Friday, 13 Feb 2015 - AMC

Dow +46.97 at 18019.35, Nasdaq +36.22 at 4893.83, S&P +8.51 at 2096.99

Market manage to have a breakout after a period of consolidation. But it is worth watching a few more session for confirmation. I suppose there should be some profit taking in tomorrow session but it is hard to see a change in trend.

Direction for Friday 13 Feb, 2015; Up

Well there was some profit taking after the market opened but we managed to see a nice run later on. It seems to me that NASDAQ is carrying a lot of momentum and S&P too. On the other hand DOW is lagging a bit.                  

Market Summary

Industry Watch

Strong: Consumer Discretionary, Energy, Materials, Industrials, Technology

Weak: Consumer Staples, Financials, Telecom Services, Utilities

Other Market Moving Factor:

• Better than expected Q4 eurozone GDP (+0.3%; consensus +0.2%)
• S&P 500 marks fresh record high

[BRIEFING.COM] The stock market finished a strong week on an upbeat note with the S&P 500 (+0.4%) setting a fresh closing record high at 2,096.99. The benchmark index posted a weekly gain of 2.0% while the Nasdaq Composite (+0.8%) outperformed to end the week higher by 3.2%. 

Equity indices climbed out of the gate after the futures market received an early morning boost from a better than expected Eurozone Q4 GDP reading (+0.3%; expected +0.2%) that was largely driven by a 0.7% quarter-over-quarter expansion in Germany (expected 0.3%). 

Meanwhile, Greece was not a focal point on Friday, but Eurogroup chief Jeroen Dijsselbloem did say he is "very pessimistic" that Monday's meeting can produce a concrete solution as Greece maintains high ambitions despite limited possibilities. 

Six of ten sectors finished in the green with cyclical groups setting the pace, which was the case throughout the week. The energy sector jumped 2.0% to extend its weekly advance to 2.6% thanks to a rally in crude oil. WTI crude advanced 2.9% to $52.67/bbl and held its ground through the release of the latest Baker Hughes U.S. rig count, which revealed a decline of 98 to 1358, representing the 10th consecutive weekly decline. 

Another commodity-linked group—materials (+0.9%)—rallied behind miners and steelmakers. Rio Tinto (RIO 49.37, +2.22) surged 4.7% after reporting better than expected results, boosting its dividend 12.0% to $2.15/share, and adding $2 billion to its buyback authorization. As for steelmakers, ArcelorMittal (MT 11.20, +0.74) jumped 7.1% despite reporting a Q4 loss. The broader Market Vectors Steel ETF(SLX 35.20, +1.14) gained 3.4%. 

Elsewhere, the top-weighted technology sector (+0.7%) began among the laggards, but ended in a position of relative strength. The influential group finished the week in the lead, up 4.3%, with Apple (AAPL 127.08, +0.62) tacking on 0.5% to extend its weekly gain to 6.9%. Chipmakers kept pace with the sector, sending the PHLX Semiconductor Index higher by 0.7%. 

Also of note, the financial sector (-0.1%) lagged throughout the day and its underperformance caused the S&P 500 to make a brief afternoon appearance in the red. However, other sectors held their own through the intraday slip, which in turn, helped the market springboard to a fresh high just ahead of the close. 

Meanwhile, countercyclical sectors struggled, but health care (+0.5%) caught up to the market during afternoon action. On the flip side, consumer staples (-0.5%), telecom services (-0.1%), and utilities (-1.6%) settled in the red. Notably, shares of Kraft (KRFT 64.42, -1.75) lost 2.7% after concerns regarding potential currency headwinds overshadowed better than expected results. 

Treasuries spent the day in a steady retreat, sending the 10-yr yield higher by five basis points to 2.03%. 

Today's participation was below-average, which was the case throughout the week. Only 744 million shares changed hands at the NYSE floor (50-day average 835 mln), which likely reflected some caution ahead of a long weekend, which is expected to include the implementation of a Russia-Ukraine ceasefire on February 15. Despite the scheduled truce, the past two days featured reports of increased clashes in the contested rail hub city of Debaltseve.

Economic data was limited to Import/Export Prices and the advance reading of the Michigan Sentiment Index: 

• Export prices, excluding agriculture, decreased 2.1% in January after decreasing 1.2% in the prior reading 
  • Excluding oil, import prices fell 0.7%, which followed last month's 0.1% decline 
• The University of Michigan Consumer Sentiment Index declined to 93.6 in the preliminary February reading from 98.1 in January while the Briefing.com consensus expected an increase to 98.3 
  • Despite the large and unexpected decline, the sentiment level is the same as it was in December 
  • The Current Conditions Index declined to 103.1 in February from 109.3 in January while the Expectations Index dropped to 87.5 from 91.0 

Bond and equity markets will be closed on Monday for Presidents' Day. On Tuesday, the Empire Manufacturing Index for February will be released at 8:30 ET while the February NAHB Housing Market Index will be reported at 10:00 ET. 

