17 Sep 2013 AMC

17 Sep 2013 AMC

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: -0.8%

·         Germany's DAX: -0.2%

·         France's CAC: -0.2%

·         Spain's IBEX: -0.1%

·         Portugal's PSI: -1.4%

·         Italy's MIB Index: + 0.1%

·         Irish Ovrl Index: + 0.1%

·         Greece ATHEX Composite: + 0.7%

Before Market Opens

S&P futures vs fair value: +1.90. Nasdaq futures vs fair value: +11.20.
The S&P 500 futures trade higher by 0.1%.

Most Asian markets ended in the red with China's Shanghai Composite (-2.1%) leading to the downside after the Foreign Direct Investment report indicated a slowdown to 6.37% from the prior reading of 7.10%. Elsewhere, the minutes from the latest Reserve Bank of Australia policy meeting indicated the central bank will continue on the easing path if the incoming data demand it. Regional data was limited. Australia's new motor vehicle sales rose 0.8% month-over-month (-3.6% previous). South Korea's PPI rose 0.3% month-over-month (0.0% prior) while the year-over-year reading slipped 1.3% (-0.9% previous). Hong Kong's unemployment held steady at 3.3%, as expected. 

·         Japan's Nikkei closed lower by 0.7% as telecom names led to the downside. KDDI and Softbank lost 7.2% and 3.8%, respectively after NTT DoCoMo released its pricing schedule for the new iPhone. A handful of exporters outperformed with Sharp jumping 6.6% and Ricoh adding 2.3%. 

·         In Hong Kong, the Hang Seng shed 0.3% as energy names underperformed. China Coal Energy and CNOOC lost 2.7% and 1.0%, respectively. Property names displayed strength as China Resources Land gained 1.8% and Hang Lung Properties added 0.8%. 

·         China's Shanghai Composite fell 2.1% as financials lagged. China Industrial Development Co and Shanghai International Port Group both lost near 10.0%. Telecom names displayed relative strength with Dr Peng Telecom & Media climbing 5.3%. 

Major European indices hover near their lows as the quiet session continues. In Germany, Chancellor Angela Merkel reiterated that a decision on another aid package for Greece will not be made until after the New Year. Participants received a moderate amount of data. Eurozone current account surplus narrowed to EUR16.9 billion from EUR19.8 billion (EUR17.3 billion expected) while the trade surplus narrowed to EUR11.1 billion from EUR13.5 billion (EUR15.3 billion forecast). Separately, the ZEW Economic Sentiment Index rose to 58.6 from 44.0 (47.2 forecast). Germany's ZEW Economic Sentiment climbed to 49.6 from 42.0 (46.0 expected). Great Britain's CPI ticked up 0.4% month-over-month (0.5% expected, 0.0% prior) while core CPI increased 2.0% year-over-year (2.1% forecast, 2.0% prior). In addition, RPI increased 0.5% month-over-month (0.4% expected, 0.0% previous),input PPI slipped 0.2% month-over-month (0.2% forecast, 1.2% prior), and output PPI ticked up 0.1% month-over-month (0.2% expected, 0.2% previous). 

·         Germany's DAX is lower by 0.2% as exporters lag. BMW, Daimler, and Volkswagen are all down between 0.3% and 1.5%. Utilities are among the outperformers as E.ON and RWE trade with gains close to 1.2%. 

·         In France, the CAC trades down 0.2% as growth-sensitive names weigh. Alstom and Total are both down near 1.5%. Technology companies are mixed as Gemalto adds 1.6% while STMicroelectronics sheds 1.7%. 

·         Great Britain's FTSE holds a loss of 0.4%. Financials are among the laggards as Barclays, Lloyds Banking Group, and Standard Life trade with losses between 1.6% and 2.9%. On the upside, Severn Trent outperforms with a gain of 3.1%. 

In domestic economic news, the July net long-term TIC flows report indicated a $31.0 billion inflow of foreign capital into U.S. denominated assets. This follows the prior month's $67.0 billion outflow.

Market Internals

Market Internals -Technical-
The Nasdaq closed up 28 (+0.75%) at 3746, the S&P 500 closed up 7 (+0.42%) at 1705, and the Dow closed up 35 (+0.23%) at 15530. Action came on slightly below average volume (NYSE 577 mln vs. avg. of 661; NASDAQ 1462 mln vs. avg. of 1539), with advancers outpacing decliners (NYSE 2064/1010, NASDAQ 1705/801) and new highs outpacing new lows (NYSE 159/34, NASDAQ 135/17).

