America (BAC 15.52, +0.07) was in the headlines after the Wall Street Journal reported the bank is nearing a $17 billion settlement with the Department of Justice over the sales of mortgage-backed securities.
Participation remained on the light side with just under 530 million shares changing hands at the NYSE.
Economic data was limited to the weekly MBA Mortgage Index, which rose 1.4% to follow last week's 2.7% decline.
Tomorrow, weekly initial claims will be reported at 8:30 ET (Briefing.com consensus 308K), while Existing Home Sales for July (consensus 5.00 million), August Philadelphia Fed Survey (consensus 15.5), and July Leading Indicators (expected 0.7%) will all be released at 10:00 ET.
The stock market ended the midweek session on a mixed note. Blue chip listings bolstered the Dow Jones Industrial Average (+0.4%) and S&P 500 (+0.3%), while the Russell 2000 (-0.4%) and Nasdaq Composite (-0.02%) underperformed.
Equity indices began the day in the red, but wasted no time regaining their flat lines. Small-cap stocks were not as fortunate as the Russell 2000 spent the day in the red.
Upon returning into positive territory, the key indices were confined to narrow ranges until the minutes from the July FOMC meeting crossed the wires. The minutes revealed that many officials saw recent job gains as a potential reason to bring forward the first fed funds rate hike; however, most officials showed preference for waiting for more evidence before changing their outlook on rates.
The minutes were followed by a retreat among equities, but the slide was not sustained. The S&P 500 was trading at a fresh session high within an hour of the release. Treasuries, meanwhile, slumped in reaction to the discussion on rates. The 10-yr note fell seven ticks with its yield climbing three basis points to 2.43%.
Eight sectors ended in the green with industrials (+1.0%) spending the entire session in the lead. The cyclical sector was supported by Dow components Boeing (BA 127.35, +1.77) and General Electric (GE 26.36, +0.31) as the two added 1.4% and 1.2%, respectively. Despite the strength in the two names, the broader PHLX Defense Index (+0.9%) ended just behind the sector. Similarly, transport stocks could not keep pace with the sector as the Dow Jones Transportation Average added 0.6%.
Also of note, shares of Hertz (HTZ 30.33, -1.23) endured quite the roller coaster ride. The stock settled at $31.56 yesterday, but fell all the way to $27.47 this morning after the company said it expects to fall short of its full-year guidance, which was withdrawn. The stock spent the bulk of the day inching off its low with a big boost coming after Carl Icahn disclosed a stake in the company and said he may seek a seat on the board. Hertz ended the session with a 3.9% decline.
The consumer discretionary sector (+0.5%) finished in second place after a handful of retailers reported their quarterly results. American Eagle (AEO 12.98, +1.39), Lowe's (LOW 52.33, +0.81), and PetSmart (PETM 70.52, +0.82) all reported better than expected results, while Target (TGT 60.33, +1.08) and Staples (SPLS 11.32, -0.30) met expectations, but issued cautious guidance. For its part, the SPDR S&P Retail ETF (XRT 87.68, +0.63) gained 0.7%.
Elsewhere, the financial sector (+0.3%) was the only outperformer of note, while the remaining sectors finished near their respective flat lines. Bank of America (BAC 15.52, +0.07) was in the headlines after the Wall Street Journal reported the bank is nearing a $17 billion settlement with the Department of Justice over the sales of mortgage-backed securities.
Participation remained on the light side with just under 530 million shares changing hands at the NYSE.
Economic data was limited to the weekly MBA Mortgage Index, which rose 1.4% to follow last week's 2.7% decline.
Tomorrow, weekly initial claims will be reported at 8:30 ET (Briefing.com consensus 308K), while Existing Home Sales for July (consensus 5.00 million), August Philadelphia Fed Survey (consensus 15.5), and July Leading Indicators (expected 0.7%) will all be released at 10:00 ET.
