19 Sep 2013 AMC

19 Sep 2013 AMC

Market Summary 

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

·         UK's FTSE: + 1.0%

·         Germany's DAX: + 0.7%

·         France's CAC: + 0.9%

·         Spain's IBEX: + 1.0%

·         Portugal's PSI: + 0.2%

·         Italy's MIB Index: + 1.4%

·         Irish Ovrl Index: + 0.6%

·         Greece ATHEX Composite: + 2.2%

Before Market Opens

S&P futures vs fair value: +4.00. Nasdaq futures vs fair value: +6.50.
The S&P 500 futures trade higher by 0.2%.

It was a sea of green across Asia as all of the major bourses saw gains on the heels of the Fed's decision to delay the tapering of its asset purchase program. India's Sensex (+3.4%) surged to its highest level in almost three years as traders gobbled up shares ahead of tomorrow's Reserve Bank of India rate decision where expectations are for no change to the current 7.25%. Emerging markets led the region higher as Indonesia's Jakarta Composite (+4.7%) and Thailand's SET (+3.5%) led the way. Elsewhere, Japan's Nikkei (+1.8%) was buoyed by comments from Bank of Japan Governor Haruhiko Kuroda, suggesting policy is having an effect on the real economy. China's Shanghai Composite and Taiwan's Taiex were closed for Mid-Autumn Festival. Data out overnight was light with Japan's trade deficit narrowing to JPY0.79 trillion (JPY0.83 trillion expected, JPY0.91 trillion previous). 

·         In Japan, the Nikkei closed higher by 1.8% as trade climbed to its best level in eight weeks. Real Estate developers and automakers were among the top performers with Mitsubishi Estate adding 4.5% and Isuzu Motors climbing 5.9% to lead their respective sectors higher. 

·         Hong Kong's Hang Seng advanced 1.7% as trade hit its best level in seven months. Gold miner Zhaojin Mining surged almost 8% as traders rushed into the precious metals space. Real estate shares were also strong as Link Real Estate Investment Trust climbed 5.4%. 

·         In China, the Shanghai Composite was closed. 

The major European indices hover near their highs with Great Britain's FTSE (+1.4%) pacing the advance. With the German national election coming up this weekend, the anti-euro party is making waves after filing a court complaint accusing the European Financial Stability Facility of fraud. Latest polls indicate the party is in-line to receive 5% of the vote, which would allow it to enter parliament. Participants received a handful of economic data. Great Britain's retail sales fell 0.9% month-over-month (0.4% expected, 1.1% prior) while the year-over-year reading rose 2.1% (3.3% forecast, 3.0% previous). In addition, core retail sales fell 1.0% month-over-month (0.3% expected, 1.2% prior while the year-over-year reading increased 2.3% (3.1% consensus, 3.2% last). Also of note, CBI Industrial Trends Orders improved to 9 from 0 (2 expected). Elsewhere, the Swiss National Bank left its key interest rate unchanged at 0.00%, as expected. Separately, the country reported a trade surplus of EUR1.85 billion (EUR2.74 billion expected, EUR2.49 billion prior). 

·         France's CAC is higher by 0.9% as growth-sensitive names outperform. Steelmaker ArcelorMittal and construction company Vinci trade with respective gains of 3.3% and 1.6%. On the downside, insurer AXA is lower by 2.4%. 

·         Germany's DAX holds a gain of 1.0% as exporters lead. BMW and Daimler are both up near 1.0%. On the downside, fertilizer producer K+S trades with a loss of 5.1%. 

·         In Great Britain, the FTSE trades up 1.4% with miners providing leadership. Anglo American, Fresnillo, and Randgold Resources are all up between 4.4% and 8.0%. Vodafone is among the laggards, trading lower by 1.1%.

Market Internals

Market Internals
The Nasdaq closed up 6 (+0.15%) at 3789, the S&P 500 closed down 3 (-0.18%) at 1722, and the Dow closed down 40 (-0.26%) at 15637. Action came on above average volume (NYSE 738 mln vs. avg. of 665; NASDAQ 1728 mln vs. avg. of 1548), with decliners outpacing advancers (NYSE 1271/1823, NASDAQ 1135/1364) and new highs outpacing new lows (NYSE 335/14, NASDAQ 237/20). 

