15 Aug 2014 AMC - Market held flat as indices approaches resistance and FOMC minutes

15 Aug 2014 AMC - Market held flat as indices approaches resistance and FOMC minutes

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: -1.4%

·         France's CAC: -0.7%

·         Spain's IBEX: -0.7%

·         Portugal's PSI: + 0.3%

·         Italy's MIB Index: Closed

·         Irish Ovrl Index: + 0.6%

·         Greece ATHEX Composite: Closed

Before Market Opens 

S&P futures vs fair value: +5.50. Nasdaq futures vs fair value: +14.70.
The S&P 500 futures trade six points above fair value.

Markets in Asia finished the week on an upbeat note amid light volume. Stimulus chatter continued in China following lower than expected loan data for July. Press reports discussed potential selective interest rate cuts before the end of the year, but the official reserve requirement ratio is not expected to be changed. 

·         Economic data was limited: 

o    Hong Kong's GDP contracted 0.1% quarter-over-quarter (expected 0.9%; previous 0.3%), while the year-over-year reading increased 1.8% (consensus 1.9%; prior 2.6%)

o    Singapore's Retail Sales fell 1.1% month-over-month (expected -2.3%; prior 5.2%), while the year-over-year reading ticked up 0.4% (consensus 2.2%; previous -5.9%) 

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·         Japan's Nikkei settled right above its flat line after spending the session in a narrow range. Sony and Yamaha outperformed with gains close to 2.0% apiece, while Mitsubishi Materials lost 1.7%. 

·         Hong Kong's Hang Seng added 0.6%, ending near its best level of the session with support from large cap names. Lenovo Group and HSBC Holding gained 2.7% and 1.3%, respectively. China Mobile climbed 5.8% following its earnings beat. 

·         China's Shanghai Composite rose 0.9%, climbing throughout the session. China National Software and Daheng New Epoch Technology both gained 10.0%. 

Major European indices hold solid gains, but trading volume has been on the light side with some participants away for Assumption Day. Italy's MIB is closed altogether. Russian President Vladimir Putin made an appearance in Crimea, calling for a peaceful resolution to the crisis in Ukraine. Separately, eyewitness reports had Russian armored personnel carriers crossing the border into Ukraine. 

·         Economic data was limited: 

o    Great Britain's preliminary Q2 GDP rose 0.8% quarter-over-quarter, as expected, while the year-over-year reading increased 3.2% (consensus 3.1%; prior 3.1%). Separately, Index of Services increased 1.0%, as expected 

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·         Great Britain's FTSE is higher by 0.7% with miners in the lead. BHP Billiton and Rio Tinto hold respective gains of 2.4% and 1.5% after BHP Billiton announced plans to spin off its aluminum, manganese, and nickel assets. 

·         Germany's DAX trades up 0.8% with utilities setting the pace. E.ON has added 1.5% and RWE is higher by 2.8%. Adidas is the weakest performer, down 0.7%. 

·         In France, the CAC is higher by 1.0% amid broad strength. Utility stocks are also in the lead with Electricite de France and GDF Suez up 3.5% and 1.5%, respectively. On the downside, industrial name Alstom holds a loss of 0.3%.

U.S. Equities

·         Equity futures point to a firm open as the major averages look for their fifth gain in six days

·         Retail remains in focus after J.C. Penney (JCP) and Nordstrom (JWN) released their quarterly reports

·         The VIX (12.42) holds at its lowest levels of August

o    S&P Futures +4 @ 1958

o    Dow Futures +44 @ 16,726

o    Nasdaq Futures +13 @ 3981

Asia

·         Markets gained across most of Asia amid a lack of data and news

·         Japan's Nikkei (+0.0%) was flat

·         Hong Kong's Hang Seng (+0.6%) put in its best close since November 2010

·         China's Shanghai Composite (+0.9%) finished at an eight-month high

·         India's Sensex (+0.7%) closed just shy of all-time highs

Market Internals

Market Internals -Technical-
The Nasdaq closed up 12 (+0.27%) at 4465, the S&P 500 closed flat at 1955, and the Dow closed down 51 (-0.30%) at 16663. Action came on mixed volume (NYSE 742 mln vs. avg. of 661; NASDAQ 1675 mln vs. avg. of 1678), with decliners outpacing advancers (NYSE 1534/1575, NASDAQ 1148/1552) and new highs outpacing new lows (NYSE 121/36, NASDAQ 67/58). 

