9 June 2014 AMC - Market held flat despite financials gains

9 June 2014 AMC - Market held flat after rally

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: + 0.2%

·         Germany's DAX: + 0.2%

·         France's CAC: + 0.2%

·         Spain's IBEX: + 0.9%

·         Portugal's PSI: + 0.6%

·         Italy's MIB Index: + 0.8%

·         Irish Ovrl Index: + 0.3%

·         Greece ATHEX Composite: Closed

Before Market Opens 

S&P futures vs fair value: -1.50. Nasdaq futures vs fair value: +0.20.
The S&P 500 futures trade two points below fair value.

Asian markets ended higher with Hong Kong's Hang Seng (+0.7%) in the lead. Elsewhere, Bank of Japan Governor Haruhiko Kuroda said the stimulus that was launched last year has achieved its goal of boosting the real economy and ending deflation, but reaching the 2.0% inflation target may take more than two years. 

·         In economic data: 

o    China's trade surplus expanded to $35.92 billion from $18.45 billion (expected surplus of $22.60 billion) as exports rose 7.0% year-over-year (consensus 6.6%, previous 0.9%), while imports fell 1.6% year-over-year (expected 6.1%, prior 0.8%). 

o    Japan's Q1 GDP was revised to 1.6% quarter-over-quarter (consensus 1.4%, previous 1.5%), while the year-over-year reading jumped 6.7% (expected 5.6%, prior 5.9%). Separately, GDP Pride Index slipped 0.1% year-over-year (consensus 0.0%, prior 0.0%) and the current account swung from a deficit of JPY780 billion to a surplus of JPY130 billion (expected surplus of JPY230 billion). Also of note, Household Confidence increased to 39.3 from 37.0 (consensus 37.7) and Economy Watchers Current Index rose to 45.1 from 41.6 (expected 45.2). 

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·         Japan's Nikkei added 0.3%, but ended on its session low. Exporters Casio, Isuzu, and Panasonic gained between 2.3% and 2.7%. On the downside, Sumco fell 4.6%. 

·         Hong Kong's Hang Seng gained 0.7% after spending the session in a narrow range. Heavyweights Hutchinson Whampoa, Tencent Holdings, and Want Want China Holdings gained between 1.9% and 2.2%. 

·         China's Shanghai Composite (+0.03%) ended flat. Datong Coal Industry lost 4.1% and Guangzhou Baiyunshan Pharmaceutical gained 5.5%. 

Major European indices trade little changed amid light volume due to Whit Monday. In news, Bank of England's Systemic Risk survey pointed to a declining probability of a high-impact event. 

·         Economic data was limited: 

o    Eurozone Sentix Investor Confidence fell to 8.5 from 12.8 (expected 13.2). 

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·         In France, the CAC is lower by 0.2%. Exporter Renault and defense contractors Airbus and Safran lead the retreat with losses between 0.8% and 1.0%. Steelmaker ArcelorMittal outperforms, up 1.4%. 

·         Germany's DAX trades flat. ThyssenKrupp leads with a gain of 1.9%, while exporters BMW and Daimler underperform with losses of 0.5% apiece. 

·         Great Britain's FTSE is higher by 0.2% with homebuilder Barratt Developments leading the way. The stock trades up 2.1%. On the downside, financials Aberdeen Asset Management and Lloyds Banking Group are down 0.9% and 1.4%, respectively.

U.S. Equities

·         Equity futures point to little change at the open as both the DJIA and S&P 500 look to add to Friday's all-time highs while the Nasdaq holds ~1.0% off its best level in more than 16 years

·         Many participants have begun to take notice of the VIX (10.73), which is showing signs of complacency, as action holds at levels last seen in February 2007

·         Today's session is absent of data, a condition which generally favors the bulls

o    S&P Futures -3 @ 1946

o    Dow Futures -19 @ 16,913

o    Nasdaq Futures -4 @ 3794

Asia

·         Markets rallied across most of Asia

·         Japan's Nikkei (+0.3%) climbed to a three-month high in response to the strongest Final GDP (1.6% QoQ actual v. 1.4% QoQ expected) reading since Q3 2011