Relative Strength: 
Gold Miners-GDX +2.13%, Smart Grid Infrastructure-GRID +1.94%, Social Media-SOCL +1.91%, Metals and Mining-XME +1.69%, Regional Banks-KRE +1.37%, Brazilian Real-BZF +1.20%, Greece-GREK +1.17%, Australia-EWA +0.95%, Middle East and Africa-GAF +0.79%, Japan-EPP +0.69%.

Relative Weakness: 
Coffee-JO -3.43%, Heating Oil-UHN -2.53%, Gasoline-UGA -2.27%, Peru-EPU -1.99%, Indonesia-IDX -1.84%, Commodities-GSG -1.48%, Cocoa-NIB -1.22%, Vietnam-VNM -0.61%, Malaysia-EWM -0.59%, United Kingdom-EWU -0.50%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Summary
There wasn't much to be said about the trading action in the stock market on Tuesday because there wasn't a whole lot of trading action. Volume at the NYSE totaled a piddly 577 mln shares versus an average of 661 mln shares. The light volume reflected a wait-and-see mindset ahead of Wednesday's highly-anticipated announcement from the FOMC on whether it has decided to begin curtailing its asset purchase program. 

It is only fitting perhaps that the S&P 500 sits on the cusp of a new all-time high just as the Fed is presumably on the cusp of cutting back on its asset purchases. Some believe the market is only where it is because of the Fed's asset purchase program. Accordingly, a decision on Wednesday to cut back on its asset purchases will provide a good signpost in the future for determining just how well the stock market and the economy were able to handle a Fed tapering. 

Today, it was pretty much steady as she goes. Bolstered by the news that Microsoft (MSFT 32.93, +0.13) is raising its quarterly dividend by 22% to $0.28 per share and is replacing a prior $40 bln share repurchase program that was set to expire at the end of the month with a new one, the S&P 500 recorded its tenth gain in the last eleven sessions. 

Most of the gains were achieved shortly after the start of trading. From about 10:00 a.m. ET on, the S&P 500 vacillated in a two-point range between 1703 and 1705, making small forays below and above those respective levels. The S&P 500 settled the day just below 1705. 

Big moves today were limited to individual stocks like Apple (AAPL 455.32, +5.20), which jumped 1.2% on a bargain hunting bid and assumptions that it may soon follow Microsoft's lead in announcing an increased return of capital to shareholders. Facebook (FB 45.07, +2.56) also outperformed on little news but strong volume. 

Not surprisingly, with Microsoft, Apple, and Facebook all pushing higher, the tech sector (+0.6%) was a pillar of support throughout today's trading. The industrials (+0.6%), consumer discretionary (+0.6%), and utilities (+0.6%) sectors also fared well. In fact, every sector, with the exception of the basic materials sector (-0.3%), which was pressured by a weak showing from the paper and packaging stocks, ended the day higher. 

The S&P 500 ended the session just shy of its best levels of the day. The same can be said for the CBOE Volatility Index (14.54, +0.16) as investors placed their bets that volatility will be picking up in the near term. 

Commodities were pretty much weak across the board. Per usual, the performance of oil ($105.49, -$1.10) and gold ($1310.00, -$7.80) caught most of the market's attention. Their weakness was considered by some to be a harbinger of a Fed tapering announcement since it is presumed that a tapering will help keep inflation pressures at bay. 

On that note, the Consumer Price Index for August didn't reveal any worrisome inflation signals. Total CPI and core CPI, which excludes food and energy, both rose just 0.1% from July. Over the last 12 months, total CPI is up 1.5% while core CPI is up 1.8%. That is below the 2.0% rate of increase seen for each in September 2012 when the Fed announced QE3. 

The other piece of economic news today showed homebuilder confidence held pretty steady in September. The NAHB Housing Market index checked in at 58 (Briefing.com consensus 59) versus 59 for August. 

The FOMC decision and the Fed's updated economic projections will be released at 2:00 p.m. ET on Wednesday. Fed Chairman Bernanke's press conference will follow at 2:30 p.m. ET. What the chairman communicates at that press conference is arguably more important than what is said in the directive.