Relative Strength: 
Turkey-TUR +3.37%, Social Media-SOCL +2.92%, MLP Index-AMJ +2.16%, Columbia Index-GXG +1.54%, Sugar-SGG +1.52%, Base Metals-DBB +1.15%, Peru-EPU +1.15%, Thailand-THD +1.08%, Clean Energy-PBW +1.00%, Indian Rupee-ICN +0.78%. 

Relative Weakness: 
Junior Gold Miners-GDXJ -4.00%, Silver Miners-SIL -2.70%, Regional Banks-KRE -1.81%, Banks-KBE -1.73%, U.S. Health Care-IHF -1.72%, Poland-EPOL -1.72%, South Africa-EZA -1.62%, Russia-RSX -1.33%, Japanese Yen-FXY -1.31%, Australia-EWA -1.18%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: S&P 500 Ends Modestly Lower While Technology Outperforms
The major averages ended today's quiet session on a mixed note. The S&P 500 shed 0.2% while the tech-heavy Nasdaq added 0.2%. 

After spiking to new record highs yesterday, the Dow, S&P 500 and Russell 2000 spent the entire session in a slow retreat off their opening levels. Seven of ten sectors finished in the red while industrials (+0.1%), technology (+0.2%), and discretionary shares (+0.01%) posted modest gains. 

The discretionary sector received support from retailers as the SPDR S&P Retail ETF (XRT 82.82, +0.18) added 0.2%. Meanwhile, homebuilders lagged across the board as rates trended higher. The iShares Dow Jones US Home Construction ETF (ITB 23.12, -0.28) fell 1.2% after jumping 4.8% yesterday. 

Elsewhere, the industrial sector displayed relative strength with transports contributing to the gain. The Dow Jones Transportation Average added 0.3%. Dow component Boeing (BA 119.04, +0.64) also outperformed, rising 0.5%, after German airline Lufthansa chose the 777X for its future long-haul fleet. 

Also of note, the technology sector ended modestly higher with the top sector component, Apple (AAPL 472.30, +7.62), advancing 1.6%. On the earnings front, Oracle (ORCL 33.89, +0.02) added 0.1% after reporting a bottom-line beat on below-consensus revenue. In addition, the company guided its second quarter earnings and revenue on the low end of consensus expectations. 

The outperformance of technology kept the Nasdaq in positive territory through most of the session. However, biotechnology held the index back from additional gains as the iShares Nasdaq Biotechnology ETF (IBB 211.33, +0.14) ended little changed. 

Countercyclical sectors lagged across the board as consumer staples, health care, telecom services, and utilities lost between 0.3% and 0.5%. 

Treasuries saw some moderate selling following yesterday's aggressive bid. The benchmark 10-yr yield added four basis points to 2.75%. 

Despite relatively narrow trading ranges, today's session saw above average participation as 738 million shares traded hands on the floor of the New York Stock Exchange. 

In today's economic data, technical problems continued causing biases in the initial claims number. Weekly initial claims increased to 309,000 from an upwardly revised 294,000 (from 292,000). Computer glitches in California and Nevada prevented many claimants from filing for unemployment benefits. Those problems created a backlog of filings, which resulted in a temporarily lower initial claims level. The Department of Labor expects the backlog to be processed over the next week or two before the claims level returns to normal. 

When the biases are gone, we expect the initial claims level to settle back to its previous 330,000 trend. 

August existing home sales increased to 5.48 million from July's unrevised 5.39 million. The Briefing.com consensus expected sales to slip to 5.30 million. Sales in August were the strongest since February 2007 when 5.79 million existing home sales were sold. Unfortunately, the National Association of Realtors does not believe sales will continue at this level through the fall. 

A spike in mortgage rates caught potential buyers by surprise. As a result, buyers rushed into the market to take advantage of relatively low rates before they went higher. This caused a temporary surge in demand and sales were pulled forward. 

The Philadelphia Fed's Business Outlook increased to 22.3 in September, its strongest level since March 2011, from 9.3 in August. The Briefing.com consensus expected the index to fall to 9.0. 

