8 Jul 2014 AMC - Market sold off ahead of FOMC minutes

8 Jul 2014 AMC - Market sold off ahead of FOMC minutes

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: -0.6%

·         Germany's DAX: -1.4%

·         France's CAC: -1.4%

·         Spain's IBEX: -1.8%

·         Portugal's PSI: -3.0%

·         Italy's MIB Index: -2.7%

·         Irish Ovrl Index: -1.4%

·         Greece ASE General Index: -4.0%

Before Market Opens 

S&P futures vs fair value: -3.70. Nasdaq futures vs fair value: -3.80.
The S&P 500 futures trade four points below fair value.

Asian markets ended the day on a mixed note. 

·         Economic news was limited to a handful of data points: 

o    Japan's Current Account surplus expanded to JPY380 billion from JPY130 billion (expected surplus of JPY170 billion), while Bank Lending rose 2.3% year-over-year (expected 2.2%, previous 2.3%). Separately, Economy Watchers Current Index rose to 47.7 from 45.1 (expected 49.2) 

o    Australia's NAB Business Confidence ticked up to 8 from 7, while NAB Business Survey improved to 2 from -1 

------ 

·         Japan's Nikkei lost 0.4%, falling for a third straight session. The stronger yen weighed as Hitachi shed 0.4% and Toyota Motor fell 0.6%. 

·         Hong Kong's Hang Seng ended flat, holding near its best levels of the year. Casino names remained under pressure as Galaxy Entertainment and Wynn Macau lost 2.7% and 1.4%, respectively. 

·         China's Shanghai Composite added 0.2%, closing at a three-week high. Datang International Power Generation surged the daily limit, 10%, amid word it would restructure its coal-chemical business. 

Major European indices trade lower across the board with Italy's MIB (-1.7%) pacing the slide. European Central Bank member Christian Noyer said the challenges of the eurozone are no longer systemic, but economic. Mr. Noyer also commented on ECB policy, saying financial conditions are normalizing due to ECB actions, but low inflation continues posing a problem. 

·         Participants received several data points: 

o    Germany's trade surplus expanded to EUR18.80 billion from EUR17.20 billion (expected surplus of EUR16.40 billion) 

o    French trade deficit widened to EUR4.90 billion from EUR4.10 billion (expected deficit of EUR4.50 billion), while the government budget deficit widened to EUR64.30 billion from EUR64.20 billion (expected deficit of EUR70.00 billion) 

o    Great Britain's Industrial Production fell 0.7% month-over-month (expected 0.2%, previous 0.3%), while the year-over-year reading rose 2.3% (consensus 3.1%, prior 2.9%). The decline represented the largest monthly drop since January 2013. Separately, Manufacturing Production fell 1.3% month-over-month (expected 0.4%, previous 0.3%), while the year-over-year reading jumped 3.7% (consensus 5.6%, last 4.3%) 

o    Swiss Retail Sales fell 0.6% year-over-year (expected 1.8%, previous 0.8%), while CPI slipped 0.1% month-over-month (forecast 0.1%, prior 0.3%) 

------ 

·         In France, the CAC is lower by 0.5% with all but two components trading in the red. Veolia Environnement and Technip are the two weakest index members with both down near 2.3%. Airbus and Total outperform with respective gains of 0.8% and 0.2% 

·         Germany's DAX trades down 0.6%. Commerzbank leads the retreat with a 3.9% loss in reaction to reports the bank may be hit with fines as part of its deferred-prosecution agreement with U.S. authorities. Peer Deutsche Bank is lower by 1.1%, while insurer Allianz outperforms with a gain of 0.9% 

·         Great Britain's FTSE holds a loss of 0.7%. International Consolidated Airlines is the worst performer, down 5.2%. Miners outperform with Fresnillo, Randgold Resources, and Rio Tinto up between 0.5% and 0.8% 

·         In Italy, the MIB trades down 1.7% amid weakness in bank shares. Banca di Milano Scarl, BMPS, and UBI Banca are down between 4.0% and 4.2%

