Market Recon Friday

Good Morning,
                        So, I was in attendance last night at the MNI sponsored event at which Cleveland Fed Pres. Loretta Mester spoke.  Ever been the dumbest kid in a room full of 200 people?  Well, I can no longer say that I don’t know how that feels.  She spoke for about 45 minutes, and then they went into a question, and answer session.  My hand was up the whole time, but well, I was not called upon.  Perhaps they read my notes.  I was recognized by a few folks.  There were a few points made by Pres. Mester that stuck in my head.  Before I comment, she does seem very likable in person, so we do have that.
                       To Mester’s credit, she sounded as if,  while she thinks that normalization of policy is where we need to go, that any shock to the economy could change, or at least prolong her outlook on the progress of such policy.  Well, lah-di-dah.  Pretty sure that’s a part of every speech.  What I found extremely troubling, as I am sure every other economist in the room did…was though she did slip at one point, and refer to the recent “soft patch” in the macro…. for the most point, she stuck to the mantra the economy is fundamentally sound, growing at a moderate pace, and that it pretty much just needs to stay on track.  She went as far as mentioning that once the Fed Funds Rate gets to 1%, we can start tackling the balance sheet.
                       Mester also was asked about, and did her best to avoid saying anything substantive on the subject of diverging monetary policy among the world’s central banks.  She said, the US economy is different, which it is, but she did not color that answer with much detail.  She sounded, to me, kind of like a football coach of an 0-16 team game-planning the Super Bowl, you know, just in case.  She did acknowledge recent market volatility, but in my opinion, she downplayed this as somewhat normal.  (I’ve been in the markets since many of you were in diapers, and….this ain’t normal)  I just felt as if she wrote most of the speech four months ago, and never really  bothered to edit, or revisit said speech before delivering it.  Either that, or I very simply was not the dumbest kid in a room full of 200 people.
 
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The Employment Situation  (January)
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08:30 ET
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            There are many, many moving parts to the BLS report, but some of them won’t matter to traders, and some of them matter far more than other to the ground level US economy.  We don’t live in castles here.  We pretty much tell you the truth, even if isn’t real pretty, and even if it isn’t what the powers that be happen to be selling today.
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Non-Farm Payrolls:  For trader types, this is the one that moves the marketplace.  In December, we saw a “very strong” 292K in this space, which we all know was built with smoke and mirrors.  Today, consensus view is for 189K, which is close to being smack dab in the middle of the 170K to 215K range.  It is hard to say how the number today will be received.  With almost all of the US macro over several months now representing an economy that appears to be falling off of a cliff, would a second consecutive beat for NFP be poorly met by Mr. Market?  Oddly, there was very little talk on this item yesterday on the trading floor.  It’s usually a much higher priority with the crowd during “Jobs Week”.
Average Hourly Earnings:  Probably the second most important slice of the Employment pie for traders.  We are looking for a m/m increase in this space of 0.3%, which would be very welcome after last month’s 0.0%.  Any kind of lift in wages has been a very long time coming for plenty of folks on Main Street.  We have had several false starts for this one over the last half year or so, including two 0.4% m/m pops that found no traction.
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Participation Rate:  Taken far more seriously than the Unemployment Rate these days.  This item is mired near incredibly low levels.  That said, December’s 62.6% was the product of two consecutive increases in this space.  What was once awful looks a lot less awful when you’re moving the other direction.  After what we’ve been through in this space, baby steps are fine.
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Underemployment Rate or U-6:  This one not only includes the unemployed, but those working part-time who would prefer to work full-time.  In December, the BLS reported this one at 9.9%.  Just so your not buying your groceries all in the same place, for comparison’s sake, Gallup, the only other folks I know of who attempt to release a US Underemployment Rate, happened to print their number at 14% for December.  At least the two are close.  Uhm yeah.  Somebody’s wrong here.
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Unemployment Rate:  This one has completely fallen off of the radar in the financial community, perhaps because of the absurdity of throwing the long term unemployed out of the total, being labeled as discouraged.  That may have worked back when finding a job was almost as easy as looking for one.  Last month this print came in at 5.0%, and that is the expectation for today.  For your information, last month, Gallup printed this item at 5.5%.  Again…. pay no attention to that man behind the curtain.
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Other Macro
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08:30 ET
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Trade Balance  (December):  For the trading community, this one will pass by quietly.  Expectations are for something close to $-43.0B, with the Exports print coming in under $182B.
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13:00 ET
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Baker Hughes Rig Count (Weekly):  Last week, this data-point saw a drop in North American active rigs drop from 887 to 850, with 19 out of the 37 rigs that ceased operation being Canadian.  A further drop in this number would be a welcome boost for Crude, which under-performed most of the commodity complex yesterday.
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15:00 ET
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Consumer Credit (December):  Total credit increased in November by $14.0B, with $5.7B of that number coming in the form of revolving credit.  That, for those of you who do not follow this closely…was a big increase in the use of credit cards.  Many of these palookas are crowing about how confident that means you all are in the economy.  I suspect that somewhat less triumphant forces may be at work here.  Maintaining your standard of living becoming an issue?  What says you?
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Friday’s Earnings Highlights
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Before the Open: AON (2.10), EL (1.10), MCO (1.04), TSN (.89), USG (.32), WY (.24)
After the Close:  Dreaming about my next disgusting plate of nachos.  Oh, so close.
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Super Bowl Prediction:  Let’s go Mets.

