18 April 2014 AMC - Market ended flat on eve of Good Friday

18 April 2014 AMC - Market ended flat on eve of Good Friday

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: + 0.6%

·         Germany's DAX: + 1.0%

·         France's CAC: + 0.6%

·         Spain's IBEX: + 0.2%

·         Portugal's PSI: + 0.9%

·         Italy's MIB Index: + 0.4%

·         Irish Ovrl Index: -0.2%

·         Greece ATHEX Composite: + 2.5%

Before Market Opens 

S&P futures vs fair value: -0.40. Nasdaq futures vs fair value: -11.30.
The S&P 500 futures trade within a point of fair value.

Asian markets ended the quiet session on a mixed note. The overnight news flow was light, but the chief of Japan's pension fund GPIF said the fund is adjusting its portfolio towards greater exposure to equities.

Economic data was limited. Japan's Household Confidence slipped to 37.5 from 38.3 (previous 40.2), while the weekly Foreign Bonds Buying report indicated net purchases in the amount of JPY115.50 billion (prior net sales of JPY378.10 billion). China's Foreign Direct Investment Increased 5.5% (previous 10.4%). Australia's NAB Quarterly Business Confidence slipped to 6 from 8, while New Motor Vehicle Sales decreased 0.3% month-over-month (prior -0.1%). South Korea's PPI was unchanged month-over-month (last 0.1%). 

·         Japan's Nikkei ended flat after spending the session in a narrow range. Honda and Olympus both lost near 2.0%, while producers of basic materials outperformed. Nisshin Steel jumped 4.8% and Taiheiyo Cement rose 3.7%. 

·         Hong Kong's Hang Seng added 0.3%, thanks to support from energy names. CNOOC and China Petroleum gained 1.4% and 1.2%, respectively. Consumer names lagged with Belle International falling 1.1%. 

·         China's Shanghai Composite shed 0.3% after spending the bulk of the session in the red as financials weighed. China Vanke lost 1.5%. 

Major European indices hold gains after climbing out of the red. It is worth mentioning that markets across Europe will be closed on Monday.

Economic data was limited to Germany's PPI, which slipped 0.3% month-over-month (expected 0.1%, prior 0.0%), while the year-over-year reading fell 0.9% (consensus -0.7%, previous -0.9%). 

·         Great Britain's FTSE is higher by 0.5% with Barclays in the lead. The stock trades up 4.6% after its peer Morgan Stanley reported above-consensus results. Diageo lags, trading lower by 3.9% after reporting disappointing sales. 

·         France's CAC trades up 0.5%. Advertiser Publicis Groupe outperforms with a gain of 2.2%. Consumer names lag with Danone and Pernod Ricard down 1.8% and 3.1%, respectively. 

·         Germany's DAX holds an advance of 0.7%. Exporters lead with Daimler and BMW up 2.6% and 1.3%, respectively. On the downside, utility provider RWE is the weakest component, down 6.1%.

U.S. Equities

·         Equity futures have erased their overnight losses, and now suggest a flat open as trade looks for a fourth day of gains

·         The S&P 500 has rallied nearly 50 handles since Tuesday's late-morning trade, and is now just 1.3% off all-time highs

·         Financials remain in focus as Goldman Sachs (GS) and Morgan Stanley (MS) both reported top and bottom line beats

·         Nasdaq futures are holding up fairly well despite the disappointing results from Google (GOOG) and IBM (IBM) 

·         Action is likely to taper off through the afternoon as traders ready for the holiday weekend

·         Initial Claims (304K actual v. 312K expected)

·         Continuing Claims (2739K actual v. 2800K expected)

o    S&P Futures +3 @ 1856

o    Dow Futures +13 @ 16,344

o    Nasdaq Futures +12 @ 3513

Asia

·         The major Asian bourses saw a mixed session

·         Japan's Nikkei finished flat after Bank of Japan Governor Kuroda reiterated the economy continues to improve and that prices are likely to rise as wage growth picks up 

·         Hong Kong's Hang Seng (+0.3%) eked out a small gain amid an uneventful trade

·         China's Shanghai Composite (-0.3%) slipped in response to the weak foreign direct investment (5.5% YTDoY) reading

·         India's Sensex (+1.6%) finished just off record highs    

·         Australia's ASX (+0.6%) saw solid gains for a third straight session

Market Internals

Market Internals -Technical-
The Nasdaq closed up 9 (+0.23%) at 4096, the S&P 500 closed up 3 (+0.14%) at 1865, and the Dow closed down 16 (-0.10%) at 16409. Action came on mixed volume (NYSE 818 mln vs. avg. of 725; NASDAQ 1784 mln vs. avg. of 2012), with advancers outpacing decliners (NYSE 1830/1291, NASDAQ 1676/954) and new highs outpacing new lows (NYSE 130/18, NASDAQ 52/38). 

