Wednesday, 3 Dec 2014 - AMC

Market Summary

from Briefings.com

Industry Watch

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

Market Moving Factors

• Dollar Index testing November high
• Small caps outperform

[BRIEFING.COM] The stock market ended the midweek session on an upbeat note with the Russell 2000 (+1.0%) pacing the advance for the second day in a row. Meanwhile, the S&P 500 posted a more modest gain of 0.4% with seven sectors ending in the green. 

Similar to yesterday, equities were essentially left to their own devices amid a lack of market-moving news. Cyclical sectors were responsible for the bulk of the advance as all six growth-sensitive groups ended in the green while health care (+0.2%) was the lone gainer on the countercyclical side. 

The materials sector (+1.4%) settled in the lead after showing relative strength throughout the session. The group benefitted from strength among steelmakers and miners with Market Vectors Steel ETF (SLX 39.15, +0.90) and Market Vectors Gold Miners ETF (GDX 19.60, +0.40) climbing 2.4% and 2.1%, respectively. 

Meanwhile, another commodity-related sector—energy (+1.2%)—settled just behind materials, which represented the third consecutive day of relative strength for the recently-battered sector. Today's advance occurred amid a 0.5% gain in crude oil ($67.30/bbl) and helped the sector extend its week-to-date gain to 3.2%. 

Elsewhere, the industrial sector (+1.3%) was the only other group to add more than 1.0%. The top-weighted sector component—General Electric (GE 26.38, +0.33)—spiked 1.3% while transport stocks also displayed relative strength. The Dow Jones Transportation Average settled higher by 0.8% with Alaska Air (ALK 56.76, +1.51) setting the pace. 

Also of note, the technology sector (+0.5%) underperformed in the morning, but powered to new highs during the final hour. The sector was underpinned by chipmakers and its strength helped the S&P 500 to a new high just ahead of the close. As for chipmakers, the group rallied broadly after Microchip Technology (MCHP 46.59, +1.94) said it is confident the small correction experienced in the third quarter is now in the past. The stock spiked 4.3% while the PHLX Semiconductor Index jumped 2.0%. 

Over on the countercyclical side, consumer staples (-0.8%), telecom services (-0.8%), and utilities (-0.3%) ended in the red while health care (+0.2%) turned positive in the early afternoon. Biotechnology contributed to the rebound with the iShares Nasdaq Biotechnology ETF (IBB 308.25, +1.38) climbing 0.5%. 

Treasuries spent the bulk of the session near their flat lines before ending close to highs. The 10-yr yield slipped one basis point to 2.28%. 

Participation was a bit below average with just over 755 million shares changing hands at the NYSE floor. 

• Economic data included ADP Employment Change, Q3 Labor Productivity Data, ISM Services, and the MBA Mortgage Index: 
• The ADP report revealed that employment in the nonfarm private business sector rose 208K in November, which was below the increase of 225K expected by the Briefing.com consensus. 
• Q3 nonfarm business productivity was revised up to 2.3% from an originally reported 2.0% gain while the Briefing.com consensus expected a revision to 2.4% 
• Unit labor costs were revised down and now show a 1.0% decline in the third quarter after initially showing a small 0.3% increase. The consensus expected a flat reading. 
• This was the second consecutive quarterly decline 
• The ISM Services Index for November rose to 59.3 from 57.1 while the Briefing.com consensus expected an uptick to 57.5 
• The weekly MBA Mortgage Index fell 7.3% to follow last week's 4.3% decline

Economic Data

• ADP Non-Farm Employment Change :208K vs 223K (Prior 233K) 
• Revised Nonfarm Productivity q/q :2.3% vs 2.3% (prev 2.0%)
• Revised Unit Labor Costs q/q :-1.0% vs 0.3% (prev 0.3%)
• Final Services PMI :56.2 vs 56.3 (Prior 56.3)
• ISM Non-Manufacturing PMI :59.3 vs 57.5 (Prior 57.1)
• Crude Oil Inventories :-3.7M vs 1.1M (Prior 1.9M)

Technical Updates

Market Internals

NYSE :
Lower than prev day volume @ 775.9M vs 813M
Advancers outpaced Decliners(adv/dec): 2029M/1083M
New highs outpaced low(high/low): 184/66

NASDAQ :
Lower than prev day volume @ 1729.8M vs 1812.8M
Advancers outpaced Decliners(adv/dec): 1694M/1049M
New highs outpaced low(high/low): 121/85


Advancers outpaced Decliners by an average 1.75 to 1 on lower volumes than prev day (-120.1 -4.57%)

