2 Jun 2014 AMC - Market ended flat after massive rally in Nasdaq

2 Jun 2014 AMC - Market ended flat after massive rally in Nasdaq

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: + 0.1%

·         France's CAC: -0.1%

·         Spain's IBEX: + 0.3%

·         Portugal's PSI: + 0.7%

·         Italy's MIB Index: + 0.8%

·         Irish Ovrl Index: Closed

·         Greece ATHEX Composite: + 1.8%

Before Market Opens 

S&P futures vs fair value: +1.40. Nasdaq futures vs fair value: +1.70.
The S&P 500 futures trade one points above fair value.

Asian markets rallied while China's Shanghai Composite and Hong Kong's Hang Seng were closed. 

·         In economic data: 

o    Japan's Capital Spending surged 7.4% year-over-year (expected 5.7%). 

o    China's Manufacturing PMI edged up to 50.8 from 50.4 (expected 50.6). 

o    India's HSBC Manufacturing PMI ticked up to 51.4 from 51.3. 

------ 

·         Japan's Nikkei gained 2.1%, climbing to its best level in two months. Dai-ichi Life Insurance lagged, falling 5.0% on reports it is looking to buy U.S.-based Protective Life. 

·         Hong Kong's Hang Seng was closed for Tuen Ng Day. 

·         China's Shanghai Composite was shuttered for Dragon Boat Festival. 

·         India's Sensex advanced 1.9%, ending just shy of a record-high close. Financials posted strong gains with State Bank of India and HDFC Bank up 4.2% and 3.3%, respectively.

Major European indices hold slim gains despite mostly disappointing data received from the region. In all likelihood, the gains in equities reflect increased expectations for easing from the European Central Bank as early as this Thursday. 

·         Participants received a handful of data points: 

o    Eurozone Manufacturing PMI fell to 52.2 from 52.5 (consensus 52.5). 

o    Germany's Manufacturing PMI contracted to 52.3 from 52.9 (expected 52.9). Separately, CPI slipped 0.1% month-over-month (consensus 0.2%, previous -0.2%), while the year-over-year reading increased 0.9% (expected 1.1%, prior 1.3%). 

o    French Manufacturing PMI rose to 49.6 from 49.3 (expected 49.3). 

o    Italy's Manufacturing PMI slid to 53.2 from 54.0 (consensus 53.7). 

o    Spain's Manufacturing PMI improved to 52.9 from 52.7, as expected. 

o    Swiss SVME PMI fell to 52.5 from 55.8 (consensus 55.0). 

o    Great Britain's Manufacturing PMI slid to 57.0 from 57.3, as expected. Also of note, Net Lending to Individuals expanded GBP2.40 billion (expected GBP2.70 billion, prior GBP2.80 billion) and BoE Consumer Credit rose GBP670 million (GBP800 million expected, GBP1.03 billion previous). 

------ 

·         In France, the CAC is flat. Consumer names LVMH Moet Hennessy and Pernod Ricard are both down near 0.8%. Defense contractors outperform with Airbus and Safran up 1.2% and 0.6%, respectively. 

·         Germany's DAX trades higher by 0.1% with chemical producer Linde in the lead. The stock trades up 1.0%. On the downside, heavyweights BMW and Daimler trade lower by 0.8% and 0.3%, respectively. 

·         Great Britain's FTSE is higher by 0.3% as miners provide support. Anglo American and Rio Tinto are both up near 1.6%. Insurer Standard Life is among the laggards, down 2.2%.

·         Italy's MIB outperforms with a gain of 0.4% thanks to financials. UnipolSai, Unione di Banche Italiane, and Banca Popolare dell'Emilia Romagna hold gains between 1.5% and 2.1%.

U.S. Equities

·         Futures point to a firm open with both the DJIA and S&P 500 looking at all-time highs at the open

·         The Nasdaq holds ~3% off its best level in more than 16 years

·         The VIX (11.40) holds near levels last seen in March 2013

o    S&P Futures +1 @ 1922

o    Dow Futures +20 @ 16,724

o    Nasdaq Futures +3 @ 3738

Asia

·         Markets gained across Asia

·         Japan's capital spending surged 7.4% QoY (5.7% QoY expected)

·         China's Manufacturing PMI edged up to 50.8 (50.7 expected) 

