4 Dec 2014 AMC -Market ended flat ahead of the employment data

4 Dec 2014 AMC -Market ended flat ahead of the employment data

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: -0.6%

·         Germany's DAX: -1.2%

·         France's CAC: -1.6%

·         Spain's IBEX: -2.4%

·         Portugal's PSI: -0.8%

·         Italy's MIB Index: -2.8%

·         Irish Ovrl Index: + 1.0%

·         Greece ASE General Index: -1.6%

Before Market Opens 

S&P futures vs fair value: -8.20. Nasdaq futures vs fair value: -13.30.
The S&P 500 futures trade eight points below fair value.

Markets gained across Asia. A Nikkei report out yesterday during U.S. trade suggested Japan Prime Minister Shinzo Abe's LDP would win a super majority in the upcoming election. 

·         In economic data: 

o    Australia's trade deficit narrowed to AUD1.32 billion from AUD2.24 billion (expected deficit of AUD1.81 billion) as imports fell 2.0% (prior -6.0%) and exports increased 2.0% (previous 1.0%). Separately, Retail Sales rose 0.4% month-over-month (expected 0.1%; prior 1.3%) 

o    South Korea's Q3 GDP was left unrevised at 0.9% quarter-over-quarter, as expected 

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·         Japan's Nikkei posted its fourth consecutive advance, gaining 0.9%. Airbag maker Takata lagged, dropping 3.3%, following reports Ford would expand its recall. 

·         Hong Kong's Hang Seng rallied 1.7% off the 50-day average. Bank of Communications was the top performer, climbing 8.0%. 

·         China's Shanghai Composite surged 4.3% to its best levels since May 2011 amid further speculation of PBOC easing. Energy giants Sinopec and PetroChina both gained the limit, 10%. 

·         India's Sensex added 0.4% to end just shy of record highs. ITC jumped 5.5% on word the government may not stop the sale of single cigarettes. 

Major European indices have surrendered their gains during a press conference held by European Central Bank President Mario Draghi. Mr. Draghi said that the central bank has begun buying covered bonds and the economic situation in the Eurozone will be reassessed early next year. That remark indicated the ECB is not yet ready to deploy a sovereign QE program, which was expected by some investors going into today's meeting. Also of note, the ECB lowered its 2015 GDP projection to 1.0% from 1.6% and cut its harmonized inflation forecast to 0.7% from 1.1%. The euro spiked about 100 pips (1.2390) in reaction to the comments while European indices fell to lows.

Elsewhere, The Bank of England maintained its policy stance and kept its key interest rate and purchasing program at their respective 0.5% and GBP375 billion. 

·         Economic data was limited: 

o    Eurozone Retail PMI jumped to 48.9 from 47.0 

o    Great Britain's Halifax House Price Index rose 0.4% month-over-month (expected 0.3%; previous -0.4%) while the year-over-year reading increased 8.2% (prior 8.8%) 

o    French Q3 Unemployment Rate spiked to 10.4% from 10.1% (expected 10.3%) 

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·         United Kingdom's FTSE trades down 0.5% with miners and energy stocks on the defensive. Anglo American, Tullow Oil, BP, and Rio Tinto hold losses between 1.8% and 2.9%. 

·         Germany's DAX is lower by 0.8%. Bank shares are under pressure with Commerzbank and Deutsche Bank down 2.8% and 2.0%, respectively. 

·         In France, the CAC has given up 1.2% with banks and energy names leading the slide. Technip, Total, Creidt Agricole, and Societe Generale are down between 1.7% and 2.6%. Telecom provider Orange leads with a gain of 1.9%. 

·         Italy's MIB holds a loss of 1.8% amid weakness in bank shares. BMPS, Banco Popolare, Unicredit, and UBI Banca are down between 2.1% and 3.4%.

