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.

Market Recon Friday

Good Morning,
                        What is the opposite of the “Ugly Stick” ???  I don’t know, but whatever that thing is….it’s out, and about this morning.  Global equities are sharply higher just about wherever you look, as are US equity index futures markets, but in Japan, it’s an extra special, “rip your face off and dance” kind of euphoric rally that picked up momentum as the day wore on.  The reasons for today’s moves are simple.  For one, Crude Oil is rallying, now above $31 for March delivery, and for two… hopes of further easing of monetary policy once again have junkies lined up around the planet to take a hit.  Yeah, dude.
                        Our tale starts in the “Land of the Rising Sun” where an unnamed aide to Prime Honcho Shinzo Abe apparently gave the public the impression that the Bank of Japan will likely ease on down the road at their policy shindig on 28, and 29 January.  Supposedly “All things are being considered”.  Japanese traders were forced to quickly shift gears out of reverse, and into ludicrous momentum mode.  Paaaartaaaayyy.
                        Then there’s Super Mario, and he wasn’t squashing mushrooms and turtles, so he could save the Princess.  No, he… for the second consecutive day, sounded as if the door was wide open to a beefed up version of the ECB’s already easy monetary policy, and that they could fire things up as soon as March.  I will say this for Mario Draghi.  The man knows how to get what he wants with words.  He really does.  The perpetuation of the debt super-cycle is a live and well, folks.  For now.
                        Know what ??  It is Friday, and there is a massive snow storm headed for the East Coast.  Here’s a crazy idea.  How about the equity indices close higher for the week, and then we all head out for a disgusting plate of nachos, and some cold beverages.  Yeah, that’s what I’m talking about.
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Give Me a Beat
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          We’ve kind of got  a lot to go over today, not all of it of the highest quality mind you, but enough worthy of a mention.
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09:45 ET
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Markit Manufacturing PMI Flash (January):  This one is an odd bird.  While the Markit Manufacturing PMI Final gets almost no attention here in the States, the Flash actually does garner some, simply because the ISM does not do the whole flash thing, so this is what we’ve got.  The Markit item printed at 51.2 for December, and for today we are expecting a very similar 51.3.  Just as odd is that 51.2 is as low as this item has been throughout the entire collapse in manufacturing that has seen consistent negative prints for the regional Fed districts, and two consecutive ISM prints that were not only sub 50, but sub 49.  Credibility is at stake here.
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10:00 ET
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Existing Home Sales (December):  This, the largest slice of the housing pie disappointed badly in November, just like pretty much did the entire pie for that month.  Most economists are expecting (hoping with fingers, and toes crossed) for a significant snap-back in the December data.  November printed at 4.76 million units when measured in SAAR fashion.  That was the first sub 5 million number in that space since February, and it really hurt because consensus view for that item was up around 5.3 million.  That leaves only two possible outcomes.  Either that number will see a serious upward revision today, or the guys who get paid to predict these things probably should not be.  That said, it is with serious doubt that I inform you that projections for this one today are for a 5.2 million unit release.  Good luck guys.  You can always line up with the already mentioned junkies.
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10:00 ET
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Leading Indicators (December):  I’ve said it before, and I guess I’ll say it again.  At least for traders, this one is utterly useless.  I have never, in my career, ever heard anyone refer to this item for any reason whatsoever.  This print will not impact your day.  Move on.  The Conference Board.  LOL.
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11:00 ET
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Baker Hughes Rig Count (Weekly):  This is one folks have certainly started watching more closely.  Although the US Rig Count did drop last week, the Canadian Count ramped up enough to actually increase the total number of North American rigs in operation.  If we see another pop here, on top of yesterday’s increase in weekly supply, does Crude stay above $31????  No, really… I’m asking, somebody tell me.
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Friday’s Earnings Highlights
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Before the Open: GE (.49), KSU (1.10)
After the Close: Just you and that disgusting plate of nachos.
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Final Word:  When nothing else works, pray.  Actually, pray first.  Now, get back to work you filthy maggots.