U.S. Equities

·         Equity futures suggest light selling at the open

·         Yesterday's weakness erased Thursday's nonfarm payroll gains

·         The VIX (11.33) climbed off its lowest levels since February 2007

·         The unofficial start to earnings season takes place after the close as former Dow component Alcoa (AA) is set to release its quarterly results

o    S&P Futures -4 @ 1967

o    Dow Futures -26 @ 16,920

o    Nasdaq Futures -5 @ 3899

Asia

·         Markets settled mixed across Asia

·         Japan posted a wider than expected current account balance (JPY0.38 trln actual v. JPY0.17 trln expected)

·         Australia's NAB Business Confidence ticked up to 8 (7 previous). Taiwan's inflation rate held at 1.6%, as expected

·         Japan's Nikkei (-0.4%) fell for a third straight session

·         Hong Kong's Hang Seng (UNCH) held near its best levels of 2014

·         China's Shanghai Composite (+0.2%) closed at a three-week high

·         India's Sensex (-2.0%) tumbled off record highs

·         Australia's ASX (-0.1%) remained near its best levels in six years

·         Indonesia's Jarkata Composite (+0.7%) continued to gain ground ahead of tonight's election

Market Internals

Market Internals -Technical-
The Nasdaq closed down 60 (-1.35%) at 4391, the S&P 500 closed down 14 (-0.70%) at 1964, and the Dow closed down 118 (-0.69%) at 16907. Action came on mixed volume (NYSE 668 mln vs. avg. of 674; NASDAQ 2035 mln vs. avg. of 1719), with decliners outpacing advancers (NYSE 1232/1908, NASDAQ 554/2121) and new highs outpacing new lows (NYSE 61/19, NASDAQ 24/31).

Relative Strength: 
Junior Gold Miners-GDXJ +1.67%, Volatility-VXX +1.51%, Sugar-SGG +1.32%, 20+ Year Treasuries-TLT +1.12%, Silver Miners-SIL +0.92%, South Africa-EZA +0.7%, Indonesia-IDX +0.58%, Brazilian Real-BZF +0.37%, Japanese Yen-FXY +0.32%, Middle East and Africa-GAF +0.32%.

Relative Weakness: 
Greece-GREK -4.53%, Social Media-SOCL -4.16%, Biotechnology-XBI -3.77%, Internet Composite-FDN -2.98%, Clean Energy-PBW -2.39%, Wind Energy-FAN -2.34%, Italy-EWI -2.25%, India-INP -2.17%, Spain-EWP -1.9%, Austria-EWO -1.73%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries

Closing Market Summary: High-Growth Names Weigh on Equity Indices Again
The major averages registered their second consecutive decline that sent the S&P 500 lower by 0.7% with nine sectors ending in the red. Like yesterday, small-cap stocks underperformed with the Russell 2000 and Nasdaq Composite posting respective losses of 1.2% and 1.4%.

In some ways, today's session resembled yesterday's affair as stocks began the trading day on a cautious note amid weakness in European equities. Yesterday, a disappointing Industrial Production report from Germany contributed to the cautious posture, while today's losses followed the largest monthly decline in UK's Industrial Production (-0.7%) since January 2013.

With participants receiving another warning sign about the strength of economic growth in the eurozone, the stage was set for another day of profit taking.

The technology sector resisted some of the selling pressure yesterday, but the top-weighted S&P 500 sector lost 1.0% today. The influential sector suffered from losses among components of all sizes, including a 0.6% drop in the shares of Apple (AAPL 95.32, -0.62) after the top-weighted tech stock spiked 2.1% on Monday.

Social media names slumped notably with the likes of Facebook (FB 62.76, -2.53), LinkedIn (LNKD 158.67, -10.58), and Twitter (TWTR 37.41, -2.82) posting losses between 3.9% and 7.0%.

Things looked a bit better among chipmakers as the PHLX Semiconductor Index trimmed its loss to 0.5% after being down as much as 1.0% at the halfway point of the session. Similarly, biotechnology also inched up off its midday low, but the iShares Nasdaq Biotechnology ETF (IBB 253.63, -5.46) still lost 2.1%, which weighed on the health care sector (-0.9%).

On the upside, the utilities sector (+0.6%), which struggled last week, spent the entire session in the green to boost its week-to-date gain to 1.0%.

Utilities notwithstanding, consumer staples (-0.2%), energy (-0.2%), and materials (-0.3%) settled ahead of the broader market, but could not climb into the green. In the materials space, Alcoa (AA 14.85, +0.11) bucked the trend, adding 0.6% ahead of its after-hours earnings report.

