6 Jan 2014 AMC - Market rallied ahead of employment numbers

6 Jan 2014 AMC - Market rallied ahead of employment numbers  

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: + 1.6%

·         Germany's DAX: + 1.5%

·         France's CAC: + 1.7%

·         Spain's IBEX: + 1.9%

·         Portugal's PSI: + 2.5%

·         Italy's MIB Index: + 2.3%

·         Irish Ovrl Index: + 1.5%

·         Greece ATHEX Composite: + 0.8%

Before Market Opens

S&P futures vs fair value: +0.70. Nasdaq futures vs fair value: +6.20.
The S&P 500 futures have slipped from their highs and currently trade just one point above fair value.

Markets across most of Asia rallied as traders stepped in to scoop up shares at discounted prices. Bangko Central ng Pilipinas held its benchmark interest rate steady at 2.50%, as expected.

In economic data, Japan's weekly foreign bonds buying report indicated net sales in the amount of JPY1.82 trillion (-JPY357 billion prior). Elsewhere, Australia's retail sales rose 0.5% month-over-month (0.4% forecast, 0.7% previous) and NAB Quarterly Business Confidence improved to 8.0 from 5.0. Separately, the trade surplus expanded to AUD468 million from AUD83 million (-AUD300 million expected) as exports rose 4.0% month-over-month (0% prior) and imports increased 2.0% month-over-month (-1.0% last). 

·         Japan's Nikkei maintained a narrow range, but slipped to lows into the close. The index ended lower by 0.2%. Sony added 1.5% ahead of its earning's report while Takeda Pharmaceuticals shed 2.7% in response to its earnings miss. 

·         Hong Kong's Hang Seng rose 0.7%, gaining for the first time in four days. Casino stocks recovered from yesterday's slide as Sands China surged 10.9% and Galaxy Entertainment jumped 7.3%. 

·         China's Shanghai Composite was closed. 

Major European indices hover near their best levels of the session after comments from two central banks. The Bank of England left its key interest rate and purchasing program unchanged at their respective 0.50% and GBP375 billion, as expected. The European Central Bank also left its key interest rate unchanged at 0.25%, as expected.

Participants received several economic data points. Great Britain's Halifax House Price Index rose 1.1% month-over-month (1.0% expected, -0.5% prior) while the year-over-year reading jumped 7.3% (7.2% forecast, 7.5% last). Eurozone retail PMI increased to 50.5 from 47.7. Germany's factory orders declined 0.5% month-over-month (0.4% expected, 2.4% prior). Elsewhere, Swiss trade surplus narrowed to CHF503 million from CHF2.03 billion (CHF2.41 billion forecast) and SECO Consumer Climate rose to 2 from -5 (1 expected). 

·         Germany's DAX trades higher by 1.1% as 28 of its 30 components register gains. Fertilizer producer K+S leads with a gain of 3.2% while exporters BMW and Daimler also show strength. The two stocks hold respective gains of 1.6% and 2.3%. 

·         Great Britain's FTSE holds an advance of 1.1% with financials contributing to the strength. Hargreaves Lansdown is higher by 3.4% and Prudential trades up 2.4%. 

·         In France, the CAC trades up 1.2% with support from most of its 40 components. Alcatel-Lucent leads with a gain of 12.1% while drug maker Sanofi lags. The stock is lower by 3.2%.

Market Internals

Market Internals -Technical-
The S&P 500 closed up 22 (+1.24%) at 1773, the Dow closed up 188 (1.22%) at 15629, and the Nasdaq closed up 46 (+1.14%) at 4057. Action came on near average volume (NYSE 730 mln vs. avg. of 700; NASDAQ 1801 mln vs. avg. of 1815), with advancers outpacing decliners (NYSE 2345/776, NASDAQ 1694/900) and new highs outpacing new lows (NYSE 43/36, NASDAQ 44/34).

Relative Strength: 
Turkey-TUR +3.73%, U.S. Home Construction-ITB +3.12%, Italy-EWI +3.05%, Latin America 40-ILF +3.03%, Timber-CUT +2.91%, Steel-SLX +2.79%, Homebuilders-XHB +2.79%, Thailand-THD +2.67%, Spain-EWP +2.66%, Oil Services-OIH +2.51%.

Relative Weakness: 
Volatility-VXX -9.95%, Coffee-JO -5.90%, Natural Gas-UNG -2.21%, Vietnam-VNM -2.17%, Sugar-SGG -1.52%, Agriculture-DBA -1.06%, Japanese Yen-FXY -0.73%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: S&P 500 Regains 100-Day Moving Average
The stock market enjoyed a broad-based rebound on Thursday that placed the Dow Jones Industrial Average (+1.2%) back above its 200-day moving average (15483). The S&P 500 also gained 1.2%, ending just north of its 100-day average (1772) after flirting with that level during the afternoon.

