16 June 2014 AMC - Market started the week with the 6th consecutive UFUM

16 June 2014 AMC - Market started the week with the 6th consecutive UFUM

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: -0.3%

·         France's CAC: -0.7%

·         Spain's IBEX: -1.0%

·         Portugal's PSI: -0.6%

·         Italy's MIB Index: -0.9%

·         Irish Ovrl Index: -0.8%

·         Greece ATHEX Composite: -0.7%

Before Market Opens 

S&P futures vs fair value: -4.80. Nasdaq futures vs fair value: -7.80.
U.S equity futures are on the defensive, following form with a generally weak showing from foreign equity markets.  Geopolitical concerns are receiving top billing as the driver behind the selling interest. The S&P futures are currently 0.3% below fair value, pointing to a lower start for the cash market.

Reviewing overnight developments: 

·         Asian markets ended the day mixed to mostly lower.  Japan's Nikkei -1.1%, China's Shanghai Composite +0.7%, Hong Kong's Hang Seng -0.1%

o    Economic data was limited:

§  India's Wholesale Price Index rose 6.0% year-over-year (expected 5.4%, previous 5.2%)

§  New Zealand's Westpac Consumer Sentiment fell to 121.2 from 121.7

o    In news:

§  Chinese Premier Le Keqiang expressed his confidence in China meeting its 7.5% growth target for 2014.

·         Major European indices are trading to the downside.  Germany's DAX Index -0.3%, France's CAC 40 -0.6%, and UK's FTSE 100 -0.3%.

o    In economic data:

§  Eurozone CPI slipped 0.1% month-over-month (expected -0.1%, previous 0.2%), while the year-over-year reading increased 0.5% (consensus 0.5%, prior 0.5%). Separately, Core CPI declined 0.1% month-over-month (previous 0.3%).

o    Among news of note: 

§  Russia and Ukraine were reportedly unable to strike a deal on gas supplies.  A Reuters reports notes that Russia subsequently cut off its supply of gas to Ukraine.

In U.S. corporate news:

·         Medtronic (MDT 68.00, +7.30): trading 12% higher after announcing it will acquire Covidien (COV 97.00, +24.98) for $42.9 bln, or $93.22 per share, in a cash and stock deal. 

·         Level 3 (LVLT 44.09): said it will acquire tw telecom (TWTC 36.34) for $40.86 per share in a cash and stock deal.

On the economic front:

·         The Empire Manufacturing survey for June (Briefing.com consensus 12.8) will be released at 8:30 ET, while April Net Long-Term TIC Flows will cross the wires at 9:00 ET. In addition, May Industrial Production (consensus 0.5%) and Capacity Utilization (consensus 78.9%) will be announced at 9:15 ET.  The NAHB Housing Market Index for June (consensus 46) will be reported at 10:00 ET.

U.S. Equities

·         Equity futures suggest modest selling at the open as traders grapple with al-Qaeda's assault on Baghdad and Russia cutting off gas supplies to Ukraine

·         Empire Manufacturing (19.3 actual v. 12.8 expected, 19.0 previous)

·         Net Long-Term TIC Flows (-$24.2B actual v. +$4.0B previous)

o    S&P Futures -3 @ 1925

o    Dow Futures -26 @ 16,671

o    Nasdaq Futures -5 @ 3764

Asia

·         Markets ended mixed across Asia

·         Japan's Nikkei (-1.1%) lost ground as the yen strengthened

·         China's Shanghai Composite (+0.7%) climbed to a two-month high after the People's Bank of China approved reserve requirement ratio cuts for a larger number of banks

·         The actions on the Mainland did not carry over to Hong Kong as the Hang Seng (-0.1%) slipped off its best levels of 2014

·         India's Sensex (-0.2%) continued its slide off record highs following an acceleration in the Wholesale Price Index (6.0% YoY actual v. 5.4% YoY expected, 5.2% YoY previous)

·         Australia's ASX (+0.1%) eked out a small gain. 