U.S. Equities

·         Equity futures have surrendered their early gains and now press the lows

·         The DJIA and S&P 500 both finished yesterday's session at all-time highs

·         The VIX (12.47) remains near its lowest levels since September

·         Challenger Job Cuts (-20.7%)

·         Initial Claims (297K actual v. 295K expected)

·         Continuing Claims (2362K actual v. 2343K expected)

o    S&P Futures -6 @ 2067

o    Dow Futures -47 @ 17851

o    Nasdaq Futures -8 @ 4302

Asia

·         Markets gained across Asia

·         A Nikkei report out yesterday during U.S. trade suggested Japanese Prime Minister Shinzo Abe would win a super majority in the upcoming election

·         Australia's retail sales (0.4% MoM actual v. 0.1% MoM expected) and trade balance (-AUD1.32 bln actual v. -AUD1.85 bln expected) both posted better than expected results

·         Japan's Nikkei (+0.9%) gained for a fourth day and hit a fresh seven-year high

·         Hong Kong's Hang Seng (+1.7%) rallied off the 50 dma

·         China's Shanghai Composite (+4.3%) surged to its best levels since May 2011 amid further speculation of PBOC easing

·         India's Sensex (+0.4%) ended just shy of record highs

·         Australia's ASX (+0.9%) regained the 50 dma amid a third straight advance

·         The Philippines' Psei (-0.8%) lagged as the country braces for Super Typhoon Hagupit

Market Internals

Market Internals -Technical-
The S&P 500 closed down 3 (-0.12%) at 2072, the Nasdaq closed down 5 (-0.11%) at 4769, and the Dow closed down 13 (-0.07%) at 17900. Action came on slightly below average volume (NYSE 779 mln vs. avg. of 790; NASDAQ 1587 mln vs. avg. of 1799), with decliners outpacing advancers (NYSE 1154/2019, NASDAQ 1081/1640) and new highs outpacing new lows (NYSE 173/124, NASDAQ 120/98).

Relative Strength: 
China 25 Index-FXI +3.02%, Egypt-EGPT +2.20%, Turkey-TUR +1.98%, Corn-CORN +1.67%, Copper-JJC +1.65%, Cotton-BAL +1.61%, Cocoa-NIB +1.30%, Base Metals-DBB +1.16%, South Korea-EWY +1.03%, Israel-EIS +0.71%.

Relative Weakness: 
Natural Gas-UNG -4.13%, Oil and Gas Exploration-XOP -3.27%, Silver Miners-SIL -2.83%, Russia-RSX -2.66%, Junior Gold Miners-GDXJ -2.39%, Eastern Europe-ESR -2.18%, Canada-EWC -1.90%, Italy-EWI -1.69%, Latin America 40-ILF -1.69%, Metals and Mining-XME -1.60%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries

Closing Market Summary: Stocks End Flat After ECB Stands Pat
The stock market ended the Thursday session on a modestly lower note ahead of Friday's Nonfarm Payrolls report for November. The S&P 500 shed 0.1% while the Russell 2000 (-0.5%) underperformed.

Thursday served as a perfect reminder for how dependent global equity markets have become on central bank stimulus. The first reminder occurred during the Asian session with China's Shanghai Composite soaring 4.3% amid expectations the People's Bank of China will introduce additional stimulus measures. While today's advance was impressive, it pales in comparison with an 18.3% surge in the index since November 20.

Meanwhile, the second reminder manifested itself through volatility in European and U.S. markets in reaction to the European Central Bank's latest policy statement and subsequent press reports.

As expected, the ECB made no changes to its interest rate corridor, but more notably, President Mario Draghi did not call for the start of a sovereign QE program, which had been expected by some. Instead, Mr. Draghi said the economic situation in the eurozone will be reassessed early next year. Furthermore, the ECB lowered its 2015 GDP projection to 1.0% from 1.6% and cut its harmonized inflation forecast for the region to 0.7% from 1.1%.

