19 Nov 2013 AMC - Market stayed flat ahead of the FOMC minutes

19 Nov 2013 AMC - Market stayed flat ahead of the FOMC minutes

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: -0.4%

·         Germany's DAX: -0.4%

·         France's CAC: -1.1%

·         Spain's IBEX: -1.6%

·         Portugal's PSI: -0.2%

·         Italy's MIB Index: -1.8%

·         Irish Ovrl Index: -0.9%

·         Greece ATHEX Composite: + 0.3%

Before Market Opens

S&P futures vs fair value: -1.70. Nasdaq futures vs fair value: flat.
The S&P 500 futures have trimmed their pre-market loss to 0.1%.

Markets across Asia ended generally lower as action tracked yesterday's late-day selloff on Wall Street. However, the selling was rather light as a quiet slate of data and news made for an uneventful trade. China's Shanghai Composite (-0.2%) slid as PBOC Governor Zhou announced the central bank will widen the renminbi's trading band, while "basically" ending its intervention in the market. Meanwhile Australia's ASX (-0.6%) lagged after the Reserve Bank of Australia suggested, "Forward-looking indicators have generally improved," leading many to believe the central bank will let the recent rate cuts work their way through the system. Data from the region was light as Australia's CB Leading Index edged up 0.3%. 

·         In Japan, the Nikkei shed 0.3% as trade slipped from a six-month high. Komatsu shed 2.5% after lowering its full-year guidance and receiving a tier 1 downgrade. Meanwhile, Sony added 1.3% after reports suggested the co is looking to cut at least $100 mln in costs. 

·         Hong Kong's Hang Seng finished flat as action holds at 31-month highs. Energy shares led the way as PetroChina and China Shenhua Energy added 2.5% and 1.2%, respectively. Meanwhile, real estate developers led to the downside as China Resources Land lost 4.7% and Sino Land gave up 1.7%. 

·         In China, the Shanghai Composite shed 0.2% as action slipped for the first time in four days. Financials and defense lagged as profit-taking weighed on names like China Merchants Bank and China Aerospace Times Electronics, which fell 2.8% and 3.4%, respectively, following their recent gains. 

Major European indices trade lower across the board with France's CAC (-0.9%) leading to the downside. Among news of note, European Central Bank Executive Board member Joerg Asmussen said the ECB could implement negative deposit rates if the 2.0% inflation target remains elusive. Mr. Asmussen added he would be ‘very, very careful' with regards to deploying the policy tool. Elsewhere, the European Financial Stability Facility (EFSF) approved an aid disbursement to Portugal in the amount of EUR3.70 billion, as expected. Investors received a handful of economic data points. Eurozone ZEW Economic Sentiment ticked up to 60.2 from 59.1 (63.1 forecast). Germany's ZEW Economic Sentiment improved to 54.6 from 52.8 (54.0 expected) while the Current Conditions Index slipped to 28.7 from 29.7 (31.0 consensus). Italy's industrial new orders rose 1.6% month-over-month (0.5% expected, 2.2% last) while the year-over-year reading increased 7.3% (-5.5% last). Separately, industrial sales ticked up 0.1% month-over-month (1.0% prior). Norway's GDP expanded 0.7% quarter-over-quarter (0.5% expected, 1.2% last). 

·         Germany's DAX is lower by 0.2% with fertilizer producer K+S leading to the downside with a loss of 4.3%. Other components of the materials sector also lag as BASF and Lanxess trade lower by 0.6% each. 

·         Great Britain's FTSE holds a loss of 0.5% as financials lag. Aberdeen Asset Management, Lloyds Banking Group, and Standard Chartered are down between 1.1% and 3.1%. EasyJet outperforms with a gain of 8.3% after reporting solid results. 

·         In France, the CAC is lower by 0.9% as 36 of 40 components register losses. Credit Agricole and Societe Generale are both down near 2.0%. Exporter Renault is the top performer, trading higher by 0.9%.

Market Internals

Market Internals -Technical-
The Nasdaq closed down 18 (-0.44%) at 3932, the S&P 500 closed down 4 (-0.20%) at 1788, and the Dow closed down 9 (-0.06%) at 15967. Action came on below average volume (NYSE 646 mln vs. avg. of 729; NASDAQ 1681 mln vs. avg. of 1779), with decliners outpacing advancers (NYSE 965/2112, NASDAQ 947/1615) and new highs outpacing new lows (NYSE 79/43, NASDAQ 85/37).

