Wednesday, 12 Nov 2014 – AMC

Market Summary

from Briefing.com

[BRIEFING.COM] The stock market ended the midweek session on a mixed note. The Nasdaq (+0.3%) and Russell 2000 (+0.5%) registered modest gains while the S&P 500 (-0.1%) settled just below its flat line.

Equity indices began the day in negative territory, but the broad weakness was not brought upon by macroeconomic developments. Instead, the benchmark index took a step back after soaring 12.0% off its mid-October low. However, the index could not be held down for long, charging back to its unchanged level before noon ET.

Heavily-weighted financials (-0.3%) and energy (-0.9%) were largely responsible for the opening weakness as the pair accounts for nearly 30.0% of the entire market. The energy sector continued retreating throughout the day while crude oil fell 1.0% to $77.11/bbl. For its part, the financial sector was able to cut its loss in half, but the group kept the benchmark index under pressure into the afternoon. Large banks were the source of the weakness after Bank of America (BAC 17.28, -0.04), Citigroup (C 53.42, -0.39), JPMorgan Chase (JPM 60.56, -0.81), Royal Bank of Scotland (RBS 11.82, -0.22), HSBC (HSBC 50.22, -0.35), and UBS (UBS 17.38, +0.05) were hit with a collective fine of $4.30 billion that was imposed by regulators from the U.S., U.K., and Switzerland. The fine marks the first action taken in a currency-rigging probe that began last year.

The daylong weakness in the two groups prevented the S&P 500 turning positive, but the benchmark index did not go down without a fight. The top-weighted sector—technology—registered a modest gain of 0.2% with help from Apple (AAPL 111.25, +1.55), while consumer discretionary (+0.5%) and industrials (+0.1%) also settled in the green.

Discretionary shares were underpinned by apparel names after Fossil (FOSL 112.48, +8.73) and Macy's (M 61.57, +2.98) reported better than expected results. However, both lowered their guidance and Fossil announced a $1 billion buyback. Retail names in general had a strong showing with the SPDR S&P Retail ETF (XRT 91.54, +1.67), which contains a selection of staple stocks, spiking 1.9%.

Elsewhere, the industrial sector rallied behind transport stocks. The Dow Jones Transportation Average added 0.4% with shipper Matson (MATX 35.21, +5.98) surging 20.5% after agreeing to acquire Horizon Lines (HRZL 0.65, +0.28) for $0.72 per share and the repayment of debt.

Treasuries notched their highs shortly before the start of the session, but retreated throughout the day. The 10-yr yield ended unchanged at 2.36%.

Participation was in-line with long-term averages but below recent trends with 702 million shares changing hands at the NYSE floor.

Economic data was limited to Wholesale Inventories and the MBA Mortgage Index:

• Wholesale inventories increased 0.3% in September after increasing a downwardly revised 0.6% (from 0.7%) in August, while the Briefing.com consensus expected an uptick of 0.2% 
  • The BEA assumed that wholesale inventories declined 0.1% in the advance estimate for Q3 GDP, but inventory growth greatly exceeded the estimate, which should result in a positive revision to third quarter growth 
• The weekly MBA Mortgage Index slipped 0.9% to follow last week's decline of 2.6% 

Economic Data

MBA Mortgage Index: -0.9% ;Prior -2.6%

Wholesale Inventories: 0.3% vs 0.2% ;Prior 0.6%

Technical Update

Under Construction

Market Internals

NYSE :
Higher than prev day volume @ 718.4M vs 614.4M
Advancers outpaced Decliners(adv/dec): 1682/1420
New highs outpaced low(high/low): 129/38

NASDAQ :
Lower than prev day volume @ 1565.4M vs 1642.7M
Advancers outpaced Decliners(adv/dec): 1490/1190
New highs outpaced low(high/low): 114/51

Advancers outpaced Decliners by an average 1.22 to 1

Up Volumes barely outpaced Down Volumes by 1.21 to 1

Bonds, Currencies & Commodities

from Briefing.com

Bonds

Treasuries Settle Little Changed:

