14 May 2014 AMC - Market turned down as small caps hit resistance.

14 May 2014 AMC - Market turned down as small caps hit resistance.

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: + 0.1%

·         Germany's DAX: 0.0%

·         France's CAC: -0.1%

·         Spain's IBEX: + 0.3%

·         Portugal's PSI: -3.4%

·         Italy's MIB Index: -0.3%

·         Irish Ovrl Index: -1.2%

·         Greece ATHEX Composite: + 1.5%

Before Market Opens 

S&P futures vs fair value: -2.60. Nasdaq futures vs fair value: -11.30.
The S&P 500 futures trade three points below fair value.

Asian Markets ended mixed with weakness apparent in most of the major bourses and strength in the periphery. The People's Bank of China ordered lenders to increase mortgage lending in an effort to provide a spark to the slowing real estate market. Elsewhere, the Australian government revealed its budget plans, announcing spending cuts on foreign aid and welfare while planning to raise taxes on the wealthy. 

o    Japan's Corporate Goods Price Index rose 2.8% month-over-month, as expected, while the year-over-year reading jumped 4.1% (consensus 4.0%, prior 1.7%). Separately, Machine Tool Orders surged 48.8% year-over-year (prior 41.8%). 

o    South Korea's Unemployment Rate climbed to 3.7% (3.5% previous). 

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·         Japan's Nikkei slipped 0.1% amid a quiet trade. Engineering company JGC weighed, tumbling 13% after issuing a downbeat forecast. 

·         Hong Kong's Hang Seng gained 1.0%, closing at a three-week high. Property shares saw robust gains as China Resources Land and China Overseas Land & Investment climbed 6.0% and 4.1%, respectively. 

·         China's Shanghai Composite booked a small loss of 0.1%. Property shares provided support as China Vanke added 1.3% and Poly Real Estate gained 1.6%. 

Major European indices trade modestly lower with Italy's MIB (-0.7%) trailing the rest of the region. The Bank of England released its latest Inflation Report, which called for the first rate increase to take place in the second quarter of next year. Participants received several data points: 

o    Eurozone Industrial Production fell 0.3% month-over-month, as expected, while the year-over-year reading slipped 0.1% (consensus 1.0%, previous 1.7%). 

o    Germany's CPI slipped 0.2% month-over-month, while the year-over-year reading increased 1.3%. Both figures met expectations. 

o    Great Britain's Claimant Count fell 25,100 (expected -30,000, prior -30,600), while the Unemployment Rate ticked down to 6.8% from 6.9%, as expected. Also of note, Average Earnings Index + Bonus rose 1.7% (consensus 2.1%, previous 1.7%). 

o    French CPI was unchanged month-over-month (consensus 0.2%, previous 0.5%). 

o    Spain's CPI rose 0.9% month-over-month, while the year-over-year reading increased 0.4%. Both figures matched expectations. 

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·         Germany's DAX is lower by 0.1% with utilities on the defensive. E.ON and RWE are lower by 0.4% and 1.8%, respectively. On the upside, basic material names K+S and ThyssenKrupp hold respective gains of 1.2% and 0.6%. 

·         In France, the CAC holds a loss of 0.2%. Financials Credit Agricole and Societe Generale are both down near 1.2%, while industrial component Alstom leads with a gain of 2.1%.

·         Great Britain's FTSE is down 0.2%. ITV is the weakest component, down 5.9%, in reaction to cautious analyst comments. On the upside, Mondi is the top performer, up 2.5%, after beating earnings expectations. 

·         Italy's MIB trades down 0.7% as Mediaset weighs. The stock was halted earlier and now trades lower by 6.3%.

U.S. Equities

·         Futures point to small losses at the open

·         Both the DJIA and S&P 500 finished yesterday at record highs

·         Yesterday's session saw the VIX (12.13) post its lowest close since August 2013

·         PPI (0.6% actual v. 0.2% expected)

·         Core PPI (0.5% actual v. 0.2% expected)

o    S&P Futures -2 @ 1892

o    Dow Futures -8 @ 16,667

o    Nasdaq Futures -10 @ 3598

Asia

·         Markets ended mixed across Asia with weakness apparent in most of the major bourses and strength in the periphery

·         The People's Bank of China ordered lenders to increase mortgage lending in an effort to provide a spark to the slowing real estate market

·         The Australian government revealed its budget plans, announcing spending cuts on foreign aid and welfare while planning to raise taxes on the wealthy

·         South Korea's unemployment rate climbed to 3.7% (3.5% previous)

·         Japan's Nikkei (-0.1%) slipped amid a quiet trade

·         Hong Kong's Hang Seng (+1.0%) closed at a three-week high 

·         China's Shanghai Composite (-0.1%) booked small losses

·         India's Sensex (-0.2%) eased off record highs

·         Australia's ASX (UNCH) held just off six-year highs

Market Internals

Market Internals -Technical-

The Nasdaq closed down 30 (-0.72%) at 4101, the Dow closed down 101 (-0.61%) at 16614, and the S&P 500 closed down 9 (-0.47%) at 1889. Action came on below average volume (NYSE 607 mln vs. avg. of 713; NASDAQ 1637 mln vs. avg. of 1974), with decliners outpacing advancers (NYSE 1197/1936, NASDAQ 697/1951) and new highs outpacing new lows (NYSE 79/26, NASDAQ 28/74).

