22 Jan 2014 AMC- Dow lagged as IBM announced poor earnings

22 Jan 2014 AMC- Dow lagged as IBM announced poor earnings 

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: -0.1%

·         Germany's DAX: -0.1%

·         France's CAC: 0.0%

·         Spain's IBEX: -0.8%

·         Portugal's PSI: -3.3%

·         Italy's MIB Index: -0.2%

·         Irish Ovrl Index: + 0.2%

·         Greece ATHEX Composite: + 0.6%

Before Market Opens

European Markets Update: CAC UNCH, FTSE -0.1%, DAX -0.1%
Core European indices hover just below their flat lines while markets in Italy (-0.8%) and Spain (-0.9%) lag. Investors received several economic data points as Great Britain's Claimant Count declined 24,000 (-35,000 expected, -34,300 last) while the Unemployment rate fell to 7.1% from 7.4% (7.3% consensus), putting it just 0.1% above the BoE's threshold for policy tightening. Separately, Public Sector Net Borrowing rose GBP10.40 billion (GBP12.30 billion expected, GBP15.10 billion last) and Average Earnings + Bonus increased 0.9% (1.0% forecast, 0.9% last). Elsewhere, Spain's trade deficit widened to EUR1.76 billion from EUR1.36 billion (deficit of EUR0.50 billion expected) and Swiss ZEW Expectations ticked down to 36.4 from 39.4 (44.0 consensus). 

·         France's CAC trades flat. Consumer names Danone and L'Oreal hold respective gains of 1.8% and 1.2% while producers of basic materials lag. Lafarge is lower by 2.0% and Vallourec holds a loss of 1.4%. 

·         Great Britain's FTSE is lower by 0.1% as financials lag. Royal Bank of Scotland and RSA Insurance Group are both down near 3.0%. 

·         In Germany, the DAX holds a loss of 0.1% as banks lag while utilities outperform. Allianz, Deutsche Bank, and Muenchener Re are all down between 0.6% and 1.9%. On the upside, E.ON is higher by 0.9% and RWE trades up 3.0%.

Market Internals

Market Internals -Technical-
The Nasdaq closed up 17 (+0.41%) at 4243, the S&P 500 closed up 1 (+0.06%) at 1845, and the Dow closed down 41 (-0.25%) at 16373. Action came on mixed volume (NYSE 614 mln vs. avg. of 676; NASDAQ 1879 mln vs. avg. of 1740), with advancers outpacing decliners (NYSE 2010/1104, NASDAQ 1505/1094) and new highs outpacing new lows (NYSE 188/26, NASDAQ 242/20).

Relative Strength: 
Natural Gas-UNG +4.46%, Indonesia-IDX +2.74%, China 25 Index-FXI +2.40%, Egypt-EGPT +1.93%, Oil and Gas Exploration-XOP +1.84%, Gasoline-UGA +1.79%, Oil-USO +1.68%, U.S. Home Construction-ITB +1.58%, Turkey-TUR +1.56%, Chile-ECH +1.46%.

Relative Weakness: 
Junior Gold Miners-GDXJ -4.56%, Silver Miners-SIL -3.15%, Vietnam-VNM -1.68%, Volatility-VXX -1.50%, Copper Miners-COPX -1.48%, Coffee-JO -1.27%, Canadian Dollar-FXC -1.05%, Spain-EWP -0.95%, Brazilian Real-BZF -0.86%, Canada-EWC -0.66%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: Stocks End Mixed Once Again
Equities endured an uninspiring Wednesday session, which unfolded in similar fashion to Tuesday's affair. Like yesterday, the major averages ended mixed with the Dow Jones Industrial Average (-0.3%) coming out on the losing end while the Nasdaq (+0.4%) and S&P 500 (+0.1%) eked out modest gains.

