Market Recon Monday

Good Morning,
                    Away from business and economics, there was more violence over night.  In Germany, and in Florida.  The easy route for all of us not immediately impacted when we hear of such things would be to avoid feeling it, to let it callous over.  Let’s not do that, folks.  Let’s all hurt every single time anyone hurts.  Sound naive ??  OK, then I’m naïve.  Only way this gets better is if people feel for each other.  Start today.  Maybe down the road, one person changes their mind.  Not you.  Not I.  Team.
                   Today brings us the quietest day of this week, both for macro, and for earnings.  As the week develops, you’ll hear from the FOMC, and the BOJ, and to say that there is some pressure on the BOJ would be putting it lightly.  We’ll also see Q2 GDP data from the UK, the EMU, and the US, and then there’s earnings.  Tis the season, and the season will hit it’s stride this week.  Seemingly, quarterly numbers have gotten off to a better start than many expected.  By the end of the week, we’ll know if that was simply a mirage.
                   This did not get much media attention, but under the radar, the IMF prepared a note for the G-20 concerning Special Drawing Rights, or SDR’s.  Without going into great detail, the IMF is exploring whether or not the International Monetary System would benefit from an expanded use for SDR’s.  Three forward looking roles will be studied.  The composite reserve currency asset function, issued and administered by the IMF; SDR denominated financial market instruments that could be issued and held by any party, and finally … using the SDR as a unit of account.  A step toward a global currency ? Possibly.  A strike at the US dollar as the planet’s major reserve currency ?  I think so.  We may be a long way off, but then again, we may not be.  I’d pay attention here.
                    Oh, the Democratic Party kicks off their party tonight amid lots of news.  It may, or may not be funny that neither major US political party appears to have their act together, but one thing is certain.  This is all very entertaining.
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Macro
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10:30 ET
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Dallas Fed Manufacturing Index (July):  Expected -14.1, Prior -18.3.  This will be a tough one.  You won’t see it impact the marketplace, mostly because everyone knows a tough number is coming.  Manufacturing has been the slowest slice of this economy to recover, and Dallas, thanks to what has happened to Energy prices over the last couple of years has been in a constant state of contraction since it’s last positive print in December of 2014.  After what seemed to be a semi-decent June for manufacturers, the Empire State and Philadelphia turned in mixed reports last week.  We’ll hear from Richmond, and Kansas City later this week.
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Monday’s Earnings Highlights
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Before the Open: DHR (1.22), KMB (1.47), COL, (1.59), S (-.08)
After the Close: CE (1.55), GILD (3.01), LVS (.56), TXN (.77)