Mid-Day Thoughts

Allrighty Then,

1) US Dollar remains weak, putting a bid under dollar denominated commodities, and successively the Materials, Energy, and Industrial sectors. Oh, and by the way, the transports are screaming.

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2) Lack of hard news on some kind of coordinated production cut acts as a counterweight on Crude.
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3) Weakness in defensive plays across the board, at least as far as stocks are concerned, namely the Utilities, Staples, and Health Care sectors.  Non-equity defensive plays such as government bonds, and gold are doing fine.
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4) MACRO, MACRO, MACRO… honestly…How bad can the macro get?  Actually, the Productivity vs. Labor Costs equation is just about the most important data that we do see, and it will impact future decisions made by hiring managers.  It has become clear to me that the the FOMC can not raise interest rates anytime soon, unless forced to by a burst in consumer level inflation.  A couple of head fakes, sure…but an eventual cut is far more likely.  That will be embarrassing for them, so they will drag their feet..
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5)  Don’t get me wrong… I am rooting for the economy.  Would much rather be wrong about this than right.
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6)  Jobs Day tomorrow, after the absolutely ridiculous seasonal adjustment last month…. does it mean anything?
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7) LNKD earnings tonight.  From 11 to 12 dollars worth of implied volatility baked in.
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8) Okay, back to work you maggots.

Market Recon Thursday

Good Morning,
                        The US Dollar is weaker again at this time, with the DXY rolling off of a table earlier this morning.  That has been good news for equities, globally, as dollar denominated commodities found some relief.  This will also be our driver…at least for now.  I don’t tell you what to do, you know that, but financial stocks, though they came back quite nicely yesterday, are scaring the heck out of me.  Something is wrong…don’t know what just yet, but they are trading as if there is unbroken news out there somewhere.  There are enough choices in our galaxy for traders, who might have limited risk tolerance to avoid taking shots that might look very ignorant in hindsight.
                       Obviously nothing that is true remains true for very long, and agility will remain a trader’s best friend in these times.  If you marry your positions, they must be protected, and if you are not married to said positions, then you must understand technicals, or at least a set of technicals that you believe work for you.  I have three, one of which is my own, and highly classified.  I am not saying that there is no place for fundamentals.  Those are for your core positions.  What I am saying is that the robots that you’re up against are being programmed by guys who, for the most part, all study the same stuff.  They were not raised in the auction market, and have never developed instinct.  In times of high volatility, when parts are moving faster than human brains can make cognitive decisions, in order to beat the chart monkeys, you must yourself become a chart monkey.  They are faster than you.  They can impact the market in size. You may not be able to do those things…. but….  they do not know what you are going to do.  Understand them better than they understand you.  You can have that edge on them.  Got work ethic?  I bet you do,  no…… I know you do.
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Da Macro
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08:30 ET
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Initial Jobless Claims (Weekly):  Last week, we backed off of our recent high of 294K that printed two weeks ago with at tag of 278K.  Before you go all warm and fuzzy on me though, continuing claims hit a five month high last week, so the big ugly is still out there.  Expectations for today are for an in-line 279K, but just a warning.. the skew is to the upside.
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Non-Farm Production, and Unit Labor Costs (Q4):  I could do these two separately, but let’s face it… these two aren’t just cute together, they’re like peanut butter and jelly.  I mean what is more closely tangled than Worker Productivity, and Labor Costs.  Take it from a guy who’s had his teeth kicked in, you want to be more productive than you cost, at least in the private sector.  Workers rejoiced in the third quarter when Productivity surged 2.2%, while Costs only increased by 1.8%.  (These numbers are measured q/q in SAAR fashion.)  Well…kiddies….expectations for the fourth quarter, like just about everything else we’ve seen for a bit, are just awful.  Projections for Productivity are in the area of -1.6%, while Costs are expected to have risen 3.9% or so.  Some economists are as high as 5.4% on this one.  If these expectations are accurate…then it stands to reason, that more than a few lay-offs are on the way.  The Big Ugly lurks.
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10:00 ET
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Factory Orders (December):  Yeah, we’ve got another winner here.  Looks like this one is headed for month over month contraction of -2.8%, after shrinking just -0.2% in November.  If that number is accurate, this will be the nastiest release in this space in eleven months.
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10:30 ET
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Natural Gas Inventories (Weekly):  The reductions in supply just keep growing in this space.  We expect another sizable reduction today, probably something close to the tune of 175 billion cubic feet.
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From the Fed
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Way Early
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Boston Fed Pres. Eric Rosengren spoke this morning on the subject of “Too Big to Fail” in Cape Town, South Africa.  Rosengren is somewhat dovish, and is a voting member of the FOMC.  He apparently thinks that threats from “Too big to fail” organizations have abated.  That’s good.  He, as far as I could tell, did not really go into policy all that much.
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08:30 ET
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Dallas Fed Pres. Robert Kaplan is set to speak from Dallas on the global economy.  Kaplan is not a voting member of the FOMC this year.
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17:00 ET
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Cleveland Fed Pres. Loretta Mester will speak at an MNI sponsored event in New York City.  Mester is a voting member of the FOMC this year, and will open herself up to questions after the speech.  You know I appreciate that.
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Thursday’s Earnings Highlights
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Before the Open: CI (1.79), CLX (1.05), COP (-.64), MMC (.71), PM (.81), RL (2.11)
After the Close: DV (.66), LNKD (.78)

