13 Jan 2014 AMC - Market sunk last night after employment report last week

13 Jan 2014 AMC - Market sunk last night after employment report last week

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: + 0.4%

·         France's CAC: + 0.3%

·         Spain's IBEX: + 0.7%

·         Portugal's PSI: + 0.7%

·         Italy's MIB Index: + 0.7%

·         Irish Ovrl Index: + 1.1%

·         Greece ATHEX Composite: -0.8%

Before Market Opens

S&P futures vs fair value: -4.40. Nasdaq futures vs fair value: -5.00.
The S&P 500 futures hover four points below fair value.

The major Asian bourses closed mostly higher, led by emerging markets. India's CPI eased to 9.9% year-over-year, as expected (11.6% previous).

In Japan, the approval rating of Prime Minister Shinzo Abe has increased to 62%. Elsewhere, China's Ministry of Finance expects 2014 GDP to come in at 7.5% with the lower limit at 7.0%. 

·         Japan's Nikkei was closed for Coming-of-Age Day. 

·         Hong Kong's Hang Seng added 0.2% amid a sleepy session. Real estate developers were mixed as Sino Land tacked on 1.5% while China Overseas Land lost 0.9%. 

·         China's Shanghai Composite slipped 0.2% to its lowest level in five months as sellers remained in control for a fifth session. Technology shares were pressured as investors await an onslaught of IPOs that are expected to come to market. GoerTek gave up 2.6%. 

Major European indices hold modest gains across the board with peripheral indices providing the lead. Economic data was limited to Italy's industrial production, which increased 1.4% year-over-year (0.1% expected, -0.4% prior).

The first half of today's session has been free of noteworthy headlines but Moody's commented on Portugal, saying the next date for potential rating action regarding the country falls on May 9th. 

·         In France, the CAC holds a modest gain of 0.1%. Alcatel-Lucent leads with an advance of 4.7% amid reports the company is looking to sell its enterprise business. 

·         Great Britain's FTSE trades higher by 0.2%. Financials Barclays and Royal Bank of Scotland are among the leaders with respective gains of 2.3% and 2.4%. On the downside, Tullow Oil trades lower by 2.1%. 

·         Germany's DAX trades up 0.2% with banks in the lead. Commerzbank and Deutsche Bank are both up near 3.4%. Adidas lags with a loss of 1.7%. 

·         Spain's IBEX sports a gain of 0.6%. Banco Popular Espanol and Bankia are higher by 5.7% and 1.1%, respectively.

Market Internals

Market Internals -Technical-
The Nasdaq closed down 61 (-1.47%) at 4113, the S&P 500 closed down 23 (-1.26%) at 1819, and the Dow closed down 179 (-1.09%) at 16258. Action came on slightly above average volume (NYSE 719 mln vs. avg. of 685; NASDAQ 2177 mln vs. avg. of 1771), with decliners outpacing advancers (NYSE 887/2243, NASDAQ 736/1889) and new highs outpacing new lows (NYSE 156/25, NASDAQ 170/19).

Relative Strength: 
Natural Gas-UNG +5.75%, Junior Gold Miners-GDXJ +5.50%, Volatility-VXX +3.60%, Silver Miners-SIL +2.88%, Egypt-EGPT +2.21%, Japanese Yen-FXY +1.09%, New Zealand-ENZL +0.90%, Cotton-BAL +1.00%, Australian Dollar-FXA +0.73%, Canadian Dollar-FXC +0.53%.

Relative Weakness: 
Clean Energy-PBW -2.98%, Retail-XRT -2.89%, Social Media-SOCL -2.87%, Greece-GREK -2.84%, Oil and Gas Exploration-XOP -2.79%, U.S. Home Construction-ITB -2.38%, Turkey-TUR -2.29%, South Africa-EZA -2.16%, China 25 Index-FXI -1.98%, Italy-EWI -1.51%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: Stocks End on Lows as Retailers Weigh
The stock market endured a forgettable start to the new trading week as the major averages ended on their lows. The S&P 500 fell 1.3%, ending at its lowest level of 2014.

Equities began the session with modest losses and spent the first three hours of action near their flat lines. The indices were able to inch back into positive territory during the late morning, but the move lacked conviction and failed to invite dip-buyers to the party. Shortly thereafter, sellers were the ones partying as the indices spent the entire afternoon in a steady downdraft.

In all likelihood, the selling was exacerbated by the fact many participants were not positioned to absorb today's volatility. On that note, the CBOE Volatility Index (VIX 13.37, +1.23) began the session in the red and tested multi-month lows before afternoon weakness sparked a rush for downside protection.

