15 Jan 2014 AMC- Nasdaq, Russells and S&P500 broke new high on Bank of America's upbeat earnings

15 Jan 2014 AMC- Nasdaq, Russells and S&P500 broke new high on Bank of America's upbeat earnings

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: + 0.8%

·         Germany's DAX: + 2.0%

·         France's CAC: + 1.4%

·         Spain's IBEX: + 1.4%

·         Portugal's PSI: + 0.9%

·         Italy's MIB Index: + 1.6%

·         Irish Ovrl Index: + 0.6%

·         Greece ATHEX Composite: + 1.8%

Before Market Opens

S&P futures vs fair value: +3.00. Nasdaq futures vs fair value: +12.70.
The S&P 500 futures trade three points above fair value.

Markets rallied across most of Asia, buoyed by yesterday's strong gains on Wall Street. In economic data, China's M2 money supply was light at 13.6% year-over-year (13.9% expected) while new loans (CNY438 billion actual versus CNY589 billion expected) also missed. Elsewhere, Japan's M2 money stock rose 4.2% year-over-year (4.5% forecast, 4.4% prior) and Machine Tool Orders jumped 28.0% year-over-year (15.4% last). Also of note, India's Wholesale Price Index eased to 6.2% year-over-year (7.0% expected, 7.5% previous), a five-month low. 

·         Japan's Nikkei jumped 2.5%, posting its best gain in four months and nearly erasing Tuesday's entire fall as the weak yen fueled the rally. Exporters were in favor as TDK surged 6.8% and Toyota Motor gained 1.5%. 

·         Hong Kong's Hang Seng added 0.5% but trade remained trapped in the tight range that has been in place for nearly all of 2014. PC maker Lenovo was the top performer, climbing 5.5%, to its best level since the spring of 2000, as momentum continues following last week's upbeat PC shipments report. The company posted solid numbers despite many of its competitors seeing weak demand. 

·         China's Shanghai Composite slipped 0.2% as shares traded lower for the eighth time in ten 2014 sessions. Financials lost ground after new loans fell short of estimates. ICBC gave up 1.7% and Huxia Bank slid 2.4%. 

Major European indices sit at their best levels of the session after rallying steadily through the first half of action. Investors received a handful of economic data points as eurozone trade surplus expanded to EUR16.00 billion from EUR14.30 billion (EUR16.70 billion forecast), Great Britain's CB Leading Index rose 0.5% month-over-month (0.4% last), and Swiss retail sales rose 4.2% year-over-year (1.6% consensus, 1.6% last). Elsewhere, Spain's CPI ticked up 0.1% month-over-month, as expected (0.2% prior). On an annualized basis, CPI rose 0.3% (0.2% forecast, 0.2% prior).

Among news of note, the Bank of France has proposed cutting the Livret savings rate from 1.25% to 1.00%, but the proposal has been met with pushback from Finance Minister Pierre Moscovici. 

·         Great Britain's FTSE is higher by 0.5% with Burberry in the lead. The apparel manufacturer trades higher by 4.9% after reporting better-than-expected holiday sales. Financials have also displayed strength with Prudential and Standard Life both up near 2.3%. 

·         In France, the CAC holds an advance of 0.6% as bank shares outperform. BNP Paribas and Credit Agricole hold gains close to 2.0% apiece. On the downside, consumer names Danone, L'Oreal, and Pernod Ricard hold display losses between 0.7% and 1.0%. 

·         Germany's DAX trades up 1.3% with Deutsche Lufthansa leading. The airline is higher by 4.9%. Utilities also outperform with E.ON and RWE up 1.9% and 3.4%, respectively.

Market Internals

Market Internals -Technical-
The Nasdaq closed up 32 (+0.76%) at 4215, the Dow closed up 108 (+0.66%) at 16482, and the S&P 500 closed up 10 (+0.52%) at 1848. Action came on above average volume (NYSE 704 mln vs. avg. of 677; NASDAQ 1979 mln vs. avg. of 1741), with advancers outpacing decliners (NYSE 1992/1061, NASDAQ 1714/885) and new highs outpacing new lows (NYSE 250/19, NASDAQ 251/13). 

Relative Strength: 
Lithium-LIT +2.31%, Copper Miners-COPX +2.21%, Oil-USO +2.21%, Indonesia-IDX +2.14%, Rare Earths-REMX +2.02%, Metals and Mining-XME +1.93%, Spain-EWP +1.51%, Italy-EWI +1.51%, Chile-ECH +1.48%, Germany-EWG +1.34%.

