The week started with the continuation of US market’s momentum from Friday March 28th higher close. The final day of the first quarter demonstrated classic mutual/hedge fund window dressing activities and the month ended on a high note.
The market got a boost from Chairwoman Yellen on Monday March 31st, when she said that the economy and labor markets aren’t in a desirable state, hence, the Feds will continue to keep rates low to support the economic activities. It was more dovish than her previous statements. Asian and European markets closed higher on Tuesday despite disappointing Chinese HSBC Manufacturing PMI.
After two up days, market started to show some sluggishness on Wednesday. Part of the reason was due to the coming Friday’s Non-Farm Payroll report, which usually slows down the activities are market participants try to decipher tea-leaves and not make any bold bets. The EU area GPD missed the estimates, which dampened the enthusiasm. However, S&P 500 closed at all time high.
Thursday was kind of replica of Wednesday – traders kept on playing wait-see-game. US trade deficit rose and that did not help the market. S&P 500 closed down and in the process made an inside-candle.
The Friday’s Non-Farm Payroll report disappointed by coming 7K below the consensus of 199K. The unemployment rate also inched up and the hourly earnings were unchanged. The European markets were up mainly because of the fresh talk of stimulus.
On Friday, market opened higher and reached intra-day high but could not sustain it, closing down near day’s lows. NASDAQ was the biggest loser and it closed even the week in red.
The Week In A Nutshell
Most global indices rose for the week except for the NASDAQ. The 3-month picture is still a bit mixed for developed and emerging markets.
| Week | 3-Month | Week | 3-Month | |||
| North America | Global Dow | 1.3% | 1.4% | |||
| DJIA | 0.5% | (0.6)% | ||||
| S&P 500 | 0.4% | 1.6% | Latin America | |||
| NASDAQ | (0.7)% | (0.6)% | Brazil | 2.6% | (0.8)% | |
| Dow Transport | 1.6% | 3.0% | Mexico | 1.4% | (5.5)% | |
| Russell 2000 | 0.1% | (0.6)% | ||||
| Europe | Asia & Pacific | |||||
| UK FTSE 100 | 1.2% | (1.7)% | Shanghai | 8.8% | (1.8)% | |
| German DAX | 1.1% | 1.5% | Nikkei 225 | 2.5% | (7.5)% | |
| French CAC40 | 1.7% | 4.9% | Hang Seng | 2.0% | (3.2)% | |
| Spain | 3.4% | 7.8% | South Korea | 0.4% | (1.2)% | |
| Italy | 3.2% | 16.9% | Australia | 1.0% | 1.2% | |
| Switzerland | 1.5% | 3.3% | Bombay | 0.1% | 5.8% | |
| Russia | 4.2% | (17.9)% | Indonesia | 1.9% | 13.7% | |
| Turkey | 5.0% | 6.8% | Thailand | 1.7% | 5.0% | |
Treasury yields rose but are still substantially lower than 3 months ago. Bonds fell.
| Week | 3-Month | Week | 3-Month | |||
| 30-Yr. Treasury Yields | 1.2% | (8.2)% | 13-Week Yields | (39.4)% | (63.6)% | |
| 10-Yr. Treasury Yields | 0.5% | (8.4)% | 30-Yr. Bond | (0.4)% | 4.4% |
Commodities fell for the week but for precious metals. Most are up for last 3-month.
| Week | 3-Month | Week | 3-Month | |||
| GSCI Index | (0.8)% | 4.2% | ||||
| Light Crude | (0.6)% | 1.8% | Wheat | (3.7)% | 11.5% | |
| Nat Gas | (1.5)% | (0.2)% | Soybeans | 2.6% | 11.0% | |
| Gold | 0.7% | 8.2% | Sugar | (3.5)% | 5.9% | |
| Silver | 0.8% | 1.7% | Coffee | 2.4% | 61.3% | |
| Copper | (0.5)% | (10.5)% | Cotton | (1.4)% | 9.1% | |
| Corn | 2.0% | 18.5% | Cocoa | (0.5)% | 9.4% |
Dollar generally gained for the week and Euro lost. For the three-month period, dollar index was almost flat but Aussie, Kiwi and Cable rose against USD.
| Week | 3-Month | Week | 3-Month | |||
| Dollar | 0.3% | 0.6% | ||||
| EUR/USD | (0.3)% | (0.7)% | AUD/USD | 0.5% | 4.3% | |
| GBP/USD | (0.4)% | 0.4% | NZD/USD | (0.6)% | 4.9% | |
| USD/JPY | 0.5% | (1.7)% | USD/CAD | (0.7)% | 3.1% | |
| USD/CHF | 0.6% | 0.5% | AUD/JPY | 1.0% | 2.6% |
The Economic Report Card
The amalgamation of economic news for the week was mixed, with uneven spread of good and bad report resulting in similar market move with downside bias for the week.
