Market Recon Wednesday

Good Morning,
                        Holiday week.  Volumes are very light.  Asian markets are trading sideways today, while Europe slinks itself into the green.  US equity index futures are trading at, or close to fair value.  With all that excitement out of the way, let’s talk about the 800 pound gorilla in the room…equity valuation.
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Equity Valuation ??….. Oh boy, my Favorite !!!!
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                       Okay, gang…. you’ve all seen the data released just last week, that placed our collective S&P 500 P/E ratio at 23.6.  If you haven’t seen the data, don’t feel bad, you’ve made it pretty far for a guy not doing his best.  Onward.  That 23.6 is up from 20.5 only one year ago.  Many “experts” are now citing this historical abnormality as they rush to call for a horrific end to planet Earth, and all of her financial markets.  Let’s just rip off another chaw, and cool our jets here.  Let’s try to figure out if doom and gloom are really in our future.  I mean, we’re all going to sleep the long sleep under a pile of dirt one day, but I’m talking about our immediate future.
                       Markets, though far less pure than when men, and women screamed at each other in colored jackets, while waving paper in the air, still mostly manage to get things right in the long run.  Yes there are bubbles, otherwise known as skewed output, and they are created by skewed input.  Skewed input makes skewed output correct when taken in a snapshot.  You kids with me ??  Stand up in the back if you have to.
                       What I’m trying to tell you is that while earnings are in general decline….monetary conditions are not close to historical norms,  dividend yields are not close to historical norms, and the overhead also known as energy costs are not near historical norms.  On top of that, competitive instruments of investment are yielding nothing close to their historical norms.   So, why, oh why would you call for equity valuations to return to their historical norms ??  You may have noticed that the Dow Transports are just trading at 12 times earnings, and that’s with the nice run that they’ve seen in 2016.  These are not normal times.  We all know what should be, but you’ll hurt yourself trying to make it happen now.  In the mean time, exist in this environment… in fact create more than one portfolio with differing strategies.  That’s what I’ve done for years.  Consider it your own personal hedge fund.  Odds are that you are better than some (or maybe even most) of the pros, and you won’t have to worry about clients.  You will have to work harder than ever.  I put in anywhere between 70, and 130 hours a week…. every week.  You’ re defending your children here, kid.  Let your hatred for all of those perverse forces working against you drive you.  Nothing burns like hatred.  Then eat right, pray, and go for a run.
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Multiple Choice
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Now that Unemployment is at 4.9%, and Core inflation is at 2.3% y/y….Do you think that the “independent” Federal Reserve Bank is
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a) being manipulated by politicians to temporarily keep interest rates artificially low because, after all…this is an election year.
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b) being manipulated by the banks to temporarily keep interest rates artificially low because if you can allow inflation to get out of the bottle, you’ll get more bang for your buck from an emergency Volcker style rate increase than from keeping inflation stable by nipping it in the bud now that the targets have recently been surpassed.
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c) targeting the dollar, and the yield curve, and being deceitful about their intentions.
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d) playing ball with global central banks, and being deceitful about their intentions.
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e) a bunch of really smart hard workers who care about you and me, and look out for our interests.
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Just wondering.  I’m a trusting guy.  I’ll go with e.
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The Gong Show 
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09:00 ET
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Fed Speaker:  St. Louis Fed Pres. James Bullard, who just spoke on Monday, and is a voting member of the FOMC, (and is also well know for confusing double-speak) will broadcast from Bloomberg’s HQ via satellite.  On Monday, Bullard indicated that he was pressing ahead for the next interest rate hike now that employment, and inflation have basically met the Fed’s goals.  Good?  Yeah, I can agree with that.  Bad?  This is the same guy who left Esther George dangling by herself when she dissented last Wednesday.  Way to stand by your convictions…….not impressed.  Try again, Slick.
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10:00 ET
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New Home Sales (February): This item, an item that carries with it the added implications of construction spending, and labor market demand (so, it matters) has printed below 500K (SAAR) in four of the last five months.  We expect February to have been rather strong for this item despite the weakness seen in February Existing Home Sales on Monday.  Look for something in the area of 511K (SAAR), which is fairly close to the middle of a range spanning 40K.  This one comes in with a five handle, even if it still misses…some traders will definitely feel better.
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10:30 ET
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Oil Inventories (Weekly):  It is just wild how, everyone making a projection in this space seems to simply be throwing a dart at a dart board in a dark room, with a blindfold on.  Pretty much… just take a shot, can’t be any more wrong than anybody else.  I’ve seen “experts” throw out everything from an increase in supply of one million barrels to nearly four million.  The API puts out there number on Tuesday nights, and last night they put forth an 8.8 million barrel print in this space.  That’ll leave a mark.
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17:30 ET
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Fed Speaker:  Philadelphia Fed Pres. Patrick (man, how I miss Charles Plosser) Harker will speak at the University of Pennsylvania just one day after speaking at NYU.  Harker is not a voting member of the FOMC.
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Wednesday’s Earnings Highlights
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Before the Open: GIS (.62)
After the Close: KBH (.11)