·         On the Mainland, China's Shanghai Composite (UNCH) finished flat following the largest Chinese trade surplus ($35.9 bln actual v. $22.6 bln expected, EUR18.5 bln previous) in five years. Imports fell -1.6% YoY (+6.0% YoY expected) while exports jumped +7.0% YoY (7.0% expected)

·         Hong Kong's Hang Seng (+0.7%) remained near five-month highs

·         India's Sensex (+0.7%) climbed to yet another record high

·         Australia's ASX was closed for the Queen's Birthday

Market Internals

Market Internals -Technical-
The Nasdaq closed up 12 (0.28%) at 4334, the Dow closed up 19 (0.11%) at 16943, and the S&P 500 closed up 2 (0.09%) at 1951. Action came on slightly below average volume (NYSE 595 mln vs. avg. of 677; NASDAQ 1669 mln vs. avg. of 1816), with advancers outpacing decliners (NYSE 1894/1211, NASDAQ 1849/846) and new highs outpacing new lows (NYSE 311/5, NASDAQ 191/18).

Relative Strength: 
Biotechnology-XBI +6.16%, Latin America 40-ILF +1.77%, Regional Banks-KRE +1.55%, Oil-USO +1.52%, Banks-KBE +1.45%, Volatility-VXX +1.29%, BRICs-EEB +1.03%, China 25 Index-FXI +0.99%, Japan-EPP +0.78%, Hong Kong-EWH +0.76%.

Relative Weakness: 
Coffee-JO -4.02%, Egypt-EGPT -1.94%, Natural Gas-UNG -1.61%, Realty Majors-ICF -1.43%, Corn-CORN -1.35%, Grains-JJG -1.1%, Indonesia-IDX -0.67%, Chile-ECH -0.61%, Poland-EPOL -0.58%, Swiss Franc-FXF -0.47%.

Leaders and Laggards

 

Technical Updates

Briefing's Commentaries

Closing Market Summary: Small-Caps Lead Market Higher
The stock market finished the Monday session on a modestly higher note, but the S&P 500 (+0.1%) could not keep pace with the Russell 2000 (+0.9%). Similar to the Russell 2000, the Nasdaq (+0.3%) displayed relative strength, while the Dow Jones Industrial Average (+0.1%) settled just ahead of the S&P 500.

Equity indices climbed out of the gate with the early sentiment boosted by a set of acquisitions in three influential sectors; however, the intraday strength did not last as participants opted to take some money off the table after the Dow Jones Transportation Average surrendered its morning gain after outpacing the broader market over the past few weeks.

The largest S&P 500 sector received early support from chipmakers after Hittite Microwave (HITT 77.87, +17.31) agreed to be acquired by Analog Devices (ADI 55.31, +2.62) for $78/share. Shares of HITT surged 28.6%, but the PHLX Semiconductor Index narrowed its gain to 0.2% by the close.

Meanwhile, the broader tech sector (+0.3%) also slipped into the close, but was able to eke out a modest gain with help from its largest component. Apple (AAPL 93.70, +1.48) rose 1.6% on its first day of trading after the recent 7:1 share split.

Outside of technology, the remaining cyclical sectors saw a mixed finish. Consumer discretionary and energy settled in line with the S&P 500, materials (-0.3%) lagged, while financials (+0.4%), and industrials (+0.5%) outperformed.

The industrial sector finished ahead of the broader market, but the strength among defense contractors (PHLX Defense Index +0.8%) masked the underperformance of transport stocks. The Dow Jones Transportation Average was up as much as 0.6% in the late morning, but could not hold its gain into the close, ending flat. It is worth mentioning that today's underperformance took place after the bellwether complex surged nearly 8.5% since the start of the quarter versus a 4.2% gain for the S&P 500 over the same period.

While most cyclical sectors finished in line with or ahead of the broader market, the same could not be said for the four defensive groups. The telecom services sector tacked on 0.1%, while consumer staples (-0.1%), health care (-0.5%), and utilities (-0.7%) settled in the red.