Relative Strength: 
Egypt-EGPT +1.40%, Volatility-VXX +1.23%, Corn-CORN +1.10%, Cocoa-NIB +0.75%, South Korea-EWY +0.61%, Australian Dollar-FXA +0.58%, Grains-JJG +0.52%, Platinum-PPLT +0.52%, Israel-EIS +0.32%, Taiwan-EWT +0.28%.

Relative Weakness: 
Clean Energy-PBW -2.60%, Thailand-THD -2.11%, Middle East and Africa-GAF -2.03%, Social Media-SOCL -1.95%, Chile-ECH -1.88%, Natural Gas-UNG -1.84%, Basic Materials-IYM -1.83%, South Africa-EZA -1.82%, Smart Grid Infrastructure-GRID -1.57%, Latin America 40-ILF -1.25%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: Nasdaq Leads Stocks Lower
Equities posted modest losses, ending near their lows, with the tech-heavy Nasdaq shedding 0.4% to pace the decline. The S&P 500 slipped 0.2% while the Dow Jones Industrial Average edged down 0.1%.

Stocks displayed some strength during the opening hour as an early bid catapulted the Dow above the 16,000 level for the second day in a row. The early gain in the Dow was aided by Home Depot (HD 80.38, +0.71), which reported better-than-expected earnings while raising its full-year guidance above analyst expectations. The price-weighted index also received significant support from Chevron (CVX 122.06, +1.50) and Goldman Sachs (GS 166.60, +0.92) while their respective sectors—energy (+0.2%) and financials (+0.2%)—ended in the lead. However, the rally fizzled out as the underperformance of industrials (-0.7%) weighed.

The sector ended behind the remaining cyclical groups with truckers and railroads pressuring the Dow Jones Transportation Average to a loss of 1.0%. Airlines withstood the bulk of the selling as United Continental (UAL 37.80, +1.42) surged 3.9% after announcing plans to cut costs by $2 billion per year.

Elsewhere, the discretionary sector (-0.4%) lagged as the outperformance of Home Depot was not enough to offset the losses among apparel retailers. Meanwhile, electronics retailer Best Buy (BBY 38.78, -4.78) endured a rough session, tumbling 11.0% after the company said it will aim to match or beat its competition at the expense of maximum profitability during the holiday quarter.

Similar to yesterday, the Nasdaq registered a larger decline than the broader market as chipmakers displayed broad weakness. The PHLX Semiconductor Index lost 1.3%.

Momentum names were mixed as Priceline.com (PCLN 1118.42, -9.51) lost 0.8% while Tesla (TSLA 126.09, +4.51) gained 3.7%, rebounding from yesterday's 10.2% loss. Today's bid took place after the stock had suffered a 37.0% drop off its October 1 high, and despite the National Highway Traffic Safety Administration announcing it will investigate the Model S after three vehicles caught fire after striking roadside debris.

With regard to countercyclical groups, health care (+0.1%) and telecom services (+0.1%) outperformed while consumer staples (-0.4%) and utilities (-0.7%) lagged. Notably, the staples sector was pressured by Campbell Soup (CPB 39.20, -2.61), which plunged 6.2% after missing earnings estimates by 23 cents and issuing disappointing guidance.

Treasuries finished near their lows with the benchmark 10-yr yield up four basis points at 2.71%.

Participation was on the light side as 646 million shares changed hands on the floor of the New York Stock Exchange.

Today's economic data was limited to the third quarter employment cost index, which increased 0.4%, down from a 0.5% increase in the second quarter. The Briefing.com consensus expected the index to increase 0.5%. Year-over-year, compensation increased 1.9%. Wages and salaries increased 0.3% in the third quarter. That is down from a 0.4% increase in the second quarter and the weakest gain since increasing by the same amount in Q4 2012.

Tomorrow will be busy in terms of economic data with the MBA Mortgage Index and October retail sales set to be reported at 7:00 ET and 8:30 ET, respectively. October CPI will also be reported at 8:30 ET while September business inventories and October existing home sales will be released at 10:00 ET. The day will be topped off with the 14:00 ET release of the FOMC Minutes from the October meeting.