Relative Strength: 
20+ Year Treasuries-TLT +1.09%, Latin America 40-ILF +1.04%, BRICs-EEB +0.96%, Copper Miners-COPX +0.88%, Biotechnology-IBB +0.85%, Agriculture-DBA +0.84%, Semiconductors-SMH +0.83%, Egypt-EGPT +0.82%, Netherlands-EWN +0.71%, Belgium-EWK +0.65%. 

Relative Weakness: 
Turkey-TUR -2.16%, Silver-SLV -1.26%, South Africa-EZA -1.26%, Poland-EPOL -1.18%, Gold Miners-GDX -1.14%, Columbia Index-GXG -0.98%, Wind Energy-FAN -0.96%, Middle East and Africa-GAF -0.92%, Retail-XRT -0.86%, Homebuilders-XHB -0.74%.

Leaders and Laggards

Technical Updates

Commentaries 

Closing Market Summary: Stocks End Strong Week on Cautious Note
The stock market finished an upbeat week on a cautious note after a late-morning headline interrupted an extension of this week's rally. Despite the intraday weakness, the major averages were able to climb off their lows into the close. The S&P 500 settled right below its flat line with six sectors ending in the green. The benchmark index posted a 1.2% gain for the week while the Nasdaq outperformed. The tech-heavy index added 0.3% to extend this week's advance to 2.2%.

Like yesterday, equities climbed out of the gate with biotechnology claiming the lead at the start of the session. However, the advance was halted after the spokesman for Ukraine's National Security and Defense Council said the country's army destroyed a part of an armed convoy from Russia. The news sent U.S. and European equity indices to lows, while boosting German Bunds, U.S. Treasuries, and the yen.

Notably, Germany's Bunds finished on their highs with the 10-yr yield down seven basis points at 0.95%. Similarly, the U.S. 10-yr note rallied in reaction to the news from Ukraine, but surrendered a portion of its gain during afternoon action. The benchmark yield fell six basis points to 2.34% to register its lowest close since mid-June of last year.

One could argue that the market was ripe for some profit taking after a run that saw the S&P 500 log four gains over the past five sessions. Similarly, European equities were forced to give back a portion of their gains from this week.

Six sectors registered losses with telecom services (-0.4%) finishing at the bottom of the leaderboard. Meanwhile, heavily-weighted consumer discretionary (-0.1%), financials (-0.4%), and industrials (-0.3%) also ended among the laggards, which prevented the S&P 500 from returning into the green.

However, the Nasdaq Composite was able to claw its way back into positive territory with help from biotechnology and chipmakers. The iShares Nasdaq Biotechnology ETF (IBB 263.41, +2.21) added 0.9% to end the week higher by 4.7%. Microchip manufacturers also contributed to the outperformance of the Nasdaq with the PHLX Semiconductor Index climbing 1.0%.Applied Materials (AMAT 22.48, +1.33) was a standout, surging 6.3% after reporting a one-cent beat. For its part, the technology sector (+0.1%) ended little changed.

Also of note, the energy space (+0.5%) finished in the lead, rebounding from this week's underperformance. The sector trimmed its weekly loss to 0.5%, while crude oil jumped 1.9% to $97.31/bbl. Despite the advance, the energy component shed 0.3% during the week.

After registering the lowest NYSE floor volume of the year yesterday, today's participation was boosted by options expiration. As a result, more than 740 million shares changed hands at the NYSE.

