12 June 2014 AMC - Market went down on heavy selling

12 June 2014 AMC - Market went down on heavy selling

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: -0.1%

·         France's CAC: 0.0%

·         Spain's IBEX: + 0.1%

·         Portugal's PSI: -0.9%

·         Italy's MIB Index: -0.3%

·         Irish Ovrl Index: 0.0%

·         Greece ATHEX Composite: 0.0%

Before Market Opens 

S&P futures vs fair value: -0.20. Nasdaq futures vs fair value: -2.00.
The S&P 500 futures trade less than a point below fair value.

Most Asian markets ended the Thursday session on a lower note. According to Nikkei, the Bank of Japan may raise its outlook on foreign economies while reiterating its own economic assessment. The central bank will release its latest policy decision overnight. 

·         In economic data: 

o    China's M2 Money Stock rose 13.4% year-over-year (expected 13.1%, previous 13.2%), while New Loans came in at CNY871 billion (expected CNY750 billion, prior CNY775 billion). 

o    Japan's Core Machinery Orders fell 9.1% month-over-month (consensus -11.9%, prior 19.1%), while the year-over-year reading jumped 17.6% (expected 13.2%, previous 16.1%). 

o    Australia's Claimant Count increased 4,800 (-10,000 expected, -10,300 prior), while the participation rate slipped to 64.6% from 64.7% (consensus 64.7%). The Unemployment Rate held steady at 5.8% (expected 5.9%). 

o    The Reserve Bank of New Zealand hiked its official cash rate 25 basis points to 3.25%, as expected. 

o    Bank of Korea held its key interest rate at 2.5%, as expected. 

o    Bank Indonesia left its key interest rate unchanged at 7.5%, as expected. 

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·         Japan's Nikkei ended off its session low, but still lost 0.6%. Yahoo Japan lost 2.8%, while consumer names TOTO and Japan Tobacco gained 2.8% and 2.2%, respectively. 

·         Hong Kong's Hang Seng fell 0.4% after being pressured by financials and related property names. Industrial & Commercial Bank of China lost 7.1%, while Hang Lung Properties and China Life Insurance both fell near 1.5%. 

·         China's Shanghai Composite shed 0.2%, ending near its session high. Inspur Software surged 10.0%, while chemical producer, Changyuan Group, lost 5.3%. 

Major European indices hover just above their flat lines. The European Central Bank released its Monthly Report, which discussed the current situation, suggesting present conditions do not indicate an imminent deflationary episode. 

·         Economic data was limited: 

o    Eurozone Industrial Production rose 0.8% month-over-month (consensus 0.4%, previous -0.4%), while the year-over-year reading increased 1.4% (expected 0.9%, prior 0.2%). 

o    Germany's Wholesale Price Index slipped 0.1% month-over-month (expected -0.3%, prior 0.2%). 

o    French Current Account deficit widened to EUR1.60 billion from EUR1.50 billion. Separately, CPI was unchanged month-over-month (consensus 0.1%, previous 0.0%). 

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·         Germany's DAX trades up 0.1% as 23 of its 30 components register gains. Adidas is the top performer, up 1.1%. On the downside, BMW trades lower by 0.5%. 

·         Great Britain's FTSE is higher by 0.1%. Media names display relative strength with British Sky Broadcasting and ITV up 1.4% and 2.6%, respectively. Miners trade broadly lower with Anglo American, Antofagasta, and Rio Tinto down between 1.5% and 3.3%. 

·         In France, the CAC holds an advance of 0.2%. Financials BNP Paribas and Credit Agricole outperform with gains close to 0.6% apiece. Utility network provider GDF Suez underperforms, down 1.2%.

U.S. Equities

·         Equity futures are little changed as trade looks to get back on track following yesterday's modest decline

·         Despite yesterday's selling, the major averages have gained in 12 of 15 sessions, lifting trade to fresh record highs

·         Action has been rather lackluster as of late thanks to an empty economic calender; however, data begins to pick up today and will flow into next week's FOMC meeting

·         The VIX (11.60) remains trapped near levels last seen in March 2013.

