4 Feb 2014 AMC- Market got a bounce after sinking on Monday ahead of employment report

4 Feb 2014 AMC- Market got a bounce after sinking on Monday ahead of employment report

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: -0.3%

·         Germany's DAX: -0.6%

·         France's CAC: + 0.2%

·         Spain's IBEX: + 0.3%

·         Portugal's PSI: + 1.6%

·         Italy's MIB Index: + 0.6%

·         Irish Ovrl Index: 0.0%

·         Greece ATHEX Composite: + 0.4%

Before Market Opens

S&P futures vs fair value: +8.10. Nasdaq futures vs fair value: +15.00.
The S&P 500 futures trade eight points above fair value.

It was a sea of red across Asia as all of the major averages, aside from India's Sensex (unch), ended with losses. The Reserve Bank of Australia opined overnight, opting to keep its Cash Rate unchanged at 2.50% while omitting commentary the Aussie dollar is overvalued. In other news, South Korea's inflation rate was in-line at 1.1% year-over-year. 

·         Japan's Nikkei tumbled 4.2% to a four-month low. Exporters were hit hard on yen strength as Toyota Motor plunged 5.7% and Sharp sank 8.4%. Both companies reported following the closing bell. 

·         Hong Kong's Hang Seng lost 2.9%, welcoming the Lunar New Year with a correction as the close marked a more than 11% drop from the December highs. PC maker Lenovo fell 16.4% as sellers emerged in response to an onslaught of downgrades. Over the past two weeks the company has announced more than $5 billion worth of deals, and is rumored to be looking into a joint venture to buy Sony's Vaio PC business outside of Japan. 

·         China's Shanghai Composite was closed. 

Major European indices trade in mixed fashion with Germany's DAX (-0.8%) trailing its peers. Participants received several economic data points. Eurozone PPI rose 0.2% month-over-month (0.1% expected, -0.1% previous) while the year-over-year reading decreased 0.8% (-0.9% forecast, -1.2% prior). Elsewhere, Great Britain's Construction PMI improved to 64.6 from 62.1 (61.5 forecast), Italy's CPI rose 0.2% month-over-month (0.2% forecast, 0.2% prior) while the annualized reading increased 0.7% (0.7% expected, 0.7% last), and Spain's unemployment increased 113,100 (-21,000 forecast, -107,600 last).

Among notable news, Bloomberg reports that European Central Bank President Mario Draghi would be open to ending the sterilization of bond purchases should the Bundesbank voice its backing for such policy course. It should be noted the ECB will release its latest policy statement on Thursday morning at 7:45 ET. 

·         In France, the CAC trades higher by 0.1% with help from financials. BNP Paribas and Societe Generale are up 1.0% and 1.6%, respectively. Exporter Renault lags, trading lower by 1.4%. 

·         Great Britain's FTSE sports a loss of 0.2%. ARM Holdings is the weakest performer, down 5.1% after the chipmaker saw a slowdown in revenue from royalties. Insurer Prudential outperforms with a gain of 3.2%. 

·         Germany's DAX holds a loss of 0.8% as several producers of basic materials lag. BASF, Linde, and ThyssenKrupp are down between 1.0% and 1.8%. On the upside, Adidas trades higher by 2.2%.

Market Internals

Market Internals -Technical-
The Nasdaq closed up 35 (+0.86%) at 4032, the S&P 500 closed up 13 (+0.76%) at 1755, and the Dow closed up 72 (+0.47%) at 15445. Action came on above average volume (NYSE 820 mln vs. avg. of 696; NASDAQ 2015 mln vs. avg. of 1805), with advancers outpacing decliners (NYSE 2117/999, NASDAQ 1632/988) and new lows outpacing new highs (NYSE 22/64, NASDAQ 31/50).

