8 April 2014 AMC - Market held through a volatile session ahead of FOMC minutes

8 April 2014 AMC - Market held through a volatile session ahead of FOMC minutes

Market Summary 

 European Markets Closing Prices

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

·       UK's FTSE: -0.5%

·       Germany's DAX: -0.2%

·       France's CAC: -0.3%

·       Spain's IBEX: -1.2%

·       Portugal's PSI: -2.0%

·       Italy's MIB Index: -1.5%

·       Irish Ovrl Index: -1.5%

·       Greece ATHEX Composite: -0.7%

Before Market Opens

S&P futures vs fair value: +0.90. Nasdaq futures vs fair value: +16.20.
The S&P 500 futures trade right above fair value.

Asian markets ended mostly higher with the exception of the Japan's Nikkei (-1.4%), which underperformed. The Bank of Japan kept its policy unchanged, as expected. In addition, the policy statement indicated officials do not see a need for additional monetary stimulus at this time.

Japan's current account registered a surprise JPY612.70 billion surplus on an unadjusted basis, while the seasonally adjusted deficit narrowed to JPY40 billion from JPY590 billion, as expected. Elsewhere, Australia's NAB Business Confidence slipped to 4 from 7. 

·       Japan's Nikkei lost 1.4%, closing on its 200-day moving average. Takeda Pharmaceutical tumbled 5.2% after a U.S. jury awarded $6 billion worth of damages after it was ruled the company hid the risks of its Actos diabetes drug. 

·       Hong Kong's Hang Seng rose 1.0%, gaining for the first time in four days. Tencent Holdings outperformed, up 1.6%, after seeing five days of losses. 

·       China's Shanghai Composite rallied 1.9% to a one and a half-month high. Financials paced the advance with Industrial Bank surging 8.0% and China Minsheng Banking Corp climbing 4.8%. 

Major European indices trade lower across the board with Spain's IBEX (-1.6%) leading the retreat. Participants received several economic data points. Great Britain's Industrial Production rose 0.9% month-over-month (consensus 0.3%, prior 0.1%), while the year-over-year reading increased 2.7% (expected 2.2%, previous 2.8%). Separately, Manufacturing Production rose 1.0% month-over-month (consensus 0.3%, prior 0.3%), while the year-over-year reading jumped 3.8% (expected 3.1%, previous 3.2%). French trade deficit narrowed to EUR3.40 billion from EUR5.60 billion (expected deficit of EUR5.0 billion), while the government budget deficit widened to EUR25.70 billion from EUR12.70 billion (forecast EUR22.00 billion). Elsewhere, Swiss Unemployment Rate fell to 3.3% from 3.5%, as expected. Separately, Retail Sales rose 1.0% year-over-year (consensus 0.9%, prior -0.1%).

Among news of note, according to Chancellor George Osborne, the Bank of England plans to provide support to exporters by lowering the cost of export finance loans. 

·       Germany's DAX is lower by 0.7% with growth-sensitive names on the defensive. Commerzbank and Infineon Technologies are among the weakest performers, down 2.7% and 2.3%, respectively. On the upside, steelmaker ThyssenKrupp outperforms with a gain of 0.9%. 

·       In France, the CAC holds a loss of 0.8%. Financials AXA, Credit Agricole, and Societe Generale are down between 2.4% and 2.9%. Danone is among the top-performers, up 1.2%. 

·       Great Britain's FTSE trades down 0.9%. Sports Direct International leads the retreat with a loss of 11.2% after its founder sold shares in the company. Miners outperform with Antofagasta, Fresnillo, and Rio Tinto up between 1.0% and 1.3%. 

·       In Spain, the IBEX holds a loss of 1.6% amid broad weakness. Sacyr, Fomento de Construcciones y Contratas, and Bankinter are down between 3.4% and 4.0%. Steelmaker ArcelorMittal is the only advancer, trading higher by 0.5%.

