14 Jul 2014 AMC - Market rallied as Citi post top and bottom line beats

14 Jul 2014 AMC - Market rallied as Citi post top and bottom line beats

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: + 1.2%

·         France's CAC: + 0.8%

·         Spain's IBEX: + 0.6%

·         Portugal's PSI: + 0.6%

·         Italy's MIB Index: + 0.4%

·         Irish Ovrl Index: + 1.3%

·         Greece ASE General Index: + 2.0%

Before Market Opens 

S&P futures vs fair value: +9.50. Nasdaq futures vs fair value: +18.00.
The S&P 500 futures trade ten points above fair value.

Asian markets ended mostly higher, while India's Sensex (-0.1%) underperformed. Participants received a handful of economic data points: 

o    Japan's Industrial Production rose 0.7% month-over-month (expected 0.5%, previous 0.5%), while Capacity Utilization slipped 0.7% month-over-month (prior -2.2%) 

o    Singapore's GDP contracted 0.8% quarter-over-quarter (expected 2.5%, previous 1.6%), while the year-over-year reading rose 2.1% (consensus 3.1%, prior 4.7%) 

o    Indonesia's Car Sales jumped 6.0% year-over-year (previous -2.6%) 

o    India's Wholesale Price Index slowed to 5.4% year-over-year from 6.0% (expected 5.8%) 

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·         Japan's Nikkei rose 0.9%, ending on its session high amid broad strength. Exporters Konami, NEC, and Olympus gained between 2.3% and 4.0%. 

·         Hong Kong's Hang Seng added 0.5% after spending the session in a narrow range. Telecom names contributed to the advance with China Unicom Hong Kong and China Mobile gaining 4.7% and 2.6%, respectively. Galaxy Entertainment lost 1.1%. 

·         China's Shanghai Composite rallied 1.0% into the close. Growth-sensitive names outperformed with Liaoning Automotive and Fushun Special Steel both up 10.0%. 

Major European indices trade mostly higher, while Italy's MIB (-0.3%) lags. The trading week has gotten off to a quiet start with participants receiving just one economic report: 

o    Eurozone Industrial Production fell 1.1% month-over-month (expected -1.2%, previous 0.7%), while the year-over-year reading ticked up 0.5% (consensus 0.5%, prior 1.4%) 

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·         In France, the CAC is higher by 0.6% with all but three components showing gains. Producers of basic materials lead with ArcelorMittal and Solvay up 1.7% and 2.1%, respectively. Gemalto is the weakest performer, down 0.6%. 

·         Great Britain's FTSE trades up 0.8%. Staple stocks Tesco and WM Morrison Supermarkets outperform with respective gains of 2.4% and 2.2%. Burberry Group trails, down 1.5%. 

·         Germany's DAX trades with an advance of 0.9%. Allianz is higher by 2.1% and Deutsche Bank trades up 1.4%. 

·         In Italy, the MIB holds a loss of 0.3% amid weakness in financials. BMPS, Banco Popolare, Mediobanca, and UBI Banca trade with losses between 1.9% and 3.3%.

U.S. Equities

·         Equity futures point to a strong open as markets around much of the globe firm for a second session

·         Financials are once again in focus as Citigroup (C) posted top and bottom line beats. The company also announced a RMBS settlement amounting to $4.5 bln in cash payments and another $2.5 bln in consumer relief. The financial sector will remain in focus throughout the week as earnings reports flow

o    S&P Futures +8 @ 1970

o    Dow Futures +77 @ 16,958

o    Nasdaq Futures +18 @ 3916

Asia

·         Markets gained across much of Asia

·         Japan's Nikkei (+0.9%) advanced for the first time in six sessions

·         On the Mainland, China's Shanghai Composite (+1.0%) rallied to a one-month high, supported by Beijing's pledge to use more energy efficient vehicles

·         Hong Kong's Hang Seng (+0.5%) firmed on the back of strength in telecom

·         India's Sensex (-0.1%) slipped ahead of the cooler than anticipated Wholesale Price Index (5.4% YoY actual v. 5.5% YoY expected, 6.0% YoY previous) 

·         Australia's ASX (+0.5%) ended just shy of its best close in more than six years

Market Internals

Market Internals
The Dow closed up 112 (+0.66%) at 17055, the Nasdaq closed up 25 (+0.56%) at 4440, and the S&P 500 closed up 10 (+0.48%) at 1977. Action came on below average volume (NYSE 579 mln vs. avg. of 659; NASDAQ 1474 mln vs. avg. of 1685), with advancers outpacing decliners (NYSE 2007/1138, NASDAQ 1690/999) and new highs outpacing new lows (NYSE 173/12, NASDAQ 56/37).

