28 March 2014 AMC -Nasdaq and Russells held flat as biotech lagged. Dow and S&P500 gained higher

28 March 2014 AMC -Nasdaq and Russells held flat as biotech lagged. Dow and S&P500 gained higher

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: + 1.4%

·         France's CAC: + 0.7%

·         Spain's IBEX: + 1.3%

·         Portugal's PSI: + 0.8%

·         Italy's MIB Index: + 1.5%

·         Irish Ovrl Index: + 0.2%

·         Greece ATHEX Composite: + 1.0%

Before Market Opens 

S&P futures vs fair value: +3.50. Nasdaq futures vs fair value: +12.50.
The S&P 500 futures trade almost four points above fair value.

Asian markets finished mostly higher with the exception of China's Shanghai Composite, which shed 0.2%. Comments from Chinese President Li crossed the wires, indicating Beijing was ready to implement more pro-growth measures. Elsewhere, Japanese data was mixed as household spending (-2.5% year-over-year versus 0.2% expected) missed, retail sales (3.6% year-over-year versus 3.4% expected) beat, and Tokyo Core CPI posted a hotter than anticipated 1.0% year-over-year increase (0.9% expected). 

·         Japan's Nikkei climbed 0.5%, seeing a second day of gains. Blue chips endured a mixed session as Fast Retailing climbed 1.9% and Softbank fell 1.5%. 

·         Hong Kong's Hang Seng rallied 1.1% to a two and a half-week high. Financials saw solid gains with Industrial & Commercial Bank of China climbing 2.2% following its better than expected quarterly results. 

·         China's Shanghai Composite shed 0.2%, slumping for a third session. Automaker SAIC Motor outperformed, posting an 8.4% advance after its quarterly results exceed analyst's expectations. 

Major European indices trade higher across the board with Italy's MIB (+1.3%) setting the pace. Participants received several data points. Eurozone Consumer Confidence improved to -9.0 from -12.7 (expected -13.0) while Business and Consumer Survey rose to 102.4 from 101.2 (consensus 101.4). Germany's Import Price Index ticked down 0.1% month-over-month (forecast 0.2%, last -0.1%). Great Britain's Q4 GDP was left unrevised at 2.7% year-over-year, as expected. Separately, the current account deficit narrowed to GBP22.40 billion from GBP22.80 billion (expected deficit of GBP14.00 billion). French Consumer Spending ticked up 0.1% month-over-month (expected 0.8%, prior -2.1%) while PPI ticked down 0.1% month-over-month (expected 0.3%, last -0.6%). Italy's PPI was unchanged month-over-month (expected 0.2%, last -0.2%) while the year-over-year reading fell 1.4% (consensus -1.5%, last -1.3%). Elsewhere, Spain's Retail Sales fell 0.5% year-over-year (prior 0.5%).

Among news of note, stimulus talk was alive in Europe with various analysts suggesting the European Central Bank will announce a quantitative easing program at the press conference following the upcoming meeting on April 3. 

·         Great Britain's FTSE is higher by 0.1% with miners showing strength. Anglo American, Antofagasta, Glencore Xstrata, and Rio Tinto hold gains between 0.7% and 2.0%. On the downside, insurer Resolution has tumbled 14.2% after an investigation into life and pension policies was announced. 

·         In France, the CAC trades up 0.3%. Steelmakers ArcelorMittal and Vallourec outperform with respective gains of 1.0% and 2.3%. Insurer AXA is the weakest performer, down 1.6%. 

·         Germany's DAX holds an advance of 0.8%. Exporters Daimler and Volkswagen lead with both names up near 2.0%. On the downside, Continental and Allianz are the only two decliners. Allianz is lower by 0.6% while Continental trades down 0.1%. 

·         In Italy, the MIB is higher by 1.3%. Financials Banco Popolare, BMPS, and Intesa Sanpaolo lead with gains between 3.2% and 6.4%.

