1 Apr 2014 AMC- S&P500 sets fresh highs on April's fool

1 Apr 2014 AMC- S&P500 sets fresh highs on April's fool

Market Summary

European Markets Closing Prices

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

·         UK's FTSE: + 0.8%

·         Germany's DAX: + 0.5%

·         France's CAC: + 0.8%

·         Spain's IBEX: + 1.2%

·         Portugal's PSI: + 1.7%

·         Italy's MIB Index: + 1.0%

·         Irish Ovrl Index: + 1.7%

·         Greece ATHEX Composite: + 0.5%

Before Market Opens

S&P futures vs fair value: +4.80. Nasdaq futures vs fair value: +9.70.
The S&P 500 futures trade five points above fair value.

The major Asian bourses finished mostly higher. Japan's consumption tax hike went into effect with the increase to 8.0% (5.0% previous) representing the first sales tax increase since 1997. Among economic news of note, Large Manufacturers Index improved to 17 from 16 (consensus 18) while the Large Non-Manufacturers Index increased to 24 from 20, as expected. Elsewhere, China's Manufacturing PMI ticked up to 50.3 from 50.2 (expected 50.1) while the HSBC Manufacturing PMI fell to 48.0 from 48.5 (expected 48.5).

Today's Reserve Bank of Australia rate decision saw the central bank hold its key rate at 2.50%, as expected. Notable were comments from Governor Glenn Stevens, suggesting there would likely be a "period of stability in interest rates." Meanwhile, the Reserve Bank of India kept its benchmark interest rate unchanged at 8.00%, as expected, while noting it hopes to see CPI slide to 6.0% (currently 8.1%) by early 2016. Also of note, South Korea's trade surplus widened to $4.19 billion from $0.93 billion. 

·         Japan's Nikkei slipped 0.2% back below the 50-day moving average. Utility shares weighed with Kansai Electric Power off 3.1% after reports indicated peer Hokkaido Electric needs a capital infusion. 

·         Hong Kong's Hang Seng rallied 1.3% to a three-week high. Casino-related names paced the advance as traders gobbled up shares ahead of the monthly gaming data. MGM China was the top performer in the space, up 6.6%. 

·         China's Shanghai Composite snapped its four-day skid, gaining 0.7%. Property shares saw in-line gains with Poly Real Estate higher by 0.5%. 

Major European indices trade higher across the board after a quiet first half of the session. Spain's IBEX (+1.0%) leads the region higher amid continued strength in financials. Participants received several data points. Eurozone Manufacturing PMI held steady at 53.0, as expected, while the unemployment rate held steady at a downwardly revised 11.9% (expected 12.0%). Germany's claimant count decreased 12,000 (expected -10,000, prior -15,000) while the unemployment rate was unchanged at 6.7% (expected 6.8%). Separately, Manufacturing PMI slipped to 53.7 from 53.8 (consensus 53.8). French Manufacturing PMI ticked up to 52.1 from 51.9 (expected 51.9). Great Britain's Manufacturing PMI fell to 55.3 from 56.2 (consensus 56.7). Italian Manufacturing PMI ticked up to 52.4 from 52.3 (consensus 52.1) while the monthly unemployment rate increased to 13.0% from 12.9% (expected 12.9%). Spain's Manufacturing PMI improved to 52.8 from 52.5 (consensus 52.4). 

·         Great Britain's FTSE is higher by 0.6% with financials showing strength. Aberdeen Asset Management trades up 7.1% after announcing plans to cut costs. Royal Bank of Scotland and Prudential also outperform with respective gains of 2.4% and 2.8%. 

·         Germany's DAX trades up 0.6% with banks and exporters in the lead. Commerzbank, Deutsche Bank, and Volkswagen show gains between 1.6% and 2.7%. On the downside, health care names lag. Henkel and Merck trade lower by 1.9% and 0.8%, respectively. 

·         In France, the CAC holds an advance of 0.9%. Alstom leads with a gain of 8.0% after agreeing to sell one of its units. On the downside, consumer names Danone, L'Oreal, and Pernod Ricard lag with losses between 0.5% and 1.1%. 

·         Spain's IBEX is higher by 1.2%. Banco de Sabadell, Banco Santander, and Bankinter display gains between 0.8% and 3.5%.

Market Internals

Market Internals -Technical-
The Nasdaq closed up 69 (+1.64%) at 4268, the S&P 500 closed up 13 (+0.70%) at 1886, and the Dow closed up 75 (+0.46%) at 16533. Action came on slightly below average volume (NYSE 693 mln vs. avg. of 732; NASDAQ 1989 mln vs. avg. of 2018), with advancers outpacing decliners (NYSE 2258/909, NASDAQ 2023/656) and new highs outpacing new lows (NYSE 170/6, NASDAQ 121/24).