Bonds, Currencies & Commodities

from Briefings.com

Bonds

Long Bond Leads Late-Day Rally:

• A late-day rally propelled the Treasury complex to a mixed close. 
• The complex saw light selling ahead of the cash open and whipped around as today's mixed data crossed the wires. 
• The soft ADP Employment Report (208K actual v. 225K expected) got the data started with both productivity-rev. (+2.3% actual v. +2.4% expected) and unit labor costs-rev. (-1.0% actual v. 0.0% expected) also missing estimates. 
• However, not all of the data was bad as ISM Services (59.3 actual v. 57.5 expected) saw one of its strongest readings on record. 
• Yields across the complex held in a tight 3bp range throughout the session, and saw some slippage into the close after the release of the latest Beige Book. 
• The Beige Book showed 'widespread' job growth and suggested the U.S. economy continues to expand.
• Up front, the 2Y added +1.5bps to 0.551%. The yield is probing the upper end of the 0.500%/0.550% range that was in place throughout November. 
• In the belly, the 5Y tacked on +1.8bps to 1.608%. The yield reclaimed both the 50 dma and prior support at the 1.600% level. 
• The 10Y edged up +0.2bps to 2.287%. The benchmark yield probed the important 2.300% area early in the session, but was unable to register a close above the mark.
• The 30Y slipped -1.1bps to 2.993% thanks to some late-day buying. What was previously support near 3.000% is now critical resistance. 
• A slightly flatter curve developed as the 2-10-yr spread tightened to 173.5bps. 
• Precious metals saw a mixed session as gold rallied +$10 to $1209 and silver eased -$0.08 to $16.38. 
• Data: Challenger Job Cuts (7:30) and initial and continuing claims (8:30). 
• Fed Speak: Cleveland's Mester makes opening remarks at the 2014 Financial Stability Conference (8:30). Fed Governor Brainard duplicates his speech from the previous day (13:15).

Currencies

Dollar Flirts with 89.00:

• The Dollar Index drifts on session highs near 89.00 amid a rather subdued trade. 
• The Index raced to the level following this morning's data, and has held in a tight range near the highs for the remainder of the session.
• EURUSD is -75 pips @ 1.2305 as trade slides to a 28-month low ahead of tomorrow's European Central Bank policy decision. Expectations remain low for the central bank to announce a QE-type program, but traders cannot completely rule out such action. 
• GBPUSD is +55 pips @ 1.5690 action contends with 15-month lows. Sterling has been supported despite the latest Autumn Forecast Statement suggesting the government is expected to borrow more money (GBP91.3 bln actual v. GBP86.6 previous) than previously anticipated. The 1.5600 level will be watched closely into tomorrow's Bank of England rate decision. 
• USDCHF is +60 pips @ .9780 as trade readies for its best close in over one and a half years. The pair saw little response to the better than expected Swiss GDP print, and instead remained tightly correlated to the fluctuations in the euro.
• USDJPY is +65 pips @ 119.85 as action rallied to its best levels in over seven years. Buyers emerged early in the session, and ran the pair to fresh highs after a Nikkei report suggested Prime Minister Shinzo Abe was likely to win a super majority in the upcoming election. The psychologically important 1.2000 level remains within striking distance.
• AUDUSD is -35 pips @ .8405 as trade readies for its worst close since July 2010. The hard currency came under pressure in overnight trade after Australian GDP missed forecasts, but managed to pare its losses as China's Non-Manufacturing PMI and HSBC Services PMI both showed improvement from prior readings. Australia's retail sales and trade balance are due out tonight.
• USDCAD is -45 pips @ 1.1360 after the Bank of Canada held its overnight rate at 1.00% and suggested the recent uptick in inflation was temporary. Trade has struggled in recent days near 1.1400/1.1450. Bank of Canada Governor Stephen Poloz will speak early this evening in Toronto. Canada's Ivey PMI is scheduled for tomorrow.

Commodities

• Commodities felt some pressure today as the dollar index continued to hold its gains
• In current trade, the index remains near its HoD
• At the end of today's session, Jan crude gained $0.33 to $67.30/barrel, even after pulling back off its HoD
• Natural gas was weak again due to a mild weather outlook in the U.S. (49% of U.S. homes use nat gas for heating)
• Metals ended the day mixed...
• Feb gold rose $10.40 to $1209/oz today, while Mar silver fell $0.03 to $16.42
• Mar copper lost one cent to $2.87/lb

Preview for Thursday, 4 Dec 2014

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