5 Sep 2014 AMC - Market rallied despite poor jobs reports

5 Sep 2014 AMC - Market rallied despite poor jobs reports

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: -0.3%

·         Germany's DAX: + 0.2%

·         France's CAC: -0.2%

·         Spain's IBEX: + 0.4%

·         Portugal's PSI: + 0.0%

·         Italy's MIB Index: -0.1%

·         Irish Ovrl Index: 0.0%

·         Greece ASE General Index: + 1.3%

 

Before Market Opens 

S&P futures vs fair value: -1.40. Nasdaq futures vs fair value: +6.20.
The S&P 500 futures trade one point below fair value.

Markets weakened across most of Asia to end the week. Notably, the yen weakened to levels last seen in October 2008 (105.72) before finding a bid. 

·         In economic data: 

o    Taiwan's inflation rate climbed to 2.07% year-over-year from 1.75% 

o    The Philippines' core inflation rate jumped to 3.4% year-over-year from 3.0% 

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·         Japan's Nikkei shed 0.1%, falling for the third consecutive day. The weak yen provided support as Fanuc rallied 2.1% and Toyota Motor gained 0.5%. 

·         Hong Kong's Hang Seng shed 0.2%, easing off six-year highs. Casino stocks were pressured as Galaxy Entertainment lost 1.4% and Sands China gave up 1.0%. 

·         China's Shanghai Composite rose 0.9% for its sixth consecutive advance, finishing at its best level since June 2013. Ningbo Port surged the daily limit, 10%, after Beijing announced new measures to support the shipping industry. 

Major European indices trade mostly lower, while Germany's DAX (+0.2%) and Spain's IBEX (+0.5%) outperform. 

·         Economic data was limited: 

o    Eurozone GDP was left unrevised at 0.0% quarter-over-quarter, as expected 

o    Germany's Industrial Production rose 1.9% month-over-month (expected 0.3%; prior 0.4%) 

o    French Consumer Confidence held steady at 86 (expected 85) 

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·         Germany's DAX is higher by 0.2% with exporters showing strength. Daimler and Volkswagen trade up 1.9% and 1.2%, respectively. Deutsche Boerse is the weakest performer, down 0.8%. 

·         In France, the CAC holds a loss of 0.2%. Consumer names lag with Carrefour, L'Oreal, and Pernod Ricard down between 0.8% and 2.0%. 

·         Great Britain's FTSE trades down 0.5%. Miners are on the defensive with Fresnillo down 4.6% and Randgold Resources lower by 3.0%. BP outperforms with a gain of 1.3%. 

·         Spain's IBEX is higher by 0.5%. Banco Popular, Banco Sabadell, Bankinter, Caixabank outperform with gains between 0.9% and 2.9%.

Market Internals

Leaders and Laggards

 

Technical Updates

Commentaries 

Closing Market Summary: Stocks End Abbreviated Week on Upbeat Note
The stock market finished a cautious week on a modestly higher note. The S&P 500 added 0.5%, ending the week with a slim gain of 0.2%, while the Russell 2000 (+0.3%) shed 0.2% for the week.

This morning, the Nonfarm Payrolls report for August revealed the addition of 142,000 payrolls, while the Briefing.com consensus expected a reading closer to 223,000. Interestingly, this was followed by a rally in equity futures with investors viewing the report as an argument in favor of the Fed potentially delaying its first rate hike.

Equity indices slipped from their opening levels, but the S&P 500 found support near the 1990 mark, which served as resistance in July and provided support over the past two weeks. The benchmark index tested the area around 10:45 ET and spent the remainder of the session in a slow climb to new highs.

All ten sectors finished in the green, but health care (+0.6%) contributed to the opening weakness. The countercyclical sector was pressured by Gilead Sciences (GILD 105.36, -1.50) in the early going with the stock down 8.7% at its worst point of the session. Shares of GILD narrowed their loss to 1.4% by the close, while the iShares Nasdaq Biotechnology ETF(IBB 270.60, -0.32) shed 0.1% after being down as much as 2.0%. Furthermore, the ETF logged its fourth consecutive decline, ending the week lower by 2.2%.

The underperformance of the biotech space kept the Nasdaq Composite behind the S&P 500, but the tech-heavy Nasdaq still drew a good bit of strength from the technology sector (+0.7%), which outperformed throughout the day. Components of all sizes contributed to the advance with Apple (AAPL 98.97, +0.85), Facebook (FB 77.26, +1.31), and Microsoft (MSFT 45.90, +0.64) gaining between 0.9% and 1.7%. High-beta chipmakers also displayed strength with the PHLX Semiconductor Index climbing 0.9%.