Relative Strength: 
Clean Energy-PBW +2.82%, Social Media-SOCL +2.82%, Indonesia-IDX +2.78%, Turkey-TUR +2.63%, Hong Kong-EWH +2.38%, Internet Composite-FDN +2.34%, Egypt-EGPT +2.224%, Biotechnology-IBB +2.22%, Biotechnology-XBI +2.1%, Thailand-THD +1.93%.

Relative Weakness: 
Sugar-SGG -3.83%, Volatility-VXX -3.35%, Natural Gas-UNG -2.38%, Heating Oil-UHN -2.25%, Oil-USO -2.08%, Vietnam-VNM -1.75%, Japanese Yen-FXY -0.45%, New Zealand-ENZL -0.33%, Australian Dollar-FXA -0.23%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: S&P 500 Sets Fresh Record High
The stock market kicked off April on an upbeat note with the Nasdaq Composite (+1.6%) leading the charge. The S&P 500 (+0.7%) settled at a fresh record high of 1885.52 with eight sectors registering gains while the Dow Jones Industrial Average (+0.5%) lagged.

In the absence of notable pre-market data or earnings, the major averages began the day with a steady climb that was assisted by upbeat action in Europe, where markets in France, Germany, and Great Britain posted solid gains between 0.5% and 0.8%.

For the second day in a row, the Nasdaq began the day in the lead, maintaining its outperformance throughout the session. The early strength of biotechnology (IBB +2.2%) propelled the initial advance while the index was kept near its session high into the afternoon by the daylong outperformance of the technology sector (+1.3%).

The tech sector received considerable support from several of its top components. The largest sector member, Apple (AAPL 541.65, +4.91), rose 0.9% while other large names like Cisco Systems (CSCO 23.10, +0.88), Google (GOOG 1134.89, +20.38), Oracle (ORCL 41.49, +0.58), and Qualcomm (QCOM 80.10, +1.24) gained between 1.4% and 3.9%.

Although the largest sector finished ahead of the broader market, that was not the case with all top-weighed groups. Financials (+0.4%) and energy (+0.5%) lagged while the discretionary space (+1.4%) finished in the lead.

The growth-sensitive discretionary sector was underpinned by momentum names like Amazon.com (AMZN 342.99, +6.62), Netflix (NFLX 364.69, +12.66), and Priceline.com (PCLN 1251.37, +59.48), all of which struggled in March, but started April on an upbeat note. Shares of Ford (F 16.32, +0.72) also contributed, gaining 4.6% after the company reported a 3.0% year-over-year increase in monthly sales.

On the countercyclical side, consumer staples (-0.1%), telecom services (+0.3%), and utilities (-0.7%) ended behind the broader market while health care settled in-line with the S&P 500.

With stocks holding gains throughout the session, participants did not show strong interest in volatility protection, sending the CBOE Volatility Index (VIX 13.10, -0.78) lower by 5.6%.

Treasuries registered modest losses with the benchmark 10-yr yield climbing four basis points to 2.76%.

Participation was on the light side as less than 700 million shares changed hands on the NYSE floor.

Today's economic data was limited to February Construction Spending and the March ISM Index: 

·         Construction spending increased 0.1% in February after falling a downwardly revised 0.2% (from +0.1%) in January while the Briefing.com consensus expected an increase of 0.1%. Extreme winter weather conditions in January and February were blamed for a general downturn in economic data; however, construction, which should feel the brunt of the negative winter effects, was largely in-line with recent trends. Thus, there is no reason to expect construction spending to surge due to pent up demand in the near future.

·         The ISM Manufacturing Index increased to 53.7 in March from 53.2 in February. The Briefing.com consensus expected the index to increase to 54.0. Extreme winter weather conditions were blamed for a deterioration in the ISM Manufacturing Index in January. Yet, as temperatures returned to normal, the ISM Manufacturing Index remained well below its Q4 2013 averages. This tells us that weakness in manufacturing activities was likely not tied to the adverse weather, but rather caused by cyclical trends. 

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while the March ADP Employment Change will be announced at 8:15 ET (Briefing.com consensus 215K). The day's data will be topped off with the February Factory Orders report (Briefing.com consensus 1.1%), which is set for a 10:00 ET release. 

