29 May 2014 AMC - Market rallied towards the closing bell that propelled S&P500 into a higher high

29 May 2014 AMC - Market rallied towards the closing bell that propelled S&P500 into a higher high

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: + 0.3%

·         Germany's DAX: 0.0%

·         France's CAC: 0.0%

·         Spain's IBEX: -0.2%

·         Portugal's PSI: -0.9%

·         Italy's MIB Index: -0.4%

·         Irish Ovrl Index: -0.4%

·         Greece ATHEX Composite: -1.1%

Before Market Opens 

S&P futures vs fair value: +4.70. Nasdaq futures vs fair value: +9.20.
The S&P 500 futures trade five points above fair value.

Asian markets ended mostly lower, piggybacking yesterday's trade on Wall Street. 

·         In economic data: 

o    Japan's Retail Sales (-4.4% year-over-year versus expected -3.2%) missed estimates by a wide margin. 

o    Australia's HIA New Home Sales rose 2.9% month-over-month, while Private Capital Expenditures fell -4.2% quarter-over-quarter (expected -1.6%). 

o    The Philippines Q1 GDP printed 1.5% quarter-over-quarter (consensus 1.9%). 

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·         Japan's Nikkei eked out a small gain of 0.1% as trade ticked higher for a fifth session. The strong yen provided a mixed trade for exporters as Toyota Motor added 0.5% and Sony shed 1.6%. 

·         Hong Kong's Hang Seng shed 0.3%, slipping off six-week highs. Heavyweight Tencent Holdings weighed, falling 3.1%, following reports Beijing will crack down on its messaging service. 

·         China's Shanghai Composite lost 0.5% after being rejected by the 50- and 100-day moving averages. Brokerage names were weak with Citic Securities sliding 1.7% to lead the sector lower. 

Major European indices trade mostly lower, but the overall activity has been subdued due to Ascension Day closures in Austria, Norway, Switzerland, and others. 

·         Economic data was limited to just one item: 

o    Spain's GDP rose 0.4% quarter-over-quarter, as expected. 

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·         Great Britain's FTSE is higher by 0.3% with medical equipment manufacturer Smith & Nephew in the lead. The stock trades higher by 3.9% amid takeover speculation. On the downside, Kingfisher holds a loss of 5.0% following disappointing guidance. 

·         Germany's DAX holds a loss of 0.1%. Drug maker Bayer outperforms with a gain of 1.0%, while Commerzbank weighs with a loss of 2.8%. 

·         In France, the CAC is lower by 0.2%. Electricite de France is the weakest performer, down 3.2%. Consumer names outperform with Danone, L'Oreal, and Pernod Ricard up between 0.4% and 0.8%.

U.S. Equities

·         Futures suggest a firm open

·         GDP - Second Estimate (-1.0% actual v. -0.5% expected)

·         GDP Deflator - Second Estimate (1.3% actual v. 1.3% expected)

·         Initial Claims (300K actual v. 318K expected)

·         Continuing Claims (2631K actual v. 2650K expected)

o    S&P Futures +3 @ 1912

o    Dow Futures +24 @ 16,652

o    Nasdaq Futures +5 @ 3721

Asia

·         Markets ended mostly lower across Asia, piggybacking yesterday's trade on Wall Street 

·         Japan's retail sales (-4.4% YoY actual v. -3.2% YoY expected) missed estimates by a wide margin

·         Australia's HIA New Home Sales rose 2.9% MoM while private capital expenditures fell -4.2% QoQ (-1.6% QoQ expected)

·         The Philippines Q1 GDP printed 1.5% QoQ (1.9% QoQ expected)

·         Japan's Nikkei (+0.1%) eked out a small gain as trade ticked higher for a fifth session

·         Hong Kong's Hang Seng (-0.3%) slipped off one and a half-month highs 

·         China's Shanghai Composite (-0.5%) was rejected by the 50 and 100 dma 

·         India's Sensex (-1.3%) fell for the third time in four sessions

·         Australia's ASX (-0.1%) held near six-year highs

Market Internals

Market Internals -Technical-
The Nasdaq closed up 23 (+0.54%) at 4248, the S&P 500 closed up 10 (+0.54%) at 1920, and the Dow closed up 66 (+0.39%) at 16699. Action came on below average volume (NYSE 532 mln vs. avg. of 709; NASDAQ 1567 mln vs. avg. of 1895), with advancers outpacing decliners (NYSE 2099/1033, NASDAQ 1536/1073) and new highs outpacing new lows (NYSE 193/17, NASDAQ 82/26).