·         Australia's building approvals (-5.6% MoM actual v. 2.1% MoM expected) missed by a wide margin and company operating profits (3.1% QoQ actual v. 2.6% QoQ expected) posted an upside surprise

·         India's HSBC Manufacturing PMI ticked up to 51.4 (51.3 previous) 

·         Japan's Nikkei (+2.1%) climbed to its best level in two months

·         Hong Kong's Hang Seng was closed for Tuen Ng Day

·         China's Shanghai Composite was shuttered for Dragon Boat Festival

·         India's Sensex (+1.9%) ended just shy of a record-high close 

·         Australia's ASX (+0.5%) settled just below its best level in six years

Market Internals

Market Internals -Technical-
The Dow closed up 27 (+0.16%) at 16744, the S&P 500 closed up 1 (+0.07%) at 1925, and the Nasdaq closed down 5 (-0.13%) at 4237. Action came on below average volume (NYSE 537 mln vs. avg. of 712; NASDAQ 1515 mln vs. avg. of 1888), with decliners outpacing advancers (NYSE 1487/1623, NASDAQ 1000/1631) and new highs outpacing new lows (NYSE 230/27, NASDAQ 74/28).

Relative Strength: 
Base Metals-DBB +1.35%, Copper Miners-COPX +1.29%, Natural Gas-UNG +1.27%, Japan-EWJ +1.21%, Regional Banks-KRE +1.15%, Copper-JJC +1.1%, Israel-EIS +1.09%, Eastern Europe-ESR +0.91%, Russia-RSX +0.88%, Pacific Index-VPL +0.87%.

Relative Weakness: 
Coffee-JO -2.95%, Junior Gold Miners-GDXJ -2.17%, Social Media-SOCL -1.69%, Clean Energy-PBW -1.55%, Egypt-EGPT -1.27%, Turkey-TUR -0.87%, New Zealand-ENZL -0.85%, Belgium-EWK -0.74%, Japanese Yen-FXY -0.61%.

Leaders and Laggards

 

Technical Updates

Briefing's Commentaries

Closing Market Summary: Stocks Begin June on Quiet Note
The stock market kicked off June on an unassuming note. The S&P 500 added 0.1% after spending the bulk of the day near its flat line, while the Nasdaq Composite (-0.1%) and Russell 2000 (-0.5%) underperformed throughout the session.

Equity indices displayed slim gains at the open, but small-cap stocks struggled from the get go. The major averages then had the rug pulled out from under them after a disappointing ISM Index for May (53.2 versus Briefing.com consensus 55.6) crossed the wires.

Although stocks slumped to lows in reaction to the report, they were able to trim their losses over the next 90 minutes. The Nasdaq and Russell 2000 could not return into positive territory, while the Dow and S&P 500 managed to regain their flat lines.

The recovery in the blue chip indices was assisted by headlines indicating that the original ISM report did not contain the correct seasonal adjustment data. Those headlines were accompanied by reports suggesting 56.0 was the correct reading for May, but when the final release from the ISM crossed the wires, it revealed that the index climbed to 55.4 and not 56.0.

Outside of the confusion created by the data, the first session of the month was rather uneventful. Trading volume remained on the light side as less than 537 million shares changed hands on the NYSE floor.

Similar to volume, another dynamic that carried over from May was the continued strength among transports. The Dow Jones Transportation Average advanced 0.6%, extending its year-to-date gain to 10.1%. The outperformance of transports underpinned the industrial sector (+0.4%), which ended the day just ahead of consumer discretionary (+0.3%) and financials (+0.3%) sectors.

Even though three heavily-weighted groups finished among the leaders, the S&P 500 could not pull away from its flat line as consumer staples (-0.3%), energy (-0.2%), and technology (-0.2%) weighed.

Notably, the tech sector finished near the bottom of the leaderboard due to weakness in two of its largest components. Shares of Apple (AAPL 628.65, -4.35) fell 0.7% after the company announced a set of software updates for its products, while also revealing an iOS-based Health Kit app, the release of which has been rumored in the past. Apple notwithstanding, the tech sector was also pressured by Google (GOOGL 564.34, -7.31), which lost 1.3% after its head of business development left the company.

Chipmakers, however, had a better showing than the overall sector as the PHLX Semiconductor Index advanced 0.5%. Broadcom (BRCM 34.84, +2.97) was a standout, surging 9.3% after announcing plans to explore strategic alternatives for its Cellular Baseband Business.

