18 Feb 2014 AMC- Market held flat ahead of FOMC minutes and Yellen's testimony

18 Feb 2014 AMC- Market held flat ahead of FOMC minutes and Yellen's testimony

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: + 0.9%

·         Germany's DAX: 0.0%

·         France's CAC: -0.1%

·         Spain's IBEX: -0.8%

·         Portugal's PSI: -0.5%

·         Italy's MIB Index: + 0.1%

·         Irish Ovrl Index: -0.1%

·         Greece ATHEX Composite: -0.2%

Before Market Opens

S&P futures vs fair value: +1.00. Nasdaq futures vs fair value: +3.20.
The S&P 500 futures trade one point above fair value.

Markets across Asia finished mostly higher after the Bank of Japan responded to Monday's soft GDP reading (0.3% quarter-over-quarter actual versus 0.7% expected) by maintaining its monetary policy while increasing a special loan program. The BoJ held its asset purchase program at an annual pace of JPY60-70 trillion while extending a special loan facility and doubling the pool of money available to banks. Elsewhere, the latest Reserve Bank of Australia minutes indicated the central bank is likely to remain on hold as annual inflation sits at 2.7%. Also of note, Hong Kong's unemployment rate ticked down to 3.1% from 3.2% and Taiwan's Q4 final GDP came in at 3.0%. 

·         Japan's Nikkei rallied 3.1% in response to the Bank of Japan action. Financials were in focus with Sumitomo Mitsui Financial and Mitsubishi UFJ Financial both adding 5.0%. 

·         Hong Kong's Hang Seng ticked up 0.2%, climbing to its best level in more than three weeks. Casino stocks posted solid gains as Galaxy Entertainment and Sands China both gained 1.5%. 

·         China's Shanghai Composite fell 0.8%, slipping off two-month highs as trade was rejected at the 200-day moving average. Brokerage names were weak with Haitong Securities falling 3.7%. 

Major European indices trade modestly higher with Great Britain's FTSE (+0.4%) in the lead. Participants received several economic data points. Eurozone current account surplus narrowed to EUR21.30 billion from EUR23.30 billion (EUR21.00 billion expected) and ZEW Economic Sentiment fell to 68.5 from 73.3 (73.9 expected). Germany's ZEW Economic Sentiment decreased to 55.7 from 61.7 (61.7 expected). ZEW Current Conditions improved to 50.0 from 41.2 (44.0 forecast). Great Britain's CPI fell 0.6% month-over-month (-0.5% expected, 0.4% prior) while the year-over-year reading rose 1.9% (2.0% forecast, 2.0% previous). Separately, input PPI fell 0.9% month-over-month (-0.5% consensus, 0.2% last) while the year-over-year reading decreased 3.1% (-2.9% expected, -1.0% prior). Also of note, Spain's industrial new order increased 7.8% year-over-year (-3.0% expected, -3.1% prior).

In news, European Central Bank governing council member, Ewald Nowotny, said the central bank will not lower its deposit rate without reducing the key refinance rate. 

·         Great Britain's FTSE is higher by 0.4% as financials provide support. Barclays, Royal Bank of Scotland, and Standard Chartered are all up between 0.7% and 2.1%. InterContinental Hotels trades lower by 3.5% after reporting disappointing results. 

·         Germany's DAX trades up 0.1% with RWE in the lead. The utility stock is higher by 1.3%. Carmakers lag with BMW and Volkswagen both down near 0.9%. 

·         In France, the CAC is lower by 0.2% as materials and industrials lag. Alstom, Bouygues, Lafarge, and Vallourec are all down between 2.5% and 3.9%. Electricite de France outperforms with a gain of 0.9%.

Asia

·         Markets across Asia finished mostly higher

·         The Bank of Japan responded to yesterday's soft GDP reading (0.3% QoQ actual v. 0.7% QoQ) by maintaining its monetary policy while increasing a special loan program. The BOJ held its asset purchase program at an annual pace of JPY60-70 trln while extending a special loan facility and doubling the pool of money available to banks 

·         The latest Reserve Bank of Australia minutes indicated the central bank is likely to remain on hold as annual inflation sits at 2.7%

·         Hong Kong's unemployment rate ticked down to 3.1% (3.2% previous)