·         Initial Claims (317K actual v. 315K expected)

·         Continuing Claims (2614K actual v. 2638K expected)

·         Retail Sales (0.3% actual v. 0.7% expected)

·         Retail Sales ex-auto (0.1% actual v. 0.4% expected)

·         Export Prices ex-ag (0.1%)

·         Import Prices ex-oil (0.0%)

o    S&P Futures -1 @ 1943

o    Dow Futures -9 @ 16,846

o    Nasdaq Futures -2 @ 3796

Asia

·         Markets finished mostly lower across Asia as yesterday's World Bank revisions to global growth weighed

·         Japan's Nikkei (-0.6%) fell despite the core machinery orders (-9.1% MoM actual v. -11.5% MoM expected) beat as the number saw a snap back from elevated levels that were brought on by demand for big ticket items ramping up ahead of the consumption tax increase

·         A jump in Chinese new loans (CNY871 bln v. CNY750 bln expected) failed to inspire both China's Shanghai Composite (-0.2%) and Hong Kong's Hang Seng (-0.4%)

·         India's Sensex (+0.4%) ended just off record highs 

·         Australia's ASX (-0.5%) continued its dive off six-year highs following the employment change (-4.8K actual v. 10.3K expected) miss

·         Central bank activity saw the Reserve Bank of New Zealand raise its Official Cash Rate 25 bps to 3.25% while Bank of Korea and Bank Indonesia both held their key rates at 2.50% and 7.50%. All were expected

Market Internals

Market Internals -Technical-
The Nasdaq closed down 34 (-0.79%) at 4298, the S&P 500 closed down 14 (-0.71%) at 1930, and the Dow closed down 110 (-0.65%) at 16734. Action came on slightly below average volume (NYSE 610 mln vs. avg. of 667; NASDAQ 1767 mln vs. avg. of 1802), with decliners outpacing advancers (NYSE 1302/1812, NASDAQ 939/1710) and new highs outpacing new lows (NYSE 106/12, NASDAQ 65/16).

Relative Strength: 
Junior Gold Miners-GDXJ +5.78%, Natural Gas-UNG +5%, Volatility-VXX +4.79%, Silver Miners-SIL +3.78%, Heating Oil-UHN +3.69%, New Zealand-ENZL +1.82%, Nordic 30-GXF +0.49%, Austria-EWO +0.49%, Middle East and Africa-GAF +0.46%, Australian Dollar-FXA +0.43%.

Relative Weakness: 
Platinum-PPLT -2.65%, Transportation-IYT -1.96%, Cocoa-NIB -1.91%, Steel-SLX -1.85%, Indonesia-IDX -1.5%, Base Metals-DBB -1.43%, Russia-RSX -1.39%, Thailand-THD -1.35%, Latin America 40-ILF -1.14%, Israel-EIS -0.92%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries

Closing Market Summary: Stocks Slide as Transports Lag Again
The stock market ended the Thursday session on a broadly lower note after spending the entire trading day in the red. The S&P 500 fell 0.7% with eight sectors posting losses, while the Nasdaq (-0.8%) underperformed.

Equities slumped out of the gate following some disappointing economic data and reports of skirmishes in northern Iraq. The disappointing economic news pertained to the retail sector as retail sales increased just 0.3% (Briefing.com consensus 0.7%), while core retail sales, which closely match the consumption component of GDP, slipped 0.1% in May.

Separately, reports of intensifying battles in northern Iraq led by a breakaway militant group of Al-Qaeda raised concerns about the oil supply.

The headlines out of Iraq put a bid in the oil market (+2.1% to $106.54/bbl) while also creating a residual concern that higher energy prices will be an added tax on consumers who, broadly speaking, continue to be pinched by limited wage growth. Fittingly, the worries translated into relative weakness for the consumer discretionary sector (-1.3%), which ended at the bottom of the leaderboard.

