11 June 2014 AMC - Market started profit taking with Dow and Russells lagging

11 June 2014 AMC - Market started profit taking with Dow and Russells lagging

Market Summary 

European Closing Prices

Equity indicies across Europe performed as follows:

·         UK's FTSE: -0.5%

·         Germany's DAX: -0.8%

·         France's CAC: -0.9%

·         Spain's IBEX: -0.7%

·         Portugal's PSI: -1.7%

·         Italy's MIB Index: -1.2%

·         Irish Ovrl Index: -1.1%

·         Greece ASE General Index: -1.2%

Before Market Opens 

S&P futures vs fair value: -8.10. Nasdaq futures vs fair value: -16.50.
The S&P 500 futures trade eight points below fair value.

Asian markets ended the midweek session on a mixed note. The World Bank lowered its 2014 worldwide GDP forecast to 2.8% from 3.2%. Furthermore, China's GDP expectations were taken down to 7.6% from 7.7% and Japan's forecast was revised lower to 1.3% from 1.4%. 

·         In economic data: 

o    Japan's Corporate Goods Price Index rose 0.3% month-over-month (consensus 0.1%, previous 2.8%), while the year-over-year reading increased 4.4% (expected 4.1%, prior 4.1%). Separately, BSI Large Manufacturing Conditions tumbled to -13.9 from 12.5 (expected 14.1). 

o    South Korea's Unemployment Rate held steady at 3.7%. 

o    New Zealand's Electronic Card Sales increased 1.3% month-over-month (consensus 0.5%, previous 0.3%), while the year-over-year reading jumped 7.6% (expected 5.6%, prior 5.7%). 

o    India's trade deficit widened to $11.23 billion from $10.09 billion (consensus $11.10 billion). 

o    Australia's Westpac Consumer Sentiment improved to 0.2% from -6.8%. 

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·         Japan's Nikkei added 0.5%, ending on its session high after receiving a boost from industrials. Amada, Mitsubishi Heavy Industries, and Mitsui Engineering & Shipbuilding rallied between 2.7% and 3.2%. 

·         Hong Kong's Hang Seng shed 0.3% after spending the entire session in the red. Property names underperformed with Henderson Land Development plunging 12.1%. China Resources Enterprise and Sino Land lost 2.1% and 1.8%, respectively. 

·         China's Shanghai Composite climbed into the close, adding 0.1%. Utilities outperformed with Heilongjiang Interchina Water Treatment and Grandblue Environment up 10.1% and 8.8%, respectively. 

Major European indices trade lower across the board. European Central Bank member Yves Mersch said the EU Commission has to identify asset-backed securities that are high quality and liquid in the next few weeks. 

·         Economic data was limited: 

o    Great Britain's Claimant Count fell 27,400 (expected -25,000, previous -28,400), lowering the Unemployment Rate to 6.6% from 6.8% (consensus 6.7%). Separately, Average Earnings Index + Bonus increased 0.7% (expected 1.2%, previous 1.9%). 

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·         Great Britain's FTSE is lower by 0.6%. Airlines EasyJet and International Consolidated Airlines are lower by 3.9% and 5.0%, respectively. Food retailer J Sainsbury outperforms with a gain of 2.1%. 

·         In France, the CAC holds a loss of 0.6%. Steelmaker Vallourec is the weakest performer, down 11.3% after issuing a profit warning. In addition, the stock will be replaced in the CAC 40 by Valeo on June 23. 

·         Germany's DAX trades down 0.9%. Deutsche Lufthansa has tumbled 13.9% after lowering its profit forecasts for 2014 and 2015. On the upside, chemical producer Linde is higher by 1.4%.