Relative Strength: 
Natural Gas-UNG +7.57%, Indonesia-IDX +5.36%, Turkey-TUR +5.31%, Junior Gold Miners-GDXJ +3.42%, Poland-EPOL +2.98%, Latin America 40-ILF +2.97%, South Africa-EZA +2.81%, Grains-JJG +2.51%, Regional Banks-KRE +1.9%, Coal-KOL +1.79%.

Relative Weakness: 
Volatility-VXX -2.24%, Cocoa-NIB -1.14%, 20+ Year Treasuries-TLT -1.06%, Platinum-PPLT -0.69%, Japanese Yen-FXY -0.68%, Utilities-XLU -0.59%, Swiss Franc-FXF -0.33%, Egypt-EGPT -0.17%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: Stocks Climb While Yen Slides
After enduring a broad-based selloff on Monday, the stock market rebounded, erasing roughly a third of yesterday's losses. The Nasdaq led the way, rising 0.9% while the S&P 500 gained 0.8%. For its part, the Dow Jones Industrial Average added 0.5%, but was unable to reclaim its 200-day moving average (15474).

Equities rallied steadily throughout the session in the absence of yen strength, which has been a headwind to the market since the start of the year. In fact, the yen began retreating overnight, and continued its slide into the close. Dollar/yen finished near 101.65 after starting its rally from just below the 101.00 level. Meanwhile yen futures lost 0.8%, trimming their 2014 gain to 3.6%.

Nine of ten sectors ended in the green with the discretionary space in the lead. The sector added 1.2% after Michael Kors (KORS 89.91, +13.24) and Yum! Brands (YUM 72.06, +5.06) reported above-consensus earnings. KORS surged 17.3% and YUM jumped 8.9% while also providing support to their respective industry groups. Despite today's relative strength, the discretionary sector remains the weakest performer of the year, down 7.4%.

Other influential groups like health care (+1.0%) and financials (+1.0%) also finished ahead of the broader market while technology (+0.5%) and industrials (+0.6%) lagged.

The largest S&P 500 sector, technology, struggled to keep pace with the market even with its top component, Apple (AAPL 508.79, +7.26), advancing 1.5%. Another large sector member, Microsoft (MSFT 36.35, -0.13), ended little changed after announcing Satya Nadella will replace the outgoing Chief Executive Officer Steve Ballmer.

Elsewhere, the industrial sector lagged as the underperformance of Boeing (BA 122.04, -1.04) and United Technologies (UTX 109.10, -1.06) overshadowed the broad gains among transports. The Dow Jones Transportation Average advanced 1.2% as all but one component ended in the green. Con-way (CNW 37.19, -0.66) was the lone decliner, falling 1.7%.

Treasuries ended near their lows with the 10-yr yield up four basis points at 2.62%.

Participation was above average as 820 million shares changed hands at the NYSE.

Today's economic data was limited to the December factory orders report: 

·         Factory orders declined 1.5% after increasing a downwardly revised 1.5% (from 1.8%) in November. The Briefing.com consensus expected factory orders to decline 1.7%. The durable goods data were revised slightly higher, but still left a lot to be desired. Orders fell 4.2%, which was slightly above the 4.3% decline reported in the advance release. A large portion of the decline was a result of a sharp drop in transportation demand (-9.7%), which was mostly the result of a 16.9% decline in defense and nondefense aircraft.

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while the ADP Employment Change report for January will be released at 8:15 ET. The day's data will be topped off with the 10:00 ET release of January ISM Services. 

·         Nasdaq Composite -3.5% YTD 

·         S&P 500 -5.0% YTD 

·         Russell 2000 -5.1% YTD 

·         Dow Jones Industrial Average -6.8% YTD

Commodities

Closing Commodities: Natural gas Rallies 10%, Breaking a 3-day Losing Streak

·         Mar natural gas outperformed in the commodities space as it gained strength on forecasts for colder-than-average temperatures over the next 10 days. Prices came off a session low of $5.14 per MMBtu set moments after pit trade opened and advanced as high as $5.40 per MMBtu in afternoon action. With the momentum holding steady, natural gas settled with a solid 9.6% gain at $5.37 per MMBtu. 

