13 Nov 2013 AMC- Market rallies on speculation that Yellen is going maintain QE stance

13 Nov 2013 AMC- Market rallies on speculation that Yellen is going maintain QE stance

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: -1.4%

·         Germany's DAX: -0.2%

·         France's CAC: -0.6%

·         Spain's IBEX: -0.3%

·         Portugal's PSI: -1.0%

·         Italy's MIB Index: -1.4%

·         Irish Ovrl Index: -0.8%

·         Greece ATHEX Composite: + 0.2%

Before Market Opens

S&P futures vs fair value: -8.20. Nasdaq futures vs fair value: -20.50.
The S&P 500 futures trade lower by 0.5%.

Asian markets registered losses across the board with indices in Hong Kong (-1.9%) and Shanghai (-1.8%) pacing the decline after the statement from the recently concluded third plenum failed to provide sufficient guidance to market participants. The statement was very broad and did not focus on addressing specific issues. In regional economic data, Japan's core machinery orders fell 2.1% month-over-month (-1.4% forecast, 5.4% prior) while the year-over-year reading increased 11.4% (12.6% expected, 10.3% last). Separately, CGPI slipped 0.1% month-over-month (-0.2% expected, 0.3% previous) while the year-over-year reading rose 2.5%, as expected (2.3% last). Elsewhere, Australia's Wage Price Index rose 0.5% quarter-over-quarter (0.7% expected, 0.7% last) while the year-over-year reading reflected an increase of 2.7% (2.9% forecast, 2.9% previous). Lastly, South Korea's unemployment rate held steady at 3.0%, as expected. 

·         In Japan, the Nikkei shed 0.2% as heavy industrials lagged. Kajima and Obayashi both lost near 4.5% apiece. Exporters Mazda Motors and Sony outperformed with respective gains of 3.0% and 2.7%. 

·         Hong Kong's Hang Seng ended lower by 1.9% as financials weighed. Bank of China and Industrial & Commercial Bank of China lost 3.4% and 3.6%, respectively. Energy giant CNOOC also underperformed, falling 2.6%. 

·         China's Shanghai Composite fell 1.8% as growth-sensitive names underperformed. CCS Supply Chain Management and Xinjiang Dushanzi Tianli High lost close to 7.0% each. China Vanke outperformed with a loss of 0.6%. 

Major European indices hover near their worst levels of the session with Great Britain's FTSE (-1.5%) leading the weakness even after the Bank of England released an upbeat-sounding quarterly inflation report. Most notably, the central bank said it now expects the unemployment rate threshold (7.0%) to be reached in late 2014 rather than 2016, and that, "The recovery has finally taken hold." In addition, the central bank said the probability of CPI being at or above 2.5% has decreased following the recent deceleration of inflation trends. Looking at economic data, Eurozone industrial production slipped 0.5% month-over-month (-0.3% expected, 1.0% prior) while the year-over-year reading reflected an increase of 1.1% (0.2% forecast, -1.1% last). Elsewhere, Great Britain's claimant count declined by 41,700 (-35,000 expected, -44,700 previous) while the unemployment rate ticked down to 7.6% from 7.7% (7.7% expected). In addition, average earnings ex-bonus rose 0.8% (0.9% expected, 0.8% prior) while average earnings + bonus increased 0.7%, as expected (0.8% last). Also of note, Spain's CPI rose 0.4% month-over-month (0.5% expected, -0.2% last) while the year-over-year reading ticked down 0.1%, as expected (0.3% prior). 

·         In Germany, the DAX is lower by 1.0% as 26 of 30 components register losses. Banks are among the laggards with Commerzbank and Deutsche Bank down 3.5% and 1.9%, respectively. Utilities outperform with E.ON and RWE both up near 0.5%. 

·         France's CAC trades down 1.0% as steelmaker ArcelorMittal leads the index lower with a loss of 3.7%. Exporter Renault also lags, trading lower by 2.1%. 

·         Great Britain's FTSE holds a loss of 1.5% with financials contributing to the weakness. Barclays, RSA Insurance Group, and Standard Chartered are all down between 3.3% and 3.8%.

Market Internals

Market Internals -Technical-
The Nasdaq closed up 46 (+1.16%) at 3966, the S&P 500 closed up 14 (+0.81%) at 1782, and the Dow closed up 71 (+0.45%) at 15822. Action came on near average volume (NYSE 697 mln vs. avg. of 728; NASDAQ 1755 mln vs. avg. of 1766), with advancers outpacing decliners (NYSE 2109/966, NASDAQ 1784/765) and new highs outpacing new lows (NYSE 167/51, NASDAQ 155/43).

