7 Jan 2014 AMC - Market logs in first gain in 2014, one day before FOMC minutes

7 Jan 2014 AMC - Market logs in first gain in 2014, one day before FOMC minutes

Market Summary 

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

·         UK's FTSE: + 0.4%

·         Germany's DAX: + 0.8%

·         France's CAC: + 0.8%

·         Spain's IBEX: + 2.9%

·         Portugal's PSI: + 2.5%

·         Italy's MIB Index: + 1.2%

·         Irish Ovrl Index: + 1.7%

·         Greece ATHEX Composite: + 2.7%

Before Market Opens

S&P futures vs fair value: +5.90. Nasdaq futures vs fair value: +13.50.
The S&P 500 futures trade six points above fair value.

Markets across Asia ended mixed as a quiet day for data and news had trade taking its cues from the choppy Monday session on Wall Street. Economic data of note was limited to Australia's trade deficit, which narrowed to $118 million from $358 million ($300 million deficit expected) as imports fell 1.0% month-over-month (+1.0% prior) while exports were unchanged month-over-month (0% prior). 

·         Japan's Nikkei lost 0.6%, slumping for a second session even though the yen weakened against the dollar. Heavyweight Fast Retailing shed 0.7%, bogged down by disappointing sales from its Uniqlo division. Exporters were mixed as Panasonic added 1.3% and Honda Motor fell 0.7%. 

·         Hong Kong's Hang Seng eked out a slim gain of 0.1% to end its modest two-day slide. Exporter Li & Fung surged 9.6% after the company said 2013 was a ‘solid' year. 

·         China's Shanghai Composite edged off five-month lows with a modest gain of 0.1% as shares advanced for the first time in four days. Trade was supported by companies linked to Shanghai's free-trade zone as Shanghai International Port rallied 7.9% and BesTV New Media climbed 8.4%. 

Major European indices hover near their best levels of the session while peripheral indices outperform after Ireland made its official return to international bond markets.

Investors received several economic data points. Eurozone CPI increased 0.8% year-over-year (0.9% forecast, 0.9% prior) while core CPI rose 0.7% year-over-year (0.8% forecast, 0.9% last). Separately, PPI ticked down 0.1% month-over-month (-0.1% prior, -0.5% last) while the year-over-year reading fell 1.2% (-1.3% expected, -1.3% previous). Elsewhere, Germany's retail sales increased 1.5% month-over-month (0.6% consensus, -0.8% prior) while the year-over-year reading rose 1.6% (-0.1% prior). Separately, unemployment decreased by 15,000 (-1,000 expected, 9,000 prior) while the unemployment rate held steady at 6.9%, as expected. Also of note, French Consumer Confidence ticked up to 85 from 84 (84 forecast). 

·         In France, the CAC trades higher by 0.4% with financials displaying considerable strength. BNP Paribas, Credit Agricole, and Societe Generale are all up between 2.6% and 4.8%. Producers of basic materials lag with Air Liquide and Solvay down 1.4% and 2.7%, respectively. 

·         Great Britain's FTSE is higher by 0.4%. Financials are also showing strength with HSBC, Lloyds Banking Group, and Old Mutual up between 1.7% and 2.9%. Utilities lag with Centrica lower by 1.3% and Severn Trent down 2.5%. 

·         Germany's DAX trades up 0.6% as banks pave the way. Commerzbank is higher by 4.3% and Deutsche Bank holds an advance of 2.9%. On the downside, Fresenius SE and Henkel AG trade lower by 1.2% and 0.6%, respectively. 

·         In Spain, the IBEX is higher by 2.0%. Banco Popular Espanol, Banco Santander, and CaixaBank trade with gains between 3.0% and 4.8%.

Market Internals

Market Internals -Technical-
The Nasdaq closed up 40 (+0.96%) at 4153, the Dow closed up 106 (+0.64%) at 16531, and the S&P 500 closed up 11 (+0.61%) at 1838. Action came on near to above average volume (NYSE 686 mln vs. avg. of 685; NASDAQ 2117 mln vs. avg. of 1725), with advancers outpacing decliners (NYSE 2050/1060, NASDAQ 1815/785) and new highs outpacing new lows (NYSE 140/10, NASDAQ 166/9). 