Relative Strength: 
Coffee-JO +3.2%, Sugar-SGG +2.49%, Turkey-TUR +2.17%, Cotton-BAL +1.87%, Oil and Gas Exploration-XOP +1.82%, Oil Services-OIH +1.32%, Japan-EWJ +1.14%, Singapore-EWS +1.09%, Indonesia-IDX +1.01%, Russia-RSX +0.95%.

Relative Weakness: 
Egypt-EGPT -4.64%, Vietnam-VNM -1.75%, Corn-CORN -1.42%, Greece-GREK -0.93%, India-INP -0.83%, Copper-JJC -0.75%, Rare Earths-REMX -0.67%, Natural Gas-UNG -0.67%, 20+ Year Treasuries-TLT -0.53%, New Zealand-ENZL -0.33%.

Leaders and Laggards

 

Technical Updates

Briefing's Commentaries

Closing Market Summary: Stocks Climb Despite Dismal Q1 GDP Report
The stock market ended the Thursday session on an upbeat note despite receiving some disappointing data ahead of the open. The S&P 500 settled higher by 0.5% with nine sectors registering gains, while the Dow Jones Industrial Average (+0.4%) underperformed throughout the trading day.

Shortly before the open, the second revision to Q1 GDP revealed a 1.0% contraction, while the Briefing.com consensus expected a smaller decline of 0.5%. Interestingly, the subpar report led to just a brief stumble in the futures market, which recovered swiftly. That recovery may have been aided by today's initial claims report, which suggested the labor market remains on solid ground.

Even though almost all sectors finished in the green, there was no concerted leadership among the top-weighted sectors. Of the four largest groups, health care (+0.8%) and technology (+0.7%) displayed strength throughout the session, while consumer discretionary (+0.4%) and financials (+0.2%) joined the party in the late afternoon.

Most notably, the technology sector drew significant strength from the shares of Apple (AAPL 635.38, +11.37), which gained 1.8%. The largest tech stock extended its May advance to 7.7%, while also giving a major boost to the Nasdaq Composite. Interestingly, Apple's strength had little impact on the performance of other large cap tech names as Cisco Systems (CSCO 24.68, -0.14), Google (GOOG 560.08, -1.60), and Qualcomm (QCOM 80.19, -0.03) posted slim losses.

Elsewhere, the health care sector ended among the leaders even as biotechnology had a tough time keeping up with the sector. The iShares Nasdaq Biotechnology ETF (IBB 240.96, +1.37) added 0.6% versus a 0.8% gain for the countercyclical sector.

Staying on the countercyclical side, the consumer staples sector (+0.8%) benefitted from a broad rally, while ignoring below-consensus quarterly results from Costco (COST 114.14, -0.10). Shares of the wholesale retailer finished the session with a slim loss of just 0.1%.

Meanwhile, the other two defensive sectors—utilities (+0.1%) and telecom services (unch)—spent the entire session near their flat lines.

Like the two countercyclical sectors, Treasuries also settled in the neighborhood of their flat lines, but not before seeing intraday strength. Treasuries rallied through the first two hours of action, but spent the remainder of the day in a steady retreat. As a result, the 10-yr note slipped four ticks, sending the benchmark yield higher by one basis point to 2.46%.

Participation remained light as only 532 million shares changed hands at the floor of the New York Stock Exchange. In fact, the final tally represented the lowest volume of the year with the count coming in just below the previous 2014 low of 533.3 million that was registered on January 3.