Market Recon Thursday

Good Morning,
                        Life never ceases to amaze.  In my wildest thoughts, though in some aspects…I remain permanently….a twelve year old boy, I never thought that an unknown “Neptune” sized planet would be discovered in our solar system.  That’s very cool.  What’s much less cool, but just as bazaar, and unlikely an idea is that we might witness a day where there were margin calls at the day’s lows, followed by a short squeeze for certain stocks at the highs, which would in turn be followed by a sharp sell-off into the closing bell.  Can’t make this stuff up, kids.
                       Rumors swirled throughout yesterday’s mid-day rally of a large stimulus program to be released by the PBOC.  Doubt this was it, but the PBOC did offer $60 billion worth of reverse repurchase agreements to commercial lenders this morning.  For what it’s worth, the Shanghai Composite, the planet’s weakest major stock market index so far today sold off to the tune of 3.5% in response.  That injection of cash was apparently less than Chinese investors were hoping for in the way of easy monetary policy, and once it was determined that state-owned enterprises were not going to support stocks late in the day, the selling mounted.  The Shanghai is now in “double bear market territory”.
                      Just when you thought WTI Crude could only go down another 26 clams, the attention turns from the February contract to the March contract.  Huzzah !!  Now we can still go down 28 bucks before oil is free.
                       I know this  year is tough so far, gang.  Heck, a lot of things in life are tough.  Some kid somewhere, maybe in your own neighborhood is freezing this morning, or has no access to clean water.  So, that said, let’s quit our namby pamby little ways.  Let’s kiss our spouses & kids on their foreheads.  Then let’s buckle our chinstraps, let’s tie our boots as tight as they go, and let’s work our little tails off.  Nobody else is going to save you, so draw that line in the sand.  Who do you want in charge when mayhem tries to rule the day ????  You better say yourself.  Now, do this.
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Macro
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08:30 ET
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Initial Jobless Claims (Weekly): This is one item that although printing at what is generally considered to be very good levels, has been inching higher for two to three months.  Today, consensus expectations are for something like 278K, which would be an improvement from last week’s sort of lofty 284K.  There is a slight bias in the skew to the low side of the range, which spans from 265K to 285K.  Let’s hope.
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Philly Fed Manufacturing Index (January):  Let’s also hope Philly puts in a better performance this month than did New York.  If you recall, the Empire State printed at a disastrous -19 and change last Friday.  Throughout the utter, and complete collapse of the manufacturing business in this country over the past year or so, it has been Philadelphia that has remained the most resilient of the regional Fed districts.  Today, we look for the pace of decay for this district to slow from December’s -5.9 to something in the neighborhood of -4.9.  There is even at least one outlier economist predicting a positive number for this item…. but, before you go all warm and fuzzy on me, we also have folks at -10.
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10:30 ET
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Natural Gas Inventories (Weekly): Unlike their friends down the hall at the EIA, those who release this weekly report have actually seen reductions in supply for seven consecutive weeks, and the size of the draw seems to grow every week too.  This week is no different, with expectations for -180 billion cubic feet of the stuff.
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11:00 ET
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Oil Inventories (Weekly):  The good news ????  Well, we already know that WTI Crude can only go down 28 clams from here.  The bad news ??  My little birdie who is by no means infallible is looking for a pop in supply of more than three million barrels today.  For joy. For joy.
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Thursday’s Earnings Highlights
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Before the Open: BK (.64), CP (2.77), KEY (.28), LUV (.89), TRV (2.66), UNP (1.42), UAL (2.59), VZ (.88)
After the Close: AXP (1.13), ETFC (.30), SLB (.63), SBUX (.45)