Relative Strength: 
Thailand-THD +3.23%, Austria-EWO +3.01%, Spain-EWP +2.9%, Greece-GREK +2.65%, Biotechnology-XBI +2.4%, Clean Energy-PBW +2.12%, Vietnam-VNM +2.05%, Wind Energy-FAN +1.88%, U.S. Health Care-IHF +1.83%, Internet Composite-FDN +1.57%. 

Relative Weakness: 
Coffee-JO -3.65%, Volatility-VXX -2.36%, Silver-SLV -1.52%, Poland-EPOL -1.18%, Canadian Dollar-FXC -1.12%, Coal-KOL -1.07%, Junior Gold Miners-GDXJ -1.01%, Swiss Franc-FXF -0.61%, Australian Dollar-FXA -0.56%, India-INP -0.45%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: S&P 500 Logs First Gain of 2014
The S&P 500 settled higher by 0.6%, notching its first advance of 2014. Despite today's gain, the index remains lower by 0.6% through the first four sessions of the year.

The benchmark index notched its high during the initial 90 minutes before spending the remainder of the session in a narrow range. Meanwhile, the Nasdaq (+1.0%) inched to a fresh high during the late afternoon.

Nine of ten sectors registered gains while materials (-0.2%) spent the day in negative territory. The sector was pressured by steelmakers with Market Vectors Steel ETF (SLX 47.63, -0.21) falling 0.4%.

Outside of materials, most of the remaining cyclical groups posted solid gains. The financial sector was an exception as Bank of America (BAC 16.50, -0.16), Goldman Sachs (GS 178.29, -1.08), and JPMorgan Chase (JPM 58.32, -0.68) weighed. Bank of America lost 1.0% after spiking 7.0% over the past three sessions while JPMorgan Chase fell 1.2% after announcing its settlement stemming from the Madoff case will reduce fourth quarter net income by roughly $850 million. For its part, Goldman Sachs settled lower by 0.6% after Societe Generale initiated the stock with a ‘Sell' rating.

Elsewhere, the technology sector (+0.9%) finished among the leaders even as its top component, Apple (AAPL 540.04, -3.89), lost 0.7%, ending below its 50-day moving average. Other large-cap names picked up the slack as Google (GOOG 1138.86, +21.54) and Oracle (ORCL 37.85, +0.38) advanced 1.9% and 1.0%, respectively.

The outperformance of technology gave a boost to the Nasdaq, which also drew strength from biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 226.93, +3.11) jumped 1.4%. In turn, the health care sector (+1.0%) settled in the lead.

Other countercyclical groups held up fairly well as utilities (+0.9%) outperformed while consumer staples (+0.5%) and telecom services (+0.5%) settled just behind the S&P 500.

Treasuries registered modest gains as the 10-yr yield slipped one basis point to 2.95%.

Today's economic data was limited to the November trade deficit, which narrowed to $34.3 billion from a downwardly revised $39.30 billion (from $40.60 billion) while the Briefing.com consensus expected the deficit to come in at $40.40 billion. The decline in the trade deficit in November combined with the downward revision to the October data will likely boost our fourth quarter GDP estimates.

Unfortunately, most of the decline in the trade deficit was likely temporary. A large drop in petroleum-based demand was a catalyst for a significant contraction in imports. Meanwhile, a significant portion of export growth came from the unstable sales of civilian aircraft and aircraft engines.

Among news of note, the U.S. Senate approved Janet Yellen's nomination to lead the Federal Reserve with a 56.26 vote.

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while December ADP Employment Change will be reported at 8:15 ET. The FOMC minutes from the December meeting will be released at 14:00 ET and the day's data will be topped off with the Consumer Credit report, which will cross the wires at 15:00 ET. 

·         DJIA -0.3% YTD 

·         S&P 500 -0.6% YTD 

·         Russell 2000 -0.6% YTD 

·         Nasdaq -0.6% YTD

Commodities

Closing Commodities: Precious Metals Sell Off, Oil Gains

·         Commodities ended the day mixed with oil gaining modestly, precious metals declining and corn rising slightly

·         At the end of today's session, Feb crude oil rose $0.21 to $93.67/barrel, while Feb natural gas settled unchanged at $4.30/MMBtu

·         Feb gold lost $9.20 to $1229.20/oz and Mar silver declined $0.41 to $19.79/oz