Relative Strength: 
Social Media-SOCL +3.59%, Clean Energy-PBW +2.13%, Turkey-TUR +2.09%, Wind Energy-FAN +1.83%, Cocoa-NIB +1.75%, Cloud Computing-SKYY +1.72%, India-INP +1.72%, New Zealand-ENZL +1.67%, Greece-GREK +1.65%, Mexico-EWW +1.20%.

Relative Weakness: 
Coffee-JO -3.09%, Natural Gas-UNG -2.00%, Copper-JJC -1.90%, China 25 Index-FXI -1.11%, Silver-SLV -1.10%, Peru-EPU -1.06%, Copper Miners-COPX -0.97%, South Korea-EWY -0.77%, Australia-EWA -0.57%, Taiwan-EWT -0.50%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: Stocks End on Highs Despite Early Weakness
The major averages settled on their best levels of the session despite showing some early weakness. The S&P 500 rose 0.4% while the Nasdaq outperformed with an advance of 0.7%.

Stocks began the session in the red as cautious action in Europe contributed to the lower open. Although European indices hovered near their lows as the U.S. session got underway, they were quick to climb off their lows right alongside U.S. equities.

The tech-heavy Nasdaq paced the rebound as top-weighted index components like Google (GOOG 1032.47, +20.69), Microsoft (MSFT 38.16, +0.80), and Qualcomm (QCOM 70.03, +1.52) provided significant support. In addition, Cisco Systems (CSCO 24.00, +0.27) added 1.1% ahead of its after-hours quarterly report.

Momentum names also underpinned the Nasdaq after suffering group-wide weakness last week. Facebook (FB 48.71, +2.11), LinkedIn (LNKD 220.65, +11.37), and Priceline.com (PCLN 1124.20, +24.71) gained between 2.3% and 5.4%. Tesla (TSLA 138.70, +0.90) also displayed intraday strength, but surrendered the bulk of its gain into the close amid reports of fire department activity at the company's factory in California.

Outside of technology, the discretionary sector (+1.6%) was the only other outperformer among cyclical sectors. Apparel retailers climbed throughout the session after Macy's (M 50.68, +4.35) beat on earnings and revenue. Macy's jumped 9.4% while the broader SPDR S&P Retail ETF (XRT 87.31, +1.13) advanced 1.3%.

Homebuilders also provided a measure of support to discretionary shares as the iShares Dow Jones US Home Construction ETF (ITB 22.13, +0.30) settled higher by 1.4%.

Also of note, the financial sector ended in-line with the broader market despite underperforming in early action. The sector climbed into positive territory in conjunction with the S&P, and followed the benchmark index into the close.

With regard to countercyclical sectors, only consumer staples (+0.9%) finished ahead of the broader market while health care (+0.5%), telecom services (-0.2%), and utilities (+0.3%) lagged.

Treasuries finished near their highs with the 10-yr yield down four basis points at 2.74%.

Today's participation was on the light side as less than 700 million shares changed hands on the floor of the New York Stock Exchange.

The weekly MBA Mortgage Index fell 1.8% to follow last week's decline of 2.8%.

The Treasury Budget deficit fell to $91.6 billion in October from $120.0 billion in October 2012. Since the data are not seasonally adjusted, the October budget deficit cannot be compared to the surplus in September. The CBO, which typically releases its budget estimate a few days before the Treasury releases the actual numbers, did not release an advance projection for the October data. While the government shutdown likely had an effect on the decline in the October budget deficit, the Treasury Department did not issue a statement explaining what exactly the effects were.

Tomorrow, weekly initial claims, September trade balance, and preliminary Q3 productivity will all be reported at 8:30 ET. In addition, Janet Yellen's confirmation hearing will begin tomorrow with an appearance in front of the Senate Banking Committee.

·         Nasdaq +31.3% YTD

·         Russell 2000 +30.9% YTD

·         S&P 500 +25.0% YTD

·         DJIA +20.7% YTD

Commodities

Closing Commodities: Gold Falls For A Fifth Consecutive Session

·         Dec crude oil traded higher today, advancing to a session high of $94.54 per barrel in afternoon pit action. It pulled back slightly heading into the close and settled with a 0.8% gain at $93.91 per barrel

·         Dec natural gas touched a session high of $3.63 per MMBtu in morning floor trade but slipped back into negative territory. It settled 1.4% lower at $3.57 per MMBtu, just above its session low of $3.56 per MMBtu

·         Dec gold fell for a fifth consecutive session despite trading in the black for most of today's pit trade. The yellow metal rose to a session high of $1279.80 per ounce in morning action but gave up the gain as it slipped into the red in the last half hour of floor trade. It settled with a 0.2% loss at $1268.50 per ounce, just above its session low of $1267.70 per ounce

·         Dec silver brushed a session high of $20.80 per ounce in early morning action but quickly fell into negative territory. It trended lower as the session progressed and settled 1.5% lower at $20.45 per ounce.