Market Recon Wednesday

Good Morning,
                       Whoooooo Doggie !!!!  You know who’s out and about….. and looking for you, don’t you????  With Crude Oil trading well below $28, and the US 10 year yielding less than 2%, it could only be the “ugly stick”, and boy, is that stick batting nearly .1000 this season.  I don’t think you have to wonder what you’re going to do when the ugly stick runs wild on you any more.  Stock market indices across the globe are off a rough 3% this morning.  Of major markets, only Shanghai (-1%), and the Sensex (-1.7%) seemed to have kept the carnage to something less than beast mode.  As I type out this note, S&P futures are trading about 35 points below fair value.
                       Hey now, at least Davos gets started today.  That’s right, while you’re taking your lumps, and trying to find a way to feed your family, the rich and powerful will be trying to figure it all out for us at the World Economic Forum’s annual bake sale.  Uh, yeah.  I’ll just shut up about that.
                       In other fun news, Gov. Stephen Poloz and his gang over at the Bank of Canada are expected to either cut their benchmark, the Overnight Rate, from 0.5% to 0.25%, or at least do a head-fake and leave everyone with the impression that the BOC is about to act.  There are risks, and there is real uncertainty today over whether or not we’ll actually see that cut.  After all, the Canadian Dollar has been extremely weakened versus the US Dollar of late…and a rate cut is not going to give Oil a boost which is what our northern pals really need.  Who doesn’t?  The BOC policy announcement is expected at 10am ET, and the Stephen Poloz press conference is set for 11:15 ET.
                       I wish you all luck today.  If you haven’t started playing defense yet, then I am afraid that you have made your bet.  I hope you are right.  I would much rather be late to the next euphoric drive to victory than see the wickedness of that ugly stick for a while.  Just looks like this may be a semi-permanent condition.  The charts for the S&P 500, and even the Russell 2000 showed technical construction yesterday, but WTI Crude trading at 27.50 is just too heavy a counter-weight.  Days are long, and markets in the afternoon often do not resemble markets in the morning.  Fight on.  Surrender is never an option.
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Macro
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08:30 ET
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CPI (December): Headline CPI came flat in November from October.  December expectations are for a repeat of that performance.  It is, however… the Core print that carries the most weight.  I know that the FOMC claims to follow the PCE price index, but virtually everyone else that follows such things looks at the CPI, and I find it hard to believe that the FOMC gang does not.  Projections for the Core are for a m/m increase of 0.2%, which would equal the m/m gain reported last month.  The interesting tidbit here is that Core CPI is already at 2.0% when measured in y/y format.  Expectations are for a print of 2.1% today.  Now, could you imagine…. with the economy listing as badly as it is, if this item comes in just a little bit hot.  Yowza.  That’s not a pretty picture at all, now is it?
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Housing Starts (December): This data-point, with a few bumps in the road, has been remarkably consistent since way back in April when it went back over a million monthly annualized units, and stayed there.  In November, the SAAR print came in at 1.17 million units, and consensus for today is for a very stable 1.19 million.  The range spans from 1.1 to 1.25 million, so nobody is way out there on the fringe for this one.  Permits are expected to have faded just a touch from 1.28 million to something close to 1.21 million.  This item should pass quietly.  Should.
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08:55 ET
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Redbook (Weekly):  This weekly number is being released a day late, thanks to the holiday on Monday.  By that same token, you will not see Oil Inventories today.  Last week, we saw a drop in the y/y increase for this space from a very holiday-ish 2.9% to a more pedestrian 1.7%.  Many retailers will start bringing in their Spring stuff right about now, so the focus remains squarely on this space, even now, in the dead of Winter.
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Wednesday Earnings Highlights
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                    With far fewer headline level firms reporting quarterly numbers today than yesterday, GS stands out as the day’s “main event”.  Pricing in the options market is implying in an approximate move of $3.50 for that one.
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Before the Open EAT (.75), GS (3.62), AMTD (.36)
After the Close: KMI (.18).