U.S. Equities

·         Equity futures point to a firm open

·         Yesterday's selling was unable to drop the S&P 500 into the red for 2014 as the benchmark now holds fractional gains

·         Traders continue to keep an eye on the VIX (14.62), which has been consolidating near current levels for the past month and a half

·         Personal Income (0.3% actual v. 0.2% expected)

·         Personal Spending (0.3% actual v. 0.3% expected)

·         PCE Prices - Core (0.1% actual v. 0.1% expected)

o    S&P Futures +5 @ 1846

o    Dow Futures +31 @ 16,213

o    Nasdaq Futures +15 @ 3569

Asia

·         Markets finished mostly higher across Asia

·         Comments from Chinese President Li crossed the wires, indicating Beijing was ready to implement more pro-growth measures 

·         Japanese data was mixed as household spending (-2.5% YoY actual v. 0.2% YoY expected) missed, retail sales (3.6% YoY actual v. 3.4% YoY expected) beat, and Tokyo Core CPI posted a hotter than anticipated 1.0% YoY (0.9% YoY expected)

·         Japan's Nikkei (+0.5%) saw a second day of gains

·         Hong Kong's Hang Seng (+1.1%) rallied to a two and a half-week high

·         China's Shanghai Composite (-0.2%) slumped for a third session

·         India's Sensex (+0.6%) saw a fifth straight close in record territory

·         Australia's ASX (+0.3%) continued its choppy trade

Market Internals

Market Internals -Technical-
The S&P 500 closed up 9 (+0.46%) at 1858, the Dow closed up 59 (+0.36%) at 16323, and the Nasdaq closed up 5 (+0.11%) at 4156. Action came on below average volume (NYSE 627 mln vs. avg. of 732; NASDAQ 1892 mln vs. avg. of 2019), with advancers outpacing decliners (NYSE 2200/901, NASDAQ 1331/1294) and mixed new highs/lows(NYSE 76/13, NASDAQ 35/40).

Relative Strength: 
Coffee-JO +2.6%, Egypt-EGPT +2.36%, Copper Miners-COPX +2.25%, China 25 Index-FXI +2.08%, Turkey-TUR +1.97%, Silver Miners-SIL +1.97%, Peru-EPU +1.84%, Homebuilders-XHB +1.77%, Oil Services-OIH +1.66%, Italy-EWI +1.56%.

Relative Weakness: 
Biotechnology-XBI -3.62%, Biotechnology-IBB -2.86%, Volatility-VXX -1.18%, Grains-JJG -1.05%, Livestock-COW -1.02%, Russia-RSX -0.82%, Japanese Yen-FXY -0.65%, Poland-EPOL -0.6%, Canadian Dollar-FXC -0.28%, Eastern Europe-ESR -0.13%.

Leaders and Laggards

Technical Updates

Commentaries 

Closing Market Summary: Stocks End Week on Modestly Higher Note While Biotech Remains Volatile
The stock market finished a cautious week on a modestly higher note, but kept only a portion of its opening gain. The S&P 500 added 0.5%, trimming its weekly loss to 0.5%, while the Nasdaq Composite added 0.1%, finishing the week with a 2.8% decline.

Emboldened by stimulus talk during the overnight session, equity indices began the day on a strong note with the Nasdaq leading the way. The tech-heavy index displayed early strength thanks to gains in biotechnology and other recently-battered momentum names. In all likelihood short covering played a part in the early advance that turned many recent laggards into leaders. One such area was the consumer discretionary sector, which added 0.8% for the day, but ended the week behind the remaining nine sectors with a loss of 2.1%.

Although the discretionary space held the bulk of today's gain, that was not the case with biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 229.38, -6.76) surged out of the gate and notched a high 15 minutes into the day before spending the remainder of the session in a steady retreat. Selling pressure intensified in the afternoon as the ETF dropped to yesterday's lows before settling with a loss of 2.9%.

The continued weakness in biotech pressured the health care sector (-0.4%) while other heavily-weighted groups ended mixed with respect to the broader market. Like the aforementioned consumer discretionary space, industrials (+0.7%) outperformed while financials (+0.4%) lagged. For its part, the largest S&P 500 sector, technology, ended in-line with the broader market.

Also of note, the energy sector (+1.2%) outperformed for the second day in a row, bringing its weekly gain to 2.5%. The sector drew strength from Dow component ExxonMobil (XOM 97.70, +1.46), which gained 1.5% while crude oil added 0.4% to $101.67/bbl.

On the countercyclical side, all four sectors ended behind the broader market. The telecom services (-0.1%) sector posted a modest loss while consumer staples (+0.4%) and utilities (+0.2%) registered gains.

Treasuries ended near their lows after retreating throughout the session. The benchmark 10-yr yield rose three basis points to 2.72%.

Trading volume was on the light side with just over 620 million shares changing hands at the NYSE.