Relative Strength: 
Sugar-SGG +2.61%, Vietnam-VNM +2.61%, Platinum-PPLT +2.01%, Indonesia-IDX +1.92%, Junior Gold Miners-GDXJ +1.82%, Gasoline-UGA +1.44%, Thailand-THD +1.43%, South Africa-EZA +1.39%, Base Metals-DBB +1.3%, China 25 Index-FXI +1.13%.

Relative Weakness: 
Clean Energy-PBW -2.4%, Regional Banks-KRE -2.24%, U.S. Home Construction-ITB -2.2%, Homebuilders-XHB -2.16%, Banks-KBE -1.84%, India-INP -1.2%, Israel-EIS -0.76%, Italy-EWI -0.69%, Chile-ECH -0.61%, Japan-EWJ -0.53%.

Leaders and Laggards

 

Technical Updates

Briefing's Commentaries

Closing Market Summary: Russell 2000 Leads Stocks Lower
The stock market stumbled on Wednesday with small caps leading the fall as the Russell 2000 (-1.6%) registered its second consecutive decline that placed it back below its 200-day moving average. For its part, the S&P 500 lost 0.5% with five sectors finishing in the red.

Equity indices began the midweek session below their flat lines, but outside of the Russell 2000, their losses were held in check for the bulk of the day. The S&P 500 hovered roughly four points below its flat line for the better part of the trading day until diving to a fresh low during the last 90 minutes of action.

Meanwhile, the Russell 2000 lagged from the open, and its underperformance likely contributed to the overall sense of caution. Furthermore, the relative weakness among the top-weighted sectors prevented sustained rallies from taking shape.

Out of the five largest sectors that represent more than 70.0% of the S&P 500, consumer discretionary (-1.1%), financials (-0.8%), technology (-0.6%), and industrials (-0.8%) lagged throughout the session, while health care (unch) displayed relative strength thanks to modest gains in biotech. The iShares Nasdaq Biotechnology ETF (IBB 231.41, +0.90) advanced 0.4%.

The weakest sector of the day—consumer discretionary—suffered from noteworthy losses among apparel retailers. Shares of Fossil (FOSL 100.00, -11.45) tumbled 10.3% after the company's cautious guidance overshadowed its earnings beat. Also of note, Macy's (M 57.83, -0.01) reported a one-cent beat on below-consensus revenue, but could not rally even though shareholders were treated to a 25.0% dividend hike and an increase to the share repurchase program. As a result of the decline, the worst-performing sector of the year widened its year-to-date loss to 4.7%.

Although most cyclical sectors were unable to keep pace with the broader market, energy (+0.04%) and materials (+0.1%) outperformed amid strength in the underlying commodities. Crude oil rose 0.6% to $102.34, while metals displayed strength as well. Copper futures advanced 0.7% and gold futures rose 0.9% to their respective $3.16/lb and $1306.10/ozt.

On the countercyclical side, consumer staples (-0.6%) lagged, while rate-sensitive telecom services (+0.5%) and utilities (+0.4%) finished in the lead. Both sectors likely benefitted from today's session-long retreat in yields. The 10-yr note advanced 18 ticks, pressuring its yield seven basis points to 2.54%. The benchmark yield settled at its lowest level since late October 2013.

Participation was well below average, which has been the case for the past week. In fact, daily NYSE volume has been trending lower all week with today's tally (607 million) representing the second-lowest total of the week.

Economic data was limited to the April PPI report and the weekly MBA Mortgage Index: 

·         Producer prices increased 0.6% in April, up from a 0.5% increase in March. The Briefing.com consensus expected producer prices to increase 0.2%. The economic consensus is once again having difficulties estimating producer inflation using the new methodologies. Final demand for services, which increased by its largest amount (0.7%) in March since January 2010, was anticipated to fall back in April. That did not happen. Services prices rose another 0.6% in April, which was one of the largest two-month gains in the history of the index. Final demand for goods increased 0.6% in April, up from being flat in March. Food prices, which jumped 1.1% in March, increased 2.7% in April. Energy costs, which were expected to be a primary factor for April inflation gains, increased a minute 0.1% in April after falling 1.2% in March. Excluding food and energy, core PPI increased 0.5% in April, down from a 0.6% increase in March. The consensus expected these prices to increase 0.2%. 

