28 July 2014 AMC - Market ended flat ahead of FOMC

28 July 2014 AMC - Market ended flat ahead of FOMC

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: -0.1%

·         Germany's DAX: -0.5%

·         France's CAC: + 0.3%

·         Spain's IBEX: -0.1%

·         Portugal's PSI: + 0.3%

·         Italy's MIB Index: -0.6%

·         Irish Ovrl Index: + 0.2%

·         Greece ASE General Index: -0.1%

Before Market Opens 

S&P futures vs fair value: +1.90. Nasdaq futures vs fair value: +6.70.
The S&P 500 futures trade two points above fair value.

Markets in Asia ended on a mixed note, but indices in China and Japan rallied. Tradable news and data were absent from the calendar.

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·         Japan's Nikkei rallied 0.5% to its best close in more than six months. Casino-related names outperformed as Japan Cash Machine and Universal Entertainment Corp. gained 5.3% and 2.5%, respectively. 

·         Hong Kong's Hang Seng added 0.9%, climbing for a fifth straight session and finishing at its best level since November 2010. Financials saw solid gains with Bank of Communications adding 6.2% on reports Beijing will allow more private capital to flow into the economy. 

·         China's Shanghai Composite jumped 2.4% to its best level in more than seven months. Financials led the way as Bank of Communications finished limit up, 10%, and Industrial & Commercial Bank of China rose 2.3%. 

Major European indices trade little changed with markets in Italy (-0.2%) and Spain (-0.2%) showing relative weakness. Of note, Moody's raised Portugal's sovereign rating to Ba1 from Ba2 with a ‘Stable' outlook. 

·         Economic data was limited to just one item: 

o    Italy's Business Confidence ticked down to 99.7 from 99.9 (expected 99.9) 

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·         In France, the CAC is higher by 0.2% with drug maker Sanofi in the lead. The stock trades higher by 0.9%. Consumer names also display strength with Danone, L'Oreal, and Pernod Ricard up between 0.2% and 0.5%. 

·         Great Britain's FTSE hovers just above its flat line. Reckitt Benckiser leads with a gain of 2.7% after announcing plans to spin off its pharmaceutical business. On the downside, Aberdeen Asset Management is lower by 3.2%. 

·         Germany's DAX is lower by 0.1% with exporters on the defensive. Daimler and Volkswagen hold respective losses of 2.8% and 1.9%. Drug makers outperform with Bayer and Merck up 1.3% and 2.3%, respectively. 

·         Italy's MIB trades down 0.2%. Financials lag with Banco Popolare, BMPS, Mediobanca, and UBI Banca down between 1.3% and 2.0%.

Market Internals

Market Internals -Technical-
The Dow closed up 22 (+0.13%) at 16983, the S&P 500 closed up 1 (+0.03%) at 1979, and the Nasdaq closed down 5 (-0.10%) at 4445. Action came on mixed volume (NYSE 576 mln vs. avg. of 652; NASDAQ 1665 mln vs. avg. of 1657), with decliners outpacing advancers (NYSE 1334/1782, NASDAQ 994/1691) and mixed new highs/lows (NYSE 94/60, NASDAQ 56/79).

Relative Strength: 
China 25 Index-FXI +2.14%, Rare Earths-REMX +1.65%, Columbia Index-GXG +1.61%, Indonesia-IDX +1.56%, Junior Gold Miners-GDXJ +1.47%, Silver Miners-SIL +1.42%, Utilities-XLU +1.39%, South Korea-EWY +1.27%, Grains-JJG +1.13%, Middle East and Africa-GAF +1.04%.

Relative Weakness: 
Vietnam-VNM -1.75%, Biotechnology-XBI -1.62%, Homebuilders-XHB -1.56%, Oil and Gas Exploration-XOP -1.31%, U.S. Home Construction-ITB -1.25%, Sugar-SGG -1.23%, Austria-EWO -1.19%, Russia-RSX -1.14%, Eastern Europe-ESR -0.89%, Sweden-EWD -0.73%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries

Closing Market Summary: Stocks Begin Trading Week on Unassuming Note
The stock market began the last week of July on a quiet note with the S&P 500 ending less than a point above its flat line. Like the benchmark index, the Dow Jones Industrial Average (+0.1%) also posted a slim gain, while the Russell 2000 (-0.5%) and Nasdaq Composite (-0.1%) lagged throughout the session.

The major averages were awakened from their weekend slumber with an opening retreat that pressured the S&P 500 below its 20-day moving average (1975). Even though the index dipped early, only two sectors—consumer staples (-0.5%) and industrials (-0.5%)—displayed noteworthy weakness that persisted into the close.