Reviewing today's data: 

·         Personal income increased 0.3% for a second consecutive month in February. The Briefing.com consensus expected income to increase 0.2%. As foretold in the employment report, wages and salaries were up 0.2% in February after increasing 0.3% in January. The Medicaid expansion from the implementation of the Affordable Care Act offset declines in unemployment insurance from the expiration of the emergency unemployment benefits. In all, government social benefits increased 0.8%. Personal spending met expectations, increasing 0.3% in February, up from a downwardly revised 0.2% (from 0.4%) in January. 

·         The University of Michigan Consumer Sentiment Index was revised up to 80.0 in the final March reading from 79.9 in the preliminary reading (Briefing.com consensus 80.0). Sentiment is still below the 81.6 final reading from February. There was a divergence between the March Conference Board's Consumer Confidence and the University of Michigan Consumer Sentiment indicators. The Confidence Index jumped to a six year high on stronger future expectations while the respondents in the University of Michigan survey were much more subdued. Competing trends are nothing new, but they do discount the effectiveness of using these data points to predict future consumption growth. 

On Monday, the Chicago PMI for March will be reported at 9:45 ET. 

·         S&P 500 +0.5% YTD 

·         Nasdaq Composite -0.5% YTD 

·         Russell 2000 -0.9% YTD 

·         Dow Jones Industrial Average -1.5% YTD

Commodities

Closing Commodities: Gold Ends Below $1300, Loses 3.1% On The Week

·         Apr gold spent most of today's floor trade in negative territory, dipping to a session low of $1285.90 per ounce shortly after equity markets opened. It touched a session high of $1296.50 per ounce but retreated back into the red. It settled 0.1% lower at $1293.90 per ounce, booking a 3.1% loss for the week.

·         May silver touched a session high of $19.89 per ounce after lifting from its session low of $19.66 per ounce set in early morning action. It settled 0.4% higher at $19.78 per ounce, booking a 2.6% weekly loss.

·         May crude oil pulled back from its session high of $102.24 per barrel set in morning action but managed to stay in positive territory. It brushed a session low of $101.40 per barrel and eventually settled at $101.67 per barrel, or 0.4% higher. Today's advance brought gains for the week to 2.2%.

·         May natural gas touched a session high of $4.56 per MMBtu as pit trade opened but quickly slipped into negative territory. Unable to find buying support, it settled 1.1% lower at its session low of $4.48 per MMBtu. Despite today's loss, natural gas gained 4.2% for the week.

COMEX Metals Closing Prices

  Apr gold fell $0.80 to $1293.90/oz 

·         Gold spent most of today's floor trade in negative territory, brushing a session low of $1285.90 shortly after equity markets opened. It touched a session high of $1296.50 but retreated back into the red. It settled 0.1% lower, booking a 3.1% loss for the week. 

  May silver rose $0.08 to $19.78/oz 

·         Silver touched a session high of $19.89 after lifting from its session low of $19.66 set in early morning pit trade. It settled 0.4% higher, booking a 2.6% weekly loss. 

  May copper rose 5 cents to $3.04/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         May corn fell 1 cent to $4.91/bushel 

·         May wheat fell 15 cents to $6.95/bushel 

·         May soybeans fell 1 cent to $14.36/bushel 

·         Apr ethanol rose 25 cents to $3.27/gallon 

·         May sugar (#16 (U.S.)) rose 0.23 of a penny to 22.35 cents/lbs

NYMEX Energy Closing Prices

  May crude oil rose $0.43 to $101.67/barrel 

·         Crude oil pulled back from its session high of $102.24 set in morning action but managed to stay in positive territory. It brushed a session low of $101.40 and eventually settled with a 0.4% gain. Today's advance brought gains for the week to 2.2%. 

  May natural gas fell 5 cents to $4.48/MMBtu 

·         Natural gas touched a session high of $4.56 as pit trade opened but quickly slipped into negative territory. Unable to find buying support, it settled 1.1% lower at its session low. Despite today's loss, natural gas gained 4.2% for the week. 

  May heating oil rose 1 cent to $2.95/gallon 

  May RBOB settled unchanged at $2.93/gallon

Treasuries

Yield Curve Sees Further Flattening: 10-yr: -10/32..2.719%..USD/JPY: 102.80..EUR/USD: 1.3748
The Week in Review

·         Treasuries endured a flat to higher week, buoyed by some solid auctions. Click here to see an intraweek yields chart. 

