6 Aug 2014 AMC - Market ended flat as support found

6 Aug 2014 AMC - Market ended flat as support found

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: -0.7%

·         Germany's DAX: -0.7%

·         France's CAC: -0.6%

·         Spain's IBEX: -1.2%

·         Portugal's PSI: -4.1%

·         Italy's MIB Index: -2.7%

·         Irish Ovrl Index: -0.5%

·         Greece ASE General Index: -2.7%

Before Market Opens 

S&P futures vs fair value: -9.40. Nasdaq futures vs fair value: -19.00.
The S&P 500 futures trade nine points below fair value.

Asian markets ended lower, taking the lead from yesterday's retreat on Wall Street. 

·         In economic data: 

o    Japan's Leading Index rose to 105.5 from 104.8, as expected 

o    New Zealand's Employment Change came in at 0.4% quarter-over-quarter (expected 0.7%, previous 0.9%), while the Labor Cost Index rose 0.6% quarter-over-quarter (consensus 0.4%, prior 0.3%). Separately, the Unemployment Rate fell to 5.6% from 5.9% (expected 5.8%) 

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·         Japan's Nikkei lost 1.1%, falling for a fifth consecutive day to close at levels last seen at the end of June. Heavyweight Softbank slid 3.5% following reports its U.S. subsidiary, Sprint, dropped its bid for T-Mobile US. 

·         Hong Kong's Hang Seng shed 0.3%, closing on the highs after seeing an early loss of 1.0%. China Unicom Hong Kong tumbled 5.3% after the Sprint takeover of T-Mobile US fell apart. 

·         China's Shanghai Composite shed 0.1%, holding near eight-month highs. Solar stocks outperformed on reports Beijing may soon introduce eco-friendly policies. China Singyes Solar Technologies Holdings climbed 6.1% to lead the space higher. 

Major European indices trade lower across the board with Italy's MIB -2.5% bringing up the rear. Polish Prime Minister Donald Tusk said there are no indications Russia plans to implement oil and gas embargos, but echoed yesterday's comments from his foreign minister, who said the risk of a Russian invasion of Ukraine has increased significantly 

·         Participants received several data points: 

o    Eurozone Retail PMI fell to 47.6 from 50.0 

o    Germany's Factory Orders fell 3.2% month-over-month (expected 1.0%, previous -1.6%) 

o    Great Britain's Halifax House Price Index rose 1.4% month-over-month (expected 0.4%, previous -0.4%), while the year-over-year reading jumped 10.2% (consensus 9.6%, prior 8.8%). Also of note, Manufacturing Production ticked up 0.3% month-over-month (expected 0.6%, previous -1.3%) and Industrial Production also increased 0.3% (consensus 0.6%, prior -0.6%) 

o    Italy's GDP contracted 0.2% quarter-over-quarter (expected 0.2%, previous -0.1%), while the year-over-year reading declined 0.3% (expected 0.1%, prior -0.4%) 

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·         In France, the CAC is lower by 1.2% with 39 of its 40 components in the red. Carmaker Renault is the weakest performer, down 3.3%. On the upside, Credit Agricole is higher by 0.7%. 

·         Great Britain's FTSE holds a loss of 1.2% with drug makers on the defensive after U.S. Senators called on President Obama to reduce or eliminate tax breaks for companies with overseas headquarters. AstraZeneca, GlaxoSmithKline, Shire, and Smith & Nephew are down between 2.3% and 4.0%. Hargreaves Lansdown outperforms with a gain of 2.7%. 

·         Germany's DAX is lower by 1.3%. Exporters lag with BMW, Daimler, and Volkswagen down between 0.7% and 1.7%. Fresenius Medical Care is the top performer, up 1.9%. 

·         Italy's MIB underperforms with a loss of 2.5% amid notable weakness in financials. Banca di Milano Scarl, BMPS, Mediobanca, UBI Banca, and Unicredit are down between 3.2% and 5.7%.

