4 Aug 2014 AMC - Market gains after week of heavy losses

4 Aug 2014 AMC - Market gains after week of heavy losses

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: 0.0%

·         Germany's DAX: -0.6%

·         France's CAC: + 0.3%

·         Spain's IBEX: -0.2%

·         Portugal's PSI: + 1.0%

·         Italy's MIB Index: + 0.1%

·         Irish Ovrl Index: + 0.1%

·         Greece ASE General Index: -0.6%

Before Market Opens 

S&P futures vs fair value: +3.70. Nasdaq futures vs fair value: +11.20.
The S&P 500 futures trade four points above fair value.

Most Asian markets ended the Monday on a higher note. 

·         In economic data: 

o    China's Non-Manufacturing PMI slipped to 54.2 from 55.0 

o    Japan's Monetary Base expanded 42.7% year-over-year (expected 41.2%, previous 42.6%) 

o    Australia's Retail Sales rose 0.6% month-over-month (expected 0.4%, previous -0.3%), while MI Inflation Gauge ticked up 0.2% month-over-month (prior 0.0%). Separately, ANZ Job Advertisements increased 0.3% month-over-month (previous 4.4%) 

o    Indonesia's Core Inflation slowed to 4.64% from 4.81% (expected 4.66%) 

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·         Japan's Nikkei shed 0.3%, falling for a third straight session. Heavyweight Sotfbank weighed with shares tumbling 3.7%. 

·         Hong Kong's Hang Seng added 0.3%, ending just shy of its 2014 high. Property stocks were a drag as China Resources Land lost 1.0% and Sun Hung Kai properties fell 0.9%. 

·         China's Shanghai Composite rose 1.7%, climbing to its best level in eight months on speculation Beijing was looking to make state-owned enterprise reforms and ease restrictions on brokerage firms. Citic Securities and Haitong Securities gained 5.1% and 3.6%, respectively. 

Major European indices trade mostly higher. According to Germany's IFO Institute, the country's GDP will be close to unchanged during the second quarter because of the Ukraine crisis. 

·         Economic data was limited: 

o    Eurozone PPI ticked up 0.1% month-over-month (expected 0.0%, previous -0.1%), while the year-over-year reading slipped 0.8% (expected -1.0%, prior -1.0%). Separately, Sentix Investor Confidence fell to 2.7 from 10.1 (expected 9.0) 

o    Great Britain's Construction PMI ticked down to 62.4 from 62.6 (consensus 62.0) 

o    Spain's Unemployment declined by 29,800 (expected -116,300, previous -122,700) 

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·         Germany's DAX is lower by 0.1%. BASF and Lanxess are both down near 1.0%. Utility stocks outperform with E.On and RWE up 2.3% and 1.6%, respectively. 

·         Great Britain's FTSE trades up 0.4% amid strength in bank shares. HSBC Holdings, Lloyds Banking, and Royal Bank of Scotland display gains between 1.2% and 1.8%. 

·         In France, the CAC is higher by 0.8%. Financials are also showing strength with AXA, BNP Paribas, Credit Agricole, and Societe Generale up between 1.6% and 3.2%. Software company Gemalto brings up the rear with a loss 1.7%.

U.S. Equities

·         Futures suggest a firm open

·         The recent sell off has the S&P 500 ~3.3% off its all-time high while the DJIA trades ~3.8% off its record 

·         The Russell 2000 is nearing correction territory, ~8.2% off its record peak

·         The VIX (17.03) finished Friday's session at its highest level since mid-March

o    S&P Futures +6 @ 1925

o    Dow Futures +40 @ 16,456

o    Nasdaq Futures +13 @ 3886

Asia

·         Markets gained across most of Asia

·         China's Non-Manufacturing PMI slowed to 54.2 (55.0 previous)

·         Australia's retail sales (0.6% MoM actual v. 0.3% MoM expected) outpaced estimates while ANZ Job Advertisements rose 0.3% MoM

·         Japan's Nikkei (-0.3%) fell for a third straight session

·         Hong Kong's Hang Seng (+0.3%) ended just shy of its 2014 highs

·         China's Shanghai Composite (+1.7%) climbed to its best level in eight month highs on speculation Beijing was looking to make state-owned enterprise reforms and ease restrictions on brokerage firms

·         India's Sensex (+1.0%) gained for the first time in four days 

·         Australia's ASX (-0.3%) closed at its lowest level in two weeks

Market Internals

Market Internals -Technical-
The Nasdaq closed up 31 (+0.72%) at 4384, the S&P 500 closed up 14 (+0.72%) at 1939, and the Dow closed up 76 (+0.46%) at 16569. Action came on slightly below average volume (NYSE 660 mln vs. avg. of 663; NASDAQ 1541 mln vs. avg. of 1681), with advancers outpacing decliners (NYSE 1954/1190, NASDAQ 1696/1023) and new lows outpacing new highs (NYSE 29/71, NASDAQ 24/97).

