10 Mar 2014 AMC - Market went through another round of volatile session as sentiments of mixed employment lingers

10 Mar 2014 AMC - Market went through another round of volatile session as sentiments of mixed employment lingers

Market Summary 

 European Closing Prices

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

·       UK's FTSE: -0.4%

·       Germany's DAX: -0.9%

·       France's CAC: + 0.1%

·       Spain's IBEX: + 0.3%

·       Portugal's PSI: + 1.2%

·       Italy's MIB Index: + 0.6%

·       Irish Ovrl Index: -0.5%

·       Greece ASE General Index: -0.2%

Before Market Opens

S&P futures vs fair value: -3.40. Nasdaq futures vs fair value: -1.00.
The S&P 500 futures have retreated from their highs and now trade three points below fair value.

The major Asian bourses ended mostly lower, spooked by the surprise Chinese trade deficit (-$22.98 billion versus $14.50 billion expected surplus). The deficit resulted from an 18.1% drop in exports and a 10.1% rise in imports, and was likely a result of timing of the Lunar New Year. In other data, CPI (2.0% year-over-year versus 2.1% expected) and PPI (-2.0% year-over-year versus -1.9% expected) were both slightly cooler than expected. Elsewhere, Japanese data also disappointed as the country posted a record adjusted current account deficit (JPY0.59 trillion versus JPY0.59 trillion expected) and the lowest final GDP (0.2%) since Prime Minister Shinzo Abe took office. 

·       Japan's Nikkei lost 1.0%, slipping off five-week highs. Real estate shares were weak with Sumitomo Realty & Development and Mitsui Fudosan off 2.1% and 2.4%, respectively. 

·       Hong Kong's Hang Seng fell 1.8% to a one-month low. China Southern Airlines slid 3.5% on reports two passengers aboard the Malaysian Airlines flight that vanished over the weekend had purchased tickets through a code share with the company. 

·       China's Shanghai Composite tumbled 2.9% below the 2000 level and is threatening its lowest close of 2014. Industrial & Commercial Bank of China saw sizable losses, off 2.9%.

Major European indices trade mixed after seeing early gains. Looking at economic data, Eurozone Sentix Investor Confidence improved to 13.9 from 13.3 (14.0 expected). French Industrial Production slipped 0.2% month-over-month (0.2% consensus, -0.6% prior). Italy's Industrial Production rose 1.0% month-over-month (0.4% expected, -0.8% prior) while the year-over-year reading increased 1.4% (-0.7% consensus, -0.7% last). Spain's Industrial Production increased 1.1% year-over-year (1.4% forecast, 2.2% prior). Swiss Retail Sales slipped 0.3% year-over-year (3.3% expected, 2.5% last). 

·       Germany's DAX is lower by 0.4% with Deutsche Bank trading down 2.1%. Producers of basic materials also lag with K+S and ThyssenKrupp down 0.5% and 2.1%, respectively. 

·       Great Britain's FTSE trades flat. Miners lag following China's disappointing trade data. Anglo American, Antofagasta, and Glencore Xstrata are all down close to 2.0% apiece. Defense contractor Rolls-Royce Holdings outperforms with a gain of 2.1%. 

·       In France, the CAC is higher by 0.5%. Bouygues trades higher by 8.2% after agreeing to sell a spectrum network to Iliad. Telecom provider Orange also outperforms, up 3.4%.

·       The major Asian bourses ended mostly lower, spooked by the surprise Chinese trade deficit (-$23 bln actual v. $13.2 bln surplus expected, $31.9 bln surplus previous)

·       The deficit came on a -18.1% drop in exports and 10.1% rise in imports, and is likely a result of timing of the Lunar New Year 

·       Chinese CPI (2.0% YoY actual v. 2.1% YoY expected) and PPI (-2.0% YoY actual v. -1.9% YoY expected) were both slightly cooler than expected

·       Japanese data also disappointed as the country posted a record current account deficit (JPY0.59 trln actual v. JPY0.59 trln expected) and the lowest Final GDP (0.2%) since Shinzo Abe took office 

·       Japan's Nikkei (-1.0%) slipped off five-week highs

·       Hong Kong's Hang Seng (-1.8%) fell to a one-month low

·       China's Shanghai Composite (-2.9%) tumbled below the 2000 level and is threatening its lowest close of 2014

·       India's Sensex (UNCH) ticked to a record high

·       Australia's ASX (-0.9%) eased off five-year highs

Market Internals

Market Internals -Technical-
The Dow closed down 34 (-0.21%) at 16419, the S&P 500 closed down 1 (-0.05%) at 1877, and the Nasdaq closed down 2 (-0.04%) at 4334. Action came on mixed volume (NYSE 616 mln vs. avg. of 691; NASDAQ 1946 mln vs. avg. of 1927), with decliners outpacing advancers (NYSE 1363/1736, NASDAQ 1186/1398) and new highs outpacing new lows (NYSE 98/23, NASDAQ 111/8).