Even though technology spent the day in the green, it was the utilities sector (+1.2%) that finished in the lead.

Treasuries rallied following today's Nonfarm Payrolls report, but surrendered all of their gains during the day. The 10-yr yield ended at 2.45%.

Participation was below average with roughly 600 million shares changing hands at the NYSE.

Taking a closer look at the details of today's jobs report: 

·         Nonfarm payrolls increased by 142,000 (Briefing.com consensus 223,000) 

o    July nonfarm payrolls revised to 212,000 from 209,000 

o    June nonfarm payrolls revised to 267,000 from 298,000 

·         Private sector payrolls increased by 134,000 (Briefing.com consensus 200,000) 

o    July private payrolls revised to 213,000 from 198,000 

o    June private payrolls revised to 260,000 from 270,000 

·         Unemployment rate was 6.1% (Briefing.com consensus 6.1%) versus 6.2% in July 

·         Average hourly earnings rose 0.2% (Briefing.com consensus 0.2%) after being unchanged in July 

·         The average workweek was 34.5 hours (Briefing.com consensus 34.5) for the sixth consecutive month 

·         The labor force participation rate was 62.8% versus 62.9% in July 

Monday's economic data will be limited to the Consumer Credit report for July (Briefing.com consensus $17.80 billion), which will cross the wires at 15:00 ET. 

·         Nasdaq Composite +9.7% YTD 

·         S&P 500 +8.6% YTD 

·         Dow Jones Industrial Average +3.4% YTD 

·         Russell 2000 +0.6% YTD 

Commodities

Closing Commodities: Crude oil slides 2.7% on the week

·         Precious metals rallied to session highs in morning action following a weak jobs report for August. Nonfarm payrolls added 142,000 jobs in August after adding an upwardly revised 212,000 (from 209,000) in July. The Briefing.com consensus called for an increase to 223,000. 

·         Dec gold popped to a session high of $1274.80 per ounce but quickly erased most of the gain. It spent the remainder of the session chopping around near the unchanged line and settled 0.1% higher at $1267.20 per ounce, booking a loss of 1.6% for the week.

·         Dec silver also pulled back after touching a session high of $19.28 per ounce. It dipped as low as $19.06 and settled with a 0.2% gain at $19.17 per ounce. The precious metal fell 1.6% over the week. 

·         Oct crude oil extended yesterday's losses as it retreated from its session high of $94.58 per barrel set in early morning floor trade. It fell as low as $92.86 per barrel and settled with a 1.3% loss at $93.32 per barrel. Today's weakness brought losses for the week to 2.7%. 

·         Oct natural gas fell for a fourth consecutive session despite brushing a session high of $3.84 per MMBtu in morning action. It settled 0.8% lower at $3.79 per MMBtu, booking a 6.9% loss for the week.

COMEX Metals Closing Prices

·         Dec gold rose $1.10 to $1267.20/oz 

·         Dec silver rose $0.04 to $19.17/oz 

·         Dec copper rose 2 cents to $3.17/lb

CBOT Agriculture and Ethanol/ICE Sugar Closing Prices

·         Dec corn rose 10 cents to $3.57/bushel 

·         Dec wheat rose 6 cents to $5.36/bushel 

·         Nov soybeans rose 16 cents to $10.20/bushel 

·         Oct ethanol rose 3 cents to $2.01/gallon 

·         Nov sugar (#16 (U.S.)) rose 0.16 of a penny to 25.53 cents/lb

NYMEX Energy Closing Prices

  Oct crude oil fell $1.19 to $93.32/barrel 

·         Crude oil extended yesterday's losses as it retreated from its session high of $94.58 set in early morning action. It fell as low as $92.86 and settled with a 1.3% loss at $93.32. Today's weakness brought losses for the week to 2.7%. 

  Oct natural gas fell 3 cents to $3.79/MMBtu 

·         Natural gas fell for a fourth consecutive session despite brushing a session high of $3.84 in morning pit trade. It dipped to a session low of $3.78 and settled 0.8% lower, booking a loss of 6.9% the week. 

  Oct heating oil fell 2 cents to $2.82/gallon 

  Oct RBOB fell 2 cents to $2.58/gallon



Treasuries

10Y Settles at One-Month High of 2.46%: 10Y: -01/32..2.459%..USD/JPY: 105.04..EUR/USD: 1.2953
The Week in Review

·         Treasuries lost ground this week as the European Central Bank loosened policy and reports of a ceasefire in eastern Ukraine eased geopolitical tensions. Click here to see an intraweek yields chart.

