13 Mar 2015

Thursday, 12 Mar 2015 - AMC



Dow +259.83 at 17895.22, Nasdaq +43.35 at 4893.29, S&P +25.71 at 2065.95
To be honest I don't have a good feeling about the market right now. First we saw the sell off, then the sideway so it is better to be cautious amid the volatile sessions.  Tomorrow we have some unemployment claims numbers and retails sales that could give the market more gyration (and more downside?). As I did mentioned on Tuesday that it is important to stay hedge as the market is likely to surprise us further.

I would say Thursday session might have some short-covering and maybe sideway afterwards, depending on the economic data.

Direction for Thursday 12 Mar, 2015; Up
Ok this is quite a recovery from the market. It looks to me that bad news turned out to be good news and vice versa. Well I think I have to learn more about critical thinking to dissect on the news. 

 Anyway market was generally up despite the fact that numbers from retail sales is disappointing and internals are looking rather divergence to me. The question is are we going to see more of such runs or another downhill ride?   

Market Summary
Industry Watch
Strong: Consumer Discretionary, Financials, Materials, Telecom Services, Utilities

Weak: Energy, Technology

Other Market Moving Factor:
    • Dollar Index pulls back
    • February Retail Sales below expectations (-0.6%; Briefing.com consensus +0.4%)

    [BRIEFING.COM] The major averages enjoyed a broad-based rebound on Thursday after the S&P 500 (+1.3%) lost 3.6% during the previous seven sessions. The benchmark index reclaimed its 50- (2,060) and 100-day (2,044) moving averages while the Russell 2000 (+1.7%) outperformed. 

    Equity indices charged higher out of the gate and maintained narrow ranges into the afternoon before extending to new highs during the last hour of action. The market all but ignored a disappointing retail sales report for February (-0.6%; Briefing.com consensus +0.4%), but it could be argued that the weak reading increased the likelihood that the Fed will delay its first rate hike. 

    More notably, the greenback weakened a bit with the Dollar Index (99.26, -0.54) shedding 0.5% to narrow its March gain to 4.1%. The Index was down more than 1.0% this morning, but climbed off its session low that was notched after the release of the retail sales report. 

    Today's dollar weakness was not enough to keep crude oil from ending the pit session lower by 2.3% at $47.11/bbl while the energy sector (-0.5%) was the only group that finished in the red. 

    Meanwhile, the remaining nine sectors posted gains between 0.5% (technology) and 2.2% (financials). 

    In fact, technology was the only advancer limited to a slimmer gain than 1.0%, which was largely due to a 4.7% slump in the shares of Intel (INTC 30.80, -1.53) after the company cut its Q1 revenue guidance due to weaker than expected demand for business desktop PCs. The stock widened its quarter-to-date loss to 15.1% and contributed to the underperformance of the Nasdaq Composite (+0.9%). 

    Elsewhere among cyclical sectors, financials benefitted from last evening's news that the Federal Reserve approved capital plans of 28 out of 31 major banks. Bank of America (BAC 16.08, -0.02) was requested to make adjustments to its plan while Deutsche Bank (DB 31.70, +0.12) and Banco Santander (SAN 6.87, +0.10) had their plans rejected due to qualitative concerns. Thanks to today's advance, the sector is now up 0.6% for the month while the remaining groups continue holding March losses. 

    Similar to financials, the consumer discretionary sector (+2.0%) advanced 2.0% or more amid broad strength. Retailers rallied with the SPDR S&P Retail ETF (XRT 99.31, +1.70) spiking 1.7% while restaurant names benefitted from better than expected results from Shake Shack (SHAK 47.79, +0.89) and Zoe's Kitchen (ZOES 34.94, +2.24). 

    Treasuries registered gains, but ended well below their highs following an afternoon retreat. The 10-yr yield slipped two basis points to 2.10% after hitting a low near 2.04%. 

    Today's participation was relatively light with fewer than 750 million shares changing hands at the NYSE floor. 