Consumer staples spent the bulk of the session in negative territory, but shares of Hillshire Brands (HSH 62.06, +3.14) jumped 5.3% after Tyson Foods (TSN 37.50, -2.62) confirmed its offer to acquire the company for $63/share.

Also of note, the health care sector diverged from biotechnology, with the latter receiving a boost from Merck's (MRK 57.94, +0.09) offer to acquire Idenix Pharmaceuticals (IDIX 23.79, +16.56) for $24.50/share, which represents a gargantuan premium of 239% to Friday's closing price. Meanwhile, the iShares Nasdaq Biotechnology ETF (IBB 248.03, +1.94) advanced 0.8%.

On the fixed income side, Treasuries slumped overnight, but reclaimed a portion of their losses during the session. Ultimately, the 10-yr note shed five ticks, pushing its yield higher by two basis points to 2.61%.

Light participation continued to plague the market at the start of the week with only 595 million shares changing hands at the NYSE.

Tomorrow, the Wholesale Inventories report for April (Briefing.com consensus 0.3%) and the April Job Openings and Labor Turnover Survey will both be released at 10:00 ET. 

·         S&P 500 +5.6% YTD 

·         Nasdaq Composite +3.8% YTD 

·         Dow Jones Industrial Average +2.2% YTD 

·         Russell 2000 +1.0% YTD

Commodities

COMEX Metals Closing Prices

  Aug gold rose $1.10 to $1253.80/oz 

·         Gold pulled back from its session high of $1257.30 set at floor trade open and brushed a session low of $1252.30. It eventually settled with a 0.1% gain. 

  July silver rose $0.07 to $19.07/oz 

·         Silver also retreated from its session high of $19.17 and traded as low as $19.05. Unable to regain momentum, it settled with a 0.4% gain. 

  July copper fell 1 cent to $3.04/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         July corn fell 7 cents to $4.51/bushel 

·         July wheat fell 5 cents to $6.14/bushel 

·         July soybeans settled unchanged at $14.57/bushel 

·         June ethanol settled unchanged at $2.16/gallon 

·         July sugar (#16 (U.S.)) rose 0.13 of a penny to 25.13 cents/lbs

NYMEX Energy Closing Prices

·         July crude oil rose $1.77 to $104.44/barrel 

·         July natural gas fell 6 cents to $4.65/MMBtu 

·         July heating oil rose 2 cents to $2.89/gallon 

·         July RBOB rose 4 cents to $2.98/gallon

Treasuries

Yields Tick Higher: 10-yr: -06/32..2.612%..USD/JPY: 102.53..EUR/USD: 1.3588

·         Treasuries slipped amid a subdued trade that was brought on by a lack of data and news. Click here to see an intraday yields chart.

·         Yields held in a tight 3bp range.

·         Today's weakness had the biggest impact on the belly as the 5y rallied +3bps to 1.681%, a one-month high. The ability to reclaim the 1.700% level sets up a likely test of April highs near 1.800%. 

·         The 10y climbed +1.6bps to 2.613%. Current levels will be watched closely as trendline resistance and the 50 dma lurk in the vicinity. 

·         At the long end, the 30y rallied +1.4bps to 3.451%. The yield on the long bond has tacked on close to +20bps as trade has pushed lower in six of eight sessions, and is testing trendline resistance guarded by the 50 dma.

·         A flatter curve took hold as the 5-30-yr spread narrowed to 177bps. 

·         Precious metals saw small gains as gold added +$1 to $1253 and silver edged up $0.08 to $19.07. 

·         Data: Wholesale inventories and JOLTs Job Openings (10).

·         Auction: $28 bln 3y notes.

On other news.... 




Currencies 

Dollar Nears Best Levels Since February: 10-yr: -05/32..2.610%..USD/JPY: 102.51..EUR/USD: 1.3584

·         The Dollar Index drifts on session highs near 80.65 as trade flirts with its best close in four months. Click here to see a daily Dollar Index chart.