Commodities

Closing Commodities: Precious Metals Fall Ahead of FOMC Policy Decision
Precious metals fell ahead of tomorrow's FOMC announcement where Chairman Bernanke is expected to announce a reduction in the size of the Fed's asset purchases in the amount of ~ $10-15 bln. Dec gold pulled back from its session high of $1320.70 per ounce and brushed a session low of $1305.80 per ounce. It remained in the red and settled with a 0.7% loss at $1309.00 per ounce. Dec silver dipped as low as $21.64 per ounce in early morning pit trade. It settled at $21.78 per ounce, or 1.0% lower. 

Oct crude oil extended losses for a third consecutive session despite a weaker dollar index. The energy component dipped below the $105.00 per barrel level in afternoon pit trade after pulling back from a session high of $105.98 per barrel. It closed with a 1.1% loss at $105.39 per barrel. 

Oct natural gas briefly dipped into negative territory after touching a session high of $3.78 per MMBtu at pit trade open. Unable to gain much momentum, it settled unchanged at $3.74 per MMBtu.

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Dec corn fell 3 cents to $4.54/bushel 

·         Dec wheat rose 1 cent to $6.42/bushel 

·         Nov soybeans fell 6 cents to $13.42/bushel 

·         Oct ethanol closed unchanged at $1.78/gallon 

·         Nov sugar (#16 (U.S.)) fell 0.08 of a penny to 21.00 cents/lbs

NYMEX Energy Closing Prices

  Oct crude oil fell $1.18 to $105.39/barrel 

·         Crude oil extended losses for a third consecutive session despite a weaker dollar index. The energy component dipped below the $105.00 level in afternoon pit trade after trading as high as $105.98 earlier, and settled with a 1.1% loss. 

  Oct natural gas settled unchanged at $3.74/MMBtu 

·         Natural gas retreated from its session high of $3.78 and briefly dipped into the red to a session low of $3.72. Unable to gain much momentum, it settled the session unchanged. 

  Oct heating oil fell 7 cents to $3.00/gallon 

  Oct RBOB gasoline fell 6 cents to $2.66/gallon

Treasuries

Next Day In View 

Economic Commentary

Economic Summary: August CPI, HAHB Market index roughly in line with expectations; Fed begins 2 day meeting today, decision tomorrow at 14:00
Economic Data Summary:

·         August CPI 0.1% vs Briefing.com consensus of 0.2%; July was 0.2%

·         August Core CPI 0.1% vs Briefing.com consensus of 0.2%; July was 0.2%

o    These inflation trends are not conducive to tighter monetary policy, which is what is expected to happen at tomorrow's FOMC meeting. Expect inflation trends to weaken even further from the current low-growth environment. Energy prices fell 0.3% in August. That was the first decline since April when prices fell 4.3%. At that time, a large drop in oil prices caused overall energy prices to fall. In August, energy commodity prices were flat as gasoline prices declined 0.1%, which was offset by a 1.3% increase in fuel oil. 

·         July Net Long Term TIC Flows $31.1 bln vs Briefing.com consensus of ; June was -$66.9 bln

·         September NAHB Housing Market Index 58 vs Briefing.com consensus of 59; August was 59

Fed/Treasury Events Summary:

·         The Federal Reserve has begun at two day meeting.  The decision will be announced tomorrow at 14:00 along with supplemental economic projections.  The Ben Bernanke press conference will begin at 14:30.  Below are some recent comments from Fed Presidents:

o    Sep 6th -- Kansas City Fed President Esther George (FOMC dissenter, typically hawkish) said "I continue to support slowing the pace of purchases as the appropriate next step for monetary policy.For example, an appropriate next step toward normalizing monetary policy could be to reduce the pace of purchases from $85 bln to something around $70 bln per month, then have purchases going forward split evenly between Treasury and agency-MBS securities."

o    Sep 6th -- Chicago Fed President Charlie Evans (voting FOMC member, typically dovish) said ""I expectt, however, that the outlook will materialize in such a way that we'd likely reduce the LSAP rate starting later this year and subsequently wind down these purchases over a couple of stages. For me, to start the wind-down, it will be best to have confidence that the incoming data show that economic growth gained traction during the third quarter of this year and that the transitory factors that we think have held down inflation really do turn out to be transitory."

