9 May 2014 AMC -Market ended the week mixed

9 May 2014 AMC -Market ended the week mixed

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: -0.4%

·         Germany's DAX: -0.3%

·         France's CAC: -0.7%

·         Spain's IBEX: -1.0%

·         Portugal's PSI: -1.8%

·         Italy's MIB Index: -1.6%

·         Irish Ovrl Index: -0.9%

·         Greece ATHEX Composite: -2.7%

Before Market Opens 

S&P futures vs fair value: +0.20. Nasdaq futures vs fair value: -0.80.
The S&P 500 futures trade in line with fair value.

Asian markets entered the weekend on a mixed note. The Reserve Bank of Australia released its monetary policy statement, which raised the GDP forecast for the first half of 2014 to 3.00% from 2.75% and affirmed the full-year target at 2.75%; however, the 2015 GDP projection was lowered to 2.75%-3.75% from 3.00%-4.00%. 

·         In economic data: 

o    China's CPI rose 1.8% year-over-year (expected 2.0%, previous 2.4%), while the month-over-month reading fell 0.3% (expected -0.1%, prior -0.5%). Separately, PPI decreased 2.0% year-over-year (consensus -1.8%, previous -2.3%). 

o    Japan's Leading Index fell to 106.5 from 108.9 (expected 106.9). 

o    The Bank of Korea left its key interest rate unchanged at 2.50%, as expected. 

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·         Japan's Nikkei added 0.3%, climbing off its early low with help from industrials. Ebara and Mitsubishi Heavy Industries both surged near 7.0%. On the downside, Olympus and Yokohama Rubber fell 1.8% and 3.0%, respectively.  

·         Hong Kong's Hang Seng tacked on 0.1%, ending little changed. Casino names rallied with Galaxy Entertainment and Sands China both up near 5.7%. China Unicom Hong Kong fell 2.7% after showing considerable strength over the past week. 

·         China's Shanghai Composite shed 0.2% after being unable to make a sustained move into the green. Great Wall Motor tumbled 10.0% and BTG Hotels Group lost 8.5%. 

Major European indices trade lower across the board. The euro has continued its retreat versus the U.S. dollar following yesterday's comments from European Central Bank President Mario Draghi, who said the ECB is ready to act next month if needed. The single currency has dipped into the 1.3785 area against the dollar. 

·         Participants received several data points: 

o    Germany's trade surplus narrowed to EUR14.80 billion from EUR15.80 billion (expected EUR16.60 billion). 

o    French government budget deficit widened to EUR28.00 billion from EUR25.70 billion (expected deficit of EUR33.00 biilion). 

o    Great Britain's trade deficit narrowed to GBP8.48 billion from GBP8.75 billion (expected deficit of GBP9.00 billion). Separately, Manufacturing Production rose 0.5% month-over-month (expected 0.3%, prior 1.0%) and Industrial Production slipped 0.1% month-over-month (consensus -0.2%, previous 0.8%) 

o    Italy's Industrial Production fell 0.5% month-over-month (expected 0.3%, previous -0.4%). 

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·         Germany's DAX is lower by 0.1% amid weakness in exporter shares. Adidas and Daimler are both down near 0.6%. On the upside, K+S leads with a gain of 1.8%. 

·         Great Britain's FTSE holds a loss of 0.3%. Petrofac is the weakest index component, down 15.6% after issuing a profit warning. Discretionary shares outperform with Intertek Group and Marks & Spencer Group both up 1.9%. 

·         In France, the CAC trades down 0.5%. Steelmakers ArcelorMittal and Vallourec hold respective losses of 2.9% and 4.6% after ArcelorMittal reported mixed quarterly results. 

·         Italy's MIB is lower by 1.2% as financials lag. Banco Popolare and Mediobanca are both lower by 5.0%.

U.S. Equities

·         Futures suggest small losses as a sleepy overnight trade drifts towards the cash open

·         Overnight action has been limited to a 5 handle range in S&P futures as trade holds ~1.2% off its record high

o    S&P Futures -3 @ 1869

o    Dow Futures -23 @ 16,487

o    Nasdaq Futures -8 @ 3530

Asia

·         The major Asian bourses ended mixed. 