On the fixed income side, Treasuries spent the session in a steady retreat. The 10-yr note shed 15 ticks, pushing its yield up to 2.53%.

Economic data was limited to April Construction Spending and May ISM: 

·         Construction spending increased 0.2% in April after increasing an upwardly revised 0.6% (from 0.2%) in March. The Briefing.com consensus expected construction spending to increase 0.7%. Total private construction was flat. A 0.1% increase in private residential spending was offset by a 0.1% decline in private nonresidential spending. 

·         After correcting for seasonal adjustment problems, the ISM Manufacturing Index was revised to 55.4 in May from the 53.2 reading that was originally reported. With the correction, the May ISM reading is up from 54.9 in April, but below the Briefing.com consensus which called for the ISM Index to increase to 55.6. The ISM explained that its computers accidentally used the wrong seasonal adjustment factors --which seemed to have been left over from April --when calculating the adjusted indices. After using the correct seasonal adjustments, all of the indices reported stronger activity. More importantly, the newly revised data now confirm the improvements registered by the Federal Reserve regional manufacturing surveys for May. 

Tomorrow, the April Factory Orders report (Briefing.com consensus 0.5%) will be released at 10:00 ET. 

·         S&P 500 +4.1% YTD 

·         Dow Jones Industrial Average +1.0% YTD 

·         Nasdaq Composite +1.5% YTD 

·         Russell 2000 -3.0% YTD

Commodities

COMEX Metals Closing Prices

·         Aug gold fell $2 to $1244.00/oz

·         July silver rose $0.08 to $18.75/oz

·         July copper rose 5 cents to $3.17/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         July corn closes unchanged at $4.65/bushel

·         July wheat fell 8 cents to $6.20/bushel

·         July soybeans rose 11 cents to $15.02/bushel

·         June ethanol fell 3 cents to $2.34/gallon

·         July sugar (#16 (U.S.)) fell 0.22 of a penny to 25.38 cents/lbs

NYMEX Energy Closing Prices

·         July crude oil fell $0.23 to $102.43/barrel

·         July natural gas rose 7 cents to $4.61/MMBtu

·         July heating oil fell 1 cent to $2.88/gallon

·         July RBOB fell 2 cents to $2.95/gallon

Treasuries

Yields Rise Sharply: 10-yr: -17/32..2.534%..USD/JPY: 102.42..EUR/USD: 1.3596

·         Treasuries finished near their lows, punished by a wave of early selling. Click here to see an intraday yields chart.

·         Overnight weakness saw yields firm ahead of the cash open before drifting higher in response to this morning's disappointing data.

·         Construction spending (0.2% actual v. 0.7% expected) and ISM Services (55.4 actual v. 55.6 expected, 54.9 previous) both fell short of estimates with ISM Services seeing two alterations mid-session after it was discovered the wrong seasonal adjustments were used. 

·         The 5y rallied +6.8bps to 1.596% and settled at a three-week high. Today's selling ran the yield back above its 200 dma before closing near resistance helped by the 100 dma.

·         The 10y climbed +7.7bps to 2.534%. The benchmark yield posted its highest close in a week while managing to retake the 2.500% support level that had held for the past 11 months. Key resistance lies near 2.600%. 

·         At the long end, the 30y jumped +6.3bps to a one-week high of 3.377%. A move as high as 3.450% cannot be ruled out as trendline resistance off the 2014 highs lurks in the vicinity.

·         A steeper curve took hold as the 5-30-yr spread widened to 178bps.

·         Precious metals ended mixed with gold -$3 @ $1243 and silver +$0.04 @ $18.72. 

·         Data: Factory orders (10) and auto/truck sales (14). 

·         Fed Speak: KC's George discusses monetary policy (13:50).

On other news.... 




Currencies 

Dollar Fights for Best Close in Three and a Half Months: 10-yr: -17/32..2.537%..USD/JPY: 102.41..EUR/USD: 1.3599

·         The Dollar Index holds just off session highs near 80.65 as trade fights for its best close in three and a half months. Click here to see a daily Dollar Index chart.

·         Today's bid has run the Index back above its 200 dma (80.47) and through key resistance in the 80.50 area. 

