16 Oct 2013 AMC- US Finally struck the 11th hour deal to prevent default of treasuries...

16 Oct 2013 AMC- US Finally struck the 11th hour deal to prevent default of treasuries...

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: -0.3%

·         Spain's IBEX: + 0.8%

·         Portugal's PSI: + 0.8%

·         Italy's MIB Index: + 1.5%

·         Irish Ovrl Index: + 0.8%

·         Greece ATHEX Composite: + 0.5%

Before Market Opens

European Markets Update: DAX -0.1%, FTSE -0.5%, CAC -0.8%, MIB +0.6%
Major European indices hover in the red with France's CAC leading to the downside (-0.9%). Elsewhere, Italy's MIB outperforms with a gain of 0.6%. In news of note, Germany's CDU/CSU alliance is not expected to enter a coalition government with the Greens after talks revealed the parties don't share a common ground. Separately, reports in Die Zeit indicate the next aid package for Greece will include new aid from the European Central Bank. Investors received a handful of economic data. Eurozone CPI rose 0.5% month-over-month while the year-over-year reading increased 1.1%. Separately, core CPI increased 1.0% year-over-year. All three readings met expectations. Also of note, the trade surplus expanded to EUR12.30 billion from EUR11.00 billion (EUR12.40 billion expected). Great Britain's claimant count declined 41,700 (25,000 expected, 41,600 prior) while the unemployment rate held steady at 7.7%. Separately, the Average Earnings Index + Bonus rose 0.7% (1.0% expected, 1.2% previous). Italy's trade surplus narrowed to EUR0.96 billion from EUR5.98 billion (EUR5.21 billion expected). 

·         In Germany, the DAX is off 0.1% as apparel manufacturer Adidas weighs, trading lower by 1.5%. Utilities have displayed strength with E.ON and RWE both up near 1.5%. 

·         Great Britain's FTSE is lower by 0.5% as miners lag. Anglo American and Fresnillo hold respective losses of 1.9% and 3.0%. On the upside, asset manager Hargreaves Lansdown sports a gain of 3.4%. 

·         In France, the CAC trades down 0.8%. LVMH Moet Hennessy Louis Vuitton is the weakest performer, down 6.6% after reporting a slowdown in sales growth. Telecom carrier Vivendi outperforms with a gain of 2.4%. 

·         Italy's MIB is higher by 0.6% as financials display strength. Banca Popolare dell'Emilia Romagna and Intesa Sanpaolo trade with respective gains of 2.9% and 2.1%.

Market Internals

Market Internals -Technical-
The S&P 500 closed up 23 (+1.38%) at 1722, the Dow closed up 206 (+1.36%) at 15374, and the Nasdaq closed up 45 (+1.20%) at 3839. Action came on above average volume (NYSE 752 mln vs. avg. of 696; NASDAQ 1694 mln vs. avg. of 1600), with advancers outpacing decliners (NYSE 2474/612, NASDAQ 1828/723) and new highs outpacing new lows (NYSE 270/47, NASDAQ 221/17). 

Relative Strength: 
Biotechnology-XBI +4.27%, Biotechnology-IBB +3.13%, Oil and Gas Exploration-XOP +2.81%, South Africa-EZA +2.56%, Financial Services-IYG +2.51%, Vietnam-VNM +2.14%, Financials-XLF +2.10%, Middle East and Africa-GAF +2.04%, Spain-EWP +1.81%, Italy-EWI +1.81%. 

Relative Weakness: 
Volatility-VXX -11.50%, Egypt-EGPT -2.07%, Gold Miners-GDX -2.02%, Silver Miners-SIL -1.46%, Junior Gold Miners-GDXJ -1.09%, Natural Gas-UNG -1.05%, Greece-GREK -0.84%, Japanese Yen-FXY -0.51%, British Pound-FXB -0.32%, Chinese Yuan-CYB -0.04%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: Stocks Rally as Congress Finds Common Ground
The S&P 500 settled higher by 1.4% with participants rushing into equities as Washington lawmakers appeared to be on the verge of striking a deal that would fund the government through January 15 while extending the debt ceiling until February 7, and maintaining the sequester.