Relative Strength: 
Middle East and Africa-GAF +2.96%, Indonesia-IDX +2.83%, South Africa-EZA +2.58%, Base Metals-DBB +2.27%, Corn-CORN +2.27%, Poland-EPOL +2.25%, Coal-KOL +2.23%, MLP Index-AMJ +2.14%, Thailand-THD +1.6%.

Relative Weakness: 
Volatility-VXX -4.44%, Junior Gold Miners-GDXJ -3.49%, Silver Miners-SIL -1.71%, Coffee-JO -1.21%, Brazilian Real-BZF -0.68%, Netherlands-EWN -0.58%, Singapore-EWS -0.36%, Egypt-EGPT -0.24%, Austria-EWO -0.23%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries

Closing Market Summary: Cyclical Sectors Send Stocks Higher
The stock market kicked off the new trading week on an upbeat note despite enduring a shaky start to the session. The S&P 500 settled higher by 0.7% with nine sectors ending in the green.

Equity indices climbed out of the gate amid upbeat action in Europe where Portugal's Banco Espirito Santo received bailout funds over the weekend. While the actual need for a bailout was not a positive in itself, the news calmed some fears about the stability of the European banking system.

Despite the opening strength, the key indices were back in the red during the first 90 minutes of action, but the outperformance of influential sectors like consumer discretionary (+1.0%), financials (+0.8%), and technology (+0.7%) invited dip-buyers into the fold. After a range-bound first half of the session, the indices spent the afternoon in a steady climb to new highs.

Overall, cyclical sectors fared better than defensively-oriented groups with five growth-sensitive sectors ending ahead of the broader market. The energy sector (+1.6%) was an early laggard, but surged into the lead in the afternoon after Colorado officials announced the formation of a task force aimed at minimizing regulatory conflicts in the industry. For its part, crude oil rose 0.4% to $98.27/bbl.

Like energy, the consumer discretionary sector (+1.0%) also added at least 1.0%. The group received all-around support as carmakers, homebuilders, and retailers rallied. Shares of Ford (F 17.02, +0.21) and General Motors (GM 33.61, +0.17) posted respective gains of 1.3% and 0.5% in reaction to strong July sales, while the iShares Dow Jones US Home Construction ETF (ITB 22.36, +0.22) added 1.0%. With regard to retail stocks, the SPDR S&P Retail ETF (XRT 84.57, +0.93) advanced 1.1%, but Michael Kors (KORS 77.01, -4.82) lost 5.9% after its disappointing outlook for Q2 overshadowed its above-consensus results and upbeat full-year guidance.

Elsewhere, the top-weighted S&P 500 sector—technology (+0.7%)—ended in line with the benchmark index. Large cap listings displayed broad strength with Google (GOOGL 582.27, +8.67) and Microsoft (MSFT 43.37, +0.51) both adding near 1.3%, while Apple (AAPL 95.59, -0.54) lagged. The largest tech stock shed 0.6%.

Even though most cyclical groups outperformed, the industrial sector (+0.3%) could not keep pace. Defense contractors pressured the sector (PHLX Defense Index -0.2%), while transport stocks struggled intraday. The Dow Jones Transportation Average added 0.4% to avoid its third consecutive decline.

On the countercyclical side, consumer staples (+0.4%), health care (+0.5%), and telecom services (+0.6%) benefitted from the afternoon rally, while the utilities sector (-0.6%) spent the entire trading day in the red to widen its third quarter loss to 7.1%.

Treasuries registered modest gains with the 10-yr yield slipping one basis point to 2.49%.

Participation was a bit below average with 661 million shares changing hands at the NYSE.

Tomorrow, June Factory Orders (Briefing.com consensus 0.5%) and the ISM Services Index for July (consensus 56.5) will both be reported at 10:00 ET. 

·         S&P 500 +4.9% YTD 

·         Nasdaq Composite +5.0% YTD 

·         Dow Jones Industrial Average UNCH YTD 

·         Russell 2000 -3.3% YTD

Commodities

 COMEX Metals Closing Prices

  Dec gold fell $5.60 to $1289.00/oz 

·         Gold declined for the fourth time in five sessions as the dollar index traded higher. The yellow metal pulled back from a session high of $1295.90 and brushed a session low of $1287.00. It eventually settled with a 0.4% loss. 

  Sep silver fell $0.14 to $20.24/oz 

·         Silver retreated into negative territory after touching a session high of $20.44 in morning action. It dipped as low as $20.20 and settled with a 0.7% loss. 

  Sep copper rose 3 cents to $3.24/lbs

 CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Sep corn rose 7 cents to $3.59/bushel 

·         Sep wheat rose 11 cents to $5.45/bushel 

·         Nov soybeans rose 20 cents to $10.80/bushel 

·         Sep ethanol rose 1 cent to $2.01/gallon 

·         Sep sugar (#16 (U.S.)) rose 0.18 of a penny to 25.05 cents/lbs

NYMEX Energy Closing Prices

  Sep crude oil rose $0.42 to $98.27/barrel 

·         Crude oil rose for the first time in six sessions as prices lifted from a session low of $97.52 in early morning pit trade. The energy component touched a session high of $98.52 moments before settling with a 0.4% gain. 