Today's weakness in equities translated into strength for the bond market, sending the 10-yr note higher by 15 ticks. For its part, the benchmark yield fell five basis points to 2.56%.

Participation was a bit below average with just under 670 million shares changing hands at the NYSE.

Economic data was limited to the Jobs Openings and Labor Turnover Survey and the Consumer Credit report: 

·         The Job Openings and Labor Turnover Survey for May indicated job openings increased to 4.635 million from 4.464 million 

·         Consumer credit increased by $19.60 billion in May after increasing a downwardly revised $26.10 billion (from $21.80 billion) in April. The Briefing.com consensus expected consumer credit to increase by $16.10 billion 

o    Consumer credit typically goes through large monthly revisions, but any future revision is unlikely to alter the current trend of double-digit credit growth 

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET, while the minutes from the June FOMC meeting will cross the wires at 14:00 ET. 

·         S&P 500 +6.2% YTD 

·         Nasdaq Composite +5.1% YTD 

·         Dow Jones Industrial Average +2.0% YTD 

·         Russell 2000 +0.7% YTD

Commodities

Closing Commodities: Oil, gold, silver largely recover morning losses

·         Precious metals fell into negative territory following the Job Openings and Labor Turnover Survey for May report which showed job openings increased to 4.635 mln from 4.464 mln.

·         Aug gold retreated from a session high of $1325.70 per ounce and brushed a session low of $1314.30 per ounce. It eventually settled at $1316.60 per ounce, just 50 cents below the break-even level.

·         Sep silver touched a session high of $21.25 per ounce shortly after floor trade opened but chopped around near the unchanged line following the release of May JOLTS data. Unable to gain momentum, it settled 1 cent higher at $21.02 per ounce.

·         Aug crude oil advanced to a session high of $104.20 per barrel moments after equity markets opened but quickly retreated into the red. It brushed a session low of $102.98 per barrel and settled with a 0.1% loss at $103.36 per barrel.

·         Aug natural gas spent its entire floor session in negative territory, dipping as low as $4.13 per MMBtu in morning action. It eventually settled with a 0.7% loss at $4.20 per MMBtu.

COMEX Metals Closing Prices

 

·         Aug gold fell $0.50 to $1316.60/oz 

·         Sep silver rose $0.01 to $21.02/oz 

·         Sep copper settled unchanged at $3.26/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Sep corn fell 3 cents to $3.99/bushel 

·         Sep wheat fell 2 cents to $5.56/bushel 

·         Aug soybeans fell 26 cents to $12.48/bushel 

·         Sep ethanol rose 5 cents to $2.04/gallon 

·         Sep sugar (#16 (U.S.)) rose 0.05 of a penny to 24.55 cents/lbs

NYMEX Energy Closing Prices

  Aug crude oil fell $0.13 to $103.36/barrel 

·         Crude oil advanced to a session high of $104.20 moments after equity markets opened but quickly retreated into negative territory. It brushed a session low of $102.98 and settled with a 0.1% loss. 

  Aug natural gas fell 3 cents to $4.20/MMBtu 

·         Natural gas spent its entire floor session in the red, dipping as low as $4.13 in morning action. It eventually settled with a 0.7% loss. 

  Aug heating oil fell 4 cents to $2.87/gallon 

  Aug RBOB fell 2 cents to $2.97/gallon


Treasuries

Yields Press Lower: 10-yr: +12/32..2.565%..USD/JPY: 101.54..EUR/USD: 1.3611

·         Treasuries saw solid gains as buyers remained in control for a second session. Click here to see an intraday yields chart.

·         Light buying had yields off a couple of bps ahead of the cash open and they continued lower into this afternoon's average $27 bln 3y note auction.

·         The auction drew 0.992% (WI 0.996%) and a slightly better than average 3.38x bid/cover. A solid showing from indirect bidders (38.2%) helped offset the tepid direct bid (12.7%). Primary dealers ended up with 49.1% of the supply.

·         Yields probed their lows in an initial response to the auction, but began ticking higher as the results were digested before ending just off their lowest levels of the session. 

·         The 5y slipped -3.7bps to 1.697%. Traders will be watching congestion in the 1.675% area with a breakdown producing a test of the 1.625% level. 