Economic data included the PPI report, Empire Manufacturing survey, Net Long-Term TIC Flows, Industrial Production, Capacity Utilization, and the preliminary reading of the Michigan Sentiment survey: 

·         Producer prices increased 0.1% in July after increasing 0.4% in June, while the Briefing.com consensus expected an increase of 0.2% 

o    As expected, energy prices declined in July, falling 0.6% 

o    Excluding food and energy, core PPI rose 0.2% for a second consecutive month, as expected by the consensus 

·         The Empire Manufacturing Survey for August registered a reading of 14.7, which was below the prior month's reading of 25.6 

o    The Briefing.com consensus expected a decline to 15.5 

·         The June net long-term TIC flows report showed an $18.70 billion outflow of foreign capital from U.S.-denominated assets to follow last month's inflow of $19.40 billion 

·         Industrial production increased 0.4% in July after an upwardly revised 0.4% (from 0.2%) gain in June, while the Briefing.com consensus expected an increase of 0.3% 

o    Capacity utilization hit 79.2%, as expected by the Briefing.com consensus 

·         The University of Michigan Consumer Sentiment Index fell to 79.2 in the August preliminary reading from 81.8 in July, while the Briefing.com consensus expected an increase to 81.7 

On Monday, the NAHB Housing Market Index for August will be released at 10:00 ET. 

·         Nasdaq Composite +6.9% YTD 

·         S&P 500 +5.8% YTD 

·         Dow Jones Industrial Average +0.5% YTD 

·         Russell 2000 -2.0% YTD 

Commodities

Closing Commodities: Crude Oil Rises 2%, Precious Metals Fall

·         Dec gold traded lower today but erased some losses after the spokesman for Ukraine's National Security and Defense Council said the country's forces destroyed a part of an armed convoy from Russia.

·         The precious metal dipped to a session low of $1293.00 per ounce in early morning action and reversed back above the $1300 per ounce level following the Ukraine headlines. It eventually settled 0.7% lower at $1306.60 per ounce, booking a loss of 0.3% for the week.

·         Sep silver also spent today's session in the red, sliding as low as $19.51 per ounce. Unable to gain buying support, it settled 1.9% lower at $19.52 per ounce, bringing losses for the week to 2.1%.

·         Sep crude oil lifted from its session low of $95.66 per barrel in early morning floor trade and trended higher on the Ukraine news. The energy component touched a session high of $95.70 per barrel moments before settling with a 1.9% gain at $97.31 per barrel. Today's move higher helped cut losses for the week to 0.3%.

·         Sep natural gas, on the other hand, traded in negative territory today. It tumbled as low as $3.76 per MMBtu and settled 3.3% lower at $3.77 per MMBtu, booking a weekly loss of 4.8%.

 COMEX Metals Closing Prices

  Dec gold fell $8.60 to $1306.6/oz

·         Gold traded lower today but erased some losses after the spokesman for Ukraine's National Security and Defense Council said the country's forces destroyed a part of an armed convoy from Russia. The precious metal dipped to a session low of $1293.00 in early morning action and reversed back above the $1300 level following the Ukraine headlines. It eventually settled 0.7% lower, booking a loss of 0.3% for the week. 

  Sep silver fell $0.38 to $19.52/oz 

·         Silver also spent today's session in the red, sliding as low as $19.51. Unable to gain buying support, it settled 1.9% lower, bringing losses for the week to 2.1%. 

  Sep copper rose 1 cent to $3.10/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Sep corn rose 3 cents to $3.66/bushel 

·         Sep wheat rose 15 cents to $5.52/bushel 

·         Nov soybeans fell 4 cents to $10.52/bushel 

·         Sep ethanol fell 2 cents to $2.16/gallon 

·         Nov sugar (#16 (U.S.)) settled unchanged at 25.88 cents/lb

 NYMEX Energy Closing Prices

  Sep crude oil rose $1.77 to $97.31/barrel 

·         Crude oil lifted from its session low of $95.66 in early morning floor trade and trended higher on news that Ukraine's army destroyed a part of an armed convoy from Russia. The energy component touched a session high of $95.70 moments before settling with a 1.9% gain. Today's move higher helped cut losses for the week to 0.3%. 