Relative Strength: 
Coffee-JO +6.26%, Russia-RSX +6.06%, Eastern Europe-ESR +4.46%, Natural Gas-UNG +4.24%, Middle East and Africa-GAF +3.84%, Greece-GREK +326%, Turkey-TUR +2%, Oil and Gas Exploration-XOP +1.48%, Copper Miners-COPX +1.4%, Bank and Brokerage-RKH +1.35%. 

Relative Weakness: 
Junior Gold Miners-GDXJ -2.37%, Sugar-SGG -2%, Platinum-PPLT -1.76%, Silver Miners-SIL -1.6%, Volatility-VXX -1.51%, New Zealand-ENZL -0.54%, Australian Dollar-FXA -0.5%, South Korea-EWY -0.34%, Chile-ECH -0.26%, Swiss Franc-FXF -0.21%.

Leaders and Laggards

Technical Updates

Commentaries 

Closing Market Summary: Stocks End Strong Week on Mixed Note
The stock market ended the holiday-shortened week on a mixed note as the Dow Jones Industrial Average shed 0.1%, while the S&P 500 added 0.1% with seven sectors posting gains.

Equity indices faced an uphill climb from the opening bell after disappointing quarterly results from Google (GOOG 536.10, -20.44) and IBM (IBM 190.04, -6.36) weighed on the early sentiment. Google reported earnings $0.15 below the Capital IQ consensus estimate on revenue of $15.42 billion (expected $15.52), while IBM revealed in-line earnings on revenue that was roughly $500 million below expectations.

The results from the two pressured the technology sector (-0.3%), which was down as much as 1.0% during early action. The sector was able to shed the bulk of its losses thanks to strength among chipmakers and other high-beta components. Chipmakers rallied throughout the session after upbeat earnings fromSanDisk (SNDK 82.99, +7.14) and Taiwan Semiconductor (TSM 20.71, +0.56) underpinned the space. The broader PHLX Semiconductor Index, meanwhile, jumped 1.9%.

Even though Google and IBM pressured the market early on, equity indices were able to rebound with help from several other major listings that reported above-consensus results. General Electric (GE 26.56, +0.44), Goldman Sachs (GS 157.44, +0.22), Morgan Stanley (MS 30.76, +0.87), and PepsiCo (PEP 85.55, +0.78) all beat their estimates.

Also of note, the biotech space remained volatile with the iShares Nasdaq Biotechnology ETF (IBB 222.16, -0.57) spending some time on each side of its flat line. Furthermore, the ETF ended just above its 200-day moving average (220.19) after spending the past week near that key level.

Although the Nasdaq and S&P 500 posted modest gains, the Dow Jones (-0.1%) was unable to catch up to its peers as losses in several large components like IBM, American Express (AXP 86.22, -1.18), and UnitedHealth (UNH 75.78, -2.41) acted as a wet blanket on the price-weighted index.

Treasuries retreated steadily throughout the session, causing the benchmark 10-yr yield to add nine basis points to 2.72%. The slide took place amid reports from Geneva indicating representatives from the European Union, United States, Ukraine, and Russia have reached an agreement on steps aimed at de-escalating the crisis in Ukraine. The agreement was announced by Russia's Foreign Minister Sergei Lavrov, who also said Ukraine needs ‘decentralization' and ‘more regional powers.'

Trading volume was above average thanks to a boost in activity resulting from options expiration. As a result more than 800 million shares changed hands at the New York Stock Exchange.

Today's data was limited to two releases: 

·         The initial claims level increased to 304,000 for the week ending April 12 from an upwardly revised 302,000 for the week ending April 5. The Briefing.com consensus expected the initial claims level to increase to 312,000. The Department of Labor stated that there were no special factors impacting the claims data. However, we remain skeptical of that. Over the past few years, the DOL has had extreme difficulties managing the seasonal adjustment factors around the Easter holiday. With Easter falling on a later date this year, we suspect that the claims are underreporting actual layoff levels. We expect some volatility in the next few weeks before the initial claims level settles back in the 320,000 -- 330,000 range by the beginning of May. 

·         The Philadelphia Fed's Business Outlook increased to 16.6 in April from 9.0 in March. The Briefing.com consensus expected the index to fall to 8.6. There was a general strengthening across the board. Shipments spiked to 22.7 in April from 5.7 in March. Most of the gain was the result of a significant strengthening in new orders demand, 14.8 from 5.7. The gains in shipments, however, may not be sustainable. Unfilled orders softened as the related index fell to 2.0 in April from 2.6 in March. Without a steady supply of backlogs, weaker new orders will pull down shipments growth. The employment index increased to 6.9 in April from 1.7 in March. 

