19 Dec 2013 AMC- Market stayed flat at the top after FOMC

19 Dec 2013 AMC- Market stayed flat at the top after FOMC

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: + 1.7%

·         France's CAC: + 1.6%

·         Spain's IBEX: + 2.3%

·         Portugal's PSI: + 0.7%

·         Italy's MIB Index: + 1.8%

·         Irish Ovrl Index: + 1.5%

·         Greece ATHEX Composite: + 0.8%

Before Market Opens

S&P futures vs fair value: -6.30. Nasdaq futures vs fair value: -12.50.
U.S. equity futures fell to their lows during the past 30 minutes of action without a specific catalyst. The S&P 500 futures now trade more than six points below fair value.

Asian markets ended mixed as Japan's Nikkei (+1.7%) rallied while markets in China (-1.0%) and Hong Kong (-1.1%) lagged as the recent liquidity crunch intensified once again. The two-week Shanghai Interbank Offered Rate jumped almost 114 basis points to 6.218%.

Economic data was scarce. Japan's foreign bonds buying report indicated net purchases in the amount of JPY110.50 billion (JPY390.10 billion prior). Separately, the All Industries Activity Index ticked down 0.2% month-over-month (-0.2% expected, 0.5% last). Elsewhere, New Zealand's GDP rose 1.4% quarter-over-quarter (1.1% consensus, 0.3% previous). 

·         Japan's Nikkei gained 1.7%, ending less than 100 points below its mid-May high as heavyweights Fast Retailing and FANUC led the advance. The two names settled higher by 4.5% and 4.1%, respectively. 

·         Hong Kong's Hang Seng lost 1.1% after falling from its flat line into the close. Property names weighed as China Resource Land and Hang Lung Properties fell 2.5% and 4.6%, respectively. 

·         China's Shanghai Composite slid 1.0%, ending on its lows. Financials weighed as China Vanke lost 1.5%. 

Major European indices hold solid gains across the board. Among new of note, there are reports circulating that Eurozone finance ministers have reached an agreement on a single resolution mechanism to be used in winding down troubled banks. Elsewhere, Fitch affirmed the United Kingdom's sovereign rating at ‘AA+' with a Stable outlook.

Investors received several economic data points. Eurozone current account surplus expanded to EUR21.80 billion from EUR14.90 billion (EUR14.20 billion expected). Great Britain's retail sales ticked up 0.3% month-over-month (0.3% expected, -0.9% prior) while the year-over-year reading increased 2.0% (2.3% forecast, 1.8% last). Core retail sales increased 0.4% month-over-month (0.3% consensus, -0.7% prior) while the year-over-year reading pointed to an increase of 2.3% (2.5% forecast, 2.3% last). Italy's wages were unchanged month-over-month (0.2% prior). Elsewhere, Spain's industrial new orders fell 4.0% year-over-year (1.1% expected, -0.3% prior). 

·         Great Britain's FTSE is higher by 1.0% with industrials and financials in the lead. Petrofac is higher by 4.3% and Standard Life holds an advance of 2.8%. Miners lag with Fresnillo, Glencore Xstrata, and Randgold Resources down between 0.5% and 2.9%. 

·         In France, the CAC trades up 1.2% as growth-sensitive names contribute to the gains. Technip is higher by 3.2% while financials AXA and Credit Agricole trade with respective gains of 3.0% and 2.3%. 

·         Germany's DAX sports an advance of 1.3%. Deutsche Boerse leads with a gain of 2.6% while Deutsche Post follows (+1.9%) not far behind. On the downside, HeidelbergCement is lower by 0.8%.

Market Internals

Market Internals -Technical-
The Nasdaq closed down 12 (-0.29%) at 4058, the S&P 500 closed down 1 (-0.06%) at 1810, and the Dow closed up 11 (+0.07%) at 16179. Action came on slightly below average volume (NYSE 688 mln vs. avg. of 700; NASDAQ 1684 mln vs. avg. of 1760), with decliners outpacing advancers (NYSE 1314/1799, NASDAQ 798/1607) and new highs outpacing new lows (NYSE 163/89, NASDAQ 135/24). 

Relative Strength: 
Natural Gas-UNG +4.02%, Egypt-EGPT +2.23%, Metals and Mining-XME +1.94%, Sugar-SGG +1.89%, Gasoline-UGA +1.69%, Australia-EWA +1.59%, Telecommunications-IYZ +1.19%, Nordic 30-GXF +0.81%, Canada-EWC +0.71%, Spain-EWP +0.57%. 