Market Wrap Wednesday

Good Evening,
                        I know that I rarely write an evening note anymore, but today’s action was so wild, and so invigorating  ….. that it was either run a couple of miles, or write a note.  I will probably still run a couple of miles, but at least I’m on a moving train this way.
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The Story
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                       What was the big story today???  The 8% rip in Crude?  The serious beat-down handed to the US dollar?  The game of Chutes and Ladders played by the equity market?  You know, the S&P 500 level coming in this morning was 1873, and the index bottomed at 1872 and change.  Incredible…just how technical this has all become.  Everybody looking at the same charts.  So many traders talking to each other trying to get a handle on just what we should all be looking at.  Moving parts? Yeah, no kidding.  Is it Friday yet ??
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Sold to You,….. I think
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                        First came the weakness… in the dollar, and equities.  It appears that the Bank of Japan put a cap on the scope of their leap into darkness last week that took more than a few folks by surprise.  I guess they need to take baby steps, because you and I both know that these guys will never, never, ever tighten monetary policy.  That hung an anchor on the greenback, as well as put a bid under WTI, that even a massive increase in supply couldn’t put anything more than a temporary dent in.  I think it’s fairly safe to say that both of these items saw squeezes of one type or another after that.  Then, the whole smoke and mirrors story about an emergency meeting of non-OPEC, and maybe even OPEC types that may, or many not be true.  What the ???…….  Take ’em.
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Moe, Larry, and William
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                       We saw gyrations in the Treasury market.  We saw NY Fed Pres. William Dudley sound anything but sure of himself, just one day after KC Honcho Esther George sounded like she hadn’t even taken a look at any US macro in something like three or four months.  I mean…. C’mon man !!!!!!  If you need help….ASK  !!!
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Final Score
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                      The winners??? The Energy Sector ran 4%.  Telecom, Utilities, Industrials, the Transports, and Gold all had nice days.  The losers?? After all that… US Treasuries.  Even the Financials after having their collective faces ripped off earlier in the day closed, as a sector… close to unchanged.
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Tomorrow is Thursday.  Just bring it.

