Market Recon Friday

Good Morning,
                     The Fed Chair speaks today, finally. It has been a long time since we’ve heard from Janet Yellen. Many think that simply because she may not want to corner herself, that she’ll try to walk a fine line that implies very little going into next month’s policy meeting…. or maybe simply because so many market watchers have placed so much focus on this speech. Dr. Yellen could have skipped Jackson Hole, as she’s done that before.  Ever since Ben Bernanke’s speech in 2010, the Fed Chair speaking at this symposium is met with heightened media attention, and increased market focus. She understands that.
                    The absurdity of it all is quite humorous. On Monday, the key data-point will be the Core PCE Price Index. Then at the end of next week, August Non-Farm Payrolls and wage growth numbers. How much better informed would the Fed Chair be, and would she be able to clarify her intentions if she so intended, if only this speech could be postponed exactly one week? Those looking for a telegraphed message regarding FOMC intentions already have one. In fact, they have several. Over the last ten days or so, William Dudley, Dennis Lockhart, John Williams, Stanley Fischer, Esther George, and Robert Kaplan all spoke. They all had a common theme among them….they were hawkish in their tone. Most of those names are not known as perma-hawks. Only James Bullard has remained dovish in recent Fed speak, and he often lies outside mainstream lines of economic thought.
                    If Janet Yellen sticks strictly to her topic  “Designing Resilient Monetary Policy Frameworks for the Future”, many will be disappointed. Odds are, in my humble opinion, that she would not have taken the podium in such high profile fashion unless she actually had something to say. The flashing red light here is that this assumes a certain level of common sense. If her words are interpreted to be in line with what her colleagues have been telling us, or if she clearly is even mildly in opposition, currencies will move, yields will move, commodities will move, and yes, equities will move. The most greatly impacted at first will be Financial names, and obviously the Utility or defensive names and dividend plays. Then Energy, and Materials will move with the Dollar’s impact on the commodity space. Commodities, in turn will move the Transports.
                   Should the good doctor take a pass, today is still Friday. Have a great weekend, everyone. Let’s go Mets.
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Macro
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08:30 – GDP (Q2-rev): Expecting 1.1%, prev 1.2% q/q SAAR.  Inventories were a weak point in that disastrous first look at Q2 GDP.  For June, we saw upside beats for Wholesale Inventories, and the headline number, Business Inventories as well.  Will that be enough to nudge the second snap-shot of Q2 GDP a little higher? Most economists are guessing that it will not. Some fear that the 4.2% print for Personal Consumption Expenditures may be revised a tad lower. The range of expectations for this item today is anywhere from 0.8% to 1.6%. Any market impact from this item will be sentiment based at this point. The markets are now focused on Q3, and obviously, monetary policy.
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08:30 – Goods Trade Balance (July): Expecting $-62.8B, June $-63.3B. June was the most negative number ever printed in the short life of this data-point, which is really just a component of the headline Trade Balance. That number will hit the tape one week from today. In that June report, there was growth for both imports, and exports.  The balance may have been exacerbated, but increased two-way cross border demand is a positive in any economist’s book. This release will not impact today’s trading activity.
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10:00 – Fed Speaker: Federal Reserve Bank Chair Janet Yellen speaks from Jackson Hole. The topic of this speech is “Designing Resilient Monetary Policy Frameworks for the Future.” This is the speech that the street has been waiting on all week. Her words will be used as fodder for driving market direction regarding currencies, treasuries, equities, and commodities.
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10:00 – U of M Consumer Sentiment (August-rev):  Expecting 90.7, initially 90.4. Two weeks ago, the preliminary August report in this space printed in mild disappointment. The street looks for a revision that is actually a bit higher than the original. In fact, there are some economists as high as 94 on this one. The lowest estimate I’ve seen is the preliminary 90.4, so a mere affirmation of the original survey will not be good enough. Markets do watch consumer based data-points on normal days.
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13:00 – Baker Hughes Rig Count (Weekly): Last Week 491 total, 406 oil. The number of oil producing rigs in operation is what traders watch in this space.  Last week’s print of 406 was the eighth consecutive weekly increase. This number has as much impact on intra-day Crude prices and the Energy sector as does the Inventory number on Wednesdays. Perhaps only currency valuations have a greater market impact.
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Friday’s Earnings Highlight
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Before the Open: BIG (.46)
 After the Close: something disgustingly bad for you, but delicious.

