20 Nov 2014 AMC -Market gains as Nasdaq broke high once again

20 Nov 2014 AMC -Market gains as Nasdaq broke high once again

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: + 0.5%

·         France's CAC: + 0.5%

·         Spain's IBEX: + 1.2%

·         Portugal's PSI: + 0.2%

·         Italy's MIB Index: -0.1%

·         Irish Ovrl Index: + 0.6%

·         Greece ASE General Index: -0.5%

Before Market Opens 

S&P futures vs fair value: +7.00. Nasdaq futures vs fair value: +15.00.
The S&P 500 futures trade seven points above fair value.

Markets rallied across Asia, supported by the People's Bank of China rate cut that followed Friday's close. Elsewhere, Japan's Nikkei was shuttered in observance of Labour Thanksgiving Day. Surveys in Japan indicate Prime Minister Shinzo Abe's LDP party is expected to receive 37% of the vote even though more than 60% disapprove of the dissolution of the lower house. 

·         Economic data was limited: 

o    New Zealand's Visitor Arrivals increased 3.3% month-over-month (previous 1.1%) 

o    Singapore's CPI eased to 0.1% year-over-year from 0.6% (consensus 0.6%) 

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·         Hong Kong's Hang Seng rallied 2.0% to a one-week high. Real estate stocks surged as China Overseas Land & Investment and China Resources Land jumped 11.0% and 10.4%, respectively. 

·         China's Shanghai Composite advanced 1.9% to its best levels since September 2011. Real estate developed Poly Real Estate and brokerage firm GF securities both gained the limit, 10%. 

·         India's Sensex gained 0.6%, putting in another record high. IT service providers were bid as Infosys, Tata Consultancy Services, and Wipro added between 1.3% and 3.1%.

Major European indices trade mostly higher with Spain's IBEX (+1.5%) in the lead. Friday's comments from European Central Bank President Mario Draghi about tackling low inflation stoked up expectations for increased easing efforts from the central bank. To that point, Credit Suisse expects the ECB to deploy a sovereign QE program in December. Spain's 10-yr yield has given up six basis points to 1.96% and Italy's benchmark yield is lower by five basis points at 2.15%. 

·         In economic data: 

o    Germany's Ifo Business Climate Index rose to 104.7 from 103.2 (expected 103.0) as Current Assessment increased to 110.0 from 108.4 (consensus 108.0) and Business Expectations improved to 99.7 from 98.3 (expected 95.5) 

o    Italy's non-EU trade surplus expanded to EUR4.04 billion from EUR1.53 billion 

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·         Great Britain's FTSE is lower by 0.1% amid significant weakness in the shares of Petrofac. The energy company has plunged 25.4% in reaction to a profit warning. Financials outperform with Barclays and Royal Bank of Scotland both up near 1.0%. 

·         Germany's DAX is higher by 0.7% with bank shares in the lead amid increased expectations of a sovereign QE. Deutsche Bank has spiked 3.4% and Commerzbank trades up 1.3%. 

·         In France, the CAC has added 0.8%. BNP Paribas, Credit Agricole, and Societe Generale lead with gains between 2.4% and 3.6%. Sanofi is the weakest performer, down 0.5%.

·         Spain's IBEX outperforms with an increase of 1.6%. Banco Popular, Bankinter, Banco Sabadell, and Bankia lead with gains between 2.3% and 3.0%.

Market Internals

Market Internals -Technical-
The Nasdaq closed up 42 (+0.89%) at 4755, the S&P 500 closed up 6 (+0.29%) at 2069, and the Dow closed up 8 (+0.04%) at 17818. Action came on below average volume (NYSE 691 mln vs. avg. of 801; NASDAQ 1446 mln vs. avg. of 1849), with advancers outpacing decliners (NYSE 1948/1207, NASDAQ 1950/801) and new highs outpacing new lows(NYSE 160/18, NASDAQ 116/43).

Relative Strength: 
Biotechnology-XBI +2.4%, Spain-EWP +1.94%, Biotechnology-IBB +1.74%, Nordic 30-GXF +1.52%, France-EWQ +1.47%, Sweden-EWD +1.45%, Cocoa-NIB +1.42%, Germany-EWG +1.41%, Retail-XRT +1.32%, Regional Banks-KRE +1.31%.

Relative Weakness: 
Natural Gas-UNG -2.78%, Volatility-VXX -2.18%, Latin America 40-ILF -2.17%, Platinum-PPLT -1.82%, Columbia Index-GXG -1.52%, Gold Miners-GDX -1.43%, Gasoline-UGA 1.41%, Israel-EIS -1.34%, Brazilian Real-BZF -1.24%, South Africa-EZA -1.17%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries

Closing Market Summary: S&P 500 Logs Third Consecutive Gain
The major averages kicked off the holiday-shortened week with an advance that was paced by the Russell 2000 (+1.2%). The small-cap index was followed by the Nasdaq Composite (+0.9%) while the Dow (+0.04%) and S&P 500 (+0.3%) ended closer to their flat lines.

