28 Feb AMC - S&P broke new high despite Ukraine conflicts

Market Summary

The stock market finished an upbeat week on a mixed note amid the return of concerns about the immediate future of Ukraine. The S&P 500 added 0.3% after holding a solid 0.6% gain through the bulk of the trading day. The Nasdaq Composite and Russell 2000 lagged, falling 0.3% and 0.4%, respectively.

The early advance occurred after the release of several data points that were cast in a bullish light. 

Specifically, the second estimate for Q4 GDP was weak, revised down to 2.4% from 3.2%. That was able to be spun as a basis for why the Fed isn't going to hurry the pace of its tapering or the timing of the first hike in the federal funds rate. The Chicago PMI and Consumer Sentiment reports were better than expected, providing some hope that recent economic weakness is primarily a weather phenomenon. And, finally, pending home sales were up a disappointing 0.1% in January, playing back into the notion that the Fed is going to be deliberate with its handling of monetary policy. 

The major averages reached their highs by midday, but the Nasdaq was much more tentative in its advance as large cap names traded little changed while biotechnology lagged. Appropriately, the afternoon selloff was paced by the index, which underperformed earlier in the day. Biotechnology was pressured considerably, sending the iShares Nasdaq Biotechnology ETF (IBB 264.42, -7.73) lower by 2.8%. 

The afternoon weakness came about after multiple reports indicated that Russian troops have increased their presence in Crimea, which is located in Southern Ukraine. In addition to yesterday's seizure of the parliament building, armed gunmen also took control of two airports as well as the local television station and a telecommunications company. The reports were followed by comments from Ukraine's acting President Oleksandr Turchynov, who said Russia invaded the country ‘as a guise of exercise' with intent to ‘provoke a conflict.' President Turchynov urged Russian President Vladimir Putin to ‘show reason' and pull back the forces. 

Despite the selloff, the S&P 500 was able to return into positive territory thanks to relative strength of heavily-weighted sectors like consumer discretionary (+0.5%), consumer staples (+0.7%), and financials (+0.5%). 

With uncertainty back in the picture, participants rushed in search of volatility protection, which sent the CBOE Volatility Index (VIX 13.99, -0.05) from a session low of 13.49% to 14.79%. This represented a 9.6% swing in the near-term volatility measure before it settled near the middle of its range. 

Elsewhere, Treasuries reclaimed a large portion of their morning losses. The benchmark 10-yr yield ended higher by two basis points at 2.66% after notching a session high at 2.70%. 

Participation was above average with 944 million shares changing hands at the NYSE. MSCI rebalancing, which took place at the close, likely added some volume to the final tally. 

Economic data included four reports: 

• Fourth quarter GDP was revised down from 3.2% to 2.4% in the second estimate while the Briefing.com consensus expected GDP to be revised down to 2.6%. Just about all of the data that came in over the last couple weeks were worse than what the BEA expected when it released its advance estimate. There was really nothing new in the GDP report that was a surprise from the most current monthly releases. The important takeaway is that real final sales, which were revised down to 2.3% from 2.8%, now show absolutely no breakout from trends that go back to Q1 2012. The "surge" in economic growth that led to strong 2014 economic forecasts did not actually happen. 
• The Chicago PMI for February increased to 59.8 from 59.6 while the Briefing.com consensus expected a decline to 56.0. Analysts have been quick to point to extreme winter weather conditions as the culprit for the recent poor economic data trends. Yet, the blustery weather in February had absolutely no effect on Chicago-area manufacturers. This is another data point suggesting the weather is being used as a scapegoat during a cyclical down period. 
• The final University of Michigan Consumer Sentiment Index for February was revised up to 81.6 from 81.2 while the Briefing.com consensus expected an increase to 81.5. While the index moved in the opposite direction from the Conference Board's Consumer Confidence index, overall sentiment trends were relatively flat this month. Gains in equity prices offset slightly weaker employment conditions. Changes in gasoline prices and media reports likely had little effect on overall confidence values. The Current Conditions Index strengthened to 95.4 in the final reading from 94.0 in the preliminary. The Expectations Index was revised down to 72.7 from 73.0. 
• Pending home sales for January rose 0.1%, which was worse than the 0.8% increase forecast by the Briefing.com consensus. Today's reading followed last month's revised decrease of 5.8% (from -8.7%). 