Market Internals

Market Internals -Technical-

The Nasdaq closed up 10 (0.24%) at 4321, the S&P 500 closed up 2 (0.08%) at 1938, and the Dow closed up 5 (0.03%) at 16781. Action came on slightly below average volume (NYSE 591 mln vs. avg. of 664; NASDAQ 1559 mln vs. avg. of 1787), with advancers outpacing decliners (NYSE 1559/1545, NASDAQ 1412/1253) and new highs outpacing new lows (NYSE 164/7, NASDAQ 78/23).

Relative Strength:

Biotechnology-XBI +1.87%, Clean Energy-PBW +1.77%, MLP Index-AMJ +0.94%, Homebuilders-XHB +0.88%, Base Metals-DBB +0.81%, Thailand-THD +0.62%, Switzerland-EWL +0.54%, Vietnam-VNM +0.53%, Nordic 30-GXF +0.41%, Canada-EWC +0.41%.

Relative Weakness:

Turkey-TUR -3.31%, Junior Gold Miners-GDXJ -1.95%, Egypt-EGPT -1.28%, Livestock-COW -1.27%, Russia-RSX -1.25%, Grains-JJG -1.16%, South Africa-EZA -1.12%, Poland-EPOL -1.11%, Coffee-JO -1.08%, Corn-CORN -1%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries

Closing Summary: A Wait-and-See Kind of Market

The stock market pretty much ran in circles on Monday, having closed the session close to where it began. Its indecisive nature was attributed to some worrisome-sounding headlines on the geopolitical front, yet the market action suggested it may have been owed more to a case of wait-and-see in front of Wednesday's FOMC meeting when a new policy directive will be issued along with updated economic and fed funds rate projections.

To the latter point, oil prices were little changed despite the news that the militant group, Islamic State of Iraq and Syria, took over yet another city in northern Iraq. The 10-yr note, gold prices, and the US Dollar Index, meanwhile, were also little changed, signalling that there wasn't a flight to safety on those headlines or the news that Russia cut off its gas supply to Ukraine after the two countries failed to agree on pricing.

In turn, a batch of better-than-expected economic data and another round of M&A activity highlighted by Medtronic's (MDT 60.03, -0.67) $42.9 bln acquisition of Covidien (COV 86.75, +14.73) failed to stir any concerted buying interest.

Market internals reflected an overall mixed disposition. The advance-decline line was roughly even at the NYSE and Nasdaq, volume was light at 591 mln shares, and there wasn't a single sector that ended the day up, or down, more than 1.0%. For good measure, only two Dow components -- Visa (V 210.24, -1.05) and Chevron (CVX 128.54, +1.28) -- closed more than a point away from where they ended on Friday.

The financial sector (-0.4%) underperformed all day while the utilities sector (+0.7%) outperformed all day. The former finished off its low while the latter finished off its high

Today's trading action in the S&P 500 was bounded between 1931 on the downside and 1941 on the upside. A little wave of buying interest in the closing minutes left it closer to the top end of that range than the bottom end when the closing bell rang.

The performance edge among the major indices went to the Nasdaq (+0.2%) and Russell 2000 (+0.3%), which benefited from some relative strength in Apple (AAPL 92.20, +0.92) and the biotech stocks, evidenced by the iShares Nasdaq Biotechnology ETF (IBB 248.49, +0.90).

In terms of today's economic reports, the Empire Manufacturing Survey for June, the Industrial Production report for May, and the NAHB Housing Market Index all exceeded the Briefing.com consensus estimates and overshadowed the IMF lowering its 2014 growth outlook for the US to 2.0% from 2.8%:

    Empire Manufacturing Survey 19.3 (Briefing.com consensus 12.8; prior 19.0)

    Industrial Production +0.6% (Briefing.com consensus +0.5%; prior -0.3%)

    NAHB Housing Market Index 49 (Briefing.com consensus 46; prior 45)

Tuesday's economic calendar will feature the Housing Starts and CPI reports for May, both of which will be released at 08:30 a.m. ET.

