21 Nov 2013 AMC- Market rallied to their highs again after day of FOMC minutes release.

21 Nov 2013 AMC- Market rallied to their highs again after day of FOMC minutes release.

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: 0.0%

·         Germany's DAX: -0.1%

·         France's CAC: -0.3%

·         Spain's IBEX: + 0.4%

·         Portugal's PSI: + 0.4%

·         Italy's MIB Index: + 0.6%

·         Irish Ovrl Index: -0.1%

·         Greece ATHEX Composite: + 0.5%

Before Market Opens

S&P futures vs fair value: +4.50. Nasdaq futures vs fair value: +12.20.
The S&P 500 futures trade higher by 0.2%.

Markets across Asia were mostly lower as only Japan's Nikkei (+1.9%) managed to stay out of the red. The losses came as fears the U.S. Federal Reserve would scale back its bond-buying program spread around the globe after the latest FOMC minutes indicated the Fed may begin to taper in the ‘coming months' with better data. The Nikkei rallied as the Bank of Japan kept policy unchanged, but it was the comments from BOJ Governor Kuroda that sparked the bid. Mr. Kuroda indicated the central bank may abandon its inflation target for the time being, and that it stands ready to act, if needed. Elsewhere, China's Shanghai Composite finished flat despite the latest HSBC Flash Manufacturing PMI (50.4 actual v. 50.9 expected, 50.9 previous) reading falling short of estimates. The weak Chinese data weighed on Australia's ASX (-0.4%). After Australian markets closed, Reserve Bank of Australia Governor Glenn Stevens took the mic, suggesting the strength of the Aussie dollar has caused the central bank to keep an open mind on intervention. Data from the region saw Singapore's GDP climb 1.3% quarter-over-quarter (-1.0% expected) and Malaysia's unemployment rate hold steady at 3.1%. 

·         In Japan, the Nikkei advanced 1.9% as trade rallied to a six-month high. The weaker yen provided a boost to names like Kyocera and Honda Motor, which gained 2.7% and 3.4%, respectively. Heavyweights Softbank (+3.1%) and Fast Retailing (+3.6%) also saw robust gains. 

·         Hong Kong's Hang Seng shed 0.5% as trade edged off nine-month highs. Real estate developers and financials lagged with New World Development falling 3.3% and Bank of Communications giving up 1.9% to lead their respective sectors lower. 

·         In China, the Shanghai Composite settled flat amid a choppy trade. Defense stocks saw profit-taking after their recent gains with Aerospace Communications tumbling 6.8% after surging nearly 30% over the previous three sessions. 

European indices are mixed after starting the session with broad losses. Italy's MIB leads the way with a gain of 0.5%. Among news of note, Germany's Finance Minister Wolfgang Schaeuble said the European Central Bank cannot solve the eurozone's deficit issues. This came after yesterday's speculation surrounding the possible deployment of negative deposit rates by the ECB. Separately, an article in Germany's Der Spiegel suggested Bundesbank President Jens Weidmann could be the next finance minister. Investors received several regional PMI readings, but they were mostly disappointing. Eurozone Manufacturing PMI ticked up to 51.5 from 51.3, as expected. Meanwhile, Services PMI slipped to 50.9 from 51.6 (51.9 forecast). Germany's Manufacturing PMI rose to 52.5 from 51.7 (52.0 expected) while Services PMI improved to 54.5 from 52.9 (53.0 consensus). France's Manufacturing PMI fell to 47.8 from 49.1 (49.5 forecast) while Services PMI dropped to 48.8 from 50.9 (51.0 expected). Also of note, Italian Wage Inflation came in at 0.2% month-over-month (0.0% prior). Elsewhere, Great Britain's public sector net borrowing came in at GBP6.40 billion (GBP7.30 billion forecast, GBP8.6 billion last). Separately, CBI Industrial Trends Orders rose to 11 from -4 (1 forecast). 

