9 Dec 2014 AMC -Market managed to shrug off drag by the European market

9 Dec 2014 AMC -Market managed to shrug off drag by the European market

Market Summary 

European Markets Closing Prices

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

·         UK's FTSE: -2.1%

·         Germany's DAX: -2.2%

·         France's CAC: -2.6%

·         Spain's IBEX: -3.2%

·         Portugal's PSI: -2.5%

·         Italy's MIB Index: -2.8%

·         Irish Ovrl Index: -2.4%

·         Greece ASE General Index: -12.8%

Before Market Opens 

S&P futures vs fair value: -17.90. Nasdaq futures vs fair value: -37.00.
The S&P 500 futures trade 18 points below fair value.

Markets were pressured across much of Asia. 

·         Economic data was limited: 

o    Japan's Machine Tool Orders spiked 36.6% year-over-year (prior 30.8%) 

o    Australia's NAB Business Confidence fell to 1 from 5 while NAB Business Survey declined to 5 from 13 

o    New Zealand's Electronic Card Retail Sales slipped 0.1% month-over-month (expected 0.2%; previous 1.0%) 

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·         Japan's Nikkei lost 0.7% after pulling back from seven-year highs. The stronger yen weighed on exporters as Sony lost 4.0% and Panasonic gave up 3.2%. 

·         Hong Kong's Hang Seng tumbled 2.3% back onto the 200-day average. Financials saw significant selling pressure as China Construction Bank tumbled 5.5% to pace the sector's decline. 

·         China's Shanghai Composite plunged 5.4% to post its steepest slide in over five years after soaring 25.0% over the past month. Heavyweight PetroChina plunged 8.0% and Industrial & Commercial Bank of China lost 9.3%. 

·         India's Sensex fell 1.2% for a fourth-straight day and closed at its worst level since Halloween. Commodity-linked names were a drag as Sesa Sterlite fell 5.2% and ONGC lost 4.4%. 

Major European indices trade lower across the board after Germany's November imports declined at the fastest pace in almost two years. Also of note, Greece's benchmark index is down more than 10.0% after Prime Minister Antonis Samaras called for a presidential election to replace outgoing president Karolos Papoulias. Early indications suggest the election could put the Coalition of the Radical Left (Syriza) in power. 

·         Participants received several data points: 

o    Germany's trade surplus expanded to EUR20.60 billion from EUR18.60 billion (expected EUR19.20 billion) as exports fell 0.5% (consensus -1.6%; last 5.5%) and imports declined 3.1% (expected -1.5%; previous 5.2%) 

o    UK's Industrial Production ticked down 0.1% month-over-month (expected 0.2%; last 0.7%) while Manufacturing Production fell 0.7% month-over-month (consensus 0.2%; last 0.6%) 

o    French trade deficit narrowed to EUR4.60 billion from EUR4.70 billion (expected deficit of EUR4.50 billion) 

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·         Germany's DAX is lower by 1.5% with Deutsche Lufthansa leading the retreat with a 2.5% decline. Financials also lag notably with Commerzbank and Deutsche Bank both down near 2.0%. 

·         UK's FTSE trades down 1.6% with Tesco diving more than 10.0% in reaction to a profit warning. Peer WM Morrison Supermarkets is lower by 5.0%. On the upside, G4S and Randgold Resources hold respective gains of 2.8% and 2.3%. 

·         In France, the CAC has given up 1.7% amid broad weakness. Carrefour trades down 3.1% while Credit Agricole and Societe Generale hold respective losses of 3.4% and 3.1%. 

·         Spain's IBEX is down 2.1% with all 35 components in the red. FCC leads the decline with a 7.9% loss while Bankia and Banco Popular are down 3.0% and 3.9%, respectively.

U.S. Equities

·         Equity futures suggest a heavy open 

·         Markets across the globe are under pressure as China's Shanghai Composite tumbled 5.4% and Greece's ASE is -11%

·         The VIX (14.21) is likely to open at a one-month high

o    S&P Futures -17 @ 2042

o    Dow Futures -131 @ 17720

o    Nasdaq Futures -37 @ 4242

Asia

·         Markets were pressured across much of Asia

·         Australia's NAB Business Confidence dipped to 1 (5 previous)

·         Japan's Nikkei (-0.7%) pulled back from seven-year highs

·         Hong Kong's Hang Seng (-2.3%) tumbled back onto the 200 dma

·         China's Shanghai Composite (-5.4%) posted its steepest slide in over five years as investors rushed for the exits after a rally over the past 13 sessions tacked on nearly 25%