·         The ECB lowered its main refinancing rate to 0.05% (0.15% previous) while also cutting both its marginal lending rate to 0.30% (0.40% previous) and its deposit rate to -0.20%
(-0.10% previous). The central bank also announced it would begin purchasing ABS, but did not disclose the size of those purchases.

·         U.S. economic data was mixed as surveys like the ISM Index (59.0 actual v. 57.0 expected) and ISM Services (59.6 actual v. 57.8 expected) topped estimates while hard data like factory orders (10.5% actual v. 11.0% expected), productivity-rev. (2.3% actual v. 2.6% expected), and nonfarm payrolls (142K actual v. 223K expected) fell short of expectations. The unemployment rate eased to 6.1% (6.2% previous), matching estimates. 

·         The latest Fed Beige Book suggested economic activity expanded since the previous report, but suggested "none of the Districts pointed to a distinct shift in the overall pace of growth." 

·         Up front, the 2Y tacked on +2bps to end @ 0.504%. Action tested key resistance in the 0.550% area, but was unable to break out to levels last seen in May 2011. 

·         In the belly, the 5Y added +6bps to 1.689%. Trade found support in the 1.650% area with the help from the 50 and 100 dma, and hit a one-month high.

·         The 10Y climbed +12bps to 2.461%. The benchmark yield finished  the week at a one-month high and ended on resistance guarded by the 50 dma. 

·         At the long end, the 30Y rallied +15bps to 3.237%. Action ended the week at a three-week high while settling on resistance dating back to late-July.

·         Selling swung the yield curve steeper with the 2-10-yr spread widening to 195.5bps. The 5-30-yr spread expanded to 155bps. 

The Week Ahead 

·         Monday's data is limited to consumer credit (15). 

·         Tuesday will see just the JOLTs - Job Openings (10). Treasury will auction $27 bln 3Y notes. 

·         Data remains slow on Wednesday as the weekly MBA Mortgage Index (7) and wholesale inventories (10) are due out. Treasury will hold a $27 bln 10Y note reopening.

·         Thursday's data includes initial and continuing claims (8:30) and the Treasury Budget (14). Treasury will reopen $13 bln 30Y bonds. 

·         Friday's data is the most anticipated of the week as retail sales, import/export prices (8:30), Michigan Sentiment (9:55), and business inventories (10) are due out.

On other news.... 




Currencies 

Dollar Slips Off Best Levels in a Year: 10Y +02/32..2.442%..USD/JPY: 105.01..EUR/USD: 1.2958

·         The Dollar Index drifts little changed amid a mostly uneventful session. Click here to see a daily Dollar Index chart.

·         The greenback hovered little changed near 83.80 into this morning's nonfarm payroll report before the disappointing data pressed action to a session low of 83.60. 

·         The remainder of the morning was spent clawing back those losses.

·         EURUSD is +20 pips @ 1.2955 as light buying has emerged at 14-month lows. The single currency saw an early boost from the better than expected German industrial production data before testing the 1.3000 level after this morning's jobs report. Germany's trade balance will cross the wires on Monday. 

·         GBPUSD is +5 pips @ 1.6320 as the bulls look to put in the first gain in four sessions. A quiet day for news and data from the UK has seen trade held hostage by the fluctuations in the euro as trade attempts to steady at seven-month lows neae the key 1.6300 support level. 

·         USDCHF is -15 pips @ .9310 as trade eases off its best levels in a year. The pair saw little response to the unchanged foreign currency reserves print with action instead moving in a tight correlation with the euro. Switzerland's CPI and retail sales are scheduled for Monday.

·         USDJPY is -25 pips @ 105.05 as sellers take control for just the fifth time in 20 sessions. The pair spiked to a six-year high of 105.70 in overnight trade, but has slid off that level as sellers stepped in to defend the 200 mma. Japan's current account and Q2 Final GDP are due out Sunday evening. 

·         AUDUSD is +35 pips @ .9380 as trade readies for its best close in a month. Today's bid has run the hard currency back above its 50 and 100 dma as has action contending with resistance in the .9380/.9400 area. Australian data set for Sunday evening is limited to ANZ Job Advertisements. China's trade balance is tentatively scheduled for release on Sunday evening. Chinese banks are closed for Mid-Autumn Festival. 

·         USDCAD is +5 pips @ 1.0880 as trade hovers little changed amid an uneventful trade. The pair saw some whippy action following the disappointing Canadian jobs data and Ivey PMI, but spent the remainder of the session in a tight 25 pip range. Canada's building permits data is due out Monday.