Market Recon Tuesday

Good Morning,
                        There is a chance…. don’t get too fired up, but there is a chance that market forces will let you come up for air today.  Last night we got word that Chinese GDP grew at a 6.8% pace for the fourth quarter, and a 6.9% pace for year 2015.  That, by the way, though expected was the worst print in that space since 1990.  The “good news” ended there as the Chinese National Bureau of Statistics also reported numbers for December Retail Sales, Industrial Production, and Fixed Asset Investment that, in all three cases surprised to the down side.  Boooooooo, but hang on…. there is a silver ling.  Those who think about these things all got down on one knee and decided together that further stimulus from the PBOC (China’s central bank) was most likely…. on the way.  Bring out the jugglers, and the plate spinners !!!
                        Those stimulus hopes helped put a bid under Oil, which in turn put a bid under global equities, as well as US equity index futures markets.  On top of all of that, the ECB is reporting that lending institutions within the Euro-Zone have already started easing credit conditions, and are expected to continue doing so into 2016.  Huzzah !!
                         Wait, gang !!  There’s more.  That global center for international incompetence also known as the IMF has spoken out yet again.Yes they cut GDP forecasts for the US, China, others, and for planet Earth in general, and called for easier monetary policy, but…. there was one quote that just blew me away.  Check this cutie out.  “Indeed, in an environment of higher risk aversion and market volatility, even idiosyncratic shocks in a relatively large emerging market or developing economy could generate broader contagion effects”  Wow, ya think ??    At least now everybody knows to be on the lookout for idiosyncratic shocks in emerging, and developing economies.  Not sure, but heard that the IMF may also predict Janet Yellen taking over at the Fed when Ben Bernanke retires.
                        Tomorrow is a far better day for macro, but today… we will have a couple of numbers to look at.
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A Couple of Numbers
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10:00 ET…..NAHB Housing Market Index (January):  Basically, this one is what you might call the homebuilder confidence index.  This item printed in decline for the second month in a row in December at 61.  Expectations are that the number holds at that 61 level this month.  Not a single economist that I saw has a number below 60, nor above 62 for this one today.
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16:00 ET…..TIC (November): Being released simultaneously with the closing bell, this one will not directly impact your day today, but it certainly is one to keep your eye on.  The October data presented the United States with just its’ second net out-flow of 2015, with cross- border demand for long-term US securities printing at $-16.6 billion.  Chinese holdings for US Treasuries actually remained quite stable for the month.  It was the Japanese accounts that reduced their holdings of US Treasuries by a rough $25 billion. that made the difference.
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Tuesday’s Earnings Highlights
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                  Plenty of earnings on tap for the day.  This morning’s focus will still be on the financials, but even with far fewer releases…. it will the pm that looks like it presents the most opportunity for day-traders.  It is also those late ones that will get the most media attention today.
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Before the Open: BAC (.27), SCHW (.25), CMA (.69), DAL (1.19), MS (1.97), SBNY (1.93), UNH (1.38)
After The Close: IBM (4.82), NFLX (.02).

