Market Recon Friday

Good Morning,

                        Funny thing happened yesterday afternoon, just as that S&P 1812 level that all of planet earth was keeping an eye on started to crack.  Yeah, funny thing.  That was when an Oil Minister out of the UAE was cited as saying as indicating that several OPEC nations were ready to cooperate on possible production cuts.  Oil found a bid, stocks found a bid, the rally continued in Europe,. and is still visible in early morning US equity index futures trading.  Odd timing.  They probably do all have sizable equity portfolios.  Is it pure bologna??  Well, we all know that these guys do not work well together, and don’t seem to trust each other very much.  We also know that a reduction in production (Hey, look I’m Clyde) would be a common sense move that is beyond overdue.  Are reductions coming ?? Yes, and not only from OPEC.  Will they be well coordinated ???  Yeah. maybe.
                        I’ve decided to take a day off from bashing the Fed.  I mean, even though the heart is willing, as an everyday thing…. I understand it can get pretty old.  Now…what about risk going into a three day weekend ?? Europe’s higher.  Oil is higher.  Technically, a bounce looks imminent….. but, and this is a doozy… China re-opens on Monday, while we are closed.  Traders hate carrying risk into long weekends, and China has a lot of downside likely priced into their re-opening.  In fact, by the time, we re-open on Tuesday morning, the Shanghai will have opened, and closed twice.  I think you will see some folks who got hurt this week try to ride this wave this morning, but there will be a tempering of this rally at some point today, if not by the traders themselves, by their risk managers.  This tug of war will likely be intellectually interesting to watch as the day unfolds.
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Hey, now, how about that Recession Risk Rising article by Josh Zumbren in today’s Wall Street Journal ??  Wasn’t I just a kook for mentioning this on TV weeks ago ??  Got a lot of silly looks that day.
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Nerd Note:  Not sure, but I think Strat-O-Matic opening day is today.
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Full Plate of Macro
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08:30 ET
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Retail Sales (January):  December was an ugly month for Retail Sales.  Let that one sink in for a second.  That’s right, last month’s prints both came in at -0.1% m/m.  Those prints being the headline number, and the Core, which excludes automobiles both stunk.  In fact, we have not seen a healthy month for this item since the Summer.  The January numbers that we’ll see today should show some improvement, which is good, but it will not likely be what we need to see from the consumer to make the trend look all that much better.  Expectations are for growth of 0.1% m/m at the headline, and a flat-line at the core.  Reason for hope… the skew for the core print is slightly to the high side.
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Import and Export Prices (January):  This is another instance of peanut butter and jelly macro.  Doesn’t make much sense to cover these two separately.  Deflation anyone??  Both of these items have been mired in deep contraction for quite some time now, having collectively abandoned the zero growth zone back in the lazy, hazy, crazy days of Summer.  In December, US exporters received 1.2% less for their goods than they did in November.  Conversely, Importers paid 1.1% m/m, so there is that.  For January, expectations are that Export prices saw deterioration of only -0.8% m/m, while Import prices just rolled off of a table again…to the tune of -1.4% m/m.
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10:00 ET
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Business Inventories (December):  Due to this item’s lack of sex appeal, and the fact that this is dated information..you will not see much of an impact here.  We also have a higher profile release kicking off at the same time.  Due to lagging sales, the inventory build has been weak in recent months.  In November, we saw this item contract by -0.2% m/m.  This print should show some improvement to +0.1% m/m.
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U of M Consumer Sentiment (February {p}):  As you already know, anything with the word “consumer” in it, has outsized market impact upon it’s release.  The U of Michigan survey, although well off of it’s highs, has for the most part remained entrenched in the 90’s.  That is a healthy area to be by most economist’s standards.  For this, the preliminary February print, we look for a slight uptick to 92.3, from the January final of 92.0.
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13:00 ET
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Baker Hughes Rig Count (Weekly):  This item showed some declines last week, and it stands to reason, given the price of Crude over the last few days that the rig count probably dropped further.  Going into this number, the US count stands at 511, and the North American count stands at 813.
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The Dark Side of the Force
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                Not bashing.  Just letting you know that we do have two Fed speakers approaching the perimeter.
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09:45 ET:  Dallas Fed Pres. Rob Kaplan will speak from Dallas on the housing outlook for the state of Texas.  It does not appear that monetary policy is on his agenda for today, and he is not a voting member of the FOMC.  I do not see this speech as an imminent threat to the markets.
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10:00 ET: New York Fed Pres. William Dudley is set to speak on household debt from New York City.  As you all know, Dudley is a voting member, and his words are watched extremely closely.  Therefore, even though his direction today should not take him anywhere dangerous today, his threat level to the marketplace will remain at least moderate.
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Friday’s Earnings Highlights
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Before the Open: IPG (.62), RRGB (.82)
After the Close: We usually look forward to a nasty plate of disgusting nachos.  After this week of market action however, nachos have been deemed a bit pricey.  Saving up for next week.