·         Economic data saw consumer confidence (82.3 actual v. 78.2 expected) and durable orders (2.2% actual v. 1.0% expected) top estimates while new home sales (440K actual v. 445K expected) and pending home sales (-0.8% actual v. -0.2% expected) missed. GDP - Third Estimate (2.6%) and Michigan Sentiment - Final (80.0) were in-line with expectations. 

·         The 5y was little changed for the week, settling @ 1.736%. Traders continue to focus on the 1.725% level as trendline resistance off the September highs lurks in the vicinity. 

·         The 10y shed -4bps to end the week @ 2.712%. The benchmark yield pressed lower for five straight sessions before Friday's selling end the streak. Current levels are home to both the 50 and 200 dma, but the 2.600% area remains more important as a breakdown would drop action to levels last seen in October. 

·         At the long end, the 30y fell -7bps to 3.544%. The yield on the long bond broke below the key 3.550% area, causing action to press to nine-month lows. The inability to retake the 3.550% level in a timely manner puts 3.150% in play. 

·         Tuesday's $32 bln 2y note auction was average, drawing 0.469% (WI 0.471%) and a 3.20x bid/cover. A strong indirect bid (40.9%) provided support as directs (21.5%) saw an average takedown. Primary dealers ended with 37.6% of the supply.

·         Wednesday's strong $35 bln 5y auction drew 1.715% and a solid 2.99x bid/cover. Indirect (50.9%) and direct (23.1%) bidders saw takedowns well above their 12-auction averages, leaving primary dealers with just 26% of the supply and their lowest takedown on record. 

·         Thursday's solid $29 bln 7y note auction drew 2.258% (WI 2.263%) and an in-line 2.59x. Support was provided by direct bidders (32.6%) as the indirect bid (41.4%) was in-line with its 12-auction average. Primary dealers were left with just 26% of the supply.   

·         The yield curve continued to flatten with the 5-30-yr spread tightening to 181bps, its narrowest since October 2009.

·         A flatter 2-10-yr spread also took hold as trade narrowed to 226.5bps. 

The Week Ahead 

·         Monday's data is limited to Chicago PMI (9:45). Fed Chair Janet Yellen will be in Chicago to speak at the Federal Reserve Bank of San Francisco/Federal Reserve Bank of Chicago/Community Development Financial Institutions Fund 2014 National Interagency Community Reinvestment Conference (9:55).

·         Tuesday will see ISM Index, construction spending (10), and auto/truck sales (14). 

·         Wednesday's data includes the weekly MBA Mortgage Index (7), ADP Employment Change (8:15), and factory orders (10). ATL's Lockhart gives his economic outlook (12:30). STL's Bullard will be available to the media (16) before giving opening remarks at the Home Jones Memorial Lecture (17).

·         Data continues to flow on Thursday as Challenger Job Cuts (7:30), initial and continuing claims, trade balance (8:30), and ISM Services (10) are released. 

·         Friday's data is the most anticipated of the week as nonfarm payrolls, nonfarm private payrolls, unemployment rate, hourly earnings, and average workweek (8:30) are due out.

On other news.... 




Currencies 

Dollar Ticks Higher Amid Sleepy Trade: 10-yr: -07/32..2.711%..USD/JPY: 102.78..EUR/USD: 1.3752

·         The Dollar Index continues to hold small gains as action probes the 80.20 level. Click here to see a daily Dollar Index chart.

·         Today's bid has the Index on track for a fifth day of gains as action probes the 50 dma. 

·         EURUSD is +10 pips @ 1.3750 as a rather uneventful day draws to a close. Selling over the past week and a half has dropped the single currency off its best levels since October 2011 with action finding support in the 1.3700/1.3750 area ahead of next week's ECB meeting. Persistent chatter of deflation has some looking for the central bank to announce a QE-type program while others believe it is just more jawboning in an effort to weaken the euro. Eurozone data out Monday includes CPI Flash Estimate and German retail sales.

·         GBPUSD is +45 pips @ 1.6650 as trade remains on track to post a fifth day of gains. Sterling has seen steady buying throughout the session despite today's record trade deficit. Resistance in the 1.6600/1.6650 area remains in focus with a breakout putting the February/March highs in jeopardy. Britain's net lending to individuals is due out on Monday.

·         USDCHF is flat @ .8865 as trade has seen a sharp reversal from this morning's highs. The pair kissed the 50 dma (.8897) early in the session, but sellers emerged in defense of resistance in the area. Action continues to be a derivative of the euro thanks the Swiss National Bank's EURCHF1.20 floor. Switzerland's KOF Economic Barometer is set to cross the wires. 