Stocks began on an upbeat note and climbed through the first 90 minutes of action. Much of the advance was paced by groups that faced aggressive selling during the recent pullback, suggesting short covering played a role in the rally.

Yen weakness also factored into the advance as the retreat of the Japanese currency calmed fears about some participants being forced out of yen-based carry trades due to strength in the funding currency. The dollar/yen pair ended the New York session right above 102.00 after starting the day near 101.20.

The consumer discretionary group (+2.1%) ended in the lead with media names making a significant contribution after Dow component Disney (DIS 75.56, +3.80) beat its Capital IQ consensus estimate by 13 cents on in-line revenue.

Elsewhere among discretionary shares, retailers and homebuilders displayed industry-wide strength. The SPDR S&P Retail ETF (XRT 80.00, +1.88) gained 2.4% and iShares Dow Jones US Home Construction ETF (ITB 24.82, +0.75) jumped 3.1%.

Also of note, the largest S&P 500 sector, technology (+1.2%) ended in line with the broader market. Most large cap components displayed strength, but Facebook (FB 62.16, -0.03) ended little changed after its peer, Twitter (TWTR 50.03, -15.94), reported earnings. Although the social media company announced above-consensus results, its Monthly Active Users metric showed disappointing growth.

On the countercyclical side, all four groups—consumer staples (+1.1%), health care (+0.5%), utilities (+0.6%), and telecom services (+0.1%)—were unable to keep pace with the S&P 500. Notably, the staples sector received support from Green Mountain Coffee Roasters (GMCR 102.10, +21.22) after the company announced a strategic partnership with Coca-Cola (KO 38.03, +0.42), in which KO will purchase a 10% minority stake in GMCR. In addition, GMCR reported a bottom-line beat on below-consensus revenue.

Treasuries ended near their lows with the 10-yr yield up three basis points at 2.71%.

Participation was a bit above average as 730 million shares changed hands at the New York Stock Exchange.

Today's economic data featured three reports: 

·         The initial claims level settled back into the 330,000 range this week as the initial claims level fell to 331,000 from an upwardly revised 351,000 (from 348,000). The Briefing.com consensus expected the initial claims level to fall to 335,000. 

·         Fourth quarter nonfarm labor productivity increased 3.2% while the Briefing.com consensus expected an increase of 2.4%. That was down from an upwardly revised 3.6% increase (from 3.0%) in the third quarter. Profit growth outperformed labor gains in the fourth quarter. Compensation per hour increased only 1.5%, down from a 1.6% increase in the third quarter. With compensation increasing at a slower rate than productivity, unit labor costs fell 1.6%. That was the third quarterly decline of 2013. 

·         The U.S. trade deficit for December widened to $38.7 billion from an upwardly revised $34.6 billion (from $34.3 billion). The Briefing.com consensus expected the trade deficit to increase to $36.0 billion. The Bureau of Economic Analysis assumed the trade deficit in December increased to around $37.0 billion in the advance estimate for fourth quarter GDP. The slightly higher than expected deficit will likely contribute to lower GDP growth in the second estimate. 

Tomorrow's data will focus on jobs with the nonfarm payrolls report for January set to be released at 8:30 ET. Hourly earnings and average workweek will also be announced at 8:30 ET while the December consumer credit report will cross the wires at 15:00 ET. 

·         Nasdaq Composite -2.9% YTD 

·         S&P 500 -4.1% YTD 

·         Russell 2000 -5.1% YTD 

·         Dow Jones Industrial Average -5.7% YTD

Commodities

Closing Commodities: Natural Gas Settles 2.2% Lower

·         Apr gold popped to a session high of $1267.50 per ounce in early morning pit trade but quickly gave up the gain. It chopped around near the unchanged line for the remainder of the session and settled 20 cents lower at $1256.80 per ounce.

·         Mar silver traded in positive territory today, advancing to a session high of $20.18 per ounce in early morning action. It brushed a session low of $19.83 per ounce and eventually settled at $19.92 per ounce, or 0.6% higher.

·         Mar crude oil traded higher but retreated from its session high of $98.83 per barrel set in early morning floor trade. It dipped to a session low of $97.47 per barrel in afternoon action and settled with a 0.5% gain at $97.84 per barrel.

·         Mar natural gas traded as high as $5.40 per MMBtu in overnight trade but fell below $5.00 following inventory data that showed a draw of 262 bcf. Expectations called for a larger draw of 270-273 bcf. Unable to regain momentum, it settled with a 2.2% loss at $4.93 per MMBtu.