Market Recon Thursday

Good Morning,
                    The symposium in Jackson Hole, hosted by the Kansas City Fed kicks off today. Not to get too excited, mind you. The chances of a market moving headline leaking out ahead of the Fed Chair’s speech tomorrow morning would be quite sloppy. Then again, when it comes to the spoken word, many Federal Reserve Bank officials seem to be a lot less careful than they are with actual policy. What may be of interest today will be the meeting between leaders of the “Fed Up” group of activists, and several Fed officials. “Fed Up” in short, if you have not been following, promotes better public understanding of central bank functionality, while also favoring the barring of bankers from regional Fed district boards, a lower for longer interest rate policy, and more demographic diversity at the central bank.
                    About that speech. there really does seem to be an indecisiveness across different markets about what to expect. The S&P 500 has traded in a 25 point range, and the US ten year has yielded between 1.52%, and 1.59% for about two weeks. Most analysts when asked, express their opinion that the Fed Chair will intentionally be vague, and try not to paint herself into a corner. The DXY has stayed between 94.25 and 95 for nearly two weeks. That softness may, however be a functionality of strength in some major foreign currencies (today, its the Euro) more than any anticipation of domestic monetary policy shifts.
                   That said, there was huge movement out of Gold, and Gold futures just yesterday….as the Fed Funds futures indicate slightly higher probabilities of an imminent increase. Technical selling? Yes. Stops elected? Yes. Still, there has been no early recovery in that space this morning. I think, though Gold is usually considered a safe haven, that move equated to a preservation of capital play for those participants who needed to protect their best trade of the year…. ahead of a potential pitfall.
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Macro
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08:30 – Durable Goods Orders (July): Expecting 3.4%, June -4.0% m/m.
 08:30 – ex-transportation (July): Expecting 0.5%, June -0.5% m/m.  Durable Goods Orders have been a tough nut to crack for this “economic recovery”, printing in contraction in six of the last eight months, including the last three.  In fact, it’s been almost as ugly at the Core, which excludes transportation orders. On that level, we’ve seen four negative numbers in the last seven months, including the last two. Non-military, ex-transportation Capital Goods was the one bright spot last month, finally turning a corner, and putting up a positive number.  Expectations are for much better numbers all around this month. Markets could react if hit with another disappointment in this space. It’s a little tricky with Jackson Hole looming.
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08:30 – Initial Jobless Claims (Weekly): Expecting 265K, Last Week 262K.  There will likely be no surprises in this space today. The entire range of expectations spans just 10K, from 260K to 270K. Due to this item’s regularity, it no longer punches it’s weight in terms of market impact. I would go into why, but I might bore you.
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09:45 – Markit Flash Services PMI (August): Expecting 51.9, July 51.4.  This one is considered a non-event by market participants. It compares to the ISM Non-Manufacturing Index, which does not flash, and is much more closely followed. See you then.
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10:30 – Natural Gas Inventories (Weekly): Expecting 20, Last Week 22 B cf. The Natural Gas number matters a whole lot if you are trading the space, and very little if you are not, so it’s focus audience is very narrow. This data-point has printed in mild expansion in 17 of the last 18 weeks.  In fact, the last two weeks have both hit the tape at a build of 20 something billion cubic feet. That is what we expect again today.
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11:00 – Kansas City Fed Manufacturing Index (August): July -6.  Manufacturing data has been coming in a bit awkward this August. For the month, the Empire State, and Philadelphia reports showed lackluster performance, while Richmond would have to be considered very disappointing. To begin with, the odds are heavily stacked against Kansas City (as they prepare to host the Jackson Hole symposium).  KC has printed in contraction in 15 of the last 17 months. If you think that’s bad, Dallas is scheduled to report on Monday. Dallas has printed in contraction for 19 consecutive months.
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Thursday’s Earnings Highlights
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Before the Open: DG (1.09), DLTR (.74), MDT (1.01), SHLD (-3.48), TIF (.72), TD (1.21)
After the Close: GME (.28), ULTA (1.39)

Market Recon Wednesday.

