13 Aug 2014 AMC - Market recovered from downtrend

13 Aug 2014 AMC - Market recovered from downtrend

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: + 0.4%

·         Germany's DAX: + 1.4%

·         France's CAC: + 0.8%

·         Spain's IBEX: + 0.6%

·         Portugal's PSI: + 1.9%

·         Italy's MIB Index: + 0.6%

·         Irish Ovrl Index: + 0.5%

·         Greece ASE General Index: + 1.6%

Before Market Opens 

S&P futures vs fair value: +6.80. Nasdaq futures vs fair value: +15.50.
The S&P 500 futures trade seven points above fair value.

Most Asian markets finished the session with gains. Japan's Q2 GDP plunged 6.8% year-over-year, but that was still ahead of the expected decline of 7.1%. Economy Minister Akira Amari said the recovery remains on track, but the policy approach would be flexible if needed. Mr. Amari also said there is no need for a higher budget at this time. 

·         In other economic news: o Japan's GDP Price Index rose 2.0% year-over-year (expected 1.7%; previous -0.1%) 

o    China's New Loans came in at CNY385 billion (expected CNY780 billion; previous CNY1.08 trillion), while Retail Sales increased 12.2% (consensus 12.4%; prior 12.4%). Separately, Fixed Asset Investment jumped 17.0% year-over-year (expected 17.4%; previous 17.3%) and Industrial Production increased 9.0% year-over-year, as expected (previous 9.2%) 

o    South Korea's Unemployment Rate decreased to 3.4% from 3.6% (expected 3.5%) 

o    Australia's Westpac Consumer Sentiment improved to 3.8% from 1.9%. Separately, Wage Price Index ticked up 0.6% quarter-over-quarter (expected 0.7%; previous 0.7%)

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·         Japan's Nikkei added 0.4%, rallying to a one-week high as action saw a third day of gains. Exporters were supported by the weaker yen with Nikon Corp rallying 1.8%. 

·         Hong Kong's Hang Seng gained 0.8%, finishing at its best levels since November 2010. Telecom provided support with China Mobile and China Unicom Hong Kong both higher by 1.9%. 

·         China's Shanghai Composite added 0.1%, ending near its 2014 highs. Insurer Ping An tacked on 1.8% following its better than expected quarterly report. 

Major European indices trade higher across the board with Germany's DAX (+0.9%) in the lead. The Bank of England released its quarterly inflation report, which revealed expectations for inflation to remain at or below 2.0% until the end of the forecast period. In addition, Bank Governor Mark Carney said the BoE plans to raise rates in small increments, but there is no pre-set course for the rate path. 

·         Participants received several data points: 

o    Eurozone Industrial Production slipped 0.3% month-over-month (expected 0.3%; previous -1.1%), while the year-over-year reading was unchanged (consensus 0.1%; prior 0.6%) 

o    Germany's CPI rose 0.3% month-over-month, while the year-over-year reading increased 0.8%. Both figures matched expectations. Separately Wholesale Price Index ticked up 0.1% month-over-month (expected -0.2%; previous -0.1%), while the year-over-year reading fell 0.7% (consensus -0.9%; prior -0.8%) 

o    Great Britain's Average Earnings Index + Bonus declined 0.2% (expected -0.1%; last 0.4%), while the Claimant Count fell 33,600 (expected -30,000; prior -39,500). The Unemployment Rate slipped to 6.4% from 6.5% 

o    France's CPI fell 0.3% month-over-month (expected -0.2%; prior 0.0%) 

o    Spain's CPI fell 0.9% month-over-month, while the year-over-year reading ticked down 0.3%. Both figures were in line with expectations 

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·         Great Britain's FTSE is higher by 0.2% with financials in the lead. Barclays, Royal Bank of Scotland and Prudential are up between 1.5% and 2.2%. Miners Glencore and Rio Tinto underperform with losses close to 2.8% apiece. 

·         In France, the CAC trades up 0.6%. Financials have also provided support with BNP Paribas, Credit Agricole, and Societe Generale holding gains between 1.5% and 2.0%. Bouygues is the weakest performer, down 2.3%. 

·         Germany's DAX outperforms with a gain of 0.9%. Utilities E.On and RWE lead after E.On reported better than feared results. The two names hold respective gains of 4.2% and 2.4%. Deutsche Boerse and Henkel are the only two decliners with losses close to 0.4% apiece.