All ten sectors ended in the red but cyclical groups saw the largest losses. The consumer discretionary sector (-2.0%) finished behind the remaining groups as retailers lagged after Bon-Ton Stores (BONT 13.41, -2.09), Express (EXPR 18.15, -0.87), Lululemon (LULU 49.70, -9.90), and PVH (PVH 129.55, -2.58) issued disappointing guidance. The four names lost between 2.0% and 16.6% while the SPDR S&P Retail ETF (XRT 83.36, -2.48) fell 2.9%, widening its January loss to 5.4%. For its part, the discretionary sector extended its January decline to 2.6% after ending 2013 ahead of the remaining nine sectors with a gain of 40.4%.

Elsewhere, the energy space (-1.9%) also played a significant part in pressuring the broader market. The sector lagged throughout the session as crude oil fell 0.9% to $91.78 per barrel. The other commodity-related sector—materials (-1.4%)—fared a bit better but also finished behind the S&P 500 even as gold futures added 0.4% to $1251.10 per troy ounce.

On the countercyclical side, consumer staples (-0.6%), health care (-0.8%), telecom services (-1.1%), and utilities (-0.9%) finished ahead of the broader market.

In M&A news, Beam (BEAM 83.42, +16.45) surged 24.6% after the company agreed to be acquired by Suntory Holdings for $83.50 per share.

Despite the selloff, participation was below average as 719 million shares changed hands on the floor of the New York Stock Exchange.

Treasuries ended on their highs with the 10-yr yield down three basis points at 2.83%.

Economic data was limited to the December Treasury budget, which showed a surplus of $53.20 billion after showing a deficit of $1.20 billion in December 2012.

Tomorrow, December Retail Sales as well as December export prices ex-agriculture and import prices ex-oil will be reported at 8:30 ET while the November Business Inventories report will cross the wires at 10:00 ET. 

·         Russell 2000 -1.2% YTD 

·         Nasdaq -1.5% YTD 

·         S&P 500 -1.6% YTD 

·         DJIA -1.9% YTD

Commodities

Closing Commodities: Natural Gas Futures Rise 5.2%, Driven By Weather

·         Feb natural gas outperformed the commodities space today, rising on near-term forecasts for colder weather. It climbed as high as $4.29 per MMBtu after coming off its session low of $4.20 per MMBtu set in early morning floor action. It settled with a solid 5.2% gain at $4.27 per MMBtu

·         Feb crude oil extended Friday's losses as it spent all of today's pit trade in negative territory. The energy component brushed a session high of $92.38 per barrel shortly after equity markets opened but slipped back below the $92 per barrel level. It brushed a session low of $91.65 per barrel moments before settling with a 0.9% loss at $91.78 per barrel

·         Feb gold rose for a third consecutive session, lifting from a session low of $1243.90 per ounce set at pit trade open. The yellow metal brushed a session high of $1252.80 per ounce by late morning action. It eventually settled with a 0.4% gain at $1251.10 per ounce

·         Mar silver also trended higher today. It broke into positive territory in late morning floor trade after trading as low as $19.97 per ounce earlier in the session. It touched a session high of $20.43 per ounce moments before settling at $20.37 per ounce, or 0.7% higher.

COMEX Metals Closing Prices

  Feb gold rose $4.50 to $1251.10/oz 

·         Gold rose for a third consecutive session while the dollar index chopped around near the unchanged line. The yellow metal lifted from its session low of $1243.90 set at pit trade open and brushed a session high of $1252.80 by late morning action. It settled slightly below that level, booking a gain of 0.4%. 

  Mar silver rose $0.14 to $20.37/oz 

·         Silver also trended higher today. It broke into positive territory in late morning floor trade after trading as low as $19.97 earlier in the session. It touched a session high of $20.43 moments before closing with a 0.7% gain. 

  Mar copper rose 1 cent to $3.35/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Mar corn rose 2 cents to $4.34/bushel 

·         Mar wheat rose 5 cents to $5.73/bushel 

·         Mar soybeans rose 17 cents to $12.95/bushel 

·         Feb ethanol fell 2 cents to $1.95/gallon 

·         Mar sugar (#16 (U.S.)) fell 0.12 of a penny to 20.25 cents/lbs

Treasuries

Longer Dated Yields Settle at Pre-Taper Levels: 10-yr: +05/32..2.830%..USD/JPY: 102.91..EUR/USD: 1.3668

·         Treasuries closed on their highs as the complex gained for the sixth time in eight 2014 sessions. Click here to see an intraday yields chart.

·         Buying up front dropped the 1M bill yield to a low of -0.02%, its first negative reading since September. 

·         The 2y shed -2bps, closing the session @ 0.366%. The front of the curve will likely remain in focus over the next month as the debt ceiling deadline looms on February 7. 

·         In the belly of the curve, the 5y lost -3.4bps to close @ 1.589%. Aggressive buying over the last three sessions has shaved off ~ -18bps, and has action looking at a test of 1.550% support. 