Weekly Analysis




Technical Updates

Briefing's Commentaries


Week in Review: September Begins on Quiet Note

On Tuesday, the market started the abbreviated week on a mixed note with modest point changes on either side of the unchanged mark for the major indices. For the most part, the stock market was a sideshow. The main trading events were seen in the commodity and Treasury markets, both of which saw some decent-sized losses within their respective complex. Dollar strength was at the heart of the weakness in the commodity arena, which saw a 4.2% drop in natural gas futures to $3.90/btu, a 3.1% decline in oil prices to $92.96/bbl, and a 1.7% slide in gold prices to $1266.10/troy ounce. The US Dollar Index increased 0.3% to 82.99 -- a 13-month high -- as the yen hit its weakest level (105.15) against the greenback since January.

The stock market had difficulty getting anything going on Wednesday as a wait-and-see stance permeated the trading action. That was understandable given some confusing headlines about cease-fire talk between Ukraine and Russia, Apple suffering a 4.2% decline in its stock price, and the specter of policy meetings by the Bank of Japan, the Bank of England, and the ECB on Thursday. The way things ended on Wednesday was pretty much how they went throughout the day. That is, the Dow (+0.1%) and S&P 500 (-0.1%) held up better than the Nasdaq Composite (-0.6%) and Russell 2000 (-0.6%). Things sounded more promising before the open when there was talk of a "permanent" cease-fire agreement between Ukraine and Russia. However, Kremlin countered that it could not have agreed to such a thing when it is not a party to the conflict in eastern Ukraine.

Equities finished Thursday on a modestly lower note following a daylong retreat from the opening high. The S&P 500 shed 0.2%, while the Russell 2000 (-0.4%) settled behind the benchmark index. Overnight, the Bank of Japan and the Bank of England made no changes to their policy stances, while the European Central Bank announced a rate cut. The ECB lowered its main refinance rate to 0.05% from 0.15%, cut its deposit facility rate to -0.2% from -0.1%, and cut the marginal lending rate to 0.3% from 0.4%. In addition to the cuts, the central bank announced the deployment of an asset-backed securities purchase program, but it was revealed that the decision was not unanimous. The policy move pressured the euro, sending the single currency to its lowest level since July of last year.

Next Week In View





Economic Commentaries

Economic Summary: NFP's miss expectations; Unemployment Rate remains at 6.1%
Economic Data Summary:

·         August Non Farm Payrolls 142K vs Briefing.com consensus of 223K; July was revised to 212K from 209K

o    Manufacturing 0K

o    Professional and business services +47K

o    Retail Trade -8.4K

·         August NonFarm Private Payrolls 134K vs Briefing.com consensus of 200K; July was revised to 213K from 198K

·         August Unemployment Rate 6.1% vs Briefing.com consensus of 6.1%; July was 6.2K

·         August Hourly Earnings 0.2% vs Briefing.com consensus of 0.2%; July was 0.0

·         August Average WorkWeek 34.5 vs Briefing.com consensus of 34.5; July was 34.5

o    This was the first time since January that payrolls didn't add at least 200,000 jobs in a month and was the smallest increase since December 2013. Over the last several weeks, the initial claims level dropped below 300,000. These levels normally imply monthly payroll gains of about 300,000. With actual job growth less than half of the implied initial claims forecast, it would seem that the claims data are biased from seasonal adjustment or some other unknown shock.

Upcoming Economic Data:

·         July Consumer Credit due out Monday at 15:00 (June was $17.3 bln)

Other International Events of Interest

·         Eurozone GDP was left unrevised at 0.0% quarter-over-quarter, as expected 

·         Germany's Industrial Production rose 1.9% month-over-month (expected 0.3%; prior 0.4%) 

Jason's Commentaries

Came in as a surprise as the non-farm payrolls came in at 142k, way below monthly average of 200k jobs. With such a terrible number, the market managed to rally on a low volume of 600m share traded on the NYSE. The week came in rocky as there are new development in the Russia-Ukraine Crisis and the ECB cutting rates unexpectedly. Putin issued a ceasefire agreement to Ukraine, which Ukraine rejected. That caused the market to end up in consolidation for the past week. However, the ISM manufacturing and non-manufacturing continues to expand and I believe that the economy is looking pretty ok as well. However, depend the jobless rate is standing at 6.1%, the number was largely consisting of part timers. The market needs a increase in full time employment.

Right now, the market is consolidating at the top after both Nasdaq and S&P500 broke the high. However, given the current situation, we might be at the top and is likely to have a retracement. Seems that both S&P500 and Nasdaq is unable to sustain the high for that long afterall.

Market Call: DOWN

Date: 8 Sep 2014