10 Dec 2014 AMC -Market ended in the sea of red as Ol hits new low of $60.43

10 Dec 2014 AMC -Market ended in the sea of red as Ol hits new low of $60.43

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: -0.5%

·         Germany's DAX: + 0.1%

·         France's CAC: -0.8%

·         Spain's IBEX: -0.5%

·         Portugal's PSI: -1.9%

·         Italy's MIB Index: -0.9%

·         Irish Ovrl Index: -0.4%

·         Greece ASE General Index: -1.0%

Before Market Opens 

S&P futures vs fair value: -5.70. Nasdaq futures vs fair value: -8.80.
The S&P 500 futures trade six points below fair value.

The major Asian bourses ended mixed. Japan's 10-yr yield dipped below the 0.40% threshold for the first time ever after the BSI Manufacturing Index (8.1; expected 13.1) was the latest number to fall short of estimates. 

·         In economic data: 

o    China's CPI declined 0.2% month-over-month (expected 0.1%; previous 0.0%) while the year-over-year reading rose 1.4% (consensus 1.6%; last 1.6%). Also of note, PPI fell 2.7% year-over-year (consensus -2.4%; previous -2.2%) 

o    Japan's Household Confidence fell to 37.7 from 38.9 (expected 39.6) while Corporate Goods Price Index declined to 2.7% year-over-year from 2.9% (expected 2.6%) 

o    South Korea's Unemployment Rate ticked down to 3.4% from 3.5% (consensus 3.5%) 

o    Australia's Home Loans rose 0.3% month-over-month (expected 0.2%; last -0.4%) while Westpac Consumer Sentiment came in at -5.7% (previous 1.9%) 

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·         Japan's Nikkei saw a third day of selling and fell 2.3%. The strong yen weighed on exporters as Canon fell 2.7% and Toyota Motor sank 3.0%. 

·         Hong Kong's Hang Seng added 0.2% to find support at the 200-day average. Bargain hunters emerged in casino-related names as Galaxy Entertainment and Sands China rallied 3.2% and 1.1%, respectively. 

·         China's Shanghai Composite jumped 2.9% to halve yesterday's loss. Real estate developers were strong with Poly Real Estate surging 6.1%. 

·         India's Sensex added 0.1% for its first gain in four days. Pharma provided support as Cipla added 1.5% and Dr. Reddy's Laboratories tacked on 1.4%. 

Major European indices have slipped from their highs with Spain's IBEX (-0.1%) dipping into the red. Elsewhere, Bank of England Governor Mark Carney discussed the expected rate path once again, saying rate hikes will be gradual and limited. Mr. Carney also said inflation is likely to dip below 1.0% 

·         Economic data was limited: 

o    UK's trade deficit narrowed to GBP9.62 billion from GBP10.51 billion (expected deficit of GBP9.53 billion) 

o    French Industrial Production fell 0.8% month-over-month (expected 0.2%; prior 0.0%) while Non-Farm Payrolls declined 0.3% quarter-over-quarter (consensus -0.2%; last -0.2%) 

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·         UK's FTSE hovers just above its flat line. Energy-related names trade in mixed fashion with Tullow Oil up 3.7% while BG Group, Petrofac, and Royal Dutch Shell are down between 1.3% and 1.6%. 

·         France's CAC is higher by 0.3% with Vinci in the lead. The engineering company has spiked 4.5%. Financials lag with BNP Paribas, Credit Agricole, and Societe Generale down between 0.4% and 1.1%. 

·         In Germany, the DAX trades up 0.7%. Infineon Technologies leads with a solid gain of 1.6% while financials Deutsche Bank and Commerzbank trade lower by 0.7% and 1.5%, respectively. 

·         Spain's IBEX is lower by 0.1% after dipping into the red in recent action. Banco Sabadell, Banco Popular, and Caixabank are down between 0.8% and 2.0%.

U.S. Equities

·         Equity futures point to a modest drop at the open

·         MBA Mortgage Index (+7.3% actual v. -7.3% expected)

o    S&P Futures -4 @ 2053

o    Dow Futures -34 @ 17,746

o    Nasdaq Futures -3 @ 4288

Asia

·         The major Asian bourses ended mixed

·         Japan's BSI Manufacturing Index (8.1 actual v. 13.1 expected, 12.7 previous) was the latest number to fall short of estimates

·         China's CPI (1.4% YoY actual v. 1.6% YoY expected) and PPI (-2.7% YoY actual v. -2.3% YoY expected) both posted cooler than expected readings