·         Nasdaq +30.2% YTD

·         Russell 2000 +29.7% YTD

·         S&P 500 +25.4% YTD

·         DJIA +21.9% YTD

Commodities

Closing Commodities: Crude Oil And Gold Finish With Modest Gains

·         Dec crude oil slipped to a session low of $92.43 per barrel but recovered back into positive territory in morning floor trade. The energy component advanced to a session high of $93.46 per barrel and settled with a 0.4% gain at $93.36 per barrel.

·         Dec natural gas extended yesterday's losses as it retreated from its session high of $3.64 per MMBtu set in early morning floor action. It trended lower into the red and settled at its session low of $3.55 per MMBtu, booking a 1.9% loss.

·         Dec gold traded slightly lower as the dollar index chopped around in negative territory. The yellow metal rose to a session high of $1278.20 per ounce in morning pit trade and eventually settled with a 0.1% gain at $1273.20 per ounce.

·         Dec silver rose to a session high of $20.48 per ounce in morning floor trade but pulled back into negative territory as the session progressed. It chopped around slightly below the unchanged line in afternoon pit action and settled at $20.32 per ounce, or 0.1% lower.

 CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Dec corn rose 6 cents to $4.18/bushel 

·         Dec wheat rose 8 cents to $6.50/bushel

·         Jan soybeans fell 9 cents to $12.79/bushel 

·         Dec ethanol rose 4 cents to $1.84/gallon 

·         Jan sugar (#16 (U.S.)) settled unchanged at 20.85 cents/lbs

Treasuries

Treasuries Leak Lower: 10-yr: -10/32..2.707%..USD/JPY: 100.18..EUR/USD: 1.3535

·         Treasuries ended near their lows as steady selling persisted throughout the session. 

·         The weakness came amid a lack of data and news as technical factors were at play. Yields pressed support in overnight trade, but were unable to break those levels and spent the session climbing higher. Click here to see an intraday yields chart.

·         The 5y ended +3.8bps @ 1.358% after being unable to penetrate the 1.300% level. The 1.400-1.450% area will be watched closely over the coming days as resistance is helped by the 50 and 100 dma. 

·         The 10y added +3.4bps after early action was unable to break below the 2.650% threshold that is defended by the 50 and 100 dma. Many will be watching the 2.750% area as a breakout above the level will likely result in a retest of the 3.000% area. 

·         After outperforming for most of the day, the 30y finished in-line. A +3.8bp climb ran the long yield up to 3.804%. 

·         Selling swung the yield curve steeper as the 2-10-yr spread widened to 242bps. 

·         Precious metals were little changed with gold +$2 @ $1274 and silver flat near @$20.35. 

·         Tomorrow's Data: MBA Mortgage Index (7), retail sales, retail sales ex-auto, CPI, core CPI (8:30), existing home sales, business inventories (10), and the FOMC minutes (14)

·         Tomorrow's Fed Speak: STL's Bullard will be in Chicago, IL to take part in a discussion on monetary policy and the economy as part of the Bloomberg Business Summit.

Next Day In View 

Economic Commentary

Economic Summary: Employment Cost Index slightly below estimates; Bernanke to speak tonight at 19:00; CPI, retail sales tomorrow at 8:30; FOMC Minutes tomorrow at 14:00
Economic Data Summary:

·         Third Quarter Employment Cost Index +0.4% vs Briefing.com consensus of +0.5%; Second Quarter was 0.5%

o    Wages and salaries increased 0.3% in the third quarter. That is down from a 0.4% increase in the second quarter and the weakest gain since increasing by the same amount in Q4 2012. Benefits spending rose 0.7% in Q3 2013. That was the strongest increase since Q2 2012 and easily topped the 0.4% increase in Q2 2013. 

Upcoming Economic Data:

·         Weekly MBA Mortgage Applications due out Wednesday at 7:00 (Last Week was -1.8%)

·         October Retail Sales due out Wednesday at 8:30 (Briefing.com consensus of 0.1%; September was -0.1%)

·         October Retail Sales Ex-Auto due out Wednesday at 8:30 (Briefing.com consensus of 0.1%; September was 0.4%)

·         October CPI due out Wednesday at 8:30 (Briefing.com consensus of 0.0%; September was 0.2%)

·         October Core CPI due out Wednesday at 8:30 (Briefing.com consensus of 0.2%; September was 0.1%)

·         October Existing Home Sales due out Wednesday at 10:00 (Briefing.com consensus of 5.20 M ; September was 5.29 M )

