10 Feb 2014 AMC- Market held flat ahead of Yellen's testimony

10 Feb 2014 AMC- Market held flat ahead of Yellen's testimony

Market Summary 

European Markets Closing Prices

Stock markets across Europe performed as follows:

·         UK's FTSE: + 0.3%

·         Germany's DAX: -0.1%

·         France's CAC: + 0.2%

·         Spain's IBEX: -0.9%

·         Portugal's PSI: -0.1%

·         Italy's MIB Index: -0.1%

·         Irish Ovrl Index: -0.5%

·         Greece ASE General Index: + 0.4%

Before Market Opens

S&P futures vs fair value: -1.60. Nasdaq futures vs fair value: -0.80.
The S&P 500 futures trade less than two points below fair value.

Markets across Asia ended mostly higher, piggybacking Friday's gains on Wall Street. In China, the State Council reiterated its 2014 growth target remains at 7.5%. Elsewhere, Japan's December current account balance registered its largest deficit on record (JPY638.6 billion actual versus JPY685.4 billion expected) while the FY2013 number recorded the smallest surplus on record (JPY3.3 trillion). 

·         Japan's Nikkei gained 1.8%, posting its best close in a week. Olympus was the top performer, adding 7.2%, after its earnings beat led to a slew of upgrades. 

·         Hong Kong's Hang Seng shed 0.3% in response to the city's financial secretary indicating a potential tightening in fiscal policy. Property developers lagged with Henderson Land down 2.6% to lead the space lower. 

·         China's Shanghai Composite gained 2.0%, closing at a one-month high. Automakers posted robust gains. BYD and FAW surged the limit, 10%, after Beijing announced it will continue to provide incentives on electrical vehicles for at least the next couple of years as it looks for ways to combat pollution. 

Core European indices trade little changed while Spain's IBEX (-1.0%) is being pressured by financials after the European Central Bank Supervisory Chair said that weak banks need to fail for the ECB stress test to be credible.

Participants received several economic data points. Eurozone Sentix Investor Confidence improved to 13.3 from 11.9 (10.7 expected). France's Industrial Production slipped 0.3% month-over-month (0.1% expected, 1.2% last). Italy's Industrial Production fell 0.9% month-over-month (0.2% expected, 0.3% prior) while the year-over-year reading slipped 0.7% (0.4% consensus, 1.5% previous). Swiss unemployment rate held steady at 3.2%, as expected. 

·         Germany's DAX is lower by 0.1% with materials producers BASF and HeidelbergCement both down near 1.0% apiece. Exporter Volkswagen outperforms with a gain of 0.4%. 

·         Great Britain's FTSE is higher by 0.1% as miners provide support. Fresnillo has surged 6.6% and Randgold Resources trades up 2.3%. On the downside, asset manager Hargreaves Lansdown holds a loss of 4.0%. 

·         In France, the CAC is higher by 0.2% as L'Oreal leads with a gain of 4.6%. On the downside, steelmaker ArcelorMittal is lower by 1.7%. 

·         Spain's IBEX holds a loss of 1.0% as financials weigh. Banco Santander, CaixaBank, and Banco Bilbao Vizcaya Argentaria are all down between 0.7% and 1.6%.

Market Internals

 Market Internals -Technical-

The Nasdaq closed up 22 (+0.54%) at 4148, the S&P 500 closed up 3 (+0.16%) at 1800, and the Dow closed up 8 (0.05%) at 15802. Action came on slightly below average volume (NYSE 640 mln vs. avg. of 699; NASDAQ 1687 mln vs. avg. of 1816), with advancers outpacing decliners (NYSE 1818/1289, NASDAQ 1536/1057) and new highs outpacing new lows (NYSE 65/16, NASDAQ 68/13).

Relative Strength: 
Vietnam-VNM +4.58%, Junior Gold Miners-GDXJ +4.20%, Silver Miners-SIL +3.30%, Biotechnology-XBI +2.84%, Biotechnology-IBB +1.78%, Belgium-EWK +0.25%, Peru-EPU +0.12%, Chinese Yuan-CYB +0.12%, Swiss Franc-FXF +0.10%.

