6 Nov 2014 AMC - Market broke into the high despite utilities sunk 1.70%

6 Nov 2014 AMC - Market broke into the high despite utilities sunk 1.70%

Market Summary 

 European Markets Closing Prices

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

·       UK's FTSE: + 0.2%

·       Germany's DAX: + 0.7%

·       France's CAC: + 0.5%

·       Spain's IBEX: -0.3%

·       Portugal's PSI: + 0.5%

·       Italy's MIB Index: -0.7%

·       Irish Ovrl Index: + 0.3%

·       Greece ASE General Index: + 0.5%

Before Market Opens 

S&P futures vs fair value: +6.60. Nasdaq futures vs fair value: +12.20.
The S&P 500 futures trade almost seven points above fair value.

Markets closed mixed across Asia. The latest Bank of Japan minutes voiced concern the recent drop in oil prices could push inflation below 1.0%. 

·       Economic data was limited: 

o   Japan's Leading Index rose to 105.6 from 104.4 (expected 105.5) 

o   Australia's Employment Change came in at 24,100 (expected 10,300; prior -23,700), but the Unemployment Rate held at 6.2% (expected 6.1%) 

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·       Japan's Nikkei fell 0.9% from seven-year highs. Toyota Motor edged up 0.1% after reporting better than expected quarterly results and announcing it expects record profit for the fiscal year. 

·       Hong Kong's Hang Seng shed 0.2% to register its fourth day of selling. Casino names remained under pressure as Sands China and Galaxy Entertainment sank 4.6% and 3.2%, respectively. 

·       China's Shanghai Composite added 0.3% to close near 21-month highs. Rail stocks extended their recent strength with China Railway Group climbing 2.6% and China Railway Construction Group jumping 2.8%. 

·       India's Sensex was closed for holiday. 

Major European indices have surged to highs after European Central Bank President Mario Draghi said the central bank will begin purchases of asset-backed securities soon. However, it is worth noting that the ECB has already discussed its intentions to begin ABS purchases in the past. Mr. Draghi also said the central bank is ready to step up its easing efforts if needed, but that contrasts with this week's Reuters story, which suggested nearly half of the ECB board opposes a sovereign quantitative easing program.

Elsewhere, the Bank of England made no changes to its policy stance, keeping its key rate and the purchasing program at their respective 0.5% and GBP375 billion. The euro has dropped to 1.2410 against the dollar. 

·       Participants received several data points: 

o   Germany's Factory Orders ticked up 0.8% month-over-month (expected 2.3%; prior -4.2%) 

o   Great Britain's Industrial Production rose 0.6% month-over-month (consensus 0.4%; last -0.1%) while the year-over-year reading increased 1.5% (forecast 1.5%; prior 2.2%). Separately, Manufacturing Production rose 2.9% year-over-year (expected 2.8%; prior 4.0%) and Halifax House Price Index increased 8.8% year-over-year (consensus 9.1%; last 9.6%) 

o   Swiss SECO Consumer Climate fell to -11 from -1 (expected -5) 

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·       Great Britain's FTSE is higher by 0.5%. Staple stocks outperform with WM Morrison Supermarkets, J Sainsbury, and Tesco up between 3.6% and 6.8% after WM Morrison reaffirmed its guidance. On the downside, AstraZeneca, GlaxoSmithKline, and Smith & Nephew are down between 1.3% and 2.2%. 

·       In France, the CAC trades up 1.0% amid strength in growth-sensitive names. Cap Gemini, Technip, and Michelin are up between 3.3% and 4.8%. Financials lag with Credit Agricole and Societe Generale down 4.7% and 1.2%, respectively. 

·       Germany's DAX has climbed 1.1% with help from producers of basic materials. HeidelbergCement, ThyssenKrupp, and K+S are up between 2.0% and 5.6%. Drug makers lag with Bayer and Merck lower by 1.1% and 1.7%, respectively.

