Wednesday, February 19, 2014

18 Feb 2014 AMC- Market held flat ahead of FOMC minutes

Market Summary

Equity indices kicked off the abbreviated trading week on a relatively quiet note. Small caps finished in the lead (Russell 2000 +1.0%) while the S&P 500 added 0.1%. 

The benchmark index saw a brief dip at the open, but the weakness was erased promptly thanks to the early strength of the health care sector (+0.9%). The group surged out of the gate after Actavis (ACT 201.47, +9.59) agreed to acquire Forest Laboratories (FRX 91.04, +19.65) for $25 billion. Biotechnology also factored into the sector's strength as the iShares Nasdaq Biotechnology ETF (IBB 264.24, +6.73) jumped 2.6%. 

Outside of health care, gains in other sectors were much more subdued. Energy (+0.3%) was the second-best performer, aided by crude oil, which surged 2.2% to $102.52/bbl. 

Similar to crude, precious metals enjoyed another strong session. Gold futures rose 0.4% to $1324.60/ozt while silver futures saw their ninth day of gains, spiking 2.2% to $21.91/ozt. This underpinned miners, sending the Market Vectors Gold Miners ETF (GDX 26.46, +0.11) higher by 0.4%. 

Elsewhere among cyclical sectors, financials (+0.2%) outperformed while consumer discretionary (+0.1%) and technology (+0.1%) ended in-line. Also worth noting, the industrial sector (-0.2%) lagged due to the underperformance of transports. 

The Dow Jones Transportation Average (-1.0%) fell below its 50-day moving average (7277) as 16 of its 20 components registered losses. Most notably, Kansas City Southern (KSU 91.67, -4.29) lost 4.5% after JP Morgan downgraded the stock to ‘Neutral' from ‘Overweight.' 

Countercyclical groups were mixed as health care and utilities (+0.3%) outperformed while consumer staples (-0.7%) and telecom services (-0.9%) lagged. Dow component Coca-Cola (KO 37.47, -1.46) pressured the staples sector after reporting in-line earnings on below-consensus revenue. 

Even though equities ended higher, there was some demand for volatility protection, which pushed the CBOE Volatility Index (VIX 13.87, +0.30) higher by 2.2%. 

Treasuries ended near their best levels of the day with the 10-yr yield down four basis points at 2.71%. 

Participation was a bit below average with only 709 million shares changing hands at the NYSE. 

Among overseas news of note, the Bank of Japan made no changes to its interest rate or the purchase program; however, the bank did double its bank lending facility to JPY7 trillion. The yen weakened in reaction to the news, but erased about half of the decline during today's session. The dollar/yen pair traded near 102.35 at the New York close after notching an overnight high of 102.75. 

Today's data was limited to three reports: 
  • The February NAHB Housing Market Index fell to 46 from 56 while the consensus expected the reading to hold at 56. 
  • The Empire Manufacturing Survey for February registered a reading of 4.5, which was down from the prior month's unrevised reading of 12.5. Economists polled by expected the survey to decline to 7.5. 
  • Lastly, the December net long-term TIC flows report indicated a $45.9 billion outflow of foreign capital from U.S. denominated assets. This followed the prior month's $28.0 billion outflow. 
Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while January Housing Starts, Building Permits, and PPI will all be reported at 8:30 ET. Also of note, the latest minutes from the January FOMC meeting will cross the wires at 14:00 ET. 
  • Nasdaq Composite +2.3% YTD 
  • Russell 2000 -0.1% YTD 
  • S&P 500 -0.4% YTD 
  • Dow Jones Industrial Average -2.7% YTD

Market Internals

Leaders & Laggards

Technical Summary

Next Day in View

Alvin's commentaries

The market continues to be flat with Nasdaq creating new high again ahead of the FOMC minutes at 2pm where Janet will be giving her 2nd testimony.

On the technical front, Dow is hitting a strong resistance at 16,150, while S&P500 is hitting a strong resistance at 1,850. Nasdaq however is creating a new high. Given we have a down Jan and up Valentine's Day indicator, I reckon we will be going into a volatile 2014.

Market Call: DOWN
Date:19 Feb 2014

No comments:

Post a Comment