• Nasdaq Composite +3.2% YTD
• Russell 2000 +1.9% YTD
• S&P 500 +0.6% YTD
• Dow Jones Industrial Average -1.5% YTD

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Alvin's Commentaries

Market started with a strong bullish bias and S&P500 broke new high. However, the market quickly reversed at 1.30pm just to recover back at 3pm, which Dow & S&P500 ended positive leaving Nasdaq in the red. Volumes were at 932m. Given the new high and futures today in red, I am expecting this bullish to be short lived.

Market Call: Down

Date: 3 Mar 2014

23 Feb AMC - Market dips slightly as consumer sentiment falls below expectation

Market Summary

The stock market spun its wheels during the Tuesday session, ending essentially where it started. The S&P 500 shed 0.1% after spending the bulk of day within a striking distance of its flat line. 

Equity indices tried to build on the relative strength of the two consumer sectors, but the rally attempts were stifled by the daylong underperformance of the top three groups. 

Financials (-0.6%), health care (-0.2%), and technology (-0.3%) lagged from the opening bell and slumped to lows during the final hour of action. Since the three sectors account for more than 46.0% of the entire S&P 500, their underperformance acted as a headwind. 

In the financial sector, Morgan Stanley (MS 29.71, -0.60) was the weakest performer among the majors while JPMorgan Chase (JPM 57.03, -1.00) fell 1.7% after announcing plans to eliminate jobs in its mortgage banking unit. In addition, the financial giant said it has observed a lower level of client activities across most investment banking units so far this year. 

Elsewhere, the technology sector succumbed to the pressure exerted by some of its top components. Apple (AAPL 522.06, -5.49) lost 1.0% while Cisco Systems (CSCO 21.84, -0.28), Facebook (FB 69.85, -0.93), and Qualcomm (QCOM 74.91, -0.52) fell between 0.7% and 1.3%. 

Unlike the traditional tech space, biotechnology remained strong. The iShares Nasdaq Biotechnology ETF (IBB 273.23, +1.15) added 0.4%, extending its year-to-date advance to 20.3%. Despite the strength, health care ended among the laggards. 

On the upside, the consumer discretionary sector (+0.5%) finished in the lead after Home Depot (HD 80.98, +3.11) reported an earnings beat on below-consensus revenue. The company guided fiscal-year 2015 results below analyst estimates, but boosted its dividend 21.0% to $0.47 per share. On a related note, most homebuilders rallied while Toll Brothers (TOL 38.25, -0.09) shed 0.2% despite beating on earnings. The broader iShares Dow Jones US Home Construction ETF (ITB 25.55, +0.28) rose 1.1%. 

Homebuilders received a measure of support from lower rates as the 10-yr yield slipped four basis points to 2.70%. Participation was well below average with only 633 million shares changing hands at the NYSE. 

Today's economic data included three reports: 

• The Conference Board's Consumer Confidence Index slipped to 78.1 in February from a downwardly revised 79.4 (from 80.7) while the Briefing.com consensus pegged the index at 80.8. Typically, confidence mirrors trends in stock prices, gasoline costs, employment levels, and media reports. There has been increased volatility among these indicators, but overall trends have been moving sideways. The slight drop in confidence, which is still above the December level (77.5), is likely nothing more than consumers reacting to the recent volatility. 
• The December Housing Price Index from the FHFA increased 0.8%, which followed an uptick of 0.1% observed in November. 
• The Case-Shiller 20-city Home Price Index for December rose 13.4% while a 13.6% increase had been expected by the Briefing.com consensus. This followed the November increase of 13.7%. 

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while New Home Sales for January will be reported at 10:00 ET. 