·         The weekly MBA Mortgage Index rose 3.6% to follow last week's increase of 5.3%. 

Tomorrow, weekly initial claims (Briefing.com consensus 325,000), April CPI (consensus 0.3%), and the Empire Manufacturing survey for May (consensus 4.8) will all be released at 8:30 ET, while March Net Long-Term TIC Flows will be announced at 9:00 ET. April Industrial Production (consensus 0.0%) and Capacity Utilization (consensus 79.2%) will be announced at 9:15 ET, while the Philadelphia Fed survey for May (consensus 9.1) and the May NAHB Housing Market Index (consensus 48) will cross the wires at 10:00 ET. 

·         S&P 500 +2.2% YTD 

·         Dow Jones Industrial Average +0.2% YTD 

·         Nasdaq Composite -1.8% YTD 

·         Russell 2000 -5.0% YTD

Commodities

COMEX Metals Closing Prices

·         June gold rose $10.20 to $1306.10/oz

·         July silver rose $0.23 to $19.78/oz

·         July copper rose 1 cent to $3.16/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         July corn fell 7 cents to $4.95/bushel

·         July wheat fell 19 cents to $6.91/bushel

·         July soybeans rose 2 cents to $14.86/bushel

·         June ethanol rose 3 cents to $2.16/gallon

·         July sugar (#16 (U.S.)) fell 0.01 of a penny to 24.43 cents/lbs

NYMEX Energy Closing Prices

·         June crude oil rose $0.61 to $102.34/barrel

·         June natural gas rose 1 cent to $4.37/MMBtu

·         June heating oil rose 1 cent to $2.96/gallon

·         June RBOB rose 4 cents to $2.97/gallon

Treasuries

10y Sinks to Lowest Level Since Halloween: 10-yr: +21/32..2.538%..USD/JPY: 101.76..EUR/USD: 1.3710

·         Treasuries finished with solid gains as money moved into the complex for a second session. Click here to see an intraday yields chart.

·         The complex attracted overnight buying amid the dovish rhetoric from both the Bank of England and Germany's Bundesbank, and saw follow through buying despite the hotter than expected PPI (0.6% actual v. 0.2% expected) report. 

·         While no one reason can be fingered for the move, some participants noted the bid came as shorts were squeezed out of positions as yields probed key technical levels.

·         The 30y shed -7.9bps to 3.375% as action closed just above 11-month lows. 

·         The 10y tumbled -7.5bps to 2.543%. The benchmark yield slipped below key 2.600% support, and pressed to levels last seen on Halloween. The 2.500% area will be watched closely in the days ahead. 

·         The 5y lost -5.9bps to 1.561%. Today's bid pressed the yield as low as 1.536% before sellers emerged in defense of the 200 dma. Today's action is notable as trendline support off the June 2013 lows has been breached. 

·         A flatter curve developed as the 2-10-yr spread narrowed to 217.5bps. Support at the level dates back to June 2013, shortly after the Fed's taper talk began. 

·         Precious metals booked solid gains as gold climbed +$11 to $1306 and silver rallied +$0.23 to $19.78. 

·         Data: Initial and continuing claims, CPI, Empire Manufacturing (8:30), Net Long-Term TIC Flows (9), industrial production and capacity utilization (9:15), Philly Fed, and NAHB Housing Market Index (10). 

·         Fed Speak: NY's Dudley will give opening remarks at the NY Fed's summit on small business credit innovations (8:30). Fed Chair Janet Yellen will speak at a reception to launch National Small Business Week (18:10).

On other news.... 




Currencies 

Dollar Snaps Five-Day Win Streak: 10-yr: +18/32..2.548%..USD/JPY: 101.80..EUR/USD: 1.3706

·         The Dollar Index (80.10) holds small losses as the current five-day win streak is likely at an end. Click here to see a daily Dollar Index chart.

·         The light selling comes amid a rather uneventful trade as the entire session has seen a range of 10 cents. 

·         EURUSD is flat @ 1.3700 as action holds near three-month lows. Headlines crossing ahead of the lunchtime hour saw Bundesbank President Jens Weidmann attempt to strike a neutral tone as he suggested ECB action would be welcomed, but the tools that should be used are still up for discussion. Aside from those comments, today's session has been light of both data and news, and has kept the single currency in a tight 20 pip range throughout U.S. trade. Support in the 1.3700 area remains under close watch. Eurozone data is heavy as CPI and the ECB Monthly Bulletin accompany GDP readings from around the region. 

·         GBPUSD is -60 pips @ 1.6770 as trade readies for its lowest close in a month. Sterling has come under pressure today following the disappointing British jobs data, and dovish comments from BOE head Mark Carney indicating that while the economy is nearing the point of a rate hike no action is likely to occur until the first half of 2015. Support in the 1.6725 area is helped by the 50 dma. 

