20 Nov 2014 AMC -Market recovered from bearish start and end up in the green

20 Nov 2014 AMC -Market recovered from bearish start and end up in the green

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: + 0.1%

·         France's CAC: -0.8%

·         Spain's IBEX: -1.6%

·         Portugal's PSI: -0.6%

·         Italy's MIB Index: -0.9%

·         Irish Ovrl Index: + 0.4%

·         Greece ASE General Index: + 0.6%

Before Market Opens 

S&P futures vs fair value: -8.40. Nasdaq futures vs fair value: -15.80.
The S&P 500 futures trade eight points below fair value.

Markets ended little changed across much of Asia. 

·         In economic data: 

o    China's HSBC Manufacturing PMI slipped to 50.0 from 50.4 (expected 50.3) 

o    Japan's Manufacturing PMI ticked down to 52.1 from 52.4 (consensus 52.7) while the trade deficit narrowed to JPY980 billion from JPY1.07 trillion (expected deficit of JPY1.02 trillion) as imports increased 2.7% (consensus 3.4%; last 6.2%) and exports jumped 9.6% (expected 3.4%; prior 6.2%) 

o    Hong Kong's CPI eased to 5.2% from 6.6% (consensus 4.0%) 

o    New Zealand's Input PPI fell 1.5% quarter-over-quarter (forecast 0.3%; previous -1.0%) while Output PPI decreased 1.1% (consensus 0.2%; last -0.5%) 

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·         Japan's Nikkei added 0.1% to hold at its best levels in seven years. Financials lagged as Credit Saison and Sony Financial lost 3.3% and 2.4%, respectively. 

·         Hong Kong's Hang Seng shed 0.1%, but held the 200-day average. Hong Kong Exchanges remained under pressure since the Stock Connect Launch, losing another 1.3%. 

·         China's Shanghai Composite recovered its early losses and eked out a slim gain of 0.1%. Haitong Securities jumped 1.8% as brokerage names outperformed amid word Beijing was looking to expedite changes to the IPO process. 

·         India's Sensex ticked up 0.1% to remain near all-time highs. IT Service providers led as Infosys, Wipro, and Tata Consultancy Services all gained close to 1.2%. 

Major European indices trade lower across the board with Spain's IBEX (-2.1%) showing the largest decline. Elsewhere, French Finance Minister Michel Sapin commented on the eurozone, saying the UK would be worse off if it left the Union. Mr. Sapin also addressed the prospects of a fine for not meeting EU targets in its budget, saying the fine will not be a major issue 

·         Economic data was plentiful: 

o    Eurozone Manufacturing PMI ticked down to 50.4 from 50.6 (expected 50.9) while Services PMI fell to 51.3 from 52.3 (consensus 52.3) 

o    Great Britain's Retail Sales rose 0.8% month-over-month (consensus 0.4%; prior -0.4%) while the year-over-year reading increased 4.3% (expected 3.8%; last 2.3%). Core Retail Sales rose 0.8% month-over-month (consensus 0.3%; previous -0.3%) while the year-over-year reading jumped 4.6% (forecast 3.9%; last 2.8%). Also of note, CBI Industrial Trends Orders improved to 3 from -6 (expected -3) 

o    Germany's Manufacturing PMI fell to 50.0 from 51.4 (consensus 51.5) while Services PMI eased to 52.1 from 54.4 (expected 54.5). Separately, PPI fell 0.2% month-over-month (expected -0.1%; last 0.0%) 

o    French Manufacturing PMI slipped to 47.6 from 48.5 (consensus 48.9) while Services PMI improved to 48.8 from 48.3 (consensus 48.6) 

o    Italy's Industrial New orders fell 1.5% month-over-month (expected -1.0%; prior 1.5%) 

o    Norway's Q3 GDP expanded 0.5% quarter-over-quarter (consensus 0.4%; last 1.1%) 

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·         Germany's DAX trades lower by 0.7% with 2/3 of the index in negative territory. Commerzbank and Deutsche Bank are among the weakest performers, down 2.2% and 2.4%, respectively. Adidas outperforms with a solid gain of 1.7%. 

·         Great Britain's FTSE has given up 0.7% with miners fueling the retreat. Anglo American, BHP Billiton, and Rio Tinto are down between 2.8% and 3.3%. Consumer names have held up well with Coca-Cola HBC, and TUI Travel both up near 1.7%. 