·         Australian data was mixed as Westpac Consumer Sentiment fell to -5.7% (+1.9% previous) and home loans climbed 0.3% MoM (0.1% MoM expected)

·         Japan's Nikkei (-2.3%) saw a third day of selling

·         Hong Kong's Hang Seng (+0.2%) found support at the 200 dma

·         China's Shanghai Composite (+2.9%) halved yesterday's losses

·         India's Sensex (+0.1%) gained for the first time in four days

·         Australia's ASX (-0.5%) neared two-month lows

Market Internals

Market Internals -Technical-
The Nasdaq closed down 82 (-1.73%) at 4684, the S&P 500 closed down 34 (-1.64%) at 2026, and the Dow closed down 268 (-1.51%) at 17533. Action came on mixed volume (NYSE 893 mln vs. avg. of 796; NASDAQ 1709 mln vs. avg. of 1801), with decliners outpacing advancers (NYSE 572/2638, NASDAQ 496/2269) and new lows outpacing new highs (NYSE 110/267, NASDAQ 88/123).

Relative Strength: 
Volatility-VXX +10.53%, Natural Gas-UNG +1.78%, Japanese Yen-FXY +1.34%, New Zealand-ENZL +1.25%, 20+ Year Treasuries-TLT +0.73%, Singapore-EWS +0.68%, Sugar-SGG +0.58%, Swiss Franc-FXF +0.51%, Australian Dollar-FXA +0.37%, Silver-SLV +0.31%.

Relative Weakness: 
Columbia Index-GXG -5.42%, Oil and Gas Exploration-XOP -4.79%, Oil-USO -3.8%, Gasoline-UGA -3.68%, MLP Index-AMJ -3.63%, Oil Services-OIH -3.52%, Mexico-EWW -3.22%, Latin America 40-ILF -3.02%, Canada-EWC -2.65%, Greece-GREK -2.22%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries

Closing Market Summary: Energy Sector Leads Stocks Lower
The major averages ended the Wednesday session on a broadly lower note. The S&P 500 lost 1.6% with all ten sectors ending in the red while the Russell 2000 (-2.1%) underperformed.

For the second day in a row, the major averages slumped at the start, but unlike yesterday, the key indices could not stage a comeback with a big drop in the energy sector (-3.1%) keeping the market under pressure throughout the session.

The energy sector widened its fourth-quarter loss to 15.9% with crude oil settling lower by 4.5% at $60.92/bbl. Today's slide took place after China reported its lowest year-over-year growth in CPI (1.4%) and OPEC cut its demand forecast. In addition, crude stockpiles showed an unexpected build. Following today's drop, the energy component is down 33.4% since the end of the third quarter.

However, the recent slump among commodities has not been isolated to just oil, but the weakness factored in more prominently today as misgivings about the pace of global economic growth and the potential spillover effect for the U.S. fueled a sense that the market has come too far too fast. Accordingly, today's selling interest hit far and wide with nine sectors losing more than 1.0%.

Similar to energy, the materials sector (-2.1%) spent the day at the bottom of the leaderboard. Growth concerns weighed on steelmakers, which sent Market Vectors Steel ETF (SLX 36.28, -1.29) lower by 3.4%.

Elsewhere, the industrial sector (-1.9%) slumped under the weight of Boeing (BA 124.64, -5.02). The Dow component lost 3.9% and fell below its 50-, 100-, and 200-day averages. The underperformance of the influential sector component masked the relative strength among airlines after International Air Transport Association's projection that the airline industry's collective global net profit after tax will increase to $25.00 billion in 2015 from an estimated $19.00 billion in 2014. Jetblue Airways (JBLU 15.15, +0.11), Southwest Airlines (LUV 41.48, +0.75), and United Continental (UAL 63.69, +1.17) jumped between 0.7% and 1.9%, helping the Dow Jones Transportation Average (-1.4%) finish a little ahead of the market.

Also of note, the consumer discretionary sector (-1.4%) settled ahead of the market, but that was no thanks to Yum! Brands (YUM 70.53, -4.69). The stock tumbled 6.2% after issuing disappointing guidance. In a way, the guidance from Yum! echoed global growth concerns. The company said that sales at its China division have not recovered from bad publicity over the summer as fast as the company had expected.

Growth concerns were also visible in the foreign exchange market with the Dollar Index (88.25, -0.45) recording its third consecutive decline. Notably, the retreat in the dollar gave a big boost to the yen and pressured the dollar/yen pair below yesterday's low (118.00).

Safe haven demand boosted Treasuries with the 10-yr yield falling six basis points to 2.16%.