Relative Weakness: 
Turkey-TUR -4.37%, Silver-SLV -3.14%, Junior Gold Miners-GDXJ -2.88%, India-INP -2.67%, China 25 Index-FXI -2.29%, Coffee-JO -2.19%, Thailand-THD -2.14%, Platinum-PPLT -1.51%, Realty Majors-ICF -1.50%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: Nasdaq loses 0.3%
There was plenty of excitement in the stock market on Wednesday following the FOMC decision to taper its asset purchase program. There wasn't much excitement, however, on Thursday, which featured the added news that the Senate passed the two-year budget agreement. After some early gyrations, the major indices held to pretty tight trading ranges throughout the session and ended the day little changed.

All in all, it was a pretty good showing given the scope of Wednesday's advance and considering the yield on the 10-yr note went as high as 2.95% before settling back down to 2.93%.

A lack of concerted leadership and some buying exhaustion were to blame for the inability to log another record closing high for the S&P 500. It challenged Wednesday's high on two occasions, but each time it was greeted with renewed selling interest that held it in check.  The Dow, though, eked out another record close.

Sector-wise, there wasn't a single sector that moved up, or down, more than 1.0%. The performance range was highlighted by a 0.3% gain for the materials sectors on the upside and a 0.7% loss for the rate-sensitive utilities sector on the downside.

Large-cap averages held up better than their smaller counterparts, but a 1.2% drop in Apple (AAPL 544.46, -6.31) left the Nasdaq 100 in a position of underperforming the broader market. The S&P Midcap 400 Index (-0.8%) and the Russell 2000 (-0.8%) were the biggest laggards. That was likely owed to some portfolio rebalancing decisions given that each has outperformed the Dow Jones Industrial Average and S&P 500 year-to-date.

Another notable pocket of weakness was found in the precious metals space. Gold (-$43.30 to $1191.70/troy oz.) and silver (-$0.89 to $19.17/troy oz.) dropped 3.5% and 4.4%, respectively, on a host of reasonable explanations that ranged from dollar strength to a lack of inflation concern to tax-loss selling.

Today's economic data didn't move the needle much since it was a mixed bag. 

·         Initial claims for the week ending December 14 rose by 10,000 to 379,000 (Briefing.com consensus 333,000). That was the highest level in nine months, but once again seasonal adjustment problems were cited by the Department of Labor as impacting the reporting, so it couldn't be taken at face value as a "clean read."

·         Existing home sales declined 4.3% in November to a seasonally adjusted annual rate of 4.90 mln (Briefing.com consensus 5.00 mln). November marked the first time in 29 months that home sales were below year-ago levels.

·         The Philadelphia Fed Index jumped to 7.0 in December (Briefing.com consensus 5.0) from 6.5, reflecting an expansion in manufacturing activity in the Philly Fed region

·         Leading Indicators increased 0.8% in November (Briefing.com consensus 0.6%) following a downwardly revised 0.1% increase (from 0.2%) in October 

The only item on Friday's economic calendar is the third estimate for third quarter GDP (Briefing.com consensus 3.6%; prior 3.6%), which isn't expected to have any impact given its dated nature.

Trading volume today was on the lighter side with 688 mln shares changing hands at the NYSE. That number will be substantially higher on Friday given the quarterly rebalancing and options expiration activity.

·         Nasdaq +34.1% YTD

·         Russell 2000 +32.7% YTD

·         S&P 500 +26.9% YTD

·         DJIA +23.5% YTD

Commodities

Closing Commodities: Gold Drops Below $1200/oz, Falls To A Closing Level Not Seen Since Aug 2010

·         Precious metals were under significant pressure today as the dollar index held gains following yesterday's FOMC taper announcement. Feb gold fell below the $1200 per ounce level after touching a session high of $1207.80 per ounce in early morning pit trade. It settled with a 3.3% loss at $1193.60 per ounce, at the lowest level since Aug 2010 for the continuous contract

·         Mar silver traded in a consolidative fashion near the $19.20 per ounce level. Unable to gain momentum, it settled 4.4% lower at $19.18 per ounce

·         Jan crude oil extended yesterday's gains despite the stronger dollar index. It came off its session low of $97.85 per barrel set at pit trade open and rose to a session high of $99.49 per barrel. The energy component pulled back slightly in late afternoon floor action and settled with a 1.0% gain at $99.07 per barrel

·         Jan natural gas advanced to the highest level since July 2011 following a record weekly drop in stockpiles. Inventory data for the week ending Dec 13 showed a draw of 285 bcf when a draw of 258-264 bcf was anticipated. Natural gas lifted from its session low of $4.29 per MMBtu and settled with a 4.7% gain at $4.46 per MMBtu.