Mid-Day Thoughts

Salutations,

                 Obviously, the terror attacks in Belgium remain the lead story today, and our prayers remain with the victims, their families, and the first responders.  Honestly.  Other than murder, given global market reaction…. the objectives of the terrorists have again apparently ended in failure.  That said, we talk about markets, and there is a job to do.
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1) The muted risk-off reaction seen in European equity markets, as well as here in the US has abated even further.  After last week’s big swing and miss by the Fed, this has to be seen as bullish for the markets.  We have Equities, Gold, and Crude all primed for profit taking…. just waiting for a catalyst… you would have thought.  Now we have a catalyst, and the sell-off still faded quickly.  100 points to go for the S&P 500…. why not ?  The Fed has apparently decided to allow inflation to heat up beyond their goals, and there remains very few places where one can turn a buck.  If “smart” money starts heading back in…..  kookier things have happened.
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2) Nervous investors did prep for a risk-off day.  Without puking their longs, Utilities, Gold, Treasuries, and the VIX are all at least started in the green today… completing the “Safety Dance” quartet.  All are now off of their respective highs.  Outside of that, Health Care is stronger today, after taking a beating last week.  Staples (a strength yesterday, and a somewhat defensive sector) are in the red today, as are the Financials.
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3) Technically, the S&P 500 found support at 2041, and has now met resistance at that well established 2052 level.  As was the case yesterday, a crack & hold at that spot, could vault us to 2062.
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4) NKE reports tonight.  The Street looks for $.49.  NKE options expiring on 24 March are pricing in a little better than $2 worth of volatility.  In full disclosure, I am playing a simple non-direction strangle here, just pushing out the expiration a bit, just in case I need time to be right.