U.S. Equities

·         Futures point to a firm open

·         The VIX (14.13) holds near a two-week low

·         MBA Mortgage Index (-2.7%)

·         Retail sales (0.0% actual v. 0.3% expected)

·         Retail sales ex-auto (0.1% actual v. 0.3% expected)

o    S&P Futures +6 @ 1937

o    Dow Futures +40 @ 16,560

o    Nasdaq Futures +14 @ 3918

Asia

·         Markets rallied across most of Asia

·         Japan's preliminary GDP tumbled at an annualized rate of -6.8%, marking the worst reading since the twin disasters back in 2011

·         China's new loans (CNY385 bln actual v. CNY780 bln expected), industrial production (9.0% YoY actual v. 9.1% YoY expected) and fixed asset investment (17.0% YTDoY actual v. 17.4% YTDoY expected) all missed

·         Australia's Westpac Consumer Sentiment improved to 3.8% (1.9% previous) and the Wage Price Index (0.6% QoQ actual v. 0.8% QoQ expected) fell short of estimates

·         Japan's Nikkei (+0.4%) rallied to a one-week high as action saw a third day of gains

·         Hong Kong's Hang Seng (+0.8%) finished at its best levels since November 2010

·         China's Shanghai Composite (+0.1%) ended near its 2014 highs

·         India's Sensex (+0.2%) gained despite the hot inflation data

·         Australia's ASX (-0.3%) slipped off one-week highs

Market Internals

Market Internals -Technical-
The Nasdaq closed up 45 (+1.02%) at 4434, the S&P 500 closed up 13 (+0.67%) at 1947, and the Dow closed up 91 (+0.55%) at 16652. Action came on below average volume (NYSE 548 mln vs. avg. of 660; NASDAQ 1486 mln vs. avg. of 1682), with advancers outpacing decliners (NYSE 2335/814, NASDAQ 1813/891) and new highs outpacing new lows (NYSE 75/27, NASDAQ 57/47).

Relative Strength: 
Greece-GREK +3.09%, Cotton-BAL +2.45%, Biotechnology-XBI +2.21%, Biotechnology-IBB +2.17%, Heating Oil-UHN +2.07%, Shipping-SEA +1.84%, Middle East and Africa-GAF +1.84%, Russia-RSX +1.75%, Vietnam-VNM +1.55%, Taiwan-EWT +1.33%.

Relative Weakness: 
Volatility-VXX -5.56%, Natural Gas-UNG -3.75%, Base Metals-DBB -1.36%, Copper-JJC -1.12%, Smart Grid Infrastructure-GRID -0.92%, Latin America 40-ILF -0.86%, British Pound-FXB -0.71%, Columbia Index-GXG -0.48%, Egypt-EGPT -0.19%, Japanese Yen-FXY -0.18%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries

Closing Market Summary: Stocks and Bonds End Near Highs
The stock market ended the midweek session on an upbeat note with the Nasdaq Composite in the lead. The tech-heavy index advanced 1.0%, while the S&P 500 added 0.7% with all ten sectors ending in the green.

Equity indices registered roughly half of their gains at the open with heavily-weighted health care (+1.2%) and technology (+1.1%) providing support from the start. In fact, only one other sector—industrials (+0.8%)—ended ahead of the broader market.

Notably, the health care space was underpinned by biotechnology. The iShares Nasdaq Biotechnology (IBB 257.13, +5.47) surged off its 50-day moving average for a 2.2% gain, registering its best close since late July. In addition to supporting the top-weighted countercyclical sector, biotech helped fuel the Nasdaq rally.

Top-weighted tech components like Apple (AAPL 97.24, +1.27), Facebook (FB 73.77, +0.94), and Google (GOOGL 584.56, +12.44) also provided support to the Nasdaq, while chipmakers followed closely. The PHLX Semiconductor Index added 0.9% to extend its weekly gain to 1.8%. Of the 30 index components, 26 settled higher, while Cree (CREE 44.82, -4.39) tumbled 8.9% following its one-cent beat and below-consensus guidance for the upcoming quarter.

Elsewhere, industrials drew strength from defense contractors, while transport stocks ended in line with the broader market. The PHLX Defense Index rose 1.4% with Raytheon (RTN 93.64, +2.26) leading the way. For its part, the Dow Jones Transportation Average settled higher by 0.7%.

Although every sector finished higher, there were some soft spots present in the market. Retail stocks underperformed throughout the session following a disappointing Retail Sales report for July and worse than expected earnings from Macy's (M 56.47, -3.29). The stock fell 5.5%, while the SPDR S&P Retail ETF (XRT 84.52, -0.54) lost 0.6%.

On the countercyclical side, consumer staples (+0.3%), utilities (+0.2%), and telecom services (+0.1%) all finished near their flat lines, while the aforementioned health care sector provided leadership.

Strikingly, the daylong strength in equities did not lure money out of the Treasury market. The 10-yr note climbed throughout the session, ending near its high. The benchmark yield slipped three basis points to 2.42%.

Participation was below average with fewer than 550 million shares changing hands at the NYSE.