The price-weighted Dow spent the entire session in the red as 19 of its 30 components registered losses. Most notably, the second-largest index member, IBM (IBM 182.25, -6.18), plunged 3.3% after beating its Capital IQ earnings estimate by 13 cents on below-consensus revenue. Despite the bottom-line beat, the report was scrutinized due to the company accounting for a lower tax rate than in previous quarters.

On the upside, another large index member, United Technologies (UTX 116.12, +1.13), gained 1.0% after reporting a bottom-line beat on below-consensus revenue. Furthermore, the stock factored into the outperformance of the industrial sector (+0.2%), which also drew strength from transports. The Dow Jones Transportation Average jumped 1.1% with help from railroads after Norfolk Southern (NSC 92.94, +4.23) reported an earnings beat.

Like industrials, most other cyclical sectors finished just ahead of the broader market. The discretionary sector (+0.3%) rallied despite cautious action among retailers after Coach (COH 49.38, -3.17) reported disappointing earnings and said its North American comparable-store sales tumbled 13.6% during the quarter.

Elsewhere, energy (+0.3%) climbed as crude oil rose 1.8% to $96.72/bbl while materials (-0.9%) lagged after Freeport-McMoRan (FCX 34.52, -0.74) reported a top-line miss.

The remaining cyclical groups, financials (+0.1%) and technology (unch) ended little changed.

On the countercyclical side, health care (+0.1%) and utilities (+0.1%) finished in-line with the S&P 500 while consumer staples (-0.1%) and telecom services (-0.7%) ended in the red.

Treasuries finished in the red as the 10-yr yield ticked up three basis points to 2.86%. Trading volume was well below average with only 616 million shares changing hands at the NYSE.

Today's economic data was limited to the weekly MBA Mortgage Index, which rose 4.7% to follow last week's 11.9% increase.

Tomorrow, weekly initial claims will be reported at 8:30 ET while the November FHFA Housing Price Index will be released at 9:00 ET. December Existing Home Sales and Leading Indicators will cross the wires at 10:00 ET. 

·         Nasdaq Composite +1.6% YTD 

·         Russell 2000 +1.6% YTD 

·         S&P 500 -0.2% YTD 

·         Dow Jones Industrial Average -1.2% YTD

Commodities

COMEX Metals Closing Prices

  Feb gold fell $3.10 to $1238.60/oz 

·         Gold extended yesterday's losses as the dollar index recovered into positive territory. The yellow metal retreated from its session high of $1242.70 set moments after floor trade opened and settled just above its session low of $1238.10, booking a loss of 0.2%. 

  Mar silver fell $0.01 to $19.84/oz 

·         Silver oscillated between positive and negative territory today, with prices dipping to a session low of $19.83. Unable to gain momentum, it settled with a 0.1% loss. 

  Mar copper fell 1 cent to $3.34/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Mar corn rose 1 cent to $4.26/bushel 

·         Mar wheat fell 1 cent to $5.61/bushel 

·         Mar soybeans settled unchanged at $12.81/bushel

·         Feb ethanol fell 4 cents to $1.85/gallon 

·         Mar sugar (#16 (U.S.)) rose 0.01 of a penny to 20.32 cents/lbs

 NYMEX Energy Closing Prices

  Mar crude oil rose $1.74 to $96.72/barrel 

·         Crude oil rose for a third consecutive session ahead of tomorrow's release of weekly inventory data. Prices lifted from a session low of $95.64 and continued to trend higher for the remainder of floor trade. The energy component eventually settled with a 1.8% gain. 

  Feb natural gas rose 26 cents to $4.69/MMBtu 

·         Natural gas extended yesterday's gains as it gained strength on a strong Northeast winter storm. It trended higher after coming off its session low of $4.57 and settled just below its session high of $4.70, booking a solid 5.9% gain. 

  Mar heating oil rose 3 cents to $2.98/gallon 

  Mar RBOB rose 6 cents to $2.69/gallon

Treasuries

Treasuries Close on Lows: 10-yr: -07/32..2.860%..USD/JPY: 104.40..EUR/USD: 1.3548

·         Treasuries finished on their lows as an afternoon rally stalled out and trade slipped back onto the lows ahead of the cash close. Click here to see an intraday yields chart.