Market Recon Wednesday

Good Morning,
                        Just how bad was yesterday’s sell-off in US Equity markets?  It did feel pretty bad.  Tactically, there was some damage.  The sell-off was broad-based, with Energy, Financial, Transport, and Small Cap types suffering the most.  I was kind of hoping that Transports, and Small Caps had started to turn a corner.  The Energy sector is going to correlate to Oil, that’s obvious, and the unknown, or maybe in some cases well known strings that tie Energy to some banks is also going to push Financial toward the correlation.
                        The Transports have already suffered mightily, and while moving commodities is what many of them do, reduced fuel costs will improve dynamics for some, and Small Caps…what can you say there?  In a strong dollar environment, they have to be winners, no?  So, we are not healthy.  We already know that.  Back to the charts.  Though, suffering that tactical drawback, the strategic damage really was not as severe as it felt.  That doesn’t mean that I think we are okay.  All of our risks are still there, and the mindless Fed that would have us import the very deflation that they wish to fight, is still, even with collapsing global demand, and crude being crude, our top market risk.  As to the strategic, I think that we can go as low as SPX 1865, or maybe even 1860 before we know for sure that whatever you are doing might need to be adjusted.
                         Today is global Service Sector PMI day.  Overall, the Euro-Zone hit consensus with Spain actually topping forecasts.  Unfortunately Italy, France, and Germany all missed the mark.  Even European Retail Sales, while printing at their best level since Autumn fell short of expectations.  European markets are painted blood red again, but this is not a complete romp, and US Equity Index futures markets are, at least so far, hanging onto small gains.  The American Service Sector gets it number today at 10am.
                        If you have not already decided to make today great, do it now.  You have nothing to lose by doing your best.  So, do it.  If they (whomever) don’t like your best, don’t hold back… lead by example.  At least one of them (whomever) will follow.
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So, You Think We’re All Morons
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          I have said it since I was a young economics student…. Why not just get rid of seasonal adjustments???  They serve no purpose other than to streamline the data for comparison’s sake.  Well, if economics is the study of human behavior in relation to a set of conditions, and resources…..and if we are not a bunch of utter and complete morons….then we know things like seasonal change, and occasionally unexpected forces do impact human behavior.  That said, save us your load of bologna, and just for Pete’s sake release the pure data, exactly the way it is….without the nonsense.  If 11 thousand people found a job, do not tell the masses that 292 thousand people found a job.  I know that it all works out in the end, or at least is supposed to, but, and this my friends, is a big but…. I value honesty.  Any self respecting numbers nerd does.  Any man or woman should.  The guy across your street that you just waved at, who lost his job 14 months ago, still needs to find a new one.  Sarge out.
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Today’s Macro
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08:15 ET
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ADP Employment Report (January):  This item, which is meant to be a predictor for Friday’s Private Payrolls portion of the Non-Farm Payroll report, is often ridiculed for being inaccurate.  Well, in December, this one came in at a very healthy 257K, and we all know that the NFP print then came in at not only very healthy, but an extremely seasonally adjusted 292K.  Today, we expect that this item may have slipped back below 200K, probably to something in the 190’s.  There are economists out there as low as 160K, and as high as 220K.
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09:45 ET
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Markit Services PMI (January):  This item flashed mid-month at 53.7, and that is our expectation for today.  That said, the market will wait 15 minutes for the ISM print, before reacting in this space.
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10:00 ET
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ISM Non-Manufacturing Index (January):  With most parts of the economy crumbling down around the kingdom, and with the manufacturing biz in an outright depression (worse than recession)….  (although New Orders did seem to budge in the right direction on Monday), many folks who normally let this one pass will be watching closely.  The December print showed up at 55.3, which is healthy, and still comfortably in expansionary territory.  The problem here is that we need the Service Sector to remain our engine, and this item is very steadily trending in the wrong direction.  That 55.3 was the weakest print in this space since April of 2014, and the projection for today is for a slightly weaker 55.2.  On top of that, the skew for this one is to the downside, with the low end of the range at 53.0.
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10:30 ET
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Oil Inventories (Weekly):  Last week, we were looking for an increase in supply of over 3 million barrels, and the print came in at an increase of over 8 million.  If you don’t follow this item closely, I’m not joking.  These are the numbers.  That was the largest increase for any one week, in about nine months.  Today, expectations are that we tack on another 4.2 million barrels.  What could possibly go wrong?
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Wednesday’s Earnings Highlights
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Before the Open:  GM (1.20), IP (.82), MAN (1.52), MRK (.91), SO (.42)
After the Close:  BWLD (1.48), GPRO (.03), GMCR (.68), MET (1.36), YUM (.66).