    Economic data included Initial Claims, Retail Sales, Import/Export Prices, and Business Inventories: 
    • Retail sales declined 0.6% in February after declining 0.8% while the Briefing.com consensus expected an increase of 0.4% 
      • Some may blame the inclement weather in the Northeast as a contributing factor; however, in our opinion, the decline simply resulted from consumers continuing their savings trend and not spending. 
      • The numbers were pretty weak across the board, with motor vehicle sales being the hardest hit sector. These sales fell 2.5% in February after increasing 0.5% in January. 
      • Excluding motor vehicle sales, retail sales declined 0.1% after declining 1.1% while the consensus expected an increase of 0.6%. 
    • The initial claims level declined to 289,000 for the week ending March 7 from an upwardly revised 325,000 (from 320,000) while the Briefing.com consensus expected a decline to 306,000 
      • According to the Department of Labor, there were no special factors that impacted the data 
    • Export prices, excluding agriculture, increased 0.2% in February after decreasing 1.0% in the prior reading 
      • Excluding oil, import prices fell 0.3%, which followed last month's 0.7% decline 
    • Business Inventories were unchanged in January while the Briefing.com consensus expected an increase of 0.1% 
      • The December reading was revised to unchanged from 0.1% 
    • The Treasury Budget for February showed a deficit of $192.30 billion while the Briefing.com consensus expected a deficit of $192.00 billion 
    Tomorrow, February PPI (Briefing.com consensus 0.3%) will be released at 8:30 ET while the preliminary reading of the Michigan Sentiment Index (consensus 95.8) for March will cross the wires at 10:00 ET.