Market Recon Tuesday

Morning,
              Sad. Yes, so sad that the mindless mass murder of innocents is losing it’s shock value.  Oh, what happened this morning in Belgium is still tragic.  Always tragic.  That has not changed at all, but just look at the marketplace in the wake of this news.  This day is long from over, but if you were watching S&P futures trade in the wee hours (as I was, cuz I’m a nut), you saw the plunge, then you saw the headlines, and then almost methodically you saw the futures climb most of the way back.  Not only that, in Europe, all of the major equity indices now show almost the same chart pattern.  Many of those markets are down less than half of one percent for the session as I type.
              While we’re at it, why don’t you say a quick payer (or whatever it is you do) for the victims, and their families.  Then say one for those who now must risk their lives responding.  After all, this is Holy Week.  I’ll wait right here, then we’ll move on.
              We still have a job to do, right….  so let’s get after it.  Though market reaction has been muted, I would not be amazed to see some traders look for an excuse to book some profits (been thinking that for a few days), especially if something else were to cause concern.  We’ve had very nice runs in many sectors, as have both Gold, and Crude.  I would think (I know) that we likely are approaching some target prices.  Could see increased (yes, increased) volatility as we approach the end of the quarter.
              Thinking hard on re-allocation going into Q2.  Our defensive equity stance, and high cash level worked well with our push into Gold.  Not going to go nuts, but if we get an S&P 500 Fed fueled jackknife move to something like 2150…. you want to be there.  You may not approve of the perverse economic skews that we are forced to live with, but adapting to, and then excelling in the environment provided is our everyday goal.  So then, be excellent.  Disagree??
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Numbers and Salesmen
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08:55 ET
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Redbook (Weekly):  This item has, of late… been stumbling a bit, but has been steadily maintaining some year over year growth.  I think the market for the retailers remains okay if this continues to sport growth of more than half of one percent.  If not, well….we’ll cross that bridge…..
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09:00 ET
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FHFA HPI (January):  As far, as home price indices go, this is the one that folks usually do not watch very closely.  The lack of trader attention is due primarily to the narrow scope of this item.  The FHFA HPI only covers single family homes, and only covers conventional mortgages that contact Fannie Mae & Freddie Mac.  Now that I’ve said all of that, I think that today is the day that this one may get some (some, not a lot of) attention.  Now that we’ve seen a fairly severe miss for February Existing Home Sales that came after a miss for February Housing Permits, housing data is likely to be even more closely scrutinized than usual in the immediate future.  The caveat ??  Both of our HPI’s trail all of the other data by a month, and January was a decent month for housing.  Expect something close to 0.5% m/m or this one today, up from December’s 0.4% print.
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09:45 ET
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Markit Manufacturing Flash PMI (March):  Here we go again.  Second largely ignored item of the day, that could get a closer than usual look.  You’ve all seen the Empire State, and Philly Fed suddenly swing into expansion, and the ISM does not do “flash” type data, so….. the only game in town is …….., oh this, and the Richmond Fed.  Today, we look for a 52-ish number up from the February final of 51.3. Keep in mind, Markit’s PMI has stayed above 50 since the cows came home, so their reliability is suspect.  Really suspect.
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10:00 ET
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Richmond Fed Manufacturing Index (March):  Can Richmond make it three regional Fed districts in a row that print their manufacturing data above zero ??  Unlike most of it’s peers, Richmond has only been in contraction for two straight months, and consensus for today is between 0, and -1, so this will be a squeaker.  Thinking they can pull this off.  I know, I’m just a sunny patch of optimism.
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12:30 ET
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Fed Speaker:  Chicago Fed Pres. Charles Evans speaks from Chicago.  Chicago does not have a vote this year, but for some reason folks do seem to listen to Evans.  Just remember, this is the guy who told you in late February that core inflation is “a good indicator of where total inflation is likely to be headed over the next year or so”  Thank you Dr. Evans, unless Crude trades down to zero, you may be on to something there.  Really ???  Are these guys paid for this ??  I’ve also heard that vegetables are good for you, but I’m still waiting for more data.
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18:30 ET
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Fed Speaker: Philadelphia Fed Pres. Patrick Harker is all set to be heard at NYU.  He will speak on Growth, and the role of Economic Policies.  Yeah, that ought to be good.  Growth and Policy….just like peanut butter and jelly.  Harker does not vote this year, and has largely flown under the radar since taking the reigns in Philly.  Given my well-known tolerance for those that pervert the purity of free market price discovery, and the sanctity of risk assessment, I’ll give him a pass today.
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Tuesday’s Earnings Highlights
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Before the Open: Nothing that has me storming the castle.
After the Close: CTAS (.95), KKD (.21), NKE (.49), RHT (.47), SCS (.22)