Stocks registered opening gains after it was reported that Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell resumed working on a deal after the House of Representatives failed to vote on its own measure last evening. Equities caught a second wind in reaction to reports indicating House Speaker Boehner would bring the Senate plan for a vote on the House floor. Although the session ended before Congress had a chance to vote, the Senate plan is expected to be approved by both chambers.

All ten sectors posted gains with financials (+2.2%) ending in the lead. The sector received support from Bank of America (BAC 14.56, +0.32) and PNC Financial (PNC 73.87, +1.36) after both banks reported bottom-line beats. Thanks to today's gain, the financial sector extended its October advance to 3.9%.

Outside of financials, only health care and energy hold month-to-date gains larger than 3.0%. The health care sector rose 2.0% today, and received support from shares of Abbott Labs (ABT 35.90, +2.19) after the drug maker beat on earnings. Meanwhile, energy gained 1.4% as crude oil advanced 0.9% to $102.16 per barrel.

Elsewhere, consumer staples (+1.4%) also contributed to the rally as PepsiCo (PEP 82.27, +1.67) ended higher by 2.1% following its earnings beat on in-line revenue.

Although all sectors posted solid gains, industrials (+0.7%) trailed behind the remaining nine groups as defense contractors weighed. The PHLX Defense Index underperformed for the second day in a row, adding 0.1%. Transports, however, kept pace with the S&P as the Dow Jones Transportation Average advanced 1.4%.

With the reduced threat of imminent default, the CBOE Volatility Index (VIX 14.84, -3.82) lost 20.9%, tumbling to its lowest level since late September. Treasuries ended on their highs with the 10-yr yield down six basis points at 2.67%.

Trading volume was just above average as 753 million shares traded hands on the floor of the New York Stock Exchange.

On the economic front, the weekly MBA Mortgage Index ticked up 0.3% to follow last week's increase of 1.3%.

Separately, the October NAHB Housing Market Index fell to 55 from 58. Today's report was below the reading of 57 expected by the Briefing.com consensus.

Also of note, the Federal Reserve released its Beige Book, which did not contain many surprises. The report said economic growth during the period between September and early October continued at a "modest to moderate pace" while employment continued to grow modestly. The report also touched on the budget deadlock, saying the situation contributed to an increase in uncertainty.

Tomorrow, weekly initial claims will be reported at 8:30 ET while September industrial production and capacity utilization will both be released at 9:15 ET. The day's data will be topped off with the 10:00 ET release of the October Philadelphia Fed survey. On the earnings front, Goldman Sachs(GS 162.25, +4.62), UnitedHealth (UNH 75.19, +1.32), and Verizon (VZ 47.25, +0.93) will report their quarterly results before the opening bell.

Today's advance extended the S&P's year-to-date gain to 20.7%. The benchmark index ended the session less than nine points below its all-time high of 1729.86. 

·         S&P 500 +20.7% YTD

·         DJIA +17.3% YTD

·         Nasdaq +27.2% YTD

·         Russell 2000 +28.6% YTD

Commodities

Closing commodities: Crude Oil Closes 1.1% Higher, Finishing Above $102/Barrel; Gold Rises 0.7%

·         Nov crude oil extended yesterday's gains as Senate Majority Leader Reid announced a proposal to fund and reopen the government on the Senate floor, saying the measure would fund the government through Jan 15 and extend the debt ceiling through Feb 7

·         The Senate and the House have yet to vote on the plan. The energy component trended higher after lifting from its session low of $100.75 per barrel. It settled with a 1.1% gain at $102.29 per barrel

·         Nov natural gas erased earlier gains as it pulled back from its session high of $3.87 per MMBtu. It settled with a 0.5% loss at $3.77 per MMBtu

·         Precious metals dipped into negative territory in morning pit trade but regained momentum as the dollar index gave up its earlier gains

·         Dec gold brushed a session low of $1268.60 per ounce but settled with a 0.7% gain at $1282.00 per ounce. Dec silver booked a 0.8% gain as it closed at $12.37 per ounce after trading as low as $21.12 per ounce

COMEX Metals Closing Prices

·         Dec gold rose $8.70 (+0.7%) to $1282.00/ounce 

·         Dec silver rose $0.18 (+0.8%) to $21.37/ounce 

·         Dec copper settled unchanged at $3.31/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Dec corn fell 2 cents to $4.42/bushel