Meanwhile, most of the remaining sectors kept pace with the broader market and climbed to highs as the afternoon wore on. The consumer discretionary sector (+0.2%) was an early laggard, but ended among the leaders with help from the likes of Netflix (NFLX 424.66, +2.80) and Priceline.com (PCLN 1239.29, +11.51). Furthermore, the sector drew strength from the retail industry, where Family Dollar (FDO 75.74, +15.08) agreed to be acquired by Dollar Tree (DLTR 54.87, +0.65) for $74.50/share, representing a 22.8% premium to Friday's closing price.

M&A activity was also the focus in another influential sector—technology (+0.2%)—with Zillow (Z 160.32, +1.46) acquiring Trulia (TRLA 65.04, +8.69) for $3.50 billion in stock, which represents roughly a 25.3% premium to Friday's closing price.

Elsewhere among tech shares, the largest sector component—Apple (AAPL 99.02, +1.35)—rallied 1.4%, but high-beta chipmakers were not nearly as fortunate. The PHLX Semiconductor Index shed 0.1% after being down as much as 1.3% during the opening hour of action.

Similar to chipmakers, biotech stocks struggled throughout the session, and while their underperformance weighed on the Nasdaq Composite, it had little impact on the health care sector. The iShares Nasdaq Biotechnology ETF (IBB 251.91, -2.15) lost 0.9%, while the health care sector tacked on 0.1%.

Like health care, countercyclical telecom services (+0.5%) and utilities (+1.5%) also finished in the green. Notably, the utilities sector climbed throughout the session to extend its year-to-date advance to 13.3%.

On the fixed income side, the 10-yr note made a brief appearance in the green when equities were on their lows, before sliding to a fresh low ahead of the close. The benchmark note shed four ticks with its yield climbing two basis points to 2.48%.

Participation was below average with less than 580 million shares changing hands at the NYSE.

Economic data was limited to the Pending Home Sales report for June: 

·         Pending home sales fell 1.1% in June, which was worse than the 0.8% decrease forecast by the Briefing.com consensus 

o    The May reading was revised down to 6.0% from 6.1% 

Tomorrow, the Case-Shiller 20-City Index for May (Briefing.com consensus 10.0%) will be released at 9:00 ET, while July Consumer Confidence (consensus 85.6) will cross the wires at 10:00 ET. On the earnings front, BP (BP 50.64, -0.28), Honda Motor (HMC 35.18, +0.19), Pfizer (PFE 30.10, -0.09), and UPS (UPS 102.66, -0.91) will report their results ahead of the opening bell. 

·         S&P 500 +7.1% YTD 

·         Nasdaq Composite +6.4% YTD 

·         Dow Jones Industrial Average +2.5% YTD 

·         Russell 2000 -2.1% YTD

Commodities

Closing Commodities: Crude Oil Closes Lower, Below $102/Barrel

·         Aug gold chopped around near the unchanged level today in a tight range between $1301.80 per ounce and $1305.80 per ounce. Unable to gain momentum, it settled just 20 cents higher at $1303.20 per ounce. 

·         Sep silver slipped into negative territory in afternoon action after trading as high as $20.73 per ounce earlier in the session. It touched a session low of $20.55 per ounce and settled with a 0.3% loss at $20.57 per ounce.

·         Sep crude oil came off its session low of $100.82 per barrel in morning action and trended higher to a session high of $102.12 per barrel. However, it lost momentum heading into the close and settled with a 0.4% loss at $101.68 per barrel.

·         Aug natural gas rose to a session high of $3.85 per MMBtu but reversed into the red in late morning floor trade. It brushed a session low of $3.73 per MMBtu and eventually settled at $3.75 per MMBtu, or 0.8% lower.

COMEX Metals Closing Prices

  Aug gold rose $0.20 to $1303.20/oz 

·         Gold chopped around near the unchanged line today in a tight range between $1301.80 and $1305.80. Unable to gain momentum, it settled just 20 cents higher. 

  Sep silver fell $0.07 to $20.57/oz 

·         Silver slipped into negative territory in afternoon action after trading as high as $20.73 earlier in the session. It brushed a session low of $20.55 and settled with a 0.3% loss. 

  Sep copper settled unchanged at $3.24/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Sep corn rose 5 cents to $3.68/bushel 

·         Sep wheat fell 3 cents to $5.35/bushel 

·         Aug soybeans rose 24 cents to $12.36/bushel 

·         Sep ethanol rose 5 cents to $2.09/gallon 

·         Sep sugar (#16 (U.S.)) rose 0.04 of a penny to 24.58 cents/lbs

NYMEX Energy Closing Prices

  Sep crude oil fell $0.42 to $101.68/barrel

·         Crude oil trended higher after coming off its session low of $100.82 in morning action. It brushed a session high of $102.12 but lost momentum heading into the close and settled with a 0.4% loss. 

  Aug natural gas fell 3 cents to $3.75/MMBtu

·         Natural gas rose to a session high of $3.85 but fell into negative territory in late morning floor trade. It brushed a session low of $3.73 and eventually settled with a 0.8% loss. 