Relative Strength: 
Coffee-JO +3.29%, India-INP +1.58%, Sugar-SGG +1.50%, Vietnam-VNM +1.42%, Lithium-LIT +1.34%, Livestock-COW +1.13%, Israel-EIS +1.06%, Cotton-BAL +0.90%, Greece-GREK +0.80%, Indian Rupee-ICN +0.43%.

Relative Weakness: 
Copper Miners-COPX -3.38%, Junior Gold Miners-GDXJ -2.64%, Grains-JJG -2.63%, Chile-ECH -2.23%, Rare Earths-REMX -2.04%, U.S. Home Construction-ITB -1.91%, China 25 Index-FXI -1.54%, Brazilian Real-BZF -1.28%, Australia-EWA -1.26%, Latin America 40-ILF -1.25%.    

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: Stocks Begin New Week on Modestly Lower Note
The major averages began the new trading week on a slightly lower note with small caps leading the weakness. The Russell 2000 shed 0.3% while the S&P 500 slipped less than a point with six sectors ending in the red.

Equity indices began the day in negative territory with only the Nasdaq (-0.04%) making a very brief appearance in the green. After sliding through the first hour of action, the major averages reversed and spent the remainder of the session climbing off their lows with help from the three top-weighted sectors. Health care and financials gained 0.4% and 0.04%, respectively, while technology (-0.1%) ended just below its flat line. Also contributing to the rebound was the energy sector, which added 0.2% even as crude oil fell 1.4% to $101.07/bbl.

The S&P 500 tried to regain its flat line, but came up just short as the weakness among consumer discretionary (-0.4%), industrials (-0.5%), and materials (-0.1%) sectors kept a lid on the attempted rally.

Although the materials sector accounts for less than 4.0% of the entire S&P 500, the group was a notable early laggard after China reported disappointing trade figures for February. The country's trade balance swung from a surplus to a deficit of $22.98 billion (expected surplus of $14.50 billion) as exports fell 18.1% (expected +6.8%) while imports grew 10.1% (consensus +8.0%). The big miss did not come without an excuse as the Lunar New Year, which took place at the start of the month, was cited for causing distortions to the report.

The trade figures put additional pressure on copper futures, which continued their recent weakness. The metal fell 1.3% to $3.042/lb after starting the year in the 3.400/lb area. Miners and steelmakers were also pressured with Freeport-McMoRan (FCX 31.38, -0.81) and Market Vectors Steel ETF (SLX 43.87, -0.75) sliding 2.5% and 1.7%, respectively.

Elsewhere, the industrial space was pressured by Boeing (BA 126.89, -1.65), which lost 1.3% after a 777 jet operated by Malaysia Airlines vanished over the South China Sea during the weekend. Separately, a Tokyo-bound 787 from San Francisco was forced to make an emergency landing in Hawaii due to engine issues. Although the industrial space finished at the bottom of the leaderboard, transports fared a bit better. The Dow Jones Transportation Average shed 0.2%, trimming its March gain to 3.2%.

Also of note, the discretionary sector spent the duration of the session among the laggards. Homebuilders ended broadly lower with the iShares Dow Jones US Home Construction ETF (ITB 25.23, -0.49) falling 1.9%. Automakers also lagged with Ford (F 15.51, -0.11) and General Motors (GM 37.08, -0.61) ending lower by 0.7% and 1.6%, respectively.

The Treasury market spent the day inside a narrow range and the 10-yr yield slipped one basis point to 2.78%.

Trading volume was well below average with just over 615 million shares changing hands at the NYSE.

Tomorrow, the January Wholesale Inventories report will be released at 10:00 ET. 

·       Nasdaq Composite +3.8% YTD 

·       Russell 2000 +3.4% YTD 

·       S&P 500 +1.6% YTD 

·       Dow Jones Industrial Average -1.0% YTD

Commodities

Closing Commodities: Grains Drop Following WASDE Report

·       Commodities ended the day mostly lower today with energy, excl natural gas, grains (corn, wheat and soybeans) and copper and silver all finishing in the red.

·       Gold and natural gas futures ended today's session higher.Grains sold off today following the monthly USDA WASDE report.