·         Dec wheat fell 5 cents to $6.81/bushel

·         Nov soybeans rose 11 cents to $12.78/bushel

·         Nov ethanol rose 2 cents to $1.81/gallon

·         Jan sugar (#16 (U.S.)) rose 0.13 of a penny to 22.00 cents/lbs

NYMEX Energy Closing Prices

·         Nov crude oil rose $1.12 (+1.1%) to $102.29/barrel 

·         Nov natural gas fell 2 cents (-0.5%) to $3.77/MMBtu 

·         Nov heating oil rose 3 cents to $3.04/gallon 

·         Nov RBOB gasoline rose 4 cent to $2.70/gallon

Treasuries

Treasuries Reverse to Highs: 10-yr: +16/32..2.674%..USD/JPY: 98.75..EUR/USD: 1.3530

·         Treasuries slipped to session lows early as traders moved into riskier assets on headlines indicating a deal to reopen the government and raise the debt ceiling was in place. However, the complex began reversing in late-morning trade and continued its climb into the cash close. Click here to see an intraday yields chart.

·         Indications are the bill will pass through the Senate and then the House, funding the government through January 15 and raising the debt ceiling until February 7. 

·         Up front, yields fell sharply as default risk waned on reports of a deal. The 4w plunged -20bps to 0.134%, closing at its lowest level since October 4. Even the 3m and 6m yields fell -5bps to 0.086% and 0.117%, respectively, despite Congress' latest decision to kick the can down the road til early next year. 

·         The belly lagged a bit as yields there posted modest declines. The 2y shed -2.8bps to 0.334% while the 5y slipped -3.6bps to 1.395%. 

·         Longer dated paper posted solid gains, causing the 10y and 30y yields to erase roughly -5bps apiece to 2.671% and 3.724%, respectively. 

·         A flatter curve took hold as the 2-10-yr spread tightened to 233.5bps. 

·         Precious metals saw gains with gold +$8 and silver +$0.15 to their respective $1281 and $21.35. 

·         Data: Initial and continuing claims (8:30), the Philly Fed (10). The releases of housing starts, building permits, industrial production, and capacity utilization data are delayed because of the government shutdown. 

·         Fed Speak: Dallas' Fisher remains in New York, NY to speak on U.S. monetary policy (8 and TBD); Chicago's Evans will be in Madison, WI to discuss economic conditions and monetary policy (12:45); KC's George will be in Oklahoma City, OK to talk about the U.S. economy; and Minny's Kocherlakota travels to Butte, MT to discuss "A Time of Testing" (14:45).

Next Day In View 

Events and conferences of interest for tomorrow

Events and conferences of interest for tomorrow October 17th include:

·         ETIS Community Gathering 2013

o    Scheduled to appear: CNSI

·         New York Business Expo and Conference

o    Scheduled to appear: TWC

·         Chicago Fed President Charlie Evans (voter, dove) to speak at 12:45

Economic Commentary

Economic Summary: NAHB Housing Market Index misses expectations; October Fed's Beige Book due out at 14:00
Economic Data Summary:

·         Weekly MBA Mortgage Index 0.3% (Last Week was 1.3%)

·         October NAHB Housing Market Index 55 vs Briefing.com consensus of 57; September was 58

Fed/Treasury Events Summary:

·         Latest on the debt ceiling is that Boehner has agreed to take up Senate Bill and vote on it first. Senate bill would fund Government through Jan 15.

Upcoming Economic Data:

·         Weekly Initial Claims due out Thursday at 8:30 (Briefing.com consensus of 330K; Last Week was 374K)

·         Weekly Continuing Claims due out Thursday at 8:30 (Briefing.com consensus of 2.900 M ; Last Week was 2.905 M )

·         September Housing Starts due out Thursday at 8:30 (Briefing.com consensus of 915K; August was 891K) -- will be delayed due to Government shutdown

·         September Building Permits due out Thursday at 8:30 (Briefing.com consensus of 932K; August was 918K)-- will be delayed due to Government shutdown

·         September Industrial Production due out Thursday at 9:15 (Briefing.com consensus of 0.3%; August was 0.4%)

