25 June 2014 AMC -Market had a sharp bounce after massive drop on Tuesday despite disappointing GDP data

25 June 2014 AMC -Market had a sharp bounce after massive drop on Tuesday despite disappointing GDP data

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: -0.8%

·         Germany's DAX: -0.7%

·         France's CAC: -1.3%

·         Spain's IBEX: -1.3%

·         Portugal's PSI: + 1.0%

·         Italy's MIB Index: -0.8%

·         Irish Ovrl Index: -0.6%

·         Greece ATHEX Composite: -1.4%

Before Market Opens 

S&P futures vs fair value: -2.30. Nasdaq futures vs fair value: -2.00.
The S&P 500 futures trade two points below fair value following disappointing Q1 GDP and May Durable Orders data.

Asian markets ended mostly lower. 

·         Regional economic data was limited: 

o    Japan's Corporate Services Price Index rose 3.6% year-over-year (expected 3.2%, previous 3.4%) o South Korea's Consumer Confidence ticked up to 107 from 105. 

o    Malaysia's unemployment rate slipped to 2.9% from 3.0% 

o    The Philippines' trade deficit widened to $743 million from $199 million. 

------ 

·         Japan's Nikkei lost 0.7%, slipping off five-month highs as traders shrugged off Prime Minister Shinzo Abe's ‘Third Arrow.' Insurers lagged with Dai-ichi Life Insurance falling 2.4%. 

·         Hong Kong's Hang Seng shed 0.1%, but held at a one-month low. The property sector was mixed as Henderson Land Development added 1.6% and China Overseas Land & Investment lost 1.5%. 

·         China's Shanghai Composite fell 0.4% on low volume. Financials lagged as ICBC and Citic Securities shed 1.5% and 1.0%, respectively. 

Major European indices trade lower across the board. Ukraine's President Petro Poroshenko said the cease-fire agreement, which was set to run through Friday, may be terminated after a government helicopter was shot down by separatists yesterday. 

·         In economic data: 

o    Germany's GfK Consumer Climate ticked up to 8.9 from 8.6 (expected 8.5) 

o    French Business Survey slipped to 98 from 99 (expected 99) 

o    Great Britain's CBI Distributive Trades Survey fell to 4 from 16 (expected 24) 

o    Italy's Retail Sales ticked up 0.4% month-over-month (expected 0.2%, previous -0.2%), while the year-over-year reading increased 2.6% (forecast -0.5%, prior -3.5%). Separately, Consumer Confidence slipped to 105.7 from 106.2 (expected 106.3) 

o    Spain's PPI declined 0.4% year-over-year (consensus -0.6%, prior -0.2%) 

o    Swiss Consumption Indicator improved to 1.77 from 1.68 

------ 

·         Germany's DAX is lower by 0.8%. HeidelbergCement is the weakest performer, down 2.3% after receiving a downgrade. Health care names display relative strength with Merck and Fresenius Medical Care up 0.8% and 0.4%, respectively. 

·         Great Britain's FTSE holds a loss of 0.9% amid weakness in industrial shares. Bunzl and Meggitt are both down near 3.0%. Shire trades up 1.3% after receiving an improved takeover offer from AbbVie. 

·         In France, the CAC trades down 1.2%. Vivendi is pressuring the index with a loss of 5.0% despite Credit Suisse re-initiating coverage with an ‘Outperform.' 

·         Spain's IBEX holds a loss of 1.6% with construction names showing weakness. Abengoa, Fomento de Construcciones, and ACS are down between 3.3% and 4.7%.

U.S. Equities

·         Equity futures point to modest losses at the open following the disappointing GDP - Third Estimate and durable orders data

·         The selling has the major averages looking at a two-day skid for only the second time in June

·         Traders continue to monitor the VIX (12.13), which is working its way off the lowest levels since February 2007

·         MBA Mortgage Index (-1.0%)

·         Durable Orders (-1.0% actual v. 0.4% expected)

·         Durable Orders -ex Transportation (-0.1% actual v. 0.4% expected)

·         GDP - Third Estimate (-2.9% actual v. -1.8% expected)

·         GDP Deflator - Third Estimate (1.3% actual v. 1.3% expected)

o    S&P Futures -3 @ 1940

o    Dow Futures -35 @ 16,717

o    Nasdaq Futures -7 @ 3787

Asia

·         Markets ended mostly lower across Asia

·         Malaysia's unemployment rate slipped to 2.9% (3.0% previous)

·         South Korea's consumer confidence ticked up to 107 (105 previous)

·         The Philippines' trade deficit widened to $743 mln (199 mln previous)

·         Japan's Nikkei (-0.7%) slipped off five-month highs as traders shrugged off Prime Minister Shinzo Abe's ‘Third Arrow.' 