Relative Strength: 
Coffee-JO +1.97%, Rare Earths-REMX +1.8%, Latin America 40-ILF +1.76%, Turkey-TUR +1.67%, Israel-EIS +1.59%, Grains-JJG +1.57%, Corn-CORN +1.52%, Greece-GREK +1.38%, Thailand-THD +1.37%, Social Media-SOCL +1.32%.

Relative Weakness: 
Junior Gold Miners-GDXJ -4.79%, Silver Miners-SIL -2.99%, Volatility-VXX -2.9%, Platinum-PPLT -1.32%, Utilities-XLU -1.14%, Russia-RSX -0.75%, Eastern Europe-ESR -0.56%, Italy-EWI -0.3%, British Pound-FXB -0.21%, Japanese Yen-FXY -0.21%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries

Closing Market Summary: Stocks Climb Amid M&A Activity
The major averages started the new trading week on an upbeat note, but the bulk of the action on Monday took place at the start of the session. The S&P 500 rose 0.5% with nine sectors registering gains, while the Dow Jones Industrial Average (+0.7%) outperformed. For its part, the small-cap Russell 2000 (+0.5%) settled in the middle of its trading range after showing relative strength at the start.

Equity indices received an opening boost from the financial sector (+0.6%), which in turn, was underpinned by Citigroup (C 48.42, +1.42) after the bank reported its earnings. Shares of Citigroup jumped 3.0% in reaction to above-consensus results that excluded the impact of a $3.8 billion charge stemming from settlements related to RMBS and CDO-related claims. The financial sector, meanwhile, spent the entire session in a steady retreat from its early high.

Although financials slipped from their opening levels, that void was filled by other influential sectors like energy (+0.9%) and technology (+0.8%).

The top-weighted S&P 500 sector—technology—rallied on the back of its largest components. Apple (AAPL 96.45, +1.23), Google (GOOGL 594.26, +7.61), Facebook (FB 67.90, +1.56), and IBM (IBM 189.87, +1.87) gained between 1.0% and 2.4% to name a few. However, chipmakers were not as strong with the PHLX Semiconductor Index tacking on 0.4%.

Elsewhere, the energy sector was boosted by M&A activity, while crude oil ended the session little changed at $100.99/bbl. On the acquisition front, Kodiak Oil & Gas (KOG 14.91, +0.68) rose 4.8% after agreeing to be acquired by Whiting Petroleum (WLL 84.58, +6.04) for $6 billion.

The energy sector was not the only source of M&A news as industrials (+0.6%) and health care (+0.4%) also benefitted from deals.

Among industrials, URS (URS 58.40, +6.38) surged 12.3% after agreeing to be acquired by Aecom (ACM 34.98, +3.22) for $56.31 per share. Furthermore, defense contractors and transports also displayed relative strength with the PHLX Defense Index and the Dow Jones Transportation Average both adding 0.7%.

On the countercyclical side, health care was limited to a gain of 0.4% even though Shire Pharmaceuticals (SHPG 254.27, +5.21) jumped 2.1% on reports it will accept a $53 billion takeover bid from AbbVie (ABBV 54.85, -0.11). Also of note, Mylan (MYL 51.24, +1.04) struck a $5.3 billion deal to purchase Abbott's (ABT 41.82, +0.52) non-US developed markets specialty and branded generics business.

Similar to health care, other countercyclical sectors also ended behind the broader market. Consumer staples (+0.4%) and telecom services (+0.3%) posted modest gains, while the utilities sector lost 1.2%.

Treasuries ended near their lows with the 10-yr yield up two basis points at 2.54%.

Participation was well below average as less than 600 million shares changed hands at the NYSE.

Tomorrow, the Retail Sales report for June (Briefing.com consensus 0.7%), June import/export prices, and the July Empire Manufacturing survey (consensus 13.2) will be released at 8:30 ET, while the Business Inventories report for May (consensus 0.6%) will cross the wires at 10:00 ET. Also of note, Fed Chair Janet Yellen will appear before the Senate Banking Committee to provide her semiannual testimony on the economy and monetary policy. 