U.S. Equities

·       Equity futures point to gains at the open as trade whips around amid the Mario Draghi press conference

·       The DJIA and S&P 500 finished yesterday's session at record peaks

·       The VIX (14.17) continues to test support dating back to the middle of September

·       Challenger Job Cuts (11.9%) 

·       Initial Claims (278K actual v. 285K expected)

·       Continuing Claims (2348K actual v. 2378K expected)

·       Productivity-prel (2.0% actual v. 1.5% expected)

·       Unit Labor Costs (0.3% actual v. 0.7% expected)

o   S&P Futures +6 @ 2025

o   Dow Futures +76 @ 17489

o   Nasdaq Futures +16 @ 4159

Asia

·       Markets closed mixed across Asia

·       The latest Bank of Japan minutes voiced concern the recent drop in oil prices could push inflation below 1%

·       Portal Rasmi Bank Negara Malaysia kept its benchmark interest rate unchanged at 3.25%, as expected

·       Australia's employment change (24.1K actual v. 20.3K expected) topped estimates and the unemployment rate held steady at 6.2%

·       Japan's Nikkei (-0.9%) fell from seven-year highs

·       Hong Kong's Hang Seng (-0.2%) saw a fourth day of selling

·       China's Shanghai Composite (+0.3%) closed near 21-month highs

·       India's Sensex was closed for holiday

·       Australia's ASX (-0.2%) gave up its early gains and finished slightly in the red

Market Internals

Market Internals -Technical-
The Dow closed up 70 (+0.40%) at 17554, the Nasdaq closed up 18 (+0.38%) at 4638, and the S&P 500 closed up 8 (+0.38%) at 2031. Action came on slightly below average volume (NYSE 734 mln vs. avg. of 771; NASDAQ 1821 mln vs. avg. of 1844), with advancers outpacing decliners (NYSE 1813/1349, NASDAQ 1579/1132) and new highs outpacing new lows (NYSE 186/64, NASDAQ 122/65).

Relative Strength:
Natural Gas-UNG +5.46%, Gold Miners-GDX +3.74%, Silver Miners-SIL +3.4%, U.S. Home Construction-ITB +2.05%, Biotechnology-XBI +2.03%, Israel-EIS +1.06%, Vietnam-VNM +0.71%, Peru-EPU +0.43%, South Korea-EWY +0.43%, Germany-EWG +0.11%.

Relative Weakness:
Russia-RSX -4.15%, Eastern Europe-ESR -3.31%, Turkey-TUR -2.7%, Brazilian Real-BZF -2.66%, Volatility-VXX -2.61%, Latin America 40-ILF -2.61%, Coffee-JO -2.11%, Utilities-XLU -1.7%, Telecommunications-IYZ -1.46%, Nuclear Energy-NLR -1.35%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries

Closing Market Summary: Stocks Climb Ahead of October Jobs Report
Equity indices registered modest gains on Thursday ahead of the Nonfarm Payrolls report for October (Briefing.com consensus 235,000), which will be released tomorrow. The S&P 500 added 0.4% with seven sectors ending in the green.

The key indices spent the entire session in a slow and steady climb off their opening lows, but the same could not be said for the greenback.

The Dollar Index (88.08, +0.64) spiked 0.7% after the European Central Bank released its latest policy statement. Although the central bank did not announce any changes, the euro tumbled below 1.2380 against the dollar after Mario Draghi said the bank will begin purchases of asset-backed securities soon and will not hesitate to introduce additional easing if needed. The reminder of willingness to consider additional measures boosted European equities and helped U.S. futures climb off their overnight lows.

However, it should be noted that the ECB has already discussed its intentions to begin ABS purchases in the past. Furthermore Mr. Draghi's comments about additional easing contrasted with Tuesday's Reuters story, which claimed nearly half of the ECB board opposes the implementation of a sovereign quantitative easing program.

The resulting dollar strength weighed on crude oil (77.90, -0.78), but the energy sector (+1.3%) ended in the lead despite showing early weakness. The sector climbed to highs during the final hour of the session, rising above the industrial space (+1.1%), which led for the bulk of the day.

Industrials received strong support from General Electric (GE 26.36, +0.54) as the top-weighted sector component reclaimed its 200-day moving average, spiking 2.1% to levels last seen in mid-September. Transports also fared well with the Dow Jones Transportation Average jumping 1.3%.

Elsewhere among cyclical sectors, consumer discretionary (+0.9%) and materials (+0.8%) displayed strength while financials (+0.1%) and technology (-0.1%) lagged.