Separately, the current account deficit for the second quarter totaled $98.9 billion, which was narrower than the $100.0 billion deficit that had been broadly anticipated. 

There is no economic data of note on tomorrow's calendar.

Commodities

Closing Commodities: Gold And Silver Hold Big Gains Post FOMC Announcement

·         Oct crude oil pulled back from its session high of $108.66 per barrel and slipped into negative territory as reports indicated that Libyan crude oil production is on the road to recovery with the reopening of the El Feel and Sharara oil fields. The energy component brushed a session low of $106.17 per barrel moments before settling with a 1.7% loss at $106.26 per barrel

·         Oct natural gas popped to a session high of $3.82 per MMBtu on bullish inventory data that showed a build of 46 bcf when a build of 55-56 bcf was anticipated. Prices reversed, however, and fell as low as $3.68 per MMBtu in afternoon floor trade. Natural gas eventually settled with a 0.3% gain at $3.72 per MMBtu

·         Precious metals held on to yesterday's gains that came on the 14:00 ET FOMC decision to withhold tapering of its stimulus program. The announcement was made after floor trade in gold, silver, and copper had ended and sent Dec gold and Dec silver rallying sharply in yesterday's afternoon electronic trade

·         Both metals traded in a consolidative fashion today, with gold trading near the $1370.00 per ounce level and silver rising to a session high of $23.44 per ounce in late morning floor action

·         Gold settled at $1369.10 per ounce and silver settled at $23.29 per ounce, booking respective gains of 4.7% and 7.9% as of yesterday's pit close

COMEX Metals Closing Prices

  Dec gold rose $61.70 to $1369.10/ounce 

·         Gold held on to yesterday's gains that came on the 14:00 ET FOMC decision to withhold tapering of its stimulus program (after floor trade in gold, silver, and copper had ended). The yellow metal rallied sharply in yesterdays afternoon's electronic trade and spent today's floor session trading near the $1370.00 level, gaining 4.7% since yesterday's pit close. 

  Dec silver rose $1.71 to $23.29/ounce 

·         Silver also spiked yesterday following the FOMC announcement and slightly extended  gains today. It rose as high as $23.44 in late morning floor action and booked a 7.9% gain as of yesterday's pit close. 

  Dec copper rose 7 cents to $3.35/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Dec corn rose 3 cents to $4.60/bushel 

·         Dec wheat rose 10 cents to $6.56/bushel 

·         Nov soybeans fell 8 cents to $13.40/bushel 

·         Oct ethanol rose 4 cents to $1.88/gallon 

·         Nov sugar (#16 (U.S.)) rose 0.04 of a penny to 21.02 cents/lbs

NYMEX Energy Closing Prices

  Oct crude oil fell $1.88 to $106.26/barrel 

·         Crude oil slipped into negative territory as reports indicated that Libyan crude oil production is on the road to recovery with the reopening of the El Feel and Sharara oil fields. The energy component retreated from its session high of $108.66 and brushed a session low of $106.17 moments before settling with a 1.7% loss. 

  Oct natural gas rose 1 cent to $3.72/MMBtu 

·         Natural gas spiked to a session high of $3.82 on bullish inventory data. However, it was unable to hold on to the gains and fell as low as $3.68 in afternoon pit trade. Natural gas eventually settled with a 0.3% gain. 