  Sep natural gas fell 13 cents to $3.77/MMBtu 

·         Natural gas, on the other hand, traded in negative territory today. It tumbled as low as $3.76 and settled 3.3% lower, booking a weekly loss of 4.8%.

  Sep heating oil rose 3 cents to $2.85/gallon 

  Sep RBOB rose 3 cents to $2.70/gallon

 


Treasuries

Longer Dated Yields Press to Lowest Levels in Over a Year: 10-yr: +15/32..2.343%..USD/JPY: 102.33..EUR/USD: 1.3392
The Week in Review

·         Treasuries posted strong gains this week as global growth concerns and a reemergence of geopolitical worries dropped yields to multi-month lows. Click here to see an intraweek yields chart.

·         Flat growth in the eurozone and France and negative growth in Germany (-0.2% QoQ) and Japan (-1.7% QoQ) stoked fears of a global slowdown.

·         The situation in Eastern Europe re-escalated as reports from Ukraine suggested the country's defense had destroyed parts of a Russian armored convoy. 

·         Economic data was light, and mixed, as retail sales (0.0% actual v. 0.3% expected), Empire Manufacturing (14.7 actual v. 15.5 expected), and Michigan Sentiment (79.2 actual v. 81.7 expected) missed while industrial production (0.4% actual v. 0.3% expected) beat and Fed Chair Janet Yellen's favorite indicator, JOLTs - Job Openings (4.671M actual v. 4.577M prior), improved.

·         Auctions for the week started out slow and gradually improved.

·         Tuesday's average $27 bln 3y note auction drew 0.924% and a tepid 3.03x bid/cover.Indirect bids (36.2%) slightly outpaced their 12-auction averages and direct bids (19.0%) were in-line, leaving primary dealers with 44.8% of the supply.  

·         Wednesday's average $24 bln 10y note 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. 

·         Thursday's strong $16 bln 30y bond auction drew 3.224% (WI 3.247%) and a solid 2.60x bid/cover (12-auction average 2.38x) as indirect (45.9%) and direct (24.4%) bids both outpaced their 12-auction averages. Primary dealers were left with just 29.7% of the supply. 

·         Up front, the 2y shed -4bps to 0.411%. Buying over the course of the week pushed action down to levels last seen at the beginning of June.

·         The 5y fell -7bps to 1.541%. Action pressed below the 200 dma (1.593%) and even probed the 1.500% level before finishing Friday's session near 1.550% support.

·         The 10y tumbled -9bps to 2.345%. The benchmark yield hit a 13-month low of 2.305% before seeing a bounce into week-end. 

·         At the long end, the 30y plunged -9bps to 3.135%. The yield on the long bond hit 3.107%, its lowest since May 2013, before inching up into Friday's close. 

·         Aggressive flattening along the yield curve saw the 2-10-yr spread narrow to 193.5bps and the 5-30-yr spread tighten to 159.5bps.  

The Week Ahead 

·         Monday's data is limited to the NAHB Housing Market Index (10). 

·         Data picks up on Tuesday with CPI, core CPI, housing starts, and building permits (8:30). 

·         Wednesday will see the weekly MBA Mortgage Index (7) and the latest FOMC minutes (14). 

·         Data concludes for the week on Thursday with initial and continuing claims (8:30), existing home sales, Philly Fed, and leading indicators (10). The Kansas City Fed's Jackson Hole Symposium begins. 

·         There is no data on Friday. Fed Chair Janet Yellen will speak on "Labor Markets" at the Kansas City Fed's Jackson Hole Symposium (10).