·         EURUSD is -35 pips @ 1.3600 as trade continues to probe key support ahead of Thursday's European Central Bank rate decision. The single currency saw an early test of the 200 dma (1.3643), but quickly reversed into negative territory following the mixed Italian and Spanish Manufacturing PMI figures. Also impacting today's session were comments from ECB member Ewold Nowotny, which hinted at the possibility negative deposit rates could be announced at this week's policy meeting. The 1.3600 support level will remain in focus into the event. Eurozone CPI Flash Estimate and unemployment rate accompany Spanish unemployment change. 

·         GBPUSD is -5 pips @ 1.6740 as trade has given up its early gains. An early bid developed despite the disappointing Manufacturing PMI and net lending to individuals data, but trade was unable to reclaim resistance in the 1.6750 area that is guarded by the 50 dma. The 1.6700 support level remains in focus as the Bank of England is set to opine on Thursday. Britain's Nationwide Home Price Index and Construction PMI are scheduled for tomorrow.

·         USDCHF is +45 pips @ .8985 as trade presses its best levels in three and a half months. Today's bid has the pair comes following the SVME PMI miss, and has action contending with its first close above the 200 dma since September. 

·         USDJPY is +65 pips @ 102.40 as trade looks likely to post its best close in a month after retaking both the 50 and 100 dma. The pair has found a bid despite the strong Japanese capital spending figures as reports have surfaced indicating Japanese pension funds are looking to shed their JGBs in an effort to move further out on the risk curve. Japanese data is limited to average cash earnings.

·         AUDUSD is -65 pips @ .9240 after early strength failed at the 50 dma and .9320 resistance. The hard currency has struggled amid today's session as the weak building approvals more than offset an improvement in China's Manufacturing PMI. Support in the .9220 area remains under close scrutiny with a breakdown likely producing a test of the 200 dma (.9175). The Reserve Bank of Australia opines tonight. Australian data includes retail sales and the current account balance. China's Non-Manufacturing PMI and HSBC Final Manufacturing PMI are due out tonight. 

·         USDCAD is +55 pips @ 1.0900 as trade probes resistance in the area. The pair has been bid from the get go as the bulls wanted to avoid a retest of 1.0825 support.

Next Week In View





Economic Commentaries

Economic Summary: ISM misses expectations; Construction Spending also below estimates; Factory orders tomorrow at 10:00
Economic Data Summary:

·         May ISM Index 53.2 vs Briefing.com consensus of 55.6; April was 54.9

o    The national reading did not correspond with the strength reported in nearly all of the regional Federal Reserve manufacturing surveys. Remarkably (and strangely), all of the sub-indices for the national ISM had negative implications for manufacturing growth. Production growth decelerated as the related index fell to 55.2 in May from 55.7 in April. 

·         April Construction Spending 0.2% vs Briefing.com consensus of 0.7%; March was 0.2%

o    Total private construction was flat. A 0.1% increase in private residential spending was offset by a 0.1% decline in private nonresidential spending. Even though housing starts jumped 13.2% and topped 1.00 mln in April, residential construction growth remains weak. Part of that is due to the fact that most of the increase in starts came from multifamily construction, which has smaller monthly put-in-place values per unit than single-family construction.

Upcoming Economic Data:

·         April Factory Oders due out Tuesday at 10:00 (Briefing.com consensus of 0.5%; March was 1.1%)

·         May Auto Sales due out Tuesday at 14:00 (April was 5.3 M )

·         May Truck Sales due out Tuesday at 14:00 (April was 7.3 M)

Upcoming Fed/Treasury Events:

·         Kansas City Fed President Esther George (voting FOMC member, hawkish) to speak tomorrow at 13:50

Other International Events of Interest

·         Eurozone Manufacturing PMI fell to 52.2 from 52.5 (consensus 52.5). 

·         Germany's Manufacturing PMI contracted to 52.3 from 52.9 (expected 52.9). 

·         China's Manufacturing PMI rose to 50.8 from 50.4 (expected 50.6). 

Jason's Commentaries

It seems that the market went through a very volatile session on Monday. The market decided to sell of during the first half an hour and started to recover by 11am ET. However, throughout the lunch time, the market started flat until the last trading hour, the market decided to have another rinse before ending the trading day with a little change. The volumes were far lower than expected. This is definitely a big price to volume divergence. With such divergence, I really doubt the rally is sustainable. Right now, Nasdaq and Russells are stuck at the resistance and S&P500 is rallying. Last night was a flat day led by Industrials and Discretionary. The market might price into the employment data on Friday so it might be a big game changer this coming Friday.

Market Call: DOWN

Date: 3 June 2014