·         Taiwan's Q4 Final GDP printed 3.0%

·         Japan's Nikkei (+3.1%) rallied in response to the Bank of Japan action

·         Hong Kong's Hang Seng (+0.2%) ticked to its best level in more than three weeks

·         China's Shanghai Composite (-0.8%) slipped off two-month highs as trade was rejected at the 200 dma

·         India's Sensex (+0.8%) climbed to a three-week high

·         Australia's ASX (+0.2%) ticked to a three-month high as shares gained for the eighth time in nine sessions

Market Internals

Market Internals -Technical-
The Nasdaq closed up 29 (+0.68%) at 4273, the S&P 500 closed up 2 (+0.12%) at 1841, and the Dow closed down 24 (-0.15%) at 16130. Action came on mixed volume (NYSE 709 mln vs. avg. of 700; NASDAQ 1750 mln vs. avg. of 1853), with advancers outpacing decliners (NYSE 2050/1049, NASDAQ 1823/815) and new highs outpacing new lows (NYSE 225/21, NASDAQ 189/15).

Relative Strength: 
Coffee-JO +9.00%, Natural Gas-UNG +4.88%, Sugar-SGG +3.99%, Clean Energy-PBW +2.99%, Social Media-SOCL +2.62%, Japan-EWJ +2.20%, United Kingdom-EWU +1.49%, Vietnam-VNM +1.39%, Pacific Index-VPL +1.21%, Greece-GREK +0.98%.

Relative Weakness: 
Latin America 40-ILF -1.86%, Turkey-TUR -1.58%, Sweden-EWD -1.46%, Egypt-EGPT -1.35%, Junior Gold Miners-GDXJ -1.27%, Volatility-VXX -1.24%, Russia-RSX -1.22%, Transportation-IYT -1.05%, Steel-SLX -1.01%, U.S. Home Construction-ITB -0.71%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: Small Caps Lead Stocks Higher
Equity indices kicked off the abbreviated trading week on a relatively quiet note. Small caps finished in the lead (Russell 2000 +1.0%) while the S&P 500 added 0.1%.

The benchmark index saw a brief dip at the open, but the weakness was erased promptly thanks to the early strength of the health care sector (+0.9%). The group surged out of the gate after Actavis (ACT 201.47, +9.59) agreed to acquire Forest Laboratories (FRX 91.04, +19.65) for $25 billion. Biotechnology also factored into the sector's strength as the iShares Nasdaq Biotechnology ETF (IBB 264.24, +6.73) jumped 2.6%.

Outside of health care, gains in other sectors were much more subdued. Energy (+0.3%) was the second-best performer, aided by crude oil, which surged 2.2% to $102.52/bbl.

Similar to crude, precious metals enjoyed another strong session. Gold futures rose 0.4% to $1324.60/ozt while silver futures saw their ninth day of gains, spiking 2.2% to $21.91/ozt. This underpinned miners, sending the Market Vectors Gold Miners ETF (GDX 26.46, +0.11) higher by 0.4%.

Elsewhere among cyclical sectors, financials (+0.2%) outperformed while consumer discretionary (+0.1%) and technology (+0.1%) ended in-line. Also worth noting, the industrial sector (-0.2%) lagged due to the underperformance of transports.

The Dow Jones Transportation Average (-1.0%) fell below its 50-day moving average (7277) as 16 of its 20 components registered losses. Most notably, Kansas City Southern (KSU 91.67, -4.29) lost 4.5% after JP Morgan downgraded the stock to ‘Neutral' from ‘Overweight.'

Countercyclical groups were mixed as health care and utilities (+0.3%) outperformed while consumer staples (-0.7%) and telecom services (-0.9%) lagged. Dow component Coca-Cola (KO 37.47, -1.46) pressured the staples sector after reporting in-line earnings on below-consensus revenue.

Even though equities ended higher, there was some demand for volatility protection, which pushed the CBOE Volatility Index (VIX 13.87, +0.30) higher by 2.2%.

Treasuries ended near their best levels of the day with the 10-yr yield down four basis points at 2.71%.

Participation was a bit below average with only 709 million shares changing hands at the NYSE.

Among overseas news of note, the Bank of Japan made no changes to its interest rate or the purchase program; however, the bank did double its bank lending facility to JPY7 trillion. The yen weakened in reaction to the news, but erased about half of the decline during today's session. The dollar/yen pair traded near 102.35 at the New York close after notching an overnight high of 102.75.