Market Recon Friday

Good Morning,
                     Today is Flash PMI day.  Flashapalooza.  Not a big deal in the US, but a pretty big deal around the globe…..especially in Europe given that this is the first true post-Brexit read.  These numbers were a little tough to truly interpret.  French Manufacturing contracted, the German Manufacturing & Service sectors both showed expansion (yet their ZEW numbers were awful this week.)…in fact, EMU numbers in aggregate grew, and landed close enough to consensus as to not cause much alarm.  Where there might be some cause for concern were in the British data.
                     The UK Manufacturing & Service arenas both printed in a state of contraction, and for the service sector, it was deep into contraction.  The UK, much like the US depends very heavily on the service economy.  What does this mean to the trader?  It means that the British Pound took an immediate hit.  Mark Carney spoke about easing Bank of England monetary policy in August earlier this week, and if these figures are not northerly revised by the end of the month, the MPC (the UK’s FOMC) may actually have to go ahead and do it.
                    While the Pound tests 1.31 support, you’ll notice that the Euro, and the Yen are also weaker this morning, though to lesser degrees.  This has put early pressure on the commodity complex, including your favorites, Gold & Oil.  WTI Crude shows signs of retreating through the 44.50 support level again.  In fact, the level has been pierced a couple of time now, but not in significant fashion.  Should that spot become resistance, you could be talking about $38 Oil again in the not too distant future.  As for Gold, you know that I’m a closet bug.  It has not threatened the 1305 spot recently.  One thing to keep in mind is how crowded the “long the miners” space has become.  When Gold moves, it moves like lightning.  When the commodity hits 1305, it could just as easily hit 1275.  That may be a buy signal for the underlying commodity, but the move lower for some of these mining names will be exacerbated to the downside if that happens.  With the BOJ stepping to the plate next week, this trade is probably already priced at a premium.  If you are already sitting on found money, why wouldn’t you take some off?  Just thinking like a guy with a P/L.
                    The G-20 meets this weekend in Chengdu, China.  On the docket ?? Greece, Italy, Brexit… oh, and Jack Lew also warned against central banks’ competitive currency devaluation.  Key word…competitive.  Didn’t say anything about coordinated, did he?  Keep in mind that China, the host, has been on again, off again, aggressive on this front.
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Macro
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09:45 ET
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Markit’s Manufacturing Flash PMI (July -p): Expected 51.7, Prior 51.3.  This data-point usually does not catch much attention in the marketplace.  The revised print is released alongside the highly focused upon ISM print, so traders don’t really look at it at all.  Due to the fact that the Flash number has no competition, and that we’ve seen mixed signals from the Empire State, and Philadelphia releases, there could be some reaction if we see something way out of bounds here.  I would not bet on that happening though.  The range today runs from 50.5 through 52.5.
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13:00 ET
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Baker Hughes Rig Count (Weekly): Prior 447 total / 357 Oil.  There has been steady growth in both the total number of US rigs in operation, and also in the number of rigs solely involved in the production of Oil. Natural Gas is not going to move the marketplace, so the Oil rigs are what we focus on. I would think that with Crude well off of it’s peaks, and struggling to hold the 44.50 support level that this weekly increase will likely slow if not this week, then very soon.
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Friday’s Earnings Highlights
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Before the Open: AAL (1.66), GE (.46), HON (1.64), SWK (1.71), WHR (3.37)
After the Close: Stuff guys my age shouldn’t eat or drink.

Mid-Day Recon (Thursday)

Good Afternoon,
Currency valuations were the story this morning, and yes, you can blame the central bankers, with some help from the media. First up, the Japanese Yen rallied hard when BBC Radio aired an old interview with BOJ Gov. Hiruhiko Kuroda. In that interview, the Governor ruled out “helicopter money”, or perpetual bonds. With the Bank of Japan widely expected to act aggressively next week, markets reacted at the time. The Yen did soften somewhat after news broke that the interview was dated. After that ridiculousness, the ECB held off on acting further, which was expected. At first the Euro spiked higher, most uncharacteristic behavior for that unit of currency while the ECB president is speaking. Draghi did eventually go into the preparedness of the central bank to act if post-Brexit conditions worsen, and the ECB’s ability to keep finding something, anything to buy. That sent the Euro back to it’s recent support level of 1.10 versus the US dollar.

The secondary story of the day would be the domestic macro that we saw this morning. The two items that most notably stand out are June Existing Home Sales, and the July Philly Fed. First, the Philly Fed… a -2.9 print that actually seemed a bit misleading, once one took a look under the hood. With New Orders, Shipments, and Unfilled Orders all moving the right way, this was hardly a discouraging report. Existing Home Sales then beat to the upside, close to the top of the range. This added to what was already a fairly strong month of June for the US economy. June was a month where we saw a strong NFP print followed by hot Retail Sales, improved Industrial Production, and some strength in Housing Starts, not to mention y/y Core Consumer level inflation of 2.3%.