Discretionary shares suffered from broad weakness among homebuilders and retailers. The iShares Dow Jones US Home Construction ETF (ITB 23.99, -0.24) lost 1.0%, while SPDR S&P Retail ETF (XRT 84.41, -1.15) tumbled 1.3%, extending its year-to-date loss to 4.2%.

Higher energy prices also pressured industrials (-1.3%), and specifically, transport stocks. The Dow Jones Transportation Average tumbled 2.0% with all 20 components ending in the red. Of the 20 listings, 16 posted losses larger than 1.0% with airlines leading the weakness. Delta Air Lines (DAL 38.50, -2.21) and United Continental (UAL 42.60, -2.66) fell 5.4% and 5.9%, respectively.

With transports unable to stage a bounce, the last hope for a rebound hinged on the performance of high-growth names. Small caps displayed relative strength in the morning, but an afternoon fade sent the Russell 2000 and the Nasdaq Composite to fresh lows.

The tech-heavy Nasdaq ended behind the remaining major averages due to afternoon weakness in biotechnology and chipmakers. The iShares Nasdaq Biotechnology ETF (IBB 247.83, -1.20) and PHLX Semiconductor Index posted respective losses of 0.5% and 0.3% despite showing intraday strength.

On the upside, energy (+0.3%) and utilities (+0.3%) finished modestly higher, extending their year-to-date gains to 8.6% and 10.3%, respectively.

Also of note, Treasuries enjoyed a strong day with the move flowing from some safe-haven positioning, some disappointment over the retail sales data, and some surprise at the strength of the 30-yr bond auction. The latter saw a bid-to-cover ratio of 2.69 (12-auction average was 2.35) and the highest takedown by indirect bidders (51.7%) since 2006. The benchmark 10-yr note, meanwhile, added 14 ticks, sending its yield lower by five basis points to 2.59%.

Participation left a bit to be desired as only 610 million shares changed hands at the NYSE.

Investors received several data points: 

·         There weren't any major surprises with the initial claims report for the week ending June 7. It showed claims increasing by 4,000 to 317,000. That was roughly in-line with the Briefing.com consensus estimate, which was pegged at 315,000. The four-week moving average for this series jumped by 4,750 to 315,250. The Department of Labor clarified that there were no special factors impacting this week's initial claims, which continue to point to nonfarm payrolls growth in the neighborhood of 200,000. 

·         Continuing claims for the week ending May 31 increased by 11,000 to 2.614 mln, which was better than the Briefing.com consensus estimate of 2.638 mln. 

·         Total retail sales for May increased 0.3%. Excluding autos, they were up 0.1%. Those results were below the Briefing.com consensus estimates, which called for increases of 0.7% and 0.4%, respectively. That is the disappointing news. The offsetting news is that there were large upward revisions for April. Specifically, total retail sales in April were revised up to 0.5% from 0.1% while sales, excluding autos, were revised up to 0.4% from 0.0%. 

·         Export prices, excluding agriculture, rose 0.1% in May after decreasing 1.2% in the prior reading. Excluding oil, import prices were unchanged, which followed last month's unchanged reading. 

·         April business inventories rose 0.6%, while the Briefing.com consensus expected an uptick of 0.4%. This followed the prior month's unrevised increase of 0.4%. 

Tomorrow, May PPI (Briefing.com consensus 0.2%) and core PPI (consensus 0.1%) will be reported at 8:30 ET, while the June Michigan Sentiment survey (consensus 82.9) will be released at 9:55 ET. 

·         S&P 500 +4.4% YTD 

·         Nasdaq Composite +2.9% YTD 

·         Dow Jones Industrial Average +1.0% YTD 

·         Russell 2000 -0.4% YTD

Commodities

COMEX Metals Closing Prices

  Aug gold rose $13.00 to $1274.10/oz 

·         Gold trended higher today as it gained strength from a weaker dollar index. The yellow metal came off its session low of $1261.80 and settled just below its session high of $1274.60, booking a gain of 1.0%. 