Market Recon Friday

Good Morning,
                       It’s back.  Just could not stay away for very long, could it?  Our old nemesis… the “Ugly Stick” is out and about.  Most Asian, and European equity market indices are having a rough final trading session today, capping off a volatile week.  Those markets have backed up something close to a percent and a half or so.  The real carnage is in the Oil market, where it appears that the $30 support level has been significantly breached, while Iranian officials talked up their future production.
                      This shift in the price of Crude, and liquidity concerns is what pushed the Shanghai Composite more than 3% lower, and is currently doing a number on US futures markets, though it is still early.  Shanghai, by the way, is now 20% lower than it was less than a month ago.  It is said that if you play dead, a bear simply walks away.  I can tell you that there is some truth to that (he does smell you, and push you around a bit), however… in the financial markets, that is not a plan.  You have to play defense.
                      Gang, we’ve got more macro, and more earnings releases from Financial firms than you can possibly shake a(n) (ugly) stick at.  That said, consensus views for nearly all of our higher profile macro today does have, or is close to having a contractionary minus sign in front of it.  An ugly minus sign.
                      OK, it is Friday you wonderful people.  Let’s tape on the foil, and get after it.  Old time Hockey.
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Hordes of Data
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08:30 ET
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Empire State Manufacturing Index (January):  Can you feel the excitement?  Our very first look at manufacturing in calendar year 2016.  I can hardly contain myself.  As most of you know, American manufacturing has been in a full state of collapse for quite some time now, and the Empire State has taken it full on the chin.  In December, the district’s pace of decay actually slowed to -4.6.  Today, a sixth consecutive month spent in contraction is likely.  Consensus is for another -4 tag, which is smack dab in the middle of the range.
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PPI (December):  Inflation, at least at the producer level did wake up in November.  After spending two month’s in contraction, we saw a surprisingly hot 0.3% monthly increase at both the Headline, and the Core.  That increase was obviously not fully passed on to the consumer.  (Thank goodness, says this consumer).  Most economists I see do not see November’s heat turning into a trend.  Today, we look for -0.2% m/m at the Headline thanks to energy, and a not so robust +0.1% m/m at the Core.
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Retail Sales (December):  In a day full of high profile macro, this item is perhaps the most important to traders.  It is widely expected that cooling auto sales, and lower prices for gasoline will hurt headline Retail Sales.  That said, the headline print is projected to come in flat from November, though the range is slightly skewed into the negative.  Consensus for the Core number is for an increase of 0.2% m/m.  In each case, there is a slowing in the pace of growth here.  Not really what you want to see in December.
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09:00 ET
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Fed Speaker:  It’s been ages since we’ve heard from NY Fed Pres. “Wild Bill” Dudley, and that’s to his credit, because some of us (myself included) think that some of these guys talk way too much, and thus have outsized market impact.  The wild one will be in Somerset, New Jersey.
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09:15 ET
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Industrial Production (December):  This very important data point has shown contraction in eight of the eleven months reported so far for 2015.  Today, we look for a m/m print of -0.2%, which would make it nine.  There is however…some hope.  Consensus Range for this guy spans from -0.5% m/m to +0.5% m/m.  With manufacturing running out of room to the downside, this may be left up to the Utilities, and the Miners (uh oh).
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Capacity Utilization (December):  Last month, the November release for Capacity Utilization came in at 77.0%, the worst print in that space since July of 2011.  Today, expectations are for a 76.8% print, which would be (let’s say it together, gang)… the worst print in this space since July of 2011.  Oh, Get some !!!
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10:00 ET
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U of M Consumer Sentiment (January [p]):  This data-point has shown slow and steady improvement since early Autumn.  I don’t know why they’re so optimistic, but who are we to discourage it ??…  so …. Rock on.  Expectations are for a 92.9 print today.  Hopes and dreams are for 93 plus.
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Business Inventories (November):  Probably the least sexy number that we’ll see today, and it’s somewhat dated to boot.  We’re looking for a flat print here, just like we got last month, but after the week we’ve had, and the higher profile number that we will have already had, they could probably throw any number they want on the scoreboard for this one, and the market will not notice.
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Friday’s Earnings Highlights
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Note:  We’ve got a boatload of Financials reporting this morning.  JPM reported what looked like a pretty decent release yesterday morning, yet the sector still underperformed the general marketplace.
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Before the Open:  BLK (4.84), C (1.12), PNC (1.78), USB (.79), WFC (1.03)
After the Close:  Hopefully something simultaneously disgusting and delicious.
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Guidelines for Today, Tomorrow, and Forever
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To always do the right thing, regardless of the circumstance I find myself in.  To choose the hard right, over the easy wrong.  If my mother could see me right now, would I be  embarrassed?  Carry on.