Market Recon Thursday

Good Morning,
                    Although today is an ECB policy meeting day, surprisingly the central banking headline of the day has come from the BOJ.  I’m sure you noticed earlier today that the Japanese Yen bottomed out around 107, and a half per the US Dollar, and has strengthened rapidly over the last couple of hours.  The last price I see as I bang out this note is closer to 105 and a half.  So what gives?  BOJ Gov. Haruhiko Kuroda, in an interview on BBC Radio, indicated that there are no limitations to BOJ monetary stimulus if need be… like every central banker has said in every speech everywhere.  What moved the currency markets was his downplaying of the kind of stimulus that has at least had something of a hand in floating global equity markets.
                   He said that there” is no need, and no possibility for helicopter money”.  No word yet if that scream you heard in the middle of the night was the former Fed Chair’s cry of anguish.  The Governor also indicated that about all that they could do would be to expand existing policy.  It is interesting to note that since this interview, the Nikkei 225 is off of the day’s highs, but is still up on the day, and is in fact your global equity index leader at this time.  Perhaps there is still a large fiscal/monetary package on the way.  Maybe they simply still intend to keep score.  In chalk.  For now.
                  The ECB decision on the Minimum Bid Rate (which will be left unchanged) will be announced at 07:45 ET.  As always, the Mario Draghi press conference at 08:30 ET will be the big ticket item.  Draghi will stress that not enough time has passed since the June 23rd UK Brexit vote to make a policy judgement, and will set up September as the time to make that assessment.  September…. sounds familiar.
                  We, here in the states…actually have quite a full day of both earnings releases, and macro ahead of us.  The busiest day of the week for sure.  June Existing Home Sales, and the July Philly Fed both present market moving ability, while the corporate numbers will come from all corners without a sector, nor an industrial theme.  We have not heard from any of our central bankers all week, and you will not until after next Wednesday’s policy announcement.
                  For all of you Comic-Con weirdos out there, I’ve got a treat for you.  Google this….  “Edrio Two Tubes”.  You’re welcome.
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Macro
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08:30 ET
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Initial Jobless Claims (Weekly): Expected 267K, Prior 254K.  Those filing for Unemployment benefits will fortunately not amount to very high numbers today.  Though, we expect to see an increase in this space today, this item will remain at historically low levels, and probably just nudge the four week moving average up from the 259k where it now stands.
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Philadelphia Fed Manufacturing Index (July): Expected 5.0, Prior 4.7. Philly was one of three Federal Reserve regional district manufacturing indices that printed in a state of expansion in June, along with NY, and KC.  For July, we’ve already seen the Empire State repeat that trick, though just barely (0.6).  New & Unfilled Orders were a problem in that report, with delivery time being a strength.  The market will likely react to the Philly Fed as it is the country’s most focused upon regional manufacturing data-point.
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09:00 ET
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FHFA HPI (May): Expected 0.4% m/m, Prior 0.2% m/m.  Analysts may compare this narrowly focused home price index to Case-Shiller, but …. Case-Shiller is the only one that traders will notice.  That item will print next Tuesday.  Market participants won’t have to worry about this item.
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10:00 ET
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Existing Home Sales (June): Expected 5.48M SAAR, Prior 5.53M SAAR.  This data-point brings with it, a touch of danger today.  June, for the most part.. has been a stronger than usual month for the US economy, and though there’s really nothing wrong with a seasonally adjusted annualized rate of 5.48 million units, this would still be a minus tick.  With equity markets sitting on top of a mountain right now, a major item that prints in weak fashion could be the pin prick…. if anything can be right now.
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CB Leading Indicators (June): Expected 0.2% m/m, Prior -0.2% m/m.  Another non-event.  This is a composite index of ten other higher profile domestic macro-economic data-points.  You’ve already reacted to those.  Nobody you know will react to this one.
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10:30 ET
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Natural Gas Inventories (Weekly): Expected 44B cf, Prior 64B cf. Incredibly, this number is headed for a fourteenth consecutive inventory build in the space.  That came just a couple of weeks after a sixteen week stretch of consecutive weekly drawdowns had ended.  In my experience, I had found Nat Gas futures to be one of the toughest items to trade in the financial universe.  Good luck if that’s you today.  That said, this will not impact the equity markets in a big way upon release.
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Thursday’s Earnings Highlights
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Before the Open: BX (.41), DPZ (.94), GM (1.48), MAN (1.52), DGX (1.31), SHW (4.16), LUV (1.21), TRV (2.08), UNP (1.16)
After the Close: T(.72), SAM (1.95), COF (1.87), CMG (.93), PYPL (.36), SBUX (.49), V (.67)