Today's data was limited to three reports: 

·         The February NAHB Housing Market Index fell to 46 from 56 while the Briefing.com consensus expected the reading to hold at 56. 

·         The Empire Manufacturing Survey for February registered a reading of 4.5, which was down from the prior month's unrevised reading of 12.5. Economists polled by Briefing.com expected the survey to decline to 7.5. 

·         Lastly, the December net long-term TIC flows report indicated a $45.9 billion outflow of foreign capital from U.S. denominated assets. This followed the prior month's $28.0 billion outflow. 

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while January Housing Starts, Building Permits, and PPI will all be reported at 8:30 ET. Also of note, the latest minutes from the January FOMC meeting will cross the wires at 14:00 ET. 

·         Nasdaq Composite +2.3% YTD 

·         Russell 2000 -0.1% YTD 

·         S&P 500 -0.4% YTD 

·         Dow Jones Industrial Average -2.7% YTD

Commodities

Closing Commodities: Natural Gas Rises Over 6%, Gold Climbs 0.4%

·         Precious metals traded higher as the dollar index traded in the red. 

·         Apr gold extended gains for a seventh consecutive session, trending higher after lifting from its session low of $1317.00 per ounce set at pit trade open. It eventually settled with a 0.4% gain at $1324.60 per ounce.

·         Mar silver came off its session low of $21.51 per ounce and settled 2.2% higher at $21.90 per ounce, just below its session high of $21.91 per ounce.

·         Mar crude also got a boost from the weaker dollar index. Prices lifted from a session low of $101.16 per barrel and touched a session high of $102.54 per barrel moments before settling at $102.52 per barrel, or 2.2% higher.

·         Mar natural gas traded in positive territory, climbing as high as $5.59 per MMBtu in late afternoon floor action. It settled at $5.54 per MMBtu, booking a solid 6.3% gain.

COMEX Metals Closing Prices

  Apr gold rose $5.60 to $1324.60/oz 

·         Gold extended gains for a seventh consecutive session as it gained support from a weaker dollar index. The yellow metal trended higher after lifting from its session low of $1317.00 set at pit trade open. It eventually settled with a 0.4% gain. 

  Mar silver rose $0.48 to $21.90/oz 

·         Silver also rose steadily today. It came off its session low of $21.51 and settled just below its session high of $21.91, booking a gain of 2.2%. 

  Mar copper rose 3 cents to $3.29/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Mar corn rose 5 cents to $4.50/bushel 

·         Mar wheat rose 15 cents to $6.12/bushel 

·         Mar soybeans rose 23 cents to $13.61/bushel 

·         Mar ethanol rose 3 cents to $2.09/gallon 

·         May sugar (#16 (U.S.)) rose 0.02 of a penny to 21.77 cents/lbs

 

NYMEX Energy Closing Prices

  Mar crude oil rose $2.23 to $102.52/barrel 

·         Crude oil climbed above $102 as the dollar index traded in the red. Prices came off a session low of $101.16 set in early morning pit trade and touched a session high of $102.54 just before settling with a 2.2% gain. 

  Mar natural gas rose 33 cents $5.54/MMBtu 

·         Natural gas traded in positive territory today, climbing as high as $5.59 in late afternoon floor action. It settled just below that level, booking a solid 6.3% gain. 

  Mar heating oil rose 2 cents to $3.10/gallon 

  Mar RBOB rose 4 cents to $2.84/gallon

Treasuries

Treasuries Post Modest Gains: 10-yr: +10/32..2.710%..USD/JPY: 102.33..EUR/USD: 1.3755

·         Treasuries ended just off their best levels of the session as some afternoon selling took hold. Click here to see an intraday yields chart.

·         The complex saw small gains as traders settled into their desks for the start of the holiday-shortened week, and quickly ticked to fresh highs as both Empire Manufacturing (4.5 actual v. 7.5 expected) and NAHB Housing Market Index (46 actual v. 56 expected) readings printed well below expectations. 

·         As has been the case lately, buyers focused their efforts on maturities in the belly. 

·         The 5y shed -4.6bps to finish @ 1.479%. Today's action saw the yield close on its 100 dma as action nears another test of the key 1.450% support level. 