·         India's Sensex (-1.2%) fell for a fourth-straight day and closed at its worst level since Halloween

·         Australia's ASX (-1.7%) was rejected by the 50 dma

Market Internals

Market Internals -Technical-
The Nasdaq closed up 26 (+0.54%) at 4766, the S&P 500 closed down 1 (-0.02%) at 2060, and the Dow closed down 51 (-0.29%) at 17801. Action came on slightly above average volume (NYSE 814 mln vs. avg. of 797; NASDAQ 1788 mln vs. avg. of 1806), with advancers outpacing decliners (NYSE 1907/1290, NASDAQ 1889/882) and new lows outpacing new highs (NYSE 111/256, NASDAQ 90/170).

Relative Strength: 
Oil and Gas Exploration-XOP +4.85%, Gold Miners-GDX +4.66%, Silver-SLV +3.88%, Biotechnology-XBI +2.89%, Metals and Mining-XME +2.63%, Peru-EPU +1.06%, Singapore-EWS +1%, Japanese Yen-FXY +0.88%, Israel-EIS +0.86%, New Zealand-ENZL +0.76%.

Relative Weakness: 
Greece-GREK -11.92%, China 25 Index-FXI -3.33%, Vietnam-VNM -2.78%, India-INP -1.98%, Wind Energy-FAN -1.74%, Spain-EWP -1.52%, Telecommunications-IYZ -1.36%, Pharmaceuticals-PPH -1.1%, Lithium-LIT -0.79%, Insurance-KIE -0.78%.

Leaders and Laggards

Technical Updates

Briefing's Commentaries

Closing Market Summary: Stocks End Mixed Despite Opening Plunge
The major averages ended the Tuesday session on a mixed note after starting the day with sharp losses. The Russell 2000 and Nasdaq Composite paced the rebound, climbing 1.7% and 0.5%, respectively, while the S&P 500 settled just below its flat line. The Dow shed 0.3% and was the weakest performer among the key indices.

Equity futures were pressured this morning after the overnight session featured a 5.4% plunge in China's Shanghai Composite, which endured its biggest one-day decline since 2009. The dive occurred after the index soared 25.0% in a month and was catalyzed by the People's Bank of China taking measures to tighten liquidity conditions. The central bank fixed the USDCNY exchange rate at its highest level since July and imposed stricter collateral rules on short-term loans.

The cautious sentiment carried over to the European session with Greece's ASE Index sinking 12.8% while the country's 10-yr yield surged 91 basis points to 7.95% after Prime Minister Antonis Samaras called for a presidential election. This took place right after the country was granted a two-month extension to meet its bailout requirements and the early indications suggest the election could put the Coalition of the Radical Left (Syriza) in power, which rattled markets. Adding insult to injury, Germany reported a 3.1% decline in November imports, which was the biggest drop in almost two years.

Despite the global weakness, U.S. equities did not spend much time near their early lows. In fact, the Russell 2000, which led the rebound, marked its low five minutes into the session and never looked back. Since most stocks in that arena are domestically-oriented, they benefited from the consideration that the difficulties for Greece and China make the U.S. economy (and market) look comparatively better. It didn't hurt either that the NFIB Small Business Optimism Index for November hit its highest level (98.1) since February 2007.

The strength among small caps emboldened investors to delve into some other high-beta areas like biotechnology and chipmakers. The iShares Nasdaq Biotechnology ETF (IBB 314.92, +1.13) gained 0.4%, but the health care sector (-0.4%) underperformed throughout the session.

However, biotechnology did help the Nasdaq make it into the green while chipmakers climbed off their opening lows with the PHLX Semiconductor Index returning to its flat line. Large cap components of the technology sector (+0.5%) also displayed some strength with Apple (AAPL 114.13, +1.73), Google (GOOGL 536.11, +5.38), and Oracle (ORCL 41.87, +0.50) adding between 1.0% and 1.5%.

Outside of technology, energy (+0.9%), materials (+0.3%), and industrials (+0.1%) were the only other advancers on the cyclical side. The energy sector ended in the lead while crude oil jumped 1.1% to $63.82/bbl.

Although biotechnology and chipmakers contributed to the rebound, another high-beta group—transport stocks—did not play along. The Dow Jones Transportation Average (-0.6%) ended in the middle of its intraday range with airlines showing broad weakness after Spirit Airlines (SAVE 73.77, -10.70) issued disappointing guidance in reaction to increased promotional activity among its peers. Shares of SAVE plunged 12.7% while DJTA components Delta Air Lines (DAL 46.33, -1.01) and United Continental (UAL 62.52, -1.73) lost 2.1% and 2.7%, respectively.