COMEX Metals Closing Prices

  Feb gold fell $41.00 to $1193.60/oz 

·         Gold fell below $1200 as the dollar index held gains following yesterday's FOMC taper announcement. The yellow metal brushed a session high of $1207.80 in early morning pit trade and trended slightly lower as the session progressed. It eventually settled with a 3.3% loss at the lowest level since Aug 2010 for the continuous contract. 

  Mar silver fell $0.88 to $19.18/oz 

·         Silver also spent all of today's floor trade in negative territory, trading in a consolidative fashion near the $19.20 level. Unable to gain momentum, it settled with a 4.4% loss. 

  Mar copper fell 3 cents to $3.29/lbs

 

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Mar corn rose 6 cents to $4.31/bushel 

·         Mar wheat fell 2 cents to $6.10/bushel 

·         Jan soybeans rose 2 cents to $13.27/bushel 

·         Jan ethanol rose 7 cents to $1.90/gallon 

·         Mar sugar (#16 (U.S.)) rose 0.02 of a penny to 19.41 cents/lbs

NYMEX Energy Closing Prices

  Feb crude oil rose $0.99 to $99.07/barrel 

·         Crude oil extended yesterday's gains as it came off its session low of $97.85 set at pit trade open. It rose to a session high of $99.49 but pulled back slightly in late afternoon floor action and settled with a 1.0% gain. 

  Jan natural gas rose 20 cents to $4.46/MMBtu 

·         Natural gas advanced to the highest level since July 2011 following a record weekly drop in stockpiles. Inventory data for the week ending Dec 13 showed a draw of 285 bcf when a draw of 258-264 bcf was anticipated. Natural gas came off its session low of $4.29 and rose as high as$ 4.47 before settling with a 4.7% gain. 

  Jan heating oil rose 2 cents to $3.03/gallon 

  Jan RBOB rose 4 cents to $2.74/gallon

Treasuries

Treasuries in Post-FOMC Stupor

·         The Treasury market was in a post-FOMC stupor early today that sent yields in the belly of the curve noticeably higher. 

·         The 10-yr yield pushed as high as 2.95%, but found some support as the day progressed and settled at 2.927%

·         The 5-10 spread flattened to 127 basis points from 134 basis points on Tuesday (i.e. pre-tapering announcement). Some attributed that chiefly to an unwinding of some profitable steepening trades this year.

·         The $29 bln 7-yr note auction went off reasonably well (certainly better than Wednesday's $35 bln 5-yr note auction), drawing a high yield of 2.385% on a bid-to-cover ratio of 2.45x that was above the prior auction of 2.36x but below the 12-auction average of 2.58x

·         Understandably, the little buying interest there was today was concentrated at the short end of the curve. However, the 30-yr bond also garnered some surprising support, rising five ticks and seeing its yield dip two basis points to 3.90%

·         Today's economic data was mixed

o    Initial claims for the week ending December 14 rose by 10,000 to 379,000 (Briefing.com consensus 333,000). That was the highest level in nine months, but once again seasonal adjustment problems were cited by the Department of Labor as impacting the reporting, so it couldn't be taken at face value as a "clean read."

o    Existing home sales declined 4.3% in November to a seasonally adjusted annual rate of 4.90 mln (Briefing.com consensus 5.00 mln). November marked the first time in 29 months that home sales were below year-ago levels.

o    The Philadelphia Fed Index jumped to 7.0 in December (Briefing.com consensus 5.0) from 6.5, reflecting an expansion in manufacturing activity in the Philly Fed region

o    Leading Indicators increased 0.8% in November (Briefing.com consensus 0.6%) following a downwardly revised 0.1% increase (from 0.2%) in October

·         Precious metals took it on the chin for a number of reasons that ranged from dollar strength to reduced inflation concerns to tax-loss selling

o    Gold -$43.10 to $1192.00/troy oz.; silver -$0.88 to $1919/troy oz. 

·         Friday's Data is limited to the third estimate for third quarter GDP (Briefing.com consensus 3.6%; prior 3.6%)

Next Day In View 

Economic Commentary

Economic Summary: Existing Home Sales miss expectations; Philadelphia Fed tops estimates; Q3 GDP final revision tomorrow at 8:30
Economic Data Summary:

·         Weekly Initial Claims 379K vs Briefing.com consensus of 333K; Last Week was revised to 369K from 368K

·         Weekly Continuing Claims 2.884 M vs Briefing.com consensus of 2.760 M ; Last week was revised to 2.790 M from 2.791 M

o    Every week for the past several weeks, the Department of Labor has issued a statement along with the initial claims level saying that the claims data was biased by one seasonal adjustment problem or another. It's been months since the claims data has given a clean reading of the labor sector.