Relative Weakness: 
Natural Gas-UNG -4.11%, Indonesia-IDX -2.86%, Thailand-THD -1.90%, India-INP -1.72%, Heating Oil-UHN -1.67%, Steel-SLX -1.60%, Columbia Index-GXG -1.57%, Spain-EWP -1.30%, U.S. Home Construction-ITB -1.21%, Base Metals-DBB -0.99%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: Stocks Post Modest Gains Ahead of Yellen Testimony
The stock market began the new trading week on a subdued note. The Dow Jones Industrial Average, Nasdaq, and S&P 500 posted gains between 0.1% and 0.5% with the Nasdaq Composite ending in the lead.

Overall, the session had a ‘wait-and-see' feel as many participants stuck to the sidelines ahead of tomorrow's Humphrey-Hawkins testimony on monetary policy. Although Fed Chair Janet Yellen is expected to strike a similar tone to the latest FOMC policy statement, the testimony will be the first public appearance for the new Fed Chair. Janet Yellen's prepared remarks will be released at 8:30 ET while the Q&A before the House Financial Services Committee is scheduled to begin at 10:00 ET.

The limited participation was reflected in today's trading volume as only 640 million shares changed hands at the NYSE. In fact, the final tally marked the lowest daily volume since January 28.

Seven out of ten sectors posted gains with health care (+0.9%) ending in the lead. The group outperformed throughout the session thanks in part to the relative strength of biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 250.72, +4.39) advanced 1.8% and also provided support to the Nasdaq Composite.

Like health care, the remaining countercyclical sectors also finished in the green, posting gains between 0.4% and 0.7%.

Things were a bit more mixed on the cyclical side where financials (+0.1%), technology (+0.3%), and materials (+0.4%) outperformed while consumer discretionary (-0.04%), energy (-0.6%), and industrials (-0.6%) lagged.

Notably, the industrial sector was pressured by broad weakness among transports. The Dow Jones Transportation Average fell 1.0% as 17 of its 20 components ended in the red. The bellwether complex lagged for the second consecutive session after coming up short of its 50-day moving average (7272) on Friday.

Elsewhere, the energy sector finished behind the remaining groups as large components like Chevron (CVX 111.69, -0.36) and ExxonMobil (XOM 89.52, -1.06) lagged. The two Dow members lost 0.3% and 1.2%, respectively.

Treasuries settled modestly higher with the 10-yr yield off one basis point at 2.67%.

Tomorrow, the wholesale inventories report for December will be released at 10:00 ET. 

·         Nasdaq Composite -0.7% YTD 

·         S&P 500 -2.6% YTD 

·         Russell 2000 -3.7% YTD 

·         Dow Jones Industrial Average -4.7% YTD

Commodities

COMEX Metals Closing Prices

·         Apr gold rose $11.90 to $1274.80/oz

·         Mar silver rose $0.19 to $20.12/oz

·         Mar copper fell 1 cent to $3.23/lbs

 CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Mar corn settled $0.13 higher at $4.58/bushel

·         Mar wheat rose 8 cents to $5.85/bushel

·         Mar soybeans fell 7 cents to $13.25/bushel

·         Mar ethanol rose 3 cents to $1.99/gallon

·         Mar sugar (#16 (U.S.)) settled 0.07 cents lower at 21.03 cents/lbs

NYMEX Energy Closing Prices

·         Mar crude oil rose $0.20 to $100.07/barrel

·         Mar natural gas fell 20 cents to $4.58/MMBtu

·         Mar heating oil fell $0.05 higher at $3.00/gallon

·         Mar RBOB fell 1 cent to $2.73/gallon

Treasuries

Treasuries End Little Changed: 10-yr: +03/32..2.674%..USD/JPY: 102.17..EUR/USD: 1.3635

·         Treasuries ended little changed. 

·         A quiet day for news and data saw yields across the curve confined to a tight 3bp range. Click here to see an intraday yields chart.

·         Market participants are taking note of the action up front as a slight inversion develops. The 1M bill is now yielding 0.071%, less than both the 3M (0.061%) and 6M (0.066%) bills.

·         Light selling in the belly caused the 5y to tick up +1.3bps to 1.475%. Traders continue to monitor support in the 1.450% area. 

·         The 10y finished little changed @ 2.678%. 

·         A small bid at the long end dropped the 30y -0.2bps to 3.663%. The yield on the long bond has slipped in each of the past two sessions. 

·         An unchanged curve saw the 2-10-yr spread hold @ 236.5bps. 

·         Precious metals saw solid gains with gold +$12 @ $1275 and silver +$0.11 @ $20.05. 