Good Morning,
                     Take a look at a medium length (five weeks) chart for S&P 500 cash. What you’ll see is resistance at 2193 that has been met and sharply repulsed twice within two weeks. You’ll also see a series of higher lows starting in early August. With Relative Strength almost completely neutral, and a MACD that’s not really helpful….to me, this looks like pennant formation that’s set to close very shortly. Maybe as shortly as Janet Yellen’s scheduled 10am speech from Jackson Hole on Friday. Violent move for equities in the wake of that speech? I don’t have a crystal ball, but the chart says this is likely. Direction? That’s up to the Fed Chair. The formation has an upward bias, but will be outweighed by her words.
                     You’ll notice a much stronger British Pound this morning versus both the US Dollar, and the Euro. This has everything to do with the health of the Bank of England’s quantitative easing program. The BOE made public the results of their most recent reverse auction for securities with maturities in excess of 15 years.  Remember the first reverse auction after the QE announcement made by the BOE in the wake of Brexit? The one with the bid to cover of 0.96? Well, things did get better after that, but suddenly demand (which is actually created by the sellers in this case) waned again. In yesterday’s results, B/C was just 1.54, which is just a little too close for comfort. A fear of a possible failure of the BOE’s quantitative easing program to either function correctly, or at some point even continue at all has obviously put this bid under the Pound today.
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Macro
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09:00 – FHFA HPI (June): Expecting 0.3%, May 0.2% m/m. This is basically a non-event in the macro world. We have two HPI’s, and Case-Shiller is the one traders look at. That one is due on Tuesday. Both are somewhat dated, released with a two month lag. The reason for the lack of interest in this item is it’s narrow scope as only single family homes with mortgages backed by Freddie Mac, and Fannie Mae are tracked.
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10:00 – Existing Home Sales (July): Expecting 5.52M, June 5.57M SAAR.  Like New Home Sales, Existing Home Sales have been running at the top end of the range. Like New Home Sales, the street is looking for a mild contraction in this print. Due to the shocking upside beat in that space yesterday, you can hardly doubt such an occurrence in this space today. Unlike New Home Sales, Existing Home Sales have printed in this neighborhood on and off a few times throughout the recovery, without being able to break through. Existing Home Sales represent the lion’s share of the housing market, and the sale of an Existing Home does have a significant multiplier effect on the general economy, though not quite that of a New Home.
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10:30 – Oil Inventories (Weekly): Expecting -700K, Last Week -2.5M barrels.  This item broke a three week inventory building streak last week. The pros expect a smaller draw for this week. Possibly having just as much impact on the market price of WTI Crude as the headline print is the Gasoline number.  That one is coming off of a contraction of -2.7M barrels. The only projection I’ve seen for Gasoline stocks for today is for -1.4M. last night’s API data hit the tape in startling fashion last night. Those numbers showed an increase of 4.5M barrels for Crude, and a draw for Gasoline of -2.2M. The markets (Crude, and all sectors reliant upon) will react to this release.
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Wednesday’s Earnings Highlights
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Before the Open: RY (1.70)
After the Close: GES (.07), HPQ (.45), WSM (.58)