    Global Market
    ASIA
    Asian Markets Close: Japan’s Nikkei +1.4%; Hong Kong’s Hang Seng +0.3%; China’s Shanghai Composite +1.8%
    Markets in the Asia Pacific region shrugged off Wall Street’s lackluster showing on Wednesday and powered higher in Thursday’s trade, bolstered by a surprise rate cut from the Bank of Korea (to 1.75% from 2.00%), better than expected employment data out of Australia, and speculation that China will introduce more money policy stimulus.
    Economic data
    • Japan 
      • Q1 BSI Large Manufacturing Conditions 2.4 (expected 5.7; prior 8.1)
      • Tertiary Industry Activity Index +1.4% month-over-month (expected 0.6%; prior 0.0%)
      • February Household Confidence 40.7 (expected 39.9; prior 39.1)
    • China 
      • New Loans RMB 1.020 bln (expected RMB 755.0 bln; prior RMB 1.470.0 bln)
      • M2 Money Stock +12.5% year-over-year (expected 11.1%; prior 10.8%)
    • Australia
      • February Employment Change +15.6K (expected +15.0K; prior -14.6K)
      • February Unemployment Rate 6.3% (expected 6.3%; prior 6.4%)
      • MI Inflation Expectations 3.2% (prior 4.0%)
    Equity Markets
    • Japan’s Nikkei increased 1.4%, finishing near its highs for the day and just under the 19,000 mark. Strength in the auto makers and leadership from the financial (+2.4%), consumer non-cyclical (+1.8%), and industrial (+1.5%) sectors powered the advance. Individual leaders included Eisai Co (+6.2%), Yamaha Corp (+5.3%), Tokio Marine Holdings (+4.6%), Chugai Pharmaceutical (+4.3%), and Mitsubishi Chemical Holdings (+3.8%).
    • Hong Kong’s Hang Seng advanced 0.3%, helped by strength in the consumer cyclical (+0.8%) and communications (+0.8%) sectors. Galaxy Entertainment (+3.2%) rebounded from recent losses and led all gainers, followed by Bank of Communications (+2.9%), China Life Insurance (+2.0%), China Construction Bank (+2.0%), and China Mobile (+1.9%).
    • China’s Shanghai Composite jumped 1.8%, helped in part by renewed speculation there could soon be another cut in the reserve ratio requirement. Data showed new loans were higher than expected for the latest month but down 31% from the prior reading. The Chinese market was led by the financial, energy, and utilities sectors.
    • India’s Sensex increased 1.0% and ended near its best levels of the day. Index gains were fueled by strength in the basic materials (+3.1%), communications (+2.1%), and utilities (+1.8%) sectors. All sectors were higher with the exception of consumer non-cyclical (-0.1%). Seas Sterlite (+4.1%), NTPC Ltd (+3.9%), Hindalco Industries (+3.5%), ITC Ltd (+2.5%), and Tata Steel Ltd (+2.4%) were the top gainers.
    • Australia’s S&P/ASX increased 1.0% following a report of higher than expected job growth in February. The financial (+1.4%), industrial (+1.4%), and information technology (+1.3%) sectors led the gains.
    • Regional advancers: Taiwan +0.8%, Malaysia +0.5%, Thailand +0.03%, Indonesia +0.4%, Philippines +0.6%, Vietnam +0.3%
    • Regional decliners: South Korea -0.5%, Singapore -0.2%
    FX: 
    • USD/CNY unch at 6.2620
    • USD/INR -0.4% at 62.548
    • USD/JPY -0.3% at 121.06
    EUROPE
    Major European indices trade near their flat lines while UK’s FTSE (+1.0%) outperforms. Elsewhere, Germany’s Bundesbank President Jens Weidmann said he does not believe the current economic situation calls for asset purchases by the European Central Bank. Mr. Weidmann also said that negative interest rates are transitory with no signs of second-round effects. On a separate note, Bloomberg reports the European Central Bank has increased Greece’s Emergency Liquidity Assistance allowance by EUR600 million.
    • Eurozone Industrial Production -0.1% month-over-month (expected 0.2%; prior 0.3%); +1.2% year-over-year (consensus 0.1%; last 0.6%)
    • UK’s January trade deficit narrowed to GBP8.41 billion from GBP9.93 billion (expected -GBP9.70 billion)
    • Germany’s CPI 0.9% month-over-month; 0.1% year-over-year, as expected
    • Spain’s CPI 0.2% month-over-month; -1.1% year-over-year, as expected
    • France’s CPI 0.7% month-over-month (expected 0.6%; prior -1.0%)
    CLOSING PRICES
    • UK’s FTSE: + 0.6%
    • Germany’s DAX: -0.1%
    • France’s CAC: -0.2%
    • Spain’s IBEX: -0.1%
    • Portugal’s PSI: + 0.8%
    • Italy’s MIB Index: -0.1%
    • Irish Ovrl Index: + 2.4%
    • Greece ASE General Index:  + 1.6%
    Macroeconomic Data


    Economic Data
    from Briefing.com
    • Initial Claims : 289K vs 306K (Prior 325K - Up)
    • Continuing Claims : 2418K vs 2421K (Prior 2423K - Up)
    • Retail Sales : -0.6% vs 0.4% (Prior -0.8%)
    • Retail Sales ex-auto : -0.1% vs 0.6% (Prior -1.1% - Down)
    • Export Prices ex-ag. : 0.2% (Prior -2.0% - Down)
    • Import Prices ex-oil : -0.3% (Prior -0.6% - Up)
    • Business Inventories : 0.0% vs 0.1% (Prior 0.0% - Down)
    • Natural Gas Inventories : -198bcf (Prior -228bcf)
    • Treasury Budget : -$192.3B (Prior -$193.5B)

    UNEMPLOYMENT CLAIMS

    Highlights

    • The initial claims level declined to 289,000 for the week ending March 7 from an upwardly revised 325,000 (from 320,000) for the week ending February 28. The Briefing.com Consensus expected the initial claims level to decline to 306,000.
    • The continuing claims level declined to 2.418 mln for the week ending February 28 from an upwardly revised 2.423 mln (from 2.421 mln) for the week ending February 14. The consensus pegged the continuing claims level at 2.421 mln.