·         Data: Wholesale inventories (10). 

·         Auction: $30 bln 3y notes. 

·         Fed Speak: Fed Chair Janet Yellen testifies in front of the House Financial Services Committee (10). Philly's Plosser gives his economic outlook (9) and Richmond's Lacker discusses "The Path to Financial Stability" (20).

Next Day In View 

Economic Commentary

Economic Summary: No US data today; Janet Yellen to testify to House tomorrow at 10:00

Upcoming Economic Data:

·         February Empire Manufacturing due out Tuesday at 8:30 (Briefing.com consensus of ; January was 12.5)

·         December Net Long Term TIC Flows due out Tuesday at 9:00 (Briefing.com consensus of ; November was -$29.3 bln)

·         February NAHB Housing Market Index due out Tuesday at 10:00 (Briefing.com consensus of ; January was 56)

Upcoming Fed/Treasury Events:

·         Fed Chair Janet Yellen to testify to the House tomorrow at 10:00

·         Philadelphia Fed President Charles Plosser (2014 voter, hawkish) to speak tomorrow at 9:00

·         The Treasury is expected to auction off $70 bln in new debt this week.  Results will be announced at 13:00 for each auction

o    Tuesday: $30 bln in 3 year notes

o    Wednesday: $24 bln in 10 year notes

o    Thursday: $16 bln in 30 year bonds

Other International Events of Interest

·         Japan's December current account balance registered its largest deficit on record (JPY638.6 bln actual v. JPY685.4 bln expected) while the FY2013 number recorded the smallest surplus on record (JPY3.3 trln) 

On other news.... 

Currencies 

Dollar Drifts Little Changed: 10-yr: +01/32..2.681%..USD/JPY: 102.19..EUR/USD: 1.3639

·         The Dollar Index drifts little changed amid a lackluster session. Click here to see a daily Dollar Index chart.

·         The Index has spent the entire session in a tight 15 cent range as data and news flow from around the world have been quiet. 

·         EURUSD is +5 pips @ 1.3635 as action ticks higher for the fifth time in six sessions. Today's advance has the single currency probing its 50 dma, which it has not closed above in two weeks. Key support remains in the 1.3500 area. 

·         GBPUSD is -5 pips @ 1.6405 as trade drifts amid a sleepy session. Sterling has been limited to a 40 pip range as trade probes the 50 dma. Britain's BRC Retail Sales Monitor is due out tonight. 

·         USDCHF is -10 pips @ .8970 as sellers remain in control for a fourth day. The pair continues to struggle in the .9020 region as important resistance lurks at the level. A breakdown of the .8940 area puts the December lows near .8840 back in play. 

·         USDJPY is -15 pips @ 102.15 after an early bid failed at resistance in the 102.50/103.00 area. Today's weakness comes after Japan's January current account deficit was the largest on record. Key support holds in the 101.00 area. Japanese banks are closed tomorrow for National Founding Day. 

·         AUDUSD is -15 pips @ .8940 as light selling persists for a second session. The pair saw an early test of its 50 dma (.8908), but was able to hold the level. A breakdown of .8850 puts the recent lows near .8700 in play. Australian data includes Home Price Index, home loans, and the NAB Business Confidence survey. China's new loans and trade balance are tentatively scheduled to cross the wires tonight. 

·         USDCAD is +15 pips @ 1.1045 as trade stabilizes after seven days of selling. The recent losing streak has not been too detrimental to the bull case as action has slipped just 1.6% off the recent highs. The 1.0950 area provides the first level of support.

Jason's Commentaries


It looks more like a flat day to me than anything else. The market was having tonnes of divergence. TRIN was rising all the way, VIX dropped, UVOL and DVOL were about the same. The market started the day with some bearish bias which quickly reversed all the way to the closing bell before 10am ET. The main leader of the session was Healthcare, gaining 0.83% while the industrials lagged by 0.63%. Exxon, one of the biggest capped stocks in Dow, dropped by 1.17% which provided some drag in the market. However, the main bulk of the market remained green. Looking at the volume of 653.8m shares traded on the NYSE, i reckon the market is taking a 'see-how' attitude now. Low volumes are expected follow for a few days until the respective resistance level is being broke. If the market happened to break above 1800 for the S&P500, we're looking at some upside over here. Meanwhile let's see whether Yellen is going to make that happen.

Market Call: UP

Date: 11 Feb 2014