Market Recon Thursday

Good Morning,
                        Markets…they go up and they go down.  You’ve heard that one before, and it is true.  Now, you’ve heard me talk about trains that are not running, and ships that are not sailing.  You’ve watched as Oil, and the rest of the commodity complex have utterly collapsed, along with it…. the Energy Sector, and all of it’s component industries.  Speaking of collapses, Manufacturing numbers have been quite consistent.  Back to that first sentence.  The great James Grant (and plenty of others) will often tell you that quantitative easing, and the ultra low interest rates that were married to it did not create any economic growth.  Merely that easy monetary policy simply brought consumption forward.  It still has a non-negotiable price.  We did have a nice run.  The ice is melting, and we are a long way from shore.  How’d you kids do at swim qualification ??
                       European equities are being hit with the big nasty this morning after both Italian Industrial Production for November, and German Wholesale Prices for December missed expectations by miles (more than one mile).  In fact, the only high profile global marketplace that I see sporting any shade of green today is the Shanghai Composite, after a late day (love how they do that) surge.
                       Today will be the first day of “earnings season” with a main course, and some side dishes on your plate.  I’ve been looking at this…. despite the recent market volatility, there really is not a lot of volatility baked into the options market in those names reporting today.  JPM, the day’s headliner is baking in under a dollar’s move in options expiring this week.
                        Now, about that thin ice……
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Children’s Entertainment
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07:00 ET
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Bank of England Policy Announcement:  You know, it wasn’t too far back that the BOE was on the verge of raising it’s Official Bank Rate from the 0.5% where it now stands, and has stood since 2009.  BOE Gov. Mark Carney, and Fed Chair Janet Yellen kind of remind me of two kids standing at the edge of a pond on a nasty, cold day.  Both kids daring each other to jump in until they agree to jump together on the count of 3…… 1,2,3…….  One kid jumps in, and the other points, and laughs.  Which kid do you think is Yellen?
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08:15 ET
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Fed Speaker:  St. Louis Fed Pres. James Bullard will speak on both the economy, and monetary policy from Memphis, Tennessee.  No word on a Q&A session.  Bullard has leaned hawkish, and St. Louis does vote this year after having taken a powder in 2015.
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08:30 ET
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ECB Monetary Policy Account:  This is the European version of the Fed Minutes, regularly occurring four weeks after Mario, and the gang get together, and do their thing.  This will likely be overlooked by the media due to the US macro to be released at this time, but could cause a ripple in European markets at the time.  It’s not like we don’t feel those over here.
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Arts and Crafts
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08:30 ET
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Initial Jobless Claims (Weekly):  Still at historically low levels, this number has been creeping slightly higher, with three of the last five weeks printing above 275K.  That 275K is our consensus expectation today, which if it were true, would be a drop of 2K from last week.  Scary side-note:  There are some outlier economists out there who see a print above 300K for this item today.
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Import and Export Prices (December):  Deflation anyone?  Oh, we’ve got your deflation right here.  Import Prices haven’t seen positive growth since the balmy days of June.  For a plus tick in Export Prices, you’ll have to go back to May.  So…you get the picture, it’s (oh, so very) ugly.  For December, expectations are that Import Prices got really hammered (-1.4% m/m – Ouch !!), and that Export Prices only got sort of hammered (-0.5% m/m) .  Party on, dudes.
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10:30 ET
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Natural Gas Inventories (Weekly):  You’ve heard warn about this one before.  Playing this release can eat you all up, but then again….these days… just about anything you have a position in, can eat you all up.  Projections are for a seventh consecutive weekly decline in Nat Gas Storage today.
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13:00 ET
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30 Year Treasury Bond Auction:  Yesterday, we saw a very strong auction for ten year notes.  Cant be surprised, really, with equity markets simultaneously getting their faces ripped off.  Treasury looks to unload $13B worth of bonds here, same as they did on 10 December.  That auction yielded 2.978% with a bid to cover of 2.42.  This morning I see the 30 year yielding 2.842.  Yeah, the long end of the curve looks fine.
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Thursday’s Earnings Highlights
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Before the Open: INFY (14.37), JPM (1.32), TSM (2.64)
After the Close: INTC (.63)
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Gang, I have but one request, and it might not always be easy.  Just be excellent to each other.