·         S&P 500 +7.0% YTD 

·         Nasdaq Composite +6.3% YTD 

·         Dow Jones Industrial Average +2.9% YTD 

·         Russell 2000 +0.2% YTD

Commodities

Closing Commodities: Gold Drops 2.3%, Silver Loses 2.5%

·         Precious metals fell today as equity markets advanced and concerns over the health of the Portuguese banking system lessened.

·         Aug gold traded as low as $1302.20 per ounce after retreating from its session high of $1316.60 per ounce set at pit trade open. It eventually settled with a 2.3% loss at $1306.70 per ounce.

·         Sep silver pulled back from a session high of $21.13 per ounce and settled 2.5% lower at $20.92 per ounce, just above its session low of $20.90 per ounce. 

·         Aug crude oil dipped to a session low of $100.22 per barrel in morning action but recovered into positive territory as it headed into the close. The energy component touched a session high of $101.04 per barrel and settled at $100.99 per barrel, or 0.2% higher. 

·         Aug natural gas touched a session low of $4.09 per MMBtu in morning action after trading as high as $4.17 per MMBtu earlier in the session. However, it managed to erase losses and settled unchanged at $4.15 per MMBtu.

COMEX Metals Closing Prices

  Aug gold fell $30.60 to $1306.70/oz 

·         Gold fell more than 2% today as stock markets advanced and concerns over the health of the Portuguese banking system lessened. The yellow metal traded as low as $1302.20 after retreating from its session high of $1316.60 set at pit trade open. It eventually settled with a 2.3% loss. 

  Sep silver fell $0.53 to $20.92/oz 

·         Silver also traded in negative territory. It pulled back from a session high of $21.13 and settled just above its session low of $20.90, booking a loss of 2.5%. 

  Sep copper fell 2 cents to $3.25/lbs


CBOT Agriculture and Ethanol Closing Prices

• Sep corn rose 5 cents to $3.82/bushel 
• Sep wheat rose 14 cents to $5.39/bushel 
• Aug soybeans settled unchanged at $11.96/bushel 
• Sep ethanol rose 1 cent to $2.02/gallon

NYMEX Energy Closing Prices

  Aug crude oil rose $0.20 to $100.99/barrel 

·         Crude oil dipped to a session low of $100.22 in morning action but recovered into positive territory as it headed into the close. The energy component touched a session high of $101.04 and settled with a 0.2% gain. 

  Aug natural gas settled unchanged at $4.15/MMBtu 

·         Natural gas touched a session low of $4.09 in morning action after trading as high as $4.17 earlier in the session. However, it managed to erase losses and settled at the unchanged line. 

  Aug heating oil rose 2 cents to $2.88/gallon 

  Aug RBOB rose 2 cents to $2.93/gallon


Treasuries

Yields Continue Bounce Off Support: 10-yr: -06/32..2.544%..USD/JPY: 101.57..EUR/USD: 1.3618

·         Treasuries finished on their lows as steady selling persisted throughout the session. Click here to see an intraday yields chart.

·         The complex drifted little changed into the cash open, but slipped to session lows as equities opened to strong gains. 

·         Trade leaked lower throughout the day before settling on its worst levels. 

·         The belly of the curve saw the biggest impact from today's weakness as the 5y climbed +3.3bps to 1.674%. A push through the 1.680% level puts the important 1.750% area back in the crosshairs. 

·         The 10y rallied +2.9bps to 2.549%. The benchmark yield continues to bounce off 2.500% support and could see 2.650% with a move through the 2.580% resistance level.

·         At the long end, the 30y added +2.5bps to 3.368%. Resistance in the 3.400% area is helped by the 50 dma, and a breakout sets up another try at 3.500%. 

·         Selling swung the curve steeper as the 2-10-yr spread widened to 209bps. 

·         Precious metals lost ground with gold -$30 @ $1307 and silver -$0.51 @ $20.95. 

·         Data: Retail sales, Empire Manufacturing, import/export prices (8:30), and business inventories (10). 

·         Fed Speak: Fed Chair Janet Yellen will testify before the Senate Banking Committee (10).

On other news.... 

Currencies 

Dollar Trades Flat: 10-yr: -07/32..2.546%..USD/JPY: 101.57..EUR/USD: 1.3618

·         The Dollar Index hovers little changed amid an uneventful trade. Click here to see a daily Dollar Index chart.