Reviewing today's data: 

·         First quarter GDP was revised down to -1.0% in the second estimate from a 0.1% gain in the advance estimate. GDP increased 2.6% in Q4 2013. The Briefing.com consensus expected GDP to be revised down to -0.5%. The revisions brought GDP down into negative territory for the first time since falling 1.3% in Q1 2011. Almost the entire revision was due to weaker inventory data. Inventory growth, which was down $24.30 billion from fourth quarter levels in the advance estimate, was revised to -$62.70 billion. That reduced GDP growth by an additional 1.1 percentage points (1.62 percentage points in total). Excluding inventories, real final sales were virtually unchanged in the second estimate, up 0.6% vs. a 0.7% gain in the advance estimate. Real final sales are still well below 2013 levels. 

·         The initial claims level fell to 300,000 for the week ending May 24 from a slightly upwardly revised 327,000 (from 326,000) for the week ending May 17. The Briefing.com consensus expected the initial claims level to fall to 318,000. Layoff levels are showing no signs of stability. After weeks of biases from likely seasonal adjustment problems, it looked like claims were stabilizing in the 320,000 to 330,000 range. However, over the past few weeks, claims have flirted with 300,000 a couple of times before retreating back toward 325,000. 

·         Pending home sales for April rose 0.4%, which was worse than the 1.0% increase forecast by the Briefing.com consensus. Today's reading followed last month's unrevised increase of 3.4%. 

Tomorrow, Personal Income (Briefing.com consensus 0.3%), Personal Spending (consensus 0.2%), and Core PCE Prices (expected 0.2%) will all be released at 8:30 ET, while the Chicago PMI report for May (consensus 60.3) will cross the wires at 9:45 ET. The day's data will be topped off with the final reading of the May Michigan Consumer Sentiment Survey (expected 81.4), which will be released at 9:55 ET. 

·         S&P 500 +3.9% YTD 

·         Dow Jones Industrial Average +0.7% YTD 

·         Nasdaq Composite +1.7% YTD 

·         Russell 2000 -1.7% YTD

Commodities

Closing Commodities: Natural Gas Falls Following Inventory Data, Crude Rises

·         June gold fell for a fourth consecutive session despite weakness in the dollar index. The yellow metal briefly poked into positive territory in morning action and brushed a session high of $1260.60 per ounce. However, it quickly retreated back into the red and settled with a 0.2% loss at $1256.30 per ounce.

·         July silver came off its session low of $18.78 per ounce set moments after floor trade opened and trended higher until late morning action. It touched a session high of $19.09 per ounce but slipped back into negative territory. It eventually settled at $19.02 per ounce, or 0.2% lower.

·         July crude oil trended higher following inventory data that showed a build of 1.657 mln when a build of 0.1-0.5 mln was anticipated. In addition, gasoline inventories decreased by 1.803 mln when consensus called for a build of 0.0-0.3 mln. The energy component lifted from its session low of $102.87 per barrel set in early morning action and brushed a session high of $103.94 per barrel. It settled at $103.60 per barrel, booking a gain of 0.9%.

·         July natural gas, on the other hand, fell to a session low of $4.53 per MMBtu on inventory data that showed a build of 114 bcf when a smaller build of 100-110 bcf was expected. It rose into positive territory in late morning action but retreated back into the red. It eventually settled with a 1.1% loss at $4.56 per MMBtu.

COMEX Metals Closing Prices

  June gold fell $3.00 to $1256.30/oz 

·         Gold fell for a fourth consecutive session despite weakness in the dollar index. The yellow metal briefly poked into positive territory in morning action and brushed a session high of $1260.60. However, it quickly retreated back into the red and settled with a 0.2% loss. 

  July silver fell $0.04 $19.02/oz 

·         Silver came off its session low of $18.78 set moments after floor trade opened and trended higher until late morning action. It touched a session high of $19.09 but slipped back into negative territory and eventually settled with a 0.2% loss. 

  July copper fell 3 cents to $3.14/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         July corn fell 2 cents to $4.70/bushel 

·         July wheat fell 6 cents to $6.33/bushel 

·         July soybeans rose 1 cent to $14.99/bushel 

·         June ethanol rose 3 cents to $2.38/gallon 

·         July sugar (#16 (U.S.)) rose 0.13 of a penny to 25.23 cents/lbs

NYMEX Energy Closing Prices

  July crude oil rose $0.89 to $103.60/barrel 

·         Crude oil trended higher today following crude inventory data that showed a build of 1.657 mln when a build of 0.1-0.5 mln was anticipated. Gasoline inventories decreased by 1.803 mln when consensus called for a build of 0.0-0.3 mln. The energy component lifted from its session low of $102.87 set in early morning action and brushed a session high of $103.94. It settled slightly below that level, booking a gain of 0.9%. 