·         Nasdaq Composite +2.2% YTD 

·         Russell 2000 +2.2% YTD 

·         S&P 500 +2.0% YTD 

·         Dow Jones Industrial Average -0.3% YTD

Commodities

Closing Commodities: Nat Gas Drops 2.3%, WTI Crude Falls 1.9%

·         June gold slipped into negative territory despite a slightly weaker dollar index. The yellow metal pulled back from its session high of $1287.00 per ounce set in morning action and settled 0.3% lower at $1279.90 per ounce, just above its session low of $1279.10 per ounce.

·         May silver chopped around just above the unchanged line for most of today's floor trade, touching a session high of $19.84 per ounce. However, it retreated into the red in late afternoon action and brushed a session low of $19.68 per ounce moments before closing with a 0.3% loss at $19.69 per ounce.

·         May crude oil fell below the $100 level ahead of tomorrow's release of inventory data by the EIA. The energy component slipped further into negative territory after pulling back from its session high of $101.42 per barrel. It brushed a session low of $99.55 per barrel and settled at $99.69 per barrel, booking a loss of 1.9%.

·         May natural gas also traded in the red. It touched a session high of $4.34 per MMBtu and settled 2.3% lower at its session low of $4.27 per MMBtu.

COMEX Metals Closing Prices

  June gold fell $3.80 to $1279.90/oz 

·         Gold slipped into negative territory today despite a slightly weaker dollar index. The yellow metal pulled back from its session high of $1287.00 set in morning action and settled just above its session low of $1279.10, booking a loss of 0.3%. 

  May silver fell $0.06 to $19.69/oz 

·         Silver chopped around just above the unchanged line for most of today's floor trade, touching a session high of $19.84. However, it retreated into the red in late afternoon action and brushed a session low of $19.68 moments before closing with a 0.3% loss. 

  May copper rose 2 cents to $3.04/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         May corn rose 5 cents to $5.07/bushel 

·         May wheat fell 12 cents to $6.85/bushel 

·         May soybeans rose 21 cents to $14.83/bushel 

·         May ethanol rose 8 cents to $2.79/gallon 

·         May sugar (#16 (U.S.)) rose 0.08 of a penny to 22.38 cents/lbs

NYMEX Energy Closing Prices

  May crude oil fell $1.88 to $99.69/barrel 

·         Crude oil fell below $100 ahead of tomorrow's release of inventory data by the EIA. The energy component trended lower in negative territory after pulling back from its session high of $101.42. It brushed a session low of $99.55 and settled just above that level, booking a loss of 1.9%. 

  May natural gas fell 10 cents to $4.27/MMBtu 

·         Natural gas also traded in the red. It touched a session high of $4.34 and settled 2.3% lower at its session low. 

  May heating oil fell 4 cents to $2.89/gallon 

  May RBOB fell 5 cents to $2.87/gallon

Treasuries

Treasuries Fall for Third Day: 10-yr: -11/32..2.758%..USD/JPY: 103.70..EUR/USD: 1.3792

·         Treasuries finished near their lows as sellers remained in control for a third session. Click here to see an intraday yields chart.

·         Overnight selling had yields firm into the cash open before the mixed ISM Index (53.7 actual v. 54.0 expected, 53.2 previous) and construction spending (0.1% actual v. 0.1% expected) data. 

·         Post-data selling would put in the high print for yields, but action would remain near those levels for the remainder of the day. 

·         Selling had the biggest impact on the long end as the 30y tacked on +4.3bps to finish @ 3.604%, an eight-day high. The 3.550% area remains of particular interest as a breakdown paves the way for a move into the 3.150% region. 

·         The 10y rallied +3.6bps to 2.759%. Traders continue to monitor current levels as trendline resistance off the March highs aids guards the 100 dma (2.778%). 

·         The 5y edged up +0.8bps to 1.740%, closing on the important trendline ressitance off the September peak. This area is likely to remain in focus into Friday's jobs report.

·         A steeper curve persisted as the 5-30-yr spread widened to 186.5bps. 

·         Precious metals were mixed with gold -$3 @ $1281 and silver +$0.03 @ $19.78. 

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

·         Fed Speak: 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).

Next Day In View 

Economic Commentary

Economic Summary: ISM misses expectations slightly; Construction spending in line with estimates
Economic Data Summary:

·         March ISM Index 53.7 vs Briefing.com consensus of 54.0; February was 53.2

o    That tells us that weakness in manufacturing activities were likely not tied to the adverse weather. Cyclical weakness likely caused the ISM to soften in the first quarter of 2014. There is unlikely a sizable amount of pent up demand that could cause a sudden surge to late 2013 levels. The internal components of the ISM index were better than the headline implies. Production, which contracted in February, returned to an expansion. The index increased 7.7 points to 55.9 in March from 48.2 in February. The increase in production corresponded with a slight increase in new orders (55.1 from 54.5). 