• Nasdaq Composite +2.7% YTD 
• Russell 2000 +1.1% YTD 
• S&P 500 -0.2% YTD 
• Dow Jones Industrial Average -2.4% YTD

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22 Feb AMC - Nasdaq & S&P500 registers new high

Market Summary

The stock market kicked off the new trading week on an upbeat note, sending the S&P 500 (+0.6%) to a fresh nominal intraday record high of 1858.71. Despite the rally, selling during the final hour kept the benchmark index from finishing the session above its 2013 closing high of 1848.36. 

Although the catalyst for today's buying rush could be debated, some attributed the bullish tone to the resilience of the S&P 500 futures in the face of some disappointing economic data and market performance in China. To clarify, a bearish catalyst was there for the taking, but it wasn't taken. Once the U.S. stock market started with a bullish bias, a fear of missing out on further upside helped fuel some renewed buying interest following Friday's lackluster session. 

Seven of ten sectors posted gains with energy (+1.5%) ending in the lead. The sector seized the lead at the open and maintained its outperformance throughout the session. Top sector members factored into the strength as Dow components Chevron (CVX 114.15, +1.47) and ExxonMobil (XOM 96.44, +1.41) both gained near 1.4% while crude oil rose 0.6% to $102.81/bbl. 

Staying on the commodity theme, precious metals extended their recent gains while copper sold off. Gold futures climbed 1.1% to $1337.90/ozt while silver futures advanced 1.2% to $22.04/ozt. Today's rally extended gold's monthly gain to 7.5% while silver ended the session with a February increase of 15.1%. For its part, copper slid 0.8% to $3.264/lb amid reports of Chinese banks cutting credit to property developers. On a related note, the materials sector shed 0.5%. 

Outside of energy and materials, the remaining four cyclical sectors were mixed with respect to the broader market. Financials (+0.8%) and industrials (+0.8%) outperformed while consumer discretionary (+0.6%) and technology (+0.5%) lagged. 

Notably, the tech sector was unable to keep up with the S&P 500 as several large components like Cisco Systems (CSCO 22.12, -0.01), Qualcomm (QCOM 75.43, -0.18), and Microsoft (MSFT 37.69, -0.29) lagged. The sector did see some M&A activity as TriQuint Semiconductor (TQNT 11.64, +2.41) announced a merger with RF Micro Devices (RFMD 7.03, +1.22). 

On the countercyclical side, health care (+0.8%) outperformed while consumer staples (+0.4%), telecom services (-1.1%), and utilities (-0.3%) lagged. 

Treasuries posted modest gains with the benchmark 10-yr yield slipping one basis point to 2.74%. 

Today's participation was above average as just over 830 million shares changed hands on the floor of the NYSE. 

Tomorrow, the Case-Shiller 20-city Index and the FHFA Housing Price Index for December will both be released at 9:00 ET while the February Consumer Confidence report will cross the wires at 10:00 ET. 

• Nasdaq Composite +2.8% YTD 
• Russell 2000 +1.0% YTD 
• S&P 500 UNCH YTD 
• Dow Jones Industrial Average -2.2% YTD

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Alvin's commentaries :

The S&P500 and Nasdaq made new highs! The market started with a bullish bias and by lunch time the market reversed and slowly declined but still ended positive. 706.2m shares were traded on the NYSE.

I am not convince that the bullishness can sustain for this week. Cyclical wise this week is the weakest week in Feb before the change in trend towards bull in Mar to Apr.

Market Call: DOWN

Date: 25 Feb 2014

21 Feb AMC - Market ended the week on negative territory.

Market Summary

The major averages finished the mixed week on a lower note. The Dow Jones Industrial Average and S&P 500 both shed 0.2% while the Nasdaq slipped 0.1%. For the week, the Dow and S&P 500 posted respective losses of 0.3% and 0.1% while the Nasdaq added 0.5%. 

In some ways, today's session resembled Wednesday's affair, during which the S&P 500 made an unsuccessful run at its 2013 closing high of 1848.36. However, today's rejection unfolded over the course of the afternoon while Wednesday's pushback from the record high occurred in one sharp move. 