  Oct heating oil fell 4 cents to $3.00/gallon 

  Oct RBOB gasoline fell 5 cents to $2.69/gallon

Treasuries

Treasuries Slide as Traders Take Profits: 10-yr: -16/32..2.746%..USD/JPY: 99.35..EUR/USD: 1.3530
Treasuries closed on their lows as traders booked profits following yesterday's advance. A quiet overnight trade persisted into the U.S. session, with maturities hugging their respective flat lines before testing session highs on the heels of this morning's better than expected initial claims (309K actual v. 340K expected, 294K previous) and current account deficit ($98.9 bln actual v. $100.0 bln expected, $104.9 bln previous). However, selling developed as resistance held, dropping the complex to fresh lows as existing home sales (5.48M actual v. 5.30M expected) and Philly Fed (22.3 actual v. 9.0 expected) data both outpaced estimates. The complex would drift flat to lower over the remainder of the session, ending on its worst levels. Yields across most of the curve ended up between 4 and 5 bps, with the 10-yr climbing to near 2.750% after its attempt to break 2.700% support failed. Today's selling swung the yield curve steeper as the 2-10-yr spread widened to 242 bps. Elsewhere, precious metals booked modest gains with gold climbing to $1369 and silver ticking up to $23.25. There is no data on Friday. A trio of Fed speakers will be in New York, NY with KC's George speaking on "The Federal Reserve and the Economy" (12:30), STL's Bullard discussing the U.S. economy and monetary policy (12:55), and Minny's Kocherlakota at New York University for the business school's conference on Extracting and Understanding the Risk Neutral Probability Density from Options Prices (13:45).

Next Day In View 

Economic Commentary

Economic Summary: Existing homes sales, Philly Fed, and Leading Indicators all top expectations; three voting FOMC members to speak tomorrow
Economic Data Summary:

·         Weekly Initial Claims 309K vs Briefing.com consensus of 340K; Last Week was 292K

·         Weekly Continuing Claims 2.787 M vs Briefing.com consensus of 2.880 M ; Last Week was 2.871 M

o    Computer glitches in California and Nevada prevented many claimants from filing for unemployment benefits. Those problems created a backlog of filings, which resulted in a temporarily lower initial claims level. The Department of Labor expects the backlog to be processed over the next week or two before the claims level returns to normal. When the biases are gone, we expect the initial claims level to settle back to its previous 330,000 trend. 

·         Q2 Current Account Balance -$98.9 bln vs Briefing.com consensus of -$100.0 bln; Q1 was -$106.1 bln

·         August Existing Home Sales 5.48 M vs Briefing.com consensus of 5.30 M ; July was 5.39 M

o     A spike in mortgage rates caught potential buyers by surprise. As a result, buyers rushed into the market to take advantage of relatively low rates before they went higher. This caused a temporary surge in demand and sales were pulled forward. The drop in affordability conditions from the higher mortgage rates combined with the expected payback period, which is a natural result from a the surge in demand, will cause sales to drop from current levels over the next few months. It would not be shocking if sales fell below 5.00 mln in September. Inventories increased 0.4% in August to 2.25 mln. 

·         September Philadelphia Fed 22.3 vs Briefing.com consensus of 9.0; August was 9.3

o    This index is highly volatile and the upward surprise should not be looked at as a sign of enormous improvements in the manufacturing sector. Furthermore, none of the manufacturing surveys from the Federal Reserve or ISM have a good track record at predicting the actual manufacturing trends that are found in the industrial production or factory orders data. The Shipments Index, which contracted in August, spiked to 21.2 in September. Nearly all of the gain in shipments came from new orders. 

·         August Leading Indicators 0.7% vs Briefing.com consensus of 0.6%; July was 0.6%

o    Since eight of the 10 components of the index are known prior to the release, the difference between the actual number and the consensus is typically minor. In this case, a bigger-than-expected increase in manufacturers' new orders of nondefense capital goods excluding aircraft was the likely cause for the small upside surprise. Overall, the Index of Leading Indicators points toward a solid expansionary trend. Only the decline in building permits negatively contributed to the index. 

Fed/Treasury Events Summary:

·         Cleveland Fed President Sandra Pianalto (not a voting FOMC member, typically dovish; will be retiring at the end of this year) did not comment monetary policy in her speech today.