Relative Weakness: 
Thailand-THD -2.14%, Sugar-SGG -1.88%, Middle East and Africa-GAF -1.63%, Malaysia-EWM -1.55%, Corn-CORN -1.41%, Coffee-JO -1.15%, Grains-JJG -0.85%, Egypt-EGPT -0.81%, Swiss Franc-FXF -0.71%, Natural Gas-UNG -0.66%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: S&P 500 Notches First Record High in 2014
Equities built on their Tuesday gains, turning in their best two-day stretch since mid-December. During that two-day swing, the S&P 500 jumped from its lowest level of the year to a fresh record close of 1848.38. Stocks spent the entire session in positive territory after receiving an opening boost from the World Bank hiking its 2014 global GDP growth forecast to 3.2% from 3.0%.

Seven of ten sectors finished in the green with cyclical groups driving the advance. Financials (+1.2%) and technology (+1.2%) displayed early strength and their outperformance lasted into the close.

The financial sector was buoyed by its top components after Bank of America (BAC 17.15, +0.38) beat on earnings and revenue. The stock jumped 2.4% while JPMorgan Chase (JPM 59.49, +1.75) and Wells Fargo (WFC 46.40, +0.81), both of which turned in satisfactory reports on Tuesday, gained 3.0% and 1.8%, respectively.

Elsewhere, the tech sector was underpinned by some of its most influential members. Apple (AAPL 557.36, +10.97) did some heavy lifting, climbing 2.0% amid upbeat commentary surrounding its upcoming iPhone launch in China. Chipmakers also displayed strength after Intel (INTC 26.67, +0.16) received an upgrade for the second day in a row. The stock gained 0.6% while the PHLX Semiconductor Index rose 0.9%.

Outside of the two largest sectors, gains in other areas were much more subdued. Industrials (+0.7%) and materials (+0.7%) outperformed while the remaining cyclical groups—consumer discretionary (+0.2%) and energy (-0.3%)—lagged.

Notably, the discretionary sector was pressured by homebuilders and retailers. The iShares Dow Jones US Home Construction ETF (ITB 24.31, -0.05) and SPDR S&P Retail ETF (XRT 84.02, -0.29) both slipped 0.3% with the retail ETF extending its 2014 loss to 4.6%.

On the countercyclical side, telecom services (+1.5%) outperformed while consumer staples (unch), health care (-0.1%), and utilities (-0.2%) lagged.

Treasuries posted modest losses as the 10-yr yield ticked up one basis point to 2.88%.

Participation was a bit below average as 704 million shares changed hands at the NYSE.

Also of note, the Federal Reserve released its January Beige Book, but true to form, the report was essentially ignored by the market. The report indicated that during the six weeks of 2013, the twelve Fed Districts observed a continued expansion of economic activity. Nine districts characterized the expansion as ‘moderate' while Boston and Philadelphia Districts described the pace as ‘modest.' For its part, the Kansas City region saw little change in activity.

With regard to manufacturing, nearly all districts reported steady growth in the sector but Kansas City saw a decline in production and shipments.

Lastly, prices were largely unchanged across all regions. However, Kansas City was singled out again in this section for observing a rise in some raw material prices.

Today's economic news included three data points: 

·         December PPI increased 0.4% while the Briefing.com consensus expected an uptick of 0.3%. Energy prices were a main contributor, increasing 1.6%. Most of the gain in energy costs was a result of a 2.2% increase in gasoline prices. Food prices fell 0.6% due to a 13.4% decrease in vegetable prices. Excluding food and energy, core prices unexpectedly spiked in December. Prices increased 0.3%, the largest monthly jump since rising 0.5% in July 2012. The consensus forecast called for a more modest uptick of 0.1%. 

·         The Empire Manufacturing Survey for January jumped to 12.5 from 1.0 while the Briefing.com consensus expected the survey to improve to 3.5. 

·         The weekly MBA Mortgage Application Index jumped 11.9% to follow last week's 4.2% decline. 

Tomorrow, weekly initial claims and December CPI will be released at 8:30 ET while Net long-term TIC flows for November will be announced at 9:00 ET. The January Philadelphia Fed survey and the January NAHB Housing Market Index will both be released at 10:00 ET. 