Market Recon Tuesday

Good Morning,
                     Hiruhiko Kuroda threw Japanese investors a curveball last night. The Nikkei 225, -0.6% this morning is the worst performing major equity index in Asia. The Bank of Japan Governor spoke last night on Information Technology and Financial Services, and he stuck to the topic. Kuroda didn’t go near monetary policy. Those who post on Japanese trader blogs were disappointed, forced to unwind and the US dollar fell well off of it’s highs versus the Japanese Yen.
                     European shares are green across the board this morning, after a plethora of Flash PMIs were released, both for the manufacturing, and service sectors. It’s not that the numbers were great, though they were, for the most part expansionary. I think that the relief is that, we are now into August, and generally speaking… these numbers appear unaffected by the outcome of the Brexit referendum in the UK. At least for now that is, and most economists felt that you would see broader negativity at this point. We will not see British PMI data until the end of next week (We’ll be worried about Non-Farm Payrolls by then), but the pressure seems to abating somewhat for both Mario Draghi, and Mark Carney.
                    The focus remains on WTI Crude prices today, despite the fact that William Dudley, John Williams, and Stanley Fischer all seem worried about inflation. We’ll worry about that in a couple of days. After yesterday’s announcement by Iraq on increasing production, and the bout of profit taking that ensued, the question for oil becomes where does this commodity find a bid? Holders of Energy stocks may not like the volatility, but technically, nothing is yet broken. After the run of the last two weeks, support would have to be tested in order to move higher. The spot to worry about right now is 45.75, which is still about a dollar away this morning. Should that area fail a serious test, the door could swing open to prices as low as 39. That’s not to scare you, it’s to inform you. Hedge appropriately.
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Macro
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08:55 – Redbook (Weekly): Last Week 0.2% y/y.  This weekly is coming uncomfortably close to flat-lining from last year.  Last week, was the third week in the last five that year over year growth dipped below 0.5%.  In fact, last week showed the poorest y/y growth in this space in 2016. At this point, this release will start giving us clues as to the over-all health of the back to school shopping season. Retailers need to see this number improve from last week, after what was a rough July for retail sales.
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09:45 – Markit Flash Manufacturing PMI (August): Expecting 52.7, July 52.9.  This number will not get much media, nor market attention today. If it sees any at all, it will be solely due to the fact that there is no flash ISM print.  The Richmond number in fifteen minutes will carry at least as much weight as this item.
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10:00 – New Home Sales (July): Expecting 580K, June 592K SAAR.  This will be the marquee macro-economic data-point of the day, thanks to the dramatic multiplier effect that New Home Sales have on the broader economy. Housing is once again becoming a strength in the US, as on a seasonally adjusted, annualized rate, June was the strongest month in this space since 2008. The last three months in fact, have averaged 583K, and even if we see a slight pull-back to the 580K that is expected, this item will remain on trend.
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10:00 – Richmond Fed Manufacturing Index (August): Expecting 6, July 10.  Richmond has been one of the healthier regional Fed districts as far as manufacturing is concerned. This index has printed in expansion in five of the last eight months. In my opinion, the headline numbers have not always jived with the underlying components for these data-points. Watch for growth in New Orders, Shipments, and Inventories. If they look alright, pricing and employment should fall into place.
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Tuesday’s Earnings Highlights
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Before the Open: BMO (1.83), BBY (.43), SJM (1.73), TOL (.61)
 After the Close: LZB (.29)

Market Recon Monday

Good Morning,
                     There is very little to look at today in the way of macro-economic data, or quarterly earnings releases. The rest of the week will, however be more interesting.  Earnings season may generally be over, but we’ll still have a few significant releases this week starting tomorrow.  As for the macro, you’ll see important housing numbers for July, the monthly report on Durable Goods Orders, and a revision to Q2 GDP, but the focus will undoubtedly be on the Federal Reserve Bank gathering to be held later this week in Jackson Hole, Wyoming. More specifically, the focus will be on Fed Chair Janet Yellen’s speech this Friday.
                     Janet Yellen’s speech is titled “The Federal Reserve’s Monetary Policy Toolkit”.  The title is vague enough, and in my opinion, the speech will be vague enough to allow the FOMC the wiggle room it would need in order to do whatever it needs to do after another Non-Farm Payroll number rolls in….and not lose even more credibility. The Vice Chair, Stanley Fischer spoke yesterday from Aspen, and he played the roll of the canary in the coal mine ahead of this Jackson Hole symposium.  The Vice Chair was clear that in his view, the economy is close to the Fed’s targets on employment and inflation. He indicated an awareness that growth and productivity are lagging, but that in his view, the second half of the year will be stronger than the first, and that productivity is something that monetary policy has little impact on. There are two key take-aways from the Vice Chair’s speech less than a week ahead of a very high profile speech to made by the Chair.
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1) The Vice Chair seems open to a rate hike in 2016. Without mentioning September specifically, Fischer sounded as if he was making an argument for a hike sooner rather than later.
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2) It is extremely unlikely that the Vice Chair would go public in somewhat hawkish fashion without the Chair’s knowledge. Most likely, in my opinion, he was sent ahead as a scout.  If an ambush awaits, either in the marketplace, or in the media, she would then be well aware of what she was up against.
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                   Before I go, Crude is in the spotlight again today. WTI is off more than 2% this morning. There are a number of reasons. The ever increasing US rig count that represents more domestic production, and a stronger US dollar versus most of it’s competitors are primary, but the media always forgets about profit taking. You’ve just witnessed a dramatic two week move in this space, and the trader instinct is to protect found money. You’ll notice that the Energy Sector, on Friday was ahead of the commodity on this move.