·         Great Britain's FTSE trades up 0.2%. Drug makers AstraZeneca and Shire outperform with gains close to 2.6% apiece. Miners lag with Antofagasta and Vedanta Resources down 1.9% and 3.4%, respectively. 

·         In Germany, the DAX is lower by 0.1% as steelmaker ThyssenKrupp and fertilizer producer K+S lag with respective losses of 2.1% and 2.4%. Utilities outperform with RWE trading higher by 3.7% and E.ON sporting an advance of 2.4%. 

·         France's CAC is off 0.1% as Michelin weighs. The tire maker trades lower by 2.0%. Financials are showing relative strength with BNP Paribas and Credit Agricole up 0.7% and 0.8%, respectively. 

·         In Italy, the MIB is higher by 0.5% as financials outperform. Intesa Sanpaolo trades with a gain of 1.7% and UniCredit holds an advance of 1.3%.

Market Internals

Market Internals -Technical-
The Nasdaq closed up 48 (+1.22%) at 3969, the S&P 500 closed up 14 (+0.81%) at 1796, and the Dow closed up 109 (+0.69%) at 16010. Action came on slightly below average volume (NYSE 669 mln vs. avg. of 728; NASDAQ 1643 mln vs. avg. of 1781), with advancers outpacing decliners (NYSE 2295/804, NASDAQ 1951/598) and new highs outpacing new lows (NYSE 150/73, NASDAQ 184/33). 

Relative Strength: 
Oil and Gas Exploration-XOP +2.87%, Gasoline-UGA +2.66%, Heating Oil-UHN +2.36%, Greece-GREK +2.34%, Biotechnology-XBI +2.17%, Homebuilders-XHB +2.13%, Spain-EWP +1.76%, Austria-EWO +1.52%, Poland-EPOL +1.46%, Italy-EWI +1.4%. 

Relative Weakness: 
Volatility-VXX -3.28%, Thailand-THD -1.65%, Chile-ECH -1.48%, Gold Miners-GDX -1.4%, Brazilian Real-BZF -1.35%, Middle East and Africa-GAF -1.28%, Australian Dollar-FXA -1.24%, Silver Miners-SIL -0.86%, Sugar-SGG -0.79%, Junior Gold Miners-GDXJ -0.72%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: Stocks End on Highs
The S&P 500 settled higher by 0.8%, snapping its three-day losing streak. The tech-heavy Nasdaq outperformed with an advance of 1.2% while the Dow Jones Industrial Average (+0.7%) registered its first close above the 16,000 level.

Stocks climbed throughout the session with the Nasdaq bolstered by some of its recent laggards. Momentum names like Facebook (FB 46.70, +0.27), LinkedIn (LNKD 220.61, +4.42), Priceline.com (PCLN 1159.11, +12.02), and Micron (MU 19.99, +1.19) gained between 0.6% and 6.3%. Micron led the group, breaking out to an 11-year high, after activist investor David Einhorn made a bullish case for the stock.

Biotechnology also provided the Nasdaq with a measure of support as the iShares Nasdaq Biotechnology ETF (IBB 214.21, +3.14) jumped 1.5%. On a related note, the health care sector outperformed in morning trade, but ended behind the broader market with a gain of 0.5%.

Other countercyclical groups also lagged, but only the telecom services sector (-0.3%) ended in the red. Meanwhile, consumer staples (+0.2%) and utilities (+0.3%) posted modest gains. Notably, the staples sector was pressured by Target (TGT 64.19, -2.30) as the stock fell 3.5% after reporting disappointing results.

Target was not the only retailer pressured by below-consensus earnings. Over on the discretionary side, Dollar Tree (DLTR 56.28, -2.64), Game Stop (GME 48.80, -3.64), and Sears Holdings (SHLD 59.93, -1.77) lost between 2.9% and 6.9% in reaction to disappointing earnings and/or guidance. It should be noted many retailers have offered cautious comments regarding their expectations for the holiday quarter. However, the SPDR S&P Retail ETF (XRT 87.55, +0.68) managed to outperform with a gain of 0.8%. Moreover, the consumer discretionary sector (+0.9%) ended among the leaders.