·         In France, the CAC trades down 1.2% with Technip leading the slide. The oil services company is lower by 6.8% after CGG rejected its takeover offer. 

·         Spain's IBEX underperforms with a loss of 2.1% amid broad weakness. Construction names Abengoa and Sacyr hold respective losses of 8.5% and 4.1% while financials also lag. Banco Popular, BBVA, and Bankia are down between 2.5% and 5.4%.

U.S. Equities

·         Futures point to a heavy open

·         The DJIA and S&P 500 remain near all-time highs

·         The VIX (13.96) holds near two-month lows

·         Initial Claims (291K actual v. 285K expected)

·         Continuing Claims (2330K actual v. 2380K expected)

·         CPI (0.0% actual v. -0.1% expected)

·         Core CPI (+0.2% actual v. +0.1% expected)

o    S&P Futures -9 @ 2038 

o    Dow Futures -80 @ 17,577

o    Nasdaq Futures -17 @ 4207

Asia

·         Markets ended little changed across much of Asia

·         China's HSBC Flash Manufacturing PMI (50.0 actual v. 50.2 expected, 50.4 previous) held the expansion line

·         Japan posted a 28th consecutive trade deficit (JPY0.98 trln actual v. JPY1.02 trln expected, JPY1.07 trln previous), dropping the yen to nearly 119.00 before weak European erased most of the weakness

·         Japan's Nikkei (+0.1%) held at its best levels in seven years

·         Hong Kong's Hang Seng (-0.1%) held the 200 dma. Hong Kong Exchanges remained under pressure since the Stock Connect Launch, shedding another 1.3%

·         China's Shanghai Composite (+0.1%) recovered its early losses and eked out a gain

·         India's Sensex (+0.1%) remained near all-time highs

·         Australia's ASX (-1.0%) fell into negative territory for the year

Market Internals

Market Internals -Technical-
The Nasdaq closed up 26 (+0.56%) at 4702, the S&P 500 closed up 4 (+0.20%) at 2053, and the Dow closed up 33 (+0.19%) at 17719. Action came on below average volume (NYSE 645 mln vs. avg. of 792; NASDAQ 1528 mln vs. avg. of 1854), with advancers outpacing decliners (NYSE 2062/1075, NASDAQ 1832/902) and new highs outpacing new lows(NYSE 98/36, NASDAQ 69/57).

Relative Strength: 
Junior Gold Miners-GDXJ +4.55%, Oil and Gas Exploration-XOP +3.33%, Metals and Mining-XME +2.42%, Grains-JJG +2.37%, Corn-CORN +2.32%, Greece-GREK +1.63%, Turkey-TUR +1.3%, Russia-RSX +1.06%, Canada-EWC +0.95%, Egypt-EGPT +0.82%.

Relative Weakness: 
Coffee-JO -5.49%, Spain-EWP -1.63%, South Africa-EZA -1.56%, Poland-EPOL -1.47%, Indonesia-IDX -1.34%, Italy-EWI -1.3%, Volatility-VXX -1.04%, Pharmaceuticals-PPH -0.67%, Livestock-COW -0.67%, Consumer Staples-XLP -0.43%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries

Closing Market Summary: Cyclical Sectors Send S&P 500 To New Record
The stock market ended the Thursday session on a modestly higher note despite a cautious start. The S&P 500 added 0.2%, ending at a fresh record at 2,052.75 while the Nasdaq Composite (+0.6%) and Russell 2000 (+1.1%) outperformed.

Equities faced some pressure at the start after disappointing data from overseas led to profit taking in Europe. Specifically, China's HSBC Manufacturing PMI came in at 50.0, which represents the difference between expansion and contraction, while Japan reported a slim downtick to 52.1 from 52.4. As for the eurozone, Manufacturing PMI slipped to 50.4 from 50.6 and Services PMI fell to 51.3 from 52.3.

The key indices began inching away from their lows right after the open and the cautious sentiment evaporated in a hurry after better than expected Existing Home Sales (5.26 million; Briefing.com consensus 5.17 million), Leading Indicators (0.9%; consensus 0.6%), and Philadelphia Fed Survey (40.8; expected 18.3) crossed the wires at 10:00 ET.