·         Sellers were in control throughout the session, as is usually the case on days when meaningful data and news are lacking. 

·         The complex tested its best levels of the session in mid-morning trade before seeing a sharp reversal and retest of the lows despite the strong demand at the 4W bill auction. 

·         The auction drew 0.000% and a bid/cover of 6.63x, the strongest since December 2011. A +1.2bp uptick ran the 2y up to 0.400%. 

·         The front of the curve remains on many traders' radars as the February 7 debt ceiling deadline is quickly approaching. 

·         Selling continued to have the biggest impact on the belly of the curve as the 5y climbed +5.3bps to 1.694%. Today's close marked the highest for the yield in two weeks, and has action probing 1.700% resistance that guards the 2014 highs near 1.750%. 

·         The 10y added +3.5bps and finished at 2.860%. Today's action saw the benchmark yield retake its 50 dma (2.848%) after support in the 2.820% area held strong.

·         Outperformance at the long end saw the 30y add just +2bps. The yield on the long bond settled @ 3.759%, advancing for the first time in four sessions. 

·         Selling swung the yield curve steeper as the 2-10-yr spread widened to 246bps. 

·         Precious metals slipped with gold -$3 @ $1239 and silver -$0.02 @ $19.85. 

·         Data: Initial and continuing claims (8:30), FHFA Housing Price Index (9), existing home sales, and leading indicators (10).

Next Day In View 

Economic Commentary

Economic Summary: US Mortgage Applications rise 4.7%; BoJ remains steady on policy; Existing home sales tomorrow at 10:00
Economic Data Summary:

·         Weekly MBA Mortgage Applications 4.7% (Last Week was 11.9%),

Upcoming Economic Data:

·         Weekly Initial Claims due out Thursday at 8:30 (Briefing.com consensus of 327K; Last Week was 326K)

·         Weekly Continuing Claims due out Thursday at 8:30 (Briefing.com consensus of 2.900 M ; Last Week was 3.030 M )

·         November FHFA Housing Price Index due out Thursday at 9:00 (Briefing.com consensus of ; October was 0.5%)

·         December Existing Home Sales due out Thursday at 10:00 (Briefing.com consensus of 4.90 M ; November was 4.90 M )

·         December Leading Indicators due out Thursday at 10:00 (Briefing.com consensus of 0.2%; November was 0.8%)

Other International Events of Interest

·         The Bank of Japan made no changes to its policy stance, holding its key interest rate unchanged at 0-0.10%, as expected. Separately, the All Industries Activity Index ticked up 0.3% month-over-month (0.4% forecast, -0.4% last). 

·         Australia's CPI rose 0.8% quarter-over-quarter (0.5% consensus, 1.2% prior) while the annualized reading rose 2.7% (2.5% forecast, 2.2% last). Also of note, trimmed mean CPI rose 0.9% quarter-over-quarter (0.6% forecast, 0.6% last). 

On other news.... 

  Abbott Labs (ABT) reports EPS in-line, misses on revs; guides FY14 EPS in-line; plans to repurchase $2 bln in stock this year

  Advanced Micro (AMD) reports EPS in-line, beats on revs; guides Q1 revs in-line

  Allegheny Tech (ATI) beats by $0.13, misses on revs

  Coach (COH) misses by $0.05, misses on revs; N Am comps of -13.6%

  Freeport-McMoRan (FCX) beats by $0.06, misses on revs

  IBM (IBM) beats by $0.13, misses on revs; guides FY14 EPS in-line

  Motorola Solutions (MSI) beats by $0.05, reports revs in-line; guides Q1 below consensus; guides FY14