·         A -3.5bp decline in the 10y dropped the benchmark yield to 2.711%. Action over the past week has been unable to retake 2.750% resistance, and that has caused some to shift their focus back towards the 2.600% level that is defended by the 200 dma. 

·         The long bond lagged, finishing off -2bps @ 3.680%. 

·         A slightly flatter curve saw the 2-10-yr spread narrow to 242bps. 

·         Precious metals went off on their highs with gold +$5 @ $1324 and silver +$0.49 @ $21.92. 

·         Data: MBA Mortgage Index (7), housing starts, building permits, PPI (8:30), and the FOMC minutes (14). 

·         Fed Speak: ATL's Lockhart speaks on the economy (12:15), STL's Bullard discusses the "U.S. Economy and Monetary Policy" (13), and SF's Williams gives his economic outlook (19).

Next Day In View 

Economic Commentary

On other news.... 

Currencies 

Dollar Hits 2014 Lows; Probes 80.00: 10-yr: +11/32..2.706%..USD/JPY: 102.31..EUR/USD: 1.3754

·         The Dollar Index continues to drift near session lows as trade probes the 80.00 level. Click here to see a daily Dollar Index chart.

·         The greenback saw an early bid, but trade was dropped to its lowest levels of 2014 as Empire Manufacturing and NAHB Housing Market Index numbers fell well short of estimates.

·         EURUSD is +50 pips @ 1.3755 as action attempts to put in its best close of the year. The single currency has gained ground in today's session despite data from the region mostly missing expectations and continued chatter of negative deposit rates. The 1.3800 level remains under close watch as it has acted as a lid on action since November 2011. 

·         GBPUSD is -20 pips @ 1.6685 as light selling persists for a second session. Today's weakness comes amid news Britain's CPI (1.9%) slipped below the Bank of England's 2% target for the first time in over four years; however, trade has checked up on minor support in the 1.6650 area. Tomorrow, Britain's claimant count change, unemployment rate, and Average Earnings Index will accompany the latest Bank of England MPC votes. 

·         USDCHF is -30 pips @ .8880 as sellers remain in control for a fourth straight day. The selling has the pair at its worst levels of 2014, and has many participants watching the .8840 level closely as a breakdown would drop action to levels last seen in the fall of 2011. Swiss data is limited to ZEW Economic Expectations. 

·         USDJPY is +40 pips @ 102.30 as the overnight Bank of Japan announcement has trade probing the 102.50 area. At its latest meeting, the BOJ announced it would maintain its asset purchase program at an annual pace of JPY60-70 trln while extending a special loan facility and doubling the pool of money available to banks. Resistance in the 103.00 area remains under close watch. 

·         AUDUSD is +5 pips @ .9035 amid a rather uneventful day for the pair. The hard currency saw an overnight pop following the release of the latest Reserve Bank of Australia minutes, but has spent the majority of U.S. trade straddling the flat line. Australian data out tonight includes CB Leading Index and Wage Price Index. 

·         USDCAD is -20 pips @ 1.0940 as selling persists for the eleventh time in thirteen days. The pair has been trending lower throughout the session, seeing little response to the drawdown in Canada's foreign securities purchases (-CAD4.28 bln actual v. +CAD9.97 bln expected). Canada's wholesale sales will cross tomorrow.

Jason's Commentaries


The market held flat at the top as Nasdaq composite broke into a new high once again. After a rally on Valentine's Day, and together with the long weekend, the market started to hold back a little ahead of the FOMC minutes today and 2pm ET, and Yellen's second testimony which was postponed from last week Congressional hearing to tomorrow, without any specific time yet. 

The market started the session attempting to cover the bullish gap at the open. However, the gap failed to cover for Nasdaq and Russells. After which, Nasdaq and Russells led the market higher till noon where the market started consolidating till the close. Looking at the internals, the volumes were at 720.7m shares traded on the NYSE. Internals were divergent. While looking at the sectors, Healthcare and Energy were the main reason that the market went up despite general weakness in the broader market. 

On the technical perspective, we have the S&P500 right at the all time high, Russells and Dow are looking to regain the all time once again. Nasdaq has broken into the all time high. It seems to me that I'm not going to be bearish. However, with a failed January Barometer, we might be having a soft 2014, perhaps a volatile one. Nonetheless, I won't see much upside in the market right now.   

Market Call: DOWN

Date:19 Feb 2014