On other news.... 




Currencies 

Dollar Slips in Quiet Trade: 10-yr: +17/32..2.339%..USD/JPY: 102.33..EUR/USD: 1.3391

·         The Dollar Index holds on session lows as trade probes the 81.45 level. Click here to see a daily Dollar Index chart.

·         An overnight bid tested the 81.60 area, but trade once again stalled in the area. U.S. trade has spent the majority of the day trapped in tight range between 81.40/81.50 despite reports suggesting a re-escalation in Ukraine. 

·         EURUSD is +25 pips @ 1.3390 as trade contends with its best close in a week. The single currency saw a quiet overnight trade as French and Italian banks were shuttered for Assumption Day, and action has been generally muted despite the developments in Eastern Europe. Support near 1.3550 has held up for much of the past two weeks as the bulls work to keep the tradable bottom intact. Germany's Bundesbank will release its monthly report on Monday.

·         GBPUSD is +5 pips @ 1.6690 as trade steadies near the 200 dma, which coincides with four-month lows. Sterling has come under immense pressure since the middle of July as disappointing data has pushed back expectations of a Bank of England rate hike. Action has tumbled close to 500 pips over the past month. 

·         USDCHF is -35 pips @ .9030 as trade flushes to its lowest level in three weeks. Today's weakness follows the strength of the euro, and has pushed action below the lower bound of the .9040/.9100 range that has been in place. 

·         USDJPY is -15 pips @ 102.30 as trade has surrendered its early gains in response to the headlines out of Ukraine, and is now on track for its first loss in five days. An early bid lifted the pair to nearly 102.80, but trade quickly backed off the key level as news of a re-escalation between Russia and Ukraine crossed the wires. Support near 102.00 is defended by the 50 and 100 dma. 

·         AUDUSD is flat @ .9315 amid a quiet trade. The hard currency tested .9340 resistance and the 100 dma in early action, but has slipped off the level. Australian data scheduled for Sunday night is limited to new motor vehicle sales. 

·         USDCAD is -10 pips @ 1.0895 as sellers try to put in the fourth loss in five days. The pair spiked to session highs near 1.0920 in response to the manufacturing sales beat and the large upward revisions to the recent jobs report, but has surrendered those gains. Support near 1.0860 is guarded by the 100 and 200 dma. Canada's foreign securities purchases are due out Monday.

Weekly Analysis




Technical Updates

Briefing's Commentaries


Week in Review: Stocks Climb Amid Paltry Volume 

The major averages began the new week on a modestly higher note. The S&P 500 settled higher by 0.3% with seven sectors registering gains, while the Russell 2000 (+1.0%) and Nasdaq Composite (+0.7%) outperformed. For its part, the Dow Jones Industrial Average (+0.1%) was limited to a slim gain as blue chip listings had a tough time keeping pace. Equity indices climbed from the opening bell with the early advance supported by upbeat action overseas. Furthermore, a slight improvement on the geopolitical scene was also cited for the improved sentiment. Specifically, a ceasefire was agreed upon in Gaza on Sunday, while pro-Russian separatists in east Ukraine also asked for a pause in fighting.

Equity indices stumbled on Tuesday with the Russell 2000 pacing the slide. The small-cap index lost 0.7%, while the S&P 500 (-0.2%) gave back most of its advance from the previous day. Stocks spent the first hour of action near their flat lines after index futures slumped from their overnight highs shortly ahead of the cash open. The early weakness took place as markets in Europe retreated in reaction to disappointing survey data. Specifically, Eurozone ZEW Economic Sentiment plunged to 23.7 from 48.1 (expected 41.3), while Germany's ZEW Economic Sentiment dropped to 8.6 from 27.1 (consensus 18.2). The news from overseas contributed to the shaky start and so did the underperformance of some closely-watched groups. Most notably, the top-weighted sector—technology (-0.2%)—spent the majority of the trading day in the red amid broad weakness. Chipmakers lagged early, but the PHLX Semiconductor Index was able to narrow its loss to 0.1% by the close.