| Sunday 30th | |||
| – | Japan: | Preliminary industrial production m/m was -2.3%, vs. estimate of 3.6%; Housing start was 1.0% vs. 5.2% | |
| Monday 31th | |||
| – | EU: | German retail sales m/m improved; EU Flash CPI y/y was 0.5% vs. 0.6% | |
| – | UK: | Mortgage approvals were worse at 70K vs. 75K projected | |
| – | Canada: | GDP rose to 0.5% vs 0.4% estimates | |
| – | US: | Chicago PMI came at 55.9 vs 59.8 last month and 59.2 forecasted | |
| – | Japan: | Tankan Mfg Index missed at 17 vs. 19 expected | |
| – | China: | Mfg PMI 50.3 was in line but HSBC Final Mfg PMI missed at 48.0 | |
| Tuesday 1st | |||
| – | EU: | EU unemployment rate fell to 11.9% from 12.0% estimated; German unemployment change was better at -12K vs. -9K |
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| – | UK: | Mfg PMI of 55.3 missed the estimates of 56.7 and 56.2 last month | |
| – | Canada: | RMPI m/m was better at 5.7% vs 2.3% est. and so was IPPI m/m at 1.0% | |
| – | US: | Final Mfg PMI at 55.5 missed est.; so did ISM Mfg PMI at 53.7; IBD/TIPP Economic Optimism improved to 48.0; Auto sales rose to 16.0M |
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| – | AUS: | Building approvals fell to -5.0% vs. -1.7% estimates | |
| Wednesday 2nd | |||
| – | EU: | Spanish unemployment change improved to -16.6K; EU Find GDP missed | |
| – | UK: | Construction PMI missed at 62.5 | |
| – | US: | ADP Non-Farm came in line at 191K; Factory orders beat the estimates | |
| – | AUS: | Retail sales disappointed at 0.2% but trade balance improved to 1.20B | |
| Thursday 3rd | |||
| – | EU: | Italian services PMI disappointed; Spanish PMI came in line; EU Retail sales improve at 0.4%; | |
| Friday 4th | |||
| – | UK: | Halifax HPI, at -1.1% missed the estimates of 0.7% | |
| – | Canada: | Employment change of 42.9K beat the estimates of 21.5K; So did the unemployment rate of 6.9% vs. 7.0% est.; Ivey PMI disappointed at 55.2 | |
| – | US: | Non-Farm Payroll missed at 192K the estimates of 199K; Unemployment rated increased to 6.7% vs. 6.6% expected | |
| – | COT: | Forex futures market speculative positioning data from theCFTC Commitments of Traders report as of the close on Tuesday, April 1st, 2014:
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Technical perspective – 30K Ft view:
Treasuries are flashing some warning signs. This is also the time to heed to the adage. “Sell in May and Go Away”. May is not yet there but one should keep a lookout for warning signs to prepare for it.
The 30-Year Treasury Yields ($TNX) are coming close to the downtrend line (TrendLine-A in the chart) that started in 1994 and was briefly breached 2011, before a fresh low was made. The yields also tested the support-turned resistance (TrendLine-B), made by the lows of 2003 and 2005, few times in August 2013 and December 2013 (TrendLine-C). Since the beginning of 2014, $TNX is falling down and is forming a horizontal channel at a two-year high, making a short-term topping pattern. If the lows of the channel are not held in next few days then the measured downward target of 3.200 comes in play, a (10.7%) swing.
The two ETFs, PowerShares 1-30 Laddered Treasury ETF (PLW) and iShares Lehman Aggregate Bond Fund (AGG), are good trading vehicles to use for falling yields.
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The US Dollar and Gold are trying to get off a double bottom. This past week was good for Dollar, whereas, gold continue its fall in the early part of the week but then turned around and closed the week on a high note.
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Commodities are forming a higher handle of a cup-with-handle pattern. But copper is not participating in it. Most of the gains in the CRB Index ($CRB) is coming from soft commodities.
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The equities, US and the global markets, are maintaining an upward bias despite the big hiccups on Friday.
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Foreign Markets
Markets in the Far-East, Japan (EWJ) and Hong Kong (EWH), and Brazil (EWZ)) continued to outshine most others. So did the European markets, Spain (EWP) and Italy (EWI), which were hit by EU sovereign debt crisis last year. Turkey (TUR) and Russia (RSX) too continued their bounce off the bottom.
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Looking Ahead To Week Of March 24th, 2014
Earnings
Not many major companies will come out with earnings report next week. The notables are:
- Alcoa (AA) and Science Applications (SAIC) are scheduled for Tuesday after the close
- Apogee Enterprise (APOG) and Bed Bath and Beyond (BBBY) will announce on Wednesday after close
- Commerce Bancshares (CBSH), Family Dollar (FDO), and IGATE Corp (IGTE) are coming out with earnings before open on April 10th.
- JP Morgan (JPM) and Wells Fargo (WFC) are announcing before open on Friday
Splits
– SouFun Holdings (SFUN) is splitting 5:1 and Delhaiz Group (DEG) 4:1 on April 7th.
– NIDEC Corp (NJ) is splitting 2:1 on April 8th.
– CIELO SA (CIOXY) is splitting on April 9th.
Economic Reports
- Monday
– US: Consumer Credit m/m
- Tuesday:
– US: JOLTS Job Openings at 10:00 AM
- Wednesday:
– US: Wholesale Inventory m/m at 10:00 AM
- Thursday:
– US: Unemployment Claims and Import Prices m/m at 8:30 AM
- Friday:
– US: PPI m/m at 8:30 AM; Prelim UoM Consumer Sentiment at 9:55 AM
Non-US Economic Data
- Monday
– Japan: Leading Indicators at 1:00 AM
– EU: German Industrial Production m/m at 2:00 AM
– NZD: NZIER Business Confidence at 6:00 PM
– AUS: NAB Business Confidence at 9:30 PM
- Tuesday:
– Japan: Economy Watchers Sentiment
– UK: Mfg. Production m/m at 4:30 AM; NISER GDP at 10:00 AM
– CAD: Housing Starts at 8:15 AM; Building Permits m/m at 8:30 AM
- Wednesday:
– UK: Trade Balance at 4:30 AM
– AUS: Employment change and Unemployment rate at 9:30 PM
- Thursday:
– EU: Industrial Production m/m
– UK: Asset Purchase and Bank Rate at 7:00 AM
– China: Trade Balance; CPI y/y and PPI y/y at 9:30 PM
- Friday:
– EU: German CPI m/m at 2:00 AM
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