The materials sector was boosted by miners after Randgold Resources (GOLD 64.61, +5.45) reported earnings. The company missed bottom-line estimates, but investors cheered news indicating Randgold has closed its revolving credit facility. The stock spiked 9.2% while the Market Vectors Gold Miners ETF (GDX 17.21, +0.62) jumped 3.7%.

On the downside, technology (-0.1%) spent the day in negative territory after Qualcomm (QCOM 70.57, -6.63) reported disappointing results. Shares of QCOM plunged 8.6% while the PHLX Semiconductor Index lost 0.9%.

The losses among chipmakers weighed on the Nasdaq, but the index caught up to the broader market during the final hour. Biotechnology factored into the afternoon strength with the iShares Nasdaq Biotechnology ETF (IBB 293.32, +4.42) climbing 1.5%. For its part, the health care sector (+0.6%) settled ahead of the remaining countercyclical groups.

Treasuries ended on their lows with the 10-yr yield up four basis points at 2.38%.

Participation was ahead of average with more than 730 million shares changing hands at the NYSE floor.

Economic data included Initial Claims, Productivity/Labor Cost data, and Challenger Job Cuts: 

·       Nonfarm labor productivity increased 2.0% in the third quarter, down from an upwardly revised 2.9% (from 2.3%) gain in the second quarter 

o   The Briefing.com consensus expected an increase of 1.5% 

o   Output growth decelerated in the third quarter, increasing 4.4% after a 5.5% increase in the second quarter, which was in-line with third quarter GDP growth 

o   The relatively weaker output level resulted in a modest acceleration in unit labors costs, up 0.3% after declining 0.5% in Q2 2014 

·       Initial Claims declined to 278,000 from a revised rate of 288,000 (from 287,000), while the Briefing.com consensus expected a reading of 285,000 

o   Claims have held below the 300,000 mark for the past several weeks, setting expectations for relatively strong job growth 

·       The Challenger Job Cuts report for October rose 11.9% to follow the prior decline of 24.4% 

Tomorrow, the October Nonfarm Payrolls report (Briefing.com consensus 235,000) will be released at 8:30 ET while the Consumer Credit report for September (consensus $16.00 billion) will cross the wires at 15:00 ET. 

·       Nasdaq Composite +11.1% YTD 

·       S&P 500 +9.9% YTD 

·       Dow Jones Industrial Average +5.9% YTD 

·       Russell 2000 +0.7% YTD

Commodities

Closing Commodities: Natural Gas Rallies 5% On Weather Outlook, Oil Falls 1%

·       The dollar index climbed higher this morning and remained near session highs, creating pressure on select commodities

·       The big mover this afternoon was in natural gas, which rallied notably on the current weather outlook.

·       This also follows the weekly EIA storage data, which was bearish as it showed a larger-than-expected build

·       Dec nat gas closed the day 5.1% higher at $4.41/MMBtu

·       Dec crude oil remained in negative territory, finishing 1% lower at $77.90/barrel

·       Precious metals fell modestly today with Dec gold losing 0.3% to $1142.20/oz and Dec silver -0.3% to $15.40/oz

·       Dec copper rose 0.3% to $3.02/lb

Metals price action

  Gold fell $3.40 (-0.3%) to $1142.20/oz

·       Gold is still trading below 1170, which represented a strong level of support. Today's session was a relatively tight one, with futures for the most part trading between 1142-1144.

  Silver fell 4.4 cents (-0.3%) to $15.395/oz

·       Silver is still at a 4.5 year low, and although the session ended in the red, futures trended higher for most of the pit session. Most of silvers move lower came yesterday afternoon. 

  Copper rose 0.9 cents (+0.3%) to $3.0165/lb

Agricultural price action

·       Corn rose 0.35 cents (+0.1%) to $3.705/bushel

·       Wheat fell 4.25 cents (-0.8%) to $5.205/bushel

·       Soybeans rose 8.75 cents (+0.9%) to $10.28/bushel

·       Ethanol rose 5.9 cents (+3.2%) to $1.90/gallon

·       Sugar #11 fell slightly, 0.06%, to 15.5 cents/lb

Energy price action

  Crude oil fell 78 cents (-1%) to $77.90/barrel

·       Crude bounced off its LoD 77.12 and trended slightly higher since around 10am; most of crude's move to the downside was from 6-9am. 