Thanks to the rebound, the S&P 500 marked its session high two hours after the start, but was unable to build on its gain. Instead, the index maintained a five-point range into the afternoon to end with a slim gain. However, conviction in the advance was not very strong with fewer than 650 million shares changing hands at the NYSE floor.

Meanwhile, the tech-heavy Nasdaq outperformed, turning its week-to-date loss to a gain of 0.6%. Shares of Apple (AAPL 116.31, +1.64) were a major source of strength, climbing 1.4%. Other large cap technology (+0.6%) components were not nearly as strong as the largest sector—and Nasdaq—member, but chipmakers picked up the slack. The PHLX Semiconductor Index jumped 0.9% with Intel (INTC 35.95, +1.60) surging 4.7% after providing revenue guidance and boosting its annual dividend to 96 cents.

Interestingly, the strength among high-beta chipmakers and small cap stocks was not met with gains in the biotech space. The iShares Nasdaq Biotechnology ETF (IBB 294.02, -0.19) shed 0.1% after failing to hold its intraday gain. As for health care (-0.4%), the largest countercyclical group tried to turn positive in the morning, but that effort was rebuffed. Similarly, the remaining countercyclical sectors ended in the red.

Turning back to the cyclical side, the energy sector (+1.1%) settled in the lead with help from crude oil, which spiked 1.8% to $75.82.bbl.

Elsewhere, the consumer discretionary sector (+0.4%) outperformed thanks to retailers after Best Buy (BBY 38.02, +2.48), Dollar Tree (DLTR 65.87, +3.24), Williams-Sonoma (WSM 75.22, +5.80), and L Brands (LB 80.08, +2.40) reported better than expected results. The four gained between 3.1% and 8.4% while the SPDR S&P Retail ETF (XRT 92.56, +1.52) advanced 1.7%.

Treasuries spent the day in the green, but ended near the bottom of the intraday range, sending the 10-yr yield lower by three basis points to 2.33%.

Participation was on the light side with fewer than 650 million shares changing hands at the NYSE.

Investors received several data points, including Initial Claims, CPI, Existing Home Sales, Philly Fed Survey, and Leading Indicators: 

·         Weekly initial claims decreased to 291,000 from an upwardly revised 293,000 (from 290,000), while the Briefing.com consensus expected a decline to 285,000 

o    Over the past few months, the initial claims level has stabilized below 300,000, and week-to-week volatility has slowed. Trends continue to point toward low layoff activity 

o    Continuing claims fell to 2.330 million from an upwardly revised 2.403 million, representing the lowest level since December 2012 

·         The CPI report was unchanged in October (Briefing.com consensus -0.1%) while Core CPI ticked up 0.2% (consensus 0.1%) 

o    The increase in core prices in October was the largest gain since prices rose 0.3% in May, but year-over-year price growth remains benign at 1.8% 

·         Existing home sales increased to 5.26 million SAAR in October from an upwardly revised 5.18 million (from 5.17 million) while the Briefing.com consensus pegged sales at 5.17 million 

o    Sales increased 2.6% year-over-year, which was the first gain on that basis since last October. It was also the most homes sold since September 2013 

o    The underlying conditions remain positive for the housing industry. A sharp drop in mortgage rates and strong improvements in the labor market have made housing more affordable 

·         The Philadelphia Fed's Business Outlook spiked to 40.8 in November from 20.7 while the Briefing.com consensus expected a decline to 18.3 

o    Business activities in the Philadelphia region reached their highest point since December 1993. A total of 49% of firms saw business activities improve in November as opposed to only 9% that saw decreased activity 

o    The Shipments Index rose to 31.9 in November from 16.6 in October. The gain in production was predicated on a spike in new orders (35.7 from 17.3) 

·         The Leading Indicators report for October was up 0.9%, while the Briefing.com consensus expected a reading of 0.6%. That followed a revised 0.7% increase in September (from 0.8%) 

There is no economic data of note on tomorrow's schedule. 

·         Nasdaq Composite +12.5% YTD 

·         S&P 500 +11.0% YTD 

·         Dow Jones Industrial Average +6.9% YTD 

·         Russell 2000 +0.6% YTD

Commodities

Closing Commodities: Crude Oil Closed Near $76/barrel

·         Natural gas futures rallied today 6% off of today's low of $4.25/MMBtu, rising back up to $4.50/MMBtu.