Market Recon Wednesday

Good Morning,
                       What do you think would happen should …. say … China sell off a bit, and nobody went with them ????  Well, you may just find out today.  The Shanghai Composite took a left turn late in the day, after most Asian markets, having been buoyed earlier by a steadier Yuan, had already turned into their driveways, and shut off the ignition.  Is the sub-3000 Shanghai close very significant ???  It is the first of it’s kind since the Summer scramble.  It certainly concerns me.  Stay tuned until tomorrow on that one.  In the meantime….
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Enter the Dragon
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                        Now, the Chinese export data for December, that was released last night is telling a supportive story for European equities, and US futures markets this morning.  You see, exports dropped 1.4% y/y in dollar terms (actually exports did grow in Yuan terms), but that was up against a November that saw -6.8% y/y results, and expectations for this print that were in the neighborhood of -8.0% y/y.  Not only that, but doubts about Chinese demand for Crude were put to rest, at least for the time being.  December saw a 9.3% y/y increase in Chinese Crude imports, up from the 2015 average.  In totality, China’s demand for Crude grew 8.8% in 2015 from 2015.  Hence, early morning strength in Crude & Equity futures contracts.  I know it’s a lot for this early in the morning, but I think this sheds the fluff, and simplifies things.  We’ve got  a few logs in the fire of our own today, gang, and it all may not be so pretty.
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The Good, The Bad, & The oh, so Very Ugly
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08:00 ET
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Fed Speaker:  Boston Fed Pres. Eric Rosengren speaks on the economy from Boston.  Rosengren is a voting member of the FOMC this year, and has been known in the past to be a dove.  That said, he had sounded just a touch more hawkish at times as we approached last year’s initial Fed Funds rate hike.  It will be interesting to see if, and how his views have evolved since December.  I’m not casting stones yet.
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10:30 ET
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Oil Inventories (Weekly):  Last week, we saw a surprise contraction of 5.1 million barrels in this space.  That gave a boost to the dollar denominated price of Crude, right?  No ??  Guess not.  Hey, we’ll try again this week.  Surveys say that we’re looking for an increase in supply this week of about 2 million barrels.  Surveys are inaccurate.  Often.
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13:00 ET
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10 Year Note Auction:  These monthly auctions, particularly for ten year paper are so darn intellectually interesting.  At least I find them so.  On 9 December 15, the US Treasury auctioned off 21 billion clams worth of these puppies at a yield of 2.233% with a bid to cover of 2.64.  That, at the time, was considered a strong auction.  Today, Treasury will let another $21B worth of this stuff fly of the shelves.  Last sale for the ten year that I see at this time is at a yield of 2.135%.
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Fed Speaker:  Chicago Fed Pres. Charles Evans will speaks from Cedar Rapids, Iowa.  Evans was known as one of the more dovish members of the FOMC, was probably a force behind the Fed’s failure to better time it’s initial interest rate lift-off.  Chicago will not vote in 2016, but it’s probably a safe bet that Chaz will feel comfortable making his policy leanings known.
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14:00 ET
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Beige Book:  You know what this means ??  The FOMC is just two weeks away, gang !!!  Hence, the national canvassing being done by the regional Presidents.  Ahhhh…. don’t worry.  I mean… How bad,…uhm…how ugly can the anecdotal evidence of economic conditions from the 12 Fed districts possibly be, huh ??  Doh !!!
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Federal Budget Balance (December):  This one will not factor into your trading session today, but it is economically important, and as a nation, we are really bad at it.  Consensus today is for $-2.7B, which is a really tiny deficit as far as this item goes, and consensus for this item is usually pretty close.  November’s deficit was $-64.6B.
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Today’s Earnings Highlight
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SVU will release today before the opening bell.  Consensus expectations are for 16 cents a share.  I have not seen any whisper numbers.  In October, SVU missed EPS expectations by a penny, while revenue missed small.  The stock was sawed in half in 2015, but has shown y/y revenue growth and is in the news regarding possibly spinning off it’s Save-A-Lot locations.
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OK, when I say move, you will proceed with the day’s operations, now…. Move..