    S&P 500 +4.8% YTD

    Nasdaq Composite +3.5% YTD

    Dow Jones Industrial Average +1.2% YTD

    Russell 2000 +0.1% YTD

Commodities

COMEX Metals Closing Prices

  Aug gold rose $1.20 to $1275.30/oz 

·         Gold consolidated near the unchanged level after pulling back from its session high of $1283.00 set in early morning action. Unable to gain momentum, it settled just 0.1% higher.

  July silver rose $0.07 to $19.72/oz 

·         Silver touched a session high of $19.75 moments after floor trade opened and dipped to a session low of $19.58 in morning action. The precious metal eventually settled with a 0.4% gain. 

  July copper rose 2 cents to $3.05/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         July corn fell 6 cents to $4.41/bushel 

·         July wheat fell 5 cents to $5.80/bushel 

·         July soybeans fell 5 cents to $14.22/bushel 

·         July ethanol rose 1 cent to $2.16/gallon 

·         Sep sugar (#16 (U.S.)) rose 0.01 of a penny to 25.46 cents/lbs

NYMEX Energy Closing Prices

  July crude oil rose $0.03 to $106.88/barrel 

·         Crude oil traded in a tight range near the unchanged level today. It touched a session high of $107.17 in early morning action and brushed a session low of $106.61 later in the session. The energy component eventually settled just 3 cents above the break even line. 

  July natural gas fell 4 cents to $4.70/MMBtu 

·         Natural gas touched a session high of $4.78 after trading as low as $4.67 in morning action. However, it retreated back into the red ahead of the close and settled with a 0.8% loss. 

  July heating oil rose 1 cent to $3.00/gallon 

  July RBOB rose 1 cent to $3.07/gallon 

Treasuries

2y Nears Levels Last Seen in September: 10-yr: +03/32..2.595%..USD/JPY: 101.85..EUR/USD: 1.3568

·         Treasuries finished mixed amid a lackluster trade. Click here to see an intraday yields chart.

·         The complex held modest gains ahead of the cash open, but slowly surrendered them over the course of the session as better than expected economic data and the IMF revising its US growth forecast weighed.

·         Empire Manufacturing (19.3 actual v. 12.8 expected), industrial production (0.6% actual v. 0.5% expected), capacity utilization (79.1% actual v. 78.9% expected), and the NAHB Housing Market Index (49 actual v 46 expected) all exceeded forecasts.

·         The IMF cut its US growth outlook for 2014 to 2.0% (2.8% previous) as it expects rates to remain low for quite some time. 

·         Selling up front ran the 2y up +1.2bps to 0.463% as trade tested levels last seen in September when worries of a debt ceiling breach were at a peak.

·         The 5y ticked up +0.4bps to 1.700%. The yield narrowly missed its highest close in one and a half months. 

·         A -0.7bp decline dropped the 10y to 2.597%. That level remains in focus as it provided support from early-February though the beginning of May. 

·         At the long end, the 30y fell -1.5bps to 3.397%. The yield on the long bond slipped back below trendline resistance and finished at a two-week low. 

·         A flatter curve took hold as the 2-10-yr spread narrowed to 213.5bps. 

·         Precious metals finished little changed with gold and silver slipping to $1273 and $19.62, respectively. 

·         Data: Housing starts, building permits, and CPI (8:30).

On other news.... 

Currencies 

Dollar Slips in Quiet Trade: 10-yr: unch..2.603%..USD/JPY: 101.85..EUR/USD: 1.3567

·         The Dollar Index holds small losses as trade drifts near 80.50 support. Click here to see a daily Dollar Index chart.

·         The level is likely to remain in play ahead of Wednesday's FOMC rate decision. 

·         EURUSD is +25 pips @ 1.3565 as trade readies for its best close in a week. The in-line CPI (0.5%) reading lifted trade off its worst levels, and the single currency has been in a steady climb off 1.3500 support ever since. Eurozone data out tomorrow includes ZEW Economic Sentiment and German ZEW Economic Sentiment. 