·         The 10y fell -3.3bps, finishing the day @ 2.827%. The benchmark yield has now erased the entire run up that occurred in response to the Fed announcing it was tapering its bond-buying program (Closed at 2.839% in December 17). 

·         Buying at the long end dropped the 30y -2.9bps to 3.767%, a near two-month low. 

·         A flatter curve developed with the 2-10-yr spread narrowing to 246.5bps. 

·         Precious metals went off on their highs with gold +$6 @ $1253 and silver +$0.17 @ $20.39. 

·         Data: Retail sales, import/export prices (8:30) and business inventories (10). 

·         Fed Speak: Philly's Plosser will provide his economic outlook (12:45) ahead of Dallas' Fisher discussing his "U.S. Regional and Economic Outlook" (13:20).

Next Day In View 

Economic Commentary

Economic Summary: No data until Treasury budget at 14:00; two Fed hawk voters speak tomorrow
Upcoming Economic Data:

·         December Treasury Budget due out Monday at 14:00 (Briefing.com consensus of $44.0 bln; Novmeber was -$1.2 bln)

Upcoming Fed/Treasury Events:

·         Philadelphia Fed President Charles Plosser (voting FOMC member, hawkish) to speak tomorrow at 12:45

·         Dallas Fed President Richard Fisher (voting FOMC member, hawkish) to speak tomorrow at 13:20

Other International Events of Interest

·         India's CPI eased to 9.9% YoY (9.9% YoY expected, 11.6% YoY previous)- released after the Sensex close

On other news.... 

Currencies 

Dollar Dips for Third Day: 10-yr: +05/32..2.832%..USD/JPY: 102.88..EUR/USD: 1.3665

·         The Dollar Index probes its lowest levels of U.S. trade as action presses the 80.60 level. 

·         Early buying ran the Index briefly above the 80.75 mark, but trade has drifted lower throughout the session as a lack of data and news has made for a lackluster action. Click here to see a daily Dollar Index chart.

·         EURUSD is -5 pips @ 1.3660 as action hovers near the unchanged line. The single currency has seen just a 20 pip range during U.S. trade with action holding on the highs. Resistance in the 1.3650/1.3700 area provides a headwind for the second straight day. Eurozone industrial production is due out. 

·         GBPUSD is -115 pips @ 1.6370 as heavy selling has dropped the pair to its lowest level since Christmas. Sterling has come under pressure to start the year as data has fallen short of the lofty expectations that were set at the end of 2013. The 1.6300/1.6400 support band is helped by the 50 dma (1.6296). British data includes CPI, PPI input, and RPI.

·         USDCHF is -10 pips @ .9005 as sellers remain in control for a third day. Today's weakness has pushed action back below the 50 dma (.9024), causing many to shift their focus towards .8975 support. 

·         USDJPY is -120 pips @ 102.95 as heavy selling persists for a second session. The two-day slide has dropped action to its lowest levels in nearly a month as trade checks up at the key support level. Tomorrow's action will be noteworthy as Japanese banks return from holiday. Japan's current account balance will cross the wires tonight. 

·         AUDUSD is +75 pips @ .9065 as a strong bod persists for a second session. Today's advance has lifted the hard currency to its best levels since the middle of December, and has action probing the 50 dma (.9092). What was resistance in the .8950 area will now be looked at as support. China's new loans are tentatively scheduled for release. 

·         USDCAD is -20 pips @ 1.0870 as early gains have turned into losses. The pair tested Friday's highs early in the session, but reversed to its lows ahead of release of Bank of Canada Business Outlook Survey. The Survey suggested while the economy is showing signs of resiliency there are still reasons to be concerned (weak demand and domestic uncertainty). What was previously resistance in the 1.0700 area should now be looked at as support.

Jason's Commentaries


The market turned red totally last night. The market started with a flat sentiment last night, only after noon, the market suddenly turned down... all the way till the close. All indices went down more than 1% last night. Internals were all pointing to the bear side, volumes was high at 729m shares traded on the NYSE. The main laggard on the Dow was Microsoft, dragging down Nasdaq and S&P500 as well. Merck and HP managed to hold the Dow up to make Dow the index with the less steep drop. Consumer discretionary is the worst performer last night with a 2% across its sector. It seems that the retail companies are being hit badly as Dec retail sales is not well.

On the technical side, it seems that the market just broke down from the consolidation and it might be a head and shoulders broke down. Looking forward, the market might be dragged lower if the banks' earnings are bad. While on the economic reports, the retail reports is likely to be an non-event especially the retail sales from different companies had been reported. I suspect that the market will found some footing tonight if the banks' earnings don't suck. 

Market Call: FLAT to upside

Date: 14 Jan 2014