Market Recon Wednesday

Good Morning,
                     You’ve all seen the old Japanese monster movies.  The people run, the people hide.  One or two giant monsters show up and slug it out either with each other, or the Japanese military.  In the process, the city (Tokyo) is ruined.  Well, in today’s version, the monsters are very small, and the problem is that they did not come to Japan.  “Pokémon Go”, the recent sensation that has everyone in your town walking into traffic with their heads down, was scheduled for release in the land of “the Rising Sun” for today.  That release has been delayed without a published date for rescheduling.  Nintendo shares, recent stock market darlings, were hit with a rush to take some profits at that time.  NTDOY is down more than 12% in Tokyo.
                    The ECB begins their two day policy meeting today.  You will not hear anything from them until tomorrow, and I would not expect any new policy even then.  They’re already buying everything except goods and services, and on top of that, they have managed to steadily devalue the Euro form it’s peak in May.  Keep in mind that this is the first ECB meeting since the UK’s Brexit vote.  Did you guys see those ZEW numbers yesterday ??
                    On the topic of central banking, next week is when you’ll likely see divergent policy direction in action.  You’ll have the Fed on one hand… not acting, but probably talking up a live meeting in September.  Now that Housing Starts have joined Retail Sales, Core y/y CPI, and Industrial Production in making June one of the better months that the US economy has seen in a long time, they will have to at least make a small rate hike seem to be a realistic option.  On the other hand, much is expected of the BOJ at this meeting.  Next week will not be boring.
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Macro
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10:30
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Oil Inventories (Weekly): Expected -2.1M barrels, Prior -2.5M barrels.  The headline oil supply number has printed in contraction for eight consecutive weeks.  The general expectation today is for another decline (-2.1M barrels), and consensus expectation has been rather accurate over the last four weeks, meaning that we have not seen a miss of more than 400k barrels in that time.  The API print came in at a draw of -2.3M last night, so everyone is pretty much in line today. Beneath the surface, Gasoline stocks have increased in three of the last four weeks.  These numbers usually do impact not only Crude prices, but can move the equity market as well…. and today this is the only game in town.
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Wednesday’s Earnings Highlights
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Before the Open: ABT (.53), HAL (-.19), MS (.60), TUP (1.11)
After the Close: AXP (1.72), CCK (1.11), EBAY (.42), INTC (.53), MAT (-.06), QCOM (.97)

Market Recon Tuesday

Good Morning,
                    With the Mets losing decisively last night to the Chicago Cubs, the most entertaining thing on television last night became the Republican National Convention.  You won’t find political commentary here, other than to say that entertaining was probably the right word.  Besides, it becomes difficult to have political preferences when you hate everyone equally.  Earth calling Ross Perot.  Come in Ross Perot.
                    The IMF is due to release their updated World Economic Outlook today, but bits, and pieces of it are already banging around the internet.  One thing you can be fairly sure of, is when this comes out…that you won’t learn anything.  Likely, you’ll see lowered GDP productions for the UK, for anyone that trades with the UK, and for anyone that doesn’t trade with the UK.  Other than that, you might be OK…. unless you have financial institutions in your country, or you trade with someone who trades with the UK.
                   Speaking of financial institutions…. let’s take a look under the hood, particularly at the banks, and the financial services companies.  Last week, the S&P 500 gained almost 1.5% for the five days, while the Financial sector index, buoyed by a sell-off in US treasuries, and some decent Q2 earnings picked up more than 2.5%.  A while back, I put the entire financial sector in the lock-box where I put Bio-techs a long time ago.  It’s called Pandora’s box, and I never open it.  Now, I’m thinking… just thinking about letting some of the banks out of that box.
                   The key will be interest rates.  Though this recovery has really never hit it’s stride, it would be dishonest to argue that it’s not better than it was.  We seen life in Retail Sales.  Inflation…. at least according to the Core CPI is where it was targeted.  Manufacturing is seemingly less ugly.  Wages have not gone very far at all, and that’s a problem.  The US Dollar is still strong, and that’s a problem.  So, there is some reason to think that it is time for the FOMC to seriously consider the next increment in normalization.  There is also valid argument against.  Will the bond market cooperate with a hike?  That remains to be seen.
                   The US ten year has now seen support at 1.6% more than once.  To make banks truly interesting, despite their very attractive trailing, and forward looking valuations, I think that we’re going to need to see that yield approach 2%.  If you feel compelled to get ahead of this, which I do not yet (but it is on my radar)… forget about who beat EPS, and revenue expectations.  JPM, WFC, and USB all posted positive year over year revenue results, and they all have dividend yields of 2.4% or greater (making them, in a way more interesting than locking your money up for ten years).  Now, let’s look at Beta.  WFC, and USB both have numbers of less than one, but JPM… they’re up around 1.6.  If you think the equity market is on it’s way to Nirvana, then the way to go seems obvious.  If you’re not too sure, and who is ??…. then there is the safer path.
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Macro
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08:30 ET
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Housing Starts & Permits (June): Expected: Starts 1.17M, Permits 1.15M (SAAR), Prior: Starts 1.164M, Permits 1.138M (SAAR).  Just yesterday, we saw the Housing Market Index mildly disappoint at 59, but that was a July item.  This is June data, and we expect to see mild increases for both Starts & Permits.  Housing Starts have been a remarkably consistent data-point for quite some time now.  The seasonally adjusted, annualized rate has been maintained at 1M+ for 14 consecutive months without going above 1.2M.  Keep in mind that this is twice the pace seen during the dark days of 2009 & 2010.  A consensus beat here could add credence to the idea that this economy is picking up some momentum, as seen in last week’s data.
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08:55 ET
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Redbook (Weekly):  Prior: 0.8% y/y. Last week, this item showed us a healthy year over year increase of 0.8%, it’s strongest in three weeks.  In fact, we’ve now seen seven consecutive weeks of the y/y growth of 0.5% or better that’s needed to keep this one below the radar.  In case you’re keeping score, yesterday… the Consumer Discretionary sector market performed at +0.3%, while the multi-line retailer sub-sector gained 1.3% as a group.
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Earnings
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Before the open: CMA (.69), GS (3.05), JNJ (1.68), KSU (1.03), LMT (2.93), PM (1.19), UNH (1.89)
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After the Close: DFS (1.40), MSFT (.58), UAL (2.56)