COMEX Metals Closing Prices

  Apr gold fell $0.20 to $1256.80/oz 

·         Gold popped to a session high of $1267.50 in early morning pit trade but quickly gave up the gain despite weakness in the dollar index. It chopped around near the unchanged line for the remainder of the session and settled 20 cents lower. 

  Mar silver rose $0.11 to $19.92/oz 

·         Silver traded in positive territory today, climbing to a session high of $20.18 in early morning action. It brushed a session low of $19.83 and eventually settled with a 0.6% gain.

  Mar copper rose 4 cents to $3.19/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Mar corn settled unchanged at $4.43/bushel 

·         Mar wheat fell 8 cents to $5.80/bushel 

·         Mar soybeans rose 10 cents to $13.26/bushel 

·         Mar ethanol rose 3 cents to $1.92/gallon 

·         Mar sugar (#16 (U.S.)) settled unchanged at 21.05 cents/lbs

NYMEX Energy Closing Prices

  Mar crude oil rose $0.46 to $97.84/barrel 

·         Crude oil traded higher today but retreated from its session high of $98.83 set in early morning floor trade. It brushed a session low of $97.47 in afternoon action and settled with a 0.5% gain. 

  Mar natural gas fell 11 cents to $4.93/MMBtu 

·         Natural gas traded as high as $5.40 in overnight trade but fell below $5.00 following weaker-than-anticipated inventory data. Inventories for the week ending Jan 31 showed a draw of 262 bcf when consensus called for a larger draw of 270-273 bcf. Unable to regain momentum, it settled with a 2.2% loss. 

  Mar heating oil settled unchanged at $3.00/gallon 

  Mar RBOB rose 4 cents to $2.68/gallon

Treasuries

Treasuries Slide for Third Straight Session: 10-yr: -09/32..2.703%..USD/JPY: 102.06..EUR/USD: 1.3590

·         Treasuries closed on their lows as sellers remained in control ahead of tomorrow's jobs report. Click here to see an intraday yields chart.

·         The complex hovered little changed following a lackluster overnight trade before sellers took control in response to this morning's data. 

·         A wider than expected trade deficit ($38.7 bln actual v. $36.0B expected) coupled with better than expected initial (331K actual v. 335K expected) and continuing (2964K actual v. 2993K expected) claims and productivity beat (+3.2% actual v. +2.4% expected) sparked a third straight day of losses.

·         Selling was pretty well dispersed across the curve with most yields +2.5/+3.5bps. 

·         The 5y tacked on +2.7bps, finishing the day @ 1.516%. 

·         Selling of 10s ran the benchmark yield up +3.5bps to 2.702%. The 10y closed at its highest level in a week, and is now up roughly +12bps from its recent lows. Resistance in the 2.700% area will be in focus into tomorrow's jobs report. 

·         Modest weakness at the long end caused a +2.2bp advance in the 30y. The yield on the long bond ended today's session @ 3.675%, up almost 14bps from the February 1 bottom.

·         A steeper curve persisted with the 2-10-yr spread widening to 237.5bps.

·         Precious metals settled mixed with gold flat @ $1257 and silver +$0.10 @ $19.91.

·         Data: Nonfarm payrolls, nonfarm private payrolls, unemployment rate, hourly earnings, average workweek (8:30), and consumer credit (15).

Next Day In View 

Economic Commentary

Economic Summary: Trade Balance wider than expected in December; Jobless Claims lower than expected; NFP's tomorrow at 8:30
Economic Data Summary:

·         Weekly Initial Claims 331K vs Briefing.com consensus of 335K; Last Week was 348K

·         Weekly Continuing Claims 2.964 M vs Briefing.com consensus of 2.993 M ; Last Week was 2.991 M

o     The Department of Labor stated that there were no special factors in the claims data. The upward spike in claims for the week ending January 25 was the result of volatility, likely stemming from the extreme cold weather. Filings quickly returned to normal levels this week. Labor conditions have not materially changed over the past several weeks.

·         December Trade Balance -$38.7 bln vs Briefing.com consensus of -$36.0 bln; November was -$34.3 bln

o    The goods deficit increased by $4.6 bln to $58.8 bln and the services surplus rose by $0.4 bln to $20.1 bln. Exports shrank by 1.8% in December, from $194.8 bln in November to $191.3 bln. The drop was primarily the result of a $1.2 bln decline in sales of industrial supplies and materials and a $1.0 bln drop in capital goods. A large portion of the capital goods decline was the result of weaker civilian aircraft shipments (-$0.6 bln). Exports of automotive vehicles, parts, and engines declined by $0.8 bln. Import levels increased 0.3% to $230.0 bln in December from $229.4 bln in November. 