Market Recon Tuesday

Good Morning,
                        I felt really good about where equity markets stood last night.  Yesterday’s price movement showed to me that Friday’s big rally had been digested quite successfully.  Oil took a kick in the pants, and domestic equity indices, after having sold off early, actually rallied into that falling price of crude.  We have seen signs for about a week now…of an uncoupling of these markets with that commodity.  We needed that.  Then comes this morning.
                        Once again, Crude retreats, probably to test $30 support.  Equity markets around the globe, save for Shanghai, are retreating along with it.  Shanghai, btw is sort of in it’s own universe right now.  They’ll go into their Lunar New Year period on Sunday, and the PBOC is regularly injecting large amounts of cash into the system ahead of this event as to avoid a liquidity crunch.  There will be a two month gap in Chinese macro, which may just be a god thing.
                       The Iowa Caucuses were last night, and it looks like Sen. Ted Cruz, and the former Secretary of State were the winners, both very narrowly.  I don’t think it likely that you will see a Wall Street reaction to this event, as it seems clear to me that Wall Street has yet to pick it’s favorites.  The field is still just too large for anyone who plays probabilities to accurately gage direction at this time.
                        We don’t have much macro to look at today, just a bit…and there will some Fed speak, but the markets are likely to try to defend themselves against Crude’s volatility, trade technically, and look forward to this Friday’s release from the Bureau of Labor Statistics.  Conflicting signals…  While, I don’t think anyone could still call the S&P 500 overvalued, they probably would not call it oversold either.  There’s a lot of wiggle room at these levels, and that’s what this market is going to do.
                        Gang, if you can get yourself past the stress, then you will be able to remember that this sport is still kind of fun.  If you can not get past the stress, or if it is ruining your quality of life…. then you are in deeper than your tolerance for risk allows.  So, you go to a higher cash level, and play small ball for a while.  I have done that so many times.  God bless you … I mean that with all my heart.
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Just a Little Bit o’ Macro
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08:55 ET
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Redbook (Weekly):  Our weekly measure of retail sales at chain stores has been sucking some wind of late, printing at it’s lowest levels on a y/y basis in quite some time.  Gone are the heady days of 2014 when y/y prints of 5% to 6% were commonplace.  Today, we hope that the y/y number shows growth of better than 1%.  May be a close one.
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All Day
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Total Vehicle Sales (January):  In December, we saw Total Vehicle Sales drop, quite unexpectedly…. I might add, from the torrid pace that they had run at from the Summer through November.  That print came in at an annualized 17.3 million units, while the Street was still looking for 18 million plus.  Throw in the East Coast blizzard that likely not only slowed consumption, but production as well…..and our expectation for today has been ratcheted down a notch.  We look for something the neighborhood of 17.4 million units with some forecasting a print in the mid 16’s.  Yikes…. that would leave a mark, and it’s not crazy.
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Central Bankers
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Fed Speaker:  KC Fed Pres. Esther George speaks on the economy’s outlook, and Fed policy from Kansas City, Missouri at 13:00 ET.  George is a voting member of the FOMC this year, and is thought of as a policy hawk.
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BOJ Fun:  That fun starts after the closing bell tonight, but will be worth paying attention to.  First, the Bank of Japan will release it’s policy meeting minutes at 18:50 ET.  Don’t forget that the BOJ took a flying leap into the darkness last week with negative interest rates, hence Friday’s global fireworks show.  Then…really late (for a guy based in NY), at 23:30 ET, BOJ Honcho Haruhiko Kuroda speaks at the Kisaragi-Kai in Tokyo.  The Kisaragi-Kai sound cool, but I think I’ll take a pass, and read about it when I wake up tomorrow.
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Tuesday’s Earnings Highlights
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Before the Open: ADM (.66), DOW (.69), XOM (.66), KORS (1.46), PFE (.52), UPS (1.42), USAK (.23)
After the Close: CMG (1.85), YHOO (.13)
Good Morning,
                       Poof !!  If you wake up wondering what happened to our “dance your face off”, end of the month victory march…welllllll, it was the end of the month….and China.  Yes, China, once again, showed signs of a weakening economy and that had some of the folks taking short term profits this morning.  In case you haven’t found it, China’s National Bureau of Statistics release their PMI data last night.  What it showed was a manufacturing sector that was still mired deep in contraction, and in fact missed estimates.  On top of that, although still comfortably in a state of expansion, numbers for the Chinese service sector revealed a growth that was indeed losing some steam.  Pop goes the weasel, cuz the weasel goes pop.
                      The PMI numbers, at least on the manufacturing side, continued around the planet this morning.  Japan missed, India beat. then in Europe, Germany beat, and the Euro-Zone as a whole nailed consensus, but performance was spotty, with Spain crushing it, while Italy missed badly.  We’ll participate in the whole PMI think later today, although here we call it an ISM thing.
                       I think we’re seeing a familiar trend this “Earnings Season”, with most firm’s beating their EPS expectations, probably about the usual seven in ten, and then a fare lesser percentage hitting on revenue projections…and then year over year revs,,,,whooooie.  Those y/y comps, however have been well managed by the firms themselves, and do seem to have been somewhat priced in.  Bottom line…we’re having a lousy earnings season, but, and this is a big but…..  It’s been dressed up nice with balloons, and streamers.  The public does like balloons, and streamers, and on top of that…the public is starved for yield.  Debt to Equity ratios?  Declining revs?  Cash levels are even higher than they were… Hmmmm.  Worried?  Always, but no more than usual.
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PMI-pallooza
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08:30 ET
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Personal Income (December):  The “Unholy Grail”…. personal income.  Everyone that you, and I know is caught in a never-ending battle against what they bring home, and what they need to bring home.  We all know that it’s been tough…for a very long time.  In November, Income inched up 0.3% m/m, which was actually the second weakest gain that we’ve seen since in this space since April.  Expectations for today are for a further softening in such gains to something like 0.2% m/m.  From a familial point of view…..as long as it’s beats Spending, right?
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Consumer Spending (December):  Ahhhh, our opponent, or is it our friend?  Depends where you are on the base-paths.  Are you selling?  Are you looking at the economy from above? Then you want to see folks out there moving the business cycle along, and increasing the dear, dear velocity of money.  That, however, is not how the working stiff sees it, and that is why he or she tries, many times in vain…. but tries to save, or at least service one’s own debt, with out jamming oneself up too badly.  The conundrum will be likely be expressed this morning when, as most economists believe Spending reports in at a m/m increase of 0.1%. off of November’s 0.3% monthly pace.   Looks like Income may have beaten Spending in December, but with both of then slowing down.  No celebratory party here, if indeed that is how this shakes out.
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PCE Price Index (December):  Well, kiddies, they say that there is no consumer level inflation, and this data-point is primarily why.  Janet Yellen, and the rest of the Ant Hill Gang prefer to watch this specific measure, even though Core CPI has already met, and exceeded their mandate.  As you, know this one isn’t even close.  For December, the consensus projections are for 0.0% m/m at the headline.  Don’t worry about that one, nobody on planet Earth does.  The Core print is expected to show that it vaulted ahead by 0.1% m/m, and 1.3% y/y.  Yes, vaulted.  Indeed, they all do watch the Core print. Go nuts.
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09:45 ET
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Markit Manufacturing PMI (January):  Markit’s Manufacturing PMI flashed at 52.7 back on the 22nd, after having printed at 51.2 in December.  This item had out-performed it’s more closely followed rival, the ISM number all throughout 2015.
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10:00 ET
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ISM Manufacturing Index (January):This one left a mark back when the November release came in at 48.2, which was it’s second straight print deep in the hole.  We are looking for a third consecutive month of sharp contraction when we see this release today.  The “experts” are thinking something close to 48.3, but what I think is more telling…. is that there is not a soul that I can find who is above 49.5 on this data-point for today.
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Construction Spending (December):  Here’s one that maybe you can feel a little hopeful about, and given the nature of US macro over the last few month, we’ll take anything that isn’t awful right now.  Look for a significant improvement in this one today, from November’s -0.4% m/m to something well into the positive growth side.
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11:00 ET
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ECB Speaker:  ECB President Mario Draghi testifies before the European Parliament in Strasbourg.
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13:00 ET
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Fed Speaker:  Fed Vice Chair Stanley Fisher speaks on Monetary Policy, and Foreign Relations in New York, NY.
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Monday’s Earnings Highlights
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Before the Open: AET (1.22)
After the Close: GOOG, GOOGL (8.20), MAT (.61), TSO (2.09)