Mid-Day Thoughts

Good Afternoon,

                       Very quiet post triple-witching volume today, which I guess is to be expected.  Technically, unless I’m wrong (which sounds just ridiculous, right?), we seem to be getting pinched for a point on both ends.  Came into today with S&P 500 trading levels at 2042, and 2052.  So far, we’ve seen support at 2043, and resistance at 2051.  Good enough if you’re throwing grenades.  Not so hot if you’re taking your time trying to squeeze off well aimed shots.
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1) Crack to the up, SPX 2062 becomes possible.  Like wise, if there is to be some late day profit taking, we’ll try to make a stand at 2035.
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2) As to the equity arena, Utilities and Staples have moved into the lead, and they are two of your more defensive sectors, but as far as safety dancers go, Treasuries, & Gold remain lower on the day.
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3) Energy is today’s weakest sector despite continued strength for the Crude space.
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4) Small Caps are lagging behind the market, even with a firmer US Dollar.  That’s a combo that in a healthy economy should not exist, but it is also a combo that we have seen more often than not of late.
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5) I don’t care all about the NCAA basketball tournament.  I do however care about tomorrow night’s earnings parade, the only such batch of concentrated quarterly earnings releases in household names that we’ll see this week.  NKE leads the pack, but you’ll also hear from CTAS, KKD, RHT, and SCS.  This is where the retail trader must try to make something happen in a shortened week.
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6)  Oh, and do not forget that St. Louis Fed Pres. James Bullard, member of the FOMC will speak tonight.  Bullard has the ability to impact markets.  He also has been known to claim that low interest rates are possibly causing low inflation, after just weeks earlier ….. calling further rate hikes “unwise” due to low inflation expectations.  True story.

Market Recon Monday

Good Morning,
                        Remember that whole Chinese stock market bubble thing ??  Of course you do.  Remember how Chines stocks were pushed higher by retail traders  borrowing to buy equities, and then when things got rough, the authorities pulled the rug out from under margin trading ??  (Pop)  Well, apparently it’s safe to go back in the water.  China Finance Securities Corp, a state backed operation that lends to the lenders drastically cut interest rates (if I’m reading this right) on their six month loans from 4.8% down to 3%.  Party on, Bill !!  Party on, Ted !!  The Shanghai ripped more than 2% on the day, with all of the big brokerages either limit-up (10%), or darn close to it.
                         Interesting week ahead.  Some higher profile type macro on deck, culminating in Friday’s final revision to Q4 GDP.  What I’m going watch (aside from everything) is that wimpy little Markit Flash PMI tomorrow morning.  Suddenly, with the Empire State, and Philly Fed acting like there may actually be a business in manufacturing, this one is one I want to see, for a change.  Earnings will be light again this week.  That does not mean that there is no opportunity there.  Tuesday night will bring you a bevy of names throwing numbers (and guidance) at you, with NKE being the most impactful.
                         As always, Fed Speak will matter.  Now with the Fed either pretending that they don’t see consumer level inflation, or pretending that they don’t think of macro-economic data as useful, or flat out trying to overshoot consumer level inflation targets and pretending that this is not what they’re doing (One of those three must be true.), words will push markets around.  Someday Fed speak won’t matter, and free market dynamics will rule.  That day is not today.
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Send in the Clowns (and Home Sales)
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Zero Dark Thirty
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Fed Speaker: Richmond Fed Pres. Jeffrey Lacker spoke this  morning on Central Banking from Paris, France.  Lacker toed the company line, indicating that he expects inflation to get back to 2% in time.  Must not have seen any CPI data over the last four months.  Maybe the poor guy doesn’t have internet access, or cable TV, or read newspapers.
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10:00 ET
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Existing Home Sales (February):  Housing data for February got off to a mixed start last week with a mild beat for Starts that was coupled with a mild miss for Permits.  Today’s number happens to probably best represent the housing market as a whole, as it is the largest slice of that pie.  Existing Home Sales are coming off of back to back strong months after that glitch in the November figure.  Looks for something of a pullback today, likely in the 5.31 million units (SAAR) area, down from 5.47 million.  The skew in the range is to high side of consensus.
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12:30 ET
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Fed Speaker:  Atlanta Fed Pres. Dennis Lockhart speaks on the economy from Savanna, Georgia.  We have not heard from Lockhart since late February.  At that time, he was out front about being concerned over Chinese growth.  It will be interesting to see if he works that into today’s speech, especially since markets seem less panicky over China.  Atlanta does not vote this year.
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20:30 ET
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Fed Speaker: St. Louis Fed Pres. James Bullard is expected to speak on the economy from St. Louis.  Bullard does vote this year, and if you’ll recall, he was quite vocal in late February about not raising interest rates again any time soon.  In fact, I believe he said the it would be “unwise” due to falling inflation expectations.  Hmmmmm.  Okaaay.
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Personal Note:  Four day week this week, gang.  Keep it in perspective.  You know what I mean.