·         At the end of the day's session, Dec nat gas gained 2.5% to $4.49/MMBtu

·         Jan crude oil rose as high as $75.90/barrel, but pulled back a little to close 1.8% higher to $75.82/barrel

·         Dec gold fell 0.3% to $1190.70/oz, while Dec silver lost 1% to $16.45/oz.

·         Dec copper remained in the red all day and ended at $3.02/lb, down 1%.

Metals price action

  Gold fell $3.20 (-0.3%) to $1190.70/oz

·         Most of gold's move lower came in the overnight session, actually trending higher throughout most of the day, testing some support at the 1186 several times.

  Silver fell 15.4 cents (-1%) to $16.45/oz

·         Silver has been pretty rangebound, moving around the 16.17 level most of the day. 

  Copper fell 2.85 cents (-0.9%) to 3.0185

Agricultural price action

·         Corn rose 10 cents (+2.7%) to $3.7325/bushel

·         Wheat rose 9.25 cents(+1.7%) $5.47/bushel

·         Soybeans rose 17 cents (+1.7%) to $10.2175/bushel

·         Ethanol rose 7.3 cents (+3.9%) to $1.948/gallon

·         Sugar #11 rose 1.1% to 16.05 cents/gallon

Energy price action

  Crude oil rose $1.34 (+1.8%) to $75.82/barrel

·         Crude is breaking out today above some important levels, most notably the all important 75 support. Futures are closing on session highs.

  Natural gas rose 11.6 cents (+2.5%) to $4.485/MMBtu

·         Nat gas rose overnight, but has actually declined throughout most of the pit session on inventory data that showed a draw of 17 bcf vs expectations for a draw of ~11.5 bcf until a recent bounce from support at 4.25. 

  Heating oil rose 2.3 cents (+1%) to $2.381/gallon

  RBOB fell 1.5 cents (-0.7%) to $2.0286/gallon

 


Treasuries

Yields Slip, Remain Range-Bound: 10Y: +06/32..2.335%..USD/JPY: 117.95..EUR/USD: 1.2545

·         Treasuries booked small gains amid a choppy trade. Click here to see an intraday yields chart.

·         The complex caught an overnight bid in response to the weak European PMI data and rallied to its best levels of the day as the first batch of U.S. economic data cross the wires.

·         Initial (291K actual v. 285K expected) and continuing (2330JK actual v. 2380K expected) claims were mixed while both CPI (0.0% actual v. 0.1% expected) and core CPI (0.2% actual v. 0.1% expected) saw hotter than anticipated results.

·         Maturities chopped around near session highs ahead of the second batch of economic data, and quickly came under pressure as those numbers were released. 

·         Existing home sales (5.26M actual v. 5.17M expected), Philly Fed (40.8 actual v. 18.3 expected), and leading indicators (0.9% actual v. 0.6% expected) all outpaced estimates by a wide margin. 

·         The complex would press to session lows near the unchanged line into the lunchtime hour before the strong 30Y TIPs auction ignited a short-covering rally. 

·         A choppy trade would ensue for the remainder of the session. 

·         Today's action was unable to break yields out of the ranges that have been in place over the past several weeks. 

·         Up front, the 2Y finished -1.7bps @ 0.500%. Action closed on the lower bound of the 0.500%/0.550% range that has held up throughout November. 

·         In the belly, the 5Y eased -1.5bps to 1.624%. The yield has been stuck between 1.600%/1.650% for more than three weeks. 

·         The 10Y slipped -1.6bps to 2.335%. The benchmark yield has spent most of November in a tight range between 2.300% and 2.350%. 

·         Buying at the long end pushed the 30Y down -1.4bps to 3.053%. A lackluster trade over the past month has kept the yield bottled up between 3.000% and 3.100%. 

·         The yield curve finished unchanged @ 183.5bps. 

·         Precious metals saw a mixed session as gold added +$1 to $1195 and silver slid -0.06 to $16.23. 

·         Data: None.

On other news.... 

Currencies 

Dollar Drifts Little Changed: 10Y: +05/32..2.333%..USD/JPY: 117.97..EUR/USD: 1.2548

·         The Dollar Index drifts little changed near 87.60. Click here to see a daily Dollar Index chart.