·         Hong Kong's Hang Seng (-0.1%) held at a one-month low

·         China's Shanghai Composite (-0.4%) fell amid a quiet trade

·         India's Sensex (-0.2%) slid as a jump in oil prices weighed

·         Australia's ASX (-0.6%) fell below the 100 dma

Market Internals

 


Market Internals -Technical-
The Nasdaq is up 29 (+0.68%) to 4380, the S&P 500 is up 10 (+0.49%) to 1960, and the Dow is up 49 (+0.29%) to 16868. Action has come on slightly below average volume (NYSE 639 mln vs. avg. of 667; NASDAQ 1584 mln vs. avg. of 1740), with advancers outpacing decliners (NYSE 2158/965, NASDAQ 1699/972) and new highs outpacing new lows (NYSE 155/25, NASDAQ 52/32).

Relative Strength: 
Coffee-JO +3.89%, Junior Gold Miners-GDXJ +2.97%, Oil Services-OIH +1.93%, Social Media-SOCL +1.67%, Turkey-TUR +1.65%, Oil and Gas Exploration-XOP +1.6%, Thailand-THD +1.49%, Hong Kong-EWH +1.12%, Brazilian Real-BZF +0.94%, Emerging Markets Small Cap-EWX +0.75%.

Relative Weakness: 
Volatility-VXX -3.72%, Germany-EWG -2%, Cotton-BAL -1.93%, Eastern Europe-ESR -1.42%, Greece-GREK -1.35%, Copper Miners-COPX -1.19%, Heating Oil-UHN -0.95%, Gasoline-UGA -0.85%, Russia-RSX -0.85%, Sweden-EWD -0.69%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries

Closing Market Summary: Stocks Climb Despite Disappointing Q1 GDP Revision
The stock market registered modest gains on Wednesday as participants looked past a pair of disappointing economic reports. The S&P 500 rose 0.5% with nine sectors ending higher, while the Nasdaq Composite (+0.7%) outperformed.

Prior to the open, the S&P 500 appeared to be on track for its third consecutive decline after first quarter GDP was revised down to -2.9% from -1.0% (Briefing.com consensus -1.8%). In addition, a more recent report—May Durable Orders—also surprised to the downside. Despite starting on a lower note, the major averages were able to rebound swiftly with the move likely supported by some short covering.

The health care sector (+1.1%) ended in the lead after showing relative strength throughout the session. The third-largest group was underpinned by solid gains in the shares of AbbVie (ABBV 54.97, +1.38) and Shire (SHPG 231.14, +7.87) amid reports AbbVie may submit an improved takeover proposal to Shire. However, Shire commented intraday, saying no changes have been made to the offer from May 30.

Even though the health care sector ended in the lead, biotechnology could not keep up. The iShares Nasdaq Biotechnology ETF (IBB 255.88, +0.79) added 0.3%.

Elsewhere, the consumer discretionary sector (+0.8%) lagged in the early going, but elbowed its way to the top of the leaderboard with help from media names after the Supreme Court ruled that start-up streaming service Aereo violated broadcaster copyright laws. CBS (CBS 62.48, +3.64) surged 6.2%, while Comcast (CMCSA 53.21, +0.57) and Disney (DIS 83.90, +1.22) advanced 1.1% and 1.5%, respectively.

Similar to the two top-weighted groups, the largest S&P 500 sector—technology (+0.6%)—also finished among the leaders. Google (GOOGL 585.93, +13.39) played a big part in the outperformance, rallying 2.3% as the company held its developers conference in San Francisco. Chipmakers, meanwhile, settled a bit behind the broader market (PHLX Semiconductor Index +0.4%).

One influential sector that could not finish among the other outperformers was the financial space (+0.1%). The sector underperformed for the second session in a row, but managed to narrow its week-to-date loss to 0.3%.

On the downside, the consumer staples sector spent the entire session climbing off lows, but still ended in the red (-0.1%) as General Mills (GIS 51.76, -1.94) weighed after reporting disappointing earnings.

Treasuries surged in reaction to this morning's data before erasing some of their gains in the afternoon. The 10-yr note added five ticks with its yield slipping two basis points to 2.56%.

Participation remained in line with recent averages as less than 650 million shares changed hands at the NYSE floor.

Economic data included Q1 GDP, May Durable Orders, and the weekly MBA Mortgage Index: 

·         First quarter GDP growth was revised down from -1.0% in the second estimate to -2.9% in the third estimate. GDP increased 2.6% in Q4 2013. The Briefing.com consensus expected GDP to be revised down to -1.8%. 

o    In all likelihood that economic activity weakened because it was never on that strong of a footing to begin with. We've seen this play out over the past few years where growth in the first half of the year is much slower than expected. 

o    Real final sales were revised down to -1.3% from 0.6%. That was the first decline in real final sales since Q1 2011. 