Speaking of leaders, financials (+1.5%) spent the entire session ahead of the remaining sectors. The group received broad support from its top components and Bank of America (BAC 15.59, +0.45) was the best performer among the majors.

Elsewhere, the energy sector (+0.8%) ended in-line with the broader market while crude oil spiked 1.6% to $95.34 per barrel. The other commodity-linked space—materials (+0.8%)—also kept pace with the broader market even as miners weighed. The Market Vectors Gold Miners ETF (GDX 22.53, -0.32) fell 1.4% while gold futures slid 1.1% to $1243.70 per troy ounce.

Treasuries ended mixed with the 10-yr yield slipping one basis point to 2.79%. Also of note, the 30-yr yield hit its highest level (3.938%) since August 2011 before ending at 3.883%. A fractional loss in the 5-yr note caused its yield to tick up to 1.363%.

Participation was on the light side as 669 million shares changed hands on the floor of the NYSE.

On the economic front, weekly initial claims dropped by 21,000 to 323,000 (Briefing.com consensus 333,000). The Department of Labor acknowledged, however, that the seasonal adjustments from the Veterans Day holiday may have played a role in the sharp decline, so we'll have to put an asterisk next to the encouraging headline.

Separately, producer prices declined 0.2% (consensus -0.2%) in October due to lower energy prices while core PPI, which excludes food and energy, increased 0.2% (consensus 0.1%). Over the last 12 months, PPI is up just 0.3% while core PPI has risen a tame 1.4%.

Lastly, manufacturing activity softened in November as the Philadelphia Fed's Business Outlook dropped to 6.5 from 19.8 in October. The Briefing.com consensus expected the index to fall to 11.9. Employment levels deteriorated notably as the Number of Employees Index fell to 1.1 from 15.4.

There is no notable economic data on tomorrow's schedule. 

·         Russell 2000 +31.8% YTD 

·         Nasdaq +31.5 YTD 

·         S&P 500 +25.9% YTD 

·         DJIA +22.2% YTD

Commodities

Closing Commodities: Precious Metals Extend Losses While Crude Oil Books 1.6% Gain
Jan crude oil trended higher today, lifting from a session low of $94.11 per barrel set at pit trade open. The energy component rose as high as $95.63 per barrel and settled at $95.34 per barrel, booking a gain of 1.6%. 

Dec natural gas popped to a session high of $3.74 per MMBtu following better than anticipated inventory data that showed a draw of 45 bcf when consensus called for a draw of 33-38 bcf. However, prices reversed and touched the break-even line in afternoon action. Natural gas eventually settled 0.8% higher at $3.70 per MMBtu. 

Precious metals traded lower today as investors digested yesterday's FOMC minutes that suggested the Fed could look to taper its stimulus program if the economy continued to improve. Dec gold dipped to a session low of $1235.80 per ounce shortly after equity markets opened. It inched slightly higher as the session progressed and settled with a 1.1% loss at $1243.70 per ounce. 

Dec silver touched a session low of $19.70 per ounce in morning pit action but managed to trend higher until late afternoon floor trade. It brushed a session high of $20.05 per ounce and settled at $19.93 per ounce, shaving losses to 0.6%.

COMEX Metals Closing Prices

  Dec gold fell $14.10 to $1243.70/ounce 

·         Gold extended yesterday's losses as investors digested yesterday's FOMC minutes that suggested the Fed could look to taper its stimulus program if the economy continued to improve. The yellow metal spent its entire pit session in the red, dipping to a session low of $1235.80 shortly after equity markets opened. It inched slightly higher as the session progressed and settled with a 1.1% loss. 

  Dec silver fell $0.12 to $19.93/ounce 

·         Silver also traded in the red today. It touched a session low of $19.70 in morning pit action but managed to trend higher until late afternoon floor trade. It brushed a session high of $20.05 and settled slightly below that level, shaving losses to 0.6%. 