The selloff invited above-average participation with more than 890 million shares changing hands at the NYSE floor.

Economic data was limited to the MBA Mortgage Index and the Treasury Budget: 

·         The weekly MBA Mortgage Index spiked 7.3% to follow last week's 7.3% decline 

·         The Treasury budget showed a deficit of $56.80 billion in November, down from a deficit of $135.2 billion in November 2013. The Treasury data are not seasonally adjusted, and the November data cannot be compared to the $121.7 billion deficit in October 

o    The Briefing.com Consensus expected a budget deficit of $59.0 billion 

o    The November deficit was slightly smaller than the CBO's forecast of a $59.0 billion deficit 

Tomorrow, weekly Initial Claims (Briefing.com consensus 295K), November Retail Sales (consensus 0.4%), and November Import/Export prices will be reported at 8:30 ET while the Business Inventories report for October (consensus 0.2%) will be released at 10:00 ET. 

·         Nasdaq Composite +12.2% YTD 

·         S&P 500 +9.6% YTD 

·         Dow Jones Industrial Average +5.8% YTD 

·         Russell 2000 UNCH YTD

Commodities

Closing Commodities: Oil Falls Below $61/Barrel

·         Oil was the big story again today

·         Prices collapsed following bearish OPEC, API and now EIA data

·         Oil prices dropped today following news that OPEC released its monthly oil report for December and said that global demand for oil in 2015 will be weaker than expected due to the U.S. shale oil boom and due to weaker demand

·         The 12-member cartel reduced its 2015 oil demand forecast by 280,000 barrels to 28.92 million barrels.The report comes out after OPEC decided to not cut its output last month, which has been already weighing on oil prices

·         Separately, after the close yesterday, the American Petroleum Institute reported that U.S. oil stockpiles rose by 4.4 million barrels yesterday, which was bearish since analysts were expecting a draw of 2.2 million barrels

·         Then the EIA reported its weekly oil storage data, which was also negative for oil prices

·         Minutes ago, OPEC annonced that it may hold an emergency meeting in Q1 of 2015, according to reports out earlier

·         Jan crude oil closed out today's session down $2.85 to $60.97/barrel

·         Jan nat gas rose 5 cents to $3.70/MMBtu

·         Metals ended mixed.

·         Feb gold lost $2.90 to $1229.40/oz, while Mar silver rose 4 cents to $17.18/oz

·         Mar copper fell 4 cents to $2.89/lb

Metals price action

·         Gold ended today's session $2.90 lower at $1229.40/oz

·         Silver rose $0.04 to $17.18/oz

·         Copper fell 4 cents to $2.89/lb

Agricultural price action

·         Mar Corn closed 1 cent lower at $3.94/bushel

·         Jan wheat fell 4 cents to $5.82/bushel

·         Jan soybeans fell 17 cents at $10.32/bushel

·         Ethanol closed 1 cent higher at $1.95/gallon

·         Sugar #11 rose 0.05 cents to 15.47 cents/gallon

Energy price action

·         Crude oil fell $2.85 today, closing today's pit session at $60.97/barrel

·         Natural gas rose 5 cents to $3.70/MMBtu

·         RBOB Gasoline fell 7 cents to $1.65/gallon

·         Heating oil fell 2 cents to $2.06/gallon

Treasuries

10Y Settles at 2.169%, Lowest Since October: 10Y: +14/32..2.168%..USD/JPY: 118.23..EUR/USD: 1.2433

·         Treasuries finished on their highs as an afternoon scramble for safety developed in response to the heavy selling of equities. Click here to see an intraday yields chart.

·         The complex held small gains in to the cash open and put in its best levels of the morning as equities opened up weak. 

·         Trade chopped around in a tight range into this afternoon's solid $21B 10Y note reopening. The reopening drew 2.214% (WI 2.213%) and a 2.97x bid/cover. Indirect bids (53.8%) provided support as directs (6.9%) were light. Primary dealers were left with 39.3% of the supply. 

·         Some light selling developed as an initial response to the auction, but buyers quickly emerged as equity markets rolled over in afternoon trade. 

·         Helping the cause was a report the five largest Chinese banks will hike their deposit rate by 20%.

·         Up front, the 2Y fell -4.4bps to 0.564%. Support in the 0.550% region will be in focus over the coming days. 

·         Today's aggressive bid had the biggest impact on the belly as the 5Y slid -5.7bps to 1.569%. The yield presses back below the 50 dma and closed at a one-week low. 

·         The 10Y shed -5.1bps to 2.169%. The benchmark yield broke below key support in the 2.200% region before settling at a two-month low. 