    Key Factors

    • According to the Department of Labor, there were no special factors that impacted the data.
    • Over the past four weeks, there has been some noted volatility. Claims had spiked above 300,000 and then quickly pulled back. It is hard to get a true gauge on labor market trends during this jumpiness.

    Big Picture

    • Volatility in the claims data has made it difficult to determine labor market conditions.

    RETAIL SALES

    Highlights

    • Retail sales declined 0.6% in February after declining 0.8% in January. The Briefing.com Consensus expected retail sales to increase 0.4%.
    • Excluding motor vehicle sales, retail sales declined 0.1% in February after declining 1.1% in January. The Briefing.com Consensus expected these sales to increase 0.6%.

    Key Factors

      It is hard to spin these numbers. Some may blame the inclement weather in the Northeast as a contributing factor. In our opinion, the decline in sales is simply a result of consumers continuing their savings trend and not spending.
    • The numbers were pretty weak across the board, with motor vehicle sales being the hardest hit sector. These sales fell 2.5% in February after increasing 0.5% in January. The decline was in-line with the weakness in the motor vehicle manufacturer reports that were released earlier in the month.
    • Building material and supply stores (-2.3%), general merchandise stores (-1.2%), and miscellaneous store retailers (-1.2%) saw large drops in sales in February.
    • Core sales, which exclude motor vehicle dealers, building material and supply stores, and gasoline stations, declined 0.1% for a second consecutive month in February.

    Big Picture

    • Consumer continue to increase their savings in lieu of spending. 

    BUSINESS INVENTORIES

    Highlights

    • Business inventories were flat for a second consecutive month in January after a slight downward revision (from 0.1%) to the December data. The Briefing.com Consensus expected business inventories to increase 0.1%.

    Key Factors

    • The changes in inventories for manufacturers (-0.4%) and merchant wholesales (0.3%) were known prior to the release. The only new information was that retailer inventories were unchanged in January after increasing 0.5% in December.
    • A large increase in clothing and accessory inventories (0.6%) offset declines in motor vehicle inventories (-0.2%), furniture stores (-0.1%), and building material and supply stores (-0.7%).
    • Total business sales declined 2.0% in January after declining 1.0% in December.
    • The inventory-to-sales ratio increased to 1.35 in January from 1.33 in December. That is the largest ratio since July 2009.

    Big Picture

    • Business inventories include wholesale inventories, manufacturing inventories, and retail inventories. Inventories are a component of GDP, and thus are of interest to economists, but the financial markets don't pay much attention to this release. Over the long term, the inventory-to-sales ratio has been declining, due to improving techniques for inventory management.

    TREASURY BUDGET

    Highlights

    • The Treasury budget showed a deficit of $192.3 bln in February 2015, down from a deficit of $193.5 bln in February 2014. The Treasury data are not seasonally adjusted, and the February deficit cannot be compared to the $17.5 bln deficit recorded in January. The Briefing.com Consensus expected a budget deficit of $192 bln.

    Key Factors

    • The February deficit nearly matched the CBO's forecast of a deficit of $192.0 bln.
    • Total outlays decreased to $331.7 bln in February 2015 from $337.9 bln in February 2014, a difference of $3.2 bln.
    • Total revenues declined by $5.0 bln, from $144.3 bln in February 2014 to $139.4 bln in February 2015.
    • Fiscal year-to-date, the deficit is $386.5 bln versus $376.4 bln for the comparable period in FY14.

