Market Recon Friday

Good Morning Gang,
                                 You ready ??  Old boots, Sharpened E-tool , plenty of water, soft covers, no packs…. Let’s go.
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Jobs Day (February)
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                        I’m looking at seriously conflicting data here, kids.  For both the ISM Non-Manufacturing print, and the ISM Manufacturing report, New Orders continued to impress while Production gapped higher for both releases.  Yeah, you read that right…for both of them.  Generally, that mean hat the economy is probably going to rot a little less.   Inventories also grew, while Inventory Sentiment is just crazy strong.  Yet, and this is a really big yet….  Employment was a problem on both sides of the ISM coin.  Manufacturing employment continued to ebb, while Service sector employment simply rolled off of a table in a sudden move into contraction.  Does this jive?
                       You be the manager.  If you were seeing improved order flow, ramping up production, and doing so with an intent to build inventories…would you be cutting back on labor ??  The weekly Initial Jobless Claims figures for the month do not confirm this suddenly negative bias…. unless there happened to be a statistically absurd number of retirements in February, and then the retirees were not replaced.  The Employment sub-component for the ISM twins is either incorrect, or we’ll see some lousy jobs data today…… and nobody is expecting the data to be all that bad.  Guess we’ll find out at 08:30,won’t we ??  Either way, it’s Friday.
                      Wage Growth will be almost as important as the Jobs number to the marketplace today.  We’ll see our next print for Core PCE on 28 March.  If by chance, wage growth, and core inflation should remain hot, you’ll see a rate hike sooner than a lot of folks think we will.  As I’ve said before, as a central banker…. you do not want to be left chasing inflation.  Take it from a kid who grew up on the other side of the mote.  Let’s do jobs………..
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Non-Farm Payrolls:  January printed at 151K, which was well below expectations, and was coming off of two straight solid monthly numbers.  Today, we look for something close to 187K.  As far as I can tell by scanning the eco-verse, the range for this one spans from 165K to 220K.  This single number will impact your day to a greater degree than any other single data-point that you saw this week……especially in equity index futures at the time of release.
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Unemployment Rate:  This item is no longer considered valid by your old pal.  For those of you who prefer to continue drinking the Kool-Aid, the number stands at 4.9%, and that is what is expected for today.  The Gallup survey yesterday did show an increase in participation.  If so, there could be an upside surprise here, regardless of the Payroll print.
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Underemployment Rate:  In January, U-6 reported in at 9.9%.  The market does notice movement in this item, as it is considered  the “Unemployment Rate” by most folks I know who are looking for work.  Running in the circles that I run in, I know more than a few folks in that category.
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Average Hourly Earnings:  This one stormed to a January increase of 0.5% m/m, which is good, being Core inflation got a little hot that month.  Consensus view in this space is for growth of 0.2% m/m (which would still be OK).  Warning here though, is that this view is at the top of the range, the skew is lower.
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Average Workweek:  Constantly going back and forth between 34.5 hours, and 34.6 hours.  We are looking for 34.6, which is also what we saw in January.
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Participation Rate:  This data-point is currently standing at 62.7%, which still  is truly awful, but at least it is off of the lows.  Consensus is for another 62.7% print, but given the amount of mainstream media attention that the official 4.9% Unemployment Rate got, and what Gallup told us, we could see this one inch higher.
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Other Macro (There’s More ??)
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08:30 ET
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Trade Balance (January):  This will not impact your equity trading session, especially in light of what’s competing against it, newswise.  Currency traders will care though.  We expect something like $-43.8B in this space, slightly larger than the $-43.4B that printed for December.  These numbers are in line with the long-term trend.
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13:00 ET
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Baker Hughes Rig Count (Weekly): The dwindling US rig count fell to 502 last week, with the total number for North America dropping to 677.  Expect a further drop in this space this week.  This will be an interesting number to follow as Crude attempts to find it’s way into the high $30’s.
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13:00 ET
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Fed Speaker:  If you missed Dallas Fed Pres. Rob Kaplan’s speech on monetary policy from Austin yesterday, he’ll be singing his little diddy again today from Dallas.  As a reminder, Dallas does not vote this year.  In yesterday’s speech, Kaplan sounded quite dovish, noting concern over growth, the global economy, and the strong dollar.
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Friday’s Earnings Highlights
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Before the Open: BIG (1.98), SPLS (.28)
After the Close:  Hopefully something sinfully delicious…..oh wait, it’s Lent. Filet O’ Fish again.  Darn !!
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Final Note:  Haven’t told you lately, but I do love you all, and I give a crap.  You know where I am.