·         Mar crude oil traded higher ahead of tomorrow's release of inventory data. The energy component lifted from a session low of $96.78 per barrel and rose as high as $97.71 per barrel in morning action. It eventually settled with a 0.8% gain at $97.24 per barrel. 

·         Mar silver dipped to a session low of $19.26 per ounce in morning floor trade but managed to recover back above the unchanged line. It brushed a session high of $19.48 per ounce and settled with a 0.1% gain at $19.43 per ounce. 

·         Apr gold, on the other hand, spent the pit session in the red as a stronger dollar index pressured prices. It traded in a consolidative pattern near the $1250 per ounce level and eventually settled with a 0.6% loss at $1251.60 per ounce.

COMEX Metals Closing Prices

  Apr gold fell $7.90 to $1251.60/oz 

·         Gold traded in the red today as a stronger dollar pressured prices. It traded in a consolidative pattern near the $1250 level and eventually settled with a 0.6% loss. 

  Mar silver rose $0.02 to $19.43/oz 

·         Silver dipped to a session low of $19.26 in morning floor trade but managed to recover into positive territory. It brushed a session high of $19.48 and settled with a 0.1% gain. 

  Mar copper rose 1 cent to $3.19/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Mar corn rose 6 cents to $4.42/bushel 

·         Mar wheat rose 21 cents to $5.85/bushel 

·         Mar soybeans rose 21 cents to $13.13/bushel 

·         Mar ethanol rose 4 cents to $1.88/gallon 

·         Mar sugar (#16 (U.S.)) rose 0.05 of a penny to 20.56 cents/lbs

 NYMEX Energy Closing Prices

  Mar crude oil rose $0.81 to $97.24/barrel 

·         Crude oil traded higher ahead of tomorrow's release of inventory data. The energy component lifted from a session low of $96.78 and rose as high as $97.71 in morning action. It eventually settled with a 0.8% gain. 

  Mar natural gas rose 47 cents to $5.37/MMBtu 

·         Natural gas saw big gains today on forecasts for colder-than-average temperatures over the next 10 days. Prices came off a session low of $5.14 set moments after pit trade opened and brushed a session high of $5.40 in afternoon action. With the momentum holding steady, natural gas settled with a solid 9.6% gain. 

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

  Mar RBOB fell 1 cent to $2.60/gallon

Treasuries

Treasuries Slide Amid Profit-Taking: 10-yr: -10/32..2.621%..USD/JPY: 101.60..EUR/USD: 1.3514

·         Treasuries ended just off their lows as traders booked profits following yesterday's strong gains. Click here to see an intraday yields chart.

·         Some overnight selling developed despite the weakness in Asian equity markets with the weakness persisting into U.S. trade following the small factory orders beat (-1.5% actual v. 1.7% expected). 

·         Maturities would hit their lows shortly after the noon hour before drifting amid a sleepy afternoon trade. 

·         This afternoon's 4W bill auction drew 0.130% (up from 0.030% just two days ago), a sign traders are beginning to worry about the potential for a debt ceiling breach on or around February 28. 

·         Outperformance in the belly made for an uneventful trade as the 5y edged up +2.4bps to 1.461%. 

·         Modest weakness made for a +4.3bp advance in the 10y, causing the benchmark yield to settle @ 2.624%. 

·         Selling was heaviest at the long end as a -1 03/32 plunge ran the 30y up +5.3bps to 3.593%. Traders continue to watch that area closely as support there aided by the 200 dma dates back to July. 

·         Today's weakness swung the yield curve steeper as the 2-10-yr spread widened to 231bps.

·         Precious metals ended mixed with gold +$5 @ $1254 and silver +$0.07 @ $19.49. 

·         Data: MBA Mortgage Index (7), ADP Employment Change (8:15), and ISM Services (10). 