  July silver rose $0.36 to $19.53/oz 

·         Silver also traded higher after lifting from its session low of $19.20 set in early morning action. It touched a session high of $19.55 moments before settling with a 1.9 % gain. 

  July copper fell 2 cents to $3.02/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         July corn rose 5 cents to $4.45/bushel 

·         July wheat fell 5 cents to $5.85/bushel 

·         July soybeans fell 29 cents to $14.17/bushel 

·         July ethanol rose 3 cents to $2.13/gallon 

·         Sep sugar (#16 (U.S.)) rose 0.38 of a penny to 25.56 cents/lbs

NYMEX Energy Closing Prices

  July crude oil rose $2.15 to $106.54/barrel 

·         Crude oil rose above the $106 level today amid continued tensions in Northern Iraq. The energy component brushed a session low of $105.68 in late morning action and pushed to a session high of $106.64 moments before settling with a 2.1% gain. 

  July natural gas rose 25 cents to $4.76/MMBtu 

·         Natural gas rallied sharply following bullish inventory data that showed a build of 107 bcf when a build of 109-114 bcf was anticipated. It rose to a session high of $4.77 after trading as low as $4.53 in early morning pit trade and closed with a solid 5.5% gain. 

  July heating oil rose 9 cents to $2.99/gallon 

  July RBOB rose 8 cents to $3.08/gallon


Treasuries

Strong 30y Reopening Fuels Treasuries: 10-yr: +16/32..2.578%..USD/JPY: 101.62..EUR/USD: 1.3566

·         Treasuries closed just off their highs, fueled by today's superb $13 bln 30y reopening. Click here to see an intraday yields chart.

·         Ahead of the cash open, the complex appeared to be on track for its 10th loss in 11 sessions, but buyers emerged following the disappointing retail sales (0.3% actual v, 0.7% expected) data and managed to run action back the flat line. 

·         Trade hovered little changed into the $13 bln 30y reopening, and surged to its best levels as the superb results crossed the wires. 

·         The auction drew 3.444% and a strong 2.69x bid/cover. Indirect bids (51.7%) saw their largest takedown since October 2006 and direct bids (21.7%) well outpaced their 12-auction averages. Primary dealers were left with just 26.6% of the supply. 

·         Aggressive buying was paced at the long end as the 30y shed -5.9bps to 3.410%. Today's bid dropped action back below both the 50 dma and trendline resistance off the 2014 highs.

·         The 10y erased -5.4bps to close @ 2.586%. The benchmark yield slid back below the important 2.600% level and closed at a one-week low.

·         The belly lagged as the 5y fell -3.6bps to 1.660%.

·         A flatter curve took hold as the 5-30-yr spread narrowed to 175.5bps.

·         Precious metals finished on their highs with gold +$13 @ $1274 and silver +$0.36 @ $19.53.

·         Data: PPI (8:30) and Michigan Sentiment (9:55).

On other news.... 

Currencies 

Dollar Slides Off Four-Month Highs: 10-yr: +11/32..2.591%..USD/JPY: 101.70..EUR/USD: 1.3556

·         The Dollar Index presses session lows near 80.60 as trade slides back to a test of key support in the area. Click here to see a daily Dollar Index chart.

·         EURUSD is +25 pips @ 1.3560 as action holds just off its best levels of the day. Early selling provoked the single currency to test key support in the 1.3500 area, but trade has seen a notable bounce off the level with buying persisting throughout U.S. trade. Euro bulls will look to retake the 1.3600 level. 

·         GBPUSD is +40 pips @ 1.6830 as trade contends with its best close in three weeks. The 1.6850 area is of particular interest as a run through the level puts the May highs near 1.7000 in jeopardy.