NYMEX Energy Closing Prices

  Dec crude oil rose $0.79 to $93.91/barrel 

·         Crude oil traded higher today, climbing to a session high of $94.54 in afternoon pit action. It pulled back slightly heading into the close and settled with a 0.8% gain. 

  Dec natural gas fell 5 cents to $3.57/MMBtu 

·         Natural gas brushed a session high of $3.63 in morning pit trade but slipped back into negative territory in afternoon action. It settled just above its session low of $3.56, booking a 1.4% loss. 

  Dec heating oil rose 5 cents to $2.90/gallon 

  Dec RBOB gasoline rose 4 cents to $2.63/gallon

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Dec corn fell 2 cents to $4.30/bushel

·         Dec wheat settled unchanged at $6.45/bushel

·         Jan soybeans rose 1 cent to $13.15/bushel

·         Dec ethanol rose 3 cents to $1.77/gallon

·         Jan sugar (#16 (U.S.)) settled unchanged at 20.90 cents/lbs

COMEX Metals Closing Prices

  Dec gold fell $2.70 to $1268.50/ounce 

·         Gold fell for a fifth consecutive session despite trading in positive territory for most of today's pit trade. The yellow metal advanced to a session high of $1279.80 in morning action but gave up the gain as it slipped into the red in the last half hour of floor trade. It settled just above its session low of $1267.70, booking a loss of 0.2%. 

  Dec silver fell $0.32 to $20.45/ounce 

·         Silver touched a session high of $20.80 in early morning pit trade but quickly retreated into negative territory. It trended lower as the session progressed and settled with a 1.5% loss. 

  Dec copper fell 7 cents to $3.16/lbs

Treasuries

Treasuries Grind Higher: 10-yr: +11/32..2.734%..USD/JPY: 99.31..EUR/USD: 1.3463

·         Treasuries booked solid gains as the complex grinded higher over the course of the session. 

·         Buyers took control early in the session, and never relinquished it as maturities ticked higher throughout the day. 

·         The solid $24 bln 10y note auction provided a boost in afternoon trade, drawing 2.750% and an in-line 2.70x bid/cover. An impressive showing from indirect bidders (47.6%) helped offset a weak direct bid (18.5%). Primary dealers were left with 33.9% of the supply. 

·         Buyers remained focused on maturities in the belly as the 5y shed -5.3bps, ending @ 1.397% as Treasury bulls defended key resistance (1.450%). Click here to see an intraday yields chart.

·         A solid bid was also seen in 10s, resulting in a -4.3bp drop to 2.725%. The 2.675% area will be tracked closely over the coming days as both the 50 and 100 dma lurk in the vicinity. 

·         The long bond lagged as a -2.6bp move resulted in the 30y sliding to 3.829% while dropping action off a two-month high. 

·         A flatter curve developed as the 2-10-yr spread tightened to 241.5bps. 

·         Precious metals ended mixed with gold +$3 @ $1274 and silver -$0.20 @ $20.57. 

·         Tomorrow's Data: Initial and continuing claims, the trade balance, productivity, and unit labor costs (8:30). 

·         Tomorrow's Auction: $16 bln 30y bonds. 

·         Fed Speak: Chicago's Evans will be on his home turf discussing monetary policy and the economy (13:10).

Next Day In View 

Economic Commentary

Economic Summary: Mortgage apps decline; Trade balance tomorrow at 8:30; Bernanke tonight at 19:00; Yellen confirmation hearing begins tomorrow at 10:00
Economic Data Summary:

·         Weekly MBA Mortgage Index -1.8% (Last Week was -7.0%)

Upcoming Economic Data:

·         October Treasury Budget due out Wednesday at 14:00 (Briefing.com consensus of ; September was -$120.0 bln)

·         Weekly Initial Claims due out Thursday at 8:30 (Briefing.com consensus of 330K; Last Week was 336K)

·         Weekly Continuing Claims due out Thursday at 8:30 (Briefing.com consensus of 2.862 M ; Last Week was 2.868 M )