    Big Picture

    • Raw data available at: www.fiscal,treasury.gov/fsreports/rpt/mthTreasStmt/current.htm 

    Market Internals
    NYSE:
    Lower Volumes than the day before – 747.7M vs 777.5M 

    Advancers outpaced Decliners (adv/dec): 2266 / 820
    New Highs outpaced New Lows (highs/lows): 107 / 48

    NASDAQ:
    Higher Volumes than the day before – 1846.6M vs 1825.5M
    Advancers outpaced Decliners (adv/dec): 2006 / 785
    New Highs outpaced New Lows (highs/lows): 122 / 55

    VOLATILITY S&P500 (VIX)
    15.42 -1.45 (-8.60%)
    Looking at the internals, I would say it was a bullish session. However it is not convincing with the lower volumes. Meanwhile VIX dropped and it is sitting on the support level at 15.00. I would say the market is conflicting between the fear and the confidence, or should I say lack in leadership.                 


    Technical Updates
    DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)
    17,895.22 +259.83 (+1.47%)
    Volume: 111,551,998 (above average of 95,195,215)
    Range: 17,620.49 - 17,900.10

    NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)
    4,893.29 +43.35 (+0.89%)
    Volume: 451,952,005 (above average of 450,121,963)
    Range: 4,853.20 - 4,895.80


    S&P 500 INDEX (SPX: CBOE)
    2,065.95 +25.71 (+1.26%)
    Volume: 541,588,000 (above average of 535,060,077)
    Range: 2,041.10 - 2,066.41 

    The indices are getting the rebound but DOW and S&P are testing another resistance level respectively. MACD momentum is showing some slowing down in bearishness. The candlestick pattern looks like a morning star and I think the market is likely to see more pullback.         


    Commodities
    Closing Commodities: WTI Oil Ends Near $47/Barrel
    • Natural gas and crude oil futures slid lower today and held those losses
    • Nat gas sold off following the weekly EIA storage data and ultimately closed $0.10 lower at $2.73/MMBtu
    • WTI crude oil lost steam and finished floor trading $1.10 lower at $47.11/barrel
    • Copper futures held gains today with the May contract ending $0.05 higher at $2.66/lb
    • Gold and silver also closed with a modest gains
    Energy Price Action
    • pr crude oil futures fell $1.10/barrel to $47.11/barrel
    • Apr natural gas fell $0.10 to $2.73/MMBtu
    • RBOB Gasoline fell $0.04 to $1.78/gallon
    • Heating oil closed $0.01 lower to $1.81/gallon
    Notes:
    • Natural Gas inventory was released by the EIA this morning which showed a draw last week of 198 bcf vs. expectations of 196 bcf
    Agricultural Price Action
    • May corn closed $0.01 lower at $3.89/bushel
    • May wheat closed $0.08 higher at $4.07/bushel
    • May soybeans closed $0.02 higher at $9.93/bushel
    • Ethanol closed $0.02 lower at $1.47/gallon
    • Sugar #11 closed 0.07 cents higher at 13.21 cents/lb
    Metals Price Action
    • Apr gold ended today’s session $1.50 higher at $1150.60/oz
    • May silver closed $0.14 higher at $15.52/oz
    • May copper closed $0.05 higher at $2.66/lb
    Notes:
    • Gold and Silver futures rose slightly in early trading following retail sales/claim data, ending the session with modest gains overall.