·       Corn ended the day 2% lower at $4.87/bushel, soybeans lost 40 cents (or -2.7%) to $14.19/bu and wheat fell 14 cents (or ) to $6.39/bu.

·       Copper ended 1.6% to $3.03/lb following Friday's notable losses following news that China saw its "first" corporate bond default, with Shanghai Chaori Solar Energy unable to pay its debt in full today.

·       Since China is the largest importer of copper in the world, this kind of news is something to keep in mind.

·       Apr crude oil ended today's session $1.47/barrel lower at $101.07/barrel.

·       Apr nat gas rose 3 cents to $4.65/MMBtu.

·       April gold rose $3.80 to$1341.60/oz, May silver lost one cent to $20.91/oz.

COMEX Metals Closing Prices

·       Apr gold rose $3.80 to $1341.60/oz

·       May silver fell $0.01 to $20.91/oz

·       May copper fell 5 cents to $3.03/lb

NYMEX Energy Closing Prices

·       Apr crude oil fell $1.47 to $101.07/barrel

·       Apr natural gas rose 3 cents to $4.65/MMBtu

·       Apr heating oil fell 4 cents to $2.97/gallon

·       Apr RBOB fell 2 cents to $2.95/gallon

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices- Grains drop following USDA WASDE report (See 12:02, 12:05, 12:26 comments)

·       May corn fell 10 cents to $4.87/bushel

·       May wheat fell 14 cents to $6.39/bushel

·       May soybeans fell 40 cents to $14.19/bushel

·       Apr ethanol fell 3 cents to $2.27/gallon

·       May sugar (#16 (U.S.)) fell 0.09 of a penny to 22.06 cents/lbs

Treasuries

Treasuries Finish Mixed: 10-yr: +01/32..2.782%..USD/JPY: 103.20..EUR/USD: 1.3868

·       Treasuries finished mixed amid a choppy trade. Click here to see an intraday yields chart.

·       Yields traded in a 4.5bp range, which shrunk to 2.5bps during the U.S. session. 

·       Interestingly, yields did not see the usual drift higher they are accustom to on days when data is absent.

·       Outperformance in the belly dropped the 5y -1.3bps to 1.627%. Action has tested 1.650% resistance in each of the past two sessions, but has not been able to materialize a breakout. 

·       The 10y slipped -0.6bps to 2.784%. The benchmark yield continues to test resistance in the 2.800% area that is defended by the 50 and 100 dma. 

·       At the long end, the 30y lagged. A +0.6bp advance produced the highest close since January 22. However, trade has not been able to retake either the 50 or 100 dma, which lend a hand to resistance in the 3.750% area. 

·       A slightly flatter curve took hold as the 2-10-yr spread narrowed to 242bps. 

·       Precious metals ended mixed with gold +$1 @ $1339 and silver -$0.09 @ $20.83.

·       Data: Wholesale inventories (10). 

·       Auction: $30 bln 3y notes.

Next Day In View 

Economic Commentary

Economic Summary: No US Data today; China Exports lower than expected, while China CPI slightly cooler than expected

Upcoming Economic Data:

·       January Wholesale Inventories due out Tuesday at 10:00 (Briefing.com consensus of 0.4%; December was 0.3%)

·       January JOLTS - Job Openings due out Tuesday at 10:00 (December was 3.99 M )

Upcoming Fed/Treasury Events:

·       Chicago Fed President Charlie Evans (not a voting FOMC member, typically dovish) to speak today at 12:40

·       The Treasury is scheduled to auction off new debt this week. Results for each auction will be announced at 13:00

o   Tuesday $30 bln in 3 year notes

o   Wednesday: $21 bln in 10 year notes

o   Thursday: $13 bln in 30 year bonds

Other International Events of Interest

·       Chinese CPI (2.0% YoY actual v. 2.1% YoY expected) and PPI (-2.0% YoY actual v. -1.9% YoY expected) were both slightly cooler than expected.

·       The deficit came on a -18.1% drop in exports and 10.1% rise in imports, and is likely a result of timing of the Lunar New Year 

On other news.... 

USDA WASDE report color; global soybean ending stocks estimated 3.2% below prior forecast
World corn production rose 0.1% to 967.52 mln metric tons (mmt), while exports rose to 144.53 mln mmt and ending stocks rose 0.7% to 158.47 mmt. Projected U.S. feed grain ending stocks for 2013/14 are reduced with higher corn exports and lower oats imports. Corn exports are projected 25 mln bushels higher on stronger world imports and the rising pace of shipments in recent weeks.