·         At the long end, the 30Y eased -4bps to 2.835%. The yield on the long bond closed at its lowest level since May 2013 and is now down -17bps over the past week. 

·         An unchanged curve saw the 2-10-yr spread hold @ 160.5bps.

·         Precious metals slipped as gold fell -$4 to $1228 and silver shed -$0.02 to @ $17.11.

·         Data: Initial and continuing claims, retail sales, import/export prices (8:30), and business inventories (10). 

·         Auction: $13B 30Y bond reopening.

On other news.... 

Currencies 

Dollar Sees Third Day of Selling: 10Y: +08/32..2.187%..USD/JPY: 118.24..EUR/USD: 1.2435

·         The Dollar Index trades on session lows, pressing the 88.25 region. Click here to see a daily Dollar Index chart.

·         Today marks a third day of selling in the greenback, and has action sliding into a test of support in the 87.50/88.00 area. 

·         EURUSD is +65 pips @ 1.2440 as trade continues its climb off key support in the 1.2300 region. The single currency will be in focus tomorrow morning as the results from the second round of TLTROs are scheduled for release. 

·         GBPUSD is +45 pips @ 1.5705 as buying persists for a third session. Sterling has seen support following some initial selling that developed in response to the slightly larger than expected trade deficit. Support in the 1.5600 area has held up for past month. 

·         USDCHF is -40 pips @ .9670 as trade continues to track the euro. Tomorrow's Swiss National Bank policy decision is likely to produce more commentary from Chairman Thomas Jordan indicating the central bank will defend its EURCHF floor with the utmost importance. 

·         USDJPY is -140 pips @ 118.30 as action presses to its worst levels of the session. Today's slide has the pair revisiting near-term support in the 118.00 area that survived its first test early yesterday. That level will be in focus into tonight's core machinery orders and Tertiary Industry Activity data. 

·         AUDUSD is flat @ .8290 as the pair fights to end its nine-day streak without gains. The recent lows near .8250 will be under the microscope as MI Inflation Expectations and Australian jobs data cross the wires tonight. The pair could see some additional volatility as the neighboring Reserve Bank of New Zealand opines this afternoon. 

·         USDCAD is +50 pips @ 1.1495. The pair has found buying following comments from the Bank of Canada suggesting high home prices remain the biggest headwind to the economy and as oil threatens to break below the $60 per barrel mark. Bank of Canada Governor Stephen Poloz speaks in New York ahead of tomorrow's New Home Price Index release.

Next Week In View




Economic Commentaries

Economic Summary: MBA mortgage aps rise 7.3%; retail sales tomorrow at 8:30
Economic Data Summary:

·         Weekly MBA Mortgage Applications 7.3% vs Briefing.com consensus of ; Last Week was -7.3%

Upcoming Economic Data:

·         November Treasury Budget due out Wednesday at 14:00 (Briefing.com consensus of -$59.0 bln; October was -$135.2 bln)

·         Weekly Initial Claims due out Thursday at 8:30 (Briefing.com consensus of 295K; Last Week was 297K)

·         Weekly Continuing Claims due out Thursday at 8:30 (Briefing.com consensus of 2.350 M ; Last Week was 2.362 M )

·         November Retail Sales due out Thursday at 8:30 (Briefing.com consensus of 0.4%; October was 0.3%)

·         November Retail Sales Ex-Auto due out Thursday at 8:30 (Briefing.com consensus of 0.2%; October was 0.3%)

·         November Export Prices Ex-Ag due out Thursday at 8:30 (Briefing.com consensus of ; October was -0.9%)

·         November Import Prices Ex-Oil due out Thursday at 8:30 (Briefing.com consensus of ; October was -0.2%)

·         October Business Inventories due out Thursday at 10:00 (Briefing.com consensus of 0.2%; September was 0.3%)

Upcoming Fed/Treasury Events:

·         The Treasury will issue new debt this week.  The results will be issued at 13:00

o    Wednesday: $21 bln 10 year notes

o    Thursday: $13 bln 30 year bonds

Jason's Commentaries


First is the energy stocks, then the euro stocks. It seems that the bearishness is starting to spread. If the drop of oil further, the energy stocks continued dropped which caused a drag in the whole market. It's been some time since the market dropped more than 1.5% already. VIX spiked as well. Materials became the second biggest laggard while the internals was totally convergent with the market. Volumes were at 912m shares traded on the NYSE. I suppose the market is likely to cover slightly.







Market Call: UP

Date: 11 Dec 2014