U.S. Equities

·         Equity futures are under pressure ahead of the cash open, likely forcing both the DJIA and S&P 500 off their record highs

·         The five-day win streak for both the DJIA and the Nasdaq looks to be in jeopardy while the S&P 500 looks at a second day of selling following yesterday's fractional decline

·         Complacency remains apparent as the VIX (10.99) holds near its worst levels since March 2013

·         MBA Mortgage Index (+10.3% actual v. -3.1% prior)

o    S&P Futures -9 @ 1941

o    Dow Futures -68 @ 16,874

o    Nasdaq Futures -17 @ 3783

Asia

·         Markets ended mixed across Asia

·         Japan's Nikkei (+0.5%) managed to shake off the disappointing BSI Manufacturing Index (-13.9 actual v. 14.1 expected, 12.5 previous) on word the country remained the only developed market in the region, according to MSCI

·         China's Shanghai Composite (+0.1%) eked out a gain despite local holdings being left off the MSCI Index while Hong Kong's Hang Seng (-0.3%) slipped off its best levels of 2014

·         India's Sensex (-0.4%) retreated from record highs and Australia's ASX (-0.3%) continued to slide off its best levels in six years

Market Internals

Market Internals -Technical-
The Dow closed down 102 (-0.6%) at 16844, the S&P 500 closed down 7 (-0.35%) at 1944, and the Nasdaq closed down 6 (-0.14%) at 4332. Action came on below average volume (NYSE 520 mln vs. avg. of 669; NASDAQ 1653 mln vs. avg. of 1806), with decliners outpacing advancers (NYSE 1188/1941, NASDAQ 1043/1610) and new highs outpacing new lows (NYSE 106/8, NASDAQ 80/15).

Relative Strength: 
Junior Gold Miners-GDXJ +2.97%, Coffee-JO +2.76%, Volatility-VXX +2.25%, Gold Miners-GDX +1.65%, Silver Miners-SIL +1.5%, Egypt-EGPT +1.46%, Columbia Index-GXG +0.9%, Russia-RSX +0.6%, BRICs-EEB +0.45%, Canada-EWC +0.39%.

Relative Weakness: 
Turkey-TUR -5.2%, U.S. Home Construction-ITB -1.7%, Italy-EWI -1.64%, Greece-GREK -1.56%, Spain-EWP -1.34%, Grains-JJG -1.32%, Homebuilders-XHB -1.29%, Utilities-XLU -1.26%, Timber-CUT -1.2%, Chile-ECH -1.09%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries

Closing Market Summary: Stocks Slump While World Bank Cuts Global Growth Outlook
The stock market ended the Wednesday session on a lower note with the Dow Jones Industrial Average (-0.6%) and Russell 2000 (-0.5%) leading the slide. The S&P 500 lost 0.4% with nine sectors in the red.

Equity indices spent the duration of the session in the red, while the Nasdaq (-0.1%) made a momentary appearance in the green. The tech-heavy index outperformed thanks to relative strength among chipmakers. However, the Nasdaq slumped back towards its low into the close as dip buyers were reluctant to step in and lift the overall market.

Today's retreat should not be all that surprising, considering the S&P 500 entered the session with a 4.2% gain since May 20. Meanwhile, the Russell 2000 began the day with an even more impressive 6.8% advance in that same timeframe.

With the major averages overextended on a short-term basis, the market was ready to take a step back at the sound of the first concerning headline and today's comments from the World Bank did the trick.

Specifically, the World Bank cut its 2014 global growth outlook to 2.8% from 3.2%, while also revising projections for several major economies. For instance, the growth forecast for the U.S. was lowered to 2.1% from 2.8%, while China's GDP expectations were taken down to 7.6% from 7.7%.

Fittingly, with growth concerns at the forefront, cyclical sectors like financials (-0.7%), industrials (-0.8%), and materials (-0.6%) saw noteworthy losses.

Most notably, industrials could not keep up with the broader market as defense contractors and transports weighed. Dow component Boeing (BA 134.10, -3.15) fell 2.3% after being downgraded to ‘Sector Perform' at RBC Capital Markets. The stock pressured the PHLX Defense Index, which lost 1.1%.

Transports, meanwhile, underperformed for the second day in a row. All five airline stocks that make up the transportation average lost between 1.3% and 5.2% with United Continental (UAL 45.26, -2.50) posting the largest decline after Deutsche Lufthansa slashed its guidance.

Elsewhere, the financial sector suffered from widespread losses, but Bank of America (BAC 15.59, -0.33) underperformed its peers with a 2.1% decline in reaction to reports the bank's settlement negotiations with the Justice Department have hit a snag.

