20 Aug 2013 AMC

20 Aug 2013 AMC

Market Summary 

European markets are now closed; stock markets across Europe performed as follows:

·         UK's FTSE: -0.2%

·         Germany's DAX: -0.8%

·         France's CAC: -1.4%

·         Spain's IBEX: -1.8%

·         Portugal's PSI: -1.8%

·         Italy's MIB Index: -1.4%

·         Irish Ovrl Index: -0.8%

·         Greece ATHEX Composite: -3.3%

Market Internals

Market Internals -Technical-
The Nasdaq closed up 25 (+0.68%) at 3614, the S&P 500 closed up 6 (+0.38%) at 1652, and the Dow closed down 8 (-0.05%) at 15003. Action came on below average volume (NYSE 635 mln vs. avg. of 744; NASDAQ 1244 mln vs. avg. of 1605), with advancers outpacing decliners (NYSE 2373/733, NASDAQ 1854/662) and mixed new highs/lows  (NYSE 28/272, NASDAQ 48/45). 

Relative Strength: 
Gold Miners-GDX +3.76%, U.S. Home Construction-ITB +3.09%, Egypt-EGPT +3.02%, Homebuilders-XHB +2.65%, Silver Miners-SIL +2.47%, Real Estate-IYR +2.35%, India-INP +2.08%, South Africa-EZA +1.43%, Middle East and Africa-GAF +1.37%, Mexico-EWW +1.34%.

Relative Weakness: 
Cotton-BAL -5.15%, Indonesia-IDX -3.95%, Coffee-JO -3.23%, Oil-USO -1.70%, Corn-CORN -1.64%, Grains-JJG -1.60%, Vietnam-VNM -1.57%, Thailand-THD -1.55%, China 25 Index-FXI -1.36%, Hong Kong-EWH -1.29%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: S&P 500 Snaps Losing Streak
The S&P 500 settled higher by 0.4% to snap its streak of four consecutive losses. Small caps outperformed as the Russell 2000 rose 1.5% after registering five declines in a row. 

Unaffected by another round of losses across emerging markets, stocks climbed at the open, but gains were limited as the S&P could not retake its 50-day moving average. The benchmark index made a brief midday appearance above the key level before spending the entire afternoon just below it. 

A retreat in Treasury yields contributed to the relative strength of equities as the benchmark 10-yr yield fell seven basis points to 2.82%. 

The pullback in yields helped rate-sensitive sectors such as telecom services (+0.5%), utilities (+0.8%), and home builders. The iShares Dow Jones US Home Construction ETF (ITB 21.32, +0.64) added 3.1% as most major builders gained between 2.0% and 4.0% apiece. 

The relative strength of home builders provided a measure of support to the discretionary sector, which ended atop the leaderboard. In addition, retailers rallied after Best Buy (BBY 34.80, +4.07), Home Depot (HD 74.29, -0.92), TJX Companies (TJX 54.24, +3.49), and Urban Outfitters (URBN 43.19, +3.27) all reported solid results. Meanwhile, J.C. Penney (JCP 14.01, +0.79) advanced 6.0% despite missing on earnings and revenue while Dick's Sporting Goods (DKS 46.64, -3.95) sank 7.8% following its disappointing report. The broader SPDR S&P Retail ETF (XRT 80.14, +1.21) rose 1.5%. 

While most cyclical sectors displayed strength, industrials and technology underperformed. The industrial space ended flat as the underperformance of Deere (DE 83.25, -1.27) and Dow component General Electric (GE 23.72, -0.13) overshadowed the relative strength of transportation companies. The Dow Jones Transportation Average settled higher by 0.9% as 18 of 20 components posted gains. 

Elsewhere, the tech sector was pressured by its top component, Apple (AAPL 501.07, -6.67), which lost 1.3%. 

Today's trading volume was well below average as less than 640 million shares changed hands on the floor of the New York Stock Exchange. 

There was no economic data reported today, but tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET and July existing home sales will be reported at 10:00 ET. Lastly, the Federal Open Market Committee will release the minutes from its July meeting at 14:00 ET.