Mid-Day Thoughts

My Brothers & Sisters,

1) Sloppy trading session so far. Hit resistance at SPX 1985, wpould like to see a run at 1987.  Bounced off 1977, which other than being the year of the blackout here in NY…is not a level of mine.  Not going to worry unless we poke our ugly heads below 1970.
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2) There is strength in Gold, and Treasuries, but the full safety Dance is not in effect.  Utilities, and the VIX are not playing ball.  Oil not a factor today… at all (so far).
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3) No S&P sector really leading the way, but Transports are cruising (get it?).  Health Care, and Tech are decidedly negative.
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4) Odd twist to macro.  Both New Orders, and Production confirm ISM indices for both manufacturing & services that are better than the composite PMI.  Employment in the service sector is a February weakness that has not been confirmed by weekly Initial Jobless Claims reports.  Unsure how that plays going into tomorrow’s BLS clambake.  Somewhat relieved that the divergence between Non-Farm Productivity, and Unit Labor Costs abated mildly upon revision.
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5) Be relentless… it’s what you’ve got….and most of them do not.

Market Recon Thursday

Good Morning,
                        Equity index futures are flattish to up small this morning.  Gold, Crude, Treasuries, and the mighty dollar are all staying fairly close to home this morning.  It’s as if we are all waiting on a ton of data or something.  More on that in a bit.
                        I’m reading articles this morning, and hearing talk on the radio about trading volume.  The rally isn’t sustainable is what I heard in both circles largely because volume has been greater on down days than on up days.  Pardon me if I don’t tremble in fear.  There is logic to their argument, and the two fellows that I heard, and read this morning may end up being right, but volume is not as telling as it used to be.  What I listen to is price discovery (which also, btw is not what it used to be).  We had, on Tuesday…a tremendous run built on inflows and reduced cash levels.  Right ??
                       You would have thought that yesterday we might just see some profit taking, but no we did not.  What are you left with ??  A market recently propped up by real investment, not short covering, and then evidence that technically speaking…. the market is adjusting to it’s new range.  Another thing…. in this era of electronic trading, human decision makers tend to only get involved when there is fear or panic afoot, and that could exacerbate the whole volume mismatch thingamajig.  Could this week’s macro events blow up my whole thought process ??  Absolutely, but I’m not swinging for the fences.  Art form, not science.  We identify, we adapt, we defeat, we carry on.
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Boatload O’ Macro
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08:30 ET
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Initial Jobless Claims (Weekly): How about this for consistency ??  Last week this data-point came in at 272K…. the four week moving average (which is how economists look at this one) is now 272K, and consensus expectations for today’s print are 271K.  The market is so used to the trending flat line on this item that to get a reaction, you probably wouldn’t need to print than 20k away from the mark in order to get one.
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Non-Farm Productivity & Unit Labor Costs (Q4 rev.): These two items worry me.  A lot.  This is where the labor market’s mild improvements are at greatest risk.  The initial prints for Q4 in this space showed that on a SAAR basis, Production dropped by -3.0% q/q, while the unit cost of labor increased by 4.5%.  If you work in the private sector, I don’t need to tell you what happens to someone who costs more than they produce, and on revision the gap for the quarter is expected to exacerbate.  Look for a Production print of -3.2% q/q today, with a Labor Cost number of +4.8%.  The labor market can not have too many quarters like this, and continue to grow.  It just can’t.
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Gallup Unemployment Rate (February):  I don’t know anyone else who follows this stuff, and it will not impact your trading session.  I just can’t stand that everyone buys at face value what the BLS sells, so I like to point out that there are other numbers out there, and they, are somewhat less pretty than what the government is shoving down your throat.  Every month.  In January, Gallup Unemployment printed at 5.5% versus the BLS print of 4.9%, and Gallup printed Underemployment at 14.0% versus the BLS number of 9.9%.  Sure, Gallup’s sample is small, and they don’t adjust seasonally (nobody should, IMHO.  Hey Kelly), but there are other voices out there.  You may call me a kook, and you may call me paranoid, just don’t call me late for dinner.
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09:45 ET
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Markit Services PMI (February final):  With the ISM printing in 15 minutes, nobody will care, and I don’t have enough passion for this one to go off on another tangent.  The flash came in at 