  Sep natural gas rose 4 cents to $3.84/MMBtu 

·         Natural gas chopped around in a tight range between $3.80 and $3.85 in positive territory. It managed to hold momentum and settled 1.1% higher. 

  Sep heating oil settled unchanged at $2.87/gallon 

  Sep RBOB fell 1 cent to $2.73/gallon


Treasuries

Treasuries See Small Gains: 10-yr: unch..2.490%..USD/JPY: 102.54..EUR/USD: 1.3419

·         Treasuries ended with small gains amid a sleepy trade. Click here to see an intraday yields chart.

·         The complex hovered little changed into the cash open before pressing to its best levels of the day after equities slipped into negative territory shortly after the open. 

·         A lack of economic data and a rebound in stocks caused Treasuries to pare their gains into afternoon trade. 

·         Outperformance in the belly dropped the 5y -1.5bps to 1.658%. The 1.650% level remains in focus as the 50 and 100 dma aid support in the area. 

·         The 10y slipped -1.4bps to 2.491%. Action tested support in the 2.460%/2.500% area, but was unable to produce the lowest close since late-May. 

·         The long bond lagged throughout the session before finishing -0.2bps @ 3.295%. Early buying was unable to push the yield below Friday's low.

·         A flatter curve won out as the 2-10-yr spread narrowed to 202.5bps. 

·         Precious metals finished on their lows with gold -$6 @ $1289 and silver -$0.19 @ $20.148.

·         Data: Factory orders and ISM Services (10).

On other news.... 

Currencies 

Dollar Trades Flat: 10-yr: +01/32..2.485%..USD/JPY: 102.47..EUR/USD: 1.3419

·         The Dollar Index has surrendered its small gains and now holds little changed near 81.30. Click here to see a daily Dollar Index chart.

·         The Index has struggled in recent days near the 81.50 level as trade contends with its best levels in 10 months. 

·         EURUSD is -10 pips @ 1.3420 as sellers have managed to regain control after Friday's advance was the first real gain in two weeks. The single currency has seen little reaction to news Portugal's central bank stepped in to bailout out the trouble Banco Espirito Santo with a EUR4.9 bln rescue package. The 1.3500 level remains a key hurdle for the bulls. Eurozone data out tomorrow includes Italian and Spanish Services PMI. 

·         GBPUSD is +35 pips @ 1.6855 as trade ticks higher for just the second time in 14 days. Sterling has been bid throughout the session after today's Construction PMI reading halted the run of weaker than expected data out of the UK. Support near 1.6800 remains key. Britain's Services PMI will cross the wires tomorrow. 

·         USDCHF is +10 pips @ .9065 as trade ticks higher amid a mostly uneventful session. The pair saw support following the SVME PMI miss, but action has mostly been dictated by action in the euro. 

·         USDJPY is -10 pips @ 102.45 as light selling persists for a third day. Many traders are watching the 102.00/102.20 level closely as support there is helped by the 50, 100, and 200 dma.

·         AUDUSD is +20 pips .9330 as trade has regained the 100 dma following the retail sales beat. Resistance in the .9340 area will be closely followed into tonight's trade balance release and Reserve Bank of Australia rate decision. China's HSBC Flash Services PMI is due out tonight. 

·         USDCAD is -5 pips @ 1.0910 as sellers look to put in the first loss in five days. The pair has been mired in a choppy trade as Canadian banks are closed for Civic Day.

Next Week In View




Economic Commentaries

Economic Summary: No US data today; ISM services tomorrow at 10:00
Upcoming Economic Data:

·         June Factory Orders due out Tuesday at 10:00 (Briefing.com consensus of 0.5%; May was -0.5%)

·         July ISM Services due out Tuesday at 10:00 (Briefing.com consensus of 56.5; June was 56.0)

Other International Events of Interest

·         Portugal's central bank announced plans to bailout the troubled Banco Espirito Santo with a EUR4.9 bln package that will wipeout shareholders and some subordinated creditors while transferring the healthy assets to a new bank.

·         China's Non-Manufacturing PMI slowed to 54.2 (55.0 previous)

Jason's Commentaries

As expected, the market decided to cover their shorts on Monday, and the technicals worked pretty well. However, now we have to determine whether it is going to be a dead cat bounce. Looking at the futures now, the market might actually end up down again today. The market started last night with a bit of volatility. However, the market broke the high of the day by mid-day and rallied all the way to closing. It seems that the heavy short covering caused the market to head up higher. Internals were pointing towards the bullish side. With everything said, the materials and Energy stocks are the main leader of the session which gained 1.68% and 1.19%. I have serious doubts that the selling is over.








Market Call: FLAT to Downside

Date: 5 Aug 2014