U.S. Equities

·         Futures point to a lower open

·         The S&P 500 has fallen in five of eight sessions and is ~3.6% off all-time highs

·         The VIX (16.87) holds near four-month highs

·         MBA Mortgage Index (1.6%)

·         Trade Balance (-$41.5B actual v. -$45.2B expected)

o    S&P Futures -9 @ 1904

o    Dow Futures -68 @ 16,298

o    Nasdaq Futures -25 @ 3847

Asia

·         Markets ended lower across Asia

·         Malaysia's trade surplus narrow to MYR3.97 bln (MYR5.72 bln previous)

·         Japan's Nikkei (-1.1%) fell for a fifth straight day and closed at levels last seen in at the end of June 

·         Hong Kong's Hang Seng (-0.3%) saw an early loss of 1.0% before closing on the highs

·         China's Shanghai Composite (-0.1%) held near eight-month highs

·         India's Sensex (-0.9%) was hit as the rupee fell to a five-month low versus the greenback

·         Australia's ASX (-0.1%) saw a fourth straight day of selling

Market Internals

Market Internals -Technical-
The Dow closed up 14 (+0.08%) at 16443, the Nasdaq closed up 2 (+0.05%) at 4355, and the S&P 500 closed flat at 1920. Action came on slightly above average volume (NYSE 675 mln vs. avg. of 666; NASDAQ 1695 mln vs. avg. of 1687), with advancers outpacing decliners (NYSE 1865/1267, NASDAQ 1606/1062) and new lows outpacing new highs (NYSE 28/66, NASDAQ 20/71).

Relative Strength: 
Silver Miners-SIL +3.58%, Junior Gold Miners-GDXJ +2.64%, Grains-JJG +2.16%, Coffee-JO +1.90%, Corn-CORN +1.69%, Egypt-EGPT +0.93%, Brazilian Real-BZF +0.60%, Latin America 40-ILF +0.58%, Canada-EWC +0.54%, Australia-EWA +0.53%.

Relative Weakness: 
Telecommunications-IYZ -2.48%, Greece-GREK -2.46%, Indonesia-IDX -1.97%, Russia-RSX -1.96%, Turkey-TUR -1.70%, India-INP -1.36%, Utilities-XLU -1.28%, Copper-JJC -1.13%, Wind Energy-FAN -1.09%, Nuclear Energy-NLR -0.95%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries

Closing Market Summary: Stocks End Flat Despite Renewed Eurozone Concerns
The major averages spent some time on both sides of their flat lines on Wednesday before ending little changed. The S&P 500 settled on its flat line with six sectors finishing in the red, while the Russell 2000 (+0.3%) displayed relative strength throughout the session.

Although stocks finished on a flat note, the early indication suggested the market could be in for a rough day as economic data from the eurozone and domestic corporate news weighed.

On the economic front, Germany reported its second monthly decline in factory orders (-3.2% versus expected 1.0%; prior -1.6%), while the Italian economy slipped into recession following its second consecutive quarterly GDP contraction (-0.2%; previous -0.1%).

Back at home, two potential acquisitions were called off with 21st Century Fox (FOXA 32.33, +1.03) terminating its pursuit of Time Warner (TWX 74.24, -10.95) and Sprint (S 5.90, -1.38) withdrawing its offer for T-Mobile (TMUS 31.06, -2.85).

In addition, shares of Walgreen (WAG 59.21, -9.91) plunged 14.3%, which also contributed to the early weakness. The drugstore operator said it will acquire the remaining 55.0% stake in Alliance Boots that it does not currently own and that it will not move its corporate headquarters out of the United States.

Despite the opening weakness, the S&P 500 was quick to find support at its 100-day moving average. The index breached that level for the first time since mid-April, but was able to claw back to its flat line in short order. However, extending the rebound proved challenging as a handful of influential sectors like consumer discretionary (-0.3%), health care (-0.1%), industrials (-0.5%), and technology (-0.2%) weighed.