·         September Capacity Utilization due out Thursday at 9:15 (Briefing.com consensus of 78.0%; August was 77.8%)

·         October Philadelphia Fed due out Thursday at 10:00 (Briefing.com consensus of 7.0; September was 22.3)

Upcoming Fed/Treasury Events:

·         October Fed's Beige Book due out today at 14:00

·         Kansas City Fed President Esther George (voting FOMC member, hawkish) to speak today at 18:30

·         Dallas Fed President Richard Fisher (voting FOMC member in 2014, hawkish) to speak tomorrow at 7:45

·         Chicago Fed President Charlie Evans (voting FOMC member this year, dovish) to speak tomorrow at 12:45

·         Kansas City Fed President Esther George (voting FOMC member this year, hawkish) to speak tomorrow at 13:45

·         Minneapolis Fed President Narayana Kocherlakota (2014 voter, dovish) to speak tomorrow at 14:45

Other International Events of Interest

·         Eurozone CPI rose 0.5% month-over-month while the year-over-year reading increased 1.1%. Separately, core CPI increased 1.0% year-over-year. All three readings met expectations. Also of note, the trade surplus expanded to EUR12.30 billion from EUR11.00 billion (EUR12.40 billion expected). 

On other news.... 

Fed releases October Beige Book
Click Here for the release

Reports that "Reports from the twelve Federal Reserve Districts suggest that national economic activity continued to expand at a modest to moderate pace during the reporting period of September through early October.

Consumer spending continued to increase and activity in the travel and tourism sector expanded in most Districts. Business spending and payrolls grew in many Districts. Demand for nonfinancial services rose, and manufacturing activity also expanded modestly. Residential construction continued to increase at a moderate pace. By comparison, nonresidential construction again expanded at a slower rate. Residential and commercial real estate activity varied across Districts, but largely continued to improve. Financial conditions were little changed on balance, with lending activity remaining modest in most Districts. There were mixed reports on agriculture, with excess precipitation and drought both impacting the sector. Energy and mining activity expanded or maintained high levels, with the exception of the coal industry in the eastern half of the nation. Price and wage pressures were again limited.

Employment growth remained modest in September. 


Currencies 

Dollar Holds Steady: 10-yr: +15/32..2.678%..USD/JPY: 98.77..EUR/USD: 1.3533
The Dollar Index climbed to session highs near 80.70 on headlines suggesting a deal to reopen the government and avoid a default has been reached. However, the greenback has slipped back to its flat near 80.40 as the details pointed to a temporary solution. As of now, the Senate plan calls for the government to be funded through January 15 and the debt ceiling to be raised until February 7. Click here to see a daily Dollar Index chart.

·         EURUSD is +10 pips at 1.3535 as action holds in the middle of the day's range. Today's action has seen a test of both 1.3460 support and 1.3560 resistance, but neither bulls nor bears have been able to gain control. Eurozone data is limited to the current account balance. 

·         GBPUSD is -45 pips at 1.5950 as trade has recovered a some of the losses that have developed during U.S. trade. Sterling saw an early bid following this morning's better than expected claimant count change, but steady selling materialized over the course of the morning. The 1.5900/1.5950 support level will be watched closely. Britain's retail sales will cross the wires tomorrow. 

·         USDCHF is +5 pips at .9130 as trade looks to recover some of the overnight gains. Earlier, the pair climbed to a session high of .9175 only to be rejected at yesterday's highs. Traders continue to monitor near-term support in the .9100 area while any close above .9130 will be the best since the middle of September. 

·         USDJPY is +55 pips at 98.75 as today's action has run the pair back above its 50 and 100 dma. The 99.00 level is under close watch as a breakout sets up a test of the September highs near 100.50. 

·         AUDUSD is +20 pips at .9550 as action remains on track to close at its best level in nearly four months. Bulls have their sights set on the 200 dma (.9770) if they are able to penetrate .9600 resistance. Australia's NAB Quarterly Business Confidence is due out tonight. 

·         USDCAD is -45 pips at 1.0330 as trade presses session lows. Today's weakness has pushed the pair back below its 50 and 100 dma while also marking the lowest level in over a week. Trendline support of the September 2012 lows aids the 200 dma (1.0250) and remains critical. Canada's foreign securities purchases will be released tomorrow.