Economic data included Retail Sales, Business Inventories, and the MBA Mortgage Index: 

·         Retail sales showed no growth in July following an unrevised 0.2% increase in June, while the Briefing.com consensus expected an increase of 0.3% 

o    Motor vehicle sales weighed down overall consumer demand 

§  Manufacturers already reported a drop in unit sales for July (16.5 million SAAR from 16.9 million SAAR in June), which translated into a 0.2% decline in sales at motor vehicles and parts dealers. Motor vehicles and parts sales fell 0.3% in June. 

o    Excluding motor vehicle sales, demand increased 0.1% in July after increasing an unrevised 0.4% in June, while the consensus expected an increase of 0.3% 

·         Business Inventories increased 0.4% in June after increasing an unrevised 0.5% in May, which was in line with the Briefing.com consensus. 

·         The weekly MBA Mortgage Index fell 2.7% to follow last week's 1.6% increase 

Tomorrow, weekly initial claims (Briefing.com consensus 305K) and export/import prices for July will be reported at 8:30 ET. 

·         S&P 500 +5.3% YTD 

·         Nasdaq Composite +6.2% YTD 

·         Dow Jones Industrial Average +0.5% YTD 

·         Russell 2000 -1.9% YTD

Commodities

COMEX Metals Closing Prices

·         Dec gold rose $4 to $1314.70/oz

·         Sep silver fell $0.07 to $19./oz

·         Sep copper fell 4 cents to $3.11/lb

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Sep corn closed unchanged at $3.58/bushel

·         Sep wheat fell 9 cents to $5.29/bushel

·         Nov soybeans fell 13 cents to $10.47/bushel

·         Sep ethanol rose 5% at $2.17/gallon

·         Nov sugar (#16 (U.S.)) fell 0.10 of a penny to 25.88 cents/lb

 NYMEX Energy Closing Prices

·         Sep crude oil rose $0.21 to $97.56/barrel

·         Sep natural gas fell $0.15 to $3.82/MMBtu

·         Sep heating oil rose 6 cents to $2.90/gallon

·         Sep RBOB rose 2 cents to $2.75/gallon

Treasuries

10Y Slides to 2.413%, Closes at 13-Month Low: 10-yr: +08/32..2.413%..USD/JPY: 102.41..EUR/USD: 1.3366

·         Treasuries finished on session highs. Click here to see an intraday yields chart.

·         The complex held small losses ahead of the cash open, but regained the flat line in response to the disappointing retail sales (0.0% actual v. 0.3% expected) data.

·         Action would see a steady climb over the remainder of the session as the in-line line business inventories (0.4%) data and average $24 bln 10y note auction failed to ignite any meaningful selling. 

·         The auction drew 2.439% (WI 2.434%) and a 2.83x bid/cover. A slightly better than average indirect bid (47.0%) helped offset the light direct bid (15.1%). Primary dealers ended up with 37.9% of the supply.

·         Up front, the 2y slipped -3.6bps to 0.400% and settled at its lowest levels since June. 

·         In the belly, the 5y eased -3.6bps to 1.577%. Action posted its first close below the 200 dma for the first time since the end of May. 

·         The 10y shed -2.9bps to finish @ 2.413%, marking its lowest close in 13 months. 

·         At the long end, the 30 ended off -2.5bps @ 3.241%. Trade holds just a couple of bps above its lowest close since May 2013. 

·         A steeper curve won out as the 2-10-yr spread widened to 201.5bps. 

·         Precious metals were mixed as gold gained $3 to $1314 and silver fell $0.04 to $19.87. 

·         Data: Initial and continuing claims and import/export prices (8:30). 

·         Auction: $16 bln 30y bonds.

On other news.... 

Currencies 

Dollar Fights for Best Close in 11 Months: 10-yr: +10/32..2.408%..USD/JPY: 102.44..EUR/USD: 1.3367

·         The Dollar Index holds small gains as trade contends with the 81.60 level. Click here to see a daily Dollar Index chart.

·         The area has proved difficult to conquer over the past two weeks, but trade will finish at an 11-month high if it can hold at these levels. 

·         EURUSD is flat @ 1.3365 amid a whippy trade. The single currency saw early selling probe the 1.3350 level before some weak U.S. retail sales data catapulted action above 1.3400. Trade has since surrendered those gains and is flirting with its lowest close since September. Eurozone data is heavy as Final CPI and French nonfarm payrolls accompany preliminary GDP figures from across the region.

·         GBPUSD is -120 pips @ 1.6690 as trade readies its lowest level in four months. Sterling ignored today's better than expected UK jobs report as the Bank of England's downgrade of wage growth and comments from BOE head Mark Carney suggesting the timing of a rate hike was uncertainimpacted trade. The 200 dma helps support near 1.6650. 