·         Nasdaq +0.9% YTD 

·         Russell 2000 +0.7% YTD 

·         S&P 500 0.0% YTD 

·         DJIA -0.6% YTD

Commodities

COMEX Metals Closing Prices

·         Feb gold fell $6.20 to $1239/oz

·         Mar silver fell $0.15 to $20.13/oz

·         Mar copper rose 2 cents to $3.36/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Mar corn fell 6 cents to $4.26/bushel

·         Mar wheat fell 12 cents to $5.68/bushel

·         Mar soybeans rose 12 cents to $13.18/bushel

·         Feb ethanol rose 1 cent to $1.91/gallon

·         Mar sugar (#16 (U.S.)) rose 0.02 of a penny to 20.28 cents/lbs

NYMEX Energy Closing Prices

·         Feb crude oil rose $1.64 to $94.16/barrel

·         Feb natural gas fell 5 cents to $4.32/MMBtu

·         Feb heating oil settled $0.05 higher at $2.98/gallon

·         Feb RBOB settled unch at $2.62/gallon

 

Treasuries

Next Day In View 

Economic Commentary

Economic Summary: December Core PPI ahead of expectations; Beige Book sees moderate expansion in most regions; CPI tomorrow at 8:30
Economic Data Summary:

·         Weekly MBA Mortgage Applications 11.9% vs Briefing.com consensus of ; Last Week was 2.6%

·         December PPI 0.4% vs Briefing.com consensus of 0.3%; November was -0.1%

·         December Core PPI 0.3% vs Briefing.com consensus of 0.1%; November was 0.1%

o    Food prices fell 0.6% due to a 13.4% decrease in vegetable prices. Excluding food and energy, core prices unexpectedly spiked in December. Prices increased 0.3% in December, the largest monthly increase since rising 0.5% in July 2012. The consensus forecast called for a more modest 0.1% increase. The jump in core prices does not look to be a lasting event. Pressures down the manufacturing pipeline have been weak for several months. That did not change in December. Core intermediate prices increased only 0.2%. 

·         January Empire Maufacturing 12.5 vs Briefing.com consensus of 3.5; December was 1.0

Fed/Treasury Events Summary:

·         Fed's Evans (non voter, dovish) said Fed decision to scale back QE was to rebalance policy mix, not lessen accomodation; said inflation remains too low; expects unemployment to fall to 6% or below by end of 2015; sees 2013 GDP growth of 2.75%.

·         Fed released its Beige Book. Key comments from it are as follows:

o    Reports from the twelve Federal Reserve Districts suggest economic activity continued to expand across most regions and sectors from late November through the end of the year. Nine Districts indicated the local economy was expanding at a moderate pace; among these, the Atlanta and Chicago Districts saw conditions improve compared with the previous reporting period. Boston and Philadelphia cited modest growth, while Kansas City reported the economy held steady in December.

Upcoming Economic Data:

·         Weekly Initial Claims due out Thursday at 8:30 (Briefing.com consensus of 333K; Last Week was 330K)

·         Weekly Continuing Claims due out Thursday at 8:30 (Briefing.com consensus of 2.853 M ; Last Week was 2.865 M )

·         December CPI due out Thursday at 8:30 (Briefing.com consensus of 0.3%; November was 0.0%)

·         December Core CPI due out Thursday at 8:30 (Briefing.com consensus of 0.2%; November was 0.2%)

·         November Net Long Term TIC Flows due out Thursday at 9:00 (Briefing.com consensus of ; October was $35.4 bln)

·         Janurary Phidelphia Fed due out Thursday at 10:00 (Briefing.com consensus of 8.0; December was 7.0)

·         Janurary NAHB Housing Market Index due out Thursday at 10:00 (Briefing.com consensus of 57; December was 58)

Upcoming Fed/Treasury Events:

·         Atlanta Fed President Dennis Lockhart (not a voting FOMC member, moderate) to speak tonight at 17:20

·         San Fran Fed President John Williams (non voter, moderate) to speak tomorrow at 9:15

·         Fed Chairman Bernanke to speak about Central Bank Challenges tomorrow at 11:10

Other International Events of Interest

·         India's Sensex (+1.2%) saw every component gain as shares rallied on the back of the the Wholesale Price Index easing to a five-month low. The tame number has ignited hopes the Reserve Bank of India will cut rates at its next meeting in an effort to revive growth. 

On other news.... 