Market Recon Monday

Good Morning,
                    The speed of the news cycle in this modern era truly is shocking.  It almost as if half of one day is just way too much time to spend on any one topic.  Unless, of course, we are ahead of the story, such as Brexit.  Then we can talk about all of the uncertainty that such an event will cause for six months…. the  event can happen on a Thursday, and we can be over it by Tuesday.  When the event is unforeseeable, the cycle is even quicker.  Terrorist attack in Nice on Thursday, replaced on your screen by an attempted coup in Turkey by Friday, which is then replaced by the ambush of police officers in Baton Rouge.  Not only have those gadgets in our hands eroded our individual ability to focus, it’s possible that the 24 hour awareness that globalization has brought with it, is having a similar impact on society in aggregate.
                    We may not have the number of high impact type domestic macro releases scheduled for this week that we saw last week.  We may not have the plethora (thank goodness) of Fed speakers on our daily lists of what may move the markets this week.  We do have enough fish to fry though.  From a central banking perspective, the ECB will hold their policy meeting this Thursday.  This will be their first since that Brexit vote.  we still have to wait for next week for the Fed, and whatever the BOJ is about to force-feed planet Earth.  Then there’s the Republican National Convention in Cleveland.  That should grasp the nation’s attention for at least a few days.
                    Earnings Season got off to fairly decent start last week.  This week, we’ll get a much larger dose of S&P 500 companies reporting their Q2 numbers.  We all know that adjusted earnings are expected to take another 5% hit after taking one just like that in the first quarter.  We did though, suddenly see some improved macro in the June data, namely Retail Sales… not to mention the sudden increase in Industrial Production.  One thing is certain.  We’ll know a lot more by the end of this week, than we knew at the end of last week.
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Macro
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10:00 ET
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NAHB Housing Market Index (July):   Expected: 60, Prior: 60.  Just in case, you watch this one print every month, and you really didn’t know what it is, I’ll clue you in.  This is not truly a Housing Market Index.  It’s more like a New Home builder/buyer sentiment index.  About 900 homebuilder from across the country are polled.  They are asked about current sales, expectations for future sales, and about the level of traffic that they are seeing in prospective home shoppers.  Over the last year or so, this diffusion index had hit the tape in the 60’s for eight consecutive months until March, when this item disappointed with a 58 tag.  There is stayed, at 58 for four straight months until June, when we saw a “pop”, and the index returned to 60. If there is a skew in the range today, it is slightly to the upside.
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16:00 ET
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TIC (May):  Expected: $35.0B, Prior: $-79.6B. The April data showed that cross border investment suffered a “severe” monthly outflow of nearly $-80B.  For that month, most of that negative print was related to corporate bonds, while Treasury flows remained slightly positive.  We know that the last several Treasury auctions, with the exception of last week’s 10 Year Note Auction (which was still 54% purchased by foreign accounts), have been heavily sought after by indirect buyers.  For that reason, I think it’s reasonable to expect a positive number in this space today.
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Monday’s Earnings Highlights
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Before the Open: BAC (.33), HAS (.39)
After the Close: EMC (.41), IBM (2.88), NFLX (.02), YHOO (.10)