The absence of a QE announcement gave a boost to the euro while pressuring European and U.S. stocks. However, U.S. equities were able to string together a rebound after markets in Europe closed for the day. That recovery was capped with the S&P 500 spiking into the green just after 12:30 ET when Bloomberg reported the European Central Bank will prepare a broad-based QE package for the January meeting. In a way, preparations for such a program should be expected even if no announcement is made in January and it is worth pointing out that Mr. Draghi was pressed to define ‘early' during his press conference, to which he responded, "Early, it means early, it doesn't mean the next meeting."

The vague report knocked the euro off its high to 1.2380 against the dollar after the single currency tested the 1.2455 level in the morning. Conversely, the Dollar Index (88.62, -0.33) halved its loss to 0.4%.

Although the early afternoon rebound sent the benchmark index back to its flat line, the S&P 500 was unable to extend that move. The index spent the next two hours within a point of unchanged before sliding away from its flat line into the close. Once again, an ECB-related report was cited for the afternoon weakness after Germany's Die Welt reported Mr. Draghi no longer enjoys majority support on the Executive Board.

Eight sectors finished in the red with energy (-0.9%) spending the day at the bottom of the leaderboard. The sector slumped as crude oil surrendered 0.8% to $66.75/bbl, but despite the decline, the energy sector will enter Friday with a week-to-date gain of 2.4% versus a slim 0.2% uptick for the S&P 500.

Outside of energy, telecom services (-0.2%) and industrials (-0.5%) were the only two groups unable to keep pace with the market. The industrial sector followed its top component—General Electric (GE 26.09, -0.29)—lower, while transport stocks held up relatively well with the Dow Jones Transportation Average ending in-line with the market.

Elsewhere, the consumer discretionary sector also finished in-line with the S&P 500, but retail stocks were pressured after Aeropostale (ARO 2.48, -0.71), Express (EXPR 13.19, -1.30), Guess? (GES 20.07, -2.10), and PVH (PVH 122.68, -1.72) disappointed with their earnings and/or guidance. The four names lost between 1.4% and 22.3% while the SPDR S&P Retail ETF (XRT 92.73, -0.64) fell 0.7%.

On the upside, financials (+0.1%), materials (+0.3%), and technology (+0.1%) registered modest gains. Notably, the tech sector received a measure of support from the PHLX Semiconductor Index, which added 0.1%. Shares of Avago Technologies (AVGO 103.07, +7.94) spiked 8.4% and were responsible for the bulk of the uptick in reaction to strong quarterly results and guidance.

Treasuries ended on their highs with the 10-yr yield sliding four basis points to 2.24%.

Participation was a bit below average with just over 780 million shares changing hands at the NYSE floor.

Economic data was limited to initial claims and the Challenger Job Cuts report: 

·         Weekly initial claims fell to 297,000 from an upwardly revised rate of 314,000 (from 313,000) while the Briefing.com consensus expected a decline to 295,000 

o    Continuing claims increased to 2.362 million from an upwardly revised 2.323 million (from 2.316 million) 

·         The Challenger Job Cuts report showed a 21.0% year-over-year decline in planned layoffs to follow the prior increase of 11.9% 

Tomorrow, the November Nonfarm Payrolls report (Briefing.com consensus 230K) will be released at 8:30 ET alongside the October Trade Balance (consensus -$42.00 billion). The Factory Orders report for October (consensus 0.2%) will cross at 10:00 ET and the day's data will be topped off with the 15:00 ET release of the Consumer Credit report for October (consensus $16.50 billion). 