·         USDCHF is +5 pips @ .8900 as the bulls fight for a sixth day of gains. Resistance in the .8925 region is all that stands in the way of a move into the 200 dma (.9003). Switzerland's PPI is due out tomorrow. 

·         USDJPY is -50 pips @ 101.75 as today's weakness has erased two days of gains. Traders will continue to watch the 101.25 support level ahead of tonight's preliminary GDP and tertiary industry activity releases. Bank of Japan Governor Haruhiko Kuroda will speak in Tokyo. 

·         AUDUSD is +20 pips @ .9380 as trade looks likely to post its best close in a month. The hard currency probed the .9400 level in early trade after the latest Australian budget pledged to cut spending on foreign aid and welfare while hiking taxes on the rich, but was unable to hold that level amid selling early on in U.S. trade. A breakdown of .9350 puts .9250 in the crosshairs. Australian data is limited to new motor vehicle sales.

·         USDCAD is -30 pips @ 1.0875 as action presses session lows. The 1.0815 level will be watched closely in the days ahead as the penetration of that level would produce the lowest print in more than four months. The 200 dma (1.0717) guards 1.0700 support. Canada's manufacturing sales will be released tomorrow.

Next Week In View





Economic Commentaries

Economic Summary: PPI hotter than expected; CPI tomorrow at 8:30
Economic Data Summary:

·         Weekly MBA Mortgage Applications 3.6% vs Briefing.com consensus of ; Last Week was 5.3%

·         April PPI 0.6% vs Briefing.com consensus of 0.2%; March was 0.5%

·         April Core PPI 0.5% vs Briefing.com consensus of 0.2%; March was 0.6%

o    Services prices rose another 0.6% in April, which was one of the largest two-month gains in the history of the index. Final demand for goods increased 0.6% in April, up from being flat in March. Food prices, which jumped 1.1% in March, increased 2.7% in April. That gain reflected an 8.4% increase in meat prices, which included a 20.6% increase in pork prices. Egg prices increased 15.1%. Energy costs, which were expected to be a primary factor for April inflation gains, increased a minute 0.1% in April after falling 1.2% in March. Gasoline prices increased 1.8% after falling 3.4% in March. That gain was offset by a 3.6% decline in heating oil costs and a 4.2% decline in diesel fuel prices. Excluding food and energy, core PPI increased 0.5% in April, down from a 0.6% increase in March. The consensus expected these prices to increase 0.2%.

Upcoming Economic Data:

·         Weekly Initial Claims due out Thursday at 8:30 (Briefing.com consensus of 325K; Last Week was 319K)

·         Weekly Continuing Claims due out Thursday at 8:30 (Briefing.com consensus of 2.7 M ; Last Week was 2.685 M )

·         April CPI due out Thursday at 8:30 (Briefing.com consensus of 0.3%; March was 0.2%)

·         April Core CPI due out Thursday at 8:30 (Briefing.com consensus of 0.2%; March was 0.2%)

·         May Empire Manufacturing due out Thursday at 8:30 (Briefing.com consensus of 4.8%; April was 1.3)

·         March Net Long Term TIC Flows due out Thursday at 9:00 (Briefing.com consensus of ; February was $85.7 bln)

·         April Industrial Production due out Thursday at 9:15 (Briefing.com consensus of 0.0%; March was 0.7%)

·         April Capacity Utilization due out Thursday at 9:15 (Briefing.com consensus of 79.2%; March was 79.2%)

·         May Philadelphia Fed due out Thursday at 10:00 (Briefing.com consensus of 9.1; April was 16.6)

·         May NAHB Housing Market Index due out Thursday at 10:00 (Briefing.com consensus of 48; April was 47)

Upcoming Fed/Treasury Events:

·         NY Fed President Bill Dudley (voting FOMC member, typically dovish) to speak tomorrow at 8:30

·         Janet Yellen to speak on small business tomorrow at 18:10

Other International Events of Interest

·         The Bank of England Inflation Hearings saw the BOE project the British economy will grow at 3.4% in 2014 while inflation is likely to remain near the central bank's 2% target.

·         ECB Executive Board member Peter Praet hinted the central bank would take further measures to stimulate the region's economies.

Jason's Commentaries

It seems that the market reacted to the resistance on the Russells and Nasdaq strongly last night which causes some massive profit taking last night. Volumes were at 620.1m shares traded on the NYSE while Consumer discretionary is the biggest laggard. Utilities managed to held up 0.5% amidst such profit taking day. The market is likely to consolidate for a while to the downside especially it's May right now. It seems that we're going to have lower volume in the market ranging below 600-650m shares on the NYSE, market will continue to be weak and susceptible to volatility.

Market Call: FLAT

Date: 15 May 2014