·         GBPUSD is +15 pips @ 1.6975 as buyers remain in control for a fourth session. Early strength lifted sterling above 1.7000 for the first time since August 2009, but trade has slipped off the level and is now no sure thing to close above the May peak (1.6975). Britain's CPI, PPI Input, and RPI are scheduled for tomorrow. 

·         USDCHF is -25 pips @ .8975 as action slips off four-month highs. Today's selling has the pair contending with its lowest close in a week as trade looks to push back below the 200 dma. Swiss data is limited to PPI.

·         USDJPY is -20 pips @ 101.85 as sellers take the reins for the fourth time in five sessions. Support in the 102.50 area remains under close watch as the level is guarded by the 200 dma.

·         AUDUSD is -5 pips @ .9395 amid an uneventful trade. The hard currency remains near four-month highs ahead tonight's Reserve Bank of Australia minutes and new motor vehicle sales releases.

·         USDCAD is flat @ 1.0855 as trade has seen little response to the jump in Canada's foreign securities purchases (CAD10.13 bln actual v. CAD4.27 bln expected). Support in the 1.0850 area remains in focus as a breakdown would likely provoke a test of the 200 dma.

Next Week In View




Economic Commentaries

Economic Summary: Industrial Production and Capacity Utilization roughly in line with expectations; Fed decision Wednesday at 14:00
Economic Data Summary:

·         June Empire Manufacturing 19.3 vs Briefing.com consensus of 12.8; May was 19.0

·         April Net Long-Term TIC Flows -$24.2 bln vs Briefing.com consensus of ; March was revised to $4.1 bln from $4.0 bln

·         May Industrial Production 0.6% vs Briefing.com consensus of 0.5%; April was revised to -0.3% from -0.6%

·         May Capacity Utilization 79.1% vs Briefing.com consensus of 78.9%; April was revised to 78.9% from 78.6%

o    That was in-line with the May regional manufacturing surveys, all of which showed solid production data, and the national ISM production index, which increased to its highest point since December 2013. Production growth was strong across the board. There was no one sector that led the gains. Motor vehicle and parts production increased 1.5%. Excluding this sector, manufacturing production increased 0.5% in May. Total motor vehicle assemblies increased to 11.58 mln SAAR in May from 11.46 mln SAAR in April. 

·         June NAHB Housing Market Index 49 vs Briefing.com consensus of 46; May was 45

Upcoming Economic Data:

·         May Housing Starts due out Tuesday at 8:30 (Briefing.com consensus of 1028K; April was 1072K )

·         May Building Permits due out Tuesday at 8:30 (Briefing.com consensus of 1050K; April was 1080K)

·         May CPI due out Tuesday at 8:30 (Briefing.com consensus of 0.2%; April was 0.3%)

·         May Core CPI due out Tuesday at 8:30 (Briefing.com consensus of 0.2%; April was 0.2%)

Upcoming Fed/Treasury Events

·         The Fed is scheduled to start a two day meeting Tuesday.  The decision will be announced Wednesday at 14:00 including supplemental economic projections.  The Janet Yellen press conference will be held at 14:30

Other International Events of Interest

·         India's Wholesale Price Index rose 6.0% year-over-year (expected 5.4%, previous 5.2%)

Jason's Commentaries

The market started the week with another UFUM, ahead of the FOMC statements, it seems that the pricing in is in process. Volume has been weak and are expected to last for another trading session. However, it was a rough ride in the market last night where the market had a crazy rally at the start of the day which died off by 1015am ET. After 1015am ET, the market lost all its initial gain and then by mid day, gained the initial gains. Internals were slightly divergent and it seem that the market is really expecting something to happen. On the technicals side, The indices are sitting on their support level, waiting for a breakout. The Utilities and the Energy showed some strength last night, which might suggest that the market might be turning on a defensive mode. On a side note, the treasuries yield began to flatten a little.








Market Call: FLAT to downside

Date: 24 Feb 2014