·         Durable goods orders declined 1.0% in May after increasing an upwardly revised 0.8% (from 0.6%) in April. The Briefing.com consensus expected durable goods orders to increase 0.4%. 

o    Transportation orders fell 3.0% in May as orders of nondefense aircraft and parts fell 4.0%. The drop was unusual and can be blamed on seasonal adjustments. Boeing (BA 127.06, -2.09), which is heavily represented in the transportation data, reported solid gains in orders for May. 

o    Excluding transportation, durable goods orders declined 0.1% in May following a 0.4% increase in April, while the consensus expected these orders to increase 0.4%. 

·         The weekly MBA Mortgage Index fell 1.0% to follow last week's 9.2% decline. 

Tomorrow, weekly initial claims (Briefing.com consensus 310K), May Personal Income (consensus 0.4%), Personal Spending (consensus 0.4%), and Core PCE Prices (consensus 0.2%) will all be announced at 8:30 ET. 

·         S&P 500 +6.0% YTD 

·         Nasdaq Composite +4.9% YTD 

·         Dow Jones Industrial Average +1.8% YTD 

·         Russell 2000 +1.7% YTD

Commodities

Closing Commodities: Crude Oil Settles With 0.5% Gain, Gold Rises 0.1%

·         Aug gold erased earlier losses as the dollar declined following weak economic data. Q1 GDP growth was revised down from -1.0% in the second estimate to -2.9% in the third estimate (Briefing.com consensus called for GDP to be revised down to -1.8%). In addition, May Durable Orders fell 1.0% vs expectations for an uptick of 0.4%.

·         The yellow metal lifted from its session low of $1314.30 per ounce set shortly after floor trade opened and recovered into positive territory in afternoon action.

·         It touched a session high of $1325.60 per ounce and settled with a 0.1% gain at $1322.60 per ounce.

·         July silver also trended higher after coming off its session low of $20.90 per ounce. It eventually settled at $21.13 per ounce, or 0.4% higher.Aug crude oil rose for the first time this week following reports that the White House has allowed first ultralight oil exports by Pioneer Natural Resources (PXD) and Enterprise Product Partners (EPD).

·         The energy component slipped to a session low of $105.40 per barrel when inventory data showed a build of 1.7 mln barrels when a draw of 1.6-1.7 mln barrels was anticipated but recovered back into the black. It eventually settled with a 0.5% gain at $106.50 per barrel.

·         July natural gas retreated from its session high of $4.59 per MMBtu set in early morning action and brushed a session low of $4.52 per MMBtu. However, buyers stepped in moments before floor trade closed and pushed prices back into positive territory, leaving natural gas to settle with a 0.7% gain at $4.56 per MMBtu.

COMEX Metals Closing Prices

  Aug gold rose $1.40 to $1322.60/oz 

·         Gold erased earlier losses as the dollar declined following disappointing economic data. Q1 GDP growth was revised down from -1.0% in the second estimate to -2.9% in the third estimate while the Briefing.com consensus expected GDP to be revised down to -1.8%. In addition, the Durable Orders report for May showed orders fell 1.0% against an expected uptick of 0.4%. The yellow metal lifted from its session low of $1314.30 set shortly after floor trade opened and recovered into positive territory in afternoon action. It touched a session high of $1325.60 and settled with a 0.1% gain. 

  July silver rose $0.08 to $21.13/oz 

·         Silver also trended higher after coming off a session low of $20.90. It eventually settled with a 0.4% gain. 

  July copper rose 2 cents to $3.17/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         July corn fell 2 cents to $4.41/bushel 

·         July wheat rose 5 cents to $5.75/bushel

·         July soybeans settled unchanged at $14.15/bushel 

·         July ethanol rose 1 cent to $2.07/gallon 

·         Sep sugar (#16 (U.S.)) settled unchanged at 26.05 cents/lbs

NYMEX Energy Closing Prices

  Aug crude oil rose $0.49 to $106.50/barrel

·         Crude oil rose for the first time this week following reports that the White House has allowed first ultralight oil exports by Pioneer Natural Resources (PXD) and Enterprise Products Partners (EPD). The energy component slipped to a session low of $105.40 on inventory data that showed a build of 1.7 mln barrels when a draw of 1.6-1.7 mln barrels was anticipated but recovered back into positive territory. It eventually settled with a 0.5% gain. 

  July natural gas rose 3 cents to $4.56/MMBtu 

·         Natural gas retreated from its session high of $4.59 set in early morning pit trade and brushed a session low of $4.52. However, buyers stepped in ahead of the close and pushed prices back into positive territory, leaving natural gas to settle with a 0.7% gain.

  Aug heating oil fell 1 cent to $3.04/gallon 

  Aug RBOB fell 3 cents to $3.07/gallon


Treasuries

On other news.... 