Mid-Day Note (Pre-FOMC Announcement)

Greetings,

1)  What if we continue to see hot Core inflation without the kind of strengthening macro that you’d like to see coupled with it ??  I’ve been asking that question, and we’ll be able to let you know this afternoon, because that’s exactly what we have now.  Core CPI printed at 2.3% y/y, now having spent a four consecutive months at or above the Fed’s stated target.  No doubt now….  that the Fed is in a tight spot of their own doing.  Oh well, crying over spilt milk, or a tightening cycle that started a year and a half too late will do us no good.  Excelling within the environment provided is always an option for each of us.
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2) Major equity indices have moved sideways to higher throughout the morning, with the Russell 2000 as the leader for a change.  After opening below 2014, the S&P 500 quickly re-gained that level, and then held on it’s only significant test.
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3) Oil roars off of the lower than expected inventory print, bring the Energy sector along for the ride.  Financials are also seeing a boost.
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4) Some defensive plays are selling off a bit today.  Utilities, and Staples are the weakest sectors, while the VIX has been trading at it’s 2016 lows.  Gold, and Treasuries, however are staying fairly close to unchanged.
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5) Speaking of Treasuries, they are buying the 30 Year, while mildly selling everything else, so there is some flattening of the yield curve.

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6) Whole ballgame changes at 2pm.  There is some banter on twitter today about a surprise increase.  Don’t think so, but I do think that Dr. Yellen might have to sound more hawkish today than she otherwise might have prior to that Core CPI number.