• Nasdaq Composite +3.3% YTD 
• S&P 500 +1.9% YTD 
• Russell 2000 +1.6% YTD 
• Dow Jones Industrial Average +1.1% YTD 

Week in review: Nasdaq Composite Reaches March 2000 Levels 

The stock market kicked off the week on a sleepy note with the S&P 500 (-0.4%) spending the day in a 15-point range. The benchmark index settled ahead of the Dow (-0.5%), but that was a small victory considering the S&P 500 finished near its session low. Above all, the trading volume was well below average with just 760 million shares changing hands at the NYSE floor. Equity indices faced some pressure at the start, brought on by lingering concerns about the eurozone after Greek Prime Minster Alexis Tsipras spoke in front of parliament, reiterating his intention to push back against austerity measures imposed by the troika. The concerns contributed to a lower start, but the S&P 500 did not go down without a fight. The index tried to reclaim its flat line, and was able to do so briefly on the third attempt; however, the third time was hardly the charm as a slide to a fresh session low followed. 

The major averages snapped their two-day losing streak with a Tuesday rally that allowed the S&P 500 (+1.1%) to settle at its best level of the year. The benchmark index finished ahead of the Dow (+0.8%) and Russell 2000 (+0.6%), but behind the Nasdaq Composite (+1.3%). The rumor mill was active from the early morning, starting with a Bloomberg report indicating the European Commission will propose a six-month extension for Greece. The report cited unnamed sources and was met with a swift denial from the European Commission spokeswoman, who said there is no formal proposal on the table at this time, but talks are "intensive." German Finance Minister Wolfgang Schaeuble also offered a denial, simply calling the report "wrong." Lost in the whirlwind was the fact that the Bloomberg report took place not long after Greek Defense Minister Panos Kammenos entertained the possibility of looking for financial support elsewhere, naming the United States, Russia, and China as potential options. The market rallied happily following the initial report and held its ground through the subsequent denials. The S&P 500 spent the bulk of the early afternoon in a narrow range, but powered to a fresh high ahead of the close. It is worth noting that market breadth did not turn positive until the final 90 minutes, meaning the number of advancers equaled that of decliners even as the market sported a solid gain at midday. 

Equity indices ended the midweek session on a mixed note. The S&P 500 settled just below its flat line after respecting a 15-point range while the Nasdaq Composite (+0.3%) outperformed throughout the session. The final NYSE volume (732 million) came in below average, continuing a weeklong trend. However, the limited participation was not all that surprising as some investors treaded lightly, trying to avoid potential whiplash associated with headlines out of Europe. The EU finance ministers meeting took place in Brussels, but hopes for a swift deal were dampened by Germany's Finance Minister Wolfgang Schaeuble who said he did not expect a resolution on Wednesday, echoing comments made by Eurogroup Chief Jeroen Dijsselbloem. Meanwhile, leaders from France, Germany, Russia, and Ukraine met in Minsk, and agreed to reaffirm the cease-fire agreement that was struck at the first Minsk conference on September 5, 2014, but was violated shortly after being put into place. 

The market finished the Thursday session on a broadly higher note. The S&P 500 (+1.0%) settled just six points below its record high that was registered in late December while the Nasdaq Composite (+1.2%) outperformed. Equity indices began the day with modest gains and continued their advance in undisturbed fashion throughout the day. However, participation was limited once again with 786 million shares changing hands at the NYSE floor (50-day average 836 million). Stocks received an opening boost after it was confirmed that leaders from France, Germany, Russia, and Ukraine struck a ceasefire agreement, set to go into effect over the weekend. As for Greece, Bloomberg reported that Germany is ready to soften its negotiating stance while Eurogroup chief Jeroen Dijsselbloem and Greek Prime Minister Alexis Tsipras agreed to begin a "technical assessment" of the common ground between Greece and the current program in preparations for the next Eurogroup meeting on Monday.

DOW

NASDAQ

S&P

Macroeconomic Data

Economic Data

from Briefing.com

• Export Prices ex-agri : -1.0% (Prior -1.0% - Down) 
• Import Prices ex-oil : -0.7% (Prior -0.1%) 
• Michigan Sentiment : 93.6 vs 98.5 (Prior 98.1)

MICHIGAN SENTIMENT

Highlights

• The University of Michigan Consumer Sentiment Index declined to 93.6 in the preliminary February reading from 98.1 in January. The Briefing.com Consensus expected consumer sentiment to increase to 98.3.