Monday's data will be limited to the Leading Indicators report for March, which will be released at 10:00 ET. 

·         S&P 500 +0.9% YTD 

·         Dow Jones Industrial Average -1.0% YTD 

·         Nasdaq Composite -1.9% YTD 

·         Russell 2000 -2.1% YTD 

Commodities

Closing Commodities: Natural Gas Rises 4.6% On EIA Inventory Data

·         June gold slipped deeper into negative territory today as the dollar index erased earlier losses. The yellow metal pulled back from its session high of $1303.20 per ounce set in morning action and fell as low as $1292.80 per ounce. Unable to gain momentum, it settled 0.7% lower at $1294.20 per ounce.

·         May silver chopped around slightly below the unchanged line after retreating from a session high of $19.69 per ounce set moments after floor trade opened. It brushed a session low of $19.56 per ounce and eventually settled with a 0.2% loss at $19.60 per ounce.

·         May crude oil traded higher, rising as high as $104.78 per barrel in morning action.

·         It dipped to a session low of $103.85 per barrel but recovered some of the gain in afternoon floor trade. The energy component eventually settled 0.6% higher at $104.31 per barrel.

·         May natural gas slipped to a session low of $4.48 per MMBtu in morning action but rallied sharply into positive territory following bullish inventory data that showed a build of 24 bcf when a larger build of 34-36 bcf was anticipated.

·         It inched higher for the remainder of the session and settled 4.6% higher at $4.74 per MMBtu, just below its session high of $4.75 per MMbtu.

NYMEX Energy Closing Prices

  May crude oil rose $0.58 to $104.31/barrel 

·         Crude oil traded higher today, rising as high as $104.78 in morning action. It then pulled back to a session low of $103.85 but recovered some of the gain in afternoon floor trade. The energy component eventually settled 0.6% higher. 

  May natural gas rose 21 cents to $4.74/MMBtu 

·         Natural gas slipped to a session low of $4.48 in morning action but rallied sharply into positive territory following bullish inventory data that showed a build of 24 bcf when a larger build of 34-36 bcf was anticipated. It inched higher for the remainder of the session and settled just below its session high of $4.75, booking a gain of 4.6%. 

  May heating oil settled unchanged at $3.01/gallon 

  May RBOB rose 1 cent to $3.05/gallon

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         May corn fell 3 cents to $4.95/bushel 

·         May wheat rose 3 cents to $6.91/bushel 

·         May soybeans fell 3 cents to $15.16/bushel 

·         May ethanol rose 2 cents to $2.19/gallon 

·         July sugar (#16 (U.S.)) rose 0.23 of a penny to 24.63 cents/lbs

Treasuries

Treasuries Endure Heavy Selling: 10-yr: -26/32..2.722%..USD/JPY: 102.42..EUR/USD: 1.3816
The Week in Review

·         Treasuries endured heavy selling this week. Click here to see an intraweek yields chart.

·         Most of the week's losses came on Thursday as a de-escalation in Ukraine and better than expected data sparked a sharp sell off.

·         EU, Russian, U.S., and Ukrainian officials drafted a framework calling for the "immediate start of a nationwide dialogue within the framework of the constitutional process" that "must be resolved by the Ukrainians themselves concerning an end to the conflict."   

·         On Friday, initial (304K actual v. 312K expected) and continuing (2739K actual v. 2800K expected) claims both topped forecasts while the Philly Fed (16.6 actual v. 8.6 expected) nearly double estimates. 

·         Data over the rest of the week was mixed as capacity utilization (79.2% actual v. 78.8% expected), industrial production (0.7% actual v. 0.5% expected), and retail sales (1.1% actual v. 1.0% expected) topped estimates while business inventories (0.4% actual v. 0.6% expected), Empire Manufacturing (1.3 actual v. 7.5 expected), housing starts (910K actual v. 955K expected) and building permits (990K actual v. 1003K expected) missed.

·         The latest Fed Beige Book suggested "economic activity increased in most regions of the country since the previous report" while Fed Chair Janet Yellen indicated the central bank remains committed to an accommodative policy and that there is greater chance inflation runs below the Fed's target.

·         This week's selling had the biggest impact on the belly as the 5y surged +17bps to 1.731%. The heavy selling ran the 5y through 1.700% resistance, causing the yield to close at its highest level since April 3. Many traders will be watching the 1.800% area closely as it corresponds with the September and April highs. 