Currencies 

Weak Data Weighs on Greenback: 10-yr: +08/32..2.556%..USD/JPY: 101.81..EUR/USD: 1.3634

·         The Dollar Index has halved its early losses as trade looks to regain support near 80.20. Click here to see a daily Dollar Index chart.

·         That level remains in focus as both the 50 and 100 dma lurk in the vicinity. 

·         EURUSD is +35 pips @ 1.3635 as trade looks likely to put in its best close in almost three weeks. The single currency saw little response to the GfK German Consumer Climate beat before rallying on the disappointing U.S. economic data. Resistance near 1.3650 is defended by the 200 dma.

·         GBPUSD is -10 pips @ 1.6975 as trade presses lower for the third time in four days. Sterling saw a brief spike above the 1.7000 level following this morning's U.S. economic data, but has been unable to hold the level. The 1.6850 area is home to support helped by the 50 dma, and represents the next key level. The Bank of England's Financial Stability Report is scheduled to cross the wires tomorrow and will be accompanied by a Mark Carney press conference. 

·         USDCHF is -20 pips @ .8920 as trade flirts with its lowest close in a month. Today's weakness comes amid strength in the euro, and has trade zeroing in on a test of the 50 dma (.8900).

·         USDJPY is -10 pips @ 101.85 as trade has managed to claw back most of the early losses. Post-U.S. economic data selling dropped the pair onto the 200 dma (101.67), but buyers emerged at the key level. The pair has spent most of the past two weeks locked between 101.80/102.20.

·         AUDUSD is +25 pips @ .9390 as action holds just off session highs. The hard currency was mired in a quiet trade before seeing some buying emerge in response to the lackluster U.S. economic data. 

·         USDCAD is -25 pips @ 1.0720 as trade contends with its lowest close since early-January. The 1.0700 support level will be tracked closely in the days ahead.

Next Week In View




Economic Commentaries

Economic Summary: Q1 GDP revised sharply lower to a decline of -2.9%
Economic Data Summary:

·         Weekly MBA Mortgage Applications vs Briefing.com consensus of ; Last Week was -9.2%

·         May Durable Orders vs Briefing.com consensus of 0.4%; April was 0.6%

·         May Durable Orders Ex-Transportation vs Briefing.com consensus of 0.4%; April was 0.3%

o    The drop was unusual and can be blamed on seasonal adjustments. Boeing (BA), which is heavily represented in the transportation data, reported solid gains in orders for May. Excluding transportation, durable goods orders declined 0.1% in May following a 0.4% increase in April. The consensus expected these orders to increase 0.4%. The drop was unexpected as most of the regional manufacturing surveys showed positive orders growth for May.

·         Q1 GDP-Third Estimate vs Briefing.com consensus of -1.8%; Q4 was -1.0%

o    Most analysts are going to point toward exogenous factors, such as winter weather and normal inventory volatility, for the large decline in economic activity in the first quarter. Some of that may be true, but it is difficult to justify the entire decline. It is more likely that economic activity weakened because it was never on that strong of a footing to begin with. We've seen this play out over the past few years where growth in the first half of the year is much slower than expected. The problem is that the revisions in the third estimate hit at the core of economic growth: consumption. Without a strong consumer, growth cannot accelerate to a stable, above-potential rate. 

·         Q1 GDP Deflator - Third Estimate vs Briefing.com consensus of 1.3%; Q4 was 1.3%

Upcoming Economic Data:

·         Weekly Initial Claims due out Thursday at 8:30 (Briefing.com consensus of 310K; Last Week was 312K)

·         Weekly Continuing Claims due out Thursday at 8:30 (Briefing.com consensus of 2.588 M ; Last Week was 2.561 M )

·         May Personal Income due out Thursday at 8:30 (Briefing.com consensus of 0.4%; April was 0.3%)

·         May Personal Spending due out Thursday at 8:30 (Briefing.com consensus of 0.4%; April was -0.1%)

·         May PCE Prices - CORE due out Thursday at 8:30 (Briefing.com consensus of 0.2%; April was 0.2%)

Upcoming Fed/Treasury Events:

·         Richmond Fed President Jeffrey Lacker (non voter, hawkish) to speak tomorrow at 8:30

Jason's Commentaries

The Nasdaq and S&P500 decided lead the market up, regaining the losses they have lost on Tuesday, triggered by the instability in Iraq. With that lead from the Nasdaq and S&P500, having a volume of 650m shares traded on the NYSE, the internals are showing that this might be a short covering by the market. Nonetheless, i believe this might be a start to a very volatile period. Google were one of the main issues that led the Nasdaq higher as well. And of cause, the energy sector, which got hit very badly on Tuesday, bounced significantly as well. The healthcare sector was the biggest gainer in the S&P500. Despite disappointing GDP data, the market rallied anyway. However i believe that effect might kick in a little today.








Market Call: FLAT to downside

Date: 26 Jun 2014