Drybulk shipping rates finally show the first gain of the year; YTD losses (down 40%) are something to keep an eye on
This morning, the Baltic Dry Index (BDI) is showing a gain of 4 pts to 1374, this time due to gains in capesize rates. Capesize rates rose $280 to $13,168/day, panamax rates fell $54 to $12,534 and supramax rates fell $65 to $12,364/day.

Before today's gains, the BDI was down 40% YTD to 1,370 in its worst start of the year in 30 years. 

In today' action, drybulk stocks are showing nice gains: EGLE +9.8%, FREE +8.6%, SHIP +5%, DRYS +4.4%, SB +4.1%, SBLK +4.1%, NM +4%, VLCCF +2.5%, PRGN +2.3%, GNK +2.2%, NMM +1.8%, DCIX +0.8%, SFL +0.7%.

EIA Petroleum Inventory Data
The EIA reports that for the week ending Jan 10: 

·         Crude oil inventories had a draw of 7.658 mln (consensus called for a draw of 0.6-1.3 mln)

·         Gasoline inventories had a build of 6.183 mln (consensus called for a build of 2.5 mln)

·         Distillate inventories had a draw of 1.023 mln (consensus called for a build of 1.4 mln)

·         Change in refinery utilization is at -2.3%

Currencies 

Dollar Probes 81.00: 10-yr: -02/32..2.886%..USD/JPY: 104.60..EUR/USD: 1.3597

·         The Dollar Index holds on session highs near 81.10 following the release of the Fed's latest Beige Book. Click here to see a daily Dollar Index chart.

·         Commentary showed the economy expanded at a ‘moderate' pace in most districts from late November through the end of 2013. 

·         Today's gains have the Index contending with its best close since November. 

·         EURUSD is -80 pips @ 1.3595 as sellers look to have taken control after four days of gains. Action in the single currency has favored the downside throughout the session as reports of weaker than expected growth in Germany weigh. The 1.3550 level is aided by the 100 dma (1.3555), and will be watched closely in the days ahead. Eurozone CPI data will accompany the ECB Monthly Bulletin. 

·         GBPUSD is -75 pips @ 1.6365 as today's weakness has the pair on track to post its lowest close of 2014. A quiet session in terms of news and data has trade pressing into the lower half of the 1.6250/1.6550 range that has been in place since the beginning of December. 

·         USDCHF is +65 pips @ .9090 as the current two-day win streak has mitigated most of the losses from the previous three sessions. Resistance in the .9100 region will continue to provide headwinds, but bulls will not breathe easy until they retake the 200 dma (.9235). Swiss National Bank Chairman Thomas Jordan will speak in Zurich. 

·         USDJPY is +45 pips @ 104.65 as the pair posts a second day of gains. Action has rallied sharply off 103.00 support, and with a thrust through 105.00 will see a retest of its best levels since October 2008. Japan's core machinery orders and tertiary industry activity will be released tonight. 

·         AUDUSD is -55 pips @ .8910 as sellers remain in control for a second session following the weak Chinese data released overnight. The hard currency nicked its 50 dma (.9085) just two days ago, but sellers emerged at the level and have maintained control ever since. The .8850 level remains critical with a breakdown leading to the lowest print since the summer of 2010. Australia's MI Inflation Expectations are due out ahead of employment change and the unemployment rate. 

·         USDCAD is +5 pips @ 1.0950 as trade looks to put in its seventh gain in the past eight sessions. An early bid ran the pair to nearly 1.1100, marking levels last seen in September 2009. Canadian data out tomorrow is limited to foreign securities purchases.

Jason's Commentaries


Now that the market is in the mood for earnings, it is starting to cause a lot of uncertainty in the market. As BoA beats their top and bottom line, beige book stating that states are expanding on a moderate pace, and a surprisingly good Empire State Manufacturing report, market just went higher last night. Dow was the only index not breaking the high yet. I'm expecting the market to go much higher as 3 of the 4 indices broke their respective highs. On the internals, we are have a bullish convergence and the volumes look pretty healthy. The main mover of the market last night were Tech and Financials. Tech was being led by Microsoft, Cisco, Verizon and Apple. Each gaining above 1.5%. While for the Financials, the main leader is apparently BoA. While the other financials were dragged up by Sympathy. Now that Goldman and Citi released their earnings, Goldman beats top and bottom line, while Citi misses both top and bottom line. The market is likely to take the chance to profit take tonight. On the technicals, we have a clear breakout from the resistance and the market is likely to go a lot more higher. While going through the earnings season, stay safe from the volatility.    

Market Call: DOWN

Date: 16 Jan 2014