·         Japan's Nikkei (+0.3%) reversed early losses to post a second consecutive gain

·         China's Shanghai Composite (-0.2%) slipped following the cooler than anticipated CPI (1.8% YoY actual v. 2.1% YoY expected) and PPI (-2.0% YoY actual v. -1.8% YoY expected) data while Hong Kong's Hang Seng (+0.1%) eked out a gain 

·         India's Sensex (+2.9%) surged to a record high as traders priced in the possibility the opposition Bharatiya Janta Party would win a majority in the month-long national election that will conclude on May 12

·         Australia's ASX (-0.3%) fell despite the latest RBA minutes indicating "the current accommodative policy setting is likely to be appropriate for some time yet"

Market Internals

Market Internals -Technical-
The Nasdaq closed up 20 (+0.50%) at 4072, the Dow closed up 32 (+0.20%) at 16583, and the S&P 500 closed up 3 (+0.15%) at 1878. Action came on below average volume (NYSE 638 mln vs. avg. of 726; NASDAQ 1855 mln vs. avg. of 2003), with advancers outpacing decliners (NYSE 1745/1349, NASDAQ 1677/952) and mixed new highs/lows (NYSE 69/60, NASDAQ 20/133). 

Relative Strength: 
India-INP +3.56%, Biotechnology-XBI +2.8%, Vietnam-VNM +2.53%, Social Media-SOCL +1.88%, Retail-XRT +1.78%, Clean Energy-PBW +1.49%, Biotechnology-IBB +1.38%, Indonesia-IDX +0.99%, Hong Kong-EWH +0.96%, Japan-EWJ +0.81%.

Relative Weakness: 
Coffee-JO -6.11%, Greece-GREK -3.02%, Corn-CORN -2.33%, Volatility-VXX -2.17%, Italy-EWI -1.64%, Middle East and Africa-GAF -1.56%, Utilities-XLU -1.47%, Agriculture-DBA -1.39%, New Zealand-ENZL -1.2%, Taiwan-EWT -1.08%.

Leaders and Laggards

 

Technical Updates

Commentaries 

Closing Market Summary: Stocks End Choppy Week on Upbeat Note
The stock market finished a choppy week on cautiously optimistic note. The S&P 500 added 0.2% despite spending the bulk of the session in the red. The benchmark index narrowed its week-to-date loss to 0.1%, while the Russell 2000 (+0.9%) trimmed its weekly decline to 1.8%. For its part, the Dow Jones Industrial Average (+0.2%) managed to eke out a slim gain of 0.4% for the week, finishing at a new closing record high at 16,583.34.

Generally speaking, small caps faced the brunt of the selling that took place this week, while some of the money rotated into blue chip listings, allowing indices like the Dow and S&P 500 to stay ahead of their counterparts. Today's session proved to be a bit of a departure from that trend as small caps rebounded, while blue chips struggled to keep pace with their high-beta counterparts.

The S&P 500 spent the first three hours of action stringing together a rebound from its early low. At first, the index was pressured by the four top-weighted sectors, but those groups later separated, leaving the financial sector (-0.1%) among the laggards, while consumer discretionary (+0.6%), health care (+0.6%), and technology (+0.2%) fueled the market-wide bounce.

In particular, the biotech industry was volatile as the iShares Nasdaq Biotechnology ETF (IBB 226.44, +3.09) bounced between its 20- (226.18) and 200-day moving averages (223.16), but ultimately settled closer to its 20-day average with a gain of 1.4%.

Elsewhere, gains in high-beta technology and discretionary components like Facebook (FB 57.24, +0.48), Netflix (NFLX 328.55, +6.89), LinkedIn (LNKD 148.69, +3.62), and Priceline.com (PCLN 1135.91, +27.91) gave a boost to the overall risk sentiment. However, there were still some soft spots among the recent high flyers as Rocket Fuel (FUEL 21.83, -5.98) rocketed lower by 21.5% after its cautious guidance and revenue miss overshadowed its earnings beat.

Unlike momentum names, heavily-weighted tech components were relatively weak. That underperformance was evidenced by the largest member of the tech sector—Apple (AAPL 585.54, -2.45)—which fell 0.4% amid reports the company will acquire Beats Electronics for about $3 billion. In addition, the stock was downgraded to ‘Buy' from ‘Strong Buy' at ISI Group.

On the downside, this year's leading sector—utilities (-1.4%)—spent the session in a steady retreat that trimmed its year-to-date gain to 10.9%. Meanwhile, the second-best sector of the year—energy (-0.2%)—was the second-weakest performer today, narrowing its 2014 advance to 5.2%.

Treasuries surrendered their overnight gains ahead of the open and spent the remainder of the session anchored to their flat lines. The 10-yr yield ended at 2.62%.

Today's participation was below average as less than 640 million shares changed hands at the NYSE.