Late Morning Recon

Greetings,

                       The domestic US macro-economic data released this morning has painted the economy in a better light than many were expecting to see.  With June Retail Sales reported in much hotter fashion with, or without auto sales, with a Core CPI that printed above the Fed’s stated target for an eighth consecutive month….With Industrial Production/Capacity Utilization data climbing off of their lows, the implications are clear.  We still need to see improvement in wage growth, and in the overall labor market condition, but the economy could most likely handle a quarter point increase in the Fed Funds Rate.  That is why you see, at this time… Treasury yields moving higher (not to mention the German 10yr, which went positive today), slightly weaker gold, and a US dollar that is stronger against the Euro, the Pound, and the Yen.  You will hear from San Francisco Fed Pres. John Williams at 13:00 ET, and he will likely cement this.  He may not have a vote this year, but he is a favorite of Janet Yellen’s, and is considered influential.

Market Recon Friday

Good Morning,
                     Now, we must pray for the people impacted by yet another mindless mass killing.  Pray, but do not fear.  There is no advice that one can heed that will make them “safe” in a random murder whose only target is in numbers, and not in specific individuals.  Do not make that your concern.  That is exactly what bad people want.  What the average man, or woman can do…. is prepare for every day as if it were your last.  Living in that way, will force you to the right things.  Enjoy your family time more, knowing that your time to set an example for your children is precious.  Care about each other in real time, with your presence.  It really is that easy….. but do not fear.  Do not ever fear.
                     S&P futures are down small this morning.  One would think that at some point, this dramatic, multi-day, yet low volume move higher for equity markets would abate somewhat.  We know that many institutions got themselves short ahead of Brexit, and with only a two day window to cover those shorts in decent fashion, are probably chasing these markets this week.  At first glance, last night’s terrorist attack would have seemed to be an easy excuse to take money off of the table, if that’s what traders were looking for.  Then, only a short while later, we learned that the Chinese economy performed better than expected in the second quarter.  While Chinese GDP, and Industrial Production continue to drift lower, they both beat consensus.  On top of that, Retail Sales printed at a five month high.  Certainly nothing to write home about, but the numbers did rescue Asian markets last night.
                    Yesterday, we mentioned the increase in consumer level services at JPM as a possible positive for C, and WFC today.  So far this week, we’ve seen numbers, and/or guidance from AA, CSX, YUM, and DAL as well as JPM.  Obviously this is just a trickle, but what is supposed to be another lousy earnings season is off to a decent start.
                    OK, gang…. the bottom line is that today is going to de a data-driven day.  You’re about to get hit with numbers covering inflation, consumer behavior & sentiment, the manufacturing sector, and crude production.  On top of all of that, which is enough… the plethora of Fed speakers that have inundated us with their words this week is far from over.
                      You have a great day.  Each and every one of you.
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Macro
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08:30 ET
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CPI (June): Expected 0.3% m/m, Prior 0.2% m/m  Core: Expected 0.2% m/m, Prior 0.2% m/m.  The Fed may look at the PCE price index, but most global eco-types follow the CPI when it comes to consumer level inflation.  After yesterday’s PPI numbers came in much hotter than expected both at the headline, and at the Core. this one will be watched by the marketplace.  The Federal Reserve’s stated target for inflation has long been 2.0% on a year over year basis.  For that reason, the most impact will come from the y/y number for Core CPI.  Projections are for that print to come in at 2.3%, which would be the eighth consecutive month spent at or above the stated target.  Now, you know why the Fed doesn’t watch this one.
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Retail Sales (June): Expected 0.1% m/m, Prior 0.5% m/mCore: Expected 0.4% m/m, Prior 0.4% m/m.  The one thing we already know about June Retail Sales is that auto sales hit the tape well below May, and well below consensus.  So, traders should expect to see a lousy monthly headline print.  However, most economists think that once you exclude those auto sales, the rest of the retail universe stayed on track.  If wee see the 0.4% increase that most folks are looking for, then the top four monthly gains in the last eleven months will be the last four months.  Equity markets can react  decisively when it comes to this item.