Stocks rallied out of the gate with upbeat action overseas contributing to the early strength. Equities in China and Hong Kong spiked in reaction to Friday's PBoC rate cut while European markets were boosted by increased expectations of a forthcoming sovereign QE program from the European Central Bank. To that point, Credit Suisse said it expects the ECB to announce plans for sovereign asset purchases in December.

ECB member and German Bundesbank President Jens Weidmann pushed back against the easing expectations, reminding that monetary policy alone is unable to create growth and requires corresponding measures from the fiscal side.

Despite Mr. Weidmann's comments, the market's expectation for more QE manifested itself through increased demand for Italian and Spanish debt. Italian and Spanish 10-yr yields both fell five basis points to their respective 2.15% and 1.97%.

Unsurprisingly, heightened easing expectations led to strength in European bank shares with Banco Santander (SAN 8.75, +0.25) and Deutsche Bank (DB 31.80, +0.87) spiking 2.9% and 2.8%, respectively. As for the broader financial sector (+0.6%), the cyclical group led at the start, but ceded the top spot to the consumer discretionary sector (+0.9%).

The discretionary space enjoyed broad support from homebuilders, retailers, and media names. The iShares Dow Jones US Home Construction ETF (ITB 26.08, +0.22) gained 0.9% and the SPDR S&P Retail ETF (XRT 93.90, +1.22) advanced 1.3%. Time Warner Cable (TWX 81.43, +1.38) stood out among broadcasters with a 1.7% spike.

Elsewhere among influential sectors, technology (+0.7%) and health care (+0.5%) outperformed, helping the market resist the pressure from energy (-0.7%), materials (-0.5%), and consumer staples (-0.1%).

The tech sector, and Nasdaq Composite, rallied behind the shares of Apple (AAPL 118.62, +2.16), which surged 1.9%. Chipmakers also provided support with the PHLX Semiconductor Index climbing 1.0%. Furthermore, the Nasdaq drew strength from biotechnology as the iShares Nasdaq Biotechnology ETF (IBB 300.15, +5.14) jumped 1.7%.

On the downside, the energy sector spent the day in a steady retreat. Meanwhile, crude oil held an overnight gain, but gave that back and then some to end lower by 1.0% at $75.75/bbl.

Treasuries registered modest gains after erasing their overnight losses. The 10-yr yield slipped one basis point to 2.30%.

Tomorrow, the second estimate of Q3 GDP (Briefing.com consensus 3.2%) will be reported at 8:30 ET while September Case-Shiller 20-city Index (consensus 4.6%) and FHFA Housing Price Index will both be released at 9:00 ET. The day's data will be topped off with the 10:00 ET release of the Consumer Confidence report for November (expected 96.0). 

·         Nasdaq Composite +13.9% YTD 

·         S&P 500 +12.0% YTD 

·         Dow Jones Industrial Average +7.5% YTD 

·         Russell 2000 +1.1% YTD

Commodities

Metals price action

·         Gold fell $2.10 to $1195.60/oz

·         Silver fell 2 cents to $16.38/oz

·         Copper fell 3 cents to $3.00/lb

Agricultural price action

·         Corn fell 4 to $3.67/bushel

·         Wheat fell 5 cents to $5.42/bushel

·         Soybeans rose 13 cents to $10.35/bushel

·         Ethanol rose 2 cents to $2.08/gallon

·         Sugar #11 fell 0.09 cents to 16.00 cents/gallon

Energy price action

·         Crude oil fell $0.78 to $75.75/barrel

·         Natural gas fell 14 cents to $4..14/MMBtu

·         Heating oil fell 3 cents to $2.03/gallon

·         RBOB remained unchanged at $2.40/gallon

Treasuries

Yields Finish on Key Support: 10Y: +01/32..2.306%..USD/JPY: 118.27..EUR/USD: 1.2437

·         Treasuries eked out small gains after recovering their early losses. Click here to see an intraday yields chart.

·         The complex saw some light overnight selling after the encouraging German Ifo Business Climate survey, but turned around as U.S. equity markets opened for business. 

·         A session sans data made for steady buying over the course of the morning with maturities ticking to fresh highs into this afternoon's $28B 2Y note auction.  

·         The 2Y auction was strong, drawing 0.542% (WI 0.554%) and a 3.71x bid/cover. A healthy indirect takedown (35.8%) provided support as directs (16.2%) were a tad light.

·         Post-auction buying lifted maturities to their best levels of the day before plateauing into the close.

·         Yields across much of the curve finished on key support.

·         Up front, the 2Y eased -1.6bps to 0.497% as action probes the lower end of the 0.500%/0.550% range that has held up throughout November. 