·         Nasdaq Composite +14.2% YTD 

·         S&P 500 +12.1% YTD 

·         Dow Jones Industrial Average +8.0% YTD 

·         Russell 2000 +0.8% YTD

Commodities

Closing Commodities: Energy Closes In The Red, Metals Gain

·         Energy continued to struggle and ended the day in the red

·         Natural gas prices came in this morning weak and extended losses following the weekly storage data

·         Jan nat gas closed $0.15 lower at $3.65/MMBtu

·         Jan crude oil lost steam again and finished at $66.75/barrel, down $0.55/barrel

·         Metals reversed, partially driven by Draghi comments/dollar

·         Feb gold closed $8.80 higher at $1207.40/oz, while Mar silver gained $0.10 to $16.55/oz

Metals price action

·         Gold rose $8.80 to $1207.40/oz

·         Silver rose $0.10 to $16.55/oz

·         Copper rose 3 cents to $2.91/lb

Agricultural price action

·         Corn closed 7 cents higher at $3.82/bushel

·         Wheat fell 1 cent to $5.89/bushel

·         Soybeans rose 11 cents to $10.17/bushel

·         Ethanol fell 2 cents to $1.74/gallon

·         Sugar #11 rose 0.12 cents to 15.21cents/gallon

Energy price action

·         Crude oil fell $0.55 to $66.75/barrel

·         Natural gas fell 15 cents to $3.65/MMBtu

·         Heating oil remained unchanged at $1.80/gallon

·         RBOB gasoline fell 1 cent to $2.12/gallon

Treasuries

Yields Fail to Breakout as November Jobs Report Looms: 10Y: +06/32..2.257%..USD/JPY: 119.74..EUR/USD: 1.2377

·         Treasuries gained for a second day. Click here to see an intraday yields chart.

·         The complex drifted little changed into the cash open and raced to its best levels of the morning after both initial (297K actual v. 295K expected) and continuing (2362K actual v. 2343K expected) claims missed the mark. 

·         Trade slid to session lows after Mario Draghi announced the ECB would ‘reassess' sovereign bond purchases, but the selling would not last long as equities slid deeper into the red.

·         Maturities pressed back to session highs ahead of the lunchtime hour and held in a tight range before putting in new highs just ahead of the cash close. 

·         Today's action saw yields flirt with key resistance levels, but there would be no breakouts as the November nonfarm payroll report looms tomorrow.

·         Up front, the 2Y slipped -2.3bps to 0.528%. The yield remains trapped in the tight 0.500%/0.550% range that was in place throughout November. 

·         In the belly, the 5Y eased -2.1bps to 1.587%. Action probed 1.600% resistance, but could not hold the level. 

·         The 10Y fell -3bps to 2.257%. The benchmark yield tested 2.300% early, but pulled back from the resistance. 

·         At the long end, the 30Y shed -3.5bps to 2.958%. The yield on the long bond continues to struggle near 3.000%.

·         A slightly flatter curve persisted as the 2-10-yr spread tightened to 173bps. 

·         Precious metals saw a mixed session as gold lost $1 to $1208 and silver added +$0.12 to $16.53. 

·         Data: Nonfarm payrolls, nonfarm private payrolls, unemployment rate, hourly earnings, average workweek, trade balance (8:30), factory orders (10), and consumer credit (15).

On other news.... 

Currencies 

Dollar Pulls Back as Euro Squeezes: 10Y: +04/32..2.263%..USD/JPY: 119.83..EUR/USD: 1.2362

·         The Dollar Index has recouped some of its early losses as trade probes the 88.70 level. Click here to see a daily Dollar Index chart.

·         The greenback hovered little changed into this morning's claims data and pressed to fresh lows as the numbers disappointed. 

·         Action continued lower following an ECB-fueled squeeze in the euro, hitting a low of nearly 88.20 before recovering. 

·         EURUSD is +55 pips @ 1.2365 as trade fights to hold onto its gains. This morning's ECB announcement went as expected as the central bank held its key rate at 0.05%, and the single currency dipped to a fresh 28-month low beneath 1.2300 as Mario Draghi's press conference got underway. However, the euro squeezed higher after Mr. Draghi indicated the ECB would ‘reassess' sovereign debt purchases. Action probed 1.2450 before seeing some slippage following a headline suggesting a ‘broad based' program might start in January. The ability to reclaim 1.2400 would be a victory for the bulls. Eurozone data scheduled for tomorrow is limited to German factory orders. 