World soybeans production expectations call for a decline of 0.8% to 285.43 mmt and now estimate ending stocks at 70.64 mmt, 3.2% below last month's estimate. U.S. soybean supply and use projections for 2013/14 include higher imports and exports, reduced crush, and reduced ending stocks compared with last month's report.

Soybean exports are raised 20 mln bushels to a record 1.53 billion reflecting continued strong sales and shipments through February.

Soybean crush is reduced 10 mln bushels to 1.69 billion reflecting weaker-than-expected domestic soybean meal use through the first quarter of the marketing year. Soybean stocks are projected at 145 mln bushels, down 5 mln from last month. Soybean oil stocks are reduced on lower production and increased exports.

World wheat production is now expected to be 712.92 mmt, 0.01% higher than the prior estimate, while ending stocks remained basically unchanged (183.81 mmt from 183.73 mmt). A 15-mln-bushel increase in projected Hard Red Spring wheat exports is offset by a decrease for Soft Red Winter wheat, with both changes reflecting the pace of sales and shipments.

News

·       Amazon.com (AMZN) to devlop computer games, according to reports

·       AT&T (T) plans to cut wireless data plan prices following T Mobile (TMUS) price increase, according to reports

·       Over the weekend, a Malaysia Airlines Boeing (BA) 777 crashed in the South China sea with 227 passengers aboard

·       eBay (EBAY) confirms rejection of Icahn nominees

·       Google (GOOG) plans new wearable devices such as fitness trackers, according to reports

·       Reckitt Benckiser Group has purchased K-Y brand from Johnson & Johnson (JNJ), according to reports

·       JPMorgan Chase (JPM) private equity arm sale hit a snag, according to reports

·       Southwest Airlines (LUV) reports Feb traffic; Revenue passenger miles rise 1.2% YoY, available seat miles decreased 1.7% YoY, load factor rose to 78.1% from 75.8% in Feb 2013

·       Verizon (VZ) Board authorized on Friday the corporation to repurchase up to 100 million shares of its common stock

Currencies 

Dollar Hovers Little Changed: 10-yr: +02/32..2.779%..USD/JPY: 103.16..EUR/USD: 1.3873

·       The Dollar Index hovers little changed near 79.75 as a sleepy session nears its final hour of trading. Click here to see a daily Dollar Index chart.

·       Today's action has spent most of the session hovering in a 10 cent range (79.70-79.80) as trade looks to reclaim the key 80.00 level. 

·       EURUSD is flat @ 1.3875 as trade looks for its sixth straight weekly advance. The single currency has tacked on near 400 pips during its winning streak as trade holds at its best levels since October 2011. The 1.3800 region will be critical in the days ahead as the single currency looks to maintain its recent breakout. Eurozone data is limited to the German trade balance.

·       GBPUSD is -70 pips @ 1.6640 as sellers remain in control for a second session. Action in sterling has stalled near the 1.6750 level in recent weeks as sellers continue to put up a staunch defense at the best levels since October 2009. Britain's BRC Retail Sales Monitor is due out tonight while manufacturing production, the Inflation Report Hearings, and NIESR GDP Estimate are scheduled for tomorrow. 

·       USDCHF is flat @ .8775 as trade holds on its lowest levels since November 2009. Trade saw an early boost in response to the Swiss retail sales miss, but action has slipped back onto the flat line amid a sleepy session. 

·       USDJPY is -10 pips @ 103.15 as traders await tonight's Bank of Japan interest rate decision. Of interest will be the pair's ability to hold the 103.00 level following tonight's decision as resistance and the 50 dma aid the level. 

·       AUDUSD is -55 pips @ .9015 as sellers take control for a second session. Today's weakness comes amid more worries of a slowdown in China, and has dropped action back below the key .8050 level. The .8900 area will be watched closely as a breakdown puts the January lows near .8700 in jeopardy. Australia's NAB Business Confidence is scheduled to cross the wires this evening. 

·       USDCAD is +20 pips @ 1.1100 as trade presses the January highs. Action remains within striking distance of its best levels since July 2009 as any close above 1.1186 will mark the best close since that time.

Jason's Commentaries

The market went through another volatile session last night. After such a bearish start, the market managed to reverse the bearishness and stayed sideways through the session. Volumes were quite bad at 628m shares traded on the NYSE. Not exactly impressive. Market is still waiting for something to happen. On the technical side, we have a hammer at the support right now. Healthcare was the one of the few leaders last night. I suspect that the market will continue to go sideways for a while before it breaks out. 

Market Call: FLAT

Date: 11 March 2014