  Dec copper rose 3 cents to $3.19/lb

NYMEX Energy Closing Prices

·         Jan crude oil rose $1.48 to $95.34/barrel

·         Dec natural gas rose 3 cents to $3.70/MMBtu

·         Jan heating oil rose 5 cents to $3.00/gallon

·         Jan RBOB gasoline rose 7 cents to $2.72/gallon

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Dec corn rose 6 cents to $4.22/bushel 

·         Dec wheat rose 2 cents to $6.49/bushel 

·         Jan soybeans rose 18 cents to $12.93/bushel 

·         Dec ethanol rose 12 cents to $2.05/gallon 

·         Jan sugar (#16 (U.S.)) fell 0.19 of a penny to 20.39 cents/lbs

Treasuries

Treasuries Erase Early Losses, End Little Changed: 10-yr: +06/32..2.787%..USD/JPY: 101.06..EUR/USD: 1.3465

·         Treasuries ended mixed as the complex managed to erase its early losses. 

·         Moderate selling ran yields to session highs following this morning's claims and PPI data, but Treasury bulls were able to retake control after the Philly Fed miss. Click here to see an intraday yields chart.

·         Early weakness caused the 5y to test resistance in the 1.400% area, but action slipped off that level as buyers came out of the woodwork following the Philly Fed miss. The yield ended little changed @ 1.363%. 

·         The 10y saw an early test of 2.850% resistance, but pulled back to 2.784% by the cash close. The benchmark yield ended the day -0.8bps, and settled on the neckline of the potential inverse head and shoulders pattern off the late September levels. A sustained breakout above the 2.800% area sets up another run to 3.000%. 

·         Outperformance at the long end saw the 30y slip -2.2bps to 3.883%. The lower close comes after the early selling ran the long yield to 3.938%, its highest level since August 2011.

·         Today's action flattened the yield curve as the 2-10-yr spread tightened to 250.5bps. 

·         Precious metals remained weak as gold shed -$15 to $1243 and silver fell $0.09 to near $19.97. 

Next Day In View 

Economic Commentary

Economic Summary: Jobless Claims fall; October PPI negative for second straight month; Philly Fed misses the mark
Economic Data Summary:

·         Weekly Initial Claims 323K vs Briefing.com consensus of 333K; Last Week was 339K

·         Weekly Continuing Claims 2.876 M vs Briefing.com consensus of 2.863 M ; Last Week was 2.874 M

o    That was the lowest initial claims reading since computer glitches biased the data in late September. The Briefing.com consensus expected the initial claims level to decline to 333,000. The Department of Labor stated that the seasonal adjustments from the Veteran's Day holiday may have played a role in the sharp decline in claims. It is unknown how much the holiday biased the data.

·         October PPI -0.2% vs Briefing.com consensus of -0.2%; September was -0.1%

·         October Core PPI 0.2% vs Briefing.com consensus of 0.1%; September was 0.1%

o     That was the first decline in energy prices since April. Food prices, which fell 1.0% in September, increased 0.8% in October. That was the largest increase since March. Most of the gain was the result of a 7.5% increase in beef and veal prices. Excluding food and energy, core prices inched up 0.2% after increasing 0.1% in September. That was the biggest increase since June.

·         November Philadelphia Fed 6.5 vs Briefing.com consensus of 11.9; October was 19.8

Upcoming Economic Data:

·         September JOLTS- Job Openings due out Friday at 10:00 (Briefing.com consensus of N/A; August was 3.883 M )

Upcoming Fed/Treasury Events:

·         Richmond Fed President Jeff Lacker (not a voting FOMC member, hawkish) to speak tomorrow at 12:30

·         Saint Louis Fed President James Bullard (2013 voter, dovish) to speak tomorrow at 13:00

·         Kansas City Fed President Esther George (2013 voter, hawkish) to speak tomorrow at 8:40

·         Fed Governor Daniel Taruillo (voting FOMC member, dovish) to speak tomorrow at 12:15

Other International Events of Interest

·         China's HSBC Manufacturing PMI slipped to 50.4 from 50.9 (50.8 expected). 