Notably, the industrial sector lagged throughout the session amid weakness in defense contractors and transport stocks. The PHLX Defense Index lost 1.0%, while the Dow Jones Transportation Average fell 0.6% to extend its week-to-date loss to 1.4%. Almost all 20 components of the bellwether complex posted losses with the lone bright spot appearing among airlines. Alaska Air (ALK 42.94, +0.22) and JetBlue (JBLU 10.92, +0.14) added 0.5% and 1.3%, respectively.

Elsewhere, the health care sector posted a slim loss, while biotech stocks displayed some intraday volatility. The iShares Nasdaq Biotechnology ETF (IBB 251.82, +0.18) ended just above its flat line after alternating between gains and losses during the session.

On the upside, yesterday's weakest sector—energy (+0.4%)—seized the lead at the open, but surrendered a significant portion of its gain during the afternoon.

Outside of energy, financials (+0.4%), materials (+0.7%), and consumer staples (+0.9%) were the only sectors to register gains. The materials space drew strength from mining stocks. The Market Vectors Gold Miners ETF (GDX 26.69, +0.59) gained 2.3%, whereas gold futures jumped 1.8% to $1308.30/ozt.

Treasuries held gains throughout the session, but the 10-yr note relinquished roughly two-thirds of its advance by the close. The benchmark 10-yr yield slipped two basis points to 2.47%.

Participation was a bit below average with fewer than 680 million shares changing hands at the NYSE floor.

Economic data was limited to the June Trade Deficit and the MBA Mortgage Index: 

·         The U.S. trade deficit narrowed to $41.50 billion in June from an upwardly revised $44.70 billion (from $44.40 billion), while the Briefing.com consensus expected an increase to $45.20 billion 

o    According to the advance estimate for Q2 2014 GDP, the BEA assumed the trade deficit widened to roughly $45.10 billion in June. The fact that the deficit was much smaller than the BEA expected suggests that the new trade balance will contribute positively in the second estimate 

o    The goods deficit fell to $60.30 billion in June from $63.30 billion in May 

o    The services surplus remained at $18.70 billion 

o    Exports increased by 0.1% in June, while imports declined 1.2% 

·         The weekly MBA Mortgage Index rose 1.6% to follow last week's 2.2% decline 

Tomorrow, weekly initial claims (Briefing.com consensus 308K) will be released at 8:30 ET, while the Consumer Credit report for June (consensus $15.80 billion) will cross the wires at 15:00 ET. 

·         S&P 500 +3.9% YTD 

·         Nasdaq Composite +4.3% YTD 

·         Dow Jones Industrial Average -0.8% YTD 

·         Russell 2000 -3.1% YTD

Commodities

Closing Commodities: WTI crude oil closed below $97/barrel, gold rises almost 2%

·         Dec gold rose for the first time this week despite strength in the dollar index. The move higher came on increased tension between Ukraine and Russia as headlines indicated that Russia may be building up troops on its border with eastern Ukraine in a prelude to a possible invasion.

·         The yellow metal extended overnight gains as it rose from a session low of $1296.80 per ounce and consolidated slightly above the $1306.00 per ounce level in afternoon action. It eventually settled with a 1.8% gain at $1308.30 per ounce.

·         Sep silver also traded higher, rising as high as $20.14 per ounce in morning action. It spent the remainder of the session trading near the $20.05 per ounce level and settled with a 1.0% gain at $20.03 per ounce.

·         Sep crude oil extended yesterday's losses as investors reacted to today's release of EIA inventory data. For the week ending Aug 1, crude oil inventories had a draw of 1.756 mln barrels while consensus called for a draw of 1.6-1.9 mln barrels. The energy component pulled back into negative territory after trading as high as $98.13 per barrel in morning action. It brushed a session low of $96.69 per barrel and settled with a 0.4% loss at $96.94 per barrel.

·         Sep natural gas slipped to a session low of $3.88 per MMBtu in early morning action but quickly recovered back into positive territory. It rose to a session high of $3.94 per MMBtu and settled at $3.93 per MMBtu, or 0.8% higher.

