Tuesday, 2 Dec 2014 - AMC

Market Summary

from Briefings.com

Industry Watch

Strong: Consumer Discretionary, Energy, Financials, Health Care, Industrials 
Weak: Consumer Staples, Technology, Telecom Services, Utilities

Market Moving Factors

• Dollar Index testing November high
• Small caps outperform

[BRIEFING.COM] The stock market enjoyed a broad rebound on Tuesday after starting the week with a Monday retreat. The S&P 500 settled higher by 0.6% while the Russell 2000 (+1.2%) displayed relative strength. Despite today's outperformance, the small-cap index could only narrow its weekly decline to 0.4% while the S&P 500 reclaimed most of its loss from Monday. 

The benchmark index spent the day in a steady advance with M&A news from this morning acting as a supportive factor. In the technology sector (+0.3%), Cypress Semiconductor (CY 11.92, +1.48) agreed to a $4 billion merger of equals with Spansion (CODE 27.86, +5.01) while health care component (+1.1%) Avanir Pharmaceuticals (AVNR 16.92, +1.92) agreed to be acquired by Otsuka Pharmaceuticals for $3.5 billion in cash. Also of note, insurer Aviva (AV 15.64, -0.09) announced its acquisition of Friends Life Group. 

Outside of corporate deals, the Tuesday session was very quiet, but somewhat surprisingly, trading volume surpassed recent averages with 795 million shares changing hands at the NYSE.

Nine of ten sectors were able to register gains with energy (+1.3%) ending in the lead for the second day in a row. The sector spent the bulk of the session ahead of other groups even as crude oil fell 3.0% to $66.97/bbl. Dow components Chevron (CVX 114.02, +2.29) and ExxonMobil (XOM 94.19, +1.84) both gained near 2.0% while Royal Dutch Shell (RDS.A 69.30, +1.81) surged 2.7% amid press reports the company may be interested in acquiring BP (BP 40.72, +0.89). 

Elsewhere, financials (+1.0%) and industrials (+0.8%) were the only other outperformers among cyclical sectors. The industrial space rallied behind transport stocks with their strength sending the Dow Jones Transportation Average higher by 1.2%. 

Meanwhile on the countercyclical side, the health care sector (+1.1%) held a solid gain throughout the session with biotechnology providing support. The iShares Nasdaq Biotechnology ETF (IBB 306.87, +6.25) jumped 2.1% to a fresh record high. As for the remaining defensively-oriented groups, consumer staples (+0.4%) and telecom services (-1.8%) lagged while the utilities sector (+0.7%) ended just ahead of the broader market. 

Treasuries finished on their lows with the 10-yr yield up five basis points at 2.29%. 

Economic data was limited to the Construction Spending report for October, which increased 1.1% while the Briefing.com consensus expected an increase of 0.5%. The value of construction put in place increased 0.9%, which will be a positive factor in Q4 GDP computations.

Economic Data

• Construction spending - 1.1% vs 0.6% (prev - 0.1%) 
• Total Vehicle Sales - 17.2M vs 16.6M (prev 16.5M)

Technical Updates

Market Internals

NYSE :
Lower than prev day volume @ 813M vs 877.3M
Advancers outpaced Decliners(adv/dec): 2056M/1043M
New lows outpaced highs(high/low): 111/115

NASDAQ :
Lower than prev day volume @ 1812.8M vs 1882.1M
Advancers outpaced Decliners(adv/dec): 1855M/900M
New lows outpaced highs(high/low): 73/103


Advancers outpaced Decliners by an average 2.01 to 1 on lower volumes than prev day (-133.6 -4.84%)

Bonds, Currencies & Commodities

from Briefings.com

Bonds

30Y Reclaims 3.00%:

• Treasuries finished on their lows as sellers remained in control for a second session. 
• The complex held small losses into the cash open and put in its worst levels of the morning following the construction spending (+1.1% actual v. +0.5% expected) beat. 
• Trade would hover near their lows into afternoon trade before slipping further ahead of the cash close. 
• Two days of selling has longer dated yields up nearly +15bps from yesterday's opening levels. 
• Up front, the 2Y rallied +5.2bps to 0.536%. The yield regained the lower bound of the 0.500%/0.550% range that had held up throughout November and is within a handful of bps of its highest close since mid-2011. 
• In the belly, the 5Y tacked on +6.9bps to 1.590%. The yield is testing recent support near 1.600% that gave way in late-November. 
• The 10Y climbed +6.7bps to 2.285%. Treasury bears are hoping the benchmark yield can reclaim the important 2.300% area.
• Selling at the long end ran the 30Y up +5.8bps to 3.004%. Today's slide provoked the first close above 3.000% in a week.
• A steeper curve persisted as the 2-10-yr spread widened to 175bps. 
• Precious metals lost ground as gold fell -$19 to $1199 and silver slid -$0.22 to $16.47. 
• Data: MBA Mortgage Index (7), ADP Employment Change (8:15), productivity-rev., unit labor costs-rev. (8:30), ISM Services (10), and the Fed's Beige Book (14). 
• Fed Speak: Philly's Plosser gives his economic outlook (12:30). Fed Governor Brainard discusses "Financial Stability: a Conversation with Lael Brainard" (14). Dallas' Fisher talks on the economy and monetary policy (19:30).

Currencies

Dollar Hits Best Level in Over Four Years:

• The Dollar Index rests on session highs near 8.65 and remains on track to close at its best level since June 2010. 

• EURUSD is -90 pips @ 1.2380 and is contending with its worst close in 28 months. The single currency remains under pressure despite the improvement in Spanish unemployment as traders look ahead to Thursday's European Central Bank rate decision. However, expectations remain low as many anticipate more jawboning and no action from the Mario Draghi-led central bank. Eurozone data scheduled for tomorrow includes retail sales and Italian and Spanish Services PMI. 

• GBPUSD is -90 pips @ 1.5640 as trade flirts with its worst close since September 2013. Construction PMI was the latest number to miss estimates, causing many to pare back rate hike expectations. Britain's Services PMI will be released ahead of the Treasury's Autumn Forecast Statement. 

• USDCHF is +85 pips @ .9730 as action nears its best finish since May 2013. The pair remains tightly correlated to the euro.

• USDJPY is +85 pips @ 119.25 as trade rallies to a fresh seven-year high. The overnight average cash earnings miss got the buying started early, and the pair continued higher as S&P made cautious comments regarding the country's debt load. 

• AUDUSD is -45 pips @ .8445 as trade remains on track to close at its worst level since October 2010 after the Reserve Bank of Australia held its key rate at 2.50% and hinted the next move may be a rate cut. Support in the .8400 area dates back to 2009 and is being watched closely into tonight's GDP release. China's Non-Manufacturing PMI and HSBC Services PMI are due out this evening. 

• USDCAD is +65 pips @ 1.1395 as action contends with the October/November highs. Any close above 1.1420 will be the best since July 2009.

Commodities

• Commodities took a hit today on strength in the dollar index
• The CRB Reuters/Thomson Commodity Index lost just over 2% today
• Oil prices slid lower and natural gas extended losses 
• Jan crude oil ended the day $2.05 lower at $66.97/barrel, while Jan nat gas fell $0.13 at $3.88/MMBtu
• Jan gold lost $19.60 to $1198.60/oz, while Mar silver fell $0.25 to $16.45/oz
• Mar copper climbed off its LoD and erased most of its losses, ending 2 cents lower at $2.88/lb

Preview for Wednesday, 3 Dec 2014

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