·         A rather subdued session has seen trade trapped in a tight five cent range since the equity open. 

·         EURUSD is -55 pips @ 1.1.3585 as trade continues to flirt with key support in the area. The single currency saw a quiet overnight trade as many banks in the eurozone were closed in observance of Whit Monday, but steady selling in early U.S. trade has action on track for its lowest close since early February. French industrial production will cross the wires tomorrow. 

·         GBPUSD is flat @ 1.6795 as trade hugs the 50 dma. An absence of data and news from the region has made for a lackluster session as trade continues to test resistance near 1.6800. Britain's BRC Retail Sales Monitor will cross the wires this evening and manufacturing production is due out tomorrow. 

·         USDCHF is +40 pips @ .8975 as trade nears four-month highs. Today's bid has action contending with its first close above the 200 dma since September and comes as Swiss banks were closed in observance of Whit Monday. Action remains a derivative of the euro thanks to the Swiss National Bank's EURCHF1.20 floor. Swiss retail sales are scheduled for tomorrow.

·         USDJPY is flat @ 102.50 amid a subdued trade. The pair climbed to session highs near 102.65 after Final GDP (1.6% QoQ actual v. 1.4% QoQ expected) posted its best reading since Q3 2011, but has surrendered those gains. Japanese data due out tonight is limited to Tertiary Industry Activity. 

·         AUDUSD is +15 pips @ .9345 as trade contends with the May highs. The hard currency has seen a boost from the weekend release of the Chinese trade surplus ($35.9 bln actual v. $22.6 bln expected, EUR18.5 bln previous), which was the largest in five years. Australian data includes NAB Business Confidence, ANBZ Job Advertisements, and home loans. China's CPI and PPI will be released tonight. 

·         USDCAD is -20 pips @ 1.0910 as trade slips off the 50 dma following the better than expected Canadian housing starts. Minor support rests in the 1.0900 area, but 1.0825 remains the more important level.

Next Week In View





Economic Commentaries

Economic Summary: No data today; Wholesale Inventories due out Tuesday at 10:00
Fed/Treasury Events Summary:

·         Saint Louis Fed President James Bullard (not a voting FOMC member, typically dovish) gave a speech where he indicated that the Fed is closer to its goals then anytime over the past 5 years.

Upcoming Economic Data:

·         April Wholesale Inventories due out Tuesday at 10:00 (Briefing.com consensus of 0.3%; March was 1.1%)

·         April JOLTS - Job Openings due out Tuesday at 10:00 (Briefing.com consensus of ; March was 4.014 M )

Upcoming Fed/Treasury Events Summary:

·         Fed Governor Daniel Tarullo (voting FOMC member, dovish) to speak today at 12:45

·         Boston Fed President Eric Rosengren (not a voting FOMC member, dovish) to speak today at 13:30

Other International Events of Interest

·         Japan's Q1 GDP was revised to 1.6% quarter-over-quarter (consensus 1.4%, previous 1.5%), while the year-over-year reading jumped 6.7% (expected 5.6%, prior 5.9%). Separately, GDP Pride Index slipped 0.1% year-over-year (consensus 0.0%, prior 0.0%) and the current account swung from a deficit of JPY780 billion to a surplus of JPY130 billion (expected surplus of JPY230 billion). Also of note, Household Confidence increased to 39.3 from 37.0 (consensus 37.7) and Economy Watchers Current Index rose to 45.1 from 41.6 (expected 45.2). 

Jason's Commentaries

VIX once again went to a low as financials and tech dragged the whole market up. Tech was mainly dragged out by the gain in Apple as there is a 7 to 1 split. With a volume of 602m shares traded on the NYSE, it's actually quite decent. Market started with a bullish bias at the start of the market but lost the gain by mid day. It's another UFUM again consequently. We're likely to correct soon. Market is at a very complacent level as VIX is at such low levels. Let's just hope that 2007 won't happen once again.

Market Call: FLAT to downside

Date: 10 June 2014