Market Recon Friday

Good Morning,
                        The Fed has come, the Fed has gone.  They were sort of, kind of dovish, with no promises.  Data dependent ?  Check.  Eye on the planet? check.  Not a clue beyond anyone else who pays attention?  Check.  Pretty much what any semi-reasonable Fed watcher might have expected.  We could, you know,,,, get on with the practice of trading technical, and earnings.  That doesn’t sound too bad to me.  Let’s hope that the correlation between Crude prices, and equity prices that clearly broke yesterday, after sending signals that it would crack for days, stays broken, at least outside of the Energy sector….. and of course excluding days that crude trades higher, right?
                       Chinese officials are rapidly moving pieces around trying to prevent capital outflows.  That does not seem to be helping Chinese equities that were beaten with the wooden spoon again this  morning.  The Shanghai Composite has given up 3% on the day, 25% YTD, and 48% from the heady days of June.  European stocks, though not to the same degree were also seeing red this morning.  Everyone is acting a little rattled that the Fed did not take a March increase for the Fed Funds Rate off of the table, although futures that price such an event are now trading at a lower level than they were yesterday at this time.  I do not see this as cause for alarm, but in these markets, swimming against the tide can get you pulverized.
                       US futures markets have been choppy this morning at best, but watch those FANGs today gang.  Most of you probably saw the FB earnings last night, and if you did not….. they beat EPS by 11 cents, they beat revs $470M, and y/y rev was up 51.7%.  Not too shabby.  They guided the right way, and put out a lot of groovy info.  The stock is rockin’.  There may be feet of snow on the ground, but you and I both know that pitchers and catchers are less than three weeks away.  That’s a good thing.  Be nice to someone you don’t think you get along with today.  That would be a good thing too, but don’t fake it.  It gets easy once you roll with it.  Now, roll.
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Macro
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08:30 ET
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Durable Goods Orders (December):  2015, though less volatile than 2014, was still a rather wild year for Durable Goods.  At the headline level, we’ve seen five monthly prints of m/m growth, we’ve seen five months of contraction, and last month the print came in flat from the month before, so we’re 5-5-1.  December is the tie breaker, and consensus is for a slight negative, but this is one shaky consensus.  The range spans all the way from -3.0% to +1.5% m/m.  Gang, that means that the guys who study this stuff…. don’t know, so anything is possible.  The Core number, which excludes Transportation purchases also, remarkably came in flat in November, but is at least far less volatile.  Here too, the planet looks for a slight negative, but with  a very tight range, so anything more than half of a percent in either direction will be taken by the market as a surprise.
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Initial Jobless Claims (Weekly):  This item is one that most folks are starting to notice again after a long slumber.  Very covertly, over the final quarter of 2016, this data-point has worked it’s way from the 250Ks up into the 290Ks.  Not much media attention on this one, but if we, at some point get a print with a 3 handle, it will leave a mark.  The expectations for today are for 284K, with nobody I see above 290K.  Just so you know, this weekly has printed above consensus for four consecutive weeks, with the average miss over that time being 10,500.  Just sayin’.
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10:00 ET
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Pending Home Sales (December):  Like all housing numbers, this one took a knuckle sandwich to the teeth in November.  With the exception of Housing Starts, the rest of the housing universe is seeing a wave of nicely improving December data, and even in the case of those Housing Starts, Permits did beat.  Pending Home Sales are coming off of a -0.9% m/m print, but today however, we are looking for something more like +0.9%…. and Pending Sales turn into Existing Sales…. so go team.
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10:30 ET
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Natural Gas Inventories (Weekly):  More dangerous than eating shellfish at the corner diner, the cubic feet are just melting away by the billions in this space.  Today, we go for our ninth consecutive reduction in supply, with expectations for that reduction to be in the area of -210B cf, which would be the largest draw that we’ve seen over those nine weeks.  Natural Gas is not oil.  Birdie?
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11:00 ET
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Kansas City Fed Manufacturing Index (January):  KC printed at -8 in December, which put that district in contraction for 9 of the 12 months in 2015.  We did see Richmond sport a +2 in January, which was their second straight month in expansion.  That makes them kind of special, as Philly threw up a negative number…. the Empire State was brutalized, and what happened in Dallas was almost indescribable.
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Thursday’s Earnings Highlights
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              Hold on to your pajamas kiddies, we’ve got a boatload to look at today.  There are many high profile names reporting across a wide swath of industries today.  I’ll just throw some quick numbers at you concerning implied volatility based on where options expiring this weekend were trading yesterday at closing time.  In the morning, the expectation is for BABA to move a rough $2.50, and for CAT to move something close to $1.75.  Now for the fun.  After tonight’s close, implied volatility for AMZN is about 27 clams.  Yowza.
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Before the Open:  ABT (.61), BABA (.89), MO (.68), BHI (-.10), BLL (.74), BMY (.28), CAT (.69), LLY (.78), F (.51), HOG (.21), HSY (1.05), NOC (2.04), SHW (1.87), SWK (1.77), VLO (1.39)
After the Close: AMZN (1.61), EA (1.81), FIT (.25), MSFT (.70), WDC (1.55)
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Note:  There will be no Market Recon tomorrow, so good luck with the GDP print.  For clients, Paul Lawless will be at my spot on the trading floor.  Same bat time, same bat channel..