COMEX Metals Closing Prices

·         Feb gold fell $9.20 to $1229.20/oz

·         Mar silver fell $0.41 to $19.79/oz

·         Mar copper rose 1 cent to $3.36/lbs

 CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Mar corn rose 2 cents to $4.26/bushel

·         Mar wheat fell 5 cents to $6.02/bushel

·         Mar soybeans rose 2 cents to $12.74/bushel

·         Feb ethanol rose 8 cents to $1.94/gallon

·         Mar sugar (#16 (U.S.)) rose 0.03 of a penny to 20.13 cents/lbs

NYMEX Energy Closing Prices

·         Feb crude oil rose $0.21 to $93.67/barrel

·         Feb natural gas remained unchanged at $4.30/MMBtu

·         Feb heating oil settled $0.02 higher at $2.96/gallon

·         Feb RBOB settled $0.03 higher at $2.68/gallon

Treasuries

Treasuries Close on Highs: 10-yr: +04/32..2.945%..USD/JPY: 104.52..EUR/USD: 1.3613

·         Treasuries ended on session highs, booking gains for the third time in four days. Click here to see an intraday yields chart. 

·         The complex spent the entire session in the green aside from a brief test of the flat line following this morning's narrower than anticipated trade deficit (-$34.3 bln actual v. -$40.4 bln expected). 

·         This morning's bid carried over into afternoon trade with maturities holding near their best levels of the session into this afternoon's auction. 

·         The disappointing $30 bln 3y note auction drew 0.799% and a light 3.25x bid/cover as a weak indirect takedown (27.9%) was partially offset by the strong showing from direct bidders (22.6%).

·         Some light selling surfaced following the auction, but dip-buyers emerged and ran trade to session highs ahead of the cash close. 

·         Ranges were tight across the curve, limited to 3.5bps. 

·         Buyers seemed to be focused on the maturities in the belly of the curve as those yields pressed lower by -2.5bps. 

·         The 5y slipped to 1.674%, marking its lowest close since December 20. A flush below 1.650% puts the 1.500/1.550% level in play. 

·         Traders continue to monitor the 10y, which settled @ 2.937%. The 2.900% level will be watched closely as a breakdown puts 2.800% support that is helped by both the 50 and 100 dma in jeopardy. 

·         Slight underperformance at the long end saw the 30y shed -1.7bps, ending @ 3.881%. 

·         Only the 2y ended the day higher, +0.4bps @ 0.405%. Today's close has trade nearing levels last seen in September, when the previous debt ceiling debate had just been resolved. 

·         A flatter yield curve developed as the 2-10-yr spread tightened to 253bps. 

·         Precious metals were lower with gold -@8 @ $1230 and silver -$0.30 @ $19.80. 

·         Data: MBA Mortgage Index (7), ADP Employment Change (8:15), the latest FOMC minutes (14), and consumer credit (15). 

·         Auction: Treasury will reopen $21 bln 10y notes.

Next Day In View 

Economic Commentary

Economic Summary: November Trade Deficit lower than expected (positive for Q4 GDP); Rosengren wants Q3 reduced only gradually; FOMC minutes Wednesday at 14:00
Economic Data Summary:

·         November Trade Balance -$34.3 bln vs Briefing.com consensus of ~$40.4 bln; October was revised to -$39.8 bln from -$40.6 bln

o     Unfortunately, most of the decline in the trade deficit was likely temporary. A large drop in petroleum-based demand was a catalyst for a significant contraction in imports. Meanwhile, a significant portion of export growth came from the unstable sales of civilian aircraft and aircraft engines. The goods deficit decreased by $4.9 bln in November to $53.9 bln from $58.8 bln in October. The services surplus rose to $19.7 bln from $19.5 bln. Export levels increased $1.7 bln, or roughly 0.9%, to $194.9 bln in November. The increase in exports came from industrial supplies and materials ($0.7 bln), capital goods ($0.3 bln), and motor vehicles ($0.1 bln). 

Fed/Treasury Events Summary:

·         Boston Fed President Eric Rosengren (non voter, dovish) spoke today and he said:

o    Policymakers need to consider all the costs of a slow recovery, relative to the risk of taking actions that could hasten recovery."As the economy continues to improve, we should reduce and ultimately remove the unusual support that the Federal Reserve's monetary policy has provided," Rosengren added.  But this support should be removed only gradually.  "This recovery has already been too slow, and we do not want premature tightening of monetary policy to delay the return to more normal economic conditions."