Market Recon Friday

Good Morning,
                    San Francisco Fed President John Williams spoke after the closing bell last night. His remarks are putting some downward pressure on equity index futures markets this morning.  He spoke of raising of raising the Fed Funds Rate sooner rather than later, which a serious case may be made for given the trail of supportive macro-economic results seen in key data-points on a multi-month basis now. His remarks came on top of a hawkish sounding William Dudley (NY Fed President), who spoke twice this week. Williams, though not a voting member of the FOMC this year, is considered part of Janet Yellen’s inner circle. He made one statement last night that lets you into what’s on his mind right now.
                  “If we wait until we see the whites of inflation’s eyes, we don’t just risk having to slam on the monetary policy brakes, we risk having to throw the economy into reverse to undo the damage of overshooting the mark”.  This one quote tells the trader that this central banker, who is neither a perma-dove, nor a perma-hawk is more afraid of inflation after many years of seeing very little of it, than he is of choking off growth after many years of seeing very little of it. This should, in my opinion concern any trader who’s current risk model is under-exposed to Financial names, or over-exposed to Utilities (really any dividend plays).
                   There may not be much going on today in the way of earnings, or macro. That did not stop European shares from moving lower today.  Not only were the major continental indices led lower by downgrades and selling among auto manufacturers, but there are a couple of items to be cognizant of as you proceed. First, both Portugal, and Turkey are scheduled to have their credit ratings reviewed by Fitch today. I have not yet seen headlines on this. Obviously, the outcome of the Turkish review should be interesting. Secondly, Angela Merkel, Francois Hollande, and Matteo Renzi are scheduled to meet in Italy this weekend. Italian stocks were easily the worst performers in Europe today as they were led lower by their troubled banking sector.
                   It’s the weekend, gang. Stay hungry.
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Macro
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13:00 – Baker Hughes Rig Count (Weekly): Last Week 481 Total, 396 Oil. The growing number of Oil rigs is the number that traders are watching in this report.  Last week’s 396 was a nice pop from the week prior’s 381, which in turn… was up from 374.  In fact, the number of operating rigs involved in US oil production has been growing week after week.  The price action seen over the last two weeks for WTI, and moves in the Energy sector indicate that this number is likely to stay on trend, at least in the medium-term.
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Friday’s Earnings Highlights
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Before the Open: BKE (.35), DE (.94), EL (.40), FL (.90), MSG (-.84)
After the Close: weekend stuff