Market Recon Wednesday

Good Morning,
                       Thought yesterday had it’s moving parts, didn’t you?  Well, that was nothing…and the irony is that this party, even with all that will surround us this morning will not really get into gear until after 2:30 this afternoon when the Fed Chair gets to it.  Kick back and enjoy it, kiddies.  Today won’t bore you.
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Dot Dot Goose
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                       Smell that ??  Nothing else in the world smells like that.  Fed Day.  You’ll get your policy announcement at 14:00 ET, along with those economic projections that become less and less meaningful to trader types the longer it takes us to progress through this “never ending” economic malaise.  Your real chance at fireworks, at least for market participants today will come after 14:30 ET, when Fed Chair Janet Yellen kicks this party into high gear.  What to expect ??  I don’t think too many folks are looking for an increase in the Fed Funds Rate at this time, and if they were, the disastrous Retail Sales revision that we saw yesterday probably put the kibosh on that idea.  That said, one must remember that Janet and her gang do work for the banks, not for us, and not for the country that we love.  If they have been handed marching orders, and they can justify it within their mandate…. the Fed will try to raise rates when they think that they can pull it off.  You do understand that, right?  What matters is if conditions improve for the banks, not if Johnny can find a full-time job.  Think of monetary policy… not as something that you can rely upon, but as yet another imposing condition that you must be prepared to defend yourself against.
                     Some will still watch the dots to see where mythical future interest rate levels will be.  We all know that the Fed Funds Futures are a better barometer.  They will also likely ratchet down expectations for Unemployment & GDP just a smidge.  Central planners always exaggerate their ability to manipulate economies, and markets, then have to adjust.  You might as well ask your children where the Fed Funds Rate will be next year.  While you’re at it, ask your kids how many games my Mets will win this year.  I just have to know now.  Don’t bother asking them to factor in potential injuries, or how the other National League teams will perform.  What could possibly go wrong?
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Oodles of Headline Level Macro
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08:30 ET
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CPI (February): Headline CPI came in flat last month, and expectations for today are for a contraction of -0.2% m/m.  Thing is, with what has happened in the energy space, nobody watches headline inflation.  At least nobody with anything between the ears.  For Core CPI, the number came in a bit hot in January at 0.3% m/m.  Expectations for this release are for a still warmish 0,2% m/m increase.  On a year over year basis, which is really what we think is important, look for a repeat of last month’s 2.2% print, which if so. means that consumer level inflation would remain at or above the Fed’s stated target for a fourth consecutive month.  Don’t tell them that…. and Dorothy… pay no attention to that man behind the curtain.
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Housing Starts & Permits (February):  Two red-star items released simultaneously ??  You bet.  Though this one may be overshadowed by the inflation data, depending on where it prints, it may be the market’s morning mover given it’s significance regarding not just real estate, but Construction Spending, and implied demand for labor.  Starts & Permits have both been printing at consistent levels for quite some time now.  Permits have printed at a rough 1.2 million units (SAAR) in each of the last two months, and that is what we look for today.  Starts, which I consider infinitely more important have been ebbing just a bit over the last few months, with January coming in at 1.1 million units (SAAR).  We expect a slight bounce to something close to 1.15 million for this item today.
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09:15 ET
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Industrial Production (February): In this era of national manufacturing collapse that we are forced to live in, Industrial Production got a nice reprieve in January, breaking a string of five straight monthly declines.  The Empire State number may have printed above zero for March, but that’s not going to save this February item.  Look for Production to give up -0.2% m/m, which is actually toward the higher end of the range.
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Capacity Utilization (February):  This item also broke a five month losing streak in January, surging to 77.1% from a mere 76.4% in December.  It stands to reason that with expected contraction in Production comes contraction for this little guy.  Look for something in the neighborhood of 76.9% for this one today.
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10:30 ET
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Oil Inventories (Weekly): Remember the kids’ game “Pile on the Rabbit” ??  Sure you do.  By the time you were an adolescent, it was probably called “Kill the guy with the ball”.  That game kind of reminds me of Oil supply.  Every Wednesday, Crude is the guy who picks up the ball, and well…everybody piles on.  Crude has seen sizable increases in supply in seven of the last eight weeks, and expectations for today are no different.  I’m hearing that we’ll see something like an increase of just under 3 million barrels today.  The API number, which came out last night showed an increase of 1.5 million barrels, which is why you are seeing some early strength in Crude.
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Wednesday Earnings Highlights
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Before the Open: Nothing’s got my blood moving.
After the Close: FDX ( 2.35), GES (.59), JBL (.59), WSM (1.58)
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Note:  There will be no Market Recon tomorrow or Friday, as I will be otherwise obliged.
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Historical Note:  Every year, on St. Patrick’s Day, as the remaining regiment of the Civil War’s legendary “Irish Brigade”, New York’s Fighting 69th Infantry Regiment leads the city’s parade up 5th Avenue.  The brigade was given the nickname “The Fighting Irish” by Confederate General Robert E. Lee.  The Chaplain of the Irish Brigade during the American Civil War was a Father William Corby, who later twice served as President of the University of Notre Dame in Indiana.  Hence that is how a University in Indiana’s athletic teams came to be nicknamed after a New York Army National Guard unit.  Something you very well may not have known.

Mid-Day Thoughts (A Little Anger)

Dearest Market Participants,

How Bout Dat ???