COMEX Metals Closing Prices

  Dec gold rose $23.20 to $1308.30/oz 

·         Gold rose for the first time this week despite strength in the dollar index. The move higher came on increased tension between Ukraine and Russia as headlines indicated that Russia may be building up troops on its border with eastern Ukraine in a prelude to a possible invasion. The yellow metal extended overnight gains as it rose from a session low of $1296.80 and consolidated slightly above the $1306.00 level in afternoon action. It eventually settled with a 1.8% gain. 

  Sep silver rose $0.20 to $20.03/oz 

·         Silver also traded higher, rising as high as $20.14 in morning action. It spent the remainder of the session trading near the $20.05 level and settled with a 1.0% gain. 

  Sep copper fell 3 cents to $3.17/lbs

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Sep corn rose 7 cents to $3.63/bushel 

·         Sep wheat rose 16 cents to $5.68/bushel

·         Nov soybeans rose 15 cents to $10.80/bushel 

·         Sep ethanol rose 2 cents to $1.98/gallon 

·         Sep sugar (#16 (U.S.)) rose 0.22 of a penny to 25.00 cents/lbs

NYMEX Energy Closing Prices

  Sep crude oil fell $0.39 to $96.94/barrel 

·         Crude oil extended yesterday's losses as investors reacted to today's release of EIA inventory data. For the week ending Aug 1, crude oil inventories had a draw of 1.756 mln barrels while consensus called for a draw of 1.6-1.9 mln barrels. The energy component pulled back into negative territory after trading as high as $98.13 in morning action. It brushed a session low of $96.69 and settled with a 0.4% loss. 

  Sep natural gas rose 3 cents to $3.93/MMBtu 

·         Natural gas slipped to a session low of $3.88 in early morning action but quickly recovered back into positive territory. It rose to a session high of $3.94 and settled with a 0.8% gain. 

  Sep heating oil rose 3 cents to $2.88/gallon 

  Sep RBOB rose 3 cents to $2.74/gallon


Treasuries

Treasuries Eke Out a Gain: 10-yr: +04/32..2.471%..USD/JPY: 102.03..EUR/USD: 1.3380

·         Treasuries eked out a small gain after giving up the majority of their early gains. Click here to see an intraday yields chart.

·         An overnight bid developed on global growth fears after Italy's Q2 GDP reading showed the country slipped into a technical recession.

·         Trade drifted near the highs into the U.S. session before the narrower than anticipated trade deficit (-$41.5 bln actual v. -$45.2 bln expected) and recovery in equities provoked a session-long slide. 

·         Up front, the 2y shed -2bps to 0.452% and finished on the key level that has held up since the middle of June. 

·         In the belly, the 5y eased -1.4bps to 1.650%. The yield slipped below both the 50 and 100 dma before ending on key support. 

·         The 10y fell -0.9bps to 2.474%. The early safety bid has the benchmark yield flirting with its lowest close in 13 months, but action was unable to break below the important 2.440% area.

·         Little change at the long end saw the 30y ease -0.2bps to 3.277%.Today's small bid pushed the yield lower for a fourth time in five days.

·         A slightly flatter curve developed as the 2-10-yr spread tightened to 202bps. 

·         Precious metals went off on their highs with gold +$23 @ $1308 and silver +$0.22 @ $20.05. 

·         Data: Initial and continuing claims (8:30) and consumer credit (15).

On other news.... 

Retail July Same Store Sales Preview—BTS vs Q2 Guidance
A handful of retailers report July sales tomorrow Thursday August 7 before the open (GPS tomorrow after the close, RAD / WAG already reported July sales).