Upcoming Economic Data:

·         Weekly MBA Mortgage Applications due out Wednesday at 7:00 (Briefing.com consensus of ; Last Week was )

·         December ADP Employment Change due out Wednesday at 8:15 (Briefing.com consensus of 203K; November was 215K)

·         November Consumer Credit due out Wednesday at 14:00 (Briefing.com consensus of $15.2 bln; October was $18.2 bln)

Upcoming Fed/Treasury Events:

·         San Francisco Fed President John Williams (non voter, moderate) to speak today at 14:10

·         FOMC Minutes for December meeting will be released tomorrow at 14:00

·         The Treasury is set to auction off $64 bln in new debt this week.  The results for each auction will be announced at 13:00

o    Tuesday: $30 bln in 3 year notes

o    Wednesday: $21 bln in 10 year notes

o    Thursday; $13 bln in 30 year bonds

Other International Events of Interest

·         Australia's trade deficit narrowed to AUD118 mln (AUD300 mln expected, AUD529 mln previous) as the value of the country's imports fell 1%. 

On other news.... 

Currencies 

Dollar Flirts with Key 80.80 Level: 10-yr: +05/32..2.940%..USD/JPY: 104.50..EUR/USD: 1.3620
The Dollar Index is working its way back up to session highs near 80.95 as trade appears ready to post its third gain in four sessions. Today's advance is notable as trade has worked its way back above the 80.80 resistance. Click here to see a daily Dollar Index chart.

·         EURUSD is -10 pips @ 1.3615 as action continues to test support in the area. Early action was support by some better than expected data out of Germany and Ireland's return to debt markets after exiting its bailout in December, but the single currency was unable to retake the 1.3650/1.3675 level as sellers stepped in at resistance. That has shifted the focus back to 1.3600 support that is helped by the 50 dma. Germany's factory orders and trade balance will accompany eurozone retail sales and unemployment rate. 

·         GBPUSD is +5 pips @ 1.6410 as trade holds in the middle of the day's range. Sterling has seen a quiet trade as a lack of news and data out of the UK has caused action to hover on the support level. The Bank of England Credit Conditions Survey will cross tomorrow. 

·         USDCHF is +45 pips @ .9080 as action readies for its best close since the beginning of December. Today's advance has the pair probing its 100 dma (.9086) as trade tests resistance in the .9050/.9100 area. 

·         USDJPY is +25 pips @ 104.50 amid a lackluster session. The pair has been bid from the get-go as bulls defend the 104.00 area at the open. 

·         AUDUSD is -50 pips @ .8915 as action presses lower for the first time in four sessions. The weakness in the hard currency comes despite Australia's trade balance posting a narrower than expected AUD118 mln (AUD300 mln expected, AUD529 mln previous). The .8850 level remains under close watch as a breakdown sets up a move down to levels last seen in July 2010. 

·         USDCAD is +100 pips @ 1.0755 with trade on track to post its best close since May 2010 following this morning's trade balance (-CAD0.9 bln actual v. --CAD0.2 bln expected) and Ivey PMI (46.3 actual v. 55.0 expected, 53.7 previous) misses. Bulls will now look to 1.0700 as support.

Jason's Commentaries


It came in a little unexpected from the bounce off the support last night, market started with a bullish bias and held at the high throughout the session. Though there are some profit taking in the mid-day, that wasn't enough to wipe out the gains. The main gainer last night was Healthcare, Tech and Utilities. Healthcare led as biotech gains. After a drag from Celgene, Johnson and Johnson, Amgen quickly regained their losses. In Tech, Google and IBM were the main caused for Tech to rally that much, despite Apple dropping -0.72%. Internals were showing some sort of divergence with the TRIN, volumes were healthy but it somewhat showed a flat to upside day rather than a 100 points gain on the Dow. On the Technical perspective, we're having some nice reversal patterns on the indices. It seems that we might end up higher today, however that will depend on the FOMC minutes released today at 2pm ET. The start of the day is likely to be flat, as the market awaits for the FOMC minutes. Though the FOMC statement already stated that taper will be starting, the minutes be prove to be a surprise. As it's the FOMC minutes day, i'm going to abstain from making a market call. Have fun and stay safe =D       

Market Call: ABSTAIN

Date: 8 Jan 2014