Upcoming Economic Data:

·         July Case Schiller 20 City Index due out Tuesday at 9:00 (June was 12.1%)

·         July FIFA Housing Price Index due out Tuesday at 9:00 (June was 0.7%)

·         September Consumer Confidence due out Tuesday at 10:00 (August was 81.5)

Upcoming Fed/Treasury Events:

·         Kansas City Fed President Esther George (FOMC dissenter, typically hawkish) to speak Friday at 12:20

·         Fed Governor Daniel Tarullo (voting FOMC member, typically dovish) to speak Friday at 12:40

·         Saint Louis Fed President James Bullard (voting FOMC member. recently dovish) to speak Friday at 12:55

·         Minneapolis Fed President Narayana Kocherlakota (non-voter, dove) to speak at 13:45

Other International Events of Interest

·         Japan's trade deficit narrowed to JPY960 billion from JPY1.02 trillion (deficit of JPY1.10 trillion expected) as exports increased 14.7% year-over-year (14.5% expected, 12.2% prior) and imports climbed 16.0% (18.5% consensus, 19.6% previous). In addition, the adjusted trade deficit came in at JPY0.79 trillion (-JPY0.81 trillion expected, JPY0.91 trillion prior). Separately, the All Industries Activity Index rose 0.5% month-over-month (0.3% expected, -0.7% prior). 

·         The Swiss National Bank left its key interest rate unchanged at 0.00%, as expected. Separately, the country reported a trade surplus of EUR1.85 billion (EUR2.74 billion expected, EUR2.49 billion prior). 

On other news.... 

Currencies 

Dollar Ticks Higher: 10-yr: -15/32..2.744%..USD/JPY: 99.23..EUR/USD: 1.3525
The Dollar Index hovers just off session highs as trade holds onto small gains near 80.35. Today's advance has the greenback higher for just the third time in ten days as bulls look to retake the key 80.80/81.00 support level. Click here to see a daily Dollar Index chart.

·         EURUSD is +20 pips at 1.3530 as action holds at seven-month highs. Today's advance marks the fourth straight day of gains, and adds to an impressive September that has seen the pair tack on almost 350 pips. Near-term support now rests in the 1.3400 area. 

·         GBPUSD is -95 pips at 1.6040 as trade slips for just the third time in September. Today's weakness comes on the heels of the mixed retail sales (0.9% MoM actual v. +0.4% MoM expected) and CBI Industrial Order Expectations (9 actual v. 2 expected, 0 previous) data and as sellers stepped in to defend trendine resistance that has been in place since July. Minor support rests in the 1.5900 while more meaningful help can be found near 1.5700/1.5750. Britain's public sector net borrowing is due out tomorrow. 

·         USDCHF is -30 pips at .9100 as sellers remain in control for a seventh day. Today's Swiss National Bank rate decision went as expected, with the central bank holding its Libor Rate steady at less than 0.25% and Chairman Thomas Jordan indicating the EURCHF peg will remain in place for the foreseeable future. The .9000/.9050 level will be important over the coming days. 

·         USDJPY is +110 pips at 99.25 as trade has reversed all of yesterday's losses and then some. Overnight, Bank of Japan Governor Haruhiko Kurdoa noted the central bank's policy is having an impact on the real economy. Today's bid has fun the pair back above its 50- and 100-day moving averages, and has trade looking to retake support in the area. Bank of Japan Governor Kuroda will speak at the Kisaragi-kai meeting in Tokyo. 

·         AUDUSD is -60 pips at .9435 as trade holds on session lows. The hard currency saw an early bid fail just short of yesterday's highs, and that was enough to spark the reversal. Key support rests near .9300, and is helped by the 100-day moving average. Chinese banks remain closed for Mid-Autumn Festival. 

·         USDCAD is +30 pips at 1.0255 as action has seen a sharp reversal off this morning's lows. The pair dipped below its 200-day moving average(1.0210), but has managed to since retake that mark along with critical trendline support of the September 2012 lows (1.0230).Bulls will now look to reclaim 1.0250/1.0300 support. Canada's CPI will be released tomorrow.

Jason's Commentaries


It seems that the market started taking their profit after the massive breakup into the high, right after the day of FOMC minutes. All 3 indices started with a bearish bias and started heading down.However, the Nasdaq composite found a bottom by 11am ET as Apple gained 1.64%. Tech and industrials were the only gainers in the market last night, with industrials gaining 0.34%.Volumes were healthy last night, over 700m shares traded on the NYSE. Seems flat and VIX went down. Quite a bit of divergence over here. We don't have much data coming out on Friday and it's very  likely to be a very boring Friday. 

Market Call: FLAT 

Date: 20 Sep 2013