The opening rally was supported by the largest S&P 500 sector, technology, which outperformed during the first 90 minutes of action. However, the morning leader became an afternoon laggard after the S&P 500's failed run at new record highs. The tech sector lost 0.3% while top components like Apple (AAPL 525.25, -5.90), Facebook (FB 68.59, -1.04), and Intel (INTC 24.48, -0.26) lost between 1.1% and 1.5%. Another tech component, Hewlett-Packard (HPQ 29.79, -0.40), lost 1.3% despite beating on earnings and revenue. 

Interestingly, once the technology sector slipped behind the S&P 500, the second largest sector—financials—was there to pick up the slack. The group struggled to keep pace with the S&P 500 since Wednesday and began today among the laggards, but was able to climb ahead of the broader market during the late-morning retreat. Despite today's slight gain of 0.03%, the sector ended the week behind the remaining nine groups with a loss of 0.9%. 

Elsewhere, the discretionary sector (+0.2%) finished in the lead thanks to all-around strength. Retailers held up well even after Nordstrom (JWN 59.24, -0.20) issued disappointing guidance. 

On the downside, the energy sector (-0.7%) spent the entire session in the red while crude oil slid 0.6% to $102.18/bbl. Elsewhere among commodities, gold remained strong, climbing 0.5% to $1317.30/ozt. 

Trading volume was above average, which resulted from options expiration. Nearly 800 million shares changed hands at the NYSE versus a 200-day average of 718 million. 

Treasuries posted modest gains with the benchmark 10-yr yield ending lower by two basis points at 2.73%. 

Week in Review: Stocks Endure Choppy Week 

On Monday, bond and equity markets were closed for Presidents' Day. 

Tuesday's session saw equity indices kick 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 218.41, -1.96) agreed to acquire Forest Laboratories (FRX 96.88, -0.42) for $25 billion. Biotechnology also factored into the sector's strength as the iShares Nasdaq Biotechnology ETF (IBB 268.71, +3.25) jumped 2.6%. 

On Wednesday, stocks ended on their lows with the S&P 500 snapping its three-day win streak. The index fell 0.7% while the Nasdaq (-0.8%) lagged throughout the session. The trading day began with slim losses, but the Dow and S&P 500 were quick to erase the early weakness. For its part, the Nasdaq was unable to make a sustained move into the green. Eight of ten sectors ended in the red with financials registering the largest decline. Citigroup (C 48.26, +0.13) was the weakest performer among the majors while regional banks also endured significant losses. The SPDR S&P Regional Banking ETF (KRE 38.15, +0.31) fell 2.8%. 

Equities ended the Thursday session on their highs with small caps in the lead. The Russell 2000 gained 1.1% while the S&P 500 rose 0.6% with all ten sectors posting gains. Prior to the open, the market appeared to be headed for a lower start as disappointing data from China, Japan, and the eurozone weighed on index futures. Specifically, China's HSBC Manufacturing PMI fell to 48.3 from 49.5 (49.4 expected), Japan posted a record trade deficit of JPY1.82 trillion (JPY1.56 trillion expected), and the Manufacturing PMI for the eurozone (53.0 versus 54.0 expected) disappointed. Despite the weak data from overseas, equity futures were able to find support when a better-than-expected Markit Manufacturing PMI for the U.S. was released (56.7 actual versus 53.0 expected). Historically, the data point has not been known for eliciting a noteworthy reaction in the market, but today's number likely fueled some short covering activity that sent futures back to their flat lines by the opening bell. In addition, buying ahead of Friday's options expiration likely factored into the morning rebound and the daylong rally. 

• Nasdaq Composite +2.1% YTD 
• Russell 2000 +0.3% YTD 
• S&P 500 -0.7% YTD 
• Dow Jones Industrial Average -2.9% YTD

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20 Feb - Market regain losses

Market Summary

Equities ended the Thursday session on their highs with small caps in the lead. The Russell 2000 gained 1.1% while the S&P 500 rose 0.6% with all ten sectors posting gains. 