Market Recon Thursday

Good Morning,
                    There are two interesting take-aways from this morning’s European data. First EMU Core June CPI printed it’s final revision at 0.9% y/y.  True, this meets expectations, but this item has gone nowhere for a long time.  Buying sovereign, and corporate debt has kept European governments, and businesses from falling into the abyss, but the ECB’s quantitative easing program, and their experiment with negative interest rates has not produced inflation (nor demand). Secondly, those July UK Retail Sales absolutely crushed projections. Coming off of a negative print for June, and expectations of 0.1%, this release hit the tape at 1.4% m/m. Brexit? Never heard of it?, or did it actually drag consumption forward?  Regardless, the British Pound spiked on the news, and is now trading above 1.315 vs. the US Dollar. It is becoming increasingly difficult for Mark Carney to credibly justify further easing of monetary policy in September.
                    It all started less than two weeks ago with some of the smaller. more desperate OPEC nations talking up an informal meeting in late September where these countries would push a coordinated production freeze. Then, the Russians jumped in, and talked up such an idea. I mean, why wouldn’t they talk up the selling price of a product that their economy relies so heavily upon. Throw in a US Dollar that seems to be weakening somewhat steadily against it’s competitors, and a double surprise drawdown from the EIA yesterday for Crude Inventories, and Gasoline Stocks, and …. voila !!  WTI Crude is flirting with $47 a barrel, while Brent tries to stay above $50.  Suddenly, the talk regarding the Energy sector has gone from picking a point of re-entry to wondering if one has missed the trade. Given the multiplier effect that this one commodity has beyond the Energy sector (Transports, Financials), the way WTI Crude reacts to it’s fundamentals, technicals (now, well above 44.50. next 48-49?), and currency swings is more important to the trader than three week old Fed Minutes that merely reflect the Policy Statement already released at that time.
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Macro
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08:30 – Initial Jobless Claims (Weekly): Expecting 266K, Last Week 266K.  The entire range of expectations for this item spans from 264K to 270K. That’s right, nobody expects anything out of the ordinary for this very consistent data-point. The four week moving average is now 262,750. This release still makes TV news, but has very little impact on markets these days.
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08:30 – Philadelphia Fed Manufacturing Index (August): Expecting 1.8, July -2.9.  This item was not as nasty in July as the headline appeared. After all, the strength of the report, much like the also negative August Empire State print was in New Orders & Shipments. There was also some strength in pricing. Hard to call any manufacturing index with positive numbers in those sub-components negative. This item, as the most important regional manufacturing release in the country can impact the marketplace.
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10:00 – Fed Speaker: NY Fed Pres. William Dudley will speak on regional economic conditions in New York. There is a Q&A session planned, and Dudley did make news on Tuesday with some hawkish sounding comments. The President of the New York Fed has a permanent vote at the FOMC.
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10:00 – Leading Indicators Index (July): Expecting 0.3%, June 0.3% m/m.  Nothing to see here. This one is not followed by many, and never moves the markets.
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10:30 – Natural Gas Inventories (Weekly): Expecting 22B cf, Last Week 29B cf.  Today, we expect our 17th inventory build in the last 18 weeks. This item will not impact you as a trader unless you are directly involved in the space.
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16:00 – Fed Speaker: San Francisco Fed Pres. John Williams will speak on the economy from Anchorage, Alaska.  He has had some interesting ideas of late regarding inflation and GDP targeting that personally, I’d like to hear more of. Williams is not a voting member of the committee this year, but he is considered to be influential, and is a favorite of Janet Yellen’s.
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20:00 – Fed Speaker: Dallas Fed Pres. Robert Kaplan will speak from Dallas. We have not heard from Kaplan in about two weeks, when he made a series of speeches within a few days. Kaplan has urged caution on raising interest rates, while trying to say that September was still on the table. Either he’s been unsure of his position on policy direction, or unwilling to make a stand. Kaplan does not have a vote this year.
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Thursday’s Earnings Highlights
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Before the Open: HRL (.35), TTC (.99), WMT (1.01)
After the Close: DV (.60), GPS (.58), NWY (.00)

Market Recon Wednesday

Good Morning,
                     Just where are we, regarding monetary policy?  NY Fed Pres. William Dudley rattled a few cages yesterday when he spoke of improved growth for the second half of the year, and the possibility of a looming increase in the Fed Funds Rate.  He’s not wrong.  Though first half growth was paltry, the last month of the period, June.. was rather strong across the board. Now, six weeks into the second half, we see rough spots, but also some continuance in areas that have gained strength. I think that across several months now, the Fed has communicated almost an eagerness to get on with the next rate hike, if only it can be justified.
                    Jackson Hole is only a week away. If the committee is serious about taking the next step this close to a national election, it will be up to Janet Yellen to prepare the marketplace at that time. There are a number of balls rolling in the right direction.
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Non-Farm Payrolls have been much stronger for two months.
Core Retail Sales printed badly for July, after a strong four month run.
Housing Starts have been trending toward the top of the range, and broke through in July, forcing the Atlanta Fed to increase their Q3 GDPNow forecast.
Industrial Production is finally showing life, now in positive territory for two consecutive months. Underlying components were positive in July for Manufacturing, Mining, and Utilities.
Core CPI has now run at or above the Fed’s stated 2% inflation target for nine consecutive months.
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                    The next FOMC meeting is still more than a month away. Every data-point that I just mentioned will print again prior to that meeting.  We have been prepared now several times for the next hike, only to see it postponed for one reason or another. With that first half as weak as it was, maybe that was a good thing.  Just do not forget that it was the decision makers themselves that told us that near-term risks to the economy had diminished in last month’s statement. Today’s Fed Minutes will support that theme. Will the Fed Chair stray from that course next week?
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Macro
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10:30 – Oil Inventories (Weekly): Expecting 300K barrels, Last Week 1.1M barrels. Supplies of Crude have printed in expansion for three consecutive weeks.  Expectations for today’s number range from -900K to +300K barrels, and that was before last night’s API number, which surprised to the downside for Crude (-1M barrels), and upside for Gasoline (+2.2M barrels). Interestingly, gasoline stocks have contracted in size in each of the last two weeks. Gasoline stocks seem to have had more of an impact on Crude prices of late than have actual headline inventories of Crude.
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13:00 – Fed Speaker: St. Louis Fed Pres. James Bullard will speak on the economy, and monetary policy from St. Louis. Bullard is a voting member of the FOMC, and is best known for abruptly, and very publicly changing direction on policy decisions. To be fair, Bullard turned “dove” in mid-June, and stuck with it through July.  We really haven’t heard much from him in about a month, so officially, he has held his most recent opinion for two months.
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14:00 – FOMC Minutes: Will we scour the Minutes for clues as to just how hawkish the FOMC is turning?  The information is dated, and Jackson Hole is next week.  That said, you can decide for yourself just how important these Minutes are.  NY Fed Pres. William Dudley told us yesterday that September is still on the table.  Is it likely? No.  Is it possible? I think so, and there is a case for it.  An unclear, confused case, but a case.
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Wednesday’s Earnings Highlights
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Before the Open: AEO (.21), ADI (.76), LOW (1.42), TGT (1.13)
 After the Close: BGG (.54), CSCO (.60), LB (.60)