Treasuries rallied in the morning, but surrendered a portion of their gains into the close. The 10-yr yield fell four basis points to 2.22%.

Also of note, the Dollar Index (88.73, -0.31) posted its second consecutive decline with the dollar giving ground to the yen. The dollar/yen pair was down as much as 300 pips and tested the 118.00 level before recovering to 119.60 into the afternoon.

Participation was a bit ahead of average with more than 810 million shares changing hands at the NYSE floor.

Economic data was limited to wholesale inventories and JOLTS: 

·         Wholesale inventories increased 0.4% for a second consecutive month in October after an upward revision to the September data (from 0.3%) while the Briefing.com consensus expected an increase of 0.2% 

o    Durable inventory levels were flat in October after increasing 0.7% in September with increases in hardware (1.6%) and machinery (0.4%) offsetting declines in autos (-1.4%) and professional equipment (-0.7%) 

o    Nondurable inventories increased 1.2% in October after being unchanged in September with petroleum inventories falling 1.9%, which was more than offset by gains in farm products (3.6%), drugs (3.2%), and groceries (1.1%) 

·         The Job Openings and Labor Turnover Survey for October indicated job opening increased to 4.834 million from 4.685 million 

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while the Treasury Budget for November will cross at 14:00 ET (Briefing.com consensus -$59.00 billion). 

·         Nasdaq Composite +14.1% YTD 

·         S&P 500 +11.4% YTD 

·         Dow Jones Industrial Average +7.4% YTD 

·         Russell 2000 +2.0% YTD

Commodities

Closing Commodities: Metals Close Strong On Dollar Weakness

·         Metals showed some strong gains today following weakness in the dollar index

·         Metals closed today's session with strong gains led by silver, which rose 5.3% to $17.14/ox

·         Feb gold meanwhile gained 3.1% to $1232.30/oz

·         WTI crude oil posted a modest gain today, ending $0.72 higher at $63.82/barrel

·         Natural gas gained 5 cents to $3.65/MMBtu

Metals price action

·         Gold ended today's session $37.30 higher (or +3.1%) at $1232.30/oz

·         Silver rose $0.86 (or +5.3%) to $17.14/oz

·         Copper rose 4 cents to $2.93/lb

Agricultural price action

·         Corn closed 5 cents higher at $3.95/bushel

·         Wheat fell 7 cents to $5.86/bushel

·         Soybeans fell 1 cents at $10.49/bushel

·         Ethanol closed unchanged at $1.71/gallon

·         Sugar #11 rose 0.12 cents to 15.42 cents/gallon

Energy price action

·         Crude oil rose $0.72 today, closing today's pit session at $63.82/barrel

·         Natural gas rose 5 cents to $3.65/MMBtu

·         RBOB Gasoline rose 1 cent to $1.72/gallon

·         Heating oil rose 2 cents to $2.08/gallon

Treasuries

30Y Settles at 2.875%, Lowest Since May 2013: 10Y: +11/32..2.216%..USD/JPY: 119.70..EUR/USD: 1.2367

·         Treasuries ended with modest gains, putting in the fourth advance in five sessions. Click here to see an intraday yields chart.

·         The complex drifted little changed into the cash open despite the weakness in global equity markets, but caught a bid as traders began to settle into their desks and Greece plunged further into chaos. 

·         Steady buying persisted into the equity open with trade pressing to its best levels of the day shortly after the larger than anticipated build in wholesale inventories (+0.4% actual v. +0.2% expected). 

·         Action held near the highs into this afternoon's average $25B 3Y note auction. The auction drew 1.066% and a 3.24x bid/cover. A strong indirect bid (42.2%) provided support as directs (10.1%) were a bit light. Primary dealers ended up with just 47.7% of the supply. 

·         Post-auction selling ran yields off the lows, but they were unable to reclaim their respective breakeven lines. 

·         Up front, the 2Y eased -2.4bps to 0.608%. The yield continues to ease off Friday's close of 0.640%, which was the highest since April 2011. 

·         In the belly, the 5Y slid -3.8bps to 1.626%. Today's bid pushed action back below both the 50 and 100 dma. 

·         The 10Y fell -3.7bps to 2.220%. The benchmark yield probed the important 2.200% mark, but was unable to put in a close below the level. 