·         Fourth Quarter Productivity - Prel 3.2% vs Briefing.com consensus of 2.4%; Third Quarter was 3.0%

·         Fourth Quarter Unit Labor Costs -1.6% vs Briefing.com consensus of -0.5%; Third Quarter was -1.4%

Upcoming Economic Data:

·         January Nonfarm Payrolls due out Friday at 8:30 (Briefing.com consensus of 175K; December was 74K)

·         January Nonfarm Private Payroolls due out Friday at 8:30 (Briefing.com consensus of 161K; December was 87K)

·         January Unemployment Rate due out Friday at 8:30 (Briefing.com consensus of 6.7%; December was 6.7%)

·         January Hourly Earnings due out Friday at 8:30 (Briefing.com consensus of 0.2%; December was 0.1%)

·         January Average Workweek due out Friday at 8:30 (Briefing.com consensus of 34.4; December was 34.4)

·         December Consumer Credit due out Friday at 15:00 (Briefing.com consensus of $11.5 bln; November was $12.3 bln)

Upcoming Fed/Treasury Events:

·         Boston Fed President Eric Rosengren (not a voting FOMC member, dovish) to speak tonight at 17:30

Other International Events of Interest

·         The European Central Bank held its key rate steady at 0.25%

·         The Bank of England kept both its benchmark interest rate and asset purchase program unchanged at 0.50% and GBP375 bln, respectively

On other news.... 

Currencies 

Dollar Hits One-Week Low Ahead of Jobs Report: 10-yr: -10/32..2.708%..USD/JPY: 102.08..EUR/USD: 1.3589

·         The Dollar Index hovers on session lows near 80.80 as trade readies to close at a one-week low ahead of tomorrow's jobs report. Click here to see a daily Dollar Index chart.

·         The Index saw yet another test of 81.20 resistance, but the level continued to hold strong, as it has since the middle of September. 

·         Today's slide has action now on key support as traders position themselves for the January jobs data. 

·         EURUSD is +55 pips @ 1.3590 as trade squeezed higher after the European Central Bank held its key rate unchanged at 0.25%. The inaction caused shorts to cover their positions as speculation had been mounting the ECB would embark on a QE-type program. The post-decision bid ran trade above the 100 dma (1.3590) with action ticking as high as 1.3620 before buyers exhausted. Germany's industrial production and trade balance readings are due out tomorrow. 

·         GBPUSD is +25 pips @ 1.6330 as action holds just off the highs. Sterling saw little reaction to the Bank of England's decision to keep both its benchmark interest rate and asset purchase program unchanged at their respective 0.50% and GBP375 bln with trade only seeing a bid after the ECB decision. Key support remains in the 1.6300 area. British data includes manufacturing production and the trade balance. 

·         USDCHF is -30 pips @ .9000 as trade continues a steady climb of session lows. Action was hammered down to the .8970 level as the euro rallied in response to the European Central Bank, but has once again rallied back up to the key resistance level. Switzerland's foreign currency reserves and retail sales will cross the wires tomorrow.

·         USDJPY is +60 pips @ 102.00 as action presses session highs. Resistance at current levels will be watched closely into tomorrow's jobs report. 

·         AUDUSD is +65 pips @ .8970 as trade holds at three-week highs. The hard currency has been aided better than expected Australian data and the return to risk assets. Today's trade looks likely to put in the first close above the 50 dma in three months. Tonight, the Reserve Bank of Australia will release its latest Monetary Policy Statement. Chinese banks reopen tomorrow after the weeklong Lunar New Year celebration.

·         USDCAD is -20 pips @ 1.1060 as sellers remain in control for a sixth session following today's strong Ivey PMI report (56.8 actual v. 51.3 expected, 46.3 previous). A breakdown of minor support in the 1.1050 area puts 1.0950 in play. Canada's jobs report is scheduled for tomorrow.

Jason's Commentaries


The market rallied above 1%. It was kinda expected that the market actually rallied that much ahead of employment numbers due to short covering. The market started with a bullish bias and hold up all the way till the closing bell. The volumes were standing at 743.2m shares traded on the NYSE. Likely to be the short covering from the few days of downtrend. Ahead of the employment numbers, the market is likely the cover their shorts. The internals is definitely pointing towards the bullish upside and today will be really uncertain. The main leader in the market is discretionary sector, having to gain 2.11% while the financials led by 1.55%. JP Morgan, Citi, Mastercard were amongst the big names to have gained over 2% to drag the whole market up. Right now the futures is at 0.14% and likely to gyrate in a huge manner after the employment numbers. If the employment numbers come in bad, we're definitely going down. However, if the numbers are good, I'm hopeful that the market will likely head to 1800 again.     

Market Call: ABSTAIN

Date: 7 Jan 2014