Commodities

Closing Commodities: Crude Oil Sells Off, Ends Below $105/Barrel
Commodities ended the day mixed with crude oil selling off in the afternoon session, gold ending higher, silver ending lower, copper flat and natural gas lower.

Crude oil gained some steam in the morning session and rose as high as $107.00/barrel. However, it was still modestly lower at that level and ultimately reversed lower, selling off by $2.41/barrel to $104.59. By the end of the day, Sept crude was down $2.15 at $104.92/barrel.

Sept natural gas finished 2 cents lower at $3.44/MMBtu.

Precious metals ended today's session mixed with Dec gold up $6.50 to $1372.30/oz and Sept silver down $0.12 to $23.05/oz. Sept copper closed one cent higher at $3.34/lb.

NYMEX Energy Closing Prices

·         Sep crude oil fell $2.15 to $104.92/barrel

·         Sep natural gas fell 2 cents to $3.44/MMBtu

·         Sep heating oil rose 1 cent to $3.08/gallon

·         Sep RBOB gasoline closed unchanged at $2.93/gallon

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Dec corn fell 1 cents to $4.75/bushel

·         Sep wheat fell 7 cents to $6.34/bushel

·         Nov soybeans fell 14 cents to $12.90/bushel

·         Sep ethanol remains unchanged at $2.25/gallon

·         Nov sugar (#16 (U.S.)) fell 0.15 of a penny to 20.30 cents/lbs

Treasuries

Yields nearing session lows ahead of the cash close
2-yr -1.2 bps @ 0.347%
3-yr -4.0 bps @ 0.715%
5-yr -7.1 bps @ 1.543%
7-yr -7.5 bps @ 2.202%
10-yr -7.0 bps @ 2.813%
30-yr -4.9 bps @ 3.852% 
 

Treasuries Book Gains: 10-yr: +16/32..2.820%..USD/JPY: 97.30..EUR/USD: 1.3420
Treasuries booked solid gains as maturities advanced for just the second time in seven days. The complex saw overnight buying thanks to the flight to safety that developed amid the rout in emerging equity markets. The overnight bid was all that was needed as a relatively uneventful session took place during U.S. trade thanks to a lack of meaningful news and data. Today's advance pushed yields down as much as 7 bps in the belly of the curve, with the 10-yr yield ending at 2.814%. Traders will be watching the 2.735% area over the coming days as what was resistance is now home to support. The wings of the curve lagged as 21/32 advance pushed the 30-yr yield lower by nearly 5 bps to 3.853%. Meanwhile, the 2-yr slipped just more than 1 bp to 0.347%. Curve flattening narrowed the 2-10-yr spread to 246.5 bps. Elsewhere, a mixed session played out in precious metals as gold rallied $7 to $1373 and shed $0.10 to near $23.05. Wednesday's data includes the weekly MBA Mortgage Index (7), existing home sales (10), and the FOMC minutes (14)

Next Day In View 

On other news.... 

35 minutes ahead of the open S&P futures are +2 vs fair value and DJ futures are +28
Equity futures point to modest gains at the open as trade looks to post its first gain in five days. Trade has checked up near 1640 support over the past couple of sessions, allowing bulls to set their sights on retaking the 50-day moving average (1653). Today's bid comes as BBY, HD, JCP, TJX trade higher following the release of their quarterly results.

Overnight, it was a sea of red across Asia as all of the region's bourses ended with losses. Concerns remained focused on the slide in India's rupee as it tumbled to 64.10 per dollar before paring its losses. Surprisingly, the Sensex (-0.3%) held up relatively well. Other emerging markets were not as fortunate. Indonesia's Jakarta Composite (-3.2%) was hit hard as the country's currency, the rupiah, sank to a 51-month low versus the dollar. Meanwhile, Thailand's SET (-2.0%) fell as the country's economy slid into recession for the first time since the financial crisis. Japan's Nikkei (-2.6%) and Hong Kong's Hang Seng (-2.2%) saw notable weakness.

