19 May 2014 AMC - Market rallied as tech led the session despite staples and utilities did not do very well

19 May 2014 AMC - Market rallied as tech led the session despite staples and utilities did not do very well

Market Summary 

 European Markets Closing Prices

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

·         UK's FTSE: -0.2%

·         Germany's DAX: + 0.3%

·         France's CAC: + 0.3%

·         Spain's IBEX: -0.5%

·         Portugal's PSI: 0.0%

·         Italy's MIB Index: -1.6%

·         Irish Ovrl Index: + 2.6%

·         Greece ATHEX Composite: -2.0%

Before Market Opens 

S&P futures vs fair value: -5.20. Nasdaq futures vs fair value: -9.30.
The S&P 500 futures trade five points below fair value.

Asian markets ended the first session of the week on a mixed note. Chinese housing data disappointed as price increases slowed to 6.7% (7.7% previous) with sharp notable slowdowns in Beijing (8.9% versus prior 10.3%) and Shanghai (11.5% versus 13.1%). 

o    Japan's core machinery orders surged 19.1% (expected 6.1%), likely seeing a boost due to increased demand ahead of the consumption tax hike. 

o    Hong Kong's unemployment rate held at 3.1%, as expected. 

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·         Japan's Nikkei lost 0.6%, falling to a one-month low as the strong yen weighed. Toyota and Sony both lost 1.1%. 

·         Hong Kong's Hang Seng ended just below its flat line after rallying into the close. Exporter Li & Fung was the biggest drag, falling 3.7%. 

·         China's Shanghai Composite fell 1.1%, sinking to a three-week low the housing data weighed. Real estate shares were weak as Gemdale slumped 1.4% and Poly Real Estate fell 1.2%. 

·         India's Sensex rallied 1.0% to another record-high. Utilities saw strong gains with Bharat Heavy Electric spiking 15.1% and NTPC rallying 10.6% on increased speculation Modi's victory in the election will provide a boost to the economy. 

Major European indices trade in mixed fashion with markets in Italy (-1.5%) and Spain (-0.8%) on the defensive after a German group has filed a petition with the European Court of Justice to block the European Central Bank's Outright Monetary Transactions (OMT) bond program. Italy's benchmark 10-yr yield is higher by ten basis points at 3.15%, while Spain's 10-yr yield is up three basis points at 3.00%. In other news of note, European Central Bank executive board member Peter Praet recommended a 10 basis point cut to the main refinance rate and the deposit facility at the upcoming meeting.

Participants received just one data point: 

o    Spain's trade deficit widened to EUR2.05 billion from EUR1.60 billion (expected deficit of EUR700 million). 

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·         In France, the CAC is higher by 0.1% with Alstom in the lead. The stock trades higher by 2.6%. Financials lag with Credit Agricole and Societe Generale both down near 1.5%. 

·         Germany's DAX holds a loss of 0.2%. Materials producers display strength, while banks underperform. K+S and HeidelbergCement are higher by 2.5% and 1.6%, respectively. Deutsche Bank trades lower by 2.2%. 

·         Great Britain's FTSE is lower by 0.4%. AstraZeneca is the weakest performer, down 11.5% after rejecting Pfizer's takeover offer. Air carrier easyJet outperforms with a gain of 3.5% following upbeat comments from one of its rivals. 

·         Italy's MIB trades down 1.5%. Financials UnipolSai, Unicredit, and Intesa Sanpaolo hold losses between 2.5% and 7.5%.

U.S. Equities

·         Futures point to modest selling at the open after Friday's bid halted the brief two-day skid

·         A busy Merger Monday has seen AT&T (T) announce plans to acquire DirecTV (DTV) in a stock-and-cash transaction for $95 per share and AstraZeneca (AZN) reject Pfizer's (PFE) final proposal  

·         The VIX (12.44) remains near four-month lows

o    S&P Futures -5 @ 1870

o    Dow Futures -49 @ 16,416

o    Nasdaq Futures -7 @ 3576

Asia

·         Markets finished mixed across Asia

·         Chinese housing data disappointed as price increases slowed to 6.7% (7.7% previous) with sharp notable slowdowns in Beijing (8.9% actual v. 10.3% previous) and Shanghai (11.5% actual v. 13.1%) 

·         Japan's core machinery orders surged 19.1% (6.1% expected), likely seeing a boost due to increased demand ahead of the consumption tax hike

·         Hong Kong's unemployment rate held at 3.1%, as expected

·         Japan's Nikkei (-0.6%) fell to a one-month low as the strong yen weighed

·         Hong Kong's Hang Seng (UNCH) rallied into the close, erasing its early losses

·         China's Shanghai Composite (-1.1%) sank a three-week low as today's housing data weighed

·         India's Sensex (+1.0%) rallied to another record-high

·         Australia's ASX (-1.3%) slid to a one-month low as iron-ore prices weighed

Market Internals

Market Internals -Technical-
The Nasdaq closed up 35 (+0.86%) at 4126, the S&P 500 closed up 7 (+0.38%) at 1885, and the Dow closed up 21 (+0.12%) at 16512. Action came on below average volume (NYSE 573 mln vs. avg. of 714; NASDAQ 1479 mln vs. avg. of 1952), with advancers outpacing decliners (NYSE 2020/1103, NASDAQ 1826/825) and mixed new highs/lows (NYSE 103/12, NASDAQ 36/54). 