·         Fed Speak: Philly's Plosser will be in Rochester, NY to give his economic outlook (12:30). ATL's Lockhart discusses his economic outlook in Birmingham, AL (13:40).

Next Day In View 

Economic Commentary

Economic Summary: December Factory Orders slightly better than expected; Lacker sees continued taper to bond purchases
Economic Data Summary:

·         December Factory Orders -1.5% vs Briefing.com consensus of -1.7%; was revised to +1.5% from +1.8%

o    The durable goods data were revised slightly higher, but still left a lot to be desired. Orders fell 4.2%, which was slightly above the 4.3% decline reported in the advance release. A large portion of the decline was a result of a sharp drop in transportation demand (-9.7%), which was mostly the result of a 16.9% decline in defense and nondefense aircraft. Excluding transportation, durable goods orders declined 1.3%. Led by a 2.7% increase in petroleum and coal products, nondurable goods orders increased 1.1% in December. That was up from a 0.4% increase in November. Orders of nondefense capital goods excluding aircraft fell 0.6% (from -1.3%) in the advance report. Shipments, which factored into fourth quarter GDP, increased 0.6% after originally reporting a 0.2% decline. That reversal will add upward pressure on the second estimate for Q4 GDP growth.

Fed/Treasury Events Summary:

·         Richmond Fed President Lacker (typically Hawkish) said he expects to see further reductions in the pace of purchases at upcoming meetings; full speech.

·         Chicago Fed President Evans (typically Dovish) said rates will likely remain near zero until late 2015.

Upcoming Economic Data:

·         January ADP Employment Wednesday at 8:15 (Briefing.com consensus of 178K; was 238K)

·         January ISM Services Wednesday at 10:00 (Briefing.com consensus of 53.8; was 53.0)

·         Jobless Claims Thursday at 8:30 (Briefing.com consensus of 335K; was 348K)

·         January Employment report on Friday

o    Briefing.com consensus: Unemployment Rate flat MoM at 6.7%; Nonfarm Payrolls +175K from +74K in December

Upcoming Fed/Treasury Events:

·         Eurozone Services PMI's wil be released overnight

·         Fed's Plosser and Lockhart will speak tomorrow at 12:30 and 13:40, respectively.

On other news.... 

Earnings/Guidance

·         Anadarko Petro (APC) misses by $0.18, misses on revs

·         Archer-Daniels (ADM) beats by $0.09, misses on revs

·         Boston Scientific (BSX) beats by $0.08, reports revs in-line; guides Q1 EPS above consensus, revs in-line; guides FY14 EPS above consensus, revs in-line

·         BP (BP) reports Q4 (Dec) results, revs in-line

·         Clorox (CLX) misses by $0.01, beats on revs; lowers FY14 guidance

·         CME Group (CME) misses by $0.04, reports revs in-line 

·         Delphi Automotive (DLPH) beats by $0.07, beats on revs; guides Q1 EPS below consensus, revs below consensus; guides FY14 EPS in-line, revs in-line

·         Eaton (ETN) beats by $0.02, reports revs in-line; guides Q1/FY14 EPS in-line (midpoint below consensus)

·         Edwards Lifesciences (EW) beats by $0.09, reports revs in-line; guides Q1 EPS in-line, revs in-line; guides FY14 EPS below consensus, revs in-line

·         Emerson (EMR) reports EPS in-line, revs in-line; reaffirms FY14 guidance

·         Fidelity Nat'l Info (FIS) misses by $0.02, reports revs in-line; guides FY14 EPS in-line, revs above consensus

·         Hartford Financial (HIG) beats by $0.04

·         Intl Paper (IP) misses by $0.04, misses on revs

·         J. C. Penney (JCP) reported comparable store sales for Nov/Dec +3.1% and Q4 +2%

·         Michael Kors (KORS) beats by $0.25, beats on revs; guides Q4 EPS in-line, revs above consensus; guides FY14 EPS above consensus, revs above consensus