Key Factors

• Despite the large and unexpected decline, the sentiment level is the same as it was in December.
• The Current Conditions Index declined to 103.1 in February from 109.3 in January. The Expectations Index dropped to 87.5 from 91.0.
• Consumer sentiment generally follows trends in equity values, gasoline prices, and labor market conditions. While gasoline costs have increased modestly over the past couple of weeks, the consensus expected that would be offset by general improvements in both equities and the labor market.
• The decline in consumer sentiment is unlikely to have much of an impact on consumption. Consumption follows income and not sentiment trends. As long as income grows, consumption should follow.

Big Picture

• Consumer sentiment has little influence on consumption. As long as payroll levels continue to expand, the resulting income growth should keep consumption gains steady regardless of the monthly ebbs and flows in sentiment.

Market Internals

NYSE:

Lower Volumes than the day before – 624.7M vs 802.9M 


Advancers outpaced Decliners (adv/dec): 1945 / 1147

New Highs outpaced New Lows (highs/lows): 190 / 5

NASDAQ:

Lower Volumes than the day before – 1816.0M vs 2059.1M

Advancers outpaced Decliners (adv/dec): 1720 / 1008

New Highs outpaced New Lows (highs/lows): 131 / 29

VOLATILITY S&P500 (VIX)

14.69 -0.65 (-4.24%)

Despite the drop in volume, the internals are still looking slightly bullish especially the no. of New Highs vs New Lows. And we see the VIX broke below 15.00 and this could mean more optimism in the market as we are seeing more confidence back.    

Technical Updates

DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)

18,019.35 +46.97 (+0.26%)

Volume: 85,231,610 (below average of 94,337,395)

Range: 17,961.76 - 18,037.41

NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)

4,893.84 +36.23 (+0.75%)

Volume: 456.2M (above average of 450,580,229)

Range: 4,860.12 - 4,893.84

S&P 500 INDEX (SPX: CBOE)

2,096.99 +8.51 (+0.41%)

Volume: 501.2M (below average of 533,227,906)

Range: 2,086.70 - 2,097.03 

NASDAQ forms a new high and we see the bullish breakout for all three indices. However they are near to their respective upper bound of Bollinger Bands, so have to watch out for the reversal. 

Commodities

Closing Conmodities: Oil, Gold And Silver End With Gains

• WTI crude oil, gold and silver futures traded in positive territory all day today
• Mar crude managed to end the day $1.48/barrel higher at $52.67/barrel
• Apr gold rose $6.70 to $1227/oz, while Mar silver $0.50 to $17.28/oz
• Mar nat gas gained some steam off its LoD and ended today’s session at the flat line at $2.80/MMBtu

Energy Price Action

• Mar crude oil futures rose $1.48/barrel to $52.67/barrel (See Baker Hughes Note)
• Mar natural gas closed flat D/D at $2.80/MMBtu
• RBOB Gasoline closed $0.03 higher (+1.9%) at $1.63/gallon
• Heating oil closed $0.06 higher (or +3.1%) at $1.97/gallon
• Highlights
• Crude Oil: The Baker Hughes total US rig count declined 98 rigs this week to 1358 ; marking the 10th week in a row of US declines.

Agricultural Price Action

• Mar corn closed $0.05 higher at $3.88/bushel
• Mar wheat closed $0.14 higher at $5.34/bushel
• Feb soybeans ended $0.07 higher at $9.90/bushel
• Ethanol closed flat D/D at $1.44/gallon
• Sugar #11 closed 0.16 cents lower at 14.88 cents/lb

Metals Price Action

• Apr gold ended today’s session $6.70 higher at $1227/oz
• Mar silver ended $0.50 higher at $17.28/oz
• Mar copper closed $0.01 lower at $2.60/lb