·         A quiet U.S. session has seen the Index trapped in a 10 cent range as a lack of data and tomorrow's Senate Banking Committee appearance by Fed Chair Janet Yellen has action on hold.

·         EURUSD is +10 pips @ 1.3615 as trade continues to hug support in the area. The single currency saw an early spike up to the 1.3640 level, but was rejected by the 50 dma and has spent the remainder of the session slowly easing off the level. Some afternoon comments by ECB head Mario Draghi suggesting the central bank could still use unconventional tools to spark growth has had little impact. Eurozone data out tomorrow includes ZEW Economic Sentiment and German ZEW Economic Sentiment. 

·         GBPUSD is -40 pips @ 1.7075 as trade breaks below 1.7100 support that has been in place throughout July. Today's selling sets up a likely test of 1.7000 support. Britain's BRC Retail Sales Monitor is due out tonight while CPI, PPI, and RPI will cross the wires tomorrow. Bank of England head Mark Carney will speak in London.

·         USDCHF is flat @ .8920 as another uneventful session nears the close. Recent trade has struggled near the .8940 resistance level as sellers have held their own in defense of the 50 and 200 dma. Action remains tethered to the euro thanks to the Swiss National Bank's EURCHF120 floor. Swiss data is limited to PPI. 

·         USDJPY is +35 pips @ 101.60 as trade lifts off important 101.25 support ahead of tonight's Bank of Japan rate decision. Traders are taking note of Friday's close, which was the lowest since the beginning of February and has created the first ‘death cross' since November 2012. 

·         AUDUSD is unchanged @ .9390 as a lackluster trade nears the close. Today's session has held in a tight 30 pip range but U.S. trade has been even less volatile, limited to 15 pips. The latest Reserve Bank of Australia minutes and new motor vehicle sales cross the wires this evening. 

·         USDCAD is -20 pips @ 1.0710 as trade slips off this morning's three-week highs. The 1.0600/1.0700 support band will likely see some more congestion in the days ahead.

Next Week In View




Economic Commentaries

Economic Summary: No US data today; Retail Sales tomorrow at 8:30; Yellen to give Senate testimony tomorrow at 10:00

Upcoming Economic Data:

·         June Retail Sales due out Tuesday at 8:30 (Briefing.com consensus of 0.7%; May was 0.3%)

·         June Retail Sales Ex-Auto due out Tuesday at 8:30 (Briefing.com consensus of 0.6%; May was 0.1%)

·         July Empire Manufacturing due out Tuesday at 8:30 (Briefing.com consensus of 13.2%; June was 19.3)

·         June Export Prices Ex-Ag due out Tuesday at 8:30 (Briefing.com consensus of ; May was 0.1%)

·         June Import Prices Ex-Oil due out Tuesday at 8:30 (Briefing.com consensus of ; May was 0.0%)

·         May Business Inventories due out Tuesday at 10:00 (Briefing.com consensus of 0.6%; April was 0.6%)

Upcoming Fed/Treasury Events:

·         Fed Chair Janet Yellen set to give Congressional Testimony Tuesday (Senate) and Wednesday (House) at 10:00

Other International Events of Interest

·         Germany's DAX (+0.9%) leads the region higher after the country's World Cup victory over Argentina in the title game
The rest of the region's major averages sport gains of ~0.7%, but the periphery lags.

·         A let up in Portuguese yields continues with the 10y off -6.3bps @ 3.756%. The benchmark yield had probed the 4.00% level late last week on fears of a default by the parent company of Portugal's second largest bank, Banco Espirito Santo

Jason's Commentaries

As we move into the 2nd week of earnings, the banks are starting to release their earnings. And so far... the banks have been doing pretty well for their earnings, which held the market up so far. As far as the earnings are concerned, the main pillars of the market will decide where the market will head. And based on the past estimates, I reckon the market has somemore upside to go. The options activities have been very low and the market might repeat the 2007 tragedy once again.

The market started the day with a bullish run all the way until the market close, with very minor profit taking during the trading hours. Internals were showing divergence and the volumes seems to be picking up, but pretty low for a earning seasons volumes. Surprisingly, the banks are not the strongest sectors in the market last night. The energy and tech were the 2 main leaders. Utilities however, sunk. Indicating the bullishness in the market. On the technical perspective, Dow is having a good chance to break the high once again while the other indices are on their way back to their highs once again.








Market Call: FLAT to upside

Date: 15 Jul 2014