Also of note, the technology sector (-0.3%) ended just ahead of the broader market, but chipmakers displayed strength, which underpinned the Nasdaq. Micron (MU 30.99, +1.48) jumped 5.0% after receiving an upgrade from Bank of America/Merrill Lynch, while the broader PHLX Semiconductor Index rose 0.5%.

The Nasdaq also received an intraday boost from biotechnology, but the iShares Nasdaq Biotechnology ETF (IBB 249.03, -0.27) slumped into the close, ending little changed.

Similar to biotechnology, the health care sector (-0.1%) settled near its flat line, while other countercyclical sectors posted losses. The utilities sector was particularly weak (-1.3%) after Exelon (EXC 35.75, -1.41) announced a secondary share offering.

Treasuries climbed in the morning, but surrendered the bulk of their gains during the afternoon. The 10-yr yield slipped one basis point to 2.63%.

Participation remained well below average and today's 520 million shares represented the lowest NYSE floor volume of the year.

Economic data was limited to two reports. The weekly MBA Mortgage Index surged 10.3% to follow last week's 3.1% decline and the Treasury Budget for May showed a deficit of $130.00 billion, which followed the prior deficit of $138.70 billion.

Tomorrow, weekly initial claims (Briefing.com consensus 315K), May Retail Sales (consensus 0.7%), and May Import/Export Prices will be released at 8:30 ET, while the Business Inventories report for April (expected 0.4%) will cross the wires at 10:00 ET. 

·         S&P 500 +5.2% YTD 

·         Nasdaq Composite +3.7% YTD 

·         Dow Jones Industrial Average +1.6% YTD 

·         Russell 2000 +0.3% YTD

Commodities

COMEX Metals Closing Prices

·         Aug gold rose $1 to $1261.10/oz

·         July silver closed unchanged at $19.17/oz

·         July copper fell 1 cent to $3.04/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices; corn, wheat and soybeans all end at lows for the day following USDA's WASDE report

·         July corn fell 5 cents to $4.40/bushel

·         July wheat fell 11 cents to $5.90/bushel

·         July soybeans fell 16 cents to $14.46/bushel

·         July ethanol fell 4 cents to $2.10/gallon

·         Sep sugar (#16 (U.S.)) fell 0.17 of a penny to 25.18 cents/lbs

NYMEX Energy Closing Prices

·         July crude oil rose once cent to $104.39/barrel

·         July natural gas fell 2 cents to $4.51/MMBtu

·         July heating oil rose 2 cents to $2.90/gallon

·         July RBOB rose 2 cents to $3.00/gallon

 





Treasuries

Longer Maturities See Ninth Loss in Ten Days: 10-yr: +02/32..2.637%..USD/JPY: 102.01..EUR/USD: 1.3527

·         Treasuries ended little changed with longer dated maturities falling for the ninth time in ten sessions. Click here to see an intraday yields chart.

·         The complex trade flat ahead of the cash open and ticked to its best levels of the session into the noon hour.

·         However, some light selling ahead of the $21 bln 10y reopening wiped away the small gains before a disappointing auction dropped trade to its worst levels of the U.S. session.

·         The reopening drew 2.648% (WI 2.631%) and a strong 2.88x bid/cover. An in-line direct takedown (19.4%) was unable to provide support as indirect bids (36.0%) were well below their 12-auction average. Primary dealers were left with 44.6% of the supply.

·         Action began to works its way off the lows into the final hour of cash trade, and climbed to its best levels of the afternoon in response to the improved Treasury budget ($130.0 actual v. $138.7 prior) before seeing some slippage into the close.

·         Light selling at the long end ran the 30y up +0.3bps to 3.469%, a one-month high.

·         A +0.5bp advance caused the 10y to tick up to 2.640%, its own one-month high. Resistance at the 2.650% level remains under close watch. 

·         Outperformance in the belly dropped the 5y -1bp to 1.696%, forcing action off one and a half-month highs. 

·         A steeper curve persisted as the 2-10-yr spread widened to 222bps. 

·         Precious metals were little changed with gold and silver @ $1261 and $19.20, respectively.

·         Data: Initial and continuing claims, retail sales, import/export prices (8:30), and business inventories (10). 

·         Auction: $13 bln 30y bond reopening.

On other news.... 