·         The 10y rallied +11bps to 2.721%. Selling on Friday was responsible for more than +8bps, and ran action back above the 2.680% pivot. Resistance near 2.725% is defended by the 200 dma. 

·         The wings of the curve outperformed as  the 2y added +4bps to 0.399% and the 30y tacked on +5bps to 3.517%.

·         The 30y gained +5bps on the week with selling on Friday responsible for a +6bp advance. The yield on the long bond spent the entire week below the key 3.550% level, and pressed to its lowest close since June. What was previously 3.550% support will now serve as resistance, and the inability to retake that level puts 3.150% in the cross hairs. 

·         A flatter yield curve developed as the 5-30-yr spread narrowed to 178.5bps, a level last seen in the fall of 2009.

The Week Ahead 

·         Monday's data is limited to leading indicators (10).

·         Tuesday will see the FHFA Housing Price Index (9) and existing home sales (10). Treasury will auction $32 bln 2y notes. 

·         Wednesday's data includes the weekly MBA Mortgage Index (7) and new home sales (10). Treasury will hold a $35 bln 5y note auction. 

·         Data picks up a tad on Thursday with initial and continuing claims and durable orders (8:30). Treasury will auction $29 bln 7y notes.

·         Data concludes for the week on Friday with Michigan Sentiment - Final (9:55).

On other news.... 




Currencies 

Dollar Erases Losses, Trades Flat: 10-yr: -26/32..2.722%..USD/JPY: 102.43..EUR/USD: 1.3818

·         The Dollar Index has recovered its early losses and now holds little changed near 79.80. Click here to see a daily Dollar Index chart.

·         Aiding the greenback were reports of a de-escalation in Ukraine. 

·         EURUSD is flat @ 1.3815 after trade was once again rejected by minor resistance in the 1.3850 level. The afternoon weakness has the single currency looking at a third straight flat session as action remains trapped between 1.3800 support and 1.3850 resistance. Markets across the region will be closed Friday and Monday for Good Friday/Easter. 

·         GBPUSD is flat @ 1.6795 as action presses its worst levels of the session. Early strength lifted sterling to nearly 1.6850, its best since November 2009, but action has struggled to hold onto those gains ahead of the holiday. Minor support rests near 1.6725 while 1.6600/1.6650 provides further help. British markets are closed on Friday and Monday. 

·         USDHCF is +5 pips @ .8820 as buyers look to remain in control for a fourth day. The current streak has action testing resistance helped by the 50 dma. Swiss banks will be shuttered Friday and Monday. 

·         USDJPY is +20 pips @ 102.40 as action probes the 50 dma. Today's advance comes despite further commentary from Bank of Japan Governor Kuroda, which reiterated the economy is strengthening and inflation is likely to pick up as wages grow. The pair has not lost ground in six sessions and is on track to close at its best level in one and a half weeks. Japan's tertiary industry activity is due out this evening. 

·         AUDUSD is -40 pips @ .9330 as trade looks likely to post its lowest close since April 7. Today's selling comes following Australia's disappointing NAB Business Confidence and new motor vehicle sales, and the slowdown in the pace of acceleration of China's foreign direct investment. A more than 700 pip rally off the January lows has run the hard currency to five-month highs, but action has struggled to push through the .9400/.9450 level. Australian banks are closed on Friday and Monday. 

·         USDCAD is -15 pips @ 1.1000 as trade stalls at resistance in the area. The pair has struggled since this morning's hotter than anticipated headline CPI (0.6% MoM actual v. 0.4% MoM expected).

Weekly Analysis
Week 1



Technical Updates

Briefing's Commentaries


Week in Review: Stocks Rebound From Recent Pressure

The major averages finished the Monday session on a modestly higher note, but they ended below their best levels of the day after volatility during the last two hours of action forced the indices to test their flat lines. The S&P 500 rose 0.8%, while the Nasdaq added 0.6% after being up as much as 1.3%. The stock market began the session on an upbeat note, casting aside renewed concerns about the situation in Ukraine, where the country's army was called in over the weekend to deal with pro-Russian separatists in several cities in the Southeast. Instead, the market rallied in the morning after Citigroup's (C 48.22, +0.04) above-consensus quarterly results, combined with a better-than-expected March Retail Sales report, invited buyers into the mix. In all likelihood, the early advance was assisted by some short-covering as many areas that displayed weakness in recent sessions, showed relative strength.