·         USDCHF is -15 pips @ .8980 as sellers take control for the first time in five days. An absence of data from the Swiss calendar has left the franc at the mercy of the euro with action sliding back towards a test of support and the 200 dma (.8970).

·         USDJPY is -25 pips @ 101.70 as modest selling appears for a third straight day. Support in the 101.50 area is guarded by the 200 dma and will be in focus tonight as the Bank of Japan holds its latest policy decision. Expectations are for the BOJ to hold the course. 

·         AUDUSD is +35 pips @ .9420 as buyers remain in control for the sixth time in seven sessions. Today's disappointing employment report has been offset by a large increase in China's new loans and the rate hike in neighboring New Zealand. The hard currency is on track to close at its best level since November. China's industrial production and fixed asset investment are due out this evening. 

·         USDCAD is -10 pips @ 1.0855 as action presses key support in the area. Weakness comes despite Canada's New Home Price Index (0.2% actual v. 0.3% expected) falling short of estimates with a breakdown of support likely producing a test of the 200 dma (1.0765). Canadian data is limited to manufacturing sales.

Next Week In View




Economic Commentaries

Economic Summary: Retail Sales miss expectations; Jobless Claims roughly in line with estimates
Economic Data Summary:

·         Weekly Initial Claims 317K vs Briefing.com consensus of 315K; Last Week was revised to 313K from 312K

·         Weekly Continuing Claims 2.614 M vs Briefing.com consensus of 2.638 M ; Last Week was revised to from 2.603 M

o    The Department of Labor clarified that there were no special factors impacting this week's initial claims, which continue to point to nonfarm payrolls growth in the neighborhood of 200,000. 

·         May Retail Sales 0.3% vs Briefing.com consensus of 0.7%; April was revised to 0.5% from 0.1%

·         May Retail Sales Ex-Auto 0.1% vs Briefing.com consensus of 0.4%; April was revised to 0.4% from 0.1%

o    Taking the revisions into account, the headlines for May were not as disappointing as they appeared to be at first blush. That point notwithstanding, the May report still didn't produce a ray of GDP sunshine considering core retail sales declined 0.1%. Core sales exclude autos, building materials, and gasoline station sales, and closely match with the consumption component of the GDP report.

·         May Export Prices Ex-Ag 0.1% vs Briefing.com consensus of ; April was revised to -1.4% from -1.2%

·         May Import Prices Ex-Oil 0.0% vs Briefing.com consensus of ; April was revised to 0.1% from 0.2%

·         April Business Inventories 0.6% vs Briefing.com consensus of 0.4%; April was 0.4%

Upcoming Economic Data:

·         May PPI due out Friday at 8:30 (Briefing.com consensus of 0.2%; April was 0.6%)

·         May Core PPI due out Friday at 8:30 (Briefing.com consensus of 0.1%; April was 0.5%)

·         June Michigan Sentiment due out Friday at 9:55 (Briefing.com consensus of 82.9; May was 81.9)

Upcoming Fed/Treasury Events:

·         The Treasury will auction off $13 bln in 30 year bonds today at 13:00

Other International Events of Interest

·          Japan's Nikkei (-0.6%) fell despite the core machinery orders (-9.1% MoM actual v. -11.5% MoM expected) beat as the number saw a snap back from elevated levels that were brought on by demand for big ticket items ramping up ahead of the consumption tax increase

Jason's Commentaries

It came in unexpected that the selling came that quickly. At 622m shares traded, i believe it's more of a profit taking session. Not yet a bearish trend yet. Last night started with a bearish bias, which attempted a reversal within 15 mins, but the reversal failed and all indices went all the way down till the closing bell. The main laggard last night was the industrials and consumer discretionary. Treasuries had a spectacular opening on their 30y bonds and the retail sales came in really disappointing. It seems that the market might be up too much.








Market Call: Flat to downside

Date: 13 March 2014