Economic data was limited to the Wholesale Inventories report for March and the March Jobs Openings and Labor Turnover Survey: 

·         Wholesale inventories increased 1.1% in March after increasing an upwardly revised 0.7% (from 0.5%) in February, while the Briefing.com consensus expected an increase of 1.0%. The BEA assumed that wholesale inventories increased 1.1% in March in the advance estimate of first quarter GDP. The upward revision to February, however, was not built into its model and will result in a positive contribution toward growth in the second estimate. 

·         The Job Openings and Labor Turnover Survey for March indicated job openings decreased to 4.014 million from 4.173 million. 

On Monday, the Treasury Budget for April will be released at 14:00 ET. Also of note, Ukraine's regions of Donetsk and Lugansk remain scheduled for independence referendums on Sunday.

·         S&P 500 +1.6% YTD

·         Dow Jones Industrial Average +0.04% YTD

·         Nasdaq Composite -2.6% YTD

·         Russell 2000 -4.6% YTD

Commodities

COMEX Metals Closing Prices

  June gold fell $0.40 to $1287.60/oz 

·         Gold gave up its morning gains as the dollar index climbed higher. The yellow metal pulled back from its session high of $1293.90 set in early morning action and fell into the red. It touched a session low of $1285.50 and settled 40 cents below the unchanged line, booking a loss of $1.2% for the week. 

  July silver fell $0.04 to $19.11/oz 

·         Silver also retreated into negative territory after trading as high as $19.24 in morning floor trade. It settled 0.2% lower, bringing losses for the week to 2.3%. 

  July copper rose 2 cents to $3.08/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         July corn fell 8 cents to $5.08/bushel 

·         July wheat fell 11 cents to $7.23/bushel 

·         July soybeans rose 17 cents to $14.86/bushel 

·         June ethanol rose 1 cent to $2.16/gallon 

·         July sugar (#16 (U.S.)) rose 0.19 of a penny to 24.55 cents/lbs .08/lbs

NYMEX Energy Closing Prices

  June crude oil fell $0.22 to $100.02/barrel 

·         Crude oil erased morning gains as it pulled back from its session high of $101.21and slipped into negative territory in early afternoon action. The energy component brushed a session low of $99.71 moments before settling with a 0.2% loss. Today's decline shaved gains for the week to 0.2%. 

  June natural gas fell 4 cents to $4.53/MMBtu 

·         Natural gas fell deeper into the red after pulling back from its session high of $4.57 set moments after floor trade opened. It traded as low as $4.50 and eventually settled with a 0.9% loss, booking a 3.0% loss for the week. 

  June heating oil fell 1 cent to $2.91/gallon 

  June RBOB fell 2 cents to $2.89/gallon
Treasuries

Selling Weighs on Long Bond: 10-yr: -04/32..2.623%..USD/JPY: 101.78..EUR/USD: 1.3751
The Week in Review 

·         Treasuries saw a mixed week as buyers were in control up front while selling took place in longer dated maturities. Click here to see an intraweek yields chart.

·         This week's economic data saw ISM Services (55.2 actual v. 54.0 expected) and the trade balance (-$40.4 bln actual v. -$40.6 bln expected) exceed forecasts while productivity-prel. (-1.7% actual v. -1.2% expected) fell short of estimates. 

·         Fed Chair Janet Yellen's testimony in front of the Joint Economic Committee was littered with much of her usual commentary as she suggested the U.S. economy remained on track for "solid growth." Ms. Yellen did however express some concern regarding the recent slowdown in housing as she noted, "The recent flattening out in housing activity could prove more protracted than currently expected, rather than resuming its earlier pace of recovery."

·         A solid bid up front dropped  the 5y -4bps to 0.379% as action settled near a three-week low. Support in the 0.350% area will be watched closely in the days ahead.

·         The 5y shed -4bps to finish the week @ 1.625%, on its 100 dma. The 1.550% support area is setting up as a key level as the 200 dma also lurks in the vicinity. 

·         The 10y added +4bps to 2.623%. Action over the past week has pressured key support in the 2.600% area, but so far it has held up.

·         At the long end, the 30y lagged significantly, rallying +11bps to 3.467%. Nearly the entire run up in yield came Thursday afternoon and Friday as traders digested the weak 30y auction. Friday's close was the highest since May 1. 

·         This week's auctions were mixed.

·         Tuesday's $29 bln 3y note auction. The auction was solid, drawing 0.928% and a 3.40x bid/cover. A light indirect takedown (28.1%) was offset by a strong showing from direct bidders (24.5%). Primary dealers ended up with 47.4% of the supply. 