- Nasdaq Composite +8.4% YTD
- S&P 500 +7.5% YTD
- Dow Jones Industrial Average +2.4% YTD
- Russell 2000 -0.5% YTD
Commodities
Closing Commodities: Gold Ends 0.1% Lower, Silver Gains 0.4%, Following Fed Minutes
- Dec gold traded below the $1300 per ounce level today as investors awaited the release of the FOMC minutes from the July policy meeting. The yellow metal pulled back slightly from its session high of $1299.00 per ounce set in early morning action and dipped to a session low of $1293.40 per ounce.
- It eventually settled with a 0.1% loss at $1295.00 per ounce.
- Gold slipped further in electronic trade after the release of the FOMC minutes and is currently trading at $1290.80 per ounce, or 0.5% lower.
- Sep silver touched a session high of $19.58 per ounce shortly after equity markets opened but retreated to a session low of $19.45 per ounce as the session progressed. It chopped around near the $19.50 per ounce level in afternoon action and settled at that price, booking a gain of 0.4%.
- Oct crude oil traded in positive territory today, advancing as high as $96.61 per barrel following inventory data. The EIA reported that for the week ending Aug 15, crude oil inventories had a draw of 4.47 mln barrels when a draw of 1.2-1.8 mln barrels was anticipated.
- The energy component briefly dipped below $93 per barrel in early afternoon action but eventually settled with a 0.6% gain at $93.40 per barrel.
- Sep natural gas, on the other hand, spent its entire session in negative territory. It brushed a session low of $3.79 per MMBtu and settled with a 1.5% loss at $3.82 per MMBtu.
- Gold traded below the $1300 level today as investors awaited the 14:00 ET release of the FOMC minutes from the July policy meeting. A stronger dollar index also weighed on prices. The yellow metal pulled back slightly from its session high of $1299 set in early morning action and dipped to a session low of $1293.40. It eventually settled with a 0.1% loss.
- Silver touched a session high of $19.58 shortly after equity markets opened but retreated to a session low of $19.45 as the session progressed. It chopped around near the $19.50 level in afternoon action and settled with a 0.4% gain.
CBOT Agriculture and Ethanol/ICE Sugar Closing Prices
- Sep corn fell 3 cents to $3.60/bushel
- Sep wheat fell 7 cents to $5.40/bushel
- Nov soybeans fell 16 cents to $10.37/bushel
- Sep ethanol rose 1 cent to $2.13/gallon
- Nov sugar (#16 (U.S.)) fell $0.57 to 25.13 cents/lb
NYMEX Energy Closing Prices
- Crude oil traded in positive territory today, advancing as high as $96.61 following inventory data. The EIA reported that for the week ending Aug 15, crude oil inventories had a draw of 4.47 mln barrels when a draw of 1.2-1.8 mln barrels was anticipated. The energy component briefly dipped below $93 in early afternoon action but eventually settled with a 0.6% gain.
- Natural gas, on the other hand, spent its entire session in negative territory. It brushed a session low of $3.79 and settled with a 1.5% loss.
Treasuries
FOMC Minutes Cause Yields in the Belly to Climb: 10-yr: -06/32..2.425%..USD/JPY: 103.70..EUR/USD: 1.3261
- Treasuries hovered little changed into afternoon trade before what is being described by some as 'hawkish' FOMC minutes pressed maturities to their worst levels of the day. Click here to see an intraday yields chart.
- The minutes from the July 29/30 policy meeting suggested, "Many participants noted that if convergence toward the Committee's objectives occurred more quickly than expected, it might become appropriate to begin removing monetary policy accommodation sooner than they currently anticipated."
- Up front, the 2y climbed +3.5bps to 0.472%. The yield finished near its highest levels of August as action punched through resistance in the 0.450% area.
- Post-minutes selling had the biggest impact on the belly as the 5y rallied +5bps to 1.630%. The yield reclaimed the 200 dma, and is now testing resistance near 1.640% that is guarded by both the 50 and 100 dma.
- A +2.1bp advance ran the 10y up to 2.426%. Three days of selling has the benchmark yield at its highest level in more than a week, and approaching the important 2.450% region.
- A flat session at the long end saw the 30y close @ 3.220%. Afternoon selling caused action to probe resistance in the 3.225% area, but so far action has been unable to breakout.