The stock market finished 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. The key 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.

Stocks posted modest gains on Thursday with the S&P 500 (+0.4%) extending its week-to-date advance to 1.2%. Small caps lagged throughout the session as the Russell 2000 (+0.2%) was unable to reclaim its 200-day moving average (1145). Despite receiving disappointing economic data from overseas (Eurozone GDP 0.0%; expected 0.1%), equity indices climbed out of the gate with Wednesday's leading sector—health care—pacing the advance once again. The third-largest sector added 1.2% with help from biotechnology. The iShares Nasdaq Biotechnology ETF settled higher by 1.6% to extend its weekly gain to 3.8%. It is worth mentioning that the Thursday rally lacked conviction, generating the lowest NYSE floor volume of the year (506 mln).

Next Week In View





Economic Commentaries

Economic Summary: PPI slightly cooler than expected; Michigan Sentiment misses the mark, IP inches by estimates
Economic Data Summary:

·         July PPI 0.1% vs Briefing.com consensus of 0.2%; June was 0.4%

·         July Core PPI 0.2% vs Briefing.com consensus of 0.2%; June was 0.2%

o    Prices of final goods demand were flat after increasing 0.5% in June. A 1.0% in pharmaceutical preparations costs were instrumental in keeping overall goods prices from declining. Producer services prices increased 0.1% in July, down from a 0.3% gain in June. Transportation and warehousing prices increased 0.5% as prices on freight trucking increased 0.7%. 

·         August Empire Manufacturing 14.7 vs Briefing.com consensus of 15.5; July was 25.6

·         June Net Long Term TIC Flows -$18.7 bln. May was revised to $18.6 bln from $19.4 bln

·         July Industrial Production 0.4% vs Briefing.com consensus of 0.3%; June was revised to 0.4% from 0.2%

·         July Capacity Utalization 79.2% vs Briefing.com consensus of 79.2%; June was 79.1%

o    The surge motor vehicle manufacturing confirms that the recent decline in the initial claims was likely the result of seasonal biases and not a change in labor market conditions. For the past several weeks, the initial claims level averaged below 300,000 per week. Even though the DOL reported that there were no special factors related to the decline, it was believed that motor vehicle manufacturers may have kept their plants open during normal retooling periods. That would artificially reduce the weekly claims reports as auto workers don't need to file for temporary unemployment insurance. 

·         August Michigan Sentiment 79.2 vs Briefing.com consensus of 81.7; July was 81.8

o    Even though gasoline prices improved and employment conditions firmed, a large decline in equity prices was likely responsible for the drop in consumer sentiment. The Current Conditions Index increased to 99.6 in the preliminary August reading from 97.4 in July.

Upcoming Economic Data:

·         August NAHB Housing Market Index due out Monday at 10:00 (Briefing.com consensus of ; July was 53)

Other International Events of Interest

·         China's Shanghai Composite (+0.9%) finished at an eight-month high

Jason's Commentaries


A very volatile session on the Expiration Friday last week. The market is now anticipating the FOMC minutes as well as the Jackson Hole Symposium. With these 2 mega event coming in, there might be quite a bit of pricing in the market. Needless to say, the market recover quiet a bit after the massive drop in the market a few weeks back. Leading the market was the Energy stocks which made 0.74% while the Utilities manage to gaion 0.38%. Conversely, the Financials lost 0.48% as the largest laggard. Internals were pointing to a mixed day. However, the futures were up more than 0.5% in the pre-markets and it seems to me that there quite a bit of pricing happening already. As we're in Aug, 4 months away from the year end and $25b per month of asset purchasing, it seems to me that we might not taper this month since the previous employment data did not do very well.

Market Call: FLAT to upside

Date: 18 Aug 2014