  Natural gas rose 22 cents (+5.1%) to $4.41/MMBtu

·       Natural gas is roaring higher today following inventory data that showed a build of 91 bcf vs expectations for a build of about 84.5 bcf. Futures are currently trading at the highs of the session after touching a low of 4.111 just before the data release. 

  Heating oil rose 2 cents (+0.8%) to $2.4585/gallon

  RBOB rose 4.3 cents (+2.1%) to $2.13/gallon    

Treasuries

Yields Hit One-Month Highs Ahead of October Jobs Report: 10Y: -11/32..2.376%..USD/JPY: 115.00..EUR/USD: 1.2383

·       Treasuries booked modest losses as sellers took control ahead of tomorrow's nonfarm payroll report. Click here to see an intraday yields chart.

·       Today's weakness ran yields across the curve to one-month highs and action probing key resistance levels. 

·       Maturities drifted little changed into the cash open and rallied in response to the better than expected economic data. 

·       Productivity (2.0% actual v. 1.5% expected), initial claims (278K actual v. 285K expected), continuing claims (2348K actual v. 2378K expected), and unit labor costs (0.3% actual v. 0.7% expected) all posted better than expected results. 

·       After a test of the flat line failed, maturities slid to fresh lows in early afternoon trade and drifted at those levels for the remainder of the session. 

·       Up front, the 2Y ticked up +2bps to 0.542%.

·       In the belly, the 5Y gained +2.5bps to 1.659%. Resistance in the area is guarded by the 50, 100, and 200 dma.

·       The 10Y added +2.5bps to 2.375%. The benchmark yield is contending with the 50 dma near one-month highs.

·       The long bond lagged, running the 30Y up +2.8bps to 3.093%. Action is testing the upper bound of the 3.000%/3.10% range that has been in place for the past two weeks.

·       Today's selling swung the curve slightly steeper as the 2-10-yr spread widened to 183.5bps.

·       Precious metals were little changed with gold and silver ending @ $1144 and $15.45, respectively. 

·       Data: Nonfarm payrolls, nonfarm private payrolls, unemployment rate, hourly earnings, average workweek (8:30), and consumer credit. 

·       Fed Speak: Chicago's Evans makes welcoming remarks at the 10th Annual Community Bankers Symposium (9:15).

On other news.... 

Earnings/Guidance

·       Apache (APA) reports EPS in-line, beats on revs

·       Cablevision (CVC) beats by $0.08, reports revs in-line

·       CBS (CBS) beats by $0.02, beats on revs

·       CF Industries (CF) misses by $0.56, reports revs in-line  

·       Costco (COST) reports Oct same store sales +4.0% vs +3.8% Retail Metrics consensus 

·       DIRECTV (DTV) beats by $0.02, reports revs in-line

·       L Brands (LB) reports Oct same store sales +3% vs +2.5% Retail Metrics consensus; reaffirms recently updated Q3 EPS guidance and reports prelim Q3 sales slightly above consensus

·       Molson Coors Brewing (TAP) misses by $0.02, reports revs in-line 

·       Prudential (PRU) misses by $0.21, beats on revs

·       Qualcomm (QCOM) misses by $0.06, misses on revs; guides Q1 below consensus; guides FY15 below consensus 

·       Symantec (SYMC) beats by $0.05, reports revs in-line; guides Q3 EPS and rev mid point below consensus; guides Fy15 EPS in line; FY15 revs below consensus

·       Whole Foods (WFM) beats by $0.03, reports revs in-line; guides FY15 revs below consensus; raises quarterly dividend 8% to $0.12 

·       Zillow (Z) beats by $0.07, reports revs in-line

Currencies 

Dollar Hits 88.00: 10Y: -06/32..2.370%..USD/JPY: 114.93..EUR/USD: 1.2390

·       The Dollar Index contends with its first close above 88.00 since June 2010 as trades position themselves for tomorrow's nonfarm payroll report. Click here to see a daily Dollar Index chart.

·       EURUSD is -95 pips @ 1.2390 as trade presses 27-month lows following today's ECB rate decision and accompany Mario Draghi press conference. The single currency saw little reaction to the central bank keeping its Main Refinancing Rate at 0.05%, but tumbled as Mario Draghi's press conference got underway. Mr. Draghi warned officials were unanimous in providing more stimulus if the region's economy were to notably weaken. The 1.2000/1.2200 level remains in focus as support dates back to 2004 and is guarded by the 200 mma. 