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Empire State Manufacturing Index (July): Expected 5.0, Prior 6.0.  With the state of US Manufacturing trying, with some limited success to fight it’s way out of depression, the New York State region has become a leader.  we look for more growth today, which if so, would be the fourth positive number in this space in a span of five months.  That would be a real accomplishment for any regional Fed district over the last two years.  Normally, the markets do notice this print almost as much as they do it’s sibling out of Philadelphia.  However, with two other very high profile macro releases scheduled for the same time slot, this one may pass with much reaction.
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09:15 ET
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Industrial Production (June): Expected 0.3% m/m, Prior -0.4% m/m.  Here’s another item, higher in profile, and on a national level that stands to benefit from a slightly improving manufacturing picture.  Industrial Production in the United States has contracted on m/m basis in eleven of the last fifteen months.  This month we expect to see (hope to see) growth.  In May, this item saw drops in vehicle production (witnessed by June auto sales), and Utility production.  That last one had been on again, off again in this space, and that’s where we need to see a rebound.  I would think that you’ll something positive from the miners in this report.
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Capacity Utilization (June):  Expected 75.1%, Prior 74.9%.  Cap Utilization get it’s own mention, basically because it’s easy to understand, and it best illustrates, in a general way for the lay person what the manufacturing sector goes through.  In May, that 74.9% print equaled a six year low, that was set as recently as April.  So times are tough, but as we pointed out in a few of these data-points, a corner may have been turned.  This one alone, will not move the market
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10:00 ET
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U of M Consumer Sentiment (July-p): Expected 93.6, Prior 93.5.  This twice a month survey is off of it’s multi-year highs, but not by too much.  It does seem to be becoming more volatile.  Guess it depends on who they ask.  On a less eventful day, this is one that can, and will move the markets.  More reliable than the Conference Board’s Consumer Confidence as a barometer for consumer optimism.
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Business Inventories (May): Expected 0.1% m/m, Prior 0.1% m/m.  May Wholesale Inventories, a component of this item came in a touch light.  That said, this data-point is relatively dated, ad far less sexy than some of the other numbers that we will have already seen today.  This one is not even on investor radar.
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13:00 ET
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Baker Hughes Rig Count (Weekly): Prior 440/351.  Last week, the number of rigs devoted to Oil production increased by ten rigs from 341.  The week before that, the number increased by eleven.  Crude prices have stagnated a bit over the last couple of weeks.  To see if this count stops growing will be interesting.  If not, WTI could face some selling pressure at this time.
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Fed Speaker: San Francisco Fed Pres. John Williams will speak on monetary policy from Cambridge, Massachusetts.  Williams has been quite vocally in the hawkish camp of late.  He is not a voting member of the FOMC this year.
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13:15 ET
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Fed Speakers: Minneapolis Fed Pres. Neel Kashkari, and St. Louis Fed Pres. James Bullard participate together from St. Louis in a discussion on monetary policy.  Bullard is a voting member, and this is the third time in two days that he’s forcing himself upon the public.  It’s also the second time this week that we’ll hear from Kashkari, who does not vote this year.  I think traders are past being ready to tune these guys out.
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Earnings
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Before the Open: C (1.11), INFY (.23), PNC (1.76), USB (.80), WFC (1.01)
After the Close: Something probably not that good for you, but my wife does have a say.