·         GBPUSD is -10 pips @ 1.5675 after the Bank of England kept both its benchmark interest rate and asset purchase program steady at their respective 0.50% and GBP375 bln. A rather tame trade has seen sterling stuck at 15-month lows near 1.5600.

·         USDCHF is -55 pips @ .9720 as trade pulls back from 19-month highs. As usual, today's trade has little to do with the fundamentals in Switzerland and everything to do with the tight correlation to the euro. Switzerland's foreign currency reserves are due out tomorrow.

·         USDJPY is flat @ 119.80. The pair climbed to a fresh seven-year high of 120.25 in early action, but pulled back amid the broad based weakness in the dollar. 

·         AUDUSD is -20 pips @ .8385 as sellers remain in control for a sixth day. Today's weakness comes despite the better than expected retail sales and trade data, and has action pressing key support that dates back to the summer of 2009. 

·         USDCAD is +20 pips @ 1.1385. The pair has shrugged off this morning's strong Ivey PMI (56.9 actual v. 52.7 expected, 51.2 previous) report and has spent the U.S. session in a tight 30 pip range. Canada's jobs report and trade balance will be released tomorrow.

Next Week In View




Economic Commentaries

Economic Summary: Jobless Claims slightly higher than expected, but still drop below 300K; ECB and BoE leave rates unchanged; NFP's tomorrow at 8:30
Economic Data Summary:

·         November Challenger Job Cuts -20.7% vs Briefing.com consensus of ; October was 11.9%

·         Weekly Initial Claims 297K vs Briefing.com consensus of 295K; Last Week was revised to 314K from 313K

·         Weekly Continuing Claims 2.362 M vs Briefing.com consensus of 2.343 M ; Last Week was revised to 2.323 M from 2.316 M

o    Since the beginning of September, the initial claims level has averaged roughly 290,000. While this week's claims reading is still above that trend, the pullback from last week suggests that overall employment conditions have not changed materially. 

Upcoming Economic Data:

·         November Nonfarm Payrolls due out Friday at 8:30 (Briefing.com consensus of 230K; October was 214K)

·         November Nonfarm Private Payrolls due out Friday at 8:30 (Briefing.com consensus of 228K; October was 209K)

·         November Unemployment Rate due out Friday at 8:30 (Briefing.com consensus of 5.8%; October was 5.8%)

·         November Hourly Earnings due out Friday at 8:30 (Briefing.com consensus of 0.2%; October was 0.1%)

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

·         October Trade Balance due out Friday at 8:30 (Briefing.com consensus of -$42.0 bln; September was -$43.0 bln)

·         October Factory Orders due out Friday at 10:00 (Briefing.com consensus of 0.2%; September was -0.6%)

·         October Consumer Credit due out Friday at 15:00 (Briefing.com consensus of $16.5 bln; September was $15.9 bln)

Other International Events Of Interest

·         A Nikkei report out yesterday during U.S. trade suggested Japanese Prime Minister Shinzo Abe would win a super majority in the upcoming election

·         Australia's retail sales (0.4% MoM actual v. 0.1% MoM expected) and trade balance (-AUD1.32 bln actual v. -AUD1.85 bln expected) both posted better than expected results.

·         The European Central Bank held its key rate at 0.05%, as expected

·         The Bank of England kept both its benchmark interest rate and asset
purchase program steady at their respective 0.50% and GBP375 bln

Jason's Commentaries

Ahead of hte data, the market ended last night flat to the downside as the energy sector as oil went back to $66 again. While the rest of the sectors stays sideways. However, as expected the employment data released on Friday, produces 321k jobs on top of expectation of 231k. The dollar index flew on the release of the data. Volumes were rather healthy. However, by mid-day, the market gave back its gain and ended in the red. Seems that the market is likely to end up higher today.








Market Call: UP

Date: 5 Dec 2014