On Tuesday, equities ended on a modestly higher note, but not before heavy selling pressure sent the Nasdaq Composite (+0.3%) for a test of its 200-day moving average. The S&P 500, meanwhile, added 0.7% with all ten sectors posting gains. Stocks climbed at the open with the advance built on the relative strength of biotechnology and other momentum names. Despite the solid early gains in those areas, the market began fading from its high as multiple reports pointed to an escalation of tensions in Ukraine. Specifically, a skirmish reportedly took place at the Kramatorsk airbase, but there were inconsistencies with regard to the number of injured. Some reports put the number of casualties between four and 11, while others said there were no casualties. After these reports made the rounds, Ukraine's acting President Oleksandr Turchynov was quoted by Interfax as saying the airfield has been retaken from pro-Russian militants.

The stock market ended the Wednesday session on an upbeat note with the Nasdaq (+1.3%) ending in the lead. The S&P 500 settled higher by 1.1% with all ten sectors posting gains. The benchmark index spent the entire trading day in the green, rallying to new highs during the last hour of action. The tech-heavy Nasdaq, meanwhile, briefly dipped into the red during morning action, but was able to recover swiftly. Stocks began the trading day with modest gains after the overnight session featured the release of China's Q1 GDP. Although the report could be classified as better-than-feared, it did not necessarily produce a clear-cut signal as the year-over-year reading of 7.4% beat estimates (7.3%), while the quarter-over-quarter growth of 1.4% was just below expectations (1.5%).

Next Week In View





Economic Commentaries

Economic Summary: Jobless Claims rise slightly; Philly Fed easily tops expectations (310.15 )
Economic Data Summary:

·         Weekly Initial Claims 304K vs Briefing.com consensus of 312K; Last Week was revised to 302K from 300K

·         Weekly Continuing Claims 2.739 M vs Briefing.com consensus of 2.8 M ; Last Week was revised to 2.75 M from 2.776 M

o    However, we remain skeptical of that. Over the past few years, the DOL has had extreme difficulties managing the seasonal adjustment factors around the Easter holiday. With Easter being later-than-normal this year, we suspect that the claims are underreporting actual layoff levels. We expect some volatility in the next few weeks before the initial claims level settles back in the 320,000 -- 330,000 range by the beginning of May. 

·         April Philadelphia Fed 16.6 vs Briefing.com consensus of 8.6; March was 9.0

o    Most of the gain was the result of a significant strengthening in new orders demand, 14.8 from 5.7. The gains in shipments, however, may not be sustainable. Unfilled orders softened as the related index fell to 2.0 in April from 2.6 in March. Without a steady supply of backlogs, weaker new orders will pull down shipments growth. The employment index increased to 6.9 in April from 1.7 in March.

Upcoming Economic Data:

·         March Leading Indicators due out Monday at 10:00 (Briefing.com consensus of ; February was 0.5%)

Other International Events of Interest

·         Japan's Nikkei finished flat after Bank of Japan Governor Kuroda reiterated the economy continues to improve and that prices are likely to rise as wage growth picks up 

10:08 BONDX Treasuries Retest Session Lows as Philly Fed Beats: 10-yr: -08/32..2.659%..USD/JPY: 102.15..EUR/USD: 1.3837

·         Treasuries are sliding back onto session lows following the strong Philly Fed (16.6 actual v. 8.6 expected) print.

·         Selling continues to weight heaviest on the belly as the 5y trades +4.5bps @ 1.700%. Traders will continue to watch this area closely as resistance in the 1.660%/1.700% area guards the early-April highs. 

·         A +2.5bp advance has the 10y above 2.660%. The benchmark yield is ticking higher for the third time in four days, and is nearing a test of the 2.680% pivot. 

·         Outperformance at the long end has the 30y flat @ 3.545%. 

·         Curve flattening persists as the 5-30-yr spread trades tighter @ 175.5bps. 

·         Precious metals are in the red with gold -$5 @ $1299 and silver -$0.05 @ $19.58.

Jason's Commentaries

It's the expiration 'Friday' Once again. As Friday is a public holiday, the expiration has been shifted one day earlier, causing high volumes once again at 827.3m shares on Thursday session. The week has been very bullish, after crashing down the previous week, the market went back up high once again. The market started without much strength then after lunch, the market started to take a short run till the last hour before the profit taking starts. It was generally a flat day just that Industrials made a 0.78% gain while utilities lost 1.24%. IBM, HP and Google were the main laggard of the session, due to their lacklustre earnings results. Somehow, the Nasdaq were able to shrug off the drag and main a gainer for the day. As for as technicals are concerned, I think that the market is gonna take some breather off the heavy run last week and is likely to face resistance. This week is likely to head down.  

Market Call: Down

Date: 21 April 2014