U.S. Equities

·       Futures have erased their overnight losses and now indicate small gains at the open

·       Yesterday's selling dropped the Nasdaq to a two-month low

·       The S&P 500 will look to hold the key 1840 level that is helped by the 50 dma

·       Alcoa (AA) kicks off earnings season as it is scheduled to release its quarterly results following today's closing bell

o   S&P Futures +1 @ 1839

o   Dow Futures +5 @ 16,183

o   Nasdaq Futures +9 @ 3508

Asia

·       Markets ended mostly higher across Asia

·       The Bank of Japan kept policy unchanged, as expected

·       Bank Indonesia held its key rate unchanged at 7.50%, as expected 

·       Japan's current account registered a surprise JPY612.7 bln surplus

·       Australia's NAB Business Confidence slipped to 4 (7 previous)

·       Japan's Nikkei (-1.4%) closed on its 200 dma

·       Hong Kong's Hang Seng (+1.0%) gained for the first time in four days

·       China's Shanghai Composite (+1.9%) rallied to a one and a half-month high

·       India's Sensex was closed for Ram Navami

·       Australia's ASX (-0.1%) slipped amid a lackluster session

Market Internals

Market Internals -Technical-
The Nasdaq closed up 33 (+0.81%) at 4113, the S&P 500 closed up 7 (+0.38%) at 1852, and the Dow closed up 10 (+0.06%) at 16256. Action came on near average volume (NYSE 733 mln vs. avg. of 729; NASDAQ 2040 mln vs. avg. of 2026), with advancers outpacing decliners (NYSE 2111/984, NASDAQ 1740/906) and mixed new highs/lows (NYSE 33/12, NASDAQ 24/36).

Relative Strength: 
Junior Gold Miners-GDXJ +4.06%, Turkey-TUR +2.88%, Chile-ECH +2.39%, Social Media-SOCL +2.35%, Clean Energy-PBW +2.24%, Indonesia-IDX +2.18%, Oil and Gas Exploration-XOP +1.91%, Coal-KOL +1.88%, Egypt-EGPT +1.81%, Australia-EWA +1.78%.

Relative Weakness: 
Japan-EWJ -2.14%, Volatility-VXX -1.82%, Livestock-COW -0.97%, Vietnam-VNM -0.86%, Italy-EWI -0.84%, Health Care-XLV -0.82%, Wind Energy-FAN -0.66%, U.S. Dollar-UUP -0.65%, Spain-EWP -0.58%, Austria-EWO -0.45%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries 

Closing Market Summary: Momentum Names Fuel Bounce in Equities
The major averages halted their three-day losing streak with a modest bounce that sent the Nasdaq Composite higher by 0.8%. The S&P 500, meanwhile, added 0.4% with seven sectors posting gains.

Equity indices exhibited some volatility during the opening hour before setting off on a climb to new session highs. The Nasdaq, which was the weakest index in recent days, stayed ahead of its peers throughout the day as momentum names recovered some of their recent losses.

The Nasdaq was supported by solid gains among the likes of Amazon.com (AMZN 327.07, +9.31), Google (GOOG 554.90, +16.75), LinkedIn (LNKD 169.10, +9.45), and Netflix (NFLX 348.89, +10.89). Amazon.com and Netflix also gave a boost to the consumer discretionary sector (+1.0%), while Google and LinkedIn contributed to the outperformance of the technology space (+0.9%).

Even though two of the largest sectors posted solid gains, other top-weighted groups like health care (-0.8%), financials (+0.1%), and industrials (unch) could not keep pace with the broader market. Notably, the health care sector finished at the bottom of the leaderboard amid weakness in biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 225.83, -0.99) lost 0.4%.

The underperformance of the aforementioned sectors was overshadowed by solid gains in most of the remaining areas. Energy (+0.9%) and materials (+0.4%) finished among the outperformers thanks to gains in the underlying commodities as crude oil surged 2.2% to $102.60, while copper (+0.4% to $3.05/lb) and gold (+0.5% to $1304.30/ozt) also posted gains.