Market Recon Thursday

Good Morning,
                     Risk on this morning !!  Again ? Really ?  Well, sort of.  Gold is taking a pounding this morning, but that’s a safety vehicle, right ?  can be a risky safety vehicle if you ask me, but you may get an entry point in here somewhere if you think the central banks will go too far.
                     By 7am, we’ll hear from the Bank of England, and the Street is not betting on “if” there will be an announced easing of monetary policy, but just how much easing there will be.  Last week, in the wake of the Brexit referendum, the BOE did a little “under the hood” financial engineering that should, in theory have freed up about 150 GBP in liquidity for the banks.  Not enough.  With most economists cutting their 2017 & 2018 UK GDP expectations, and some calling for a textbook recession, Mark Carney felt compelled to telegraph his intent ahead of this meeting.  A failure to act would shock the markets today.
                    Global markets are also being supported by the speculated fusion of fiscal and monetary policy that we spoke of earlier this week, that Japan may go for later this month.  “Never Never” bonds.  No maturity, no service costs, No nothing.  Gotta love it….. if you’ll like paying eight bucks for a loaf of bread.
                    After the BOE news hits the tape, JPM earnings will then hit the tape, and so goes the Financial sector.  Trading revs, Core businesses, European exposure, and finally guidance.  Interesting what happened to YUM after last night’s close.  Beat by a penny. missed on revs that were down more than 3% y/y.  Stock rocks 4%.  The firm raised full year guidance thanks to a lower effective tax rate, and improved performance in China.  By the way, that Chinese business is the part of the firm that they are planning to spin off….and it’s getting a lot of positive attention in the media.
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Macro
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08:30 ET
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PPI (June):  Expected: 0.3% m/m, Prior: 0.4% m/m; Core… Expected 0.1% m/m, Prior 0.3% m/m.  The national focus is on consumer level inflation, which you’ll see tomorrow, and even then, the Fed focus is on the PCE, not the CPI, solely so they can give themselves some flexibility without violating their stated targets.  All that said, producer level inflation came in hot for May, even ex-food & energy.  It does look like the Core print probably slowed a bit this month.  The markets will not react significantly to this item.
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Initial Jobless Claims (Weekly):  Expected: 264K, Prior 254K.  This item doesn’t even threaten to hit 300K anymore.  Not ever.  With all of this consistency, this data-point does not have the equity index futures jarring punch that it once did.  There would have to be something way outside of the range for traders to take notice, and today’s range in entirely contained within the 260K’s.  Why, you might ask…why have layoffs dwindled while Labor Market Conditions by the Fed’s own measure have deteriorated month after month for six months now?  It’s quite simple.  Obamacare.  When hiring managers need to cut overhead, it’s far simpler to do with a corps of laborers who work part-time, than it is with benefit heavy full-time workers.  I’ve interviewed retail level managers on this, and they’ll take people down to less than five hours a week when business is slow.  Btw, 42% of the labor force makes less than $15 an hour.  That’s a lot of wiggle room.
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10:30 ET
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Natural Gas Inventories (Weekly):  Expected 34B cf, Prior: 39B cf.  Nat Gas looks to be all set for it’s 13th consecutively weekly inventory build.  Not for everyone.  If you trade Nat Gas futures, you know exactly what I mean.
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Fed Speakers
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10:00 – St. Louis Fed Pres. James Bullard speaks on Monetary Policy, and the role of the US in the global economy from St. Louis.  Bullard is a voting member of the FOMC, and widely considered to be the clown prince of central banking.  Already this week, after changing his opinion on policy direction multiple times over, Bullard actually stuck to his plan for one rate into the year 2018.  Good that he can now see that far into the future.  Really. That’s good.
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11:15 – Atlanta Fed Pres. Dennis Lockhart will speak on the economy from Victor, Idaho.  Lockhart is not a voting member of the committee this year, and really has not been heard from all that much since early May when the fed was still debating a June rate hike.  His opinion today will be of interest.
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13:15 – Kansas City Fed Pres. Esther George will participate in a Q&A session from Oklahoma City, Oklahoma.  George is a voting member of the FOMC, and is considered to be the most hawkish member at that.  Earlier this week, George stated that she felt that current US interest rates are too low.  From a trader’s perspective, we know where she stands.
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18:40 – St. Louis Fed Pres. James Bullard… Yes, again.  From St. Louis.  Again.
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19:00 – Dallas Fed Pres. Robert Kaplan, who is not a voting member this year, and spoke publicly just yesterday…will participate in a Q&A session on monetary policy from St. Louis.  In yesterday’s speech, Kaplan tried to avoid saying anything very substantive.  He started out favoring gradual rate hikes, and ended up saying that the Fed was “very sensitive” to strength in the US Dollar.  You be the judge.
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Earnings
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AM: BLK (4.80), DAL (1.51), JPM (1.44), PGR (.34)