·         Wednesday's $24 bln 10y note auction was strong. The auction drew 2.612% and a 2.63x bid/cover. Solid takedowns from both indirect (49.2%) and direct (21.6%) bidders left primary dealers with only 29.2% of the supply.   

·         Thursday's $16 bln 30y bond auction was weak. The auction drew 3.400% (WI 3.403%) and a tepid 2.09x bid/cover, the lowest since August 2011. Indirect (40.3%) and direct (8.4%) bids both fell short of their twelve auction averages, leaving primary dealers with 51.3% of the supply.  

·         This week's action swung the curve steeper as the 5-30-yr spread blew out to 184bps. 

The Week Ahead 

·         Monday's data is limited to the Treasury budget (14). Philly's Plosser gives opening remarks at the Philly Fed's "Reinventing Older Communities: Bridging Growth and Opportunity" conference (12). 

·         Data picks up on Tuesday with retail sales, import/export prices (8:30), and business inventories (10). ATL's Lockhart will be in Saudi Arabia to discuss the U.S. economy (0:30). Richmond's Lacker will give opening remarks at the Richmond Fed's 2014 Credit Markets Symposium (10:30). 

·         Wednesday will see the weekly MBA Mortgage Index (7) and PPI (8:30). 

·         Data is heavy on Thursday as 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) are all released. Fed Chair Janet Yellen will speak at a reception to launch National Small Business Week (TBD). NY's Dudley will give opening remarks at the NY Fed's summit on small business credit innovations (8:30).

·         Data concludes on Friday with housing starts, building permits (8:30), and Michigan Sentiment (9:55). STL's Bullard will discuss the economy and monetary policy (11:50).

On other news.... 




Currencies 

Dollar Nears 80.00 Resistance: 10-yr: -03/32..2.617%..USD/JPY: 101.73..EUR/USD: 1.3752

·         The Dollar Index presses session highs near 79.90 as trade looks likely to close at its best level in two weeks. Click here to see a daily Dollar Index chart.

·         Traders continue to watch resistance in the 80.00 area, which has posed problems over much of the past month. 

·         EURUSD is -85 pips @ 1.3755 as trader presses to one-month lows. The single currency has seen a sharp reversal off yesterday's highs as comments by ECB head Mario Draghi pointed to potential action at the June meeting. Action has tumbled almost 250 pips from yesterday's peak, and is now moving towards a test of support in the 1.3700 area that is helped by the 100 dma. 

·         GBPUSD is -80 pips @ 1.6850 as sellers remain in charge for a third day. Today's weakness comes despite manufacturing production, the trade balance, and NIESR GDP Estimate all exceeding forecasts. The 1.6800 area should provide some minor help, but 1.6700 is the more important level. 

·         USDCHF is +65 pips @ .8865 as trade rallies to a one-month high. The recent win streak has the bulls targeting resistance in the .8950 area, but a test of the level will likely only come on euro weakness as the two currencies remain highly correlated. Swiss data is limited to retail sales. 

·         USDJPY is +10 pips @ 101.75 amid a lackluster session. Trade has been limited to a tight 30 pip range, causing many participants to look elsewhere for opportunity. The 100.00/100.25 level remains key in the days ahead. Japan's current account balance will cross the wires Sunday evening. 

·         AUDUSD is -10 pips @ .9355 as action slips back towards session lows. The hard currency has spent virtually the entire session in negative territory as the dovish RBA minutes and cool Chinese CPI and PPI data weigh. Australia's NAB Business Confidence is due out Sunday night. 

·         USDCAD is +70 pips @ 1.0900 as trade has recouped all of yesterday's losses on the back of the disappointing Canadian jobs report (-28.9K actual v. 12.8K expected) that saw the unemployment rate hold steady at 6.9%.

Weekly Analysis
Week 1



Technical Updates

 

 

Briefing's Commentaries


Week in Review: Small Caps Lag 

The stock market kicked off the trading week on a sleepy note as the major averages spent the bulk of the Monday session near their flat lines. However, a final push during the last hour of action placed the key indices at new highs into the close. The S&P 500 added 0.2%, while the Russell 2000 (-0.1%) lagged throughout the day. Equities began the session on their lows as renewed global growth concerns, combined with continued worries about Ukraine, conspired to ensure a cautious start. In China, the HSBC Manufacturing PMI fell to 48.1 from 48.3 (expected 48.4), signifying a slowdown in manufacturing activities. Elsewhere, the European Commission warned about slower-than-expected growth by lowering its 2014 inflation forecast to 0.8%. The commission also trimmed next year's inflation forecast to 1.2%, while lowering its 2015 GDP forecast to 1.7% from 1.8%.