·         McGraw-Hill Financial (MHFI) beats by $0.03, reports revs in-line; guides FY14 EPS in-line

·         Ryder System (R) beats by $0.06, misses on revs; guides Q1 EPS below consensus; guides FY14 EPS below consensus, revs above consensus

·         Spectra Energy (SE) beats by $0.03, beats on revs

·         Toyota Motor (TM) reports Q3 results; beats on revs; reaffirms FY14 sales and unit guidance

·         YUM! Brands (YUM) beats by $0.06, misses on revs; guides FY14 EPS in-line

Currencies 

Dollar Hovers Near Key 81.20 Resistance: 10-yr: -12/32..2.624%..USD/JPY: 101.59..EUR/USD: 1.3518

·         The Dollar Index continues to hold small gains amid a rather uneventful trade. Click here to see a daily Dollar Index chart.

·         Today's action has seen several tests of 81.20 resistance, but the level has held with sellers dropping action back down to 81.10. 

·         EURUSD is -5 pips @ 1.3520 as a sleepy session nears the close. The single currency continues to hover near key support as traders await Thursday's European Central Bank rate decision. Tomorrow, eurozone retail sales will accompany Services PMI data from across the region. 

·         GBPUSD is +20 pips @ 1.6325 as trade gains for the first time in six sessions. Early selling had sterling positioned for a seventh straight decline, but today's better than expected Construction PMI erased the overnight weakness. The 1.6300 support level remains key ahead of Thursday's Bank of England rate decision. Britain's Services PMI is due out tomorrow. 

·         USDCHF is +40 pips @ .9040 as action looks likely to put in an inside range day. Current trade has the pair probing the 100 dma as the pair holds at the midpoint of the .8850/.9250 range that has been in place since the middle of September. The 200 dma (.9213) remains a target for the bulls. 

·         USDJPY is +60 pips @ 101.55 as some buying has emerged for the first time in three sessions. Today's advance comes after yesterday's close marked the lowest in two and half months, and as buyers stepped in to defend the 100 dma (101.10). Japanese data is limited to average cash earnings. 

·         AUDUSD is +180 pips @ .8930 as trade readies for its best close in three weeks. Today's bid comes after last night's Reserve Bank of Australia rate decision saw the central bank hold steady at 2.50% while omitting commentary regarding the recent strength of the Aussie dollar. The change to the Statement has many pushing back expectations of a rate cut into the second half of the year. Chinese banks remain closed in observance of the Lunar New Year. 

·         USDCAD is -45 pips @ 1.1065 as trade flushes lower for a fourth consecutive session. A breakdown of current levels puts 1.0950 support in play ahead of tomorrow's Canadian building permits release.

Jason's Commentaries
As expected of a bounce on Tuesday after sinking so much on Monday. The market merely took the excuse to sell off on Monday, possibly triggering other algo traders to start shorting together. However, ahead of the employment numbers, which I expect to be bad, institutions will be covering to see what are the possible numbers on the employment report. The market started with a quick profit take as the futures started with a bullish bias. However, the market bounced off the fade and held up throughout the session.  Internals were showing some convergence on the bullishness. Volumes were at 836m shares traded. Pretty apparent that the market is covering fast.

The main leader in the market is the discretionary, gaining 1.23% while the energy sector gaining 1.03%, being the second strongest leader. The healthcare sector were being dragged up by names like Pfizer and Merck, gaining more than 2.5%. On the technical note, we've got the S&P500 bouncing off the 1740 level. While the Nasdaq is up to the 4000 level again, Russells held above 1100 points. What's worrying is that the S&P500 is below its 100MA and it might be a short term bearish sentiment. Following a consecutive DFDM. Ain't a good sign to go long on. As we're have the ADP numbers coming out at 830pm ET, we might see some volatility depending on the results of the employment numbers.  

 

Market Call: UP

Date: 4 Feb 2014