Prior to the open, the market appeared to be headed for a lower start as disappointing data from China, Japan, and the eurozone weighed on index futures. Specifically, China's HSBC Manufacturing PMI fell to 48.3 from 49.5 (49.4 expected), Japan posted a record trade deficit of JPY1.82 trillion (JPY1.56 trillion expected), and the Manufacturing PMI for the eurozone (53.0 versus 54.0 expected) disappointed.

Despite the weak data from overseas, equity futures were able to find support when a better-than-expected Markit Manufacturing PMI for the U.S. was released (56.7 actual versus 53.0 expected). Historically, the data point has not been known for eliciting a noteworthy reaction in the market, but today's number likely fueled some short covering activity that sent futures back to their flat lines by the opening bell. In addition, buying ahead of tomorrow's options expiration likely factored into the morning rebound and the daylong rally. 

Once the session got going, stocks saw a mild dip, which was erased within the first hour of action. Small caps enjoyed a strong session from the get-go after Facebook (FB 69.63, +1.57) announced the $16 billion acquisition of WhatsApp, a mobile messenger service. 

With small caps charging ahead, the rest of the market followed suit. Although the S&P 500 ended on its high, the largest two sectors—financials (+0.3%) and technology (+0.3%)—could never catch up to the index. However, the market did receive support from the third largest sector—health care—which gained 0.9%. 

Another countercyclical group—consumer staples (+0.5%)—finished behind the broader market as Wal-Mart (WMT 73.52, -1.33) weighed. The retail giant fell 1.8% after its cautious guidance overshadowed its bottom-line beat. 

Also of note, the industrial sector (+0.8%) outperformed as transports rallied broadly. The Dow Jones Transportation Average jumped 1.6% with all 20 components posting gains. Despite the sharp move, the bellwether complex was unable to regain its 50-day moving average (7278), which was violated on Tuesday. 

Treasuries ended modestly lower with the benchmark 10-yr yield up one basis point at 2.75%. 

Participation was on the light side as 660 million shares changed hands on the floor of the NYSE. 

Today's economic data featured four reports: 

• The weekly initial claims level fell to 336,000 from an unrevised 339,000 while the Briefing.com consensus expected the reading to fall to 335,000. There were no seasonal biases or unusual events reported in the data. The initial claims level is holding firmly between 330,000 and 340,000. 
• The Conference Board's Index of Leading Indicators increased 0.3% in January after a downward revision to unchanged (from +0.1%) in December. The Briefing.com consensus expected the index to increase 0.4%. The increase in the index was largely the result of the initial claims level returning to normal levels following unusual seasonal biases in the data. That component added 0.24 percentage points to the January increase in the index after reducing growth by 0.34 percentage points in December. 
• Manufacturing activity in the Philadelphia region contracted for the first time since May 2013. The Philadelphia Fed's Business Outlook Survey for February dropped to -6.3 from 9.4 while the Briefing.com consensus expected the Index to decline to 7.4. Manufacturers commented to the Philly Fed that severe winter storms affected the region and reduced business activity. If this is true, then the contraction should not last long. We are hesitant to blame all of the weakness on the weather. Poor economic data have been reported for the last two months, and evidence suggests that the overall economy is to blame for the sluggishness and not necessarily the weather. 
• Consumer prices increased 0.1% in January, down from a 0.2% increase in December. The Briefing.com consensus expected the CPI to increase 0.2%. Inflation growth remains tame, and there was nothing in the data that suggests any type of breakout. Food prices rose 0.1% after being unchanged in December. Excluding food and energy, core CPI increased an in-line 0.1% for a second consecutive month. 

Tomorrow's data will be limited to the Existing Home Sales report for January, which is set to be released at 10:00 ET. 

• Nasdaq Composite +2.2% YTD 
• Russell 2000 -0.1% YTD 
• S&P 500 -0.5% YTD 
• Dow Jones Industrial Average -2.7% YTD

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19 Feb AMC - Market takes a turn after three-day up

Market Summary

Equities ended on their lows with the S&P 500 snapping its three-day win streak. The benchmark index fell 0.7% while the Nasdaq (-0.8%) lagged throughout the session. 