·         November Existing Home Sales 4.90 M vs Briefing.com consensus of 5.00 M ; October was 5.12 M

o    The National Association of Realtors blamed declining affordability conditions as the root cause for the drop in November home sales. Tight inventories have led to upward moving prices, which, along with with higher interest rates and soft income growth, has put a dent into sales. Once more inventories come back on-line, price growth should weaken and help boost demand. Those conditions, however, have been in place for most of 2013 and that has not prevented sales from growing. With stable and elevated employment growth, demand should return over the next few months. 

·         December Philadelphia Fed 7.0 vs Briefing.com consensus of 5.0; November was 6.5

o    New orders demand strengthened as the relative index increased to 15.4 in December from 11.8 in November. That gain helped production levels accelerate. 

·         November Leading Indicators 0.8% vs Briefing.com consensus of 0.6%; October was revised to 0.1% from 0.2%

o    Since eight of the 10 components of the index are known prior to the release, the differences between the actual leading indicators index and the consensus estimate are generally small. In this case, the consensus expected weaker durable goods orders in November whereas the Conference Board believes nondefense orders of capital excluding aircraft will rebound after two consecutive months of contractions. The durables data will be released next week. 

Upcoming Economic Data:

·         Third Quarter GDP - Third Estimate due out Friday at 8:30 (Briefing.com consensus of 3.6%; Second Quarter was 3.6%)

·         Third Quarter GDP Deflator - Third Estimate due out Friday at 8:30 (Briefing.com consensus of 2.0%; Second Quarter was 2.0%)

Upcoming Fed/Treasury Events:

·         Janet Yellen confirmation hearing is scheduled for today in the Senate

Other International Events of Interest

·         Great Britain's retail sales ticked up 0.3% month-over-month (0.3% expected, -0.9% prior) while the year-over-year reading increased 2.0% (2.3% forecast, 1.8% last). Core retail sales increased 0.4% month-over-month (0.3% consensus, -0.7% prior) while the year-over-year reading pointed to an increase of 2.3% (2.5% forecast, 2.3% last). 

On other news.... 

Currencies 

Currency Commentary: DXY Rallies As Fed Tapers

·         The Dollar Index is holding on to its post-Fed gains as it floats along the 80.50 level. The DXY rallied to a two week high late yesterday as the Fed decided to begin the tapering process and cut its asset purchase program by $10 bln a month to $75 bln. The move was some what of a surprise as the majority were expecting the Fed to wait until the January or March 21014 meeting. The tapering was accompanied by dovish language on forward guidance and inflation. Economic data this morning was mixed as Initial Claims and Existing Home Sales missed expectations. The December Philadelphia Fed and November Leading Indicators both outpaced consensus. 

·         The euro has dipped below the 1.37 level this morning as EU Leaders meet at a year end Summit. The group have put into place the first pieces of a long-awaited banking union but the question of a banking back stop remains open. The single currency is now testing its 20 sma (1.3657). It is notable that the euro is now being rejected for the second time in the past two months at the 1.38 level. 

·         The pound is holding the 1.6350 level despite the strength in the dollar. A portion of the support can be attributed to a solid retail sales number that recovered from a dip in November. But it would appear the recent sell off points to profit taking from some investors. And the move over the past two days suggests investors are not ready to move on from sterling yet as it remains one of the strongest currencies in the market. 

·         The yen continued to slide to fresh multi-year lows as the dollar rallied. The yen hit the 104 level for the first time since October of 2008 as it has now erased all its losses from the Great Recession. The yen is up approx 28% since February of 2012 and 27% over the past 14 months. Tongiht the Bank of Japan will be meeting, There are expectations that the central bank will either increase its asset purchase program or hint that it will take such action early in 2014. There is also chatter that the bank will drop deflation from its lexicon (FOREX, BONDX). 

Jason's Commentaries


Last night it was as flat as expected, the only outlier of the indices is the Nasdaq, dragging down by Apple. Volumes were rather healthy at 700m shares traded. All indices were at their respective resistance level. It seems that the market has over-reacted too much to FOMC statements. It's still unclear whether the market will have sufficient strength to break above that resistance level. If that resistance level is broken, i reckon the Santa Claus Rally will happen... but if it doesn't, we're gonna have the Santa Claus sent back to his home.

The main leader of last night was Energy and the main laggard is Utilities, which performed 0.29% and 0.73% respectively. Market start last night with some slight bearish movement then stayed flat to upside throughout the session. All 3 economic reports that came out last night was terrible but somehow it did not affect the market. Probably the market is still suffering from the aftershock in the market. As we're heading towards Christmas, I'm expecting the Implied Volatility in the market to drop significantly. Meanwhile, stay safe and enjoy your Christmas =D  

Market Call: DOWN

Date: 8 Aug 2013