Currencies 

Dollar Slips Amid Lackluster Trade: 10-yr: +04/32..2.627%..USD/JPY: 101.98..EUR/USD: 1.3532 -Technical-

·         The Dollar Index holds small losses as trade presses the 80.75 level. Click here to see a daily Dollar Index chart.

·         A relatively uneventful U.S. trade has seen the Index locked in a less than 15 cent range. 

·         EURUSD is -15 pip @ 1.3530 as light selling has the pair on track for its worst close in four months. All in all it has been a quiet day for the single currency as trade has been confined to a 35 pip range amid a lack of news and data from the region. A fourth day of selling has traders monitoring key support in the 1.3500 area. Eurozone data out tomorrow is limited to industrial production. 

·         GBPUSD is +40 pips @ 1.6795 as trade has recouped all of yesterday's losses and is attempting to reclaim resistance in the area that is defended by the 50 dma. Sterling has seen a boost following today's better than expected claimant count change, which dropped the unemployment rate to a more than five-year low of 6.6% (6.7% expected, 6.8% previous). 

·         USDCHF is +5 pips @ .8995 as the bulls look to put in a fourth straight day of gains. Today's quiet trade comes amid an absence of data from the Swiss calendar with action continuing to be held hostage by the euro. 

·         USDJPY is -40 pips @ 101.95 as action nears a two-week low. The pair has been offered from the get go with the selling picking up in response to the big BSI Manufacturing Index miss. The 101.55 area will be watched closely as it is home to key support and the 200 dma. Japan's core machinery orders are due out tonight. 

·         AUDUSD is +15 pips @ .9385 as trade marches higher for the sixth time in seven days. The current streak has run the hard currency nearing its best levels since April with today's bid developing in response to the improved Westpac Consumer Sentiment. The .9400 area will be critical in the days ahead. Australian data includes MI Inflation Expectations, employment change, and the unemployment rate. 

·         USDCAD is -40 pips @ 1.0860 as trade presses session lows. Selling over much of the past week has the pair nearing the 1.0850 support level, which, if broken, would likely result in a test of the 200 dma (1.0763). Canada's New Home Price Index is scheduled for tomorrow.

Next Week In View




Economic Commentaries

Economic Summary: Mortgage Apps rise 10.3%; Retail Sales tomorrow at 8:30
Economic Data Summary:

·         Weekly MBA Mortgage Applications +10.3% (Last Week was -3.1%)

Upcoming Economic Data:

·         May Treasury Budget due out Wednesday at 14:00 (Briefing.com consensus of ; April was -$138.7 bln)

·         Weekly Initial Claims due out Thursday at 8:30 (Briefing.com consensus of 315K; Last Week was 312K )

·         Weekly Continuing Claims due out Thursday at 8:30 (Briefing.com consensus of 2.638 M ; Last Week was 2.603 M )

·         May Retail Sales due out Thursday at 8:30 (Briefing.com consensus of 0.7%; April was 0.1%)

·         May Retail Sales Ex-Auto due out Thursday at 8:30 (Briefing.com consensus of 0.4%; April was 0.1%)

·         May Export Prices Ex-Ag due out Thursday at 8:30 (April was -1.2%)

·         May Import Prices Ex-Oil due out Thursday at 8:30 (April was 0.2%)

·         April Business Inventories due out Thursday at 10:00 (Briefing.com consensus of 0.4%; April was 0.4%)

Other International Events of Interest

·         Japan's Corporate Goods Price Index rose 0.3% month-over-month (consensus 0.1%, previous 2.8%), while the year-over-year reading increased 4.4% (expected 4.1%, prior 4.1%). Separately, BSI Large Manufacturing Conditions tumbled to -13.9 from 12.5 (expected 14.1). 

Jason's Commentaries

The market started some profit taking last night with Dow and Russells lagging. Volumes were particularly weak last night with divergence throughout the day. Volumes only at 531m shares traded, market is not ready to sell the indices down yet. We're likely going to stay flat today. Last night, the industrials and Utilities were the main laggards with Utilities down 1.26% and industrials down 0.74%. Another divergent sign to see utilities down so much in a down day. Since we do not have much data coming up, i reckon the market is will likely consolidate for a while.








Market Call: FLAT

Date: 12 June 2014