·         In the belly, the 5Y shed -0.8bps to 1.603%. Traders will be watching support in the 1.600% area over the coming days. 

·         The 10Y eased -0.5bps to 2.310%. The benchmark yield ended near the important 2.300% level.

·         Little change at the long end dropped the 30Y -0.2bps to 3.019%. The yield on the long bond is pressing the lower bound of the 3.00%/3.100% range that has been in place over the past month.

·         Selling swung the curve steeper as the 2-10-yr spread widened to 181.5bps. 

·         Precious metals were flat with gold and silver finishing @ $1198 and $16.44, respectively.

·         Data: GDP - Second Estimate (8:30), Case-Shiller 20-city Index, FHFA Housing Price Index (9), and consumer confidence (10). 

·         Auction: $35 bln 5Y notes.

On other news.... 

Currencies 

Dollar Dips in Quiet Trade: 10Y: +03/32..2.305%..USD/JPY: 118.27..EUR/USD: 1.2435

·         The Dollar Index continues to hold small losses as action probes the 88.15 level. Click here to see a daily Dollar Index chart.

·         The Index has spent the entire U.S. session stuck in a 20 cent range as trade holds below the breakeven line.

·         EURUSD is +50 pips @ 1.2440 as action presses session highs. The single currency has been able to hold 27-month lows as German Ifo Business Climate topped estimates, and saw follow through buying as Bundesbank head Jens Weidmann once again spoke out against sovereign QE purchases by the ECB. The 1.2400 level remains key. 

·         GBPUSD is +40 pips @ 1.5695 as trade flirts with the upper end of the range that has been in place for nearly two weeks. A lack of news and data out of the UK has kept trade closely tracking the euro. Britain's BBA Mortgage Approvals and the latest Inflation Report Hearings are due out tomorrow. 

·         USDCHF is -25 pips @ .9670 as trade pulls back from 16-month highs. The pair saw little reaction to the in-line employment data, and remains tightly tied to the euro. 

·         USDJPY is +60 pips @ 118.35 as action holds just off seven-year highs. The pair has been an afterthought during today's session as Japanese banks were closed in observance of Labor Thanksgiving Day. Bank of Japan Governor Haruhiko Kuroda will speak in Nagoya after the latest policy minutes are released. 

·         AUDUSD is -60 pips @ .8605 as trade slides back onto key support. The hard currency tested the .8700 level in early trade, but has been unable to hold above the important .8650 area. A breakdown of .8550 will have the pair at levels last seen in July 2010. 

·         USDCAD is +65 pips @ 1.1295 as action bounces off key support. Trade opened on the key 1.1200 area and the 50 dma, but has managed to hold the level. Canadian data set for tomorrow is limited to retail sales.

Next Week In View




Economic Commentaries

Economic Summary: No US data today; Q2 GDP second estimate due out tomorrow at 8:30
Upcoming Economic Data:

·         Third Quarter GDP Second Estimate due out Tuesday at 8:30 (Briefing.com consensus of 3.2%; Q3 Prelim was 3.5%)

·         Third Quarter GDP Deflator Second Estimate due out Tuesday at 8:30 (Briefing.com consensus of 1.3%; Q3 Prelim was 1.3%)

·         September Case Schiller 20 City Index due out Tuesday at 9:00 (Briefing.com consensus of 4.6%; August was 5.6%)

·         September FHFA Housing Price Index due out Tuesday at 9:00 (Briefing.com consensus of ; August was 0.5%)

·         November Consumer Confidence due out Tuesday at 10:00 (Briefing.com consensus of 96; October was 94.5)

Upcoming Fed/Treasury Events:

·         The Treasury is expected to auction off new debt this week.  The results will be issued at 13:00

o    Monday: $28 bln in 2 year notes

o    Tuesday: $35 bln in 5 year notes

o    Wednesday: $29 bln in 7 year notes

Other International Events of Interest

·         Germany's Ifo Business Climate Index rose to 104.7 from 103.2 (expected 103.0) as Current Assessment increased to 110.0 from 108.4 (consensus 108.0) and Business Expectations improved to 99.7 from 98.3 (expected 95.5) 

Jason's Commentaries


Nasdaq broke the high once again! The tech apparently is the best gainer in monday's session. However, the indices seemed not be in sync as Dow and S&P500 ended flat while Nasdaq and Russells ended higher. Dow was being affected by the Oil prices' effect on the energy industry. Net margin for oil companies are expected to drop tremendously for the last quarter of the year. Especially the oil exploration companies. As oil drops, Exxon, one of the largest components in Dow starts to lag the Dow. Consumer Discretionary is the next best gainer in the session, having 0.93% gain last night and we're likely to see some bullishness towards the Black Friday sale happening this weekend! As the Black Friday Sales already started for some retailers, I'm expecting the market will be bullish this week!

Happy shopping!







Market Call: FLAT to upside

Date: 25 Nov 2014