            You really have to just love the lack of reliability in the macro that all of us use in our decision making.  The  Census Bureau significantly revises November & December Retail Sales higher….. Oh, yeah… get some, nothing but love songs, and chocolate ice cream for the masses.  Couple that with the wage growth that we thought was there, and (poof !!) many economists (including this one) revised their own calls for a looming recessionary environment.  Now….. we get a nasty print for February Retail Sales that brought with it… (wait for it)….  an absolutely horrific revision to January.  Throw in (once again) declining wages, and then add to that… a Federal Reserve that seems to have been given their marching orders from their banking masters, and just what the heck are the rest of us supposed to think ????
           I have an idea for the Census Bureau.  Obviously this job is too big for you.  That’s okay, really… let’s just not do the preliminary Retail Sales print two weeks after a month ends.  If six weeks is what it takes to get an accurate read, then keep the first print to yourselves, and make the revision… the initial print in this space that the public sees.  If these simple instructions are not clear, I am easily reachable, and I can dumb it down for you.
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1) Again, you see weakness in commodities that could provide a reason to take profits in equities, and at least so far the S&P 500 is coloring within pre-set lines.  Support at 2005 has been tested three times.  the high at this point is 2012, but the marble notebook says the level is at 2014.  FYI, the notebook has a pretty good track record.  Panic level 1994.  Break away level 2021.
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2) Strength this morning is the safer arenas of Utilities, and Staples.  The VIX is also higher, but the full safety is not in vogue.  Treasuries have lost steam throughout the session, and Gold has been a weight on the miners today.  Energy (oil), and Health Care are also fighting off the Ugly Stick.
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3) DXY is flat to higher, while the Russell 2000 is again weaker than the market in general.  You all know how I dislike that.
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4) Need a real positive ???  The Empire State Manufacturing Index printed above zero today (Yes, I said manufacturing index).  Best of all….. they don’t do revisions.
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5) Two days til St. Patrick’s.  Getting fired up already.

Market Recon Tuesday

Good Morning,
                        All right you filthy maggots, the markets gave you your stinkin’ one day forced vacation.  Now, it’s time to dig in.  We’ve got a lot of moving parts to tackle this morning, and if you just want to punch a ticket somewhere, put in your worthless eight hours or so and read the sports pages, and the comics…well, I guess you can go do something like that.  The rest of us (my people) are going to do this dress right dress, so lock it up tight, and let’s focus.
                        I did not like the way we closed last night.  The failure of the S&P 500 to hold 2021 on the closing bell left me thinking about today’s opening all night.  That close ruined what had been solid price performance on a day where there was clear cause for profit taking.  We move on.  Global equity markets are reacting to weakness in commodities this morning as well as a couple of other, somewhat less easily identifiable variables.  First off, the Bank of Japan held off on pouring even more kerosene on their fire, which was expected.  They sat on their hands while downgrading their own assessment of the Japanese economy.  Those negative rates really seem like a swell idea, huh guys.  Bottom line…. the Bank of Japan , like most central banks, continues to fail their people, and their country.  Nice job.  The FOMC begins their two day shindig today.  I won’t rant on those guys now.  There’s always tomorrow… God willing.
                        Super Tuesday.  Again.  Wall Street seems comfortable with the front runner in both of the major political parties this election season.  I’ve heard talk to the contrary on this, but that’s largely political banter itself.  Markets love certainty.  We all know that, and the only thing that could hurt the Street from political quarters today would be upset victories from those trailing in their respective races for party nominations.  Those upsets could happen today, at least on the right where two such underdogs are playing home games.  In all, more than 1100 delegates are at stake today, so this is indeed a market story.
                         Then there’s the macro.  We’ve got an absolute boatload of domestic macro just waiting to slap your P/L around.  February Retail Sales will provide the biggest headline among today’s numbers, and then tomorrow…. you’ll get slammed by even more data.  Now, fight like you mean it.  If you can’t do that, then just get out of our way.
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Macro Party USA
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08:30 ET
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Retail Sales (February): Retail Sales have been a bit better than people thought over the last couple of months.  The headline print for January came in at a clip of 0.2% m/m growth, and it brought upward revisions for November & December with it.  the Core print also churned out a positive number where contraction had been expected.  Consumer based activity is part of the reason that a lot of folks are feeling a little better about maybe not going into a recession in the immediate future.  Now for a little sobering news.  Consensus view for February is for headline contraction of -0.1% m/m, with a nasty -0.2% release for the Core.  Fingers crossed…. there are outlier economists up in the +0.4% ish range for both of these numbers.  This data-point will impact the marketplac upon it’s release..
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PPI (February): We all know that when folks talk about inflation, and when the Fed watches inflation data, they’re all talking about consumer level inflation.  Well, this isn’t that, but it is the first measure of inflation for the month of February that we’ll see.  PPI came in a little hot in January, as did other measures of inflation.  Core PPI in particular roared to 0.4% m/m print.  Projections are that this pace will cool to something like 0.1% m/m at said core, and outright contraction at the headline.  This item will be overshadowed by Retail sales.
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Empire State Manufacturing Index (March): This item, as is representative of pretty much all US manufacturing data has been consistently poor for quite some time now. Outright growth is likely too much to ask for these days.  Expectations are for a number close to -11.3 for this data-point today.  If so, this would be the eighth consecutive month that NY printed in a state of contraction, with seven of those prints being negative double digits.  Just for giggles, the top end of today’s range is -7.  Idea ?? The market is pretty much calloused over when it comes to poor data in this space.  This print would have to be devastatingly awful or surprisingly positive to get increased levels of attention.
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08:55 ET
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Redbook (Weekly): This measure of chain store sales showed mild improvement last week to 0.7% y/y over the week prior’s 0.6% print.  Fun fact… we have not seen a negative y/y print for this item since 2009.
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10:00 ET
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Business Inventories (January):  Not sexy, and somewhat dated, this item is often overlooked by the marketplace at it’s time of release.  Lending to that fact is the reality that for six consecutive months, this release has printed between -0.1% m/m, and +0.1% m/m.  Expectations for today are for…..drumroll, please ….. 0.0% m/m.
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NAHB Housing Market Index (March):  Also known as the Homebuilders’ Optimism Index, this one is well off of it’s highs in recent months, printing at 58 in February after spending 8 months in the 60’s (peaking at 65).  Folks who watch this one are looking for a slight bounce to 59 today.
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16:00 ET
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TIC (January):  Always an interesting macro-economic data-point if you ask me.  Given it’s 4pm time of release, it likely will not impact the bulk of your work today, but you probably should keep track of this item (if you don’t want your peers to think that you’re a moron).  For December, we witnessed net foreign demand for US long-term securities drop into negative territory ($-29.4B) for the second month in three.  The net score was worse when it comes strictly to US Treasuries ($-35.9B).  We expect both of these numbers to again in print in the negative today, but likely (hopefully) at levels far closer to zero.
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Tuesday’s Earnings Highlights
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Before the Open: DSW (.07), VRX(2.62)
After the Close: ORCL (.62).