Equity indices finished the Tuesday session on their lows after spending the entire day in negative territory. The S&P 500 tumbled 0.9% with nine sectors registering losses, while the Russell 2000 fell 1.6%, settling below its 200-day moving average for the first time since November 2012. Stocks were pressured from the get-go as index futures slid to their pre-market lows ahead of the opening bell. While the early slide was not brought on by a particular news item, it served as a reflection of the defensive sentiment in the foreign exchange market where the yen rallied to its best level in three weeks. The dollar/yen pair notched a session low in the 101.50 area, before inching up to 101.65 into the close. Once the session got going, dip-buyers tried to force a turnaround, but were unable to do so as some of the top-weighted sectors kept the pressure on the broader market. Most notably, the financial sector (-1.4%) underperformed for the second consecutive day. Influential components like Bank of America, Citigroup, and JPMorgan Chase lost between 1.6% and 2.3%, while AIG plunged 4.1% after reporting a bottom-line beat on revenue that missed estimates.

Stock indices finished the Wednesday session on a mixed note as high-growth names weighed on the Russell 2000 (+0.1%) and the Nasdaq (-0.3%), while the Dow Jones Industrial Average (+0.7%) and S&P 500 (+0.6%) outperformed thanks to strength in blue chip listings. The stock market opened the trading day with modest gains amid headlines indicating Russia's President Vladimir Putin has reached out to OSCE chief and Swiss President Didier Burkhalter, attempting to de-escalate the Ukraine crisis through diplomatic avenues. Initially, the reports boosted overall risk appetite, sending Treasuries and the yen to lows, but those moves were retraced not long after. The yen returned into the middle of its trading range, while Treasuries reclaimed their losses and spent the afternoon near their flat lines. The benchmark 10-yr yield ended unchanged at 2.59%. Stock indices, meanwhile, surrendered their opening gains during the first hour of action, but only the Nasdaq Composite spent the remainder of the session in the red, while the Dow and S&P 500 rebounded swiftly.

The stock market ended the Thursday session on a defensive note despite showing early strength. The S&P 500 lost 0.1%, while the tech-heavy Nasdaq (-0.4%) fell nearly 60 points from its session high. Also of note, the Russell 2000 (-1.0%) settled below its 200-day moving average after failing to retake that level during the session. Today's affair proved to be a bit of a rollercoaster ride as equities grinded higher in the morning, but rolled to fresh lows during the afternoon before climbing off those lows into the close. Fittingly, the areas that fueled the early advance (biotechnology and high-growth names) were the same spots that paced the afternoon slide.

Next Week In View





Economic Commentaries

Economic Summary: Wholesale inventories roughly in line with expectations
Economic Data Summary:

·         March Wholesale Inventories 1.1% vs Briefing.com consensus of 1.0%; February was 0.5%

o    The BEA assumed that wholesale inventories increased 1.1% in March in the advance estimate of first quarter GDP. The upward revision to February, however, was not built into its model and will result in a positive contribution toward growth in the second estimate. Led by a 1.9% increase in automotive inventories, total durable goods inventories increased 0.7%. Nondurable inventories increased 1.7% on strong growth in petroleum (3.3%) and farm products (3.1%) inventories. 

·         March JOLTS - Job Openings 4.014 M (February was 4.173 M)

Upcoming Economic Data:

·         April Treasury Budget due out Monday at 14:00 (Briefing.com consensus of ; March was -$112.9 bln)

Upcoming Fed/Treasury Events

·         Dallas Fed President Richard Fisher (voting FOMC member, hawkish) to speak tomorrow at 12:00

·         Philadelphia Fed President Charles Plosser (voting FOMC member, hawkish) to speak Monday at 12:00

Other International Events of Interest

·         China's Shanghai Composite (-0.2%) slipped following the cooler than anticipated CPI (1.8% YoY actual v. 2.1% YoY expected) and PPI (-2.0% YoY actual v. -1.8% YoY expected) data while Hong Kong's Hang Seng (+0.1%) eked out a gain 

Jason's Commentaries

The market ended the week mixed in the first week of may. Dow facing resistance at 16600, and S&P500 stuck at 1880 resistance level and consolidating. As usual, Nasdaq and Russells were the leaders. The market started in a bearish note, which quickly reversed in the first half an hour. After 11am, the market rallied back, closing the day in the green. However, internals were showing divergence. Utilities were the biggest laggard of the day wile the healthcare gained 0.61%. It was a non eventful day. I'm expecting the market to breakout from the consolidation, possibly to the downside.

Market Call:DOWN

Date: 12 May 2014