Interestingly, today's session was not free of some warning flags. For one, the top-performing sector of the day was the utilities space (+1.5%), which has a defensive orientation. The countercyclical group extended its year-to-date gain to 10.3%, while the second-best performer of the year, health care, narrowed its gain to 2.8%.

Elsewhere, Treasuries began climbing during the late morning and continued their advance through a solid 3-year note auction. The benchmark 10-yr yield fell three basis points to 2.68%.

Also of note, the Japanese yen rallied throughout the day, which is a dynamic that has often signaled caution among participants. Yen futures gained 1.4%, while the dollar/yen pair traded near the 101.75 level at the end of the New York session after hovering north of 103.00 overnight.

Trading volume was just above average as 733 million shares changed hands at the NYSE.

Today's economic data was limited to the Job Openings and Labor Turnover Survey for February, which indicated job openings rose to 4.173 million from 3.874 million.

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET, while the Wholesale Inventories report for February (Briefing.com consensus 0.5%) will cross the wires at 10:00 ET. Also of note, the Federal Reserve will release the minutes from its latest policy meeting at 14:00 ET. 

·       S&P 500 +0.2% YTD

·       Russell 2000 -1.5% YTD

·       Nasdaq Composite -1.5% YTD

·       Dow Jones Industrial Average -1.9% YTD

Commodities

COMEX Metals Closing Prices

·       June gold rose $6.10 to $1304.30/oz

·       May silver rose $0.16 to $20.07/oz

·       May copper rose 1 cent to $3.05/lb

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·       May corn rose 8 cents to $5.07/bushel

·       May wheat rose 6 cents to $6.82/bushel

·       May soybeans rose 20 cents to $14.83/bushel

·       May ethanol fell 6 cents to $2.28/gallon

·       May sugar (#16 (U.S.)) rose 0.57 of a penny to 24.14 cents/lbs

NYMEX Energy Closing Prices

·       Apr crude oil rose $2.14 to $102.59/barrel

·       Apr natural gas rose 6 cents to $4.53/MMBtu

·       Apr heating oil rose 4 cents to $2.93/gallon

·       Apr RBOB rose 6 cents to $2.98/gallon

Treasuries

Treasuries Post Fourth Straight Gain: 10-yr: +06/32..2.677%..USD/JPY: 101.69...EUR/USD: 1.3796

·       Treasuries booked modest gains as the complex rallied for a fourth session. Click here to see an intraday yields chart.

·       Maturities hovered little changed into the cash open before some mid-morning buying lifted trade to the highs ahead of the $30 bln 3y note auction.

·       The solid $30 bln 3y note auction drew 0.895% and a 3.36x bid/cover. A slightly less than average indirect takedown (27.2%) was supported by the strongest showing from directs (23.9%) in over a year. 

·       A post-auction bid lifted Treasuries to their best levels of the day, where they lingered throughout afternoon trade. 

·       The 5y slipped -0.7bps to 1.664%. Today's close marked the lowest since the day preceding the Fed's latest taper with action checking up near solid 1.650% support.

·       The 10y shed -1.4bps, ending the day @ 2.681%. Many participants will be watching the 2.680% pivot in the days ahead as a breakdown of that level puts the important 2.600% area in play.

·       At the long end, the 30y lost -1.8bps to finish @ 3540%. The yield on the long bond slid back below the critical 3.550% level, causing some to look for lower yields in the days ahead. 

·       A flatter curve developed with the 5-30-yr spread narrowing to 187.5bps. 

·       Precious metals booked solid gains as gold climbed $11 to $1309 and silver added $0.09 to near $20.00. 

·       Data: MBA Mortgage Index (7), wholesale inventories (10), and the latest FOMC minutes (14). 

·       Auction: $21 bln 10y note reopening. 

·       Fed Speak: Chicago's Evans talks monetary policy and the economy (15:30) before Fed Governor Tarullo speaks at the 23rd Annual Hyman P. Minsky Conference (19).