In Europe, all of the major averages are in the red with the periphery leading the decline. Spain's IBEX (-2.0%) and Italy's MIB (-1.2%) are under pressure amid a rather quiet day for news and data from the region.

Bringing focus back to the U.S., the Dollar Index is testing key support in the 80.80/81.00 area. Notable is the dollar's weakness against the euro (EURUSD +90 pips @ 1.3425), which is trading at a six-month high. Meanwhile, an overnight flight to safety has supported Treasuries with yields off as much as 5.5 bps. The benchmark 10-yr yield holds near 2.830%...The following are the most important factors influencing the market this morning:

·         Asia: Nikkei -2.6%, Hang Seng -2.2%, Shanghai -0.6% 

o    Regional economic data was limited: 

§  Japan's All Industries Activity Index slipped 0.6%, as expected (1.2% prior). 

§  Hong Kong's CPI rose 6.9% year-over-year (5.0% expected, 4.1% previous). 

§  New Zealand's inflation expectations came in at 2.4% quarter-over-quarter (2.1% previous). 

o    In news: 

§  In Japan, a member of the ruling party's tax panel described the recently-discussed sales tax increase as inevitable. 

·         Europe: FTSE -0.3%, CAC -1.2%, DAX -0.7%, MIB -1.2%, IBEX -2.0%

o    In regional economic data: 

§  Germany's PPI slipped 0.1% month-over-month (0.2% forecast, 0.0% previous) while the year-over-year reading ticked up 0.5% (0.7% expected, 0.6% prior). 

§  Norway's GDP rose 0.8% quarter-over-quarter (1.0% consensus, -0.1% previous). 

o    Looking at news: 

§  French Finance Minister Pierre Moscovici said he expects the country to reach full employment in ten years. 

·         BKS and Simon & Schuster, a unit of CBS, resolve dispute, according to reports  

·         ELTK +7.4% (secured a $4.2 mln investment from Nistek Ltd) shares by certain existing shareholders) at $82.00 per share  

·         RENT acquires iTVX, a branded entertainment analytics company; financial terms not disclosed  

·         SFD scheduled meeting to vote on proposed merger with Shuanghui International for Sep 24, 2013 at 9:00am 

·         ETZ priced offering of 5,023,486 shares of its Class A common stock (2,523,486 shares by certain existing shareholders) at $82.00 per share   

Earnings/guidance of interest:

·         BBY is +16% and trading at a 2.5 year high in the premarket after reporting Q2 ad. EPS of $0.32 vs. the Capital IQ Consensus of $0.11; revenues fell 0.4% year/year to $9.3 bln vs the $9.11 bln consensus.  

·         JCP is +5% after reporting Q2 adj. EPS of ($2.16), $1.02 worse than the Capital IQ Consensus of ($1.14); revenues fell 11.9% year/year to $2.66 bln vs the $2.78 bln consensus; reports Kyle Bass bought some of the co's secured loans appears to be helping shares this morning  

·         URBN is +8% after beating Q2 EPS on lower than expected rev; Wedbush subsequently upgraded the stock to Neutral 

·         BHP is -2% in London after missing 2H13 (June) estimates 

·         LITB is -40% after reporting its first quarter since its June IPO; Q2 adj. EPS of $0.10 beat the $0.05 consensus; rev rose 53% YoY $72.2 mln vs the $76 mln consensus; co guided for Q3 rev of $68-70 mln vs. $77.94 mln Capital IQ Consensus. 