Relative Strength: 
Eastern Europe-ESR +2.7%, Biotechnology-XBI +2.18%, Russia-RSX +2.13%, Vietnam-VNM +2.12%, Regional Banks-KRE +1.61%, Internet Composite-FDN +1.51%, Social Media-SOCL +1.47%, Biotechnology-IBB +1.4%, Malaysia-EWM +0.87%, South Africa-EZA +0.81%.

Relative Weakness: 
Cotton-BAL -1.83%, Utilities-XLU -1.54%, Coffee-JO -1.31%, Australia-EWA -1.31%, Corn-CORN -1.24%, Volatility-VXX -1.2%, Latin America 40-ILF -1.07%, Greece-GREK -1.04%, Japan-EPP -0.82%, Indonesia-IDX -0.74%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries

Closing Market Summary: Small Caps Lead Stocks Higher
The stock market began the new trading week on a modestly higher note with small caps coming out on top. The Russell 2000 advanced 1.1%, while the S&P 500 added 0.4% with seven sectors posting gains. The underperformance of blue chip listings was apparent within the Dow Jones Industrial Average (+0.1%), which spent the entire session near its flat line.

Generally speaking, the first session of the week was largely uneventful with no economic data or noteworthy earnings influencing the sentiment. However, M&A activity was in focus early, even though it did not lift the underlying stocks. Some recent came to fruition as AT&T (T 36.38, -0.36) agreed to acquire DirecTV (DTV 84.65, -1.53) for $95 per share, which represents a 10.2% premium to Friday's closing price. However, shares of DirecTV did not rally amid concerns about potential regulatory hurdles.

Elsewhere, AstraZeneca (AZN 70.64, -9.64) plunged 12.0% after rejecting Pfizer's (PFE 29.28, +0.16) latest acquisition offer. Even though AstraZeneca lagged, the broader health care sector (+0.6%) was able to overcome that weakness thanks to the relative strength of biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 231.50, +3.20) gained 1.4% after starting the session right above its 200-day moving average, which has been an area of congestion for more than a month.

Also of note, the solid performance from the biotech group underpinned the Nasdaq Composite (+0.9%), which also received noteworthy support from the technology sector (+0.8%).

The top-weighted S&P 500 sector settled in the lead thanks to broad-based gains. Large cap listings like Apple (AAPL 604.59, +7.08), Google (GOOG 528.86, +8.23), and Oracle (ORCL 42.16, +0.47) advanced between 1.1% and 1.6%, while chipmakers also rallied. The PHLX Semiconductor Index finished higher by 1.1%.

Overall, cyclical sectors were responsible for the bulk of today's rally, while only one countercyclical group—health care—finished in the green. The other three—consumer staples, telecom services, and utilities—posted losses between 0.3% and 1.6%.

The utilities sector finished the session at the bottom of the leaderboard, which widened its May loss to 4.4%. Despite the sharp month-to-date decline, the rate-sensitive sector remains higher by 8.6% for the year.

Treasuries spent the entire session in a steady retreat from their overnight highs. As a result, the benchmark 10-yr yield climbed two basis points to 2.54%.

Participation was well below average with just 573 million shares changing hands at the NYSE, which represented the second lowest total of the year.

There is no economic data of note on tomorrow's schedule. 

·         S&P 500 +2.0% YTD 

·         Dow Jones Industrial Average -0.4% YTD 

·         Nasdaq Composite -1.2% YTD 

·         Russell 2000 -4.0% YTD

Commodities

Closing Commodities: Crude Oil Rises 0.6%, Gold Gains A Modest 0.1%

·         June gold trended lower after pulling back from a session high of $1305.70 per ounce set in early morning pit trade. It dipped as low as $1293.00 per ounce and settled at $1294.10 per ounce, or 0.1% higher.

·         July silver also gave up its early morning losses as it pulled back from its session high of $19.68 per ounce. Unable to regain momentum, it closed with a 0.1% gain at $19.34 per ounce, just above its session low of $19.33 per ounce.

·         June crude oil extended Friday's gains as the dollar index traded lower. The energy component rose to a session high of $103.09 per barrel in morning action and brushed a session low of $102.49 per barrel. It eventually settled with a 0.6% gain at $102.65 per barrel.

·         June natural gas also traded higher, rising to a session high of $4.52 per MMBtu by late morning floor trade. It pulled back slightly in afternoon action and settled with a 1.4% gain at $4.47 per MMBtu.

COMEX Metals Closing Prices

  June gold rose $0.80 to $1294.10/oz 

·         Gold trended lower after pulling back from a session high of $1305.70 set in early morning pit trade. It dipped as low as $1293.00 and settled with a 0.1 % gain. 