o    Aug 23rd -- Saint Louis Fed President James Bullard (voting FOMC member, recently dovish) on CNBC said 'we do not have to be in any hurry in regards to tapering; urges caution on tapering decision; also noted low inflation.

o    August 6th -- Chicago Fed President Charlie Evans (voting FOMC member, typically dovish) said Fed may keep rates low even after jobless below 6.5%; expects low inflation to be transitory; says jobs report 'was not bad' but 'was not great'.  He also said he would not rule out cuts to bond buys to begin next month

·         CBO projected deficits to fall to 2% by 2015 but sees a gradual rise after under current law.

Upcoming Economic Data:

·         Weekly MBA Mortgage Applications due out Wednesday at 7:00 (Briefing.com consensus of ; Last Week was -13.5%)

·         August Housing Starts due out Wednesday at 8:30 (Briefing.com consensus of 910K; July was 896K)

·         August Building Premits due out Wednesday at 8:30 (Briefing.com consensus of 943K; July was 943K)

Other International Events of Interest

·         Germany's ZEW Economic Sentiment climbed to 49.6 from 42.0 (46.0 expected). 

·         China's FDI came in at 6.37% (7.10% prior). 

On other news.... 

Currencies 

Dollar Drifts Ahead of Tomorrow's FOMC Decision:
The Dollar Index hovers on session lows near 81.15 amid a rather uneventful trade. Aside from an early attempt at retaking the flat line (81.30), the Index has spent the majority of the session in a five cent range as traders pare back risk taking ahead of tomorrow's Fed decision. Key support in the 80.80/81.00 region will be watched closely following tomorrow's announcement. Click here to see a daily Dollar Index chart.

·         EURUSD is +25 pips at 1.3360 as rallies following today's strong eurozone and German ZEW Economic Sentiment surveys. The single currency has climbed more than 250 pips off the September lows, gaining in six of the past eight sessions, as it nears a test of the important 1.3400 level. 

·         GBPUSD is +15 pips at 1.5910 as trade looks for its 10th gain in 12 September sessions. Today's action is a little worrisome as it has yet to eclipse the previous day's high, marking the first time it has failed to do so in September. Resistance in the 1.6000 area is key. The Bank of England will release the latest MPC Asset Purchase Facility and Official Bank Rate votes. 

·         USDCHF is -10 pips at .9260 as action slides for the seventh time in eight days. Traders continue to monitor the important .9200 level as support there dates back to February. Switzerland's ZEW Economic Expectations are due out tomorrow. 

·         USDJPY is +15 pips at 99.25 as trade managed to hold support in the area helped by the 50- and 100-day moving averages. Bulls continue to have their sights set on retaking the 101.00 level as it would mean a retest of the four and a half-year highs (103.00ish) set back in May. 

·         AUDUSD is +35 pips at .9355 as trade probes the 100-day moving average. Today's trade has seen little response to the latest Reserve Bank of Australia minutes, which suggested further rate cuts may be on the horizon. Near-term resistance rests in the .9500 area. Australian data is limited to the CB Leading Index. 

·         USDCAD is -20 pips at 1.0300 as sellers have been in control since this morning's strong than expected Canadian manufacturing sales (1.7% MoM actual v. 0.6% MoM expected). Participants should pay close attention to the support in the 1.0250/1.0300 area as tomorrow's decision looms large.Bank of Canada Governor Stephen Poloz will speak at the Board of Trade in Vancouver.

Jason's Commentaries


Another up day in the market. Seems like the market is taking the opportunity to price into the Fed minutes while Larry Summers steps down from the contest of Fed Chairman. Market started with a bullish bias which went totally sideways throughout the entire trading session. Volumes were weak as expected, at 577m shares traded. It's definitely a sign that market is anticipating the Fed minutes a lot as the tapering announcement might be coming out tonight at 230am ET. On the technical perspective, we're definitely punching the highs. However, we have see how would the market react to the Fed minutes before we should take a position. Materials was the only laggard last night with a -0.28% loss. While discretionary stocks were up 0.58%. Nonetheless, the market is likely to start with a bullish to upside fashion before the Fed minutes is being announced. So stay safe and enjoy the ride =D

Market Call: ABSTAIN

Date: 18 Sep 2013