·       GBPUSD is -135 pips @ 1.5840 as trade dives to a fresh 14-month low. Sterling saw steady selling over the course of overnight trade, and action continued to press lower even after the Bank of England held both its Official Bank Rate and asset purchase program unchanged at their respective 0.50% and GBP375 bln.British data scheduled for tomorrow is limited to the trade balance.

·       USDCHF is +75 pips @ .9715 as trade readies for its best close since July 2013. Action remains closely tied to the euro. Swiss data due out tomorrow includes foreign currency reserves and retail sales.

·       USDJPY is +30 pips @ 114.90 as action flirts with the 115.00 area for the first time in seven years. Today's bid follows the latest BOJ minutes, which voiced concern the recent drop in oil prices could push inflation below 1%. 

·       AUDUSD is -15 pips @ .8575 as trade slides to its worst levels since July 2010. The hard currency rallied in overnight trade in response to the strong jobs report, but failed as action tested what was previously support in the .8650 area. A move into the .8350 region cannot be ruled out. The latest RBA Statement will be released this evening. 

·       USDCAD is +40 pips @ 1.1425 with action on track to close at its best level since July 2009. The strong building permits (12.7% MoM actual v. 5.2% MoM expected) number was not enough to offset the weak Ivey PMI (51.2 actual v. 59.2 expected) report. Canada's employment data will cross the wires tomorrow.

Next Week In View

Economic Commentaries

Economic Summary: Jobless Claims fall ahead of tomorrow's NFP report
Economic Data Summary:

·       October Challenger Job Cuts 11.9% vs Briefing.com consensus of ; September was -24.4%

·       Weekly Initial Claims 278K vs Briefing.com consensus of 285K; Last Week was revised to 288K from 287K

·       Weekly Continuing Claims 2.348 M vs Briefing.com consensus of 2.378 M ; Last Week was revised to 2.387 M from 2.384 M

o   Over the past several weeks, initial claims have held steady at levels below 300,000. Businesses have clearly reduced layoff activities, which should spur significant job growth. 

·       Third Quarter Productivity 2.0% vs Briefing.com consensus of 1.5%; Second Quarter was revised to 2.9% from 2.3%

o   Output growth decelerated in the third quarter, increasing 4.4% after a 5.5% increase in the second quarter. That was in-line with third quarter GDP growth. 

·       Third Quarter Unit Labor Costs 0.3% vs Briefing.com consensus of 0.7%; Second Quarter was revised to -0.5% from -0.1%

Upcoming Economic Data:

·       October Nonfarm Payrolls due out Friday at 8:30 (Briefing.com consensus of 235K; September was 248K)

·       October Nonfarm Private Payrolls due out Friday at 8:30 (Briefing.com consensus of 230K; September was 236K)

·       October Unemployment Rate due out Friday at 8:30 (Briefing.com consensus of 5.9%; September was 5.9%)

·       October Hourly Earnings due out Friday at 8:30 (Briefing.com consensus of 0.2%; September was 0.0%)

·       October Average Workweek due out Friday at 8:30 (Briefing.com consensus of 34.6; September was 34.6)

·       September Consumer Credit due out Friday at 15:00 (Briefing.com consensus of $16.0 bln; August was $13.5 bln)

Upcoming Fed/Treasury Events:

·       Chicago Fed President Charlie Evans (not a voting FOMC member, dovish) to speak today at 10:40 & 13:00 and tomorrow at 9:15

·       Fed Board member Jerome Powell (voting FOMC member) to speak today at 12:45

·       Cleveland Fed President Mester (voting FOMC member) to speak today at 19:05

·       Fed Board member Daniel Taruillo (voting FOMC member) to speak tomorrow at 14:30

Jason's Commentaries

It definitely surprising that market actually managed to break into the high for Dow and S&P500 ahead of the employment report with decent volume as GE managed to lead the market up with a 2.1% gain. Utilities had a drop of 1.7% as natural gas rallies 5% ahead of weather forecast. The market should be up much more without the lagging factor from the utilities. However, it's going to a major market mover today as employment reports and yellen is talking as well. I'm definitely not taking a call on the market today.








Market Call: ABSTAIN

Date: 7 Nov 2014