Market Recon Wednesday

Good Morning,

                        I found yesterday rather encouraging, not because equities rallied on the back of oil.  Equity index movement based on the underlying movement in the price of Crude has become all too commonplace in 2016.  What was encouraging was that…. yes the Energy sector was supported by the that movement in the commodity, but the rest of the marketplace found support in some well received earnings releases.  Morning quarterly numbers printed by the likes of MMM, FCX, PG, JNJ, and COH gave a helpful shove to the Industrial, Material, and the Consumer related sectors.  Ahhhh, but that my friends, can be, and often is a double edged sword.
                       Yesterday, we heard talk that some oil producing nations were getting closer to cutting production levels… think Saudi Arabia, Kuwait, the UAE from OPEC, and Russia, as well as Canada from other circles.  As you  might have expected, without hard news following such talk, that Crude is moving in the other direction this morning….. Not to mention the growing open interest in the March 25 puts (that expire on 17 Feb).  Jeekies.  Now, on top of that we have disappointing quarterly numbers & guidance from AAPL (That printed last night) working against us as well.  We never did promise you a rose garden, now did we?
                      On top of all of this, we have the FOMC (LOL) policy decision hurtling toward us this afternoon.  What fun !!  We’ll dig into that in about a minute.
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Macro
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10:00 ET
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New Home Sales (December): The good news is that last week, we saw December Existing Home Sales surprise to the upside after badly missing in November.  The bad news is that New Home Sales also disappointed in November….and October……and September.  The hope….I mean expectation for December is that this item prints just above 500K units when measured in SAAR (Seasonally Adjusted, Annualized Rate) fashion, after stumbling around in the 400k’s for those three months.  The range for September spans from 480K to 520K, so really are just trying to play it safe here.  Remember, most of the country had a fairly warm December, so …. no excuses.
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10:30 ET
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Oil Inventories (Weekly):  We sort of kind of had this puppy moving in the right direction.  Two of the last five weeks printed with draws of over 5 million barrels for supply.  Then last week, we saw a surprise increase of 4 million barrels.  Today, the little oil birdie that speaks is looking for another increase of close to that size, maybe just a tad less.  Fear the birdie.
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14:00 ET….FOMC Policy Announcement
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                   Gang, we have a brand new cast of characters all lined up for 2016.  I think, however, that you will probably see the same extreme caution going forward.. that we have already seen in the past…. in making moves of any kind.
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The Cast
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Having held a press conference at the December meeting where the Fed Funds Rate actually experienced it’s initial lift-off, we’ll have to gather our info today from the Statement itself, and not from the already spoken about cast of lion tamers, and alligator wrestlers.  They will have to acknowledge the grotesque Q4 data that we will get numbers on this Friday.  They will have to acknowledge considerably tighter monetary conditions, and all of the external risks that they had acknowledged when they took a pass back in September, and then forgot about.  They may acknowledge that they seem to be diverging from other global central banks.  Then again, they may try to distance themselves from .  December…. to seemingly leave all doors open….. to soothe.