  July natural gas fell 5 cents to $4.56/MMBtu 

·         Nat gas, on the other hand, fell to a session low of $4.53 on inventory data that showed a build of 114 bcf when a smaller build of 100-110 bcf was expected. It rose into positive territory in late morning action but retreated back into the red. It eventually settled with a 1.1% loss. 

  July heating oil fell 1 cent to $2.92/gallon 

  July RBOB rose 1 cent to $3.00/gallon

Treasuries

Treasuries Reverse to Losses: 10-yr: -01/32..2.453%..USD/JPY: 101.74..EUR/USD: 1.3601

·         Treasuries finished with modest losses, unable to extend their winning streak to a fourth day. Click here to see an intraday yields chart.

·         The complex held small gains into the cash open, and climbed to session highs in response to the first negative GDP print (-1.0% actual v. -0.5% expected) since Q1 2011 and the pending home sales (0.4% actual v. 1.0% expected) miss. 

·         However, yields would bottom at multi-month lows ahead of the lunchtime hour, and creep higher into the average $29 bln 7y note auction. 

·         The auction drew 2.010% (WI 2.010%) and an in-line 2.60x bid/cover. A strong direct bid (24.1%) helped offset the weak indirect takedown (40.3%), leaving primary dealers with 35.6% of the supply.

·         Post-auction selling would run yields into positive territory ahead of the cash close. 

·         The 5y rallied +4.2bps to 1.513%; however, must of the uptick was a result of a rebalancing following yesterday's auction. Key support remains in the 1.450%/1.500% area.

·         The 10y tacked on +0.9bps to finish @ 2.447%. Early buying provided a test of 11-month lows near 2.400% before retaking the flat line. 

·         At the long end, the 30y added +1.6bps to 3.304%.The yield on the long bond hit 3.267%, its lowest since June, before action bounced off trendline support that dates back to November. A further run up in yield cannot be ruled out in the near-term as a retest of the 3.400% area remains a distinct possibility. 

·         A slightly steeper curve won out as the 2-10-yr spread widened to 208bps. 

·         Precious metals remained under pressure as gold fell -$5 to $1254 and silver slumped -$0.05 to $19.01. 

·         Data: Personal income and spending, PCE Prices - Core (8:30), Chicago PMI (9:45), and Michigan Sentiment - Final (9:55). 

·         Fed Speak: Cleveland's Pianalto makes opening remarks at the Inflation, Monetary Policy, and the Public conference (8:30). Philly's Plosser and SF's Williams take part in a discussion on rules-based policy (17).

On other news.... 




Currencies 

Dollar Probes Key 80.50 Area: 10-yr: unch..2.445%..USD/JPY: 101.68..EUR/USD: 1.3601

·         The Dollar Index hovers little changed as trade contends with the key 80.50 level. Click here to see a daily Dollar Index chart.

·         EURUSD is +10 pips @ 1.3600 as some light buying emerges for the first time in three days. Today's session was lackluster as banks across much of the region were closed for Ascension Day, leading to a quiet calendar on the data front. Support in the 1.3550/1.3600 area should hold into next week's policy meeting. Eurozone data out tomorrow is limited to German retail sales. 

·         GBPUSD is -5 pips @ 1.6705 as sellers look to put in the fifth loss in the past six sessions. A quiet trade has action checking up at 1.6650/1.6700 support.

·         USDCHF is -10 pips @ .8975 as the recent rally runs into resistance at the 200 dma. Many participants continue to watch .9000 resistance closely, but action will continue to be dictated by the euro thanks to the Swiss National Bank's EURCHF1.20 floor. Switzerland's KOF Economic Barometer is set to cross the wires tomorrow.