Stocks began the day with slim losses, but the Dow and S&P 500 were quick to erase the early weakness. For its part, the Nasdaq was unable to make a sustained move into the green. 

The S&P 500 climbed through the first hour of action, but the rally stalled with the index less than four points shy of its all-time intraday high of 1850.84. Shortly before midday, equities slumped to lows in a move that coincided with a headline from the International Monetary Fund reminding investors that global growth remains uneven and fragile with persistent downside risks. 

While the IMF headline presented a convenient excuse for the swift dive, the stock market was challenged with increasing resistance prior to the release. The Nasdaq was bouncing up against its flat line while influential sectors like consumer discretionary (-0.9%), financials (-1.2%), and industrials (-0.9%) underperformed. Once the headline hit, the earlier underperformers drove the remainder of the market lower. 

Eight of ten sectors ended in the red with financials registering the largest decline. Citigroup (C 48.19, -1.19) was the weakest performer among the majors while regional banks also endured significant losses. The SPDR S&P Regional Banking ETF (KRE 37.83, -1.09) fell 2.8%. 

Elsewhere, the discretionary sector slumped despite some M&A activity among luxury retailers. Signet Jewelers (SIG 93.65, +14.38) spiked 18.1% after announcing an agreement to acquire Zale (ZLC 20.92, +6.01) for $21 per share, representing a 41.0% premium to Tuesday's closing price. 

Also of note, the industrial sector was pressured by transports as The Dow Jones Transportation Average saw its second day of losses. The bellwether complex lost 1.3% and finished the session down 2.3% for the week. 

On the upside, energy and telecom services added 0.1% and 0.5%, respectively. 

Treasuries finished on their lows (10-yr yield +2 bps at 2.73%) with the bulk of the retreat coming after the release of the FOMC minutes from the January meeting. Although the minutes did not contain any major surprises, they did indicate that some officials said there should be a ‘clear presumption' in support of continued tapering in $10 billion increments. 

Participation was on the light side with 688 million shares changing hands on the floor of the New York Stock Exchange. 

Today's economic data included two reports: 

• Housing starts fell 16% in January, from an upwardly revised 1.048 million (from 999,000) in December to 880,000. The Briefing.com consensus expected housing starts to fall to 963,000. There are some questions about how much of a role the adverse weather played in the decline. Surely the 67.7% decline in starts in the Midwest was partially weather driven. However, starts in the South, which was not that affected by the polar vortex, declined 12.5% in January. Furthermore, the hard-hit Northeast saw starts increase 61.9% in January. Normally, an exogenous shock -- such as the weather -- would result in a sizable rebound in the next month or two. However, after looking at all of the regional data, it is difficult to state with assurance that starts will return to the 1.00 million trend that they averaged in November and December. 
• January PPI increased 0.2% after ticking up 0.1% in December. The Briefing.com consensus expected the PPI to increase 0.2%. The BLS reconstructed the PPI index for January. Instead of using a Stage-of-Processing method, the PPI is now calculated based on a Final Demand-Intermediate Demand system. Beyond the typical manufacturing data, the new index also includes price trends for services, government spending, and exports. Prices of final demand goods increased 0.4% in January after increasing by the same amount in December. Energy price growth softened, up 0.3% in January after increasing 1.5% in December. Much of the gain in the final demand goods index was due to a 2.7% increase in pharmaceutical preparations. 

Tomorrow, weekly initial claims and January CPI will be reported at 8:30 ET while January Leading Indicators and the Philadelphia Fed survey for February will both be released at 10:00 ET. 

• Nasdaq Composite +2.6% YTD 
• Russell 2000 -1.1% YTD 
• S&P 500 -1.1% YTD 
• Dow Jones Industrial Average -3.2% YTD

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Alvin's Commentaries

Both Dow & S&P500 started with a slight bullish bias and reversed at 10.45am all the way down to negative territory while Nasdaq struggled from the beginning but were not able to stay positive from the start. Volumes were only 618m shares traded last night. Financials were the laggers and energy barely stay positive. On the technical front, looks like the bears are ready to jump.

Market Call: DOWN

Date:20 Feb 2014