Earnings review



American Express beats by $0.03, reports revs in-line (76.27 +1.02)
Reports Q3 (Sep) earnings of $1.25 per share, $0.03 better than the Capital IQ Consensus Estimate of $1.22; revenues rose 5.6% year/year to $8.3 bln vs the $8.24 bln consensus. The increase was driven by a rise in Card Member spending and higher net interest income that reflected lower funding costs and growth in Card Member loans. Adjusted for foreign currency translations, consolidated total revenues net of interest expense rose 7 percent from a year ago. 

The company's return on average equity (ROE) was 24.3 percent, down from 26.3 percent a year ago. 

U.S. Card Services reported third-quarter net income of $782 million, up 12 percent from $699 million a year ago. Total revenues net of interest expense increased 6 percent to $4.3 billion, from $4.1 billion a year ago. The increase reflects an 8 percent increase in Card Member spending and a rise in net interest income, driven primarily by 4 percent growth in average Card Member loans.

IBM beats by $0.03, misses on revs; reaffirms FY13 and FY15 EPS guidance (186.73 +2.07)
Reports Q3 (Sep) earnings of $3.99 per share, excluding non-recurring items, $0.03 better than the Capital IQ Consensus Estimate of $3.96; revenues fell 4.1% year/year to $23.72 bln vs the $24.8 bln consensus.

Revenue: 

·         $23.7 billion, down 4%, down 2% adjusting for currency: 

·         Software revenue up 1%, up 2% adjusting for currency; Key branded middleware up 3%; up 4% adjusting for currency; 

·         Services revenue down 3%, up 1% adjusting for currency; Global Business Services revenue flat, up 5% adjusting for currency; 

·         Services backlog of $141 billion, up 2%, up 6% adjusting for currency; 

·         Systems and Technology revenue down 17%, down 16% adjusting for currency; 

·         System z mainframe revenue up 6%; up 7 percent adjusting for currency; 

·         Growth markets revenue down 9%, down 5 percent adjusting for currency; 

·         Business analytics revenue up 8% year to date; Smarter Planet revenue up more than 20% year to date; 

·         Cloud revenue up more than 70% year to date 

Co reaffirms guidance for FY13, sees EPS of at least $16.90, excluding non-recurring items, vs. $16.89 Capital IQ Consensus Estimate. 

"We are taking action to improve execution in our growth markets unit and in the elements of our hardware businesses that are under performing. Given these actions, our strategic initiatives and the strength of our model, we are maintaining our view for the full year and remain confident in our ability to achieve at least $20 operating EPS in 2015." 


Jason's Commentaries


As the deadline for default draws near... the market is starting to anticipate that the White House will be coming to a deal to save the US government from defaulting on their debts and started to speculate on the increasing possibilities of striking a deal in the White House. As a result, Nasdaq once again broke its all time high, S&P500 has draw even closer to its all time high. Note that there is a significant decrease in the GDP due to the shutdown. If there's any effect to the companies' profits, it will be lower, but the stock prices went up. After this 'buy the rumour, sell the news' phenomenon, market may maintain a little bit of steam... but is likely to retrace after the deal is signed. As of 1230am ET, President Obama signed the bill to increase debt ceiling.. However, we're going to have some major drama happening on 7 Feb next year. 

Market flew up all the way from the start of the trading day due to the deal speculation and blowout earnings from BfA and PNC Financials. The healthcare sector was being dragged up by Abbott Labs while Staples being dragged up by PepsiCo. Volumes were pretty healthy, standing at 750.4m shares traded on the NYSE, with the bulls overrunning the bears last night. VIX sunk 21.17% last night as what I expected the previous day. Nonetheless, with the Nasdaq leading the way, i reckon in the nearer term we're still bullish, however in the slightly longer term, i'm expecting some consolidation and volatility to come. Futures at 4.50am ET is already down 0.22%. Perphaps we might see some profit taking on excuse that IBM reported lousy earnings. If Goldman Sachs report lackluster earnings, we're gonna see Dow dragging both the S&P500 and Nasdaq down today. 

Market Call: Flat to downside

Date: 17 Sep 2013