·         USDJPY is -10 pips @ 101.70 as trade has recovered most of its early losses. The pair dipped to 101.45 amid some early selling, but found support at the 200 dma. Japanese data is heavy as household spending, national core CPI, Tokyo core CPI, and preliminary industrial production are released. 

·         AUDUSD is +55 pips @ .9290 where trade probes the 50 dma. The hard currency has seen a steady bid during today's session despite the big drop in private capital expenditures as many participants seemed to take solace in the larger than expected spending in the manufacturing component. Today's bid has the pair on track to close at a one and a half-week high. 

·         USDCAD is -30 pips @ 1.0840 as trade flirts with its lowest close since January. The pair has been under pressure since late this morning as some selling took hold shortly after the in-line current account deficit (CAD12.4 bln). A flush through the 1.0825 area sets up a likely test of the 200 dma (1.0746). Tomorrow's Canadian data includes GDP and the Raw Materials Price Index.

Next Week In View





Economic Commentaries

Economic Data Summary:

·         Weekly Initial Claims 300K vs Briefing.com consensus of 318K; Last Week was 326K

·         Weekly Continuing Claims 2.631 M vs Briefing.com consensus of 2.650 M ; Last Week was 2.653 M

o     Layoff levels are showing no signs of stability. After weeks of biases from likely seasonal adjustment problems, it looked like claims were stabilizing in the 320,000 to 330,000 range. However, over the past few weeks, claims have flirted with 300,000 a couple of times before retreating back toward 325,000. If claims can stabilize at 300,000, it would be indicative of payroll growth closer to 300,000 per month than the 200,000 we had been expecting in the past. 

·         First Quarter GDP - 2nd Estimate -1.0% vs Briefing.com consensus of -0.5%; Fourth Quarter was 0.1%

·         First Quarter GDP Deflator - Second Estimate 1.3% vs Briefing.com consensus of 1.3%; Fourth Quarter was 1.3%

o     Almost the entire revision was due to weaker inventory data. Inventory growth, which was down $24.3 bln from fourth quarter levels in the advance estimate, was revised to -$62.7 bln. That reduced GDP growth by an additional 1.1 percentage points (1.62 percentage points in total). The large revision to inventories was odd considering the April merchant wholesaler and retailer inventory data mostly met the BEA's expectations. Excluding inventories, real final sales were virtually unchanged in the second estimate, up 0.6% vs. a 0.7% gain in the advance estimate. Real final sales are still well below 2013 levels. Personal consumption expenditures were revised up to 3.1% from an originally reported 3.0% gain. Consumer spending increased 3.3% in the fourth quarter. 

·         April Pending Home Sales vs Briefing.com consensus of 1.0%; March was 3.4%

Upcoming Economic Data:

·         April Personal Income due out April at 8:30 (Briefing.com consensus of 0.3%; March was 0.5%)

·         April Personal Spending due out April at 8:30 (Briefing.com consensus of 0.2%; March was 0.9%)

·         April PCE Prices - CORE due out April at 8:30 (Briefing.com consensus of 0.2%; March was 0.2%)

·         May Chicago PMI due out May at 9:45 (Briefing.com consensus of 60.3; April was 63.0)

·         May Michigan Sentiment due out May at 9:55 (Briefing.com consensus of 81.4; April was 81.8)

Upcoming Fed/Treasury Events:

·         The Treasury expects to auction off $29 bln in 7 year notes today.  Results at 13:00

Other International Events of Interest

·         Japan's Retail Sales fell 4.4% year-over-year (expected -3.3%, previous 11.0%). 

·         Bank of Japan member Sayuri Shirai said she remains confident in the central bank's ability to reach its inflation target, but that achieving the goal could take more than two years.

Jason's Commentaries


Seems that the bigger players are pushing the market up higher again amidst of these very weak volume. Volumes came in at the 230pm ET that rallied the market all the way up. Seems that the market is pricing in for a drop.... Volumes were only at 544m shares traded. It seems that the market was was pretty bullish last night as well. All sectors were up. Materials and the Energy sector was the leader of the market last night. On the technical perspective, it seems that the Russells hit a resistance level. And Nasdaq held at 4250. I believe the market likely will stay for or retrace for the weekend.

Market Call: FLAT to downside

Date: 30 May 2014