                  To keep things upbeat…… they will likely tell you that growth, despite Q4 remains on trend.  They will tell you that Core inflation remains below their 2.0% goal, despite the Core CPI currently standing at 2.1%.  They may even tell you about that strong December Employment Report that was really only a net gain of 11K jobs, but was seasonally adjusted to 292K….Ok, ok… they may not go into too much detail on that one.
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                   Basically, the Fed will take a powder today.  They will look out of their window from high up on their tower at the castle, and blow you a kiss.  They will promise to buy you an ice cream if you are a good little boy or girl, and then hope that you are a good little boy or girl.  Good luck on seeing any ice cream.  Sarge out.
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Wednesday’s Earning’s Highlights
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Before the Open: BA (1.26), GD (2.38), HES (-1.45), NSC (1.27)
After the Close:  DFS (1.30), EBAY (.50), FB (.68), MCK (3.14)

Market Recon Tuesday

Good Morning,
                       Yesterday’s movement for the S&P 500 was so precisely technical, as to be remarkable.  From the early resistance at 1902, to the violent break at 1890, to the final support at 1876, it was almost as if the script were written earlier in the day.  Really stunning, if you’re a numbers nerd.  Even if you’re a fundamentals guy, and I am one at heart, you really do have to learn this stuff.  Remember, the guys writing the programs are chart-monkeys, you might as well look at what they’re looking at. Today really begins this week, as the onslaught of macro, and quarterly earnings releases gets itself in headline making gear.  There’s a lot to get after, and keep your eyes on, so we might as well stop talking about how mush there is to look at, and start tearing it apart, so we can all make ourselves (or save) a buck.
                      Global equities are well mixed this morning, with an overall bias to the down side.  Said bias was more than a little dramatic in Shanghai, where the Composite Index gave up more than 6.4%.  Today’s big worry for Chinese investors….. capital outflows.  This beating taken by Shanghai was their worst in…wait for it…wait for it… almost three weeks.  It also has traders talking about support at the 2500 level now that 2800 is gonzo.  That index is now 47% of it’s Summer highs.
                      The rest of Asia was down significantly less than China today, with Europe down significantly less than Asia.  There were slightly green arrows to be seen in India, and Italy.  European shares seem to be towed around by Crude as Oil (Black gold that is) meandered around on it’s own volatile path this morning.
                       Did I mention the Fed ???  LOL….. Let’s bash those guys tomorrow.
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Macro
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08:55 ET
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Redbook (Weekly):  This weekly measure of comparable store sales across most of your retail chains has been losing steam of late, though still managing to sport year over year gains.  Last week’s print showed growth of 1.4% y/y, while printing in the red on a m/m basis.
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09:00 ET
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FHFA HPI (November):  This would be a tale of two HPI’s with this being the one that nobody you know will react to, or even mention, but just in case all you care about is single family homes with conventional mortgages that involve either Fannie Mae or Freddie Mac, then this is your cup of tea.  For October, this item saw a m/m increase of 0.5%, today we expect to see a slight drop in the rate of m/m growth to 0.4%.
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Case-Shiller HPI (November):  Now, this would be the HPI that everybody looks at, and though this item is released in many different formats, it is the 20 city, y/y non-seasonally adjusted format that gets the most attention.  For November, we expect to see that specific item print at 5.7%, which would an improvement from October’s 5.5%, and smack dab in the middle of consensus range.
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09:45 ET
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Markit Services Flash PMI (January):  The December final for Markit’s Service Sector PMI printed at 54.3.  Projections are for the rate of growth here to have continued to have cooled from the 57s and 58s that we saw early in 2015.
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10:00 ET
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Consumer Confidence (January):  Even with many parts of the economy taking a nose dive over the last few months, the great American consumer has remained optimistic (kooky, ain’t it?) in most surveys that reflect that kind of “sentiment”.  Although this item, which is released by the Conference Board has been volatile, it has not printed below 90 in well over a year.  December came in at 96.5, and those polled are looking for something very close to that number today.  The range for this one spans from 91 to 100.
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Richmond Fed Manufacturing Index ( January):  Did you guys see that Dallas print yesterday ??? Gee whiz, that was a bout as ugly as ugly gets…..and we’ve seen ugly get pretty ugly.  Well, Richmond did that rarest of all things for an American manufacturing index in December.  They printed a number that showed expansion.  I kid you not…. and very brave economists are predicting a two month winning streak today for this item.  We’ll see… but I am rooting for them.  Richmond had been a regular out-performer in this space throughout 2015.
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Tuesday’s Earnings Highlights
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Note:  As of yesterday afternoon, expiring weekly AAPL options were pricing in about three and a half clams worth of volatility for this afternoon’s earnings release.  I can check that for you today if you need it.
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Before the Open: MMM (1.62), COH (.66), DD (.27), FCX (-.16), JNJ (1.42), LMT (2.92), PG (.98),
After the Close: AAPL (3.23), T (.63), COF (1.61), X (-.86)
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Reminder:  You just read this note.  Somebody somewhere didn’t get that far this morning.  You’re one and oh today.  Don’t waste it.