Currencies

Currency Commentary: DXY Holding 94

• The Dollar Index has slowly inched its way higher after holding 94 support, but gains have been relatively limited. The DXY is now trading at 94.20 as we head toward the weekend. The U.S. is heading into a three day weekend with markets closed on Monday in observance of President’s Day. We will hit the ground running on Tuesday as the markets will be focused on the Greek Debt Situation which happens on Monday. On the domestic side markets will be looking at: Empire Manufacturing (Tue), Starts & Permits, PPI, Industrial Production, and Fed Minutes (Wed), and Philly Fed and Leading Indicators (Thu).
• The euro is trading just below the 1.14 level. As previously noted the Monday meeting on Greece will help define the week ahead for the euro. Both sides have provided optimistic commentary on the discussions but there has been little evidence of advancement toward a compromise. Also of interest next week, will be the first ever release of ECB minutes (Thu). This be the minutes from the historical January 22 meeting in which the ECB announced it would embark on a QE program.
• The pound has held steady at the 1.54 level. Sterling will certainly be impacted by the Eurogroup meetings on Monday but the country’s inflation report on Tuesday should provide the underlying current for the currency. BoE Governor Mark Carney had noted that the country is heading for its first period of falling prices since records began in 1989, but he did not see the country falling into a deflationary spiral.
• The yen has been holding steady at the 118.70 area. The country will release its Q4 GDP number on Sunday evening and the Bank of Japan will be holding a meeting on Tuesday but there is no new action expected from it (BONDX, FOREX).

Bonds

Bonds Take Losses in Curve Steepening Trade: 

• The main story coming into today's trade was stronger growth in the Eurozone. Some market participants are claiming that lower energy prices, a weaker Euro, and the ECB's QE program will overwhelm the deflationary forces seen in the middle of last year and bolster (might already be bolstering?) the Eurozone economy. 
  • Greece's 10-year yields finished the European session down around 90 bps. 
  • Italian and Spanish 10-year yields also dropped. 
  • Hope for a weekend deal between Greece and the troika may have also played a role.

• Data: 
  • January Import Prices -2.8% m/m (prior -1.9%), ex-oil -0.7% (prior -0.1%) 
  • January Export Prices -2.0% m/m (prior -1.0%), ex-ag. -2.1% (prior -1.0%) 
  • At 10:00 ET, the U. of Michigan's Consumer Sentiment survey missed consensus expectations (93.6 vs. a Briefing.com consensus of 98.3)
    • According to Briefing.com's chief economist, Jeffrey Rosen:
      • Despite the large and unexpected decline, the sentiment level is the same as it was in December. 
      • The Current Conditions Index declined to 103.1 in February from 109.3 in January. 
      • The Expectations Index dropped to 87.5 from 91.0.
      • Consumer sentiment generally follows trends in equity values, gasoline prices, and labor market conditions. While gasoline costs have increased modestly over the past couple of weeks, the consensus expected that would be offset by general improvements in both equities and the labor market. 
      • The decline in consumer sentiment is unlikely to have much of an impact on consumption. Consumption follows income and not sentiment trends. As long as income grows, consumption should follow. 
      • Stocks and bonds shrugged off the news. 

• The yield curve continued to steepen, with the worst losses coming in the June classic bond futures contract. 
  • 2s/30s flirted with the 200bp level. 
  • Despite all of the shelling that Treasuries took last week, they failed to bounce this week. 
  • Yield Check:
    • 2-yr: unch at 0.63%
    • 5-yr: +2 bps to 1.51%
    • 10-yr: +3 bps to 2.02%
    • 30-yr: +4 bps to 2.63%

• WTI Crude rallied for a second day in a row, up $1.56 (3.07%) to $52.78/bbl
• The USD Index traded a range, digesting yesterday's sharp fall.

• Week Ahead: 
  • Monday: President's Day, market closed  
  • Tuesday: February Empire Manufacturing (08:30 ET); February NAHB Housing Market Index (10:00 ET); Philadelphia Fed President Plosser (non-FOMC voter) speaks on the economic outlook and monetary policy (12:45 ET); December Net Long-Term TIC Flows (16:00 ET) 
  • Wednesday: MBA Mortgage Index for the week ending 2/14 (07:00 ET); January Housing Starts and Building Permits (08:30 ET); January PPI (08:30 ET); January Industrial Production and Capacity Utilization (09:15ET); FOMC Minutes (14:00 ET) 
  • Thursday: Initial Claims for the week ending 2/14 (08:30 ET); Continuing Claims for the week ending 2/7 (08:30 ET); February Philadelphia Fed (10:00 ET); January Leading Indicators (10:00 ET); Natural Gas Inventories for the week ending 2/14 (10:30 ET); Crude Inventories for the week ending 2/14 (11:00 ET); $9 billion 30-yr TIPS auction (13:00 ET); Atlanta Fed President Lockhart (FOMC voter) speaks on monetary policy and the economic outlook (13:00 ET)
  • Friday: No data

Treasury Yields:

• 2 Year Note 0.66% +0.05
• 5 Year Note 1.53% +0.03
• 10 Year Note 2.02% +0.03
• 30 Year Bond 2.63% +0.05