·         September Business Inventories due out Wednesday at 10:00 (Briefing.com consensus of 0.4%; August was 0.3%)

Upcoming Fed/Treasury Events:

·         Chicago Fed President Charlie Evans (2013 voter, dovish) to speak today at 14:15

·         Fed Chairman Ben Bernanke to speak today at 19:00

·         NY Fed President Bill Dudley (voting FOMC member) to speak tomorrow at 10:00

·         Saint Louis Fed President James Bullard (2013 voter, dovish) to speak tomorrow at 12:00

·         FOMC Minutes tomorrow at 14:00

Other International Events of Interest

·         Germany's ZEW Economic Sentiment improved to 54.6 from 52.8 (54.0 expected) while the Current Conditions Index slipped to 28.7 from 29.7 (31.0 consensus).

·         European Central Bank Executive Board member Joerg Asmussen said the ECB could implement negative deposit rates if the 2.0% inflation target remains elusive. Mr. Asmussen added he would be ‘very, very careful' with regards to deploying the policy tool. 

On other news.... 

Lockheed Martin awarded $300 mln Air Force contract (138.97 +1.12)
Co was awarded a $300,000,000 indefinite-delivery/indefinite-quantity contract for development and production of multiple foreign military sales test vehicles and equipment, mission planning, mission operational flight program, test support, logistics support, sustainment, and non-recurring engineering. Work will be performed at Lockheed Martin Missiles and Fire Control, Orlando, Fla., and Lockheed Martin Missiles and Fire Control, Troy, Ala., with an expected completion date of Nov. 19, 2018.

Currencies

Dollar Slips in Quiet Trade: 10-yr: -09/32..2.709%..USD/JPY: 100.21..EUR/USD: 1.3528
The Dollar Index clings to small losses as action holds near 80.70. The greenback has been trapped in a tight 15 cents range throughout U.S. trade (80.65-80.80) as a lack of data and meaningful news has provided sluggish action. Click here to see a daily Dollar Index chart.

·         EURUSD is +25 pips at 1.3530 as trade remains on track to close at a one-month high. The single currency was whipped around following comments from ECB member Constancio suggesting QE is a ‘possibility,' but the attempt to talk down the euro was unsuccessful as trade rallied following a brief dip. Resistance ion the area is helped by the 50 dma. Eurozone data is limited to German PPI. 

·         GBPUSD is +5 pips at 1.6115 amid an uneventful day for the pair. Today's action has been locked between support helped by the 50 dma (1.6050) and resistance near 1.6150. Those levels will be in focus as the Bank of England Monetary Policy Committee Asset Purchase Facility and Official Bank Rate votes are due out tonight. 

·         USDCHF is -15 pips at .9115 as action pushes lower for the sixth time in seven sessions. Today's weakness has the pair testing support in the area that is helped by the 50 dma (.9096). Switzerland's ZEW Economic Sentiment will be released tomorrow. 

·         USDJPY is +20 pips at 100.20 as action looks likely to post a one-month closing high. Traders continue to keep the 101.00 area on their radars as a breakout would set up a test of the May highs near 103.00. Japan's trade balance will cross the wires this evening. 

·         AUDUSD is +40 pips at .9415 as buyers are in control for the fourth time in five days. Aiding the hard currency's advance has been the somewhat hawkish RBA minutes that indicated, "Forward-looking indicators have generally improved." That statement has caused many to scale back their expectations of another RBA rate cut by year-end. Some decent resistance lies in the .9450 area and is helped by the 50 dma. 

·         USDCAD is +55 pips at 1.0480 as action nears its best close in over two months. The pair saw an early test of support in the 1.0420 area, but has seen a steady bid over the course of the session. The 1.0600 level remains key. Canadian data out tomorrow is limited to wholesale sales.

Jason's Commentaries

Was in Hong Kong and missed my DMA for 19 Nov, gonna do a backlog for 19 Nov DMA. 

The market was flat on 19 Nov, ahead of FOMC minutes. Nasdaq was the main laggard for the session as Microsoft and Google weigh on the Component. The Dow was held up by Goldman Sachs and Bank of America. Internals were looking weak as people are expecting the FOMC minutes on Wednesday 2pm ET. The rest of the internals were showing tonnes of divergence. 

Market Call: DOWN

Date: 8 Aug 2013