·         The greenback has tested both the upper and lower bounds of its recent 87.50/88.00 range, but remains unable to break out. 

·         EURUSD is flat @ 1.2550 after recouping its overnight losses. The single currency tested 1.2500 following another round of dismal PMI data, but buyers once again stepped in to defend the support level. ECB head Mario Draghi speaks tomorrow in Frankfurt. 

·         GPBUSD is +25 pips @ 1.5705 as the bulls look to put in a second day of gains following five straight losing sessions. Sterling has been boosted in today's trade by the better than expected retail and CBI Industrial Order Expectations data. A move through 1.5830 puts the key 1.6000 level and the 50 dma in focus. Britain's public sector net borrowing is due out tomorrow. 

·         USDCHF is +5 pips @ .9575 amid a choppy trade. Support in the .9550 area remains in focus as the 50 dma provides additional support to the area. 

·         USDJPY is -5 pips @ 117.90 after seeing a sharp reversal off seven-year highs. The pair rushed to a test of the 119.00 level after Japan announced its 28th consecutive trade deficit, but quickly slid off the level as a risk off trade took hold in response to the weak European PMI data. Today's potential spinning top pattern on a daily chart is problematic to the bull case. 

·         AUDUSD is +25 pips @ .8640 as action presses session highs. The hard currency tested key support in the .8550 area following China's HSBC Flash Manufacturing PMI miss, but trade bounced off the level and has been trending higher. The bulls would like to reclaim the .8650 area, putting trade back into the recent .8650/.8850 range. 

·         USDCAD is -40 pips @ 1.1300 as trade tests support in the area. The pair saw an early lift above 1.1350, but reversed lower after Canada's strong wholesale sales data. Canadian data scheduled for tomorrow is limited to CPI.

Next Week In View

There are no economic news on Friday.


Economic Commentaries

Economic Summary: October CPI flat; Existing Home Sales top expectations; Philly Fed blows past estimates
Economic Data Summary:

·         Weekly Initial Claims 291K vs Briefing.com consensus of 285K; Last Week was revised to 293K from 290K

·         Weekly Continuing Claims 2.330 M vs Briefing.com consensus of 2.380 M ; Last Week was revised to 2.403 M from 2.392 M

·         October CPI 0.0% vs Briefing.com consensus of -0.1%; September was 0.1%

·         October Core CPI 0.2% vs Briefing.com consensus of 0.1%; September was 0.1%

o    Energy prices followed trends in the PPI and declined 1.9% in October. Seasonal adjustments, however, kept overall energy price declines from being much greater than expected, which was a primary reason for the upward surprise in overall price growth. 

·         October Existing Home Sales 5.26 M vs Briefing.com consensus of 5.17 M ; September was revised to 5.18 M from 5.17 M

o    Sales increased 2.6% y/y, which was the first year-over-year gain since last October. It was also the most homes sold since September 2013.

o    The underlying conditions remain positive for the housing industry. A sharp drop in mortgage rates and strong improvements in the labor market have made housing more affordable.

·         November Philadelphia Fed 40.8 vs Briefing.com consensus of 18.3; October was 20.7

·         October Leading Indicators 0.9% vs Briefing.com consensus of 0.6%; September was revised to 0.7% from 0.8%

Upcoming Fed/Treasury Events:

·         San Fran Fed President John Williams (not a voting FOMC member, moderate) to speak today at 20:30

Other International Events of Interest

·         Eurozone Flash Manufacturing (50.4 actual v. 50.9 expected, 50.6 previous) and Services (51.3 actual v. 52.3 expected, 52.3 previous) PMI both missed estimates

Jason's Commentaries

Was expecting the global slowing economy to cause some catalyst for the market to head down lower but instead the market regained its strength and came back stronger. There again, volumes were very weak and I believe the market markers are holding their prices higher admist the weak volumes. Amongst the sector, the Energy sector was the leading sector of 1.25% as oil managed to bounce off the support level at $74, closing at $75.8 per barrel for light sweet crude oil. Maintaining the gain in the S&P500, the chipmakers manager to stage a rally as well. However, for the retailers, they are not doing as well. Target sunk, dragging Walmart along. Looking at the result, i believe the market is unlikely to make higher highs today. It will be another flat day today despite futures are up 0.28%.








Market Call: FLAT to upside

Date: 21 Nov 2014