  July silver rose 1 cent to $19.34/oz 

·         Silver also gave up its early morning losses as it pulled back from its session high of $19.68. Unable to regain momentum, it closed just above its session low of $19.33, booking a gain of 0.1%. 

  July copper rose 2 cents to $3.17/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Price

·         July corn fell 7 cents to $4.77/bushel

·         July wheat rose 1 cent to $6.76/bushel

·         July soybeans rose 18 cents to $14.83/bushel

·         June ethanol fell 2 cents to $2.22/gallon

·         July sugar (#16 (U.S.)) rose 0.02 of a penny to 24.33 cents/lbs

NYMEX Energy Closing Prices

  June crude oil rose $0.64 to $102.65/barrel

·         Crude oil extended Friday's gains as the dollar index traded lower. The energy component rose to a session high of $103.09 in morning action and brushed a session low of $102.49. It eventually settled with a 0.6% gain.

  June natural gas rose 6 cents to $4.47/MMBtu

·         Natural gas also traded higher, rising to a session high of $4.52 by late morning floor trade. It pulled back slightly in afternoon action and settled with a 1.4% gain.

  June heating oil fell 2 cents to $2.94/gallon

  June RBOB fell 1 cent to $2.96/gallon 
Treasuries

Treasuries Close on Lows: 10-yr: -02/32..2.534%..USD/JPY: 101.33..EUR/USD: 1.3713

·         Treasuries closed on their lows as steady selling took hold over the course of the session. Click here to see a daily yields chart.

·         Today's losses were not surprising as selling tends to take hold on days that lack tradable news and data. 

·         The complex ticked to session highs as stocks came under pressure at the open, but would see selling over the remainder of the day as equities quickly recovered those losses and extended their gains. 

·         Selling weighed heaviest on the long bond as the 30y added +3.6bps to 3.383%. The yield closed on minor resistance, which, if broken, is likely to produce a move into the 3.440% region.

·         The 10y climbed +1.8bps to 2.536%. Little resistance appears on the chart until the 2.580%/2.600% area. 

·         Outperformance in the belly saw the 5y slip -0.9bps to 1.539%. The yield closed on key support that is helped by the 200 dma.

·         Selling swung the curve steeper as the 5-30-yr spread widened to 184.5bps.

·         Precious metals finished flat with gold and silver at $1293 and $19.35, respectively.

·         Data: None. 

·         Fed Speak: Philly's Plosser gives his economic outlook (12:30).

On other news.... 




Currencies 

Dollar Probes 80.00: 10-yr: unch..2.528%..USD/JPY: 101.28..EUR/USD: 1.3712

·         The Dollar Index holds small losses as trade probes the 80.00 level. Click here to see a daily Dollar Index chart.

·         An uneventful session has seen trade limited to a tight 10 cent range as trade lingers near one-month highs. 

·         EURUSD is +20 pips @ 1.3710 amid a mostly uneventful session. The single currency has been bid following comments by ECB head Jens Weidmann as he suggested lower peripheral yields should also been considered when discussing the recent strength of the euro.Action has been trapped near the 1.300 support level for the past week as trade has been unable to reclaim the 100 dma. Eurozone data is limited to German PPI. 

·         GBPUSD is flat @ 1.6815 as trade attempts to put in a third day of gains. A relatively quiet session sans data and news has caused trade to hold on support in the area. British data is heavy as CPI, PPI Input, and RPI are all due out. 

·         USDCHF is flat @ .8915 as trade holds near three-month highs. A breakout above .8925 puts the 200 dma (.8998) in focus. 

·         USDJPY is -20 pips @ 101.30 as trade flirts with its lowest close in the three months. Sellers have been in control since the stronger than expected core machinery orders report, which came as consumers gobbled up big ticket items ahead of the consumption tax hike. 

·         AUDUSD is -25 pips @ .9335 as trade contends with its lowest close in almost two weeks. Weighing on the hard currency was a note from S&P, which suggested Australia's ‘AAA' rating may be in jeopardy if significant budget cuts are not made. A breakdown of .9325 puts the .9250 area in play. Australia's CB Leading Index is due out ahead of the latest Reserve Bank of Australia minutes. 

·         USDCAD is +15 pips @ 1.0870 as light buying has the pair on track for its first gain in four sessions. Today's action has been limited to a tight 25 pip range as Canadian banks are closed for Victoria Day. Canada's wholesale sales will be released tomorrow.

Next Week In View





Economic Commentaries





Jason's Commentaries

The market got a upwards drag from the Tech side as stocks like Google, Apple gained more than 1%. On top of that, the Financials also provided quite a bit of upward push. That gain has offset the loss in the utilities sector as well. The whole utilities sector lost more than 1.5% last night. On the internals, the market finished with a 584.3m shares traded on the NYSE. Apparently the market did not want to participate in light of the FOMC minutes coming out on Wednesday. The market is obviously pricing into the FOMC minutes once again. It seems that the market is going higher today again.

Market Call: FLAT to downside

Date: 20 May 2014