·         USDJPY is +60 pips @ 102.80 as action looks likely to put in its best close in two and a half weeks. The pair is higher after Tokyo CPI outpaced estimates, leading many to believe Japan's recovery continues to gather momentum. Resistance in the 103.00/103.50 area will be tracked closely. Japan's preliminary industrial production is due out Sunday evening.

·         AUDUSD is -15 pips @ .9245 as selling takes hold for the first time in seven days. An early bid lifted the hard currency to a four-month high near .9300 before sellers stepped in to defend resistance. Australian data due out Monday is limited to private sector credit with the Reserve Bank of Australia scheduled to opine Monday evening. 

·         USDCAD is +35 pips @ 1.1065 as buyers have emerged for the first time in seven days. Today's bid has action looking to retake the 50 dma, which lingers near 1.1075/1.1100 resistance. Canada's GDP will be released on Monday.

Weekly Analysis
Week 13



Technical Updates

Briefing's Commentaries


Week in Review: Stocks Slide Amid Volatility in Biotechnology 

The stock market kicked off the trading week on a cautious note with the Nasdaq leading the retreat. The tech-heavy index lost 1.2% while the S&P 500 fell 0.5% with eight sectors ending in the red. For its part, the Dow Jones Industrial Average (-0.2%) held up relatively well. Equity indices began the session in the green, but quickly slumped into the red as biotechnology continued its recent woes while other momentum names displayed broad weakness. Late-afternoon buying lifted the key averages off their lows, but the Nasdaq could only reclaim a portion of its loss. The iShares Nasdaq Biotechnology ETF settled lower by 2.8% after testing its 100-day moving average (235.61) for the first time since early November.

The major indices strung together modest gains on Tuesday on the back of some strong showings from blue-chip issues and a volatile rebound effort by the beaten-down biotechnology stocks. The move followed on the heels of a strong outing by major European bourses, which shot up largely in response to some remarks from Bundesbank head, Jens Weidmann, who suggested it was not out of the realm of possibility for the ECB to implement a QE-type program to fight deflation. It would be remiss not to add that ECB President Draghi spoke later in the day and said the ECB is not currently seeing any evidence of deflation.

Equity indices finished the Wednesday session on a cautious note with the S&P 500 falling 0.7%. The Dow Jones Industrial Average (-0.6%) outperformed while small caps bore the brunt of the pressure. The Russell 2000 declined 1.9% while the Nasdaq Composite fell 1.4%. Equity indices began the day on an upbeat note, but the financial sector (-0.9%) served up an early warning by not taking part in the opening rally. One industry group that briefly participated in the early advance was the biotech space. The iShares Nasdaq Biotechnology ETF was up as much as 1.1% during the first hour of action, but faded from the early high, taking the market lower with it. Interestingly, the broader health care sector (+0.1%) finished the day ahead of the remaining nine groups.

On Thursday, the market finished the session on a lower note with the tech-heavy Nasdaq Composite (-0.5%) trailing the other indices once again. The Nasdaq widened its week-to-date loss to 3.6% while the S&P 500 settled lower by 0.2%, extending its weekly decline to 0.9%. Equity indices began the trading day on a cautious note despite two upbeat economic data points crossing ahead of the open. Namely, fourth quarter GDP was revised up to 2.6% from 2.4% while weekly initial claims fell to 311,000 from 320,000. The release of this morning's data coincided with session lows in Treasuries, which rallied into the afternoon. The 10-yr note added four ticks, pressuring its yield down to 2.68% after notching a morning high at 2.71%.

Next Week In View






Jason's Commentaries

The market had a bullish start to Friday's session but the gains was wiped out in the later part of the day as Nasdaq and Russells lagged by biotech. The healthcare sector is only sector lagging as components like Amgen, Celgene lagged by more than 2%. Volumes were standing at 612.1m shares traded on the NYSE while the bulls were in charge of the session. Special note to treasuries, we're looking at some continual flattening of the yield curve. Yields of the 20 and 30 year has been dropping while the nearer term treasuries remained near zero. If the yield curve goes flat, we might see another stock market crash once again. On the technical side, both Dow and S&P500 are holding strong to their respective support and the market is having some hard to break it down on Friday. However, if Dow and S&P500 were to break their support, we might see some heavy selling coming in.

This week, the market will be expecting the jobs report once again. There might be some unusual pricing in happening. 

Market Call: Either bouncing off support or breaking down from support

Date: 31 March 2014