·         USDCHF is unchanged @ .9075 as a wild session draws to a close. The pair tested the lower (.9040) and upper (.9100) bounds of the range that has been in place over the past two weeks, but looks likely to finish flat as action remains dictated by the euro. Switzerland's PPI is set for tomorrow.

·         USDJPY is +20 pips @ 102.45 as trade ticks higher for a third day and is looking likely to close at a one-week high. Today's bid comes in the face of a -6.8% annualized preliminary GDP print, marking worst reading since the twin natural disasters in 2011. Traders will be watching the 102.80 level in the days ahead as a breakout puts the pair at a four-month high. Japan's core machinery orders will be released this evening. 

·         AUDUSD is +40 pips @ .9305 as action climbs off two-month lows. Resistance near .9340 will be monitored as the 100 dma provides additional help at the level. Australian data due out tonight is limited to MI Inflation Expectations. 

·         USDCAD is flat @ 1.0920 as trade hugs support in the area. Canada's New Home Price Index will cross the wires tomorrow.

Next Week In View




Economic Commentaries

Economic Summary: Retail Sales flat as estimates called for a gain; Business Inventories in line with expectations
Economic Data Summary:

·         Weekly MBA Mortgage Applications -2.7% vs Briefing.com consensus of ; Last Week was 1.6%

·         July Retail Sales 0.0% vs Briefing.com consensus of 0.3%; June was 0.2%

·         July Retail Sales Ex-Auto 0.1% vs Briefing.com consensus of 0.3%; June was 0.4%

o    According to the July employment report, aggregate earnings growth was soft at 0.2%. That didn't leave much room for consumer demand growth unless consumers dipped into their savings. Consumers have steadily increased their savings each month so far in 2014. Weak retail sales demand suggests the personal savings rate increased again in July, which kept the upward savings trend on track. Unless the savings rate begins to decline, consumption growth will be highly reliant upon employment gains. 

·         June Business Inventories 0.4% vs Briefing.com consensus of 0.4%; May was 0.5%

o    Inventories for manufacturers (0.3%) and merchant wholesalers (0.3%) were known prior to the release. The only bit of new information was that retailer inventories increased 0.5% in June, up from a 0.2% increase in May. 

Fed/Treasury Events Summary:

·         NY Fed President Bill Dudley (voting FOMC member, dovish) said in a speech that much has been done over the past few years to mitigate the structural flaws that make wholesale funding a point of weakness in the global financial system. The New York Fed, for example, has led a Federal Reserve effort to make the tri-party repo system more resilient to stress, while the SEC has taken steps to address risks associated with money market mutual funds.  Nonetheless, some important issues and vulnerabilities remain.

·         Boston Fed President Eric Rosengren (non-voter, dovish) gave a speech in which he did not comment on monetary policy or the economy.  (spoke about broker-dealer regulation). 

Upcoming Economic Data:

·         Weekly Initial Claims due out Thursday at 8:30 (Briefing.com consensus of 305K; Last Week was 289K)

·         Weekly Continuing Claims due out Thursday at 8:30 (Briefing.com consensus of 2.523 M ; Last Week was 2.518 M )

·         July Export Prices Ex-Ag due out Thursday at 8:30 (Briefing.com consensus of ; June was -0.3%)

·         July Import Prices Ex-Oil due out Thursday at 8:30 (Briefing.com consensus of ; June was -0.1%)

Upcoming Fed/Treasury Events:

·         The Treasury will auction off $24 bln in 10 year notes today at 13:00

·         The Treasury will auction off $13 bln in 30 year bonds today at 13:00

Other International Events of Interest

·         China's new loans (CNY385 bln actual v. CNY780 bln expected), industrial production (9.0% YoY actual v. 9.1% YoY expected) and fixed asset investment (17.0% YTDoY actual v. 17.4% YTDoY expected) all missed.

·         Japan's preliminary GDP tumbled at an annualized rate of -6.8%, marking the worst reading since the twin disasters back in 2011.

·         The Bank of England halved its wage growth forecast to 1.25% and Governor Mark Carney suggested the timing of a rate hike was uncertain

·         Eurozone industrial production (-0.3% MoM actual v. 0.5% MoM expected) missed estimates

Jason's Commentaries

It seems that the market has just forgotten about it's bearishness and started going up once again. Volumes were very week and divergence were obvious in the market. The market decided to head up higer from the start of the opening bell and held up high till the closing bell. The main movers were the Tech, being led by Google and Intel which gained over 2% last night. The Biotech performed pretty well as well, gaining more than 1.3%. Looking at the technicals, if we're heading above 196, we're likely to recover from the downtrend.








Market Call: FLAT to upside

Date: 14 Aug 2014