2/30 Spread: 197 bps ( UNCH ) …  2/10 Spread: 136 bps ( -2 )

Preview for the week Tuesday 17 Feb to Friday 20 Feb, 2015

Economic Data

Tuesday (17 Feb) :

• Empire Manufacturing : 9.0 (Prior 9.9)
• NAHB Housing Market Index : 58 (Prior 57)
• Net Long-Term TIC Flows : Prior $33.5B

Wednesday (18 Feb) :

• MBA Mortgage Index : Prior -9.0%
• Housing Starts : 1070K (Prior 1089K)
• Building Permits : 1065K (Prior 1032K)
• PPI : -0.4% (Prior -0.3%)
• Core PPI : 0.1% (Prior 0.3%)
• Industrial Production : 0.4% (Prior -0.1%)
• Capacity Utilisation : 79.9% (Prior 79.7%)
• FOMC Minutes

Thursday (19 Feb) :

• Initial Claims : 295K (Prior 304K)
• Continuing Claims : 2398K (Prior 2354K)
• Philadelphia Fed : 9.8 (Prior 6.3)
• Leading Indicators : 0.3% (Prior 0.5%)
• Natural Gas Inventories : Prior -160bcf
• Crude Inventories : Prior 4.868M

Friday (20 Feb) :

• No Economic Data

Earnings Highlights

Tuesday (17 Feb) :
BMO : AGIO ALE ACC ORPN CRY GPC GT LECO MDT MGM MNTA NHI PES QSR TGH TTS USAC VNR VDSI WLT WM WRI WWW

AMC : A AMC ANAD ADI BRDR CF CHE XEC CLD DVN FANG ENPH EQY EXAC FE FLS FOSL RAIL HTS HR HTA IPHS JACK JBT KALU KAR LZB MASI MEP NP NCLH OHI OMI PEB PEI PHH PLAB PBPB PGI PSB RAX O ROG SHO TEX UCTT VMI VRNS VECO VNO WTS ZIXI

Wednesday (18 Feb) :
BMO : ALLE ANGI BCRX CNK CIR CRTO CONE XRAY DXYN DUK DX ENBL ENZY FLR GRMN GEO HL HLT HUN H I MZOR NI NOR SABR SIR SBGI SONS ELOS MDCO VA WAB YNDX

AMC : AIMC ARII CRMT AMTG ARRS AVG CAR AXLL BGS ABX BJRI CSLT CDE CVG CW CYNI DTLK DENN ELNK ETP ETE EOG EPE EQC EVTC EXAM FNF LOPE HSTM HT IAG TILE IPI KEG KEYW LHO LDRH MIC MHLD MANT MRO MAR NVMI OIS ASGN OGS PAAS PKD PCYC STR RGP REXX SBRA SCTY SSS STNR SUNE SXL SUN SNPS TS TERP THRX TRN UAM UFPI WGP WES WMB WPZ XPO YUME

Thursday (19 Feb) :
BMO : ACTA ADPT AYR ANIP ARIA ATRO BLMN BCC BRC BBW CCC FUN CBB CVI UAN CVRR DAN DWRE DNR DTV DAVE FCN GEL GG HRL HST HII IDA IMAX IRC IDCC LXP LINE LPLA CLI MTRN NM NBL PDCO PDCE PCLN PWR RS SGNT SCG SIX STFC SYNT TK TTC GTS UPL YNDA WMT WST

AMC : ACTG AHS ANET AUQ BAS BEAT BRCD BRKR BLDR CCS CHSP COHU CYH EGO WIRE ETM EQIX EXR FRGI FNGN FR FPO FTR HY SAAS INAP INTU IPCM MRVL MHK MRC NEM NDLS JWN PSA FUEL ROVI SEM SSRI SPNC SPN TEP TSRO TRMR TRUE UEIC WRE XNPT

Friday (20 Feb) : 
BMO : B COG CHH COMM DE ENB ERF NPO ROCK GOV HCN IPGP IRM LH PNW PEG SWC TFX WLH

AMC : None Scheduled

Summary

Market is turning bullish but fundamentally I think the US economy is still lagging. Perhaps I can say that the rally is more on a speculation. I believe the market is only likely to continue strongly if we see a better economic numbers. Otherwise I think this is just a false breakout.

Do note that equity and bond market will be closed on Monday due to President's Day.

Direction for Tuesday 17 Feb, 2015; Down

Direction for the week Tuesday 17 Feb to Friday 20 Feb, 2015; Up

2015 Daily Directional Accuracy: 11/27 (40.74%) 
2015 Weekly Directional Accuracy: 4/6 (66.67%)