·         DKS is -4% after missing Q2 ests; co guided Q3 EPS below consensus and lowered FY14 guidance below consensus  

Select analyst actions of interest:

·         Upgrades: NLSN upgraded to Outperform from Market Perform at Bernstein, P initiated with a Buy at B. Riley & Co., WY upgraded to Buy from Neutral at Longbow, RRGB upgraded to Buy from Hold at Jefferies, FB initiated with Buy and $50 tgt at Janney, CMG upgraded to Hold from Underperform at Jefferies

·         Downgrades: RVBD downgraded to Sell from Hold at Deutsche Bank, NOK hearing cautious Bernstein comments; sees upcoming qtr as 'disastrous', QIHU initiated with a Neutral at Goldman, ZNGA initiated with Sell at Janney, PNRA downgraded to Hold from Buy at Jefferies, WMT downgraded to Neutral at Susquehanna; tgt lowered to $79 from $85

Technical factors: Sizeable follow through of last week's breakdown left the S&P down four in a row and as much as 51 points (-3.0%) off last week's high. The decline has created a near term overdone technical posture but there have been no indications of any buy side interest thus far. Initial support is in the 1644/1642 zone followed by a minor barrier at 1640. A sustained recovery back above 1650/1652 would be the first step to improving the very short term bias.

Looking ahead: There is no data. ADI, INTU, LZB, TUES, GSM, PSEC, VNET, EPAY, VELT are scheduled to report following today's closing bell while TGT, LOW, SPLS, TCK, PETM, SJM, AEO, TOL are among the names set to release their quarterly results ahead of tomorrow's open. 

Currencies 

Dollar Tests Key Support: 10-yr: +13/32..2.826%..USD/JPY: 97.22..EUR/USD: 1.3416
The Dollar Index has seen a steady climb off session lows near 80.80 with action now looking to retake the 81.00 level. Today's trade has been rather lackluster as data and news around the globe has been mostly absent. Click here to see a daily Dollar Index chart.

·         EURUSD is +80 pips at 1.3415 as trade remains on track to post its best close in six months. The single currency saw some buying following comments from German Finance Minister Wolfgang Schauble, in which he suggested Greece will likely need another bailout after 2014, as European banks possibly repatriated some euros. The 1.3400 area will now attempt to hold as minor support. 

·         GBPUSD is +20 pips at 1.5665 as trade holds at a two-month high. Early buying failed near 1.5700 as sellers emerged in defense of the June highs. Britain's public sector net borrowing and CBI Industrial Order Expectations are due out tomorrow. 

·         USDCHF is -65 pips at .9175 as the pair looks to as thought it will post its lowest close since February. Traders are watching current levels closely as the .9180/.9200 area is home to key support. 

·         USDJPY is -35 pips at 97.25 amid a rather quiet session. Early selling made for a test of minor support in the 97.00 area, but bulls have so far successfully managed to defend the level. Trendline resistance off the May highs combined with the presence of both the 50- and 100-day moving averages near 98.00 continues to prove difficult for the bulls to retake. 

·         AUDUSD is -35 pips at .9080 as trade looks to regain minor support in the .9100 area. The hard currency has been offered since the dovish Reserve Bank of Australia minutes crossed late last night. 

·         USDCAD is +50 pips at 1.0390 as trade lingers just off session highs. Today's advance comes following Canada's disappointing wholesale sales (-2.8% MoM actual v. -0.5% MoM expected), and has the pair on track to close at a two-week high. A minor victory for the bulls would be a move through 1.0425.

Jason's Commentaries


Seems that I was almost right for last night's call. Market was flat... but to the upside... Market started with a bullish bias and held throughout the session all the way till the last hour where there's some serious profit taking on the Dow Jones and the S&P500. On the Dow Jones, the only serious laggard was Home Depot, down with 1.22% and in the S&P500, Apple, Philip Morris and Visa were the heavy laggard. However, the Nasdaq 100 managed to perform much higher despite the drag with Apple. Most of the tech components were up. The consumer discretionary Volumes were standing at 634.7m shares traded, still much lesser than the volumes in June and May. The internals were pointing towards a flat day as most of the internals were divergent. The Dow jones found a support a 15,000 and the S&P500 closed back up 1650. The first half of the trading session will likely to be flat to the downside as futures is already in the negative region. However, it will be meaningful today as FOMC minutes is coming out at 2pm ET. That alone will defy all sort of technical analysis. I'm abstaining from call the market today. Behold the volatility =D

Market Call: ABSTAIN

Date: 21 Aug 2013