MARKET RECON (Ode to Transparency)

Good Morning,
                       Over the weekend, we saw some January-February macro-economic numbers out of China, and generally… they were not pretty.  Retail Sales, and Industrial Production missed their marks quite badly.  That 6.5% bottom lower bound on target GDP is starting to look sort of mushy.  Keep in mind that the Lunar New Year can distort Winter data out of China, though it’s usually a help, not a hindrance.  Global stocks are higher today in the wake of that Friday afternoon surge on Wall Street, and Shanghai is in line with everyone else.  In other global macro, Japanese Core Machinery Orders printed so far above expectations that it has me waiting for some other shoe to drop, and Euro-Zone Industrial Production actually beat for January.
                      There are no domestic macro numbers for us to judge today, and earnings are out of season.  This could point to a quieter open today, as folks decide where to deploy their capital gong into tomorrow’s Retail Sales, and Wednesday’s FOMC pow-wow that follows that hyper-important Core CPI print.  Crude seems to be taking a powder this morning, as are equity index futures, but it’s tight, and as the day’s trade progresses, it will not take much to swing the marketplace around.
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Ode to Transparency
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There once was a centralized, open outcry, two-sided auction marketplace
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Those traders, known as members, each day had to look each other in the face
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To buy or to sell, traders had to speak out loud
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No, one could not be shy, no… not to have a chance in that crowd
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They had  to announce themselves by give up, and badge for all to hear
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Today’s lack of transparency, mess that it is….was still not yet a fear
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Oh, and blocks hit the tape, business got done
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Be sharp in the crowd, and new accounts could be won
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Their word was their bond
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Let that part sink in…. their word was their bond
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When price discovery was sacred
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Price discovery was sacred
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Sacred
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Monday Earnings Highlights: MNKD (-.05) a.m., RST (-.66) p.m..