·         September Trade Balance due out Thursday at 8:30 (Briefing.com consensus of -$39.1 bln; August was -$38.8 bln)

·         Third Quarter Prodoctivity - Prel due out Thursday at 8:30 (Briefing.com consensus of 2.0%; Second Quarter was 2.3%)

·         Third Quarter Unit Labor Costs due out Thursday at 8:30 (Briefing.com consensus of 0.8%; Second Quarter was 0.0%)

Upcoming Fed/Treasury Events:

·         Atlanta Fed President Dennis Lockhart (not a voting FOMC member, typically moderate) to speak tonight at 18:00

·         Fed Chairman Ben Bernanke to speak to teachers tonight at 19:00

·         Philadelphia Fed President Charles Plosser (2014 voter, hawkish) to speak tomorrow at 9:00

·         Janet Yellen Confirmation Hearing to begin tomorrow at 10:00

Other International Events of Interest

·         Eurozone industrial production slipped 0.5% month-over-month (-0.3% expected, 1.0% prior) while the year-over-year reading reflected an increase of 1.1% (0.2% forecast, -1.1% last). 

·         Great Britain's claimant count declined by 41,700 (-35,000 expected, -44,700 previous) while the unemployment rate ticked down to 7.6% from 7.7% (7.7% expected). In addition, average earnings ex-bonus rose 0.8% (0.9% expected, 0.8% prior) while average earnings + bonus increased 0.7%, as expected (0.8% last).

On other news.... 

Currencies 

Dollar Dips Below 81.00: 10-yr: +12/32..2.720%..USD/JPY: 99.38..EUR/USD: 1.3458
The Dollar Index holds just off its worst levels of the day after a late-morning selloff pushed action back below the 81.00 level. The slide puts 80.80 support back in focus with additional support coming from the 100 dma (80.55). Click here to see a daily Dollar Index chart.

·         EURUSD is +20 pips at 1.3455 as trade rallies for a third session. The single currency has found support in the 1.3350 area over the past week as buyers have emerged in defense of the 50 dma. Resistance in the 1.3500 area is aided by the 100 dma. Eurozone data is heavy as GDP figures from around the region accompany French nonfarm payrolls. 

·         GBPUSD is +115 pips at 1.6020 as trade gains for the first time in four sessions. Sterling has been outperforming since this morning's Bank of England Inflation Report indicated the central bank now expects its 7% unemployment threshold to be reached in late 2014 (late 2016 previous), meaning the possibility of a rate hike could come sooner than expected. However, it should be cautioned that Governor Carney noted just because the 7% threshold is met does not mean a rate hike is a sure thing. Current action is probing the 50 dma. British data is limited to retail sales. 

·         USDCHF is -15 pips at .9155 as trade slips for a third day. The recent weakness comes as bulls have had difficulty retaking the 100 dma (.9235), and has trade nearing support in the .9115 region that is helped by the 50 dma. 

·         USDJPY is -25 pips at 99.35 as trade has erased most of yesterday's gains. Bulls will look to the 99.00 area as support with further help near 98.50 coming from the 50 and 100 dma. Japan's preliminary GDP is due out tomorrow. 

·         AUDUSD is +30 pips at .9325 as today's bid has ended four days of declines and lifted action off the 50 dma (.9265). Bulls are hoping to retake .9450 resistance, and doing so would put the 200 dma (.9670) back in the cross-hairs. Australian data includes MI Inflation Expectations and new motor vehicle sales. 

·         USDCAD is -30 pips at 1.0465 as trade slides off two-month highs. The 1.0450 area should provide some minor support, but 1.0400 remains key. Canadian data includes the trade balance and New Home Price Index.

Jason's Commentaries


Last night came as a total surprise as the market rallied suddenly on speculation that Yellen's Congressional hearing is likely to be dovish and that the QE is likely to stay for an 'extended' period of time. Both Dow and S&P500 broke their all time high once again. Volumes were relatively light, below 700m shares traded on the NYSE. Internals were all showing bullish convergence. Even at the closing bell, the market rallied through the highs. Even after hours, Yellen's testimony came out. That's the link..http://www.federalreserve.gov/newsevents/testimony/yellen20131114a.htm. 

 We've got the Discretionary sector supporting the rally last night, with Macy's, General Motors, Amazon, Disney leading the rally. Not forgetting Bank of America, Microsoft and Google. Oh well... I guess all analysis is gonna get thrown out of the window already with Yellen's hearing going on tonight a 10am ET. 

Market Call: ABSTAIN

Date: 14 Nov 2013