Luring in early BTS shoppers, the heightened promotional activity+tax break holidays are expected to boost monthly results. July is typically clearance/transitional month and sales for the four weeks ending Saturday August 2 did not include any N Am holiday catalysts (as usual) other than a handful states that have kicked off their annual Sales Tax Holidays. Twelve state tax holidays were during the first weekend of August (eleven last year), Mississippi fell entirely within July period (same as last year) and three state holidays fall entirely in August period (seven last year). Overall expectations from ICSC/Goldman and Redbook indicate July Same Store Sales growth near 4%. ICSC expects July comps above 4% (high end of its original target) and Redbook + 3.9% (+3.7% target). Retail Metrics is tracking slightly higher -- expecting +4.6% July same store sales.

Most retailers will provide guidance with this month's sales release—preliminary Q2 sales and updated guidance can easily overshadow monthly results. A few names that do not report monthly updates are expected to provide quarterly update: AEO, ARO, DSW, TUES, WTSL updated guidance last year.

Street expectations: Overall July commentary indicates potential upside. Telsey Advisory Group believes trends in July remained similar to June as promotional environment remained highly competitive. The firm does not see substantial downside risk from 2Q14 Street expectations heading into the quarterly releases later this month. Mizhuo expects modest pickup in July on clearance sales and better weather. Firm continues to believe the industry remains aggressive with promotions and sharp price points as a means to attract customers with many guiding for 2Q gross margin declines-maintains cautious stance on softlines. Janney expecting boost in July with potential for upside, especially the teen sector. Firm continues to believe that inventory levels (along with promotional levels) are sequentially improving from fall 2013 and expect them to continue to improve in fall 2014. Promotions have gone from "generally deeper" through 3Q/4Q13 to "flat to slightly deeper" on a year-over-year basis. CRT remains cautious on its outlook for the specialty retail sector but notes there is the potential for upside should the economy continue to show signs of improvement. Topeka believes retailers have reigned in inventories for BTS and 2H, sharpened prices and are better positioned with fast-tracking capabilities than in 1H.

Retailers pulled back following generally in-line June month and the sector was underperforming the overall market. The SPDR Retail (XRT) was -1.2% on the day, Retail HOLDRS Trust (RTH) -0.9%, Consumer Dis Spdr (XLY) -0.9% vs S&P500 index (SPX) -0.4%.

Retailers that beat June Same-Store Sales estimates: 

·         Drugstore names Rite Aid (RAD) and Walgreen's (WAG)  reported upside June comps last week. RAD June comps + 3.9% vs +2.6% consensus -  stock opened +2.8% and ended the day nearly 6% higher. WAG June comps + 7.5% vs 6.8% consensus -- stock was ~1.3% higher the following day.

·         Cato (CATO) reported June comps of 3% vs -0.5% consensus (no guidance; said June sales were in line with year-to-date trend). The stock opened 1% lower and closed down near 2%. 

·         Buckle (BKE) June comps +0.7% vs -0.5% consensus (does not provide EPS guidance). The stock opened modestly higher and ended the day nearly unchanged. 

·         Costco (COST) June comps +6% vs 5% consensus. The stock opened lower but closed in the green. 

·         Zumiez Inc (ZUMZ) reported June comps +3.2% vs +2.3% consensus and raised Q2 EPS/revs guidance. The stock opened more than 5% higher and slightly higher than that level. 

Retailers that missed June Same-Store Sales estimates: 

·         Discount retailers PriceSmart (PSMT), Fred's (FRED) and Stein Mart (SMRT) all missed June estimates. PSMT reported June comps with earnings (June comps +1% vs +4.5% consensus, Q3 -- beat by $0.01 but missed on revs). PSMT was down ~5% the next day.  FRED June comps of -0.6% vs 1.4% consensus (no guidance, said sales were unusually soft during week it was unable to place new ad program... For the weeks that the new ad program were in effect, sales and customer traffic patterns improved noticeably). The stock was down more than 2% the following day. SMRT June comps + 2.6% vs +2.7% consensus (does not provide earnings guidance). The stock opened 2% lower and closed in the red. 

·         Gap Inc (GPS) reported June comps of -2% vs 0.7% consensus. The stock was down nearly 2% the following trading day. 

·         L Brands (LB) June comps of +2% vs +2.7% consensus. The stock opened ~1% lower and ended down on the day by more than 2%. 