·         The Bank of Japan left its key interest rate unchanged at 0-0.1%, as expected. Separately, the foreign bonds buying report indicated net purchases in the amount of JPY349.90 billion (JPY357.80 billion prior). 

On other news.... 

Currencies 

Aussie Slides as RBA Governor Discusses Intervention: 10-yr: +07/32..2.785%..USD/JPY: 101.04..EUR/USD: 1.3455
The Dollar Index holds little changed near 81.10 as a choppy session nears the finish line. An overnight bid lifted the Index to session highs near 81.30, but sellers managed to take control and drop action into the red. Action during U.S. trade has been confined to a tight 10 cent range between 81.00/81.10. 

·         EURUSD is +20 pips at 1.3455 after the pair was able to find support in the 1.3400 area early in the session. The single currency dipped to its worst levels of the day following the French PMI misses before lifting off those levels after the German PMI beats. Comments from ECB head Mario Draghi propelled the pair to its best levels of the session as he warned keeping rates low for an extended period of time may pose risks. German Ifo Business Climate is due out tomorrow. ECB President Mario Draghi will be in Frankfurt, Germany to speak on "The Future of Europe." 

·         GBPUSD is +50 pips at 1.6150 as trade readies for its best close in almost a month. Igniting today's gains was the improvement in CBI Industrial Order Expectations, which climbed to 11 (0 expected, -4 previous). Resistance in the 1.6150 area remains key. 

·         USDCHF is -5 pips at .9155 amid an uneventful day for the pair. An early bid ran into resistance at yesterday's high (.9190) as sellers continue to defend the .9200 region.

·         USDJPY is +100 pips at 101.05 as action holds at its best level in over four months. The advance comes after the Bank of Japan kept its policy unchanged, but warned it stand ready to act if needed. A breakout above the 101.00 level sets up a test of 4.5-year highs near 103.00. 

·         AUDUSD is -115 pips at .9220 as heavy selling persists for a second session. Sellers took control after the Chinese Flash Manufacturing PMI miss and overnight commentary from RBA head Glenn Stevens suggested the central bank has not ruled out intervention to weaken the Australian dollar.Today's slide has dropped the hard currency below its 100 dma (.9275), and has ignited a head and shoulders pattern with a measuring objective of .8900. Look for that level to come into play if .9300 resistance is not retaken in a timely matter. Click here to see a daily AUDUSD chart.

·         USDCAD is +70 pips at 1.0520 as trade looks likely to post its best close since the beginning of September. Today's advance comes after yesterday's comments from Bank of Canada Governor Poloz, which indicated inflation is "below where we'd like it to be." The 1.0600 area is setting up as a key level. Canadian data is heavy as CPI, core CPI, retail sales, and core retail sales are scheduled for tomorrow.

Jason's Commentaries


Definitely got caught by this one. After the release of the FOMC minutes statements on Wednesday, market started with a bullish bias which rallied through the trading session. The Financial sector was the biggest gainer following by the Energy sector. Bank of Ameria, JP Morgan, Goldman Sach and many other banks rose more than 1% last night, which led the sector up. On top of that, the tech is also being led by names like Google, Intel and Apple which gained more than 1% each as well. However, internals remained divergent. TRIN was up above 1 and there's only a slight drop in the VIX. Volumes were standing at 669m shares traded on the NYSE. Such little commitment is causing me to doubt the strength of the rally. Ahead of the Thanksgiving holiday next week, eyes will be on the retail sales report after the Black Friday and Cyber Monday Sales. Me too will be looking at the Black Friday and Cyber Monday Sales.. time to contribute to the American economy. Treasuries finally found a support level and I'd be expecting the Treasuries to take a bounce. Since we're going to have the holiday season soon, Volumes are expected to dip in the coming weeks. Whether we will get a Santa Claus rally remained to be an uncertainty.

Market Call: FLAT

Date: 22 Nov 2013