·         The 10y fell -5.2bps to 2.565%. The benchmark yield pressed back below its 50 dma, and is nearing key support near 2.500%. 

·         At the long end, the 30y tumbled -6bps to 3.380%. The 3.350% area will be watched closely in the days ahead as a breach puts the May lows near 3.275% in focus. 

·         Curve flattening persisted with the 2-10-yr spread narrowing to 206bps. 

·         Precious metals eked out a gain with gold +$1 @ $1318 and silver +$0.03 @ $21.05. 

·         Data: MBA Mortgage Index (7) and the FOMC minutes (14). 

·         Auction: $21 bln 10y note reopening.

On other news.... 

Currencies 

Dollar Slips for Second Day: 10-yr: +12/32..2.568%..USD/JPY: 101.53..EUR/USD: 1.3612

·         The Dollar Index hovers on session lows near 80.15. Click here to see a daily Dollar Index chart.

·         The greenback held small gains throughout the overnight session, but slipped into the red shortly after U.S. equity markets opened for business. 

·         Support in the 80.20 area is being followed closely as both the 50 and 100 dma lurk in the vicinity.

·         EURUSD is +5 pips @ 1.3610 as trade fights for a second day of gains. The single currency dipped to session lows near 1.3590 in early trade, but has recovered those losses as buyers stepped up to defend support. All in all, the session has been relatively quiet as trade has held in a tight 30 pip range. European Central Bank President Mario Draghi speaks in London tomorrow afternoon.

·         GBPUSD is flat @ 1.7130 as action has recovered the losses that developed following the manufacturing production miss. Sterling broke to 1.7085 immediately after the disappointing data crossed the wires, but steady buying over the remainder of the session has clawed back those losses. Aiding the recovery was the solid NIESR GDP Estimate (0.9%). 

·         USDCHF is -5 pips @ .8930 as light selling persists for a second session. The pair saw little response to the tamer than anticipated CPI and retail sales figures as action continues to be dictated by activity in the euro. Resistance near .8950 has posed a problem as sellers have provided a staunch defense of the 200 dma. 

·         USDJPY is -35 pips @ 101.50 as trade contends with its lowest close in a week. Today's selling comes following the larger than expected Japanese current account surplus, and has pushed action below the 200 dma. Support in the 101.25 area is key. 

·         AUDUSD is +35 pips @ .9405 as buyers remain in control for a third day. The hard currency saw an early boost from the uptick in NAB Business Confidence (8 actual v. 7 previous), which helped action climb off support and the 50 dma in the .9340 area. Australian data is limited to Westpac Consumer Sentiment. Chinese data due out tonight includes CPI and PPI.

·         USDCAD is -10 pips @ 1.0670 as trade contends with the 1.0600/1.0700 support band. Canada's housing starts are due out tomorrow.

Next Week In View




Economic Commentaries

Economic summary: Consumer Credit at 15:00; June FOMC Minutes tomorrow afternoon
Economic Data Summary:

·         May JOLTS (Job Openings and Labor Turnover Survey) 4.635 mln; April to 4.464 mln from 4.455 mln

Fed/Treasury Events Summary:

·         None

Upcoming Economic Data:

·         May Consumer Credit this afternoon at 15:00 (Briefing.com consensus of $16.3 bln vs. $26.8 bln in April)

·         June FOMC Minutes Wednesday at 14:00

·         International:

o    China CPI at 21:30

Upcoming Fed/Treasury Events:

·         Fed's Lacker will speak at 13:00

·         3 Year $27 bln Treasury Note Auction

·         Fed's Kocherlakota will speak at 13:45

·         BoE Rate Decision tomorrow at 7:00

Jason's Commentaries

The market did something really unexpected last night... which is to sell of ahead of the FOMC minutes which is being led by both Nasdaq and Russells. Internals were showing some increase of volumes to 672m shares traded on the NYSE. While the sectors were being led by Discretionary and healthcare. The financials and Tech are hit pretty hard as well. It seems that the market is looking to take profit ahead of the FOMC minutes. On the Tecnicals, the market had a bearish reversal and we're entering into the third day. I reckon the market is unlikely to head down somemore. We're likely to stay sideways for a while.








Market Call: FLAT and volatile

Date: 9 Jul 2014