Going forward: Most retailers report Q2 results this month. The August retail period is four weeks ending Saturday August 30 and falls within Q3 period. Redbook preliminary August target is +4.5%.  
Currencies

Dollar Surrenders Early Gains: 10-yr: +05/32..2.468%..USD/JPY: 102.06..EUR/USD: 1.3378

·         The Dollar Index is probing session lows near 81.40 after an early bid had trade testing 11-month highs near 81.70. Click here to see a daily Dollar Index chart.

·         A relatively quiet trade saw a pickup in volatility during the lunchtime hour as a sharp drop in the Index corresponded with a flight into yen. 

·         Minor support at current levels will be watched closely. 

·         EURUSD is +5 pips @ 1.3375 as the bulls try to put in just the third gain in three weeks. The single currency dropped the session lows near 1.3330 after the German factory orders miss and the Italian GDP print that showed the country has fallen into recession, but has managed to work its way higher throughout the day as traders turn their attention towards tomorrow's European Central Bank rate decision. 

·         GBPUSD is -30 pips @ 1.6850 as trade presses lower for the thirteenth time in sixteen sessions. Today's weakness comes following the mixed Halifax Home Price Index and manufacturing production data as has trade flirting with its lowest close in almost two months. Support near 1.6800 will be watched ahead oftomorrow's Bank of England rate decision. 

·         USDCHF is -15 pips @ .9080 as trade pulls back after testing the 2014 highs. The pair climbed to nearly .9120 amid this morning's weakness in the euro, but has slid into the red as the single currency recovered its early losses. Swiss data out tomorrow is limited to foreign currency reserves. 

·         USDJPY is -60 pips @ 102.00 as trade flushes to a one-week low. The pair held small losses into the noon hour before a sharp selloff pushed action below the 200 dma and had trade probing the 101.80 level. The pair quickly halved those losses, but has been unable to recover them all. Support in the 102.10 area is defended by the 100 dma. 

·         AUDUSD is +45 pips @ .9350 as trade ticks to a one-week high. The hard currency spiked to session highs near .9375 amid the frantic afternoon trade, but was rejected at the level by the 50 dma. Resistance near .9350 will be watched into tonight's Australian jobs report.

·         USDCAD is -40 pips @ 1.0920 as trade probes session lows after hitting its best level in more than three months. An early bid had action threatening the 1.1000 level, but the better than expected Canadian trade balance (CAD1.9 bln actual v. -CAD0.1 bln expected, CAD0.6 bln previous) caused action to reverse course. Canada's building permits and Ivey PMI are scheduled for tomorrow.

Next Week In View




Economic Commentaries

Economic Summary: June Trade Deficit smaller than expected
Economic Data Summary:

·         Weekly MBA Mortgage Applications +1.6% vs Briefing.com consensus of ; Last Week was -2.2%

·         June Trade Balance -$41.5 bln vs Briefing.com consensus of -$45.2 bln; May was revised to -$44.7 bln from -$44.4 bln

o    According to the advance estimate for Q2 2014 GDP, the BEA assumed the trade deficit widened to roughly $45.1 bln in June. The fact that the deficit was much smaller than the BEA expected suggests that the new trade balance will contribute positively in the second estimate. 

Upcoming Economic Data:

·         Weekly Initial Claims due out Thursday at 8:30 (Briefing.com consensus of 308K; Last Week was 302K)

·         Weekly Continuing Claims due out Thursday at 8:30 (Briefing.com consensus of 2.525 M ; Last Week was 2.539 M )

·         June Consumer Credit due out Thursday at 15:00 (Briefing.com consensus of $15.8 bln; May was $19.6 bln)

Other International Events of Interest

·         Italy's MIB (-2.5%) trails the rest of the region after Q2 GDP printed -0.2% QoQ and dropped the country into recession

Jason's Commentaries

I'm late todat... =P








Market Call: FLAT to downside

Date: 8 Aug 2014