·         February Construction Spending 0.1% vs Briefing.com consensus of 0.1%; January was 0.1%

o    However, construction, which should fell the brunt of the negative winter effects, were largely in-line with recent trends. There was no noticeable pullback from the winter weather. Thus, there is no reason to expect construction spending to surge from pent up demand in the near future. Private construction increased 0.1% in February after increasing 0.2% in January. Private residential construction spending fell 0.8%. That was a large drop, but it comes on the heels of a 1.3% increase in January. 

Upcoming Economic Data:

·         Weekly MBA Mortgage Applications due out Wednesday at 7:00 (Briefing.com consensus of ; Last Week was -3.5%)

·         March ADP Employment Change due out Wednesday at 8:15 (Briefing.com consensus of 215K; February was 139K)

·         February Factory Orders due out Wednesday at 10:00 (Briefing.com consensus of 1.1%; January was -0.7%)

Upcoming Fed/Treasury Events:

·         Atlanta Fed President Dennis Lockhart (not a voting FOMC member, typically moderate) to speak tomorrow at 12:30

·         Saint Louis Fed President James Bullard (not a voting FOMC member, typically dovish) to speak tomorrow at 16:00 & 17:00

Other International Events of Interest

·         China's Manufacturing PMI (50.3 actual v. 50.1 expected, 50.2 previous) and HSBC Final Manufacturing PMI (48.0 actual v. 48.5 expected, 48.5 previous) saw mixed results
Today's Reserve Bank of Australia rate decision saw the central bank hold its key rate at 2.50%, as expected. Notable were comments from RBA Governor Glenn Stevens, suggesting there would likely be a "period of stability in interest rates" 

On other news.... 

Currencies 

Dollar Hovers Little Changed: 10-yr: -11/32..2.757%..USD/JPY: 103.67..EUR/USD: 1.3792

·         The Dollar Index hovers little changed as an uneventful session nears the final hour of trading. Click here to see a daily Dollar Index chart.

·         Today's action provided several tests of the 80.00 level, but dollar bulls held their own and managed to run action back up to the 80.10 flat line.

·         EURUSD is +20 pips @ 1.3795 as a light bid persists for a third session. Aiding today's advance was mostly better than expected data and a continued bounce off support in the 1.3700/1.3750 area that is helped by the 50 dma. Thursday's European Central Bank decision looms large. 

·         GBPUSD is -30 pips @ 1.6635 as trade looks likely to put in its first loss in seven sessions. Weighing on sterling was today's disappointing Manufacturing PMI, which posted its worst reading in seven months. A breakout above the 1.6750 level puts the recent highs near 1.6750 at risk. Britain's Nationwide Home Price Index and Construction PMI are due out tomorrow. 

·         USDCHF is -10 pips @ .8830 as trade pulls back for a second session. The pair saw an early bid following the disappointing SVME PMI data, but reversed into the red as the euro gained momentum. A breakdown of .8800 puts the March lows near .8700/.8725 in jeopardy.

·         USDJPY is +45 pips @ 103.70 as trade readies for its best close in more than three months. The ability to hold 103.25 dictates whether or not the pair sees a test of the 2014 highs near 105.25/105.50. 

·         AUSUSD is -25 pips @ .9240 as today's losses have wiped away all of yesterday's gains. The hard currency is lower after the Reserve Bank of Australia held its key rate unchanged at 2.50% while reiterating rates are likely to remain on hold for the foreseeable future. Australia's building approvals will cross the wires tonight.

·         USDCAD is -15 pips @ 1.1035 as selling persists for the seventh time in eight sessions. Today's weakness has the pair holding near a one-month low and comes following the 5.7% MoM surge in Canada's Raw Materials Price Index (2.3% MoM expected). The 1.0950 level remains key in terms of support.

Jason's Commentaries


As much as I would like to think as a joke, the S&P500 indeed set a fresh high on April's fool. By having bouncing off the support levels on the indices, the market rallied for the past 2 sessions. The market started last night with a bullish bias and then started profit taking by mid day, by lunch, the market rallied once again. HP, Cisco and Google the the main movers that pushed the S&P500 to the new high. Without a doubt, the Tech was the strongest leader in last night's session. Utilities and Staples ended in the red. As we're approaching April, the most bullish month in the year, We're very likely to end up higher this year once again. Volumes were at 723.4m shares traded on the NYSE. However, things could take a turn if the employment numbers misses expectation. We're going to have the ADP report coming at 830am ET today and that is likely to change the tone in the market a little.  

Market Call: FLAT to downside

Date: 2 April 2014