• Treasuries finished little changed after paring their early gains. 
• The complex ticked higher in early morning trade, putting in its highs shortly ahead of the cash open. 
• Maturities put in session highs as the slightly larger than expected wholesale inventories (0.3% actual v. 0.2% expected) build crossed the wires. 
• Selling developed in response to the data, and remained prevalent into the average $24B 10Y note auction.
• The auction drew 2.365% and a light 2.52x bid/cover. Indirect (44.7%) and direct (13.4%) bids missed their 12-auction averages, but primary dealers were left with just 41.9% of the supply. 
• Post-auction selling ran action back to the unchanged line before a late-day bid produced slight outperformance at the long end. 
• Light buying at the long end dropped the 30Y -1.2bps to 3.080%. The yield probed the midpoint of the 3.000%/3.100% range that has been in place for the past two weeks, but was unable to break into the lower half of the range. Resistance in the 3.100% area remains in focus. 
• A flat session saw the 10Y hold near 2.360%. The benchmark yield continues to flirt with resistance in the area and the 50 dma (2.394%). 
• In the belly, the 5Y held @ 1.640%. Participants continue to monitor resistance in the 1.650% region that is defended by the 50, 100, and 200 dma. 
• Up front, the 2Y slipped -0.8bps to 0.531%. Recent action has struggled to retake the 0.550% level. 
• A slightly steeper curve developed as the 2-10-yr spread widened to 183bps.

Currencies

Dollar Nears 88.00:

• The Dollar Index lingers on session highs near 87.90.
• Action spent most of the morning hugging the breakeven line before a lunchtime bid lifted trade to session highs.
• EURUSD is -45 pips @ 1.2430 as trade presses the worst levels of the day. Today's weakness has erased all of yesterday's gains and comes in response to jawboning by ECB head Mario Draghi indicating the central bank is considering new measures to increase inflation. The recent lows near 1.2365 remain in focus. 
• GBPUSD is -130 pips @ 1.5785 as action slides to a fresh 14-month low. Sterling has been offered following the dovish Bank of England Inflation report, which suggested inflation is likely to slide below 1% by mid-2015 and that ‘gradual, limited' rate hikes are no guarantee. The 1.5500 area is setting up as support. 
• USDCHF is +30 pips @ .9675 as trade holds near 14-month highs. However, traders continue to watch EURCHF more closely as today's -10 pip drop has pushed action down to the 1.2020 area. The Swiss National Bank is on alert as EURCHF trade moves closer to its 1.2000 floor. Swiss PPI will be released tomorrow. 
• USDJPY is -5 pips @ 115.70. The pair tumbled to 114.90 in early trade after reports suggested Prime Minister Abe has not yet decided whether or not to postpone the consumption tax increase. A positive close would be the best in seven years. Japan's core machinery orders are due out tonight.
• AUDUSD is +25 pips @ .8710 as the bulls fight for a third gain in four sessions. The hard currency has been supported by the improvement in Westpac Consumer Sentiment, and today's action has many believing the recent breakdown to .8550 was a bear trap. Australian data scheduled for this evening is limited to MI Inflation Expectations. China's industrial production and fixed asset investment will cross the wires tonight. 
• USDCAD is -30 pips @ 1.1305 as trade looks likely to put in its lowest close of November. A breakdown of minor support in the 1.1300 area sets up a move to 1.1200. Canada's New Home Price Index will be reported tomorrow.

Commodities

Crude oil slides lower, back below $78/barrel

• Energy was a weak spot today. Dec crude oil rose above $78/barrel, but for only a brief moment
• Dec crude oil slid lower and ended the day down, closing at $77.16/barrel
• Dec nat gas lost almost 2% at $4.18/MMBtu
• Metals were down as well
• Dec gold and Dec silver each fell 0.4%, while Dec copper lost 0.2%.

Preview: Thursday, 13 Nov 2014

Economic Data

• Unemployment Claims - 8.30am : 282k; Prior 278k
• JOLTS Job Opening - 10:00am: 4.81M; Prior 4.84M
• Crude Oil Inventories - 11:00am : 0.7M;Prior 0.5M
• Treasury Budget - 2:00pm : -111.5B; Prior 105.8B

Other Events of Interest

• Fed’s Plosser (2014 voting; 2015 non-voting) – 12:30
• 30 Year $16-bln Treasury Note Auction – 13:00

Commentary

Direction for Thursday, 13 Nov 2014: DOWN▼