  Norfolk Southern (NSC) beats by $0.13, beats on revs

  Northern Trust (NTRS) reports EPS in-line, revs in-line 

  Progressive (PGR) beats by $0.08, reports revs in-line

  St. Jude Medical (STJ) beats by $0.01, reports revs in-line; guides Q1 EPS in-line, revs below consensus; guides FY14 EPS in-line, revs in-line

  Texas Instruments (TXN) reports EPS in-line, beats on revs; guides Q1 EPS towards the low end of expectations, revs in-line

  United Tech (UTX) beats Q4 EPS, misses on revs; reaffirms FY14 EPS, revs guidance

  U.S. Bancorp (USB) beats by $0.01, reports revs in-line

  Zions Bancorp (ZION) reports combined impact of the Volcker Rule and the IFR, and Zions' decision to sell certain CDOs, is expected to result in pre-tax securities impairment charges of between $135 mln and $145 mln; sees Q4 loss






Currencies 

Dollar Presses Session Highs: 10-yr: -08/32..2.860%..USD/JPY: 104.46..EUR/USD: 1.3540

·         The Dollar Index drifts on session highs near 81.20 as a relatively subdued trade progresses into the final hour of trading. Click here to see a daily Dollar Index chart.

·         Today's action has centered on the flat line near 81.10 with a light afternoon bid running action back up to the overnight highs. 

·         Recent trade has the Index holding near four-month highs, but dollar bulls have so far been unable to reclaim the 200 dma (81.57).

·         EURUSD is -10 pips @ 1.3545 as a quiet session nears the close. A lack of data and news from the region has led to a tight 40 pip range throughout the U.S. session as action continues to struggle in its attempt to retake 1.3550/1.3600 resistance. Eurozone data out tomorrow is heavy as Flash Manufacturing and Services PMI from around the region accompany the current account balance and Spanish unemployment. 

·         GBPUSD is +100 pips @ 1.6575 as trade holds just off the highs. Today's bid was sparked by the drop to 7.1% (7.3% expected, 7.4% previous) in Britain's unemployment rate, and has action on track to post its best close since August 2011. Previous statements out of the Bank of England have suggested the central bank will consider tightening policy once the 7.0% unemployment threshold is breached. British data is limited to CBI Realized Sales. 

·         USDCHF is +15 pips @ .9115 as trade threatens its best close in two months. Today's trade has been locked in a tight 30 pip range as bulls and bears continue to do battle near .9100/.9120 resistance.

·         USDJPY is +15 pips @ 104.40 after the Bank of Japan kept policy unchanged at last night's meeting. Today's action made for an early test of 104.00 support, but that level was able to hold and trade is now on track to close at a one-week high. A run through 104.50 likely puts the 2014 highs back in play. 

·         AUDUSD is +40 pips @ .8845 as action climbs off its lowest levels since the summer of 2010. An early bid tested .8900, but sellers emerged in defense of resistance. Australia's MI Inflation Expectations will be released tonight ahead of China' HSBC Flash Manufacturing PMI. 

·         USDCAD is +110 pips @ 1.1075 as trade presses its best levels since August 2009. Igniting today's bid was the dovish commentary provided by the Bank of Canada while keeping its benchmark rate unchanged at 1.00%. The central bank indicated "inflation is expected to remain well below target for some time." Canada's retail sales are scheduled for tomorrow.

Jason's Commentaries


What a flat day that is.... the Dow was the only index lagging due to IBM's poor earnings. The tech suffered last night while the industrials managed to take some breather as names like UTX and LMT reported not bad earnings yesterday. Volumes were at 600 over mil shares traded on the NYSE. Materials were the biggest laggard last night. It seems that the Nasdaq and Russells broke into the high once again last night. S&P500 and Dow were the only 2 lagging behind. Technically speaking, I would be maintaining my bullish stance. However, China reports terrible HSBC PMI, causing the Asia markets to go down. US is likely go through a very bearish starts and is likely to make some of its losses back by the end of the trading session. 

Market Call: DOWN

Date: 23 Jan 2014