    Currencies

    Dollar Index Declines:
    • The U.S. Dollar Index lost ground to every major but the pound sterling today, ending down 49 ticks (-0.49%) to 99.31
      • Mark Carney said that there is "no evidence of [deflation proper] in the UK, where wage growth has picked up over the past six months." He went on to say, "there are several reasons why the dog (debt deflation) might have just been sleeping, and central banks need to be vigilant..."
      • He also said, "While the MPC can be expected to look through one-off shocks, it may be appropriate to take into account persistent external deflationary forces arising from the combination of continued foreign low inflation and the protracted effects of sterling’s strength on the prices facing UK consumers if those forces were to intensify."
        • That remark likely precipitated selling in cable, which continued throughout the day, ending down 75 pips (-0.75%) to $1.4858
    • EUR/USD rallied meaningfully for the first time since mid-February, rising 69 pips (0.65%) to $1.0616
    • USD/JPY continues to trade complacently near its 7-year high, down 18 pips (-0.15%) to 121.29
    • The commodity currencies all rallied against the greenback:
      • AUD/USD: -84 pips (-1.11%) to $0.7689
      • NZD/USD rose 69 pips (0.94%) to $0.7372 after the RBNZ rate decision. 
        • RBNZ Governor Wheeler said that "a substantial downward correction in the real exchange rate is needed to put New Zealand's external accounts on a more sustainable footing."
        • At the last meeting, he called the exchange rate "unjustified in terms of current economic conditions." 
      • USD/CAD: -41 pips (-0.32%) to 1.2701
    Bonds
    Treasuries Continue Rally:
    • The Treasury complex extended its gains for the week today, with the 10-year down 15 basis points since the close on Friday
    • Yield check:
      • 2-yr: -4 bps to 0.65%
      • 5-yr: -3 bps to 1.58%
      • 10-yr: -2 bps to 2.10%
      • 30-yr: -1 bp to 2.68%
    • The curve steepened, as traders took profits in 10's and 30's after a very good run this week
    • News:
      • February Retail Sales came out worse than expected (Actual -0.6%, Briefing.com consensus 0.4%, Prior -0.8%). The numbers were pretty weak across the board, with motor vehicle sales being the hardest hit sector. Treasuries spiked on the news but sold off rather quickly
      • Weekly Initial Claims were better than expected (Actual 289K, Briefing.com consensus 306K, Prior 325K, revised from 320K), but the data have been volatile lately
      • Treasury Auction: $13 billion 30-year auction (re-opening): 
        • High Yield 2.681%
        • Bid-to-Cover 2.18
        • Indirect Bid 51.8%
        • Direct Bid 11.6%
    • U.S. equities rallied meaningfully for the first day in a while, giving investors hope that a low was reached yesterday. The S&P 500 traded up 25.39 points (1.24%) to 2065.63
    • Commodities:
      • WTI Crude lost $1.10 (-2.28%) to $47.07/bbl
      • Copper rose 5 cents (2.09%) to $2.66/lb.
      • Gold rose $1.70 (0.15%) to 1152.3
    • Currencies: 
      • EUR/USD: +56 pips (+0.53%) to $1.0602
      • USD/JPY: -11 pips (-0.09%) to 121.36
    • Data Out Friday:
      • February PPI (08:30 ET)
      • March Michigan Sentiment (10:00 ET)
    • Fed Speak:
      • Atlanta Fed President Lockhart (FOMC-voter) speaks at 10:20 ET
      • Chicago Fed President Evans (FOMC-voter) speaks at the Brookings Institution about "Risk Management for Monetary Policy Near the Zero Lower Bound" (11:30 ET)

    Treasury Yields:
    • 2 Year Note 0.67% -0.03
    • 5 Year Note 1.59% -0.01
    • 10 Year Note 2.10% -0.01
    • 30 Year Bond 2.69% UNCH
    2/30 Spread: 202 bps ( +3 ) …  2/10 Spread: 143 bps ( +2 )













    Preview for Friday 13 Mar, 2015



    Economic Data

    Friday (13 Mar) :
    • PPI : 0.3% (Prior -0.8%)
    • Core PPI : 0.1% (Prior -0.1%)
    • Michigan Sentiment : 95.8 (Prior 95.4)
    Earnings Highlights

    Friday (13 Mar) : 
    BMO - ANN BKE CTRN EBIX HIBB MEA SPPI TA

    AMC - None Scheduled

    Summary
    We will be expecting PPI numbers out on Friday which is likely to move the market as well. I am not getting too excited about the bullishness yet as I still see some divergence. As we go into the last trading session of the week, I think we should see more sideway for the time being. Cautious is still the word for the market sentiment now.

    Direction for Friday 13 Mar, 2015; Up

    2015 Daily Directional Accuracy: 16/34 (47.06%) 
    2015 Weekly Directional Accuracy: 5/7 (71.43%)

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