- Today's action caused some flattening along the curve as the 2-10-yr spread narrowed to 195.5bps and the 5-30-yr spread tightened to 159bps.
- Precious metals went off near their lows as gold fell -$6 to $1291 and silver added +$0.03 to $19.45.
- Data: Initial and continuing claims (8:30), existing home sales, Philly Fed, and leading indicators (10).
- Fed Speak: The Kansas City Fed's Jackson Hole Symposium begins.
On other news....
Currencies
Dollar Hits 11-Month High: 10-yr: -03/32..2.411%..USD/JPY: 103.36..EUR/USD: 1.3290
- The Dollar Index holds onto small gains near 82.05 as trade looks to put in its first close above 82.00 since September. Click here to see a daily Dollar Index chart.
- Action has spent the entire U.S. session in a tight 10 cent range as traders await the FOMC minutes, which are due out at the top of the hour.
- EURUSD is -30 pips @ 1.3285 as trade presses to its lowest level in 11 months. The single currency has been under pressure since early-May as negative and slow growth environments plague much of the region and have some worried of a Japan-like stagnation. The 1.3200 support level will be monitored into Friday's Jackson Hole speech by ECB head Mario Draghi. Flash Manufacturing and Services PMI data from across the eurozone will be released tomorrow.
- GBPUSD is +5 pips @ 1.6620 after surrendering all of its early gains. Sterling surged to the 1.6680 level after the latest MPC votes indicated two members were in favor of a 25 bp rate hike at the August meeting; however, action was rejected at resistance and the 200 dma and has pushed lower over the course of the session. Britain's retail sales and public sector net borrowing are scheduled for tomorrow.
- USDCHF is +15 pips @ .9110 as action contends with its best close of 2014. A quiet day for news and data from Switzerland has left action at the mercy of the euro. Swiss data is limited to the trade balance.
- USDJPY is +45 pips @ 103.35 as trade rallies to its best level in more than four months. Fueling today's advance was the larger than trade balance miss, which marked the 40th consecutive month of a deficit. The 104.00 level will be key in the days ahead.
- AUDUSD is +10 pips @ .9310 as trade recoups its early losses. The hard currency has seen a relatively uneventful trade despite overnight comments from RBA Governor Glenn Stevens indicating rates were likely to remain on hold for a while. Resistance in the .9340 area is guarded by the 100 dma. Australia's CB Leading Index is due out tonight. China's HSBC Final Manufacturing PMI will cross the wires this evening.
- USDCAD is +10 pips @ 1.0950 amid a mostly uneventful trade. A close above 1.0972 would mark the best since late-April.
Next Week In View
Economic Commentaries
Economic Data Summary:
- Weekly MBA Mortgage applications were up 1.4% last week.
- Weekly Initial Jobless Claims Thursday at 8:30 (Briefing.com consensus of 308K; was 311K)
- Continuing Claims at 8:30 (Briefing.com consensus of 2.53 mln; was 2.54 mln)
- July Existing Home Sales at 10:00 (Briefing.com consensus 5.0 mln vs. 5.04 mln in June)
- August Philly Fed at 10:00 (Briefing.com consensus of 15.5; was 23.9)
- July Leading Indicators at 10:00 (Briefing.com consensus of +0.7%; was +0.3%)
- FOMC Minutes at 14:00
- Jackson Hole Fed Conference to be held Thursday August 21st-25th.
- Fed Chair Janet Yellen to speak Friday August 22nd at 10:00 and ECB President Mario Draghi to speak Friday August 22nd at 14:30
Jason's Commentaries
The day started with a very flat note as the market is waiting for the release of FOMC minutes. However, after the FOMC minutes which were perceived as hawkish, market rallied as well. Internals were supporting a upside movement. However, towards the end of the trading session, the market had some profit taking. On the technicals, the S&P500 reached its all time high. I reckon the market is likely to start flat for a while before breaking up higher. However, I believe the market will be staying on the sidelines for a while as Yellen is poised to speak on Friday before the Jackson Hole Symposium.
Market Call: FLAT to downside
Date: 21 Aug 2014
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