·         Buying at the long end dropped the 30Y -2.6bps to 2.875%. The yield on the long bond posted its lowest close since May 2013. 

·         A flatter curve persisted as the 2-10-yr spread narrowed to 161bps. 

·         Precious metals saw strong gains as gold climbed $34 to $1229 and silver surged $0.80 to $17.08. 

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

·         Auction: $21B 10Y note reopening.

On other news.... 

Currencies 

Dollar Recoups Some Losses: 10Y: +09/32..2.226%..USD/JPY: 119.45..EUR/USD: 1.2376

·         The Dollar Index nears its best levels of U.S. trade as action looks to retake the 88.65 level. Click here to see a daily Dollar Index chart.

·         The greenback saw early selling probe the 88.20 level before buying emerged in defense of support. 

·         EURUSD is +65 pips @ 1.2380 as trade tests its lowest levels since this morning. The euro neared the 1.2450 region after the larger than expected build in U.S. wholesale inventories, but has been batted off those highs following dovish commentary from ECB board member Peter Praet suggesting the central bank would have cut rates at the last meeting if it had not already been on the zero bound. The recent lows near 1.2300 remain in focus. Eurozone data scheduled for tomorrow is limited to French industrial production. 

·         GBPUSD is +10 pips @ 1.5660 after giving up most of its early gains. Sterling ticked to its best levels of the day near 1.5715 after NIESR GDP Estimate held at 0.7%, but has slipped over the remainder of the session. Support in the 1.5600 region remains under close watch. Britain's trade balance will be released tomorrow. 

·         USDCHF is -50 pips @ .9710 after trimming its early losses. Trade tested the .9650 support area before weakness in the euro provoked a rebound. 

·         USDJPY is -120 pips @ 119.45 as money moves into the yen amid the weakness in global equity markets. Aggressive selling provided a test of 118.00 support, but action has seen a strong rebound off the level as the major bourses fight to regain the flat line. Japan's BSI Manufacturing Index will cross the wires this evening. 

·         AUDUSD is +15 pips @ .8305 as the bulls look to halt the losing streak at eight days. The hard currency appeared to be on its way to a ninth straight loss following the weakness in China, but buyers stepped in to defend support in the .8200 area that corresponds with the 2009/2010 lows. Australia's Westpac Consumer Sentiment and home loans are due out tonight. Chinese data set for tonight includes CPI and PPI. 

·         USDCAD is -40 pips @ 1.1435 as action slips off its best levels since July 2009. Early strength made for a test of 1.1500 before sellers emerged at the psychological hurdle.

Next Week In View




Economic Commentaries

Economic Summary: Wholesale inventories top estimates
Economic Data Summary:

·         October Wholesale Inventories 0.4% vs Briefing.com consensus of 0.2%; September was revised to 0.4% from 0.3%

o    Durable inventory levels were flat in October after increasing 0.7% in September. Increases in hardware (1.6%) and machinery (0.4%) offset declines in autos (-1.4%) and professional equipment (-0.7%).

o    Nondurable inventories increased 1.2% in October after being unchanged in September. Energy price declines caused petroleum inventories to fall 1.9%. That loss, however, was more than offset by gains in farm products (3.6%), drugs (3.2%), and groceries (1.1%).

·         October JOLTS - Job Openings 4.834 M vs Briefing.com consensus of ; September was revised to 4.685 M from 4.735 

Upcoming Economic Data:

·         Weekly MBA Mortgage Applications due out Wednesday at 7:00 (Briefing.com consensus of ; Last Week was -4.3%)

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

Upcoming Fed/Treasury Events:

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

o    Tuesday $25 bln in 3 year notes

o    Wednesday: $21 bln 10 year notes

o    Thursday: $13 bln 30 year bonds

Other International Events of Interest

·         China's Shanghai Composite (-5.4%) posted its steepest slide in over five years as investors rushed for the exits after a rally over the past 13 sessions tacked on nearly 25%

·         Greece's ASE trades -11% after Greece PM Samaras has called for a snap presidential election after the country failed to secure its final bailout payment

Jason's Commentaries

Surprisingly, the energy sector managed to lead the market from ending too badly in the losses and managed to gain 1.09%. However, I believe that is likely to be a short covering after a massive loss the previous day. Things are not going to be very much the same today as Oil just broke a new low of $62.09 as at 9am ET. I highly project that the energy sector is likely to be laggard today. Judging by the movements in other sectors last night, which is very flat, we're likely to head down today.








Market Call: DOWN

Date: 10 Dec 2014