Next Day In View 

Economic Commentary

Economic Summary: Jolts Job Openings increase; Kocherlakota & Plosser to speak later this afternoon; FOMC Minutes tomorrow at 14:00
Economic Data Summary:

·       February JOLTS Jobs Openings 4.173 M (January was revised to 3.874 M from 3.974 M).

Upcoming Economic Data:

·       Weekly MBA Mortgage Applications due out Tuesday at 7:00 (Last Week was -1.2%)

·       February Wholesale Inventories due out Tuesday at 10:00 (Briefing.com consensus of 0.5%; January was -0.6%)

Upcoming Fed/Treasury Events:

·       Minneapolis Fed President Kocherlakota (voting FOMC member, dovish) to speak today at 13:30

·       Philadelphia Fed President Plosser (voting FOMC member, hawkish) to speak today at 14:45

·       FOMC Minutes tomorrow at 14:00

·       Chicago Fed President Charlie Evans (not a voting FOMC member, dovish) to speak tomorrow at 15:30

·       Fed Board Member Daniel Taruillo (voting FOMC member, dovish) to speak tomorrow at 16:00

Other International Events of Interest

·       The Bank of Japan made no changes to its policy stance, keeping its key interest rate between 0-0.10%. Separately, the current account deficit narrowed to JPY40 billion from JPY590 billion, as expected. Also of note, Economy Watchers Current Index jumped to 57.9 from 53.0 (expected 54.1). 

On other news.... 

Currencies 

Dollar Slumps to Three-Week Low: 10-yr: +06/32..2.677%..USD/JPY: 101.66..EUR/USD: 1.3798

·       The Dollar Index drifts on session lows near 79.80. Click here to see a daily Dollar Index chart.

·       Today's weakness has pushed the Index to its worst level in three weeks and has trade lower for a third straight session. 

·       EURUSD is +55 pips @ 1.3795 as buyers remain in control for a second day. The single currency's two-day advance has added close to 100 pips as buyers defended 1.3700 support that was aided by both the 100 dma and trendline support off the July lows. A push through the 1.3800 level puts the recent highs in jeopardy. Eurozone data is limited to the German trade balance. 

·       GBPUSD is +140 pips @ 1.6750 as trade rallies following the manufacturing production beat. Current levels will be under close watch into the close as any finishing print above 1.6744 will mark the best since November 2009. Britain's trade balance will cross the wires tomorrow. 

·       USDCHF is -45 pips @ .8830 as trade presses to one-week lows. Today's better than expected Swiss retail sales has aided the move, but action continues to be mainly driven by fluctuation in the euro. A breakdown of .8800 sets up a retest of the March lows near .8725. 

·       USDJPY is -135 pips @ 101.70 as action tumbles to three-week lows. Sellers have been in control throughout the session, sparked by the Bank of Japan opting to keep its asset purchase program unchanged. Support in the 101.50 area will be watched closely over the coming days. 

·       AUDUSD is +95 pips @ .9360 as trade presses four and a half-month highs. The breakout comes despite the disappointing NAB Business Confidence with action now targeting a potential move into the .9475 area. Australia's Westpac Consumer Sentiment and home loans are due out this evening. 

·       USDCAD is -45 pips @ 1.0925 as trade dips to its lowest levels in almost two months. Sellers hold control despite Canada's building permits plunging -11.6% MoM (-2.4% MoM expected). Support in the 1.0900 area is aided by the 100 dma.

Jason's Commentaries

As expected, the market held flat ahead of the FOMC minutes as the short sellers covered their shorts.  The market went through a volatile session. The market started with some bearish intent that quickly reversed after the first 30 mins then held flat up till the closing bell. Consumer Discretionary, Energy, Tech and Utilities were the top performers of the session with more than 0.9% gain. The gains are somewhat offset but the drop in Healthcare, lagging 0.82%. The volumes were holding above 700m shares traded on the NYSE. Indices are currently on their respective support levels. If the market reacts negatively to the FOMC minutes, the market might broke down. However, i highly doubt the market will break the support as we're in the most bullish month of the year. 

Market Call: UP

Date: 9 April 2014