  Aug heating oil fell 3 cents to $2.89/gallon 

  Aug RBOB fell 1 cent to $2.85/gallon




Treasuries

Treasuries Slip Amid Quiet Trade: 10-yr: -06/32..2.490%..USD/JPY: 101.87..EUR/USD: 1.3430

·         Treasuries booked small losses, finishing near their lows. Click here to see an intraday yields chart.

·         The complex held small losses into the cash open before rallying into this morning's disappointing pending home sales (-1.1% actual v. -0.8% expected) data. 

·         Maturities put in their highs in the moments following the miss, and slipped over the remainder of the session as equities recovered their early losses. 

·         This afternoon's $29 bln 2y note auction raised eyebrows as it drew 0.544%, the highest since May 2011. The auction saw a slightly less than average 3.22x bid/cover, and was supported by the 26.9% indirect takedown. Primary dealers were left with a whopping 58.8% of the supply. 

·         Post-auction selling put in the session lows before ticking higher into the cash close.

·         Today's weakness had the biggest impact on the belly as the 5y added +2.7bps to 1.703%. The yield closed at its highest level in three weeks, and is now just a handful of bps below the important 1.750% level.

·         The 10y tacked on +2.2bps to 2.491%. Action over much of the past week has held in a tight range (2.450%/2.520%) as resistance at the level holds.

·         At the long end, the 30y ticked up +1.8bps to 3.262%. Today's selling ran action off Friday's 13-month closing low. 

·         A slightly steeper curve won out as the 2-10-yr spread widened to 199.5bps.

·         Precious metals were little changed with gold and silver @ $1305 and $20.63, respectively. 

·         Data: Case-Shiller 20-city Index (9) and consumer confidence (10). 

·         Auction: $35 bln 5y notes.

On other news.... 

Currencies 

Dollar Drifts Little Changed: 10-yr: -07/32..2.495%..USD/JPY: 101.85..EUR/USD: 1.3438

·         The Dollar Index drifts little changed near 81.00. Click here to see a daily Dollar Index chart.

·         An extremely quiet session has seen action trapped in a less than 5 cent range for U.S. trade. 

·         EURUSD is +5 pips @ 1.3440 as trade stabilizes near eight-month lows. A lackluster session has seen action limited to just 15 pips. 

·         GBPUSD is +15 pips @ 1.6990 as buyers take charge for the first time in nine sessions. Sterling has found support in the 1.6950/1.7000 area as buyers emerge in defense of the 50 dma. Britain's net lending to individuals will cross the wires tomorrow. 

·         USDCHF is -10 pips @ .9035 as trade slips off its best levels since the beginning of February. Today's sleepy trade is a result of the lackluster session for the euro. 

·         USDJPY is +5 pips @ 101.85 as buyers fight to put in a seventh day of gains. Today's advance has the pair probing resistance in the 101.80 area that is guarded by the 50 dma. Additional resistance near 102.00 is also home to the 100 and 200 dma. Japan's household spending and retail sales figures are due out tonight. 

·         AUDUSD is +15 pips @ .9410 after holding minor support near .9400. The .9350 level is home to more important support that is helped by the 50 dma. 

·         USDCAD is -10 pips @ 1.0805 as action stalls at five-week highs. Many participants are watching 1.0800/1.0820 resistance as the 200 dma also lurks in the vicinity.

Next Week In View




Economic Commentaries

Economic Summary: Pending Home Sales -1.1%; Fed decision Wednesday at 14:00
Economic Data Summary:

·         June Pending Home Sales vs Briefing.com consensus of -0.8%; May was +6.1%

Upcoming Economic Data:

·         May Case Schiller 20 City Index due out Tuesday at 9:00 (Briefing.com consensus of 10.0%; April was 10.8%)

·         July Consumer Confidence due out Tuesday at 10:00 (Briefing.com consensus of 85.6; June was 85.2)

Upcoming Fed/Treasury Events:

·         The Treasury will auction off new debt this week. Results of each auction will be at 13:00

o    Tuesday: $29 bln in 2 year notes

o    Wednesday: $35 bln in 5 year notes

o    Thursday: $29 bln in 7 year notes

·         The Fed will begin at two day policy meeting tomorrow.  Policy decision will be announced Wednesday at 14:00 (no press conference or econ projections).

Other International Events of Interest

·         Chinese equities benefitted from speculation about potential stimulus measures being deployed by Beijing. 

·         In Japan, the approval rating of Prime Minister Shinzo Abe's cabinet fell below 50% for the first time since taking office, according to Nikkei. 

Jason's Commentaries

As expected, the market was totally flat and volatile last session. We had a very bearish start to the trading session which quickly reversed by 10am and closed the day with a mixed note. While we're having the utilities being the biggest gainer of 1.39% and Industrials losing 0.5% as the laggard. Industrials has been lagging and if that continues, the market might be positioning for a bearish period. Internals were showing mixed signals as well. It seems that we're likely to enter another day of volatility.








Market Call: FLAT to upside

Date: 29 Jul