Market Recon Tuesday

Good Morning,
                     Today is the biggest day of the week in terms of market impact level macro. I know we’ll see the FOMC Minutes tomorrow, and yes, they can be important. That said, the Minutes are dated information and usually hit the tape with more headline than actual impact.
                     The day’s most disturbing headline, however comes from the healthcare space. Though hardly unexpected, Aetna’s announced withdrawal from most of the states where the firm had participated in Affordable Care Act exchanges may end up being good for Aetna. It is not good news, however for the ACA, and for any perception that common folk be able to make competitive choices regarding health care. Aetna joins Humana, and United Health, among others in reducing their ACA participation. The future of health care in this country is as much in doubt as it ever was.  Will an uninsured individual still be penalized if that patient has no options within his or her state? If you thought that this was a political football prior to ACA, you were right. Problem is, it still is.
                     The US Dollar is considerably weaker this morning. UK Consumer level inflation came in a bit hot for July, while UK June Home Prices also gapped higher. This has European traders thinking the BOE may be a little less aggressive than they otherwise might have been at their MPC meeting on Sept. 8.  This has given a burst of life to the Pound. The Euro (positive ZEW sentiment numbers) rallied alongside the Pound, and the Yen is just relentless of late. The Yen is now worth just about a penny. What this does is strengthen the commodity complex on a day that you might have otherwise seen some profit taking, or even technical resistance for the Oil space. At last glance, WTI Crude is trading above $46 a barrel, still on coordination speculation.
                     Always work hard, gang. Always focus, but also look around. The person on your left, or your right might need a pal today. Don’t miss that opportunity if it’s there. Team.
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Macro
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08:30 – CPI (July): Expecting 0.0%, June 0.2% m/m (1.0% y/y).
08:30 – Core CPI (July): Expecting 0.2%, June 0.2% m/m (2.3% y/y).  This economy continually starts and stops throughout this fragile, yet lengthy recovery. The one thing that has allowed the FOMC to keep interest rates near zero, despite less than stellar data-points has been the lack of accompanying consumer level inflation.  The headline number will be a bit soft thanks to the hit that gasoline took in the Retail Sales report.  The Core print is the one that matters. Year over year Core CPI printed at 2.3% in June, it’s eighth consecutive month either at or above the Fed’s stated goal of 2%. Though those at the Fed prefer to follow Core PCE solely because it’s the lower number of the two, an increase from 2.3% in this space would be very difficult to ignore. We have several market impacting releases to focus on today.  This is probably first and foremost among them.
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08:30 – Housing Starts (July): Expecting 1.18M, June 1.189M SAAR.
08:30 – Housing Permits (July): Expecting 1.16M, June 1.153M SAAR.  Housing Starts bounced significantly for June from the minus tick they felt in May.  Perhaps nearly as important, Permits increased for the third consecutive month in June, and are expected to increase further for today’s July print. If expectations are met today, despite the mild slackening expected for Starts, these numbers are not weak, and markets will focus on the inflation numbers. A serious miss here, and all bets are off.
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08:55 – Redbook (Weekly): Last Week 0.5% y/y.  Last week, we said that we would like to sea 0.5% print in this space at a minimal rebound from the week prior’s 0.3%, and that’s exactly what hit the tape. Multi-line retailers as a group suddenly have some mojo working for them of late.  A repeat performance of last week’s print will keep this item under the radar.
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09:15 – Industrial Production (July): Expecting 0.2%, June 0.6% m/m.
09:15 – Capacity Utilization (July): Expecting 75.6%, June 75.4%.  There is no denying that the manufacturing business in this country has been through a ‘depression’. Generally speaking, things got a little better in June across a number of manufacturing related data-points. The hope for today is that headline Industrial Production prints in positive territory for the second month in a row.  That’s something that we have not seen since June & July of 2015.  As for Utilization, in June there was a significant bounce from what had been a six year low.  Projections are for further improvement in that space as well.
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12:30 – Fed Speaker: Atlanta Fed Pres. Dennis Lockhart speaks from Knoxville, Tennessee.  Lockhart, who is not a voting member of the committee this year, always seems to be a little ahead of the pack when it comes to the next rate increase.  The last time we heard from him was two weeks ago, and he was sounding rather hawkish at that time.  There will be a Q&A session after this address open to both the media and the audience.
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Tuesday’s Earnings Highlights
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Before the Open: AAP (2.11), DKS (.69), HD (1.97), TJX (.81)
After the Close: PLKI (.47), URBN (.55)

Market Recon Monday

Good Morning,
                    A new week.  From a macro point of view, Tuesday is the big day.  That’s the day that we’ll start seeing more major data-points for July following Friday’s awful numbers for Retail Sales.  If CPI, Housing Starts, and Industrial Production all come in soft, or come in a weak looking combination, then you will see chances for an increase as illustrated by the Fed Funds futures market drop from the 18% that we saw going into the weekend. There will also be the Minutes from the last FOMC Meeting, the Philly Fed Manufacturing Index, and the ever dangerous James Bullard to contend with as the week progresses.  You will also have some headline level quarterly earnings releases later this week, as the last few retailers straggle in.
                  I guess we now understand why the Bank of Japan needed to commence with this two month study of their monetary policy program.  While you were sleeping, japan released Q2 GDP data, and to put it mildly, they disappointed. We’ll still see another month of macro-economic data prior to the next BOJ policy meeting, but there is already much speculation about what the outcome of this study will be. After some media players acquired drafts of the ongoing study, it is widely expected that the BOJ will defend already in place policies.  The speculative part is whether or not, they dare get more aggressive.
                  WTI Crude is already well of off it’s highs this morning.  If you’re wondering why the volatility, you can blame Russia’s Energy Minister, Alexander Novak.  Novak indicated that Russia was already in dialogue with Saudi Arabia, and several other oil exporting nations, talking over jointly capping production.  We’ve seen this movie before, in my opinion. If you’re selling something, talking up price isn’t the craziest idea anyone ever had.
                  Have a good day, gang.  In fact, have a great week.  I’ll catch you on down the road.
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Macro
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08:30 – Empire State Mfg Survey (August): Expecting 2.2, July 0.55.  Through the prism of hindsight, we now know that the manufacturing sector of our economy sputtered through July, after a hopeful June.  This will be our first glimpse at manufacturing health or lack thereof for August.  The expectation is that the NY region stays just barely on the right side of contraction.  The “New Orders” component will be what catches the eye today, after falling off of a table last month.  On occasion, due to it’s timing this item can punch above it’s weight for futures traders.
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10:00 – NAHB Housing Market Index (August): Expecting 60, July 59.  This “homebuilder optimism index” beat expectations for June, and finally returned to the 60 level after a four month drought….and then slipped again.  It’s expected that this item can print at that elusive spot again today.  Broken down regionally, the Northeast continues to put downward pressure on this index, keeping it from reaching the higher levels seen in late 2015.
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16:00 – TIC (June): Expecting $41.1B, May $40.0B.  This item tracks net cross-border investment, and flows into, and out of US Treasuries.  Given the timing of it’s release, and the fact that the information within is extremely dated, there will be no impact on trading behavior caused by these numbers.
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Monday’s Earnings Highlights
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Before the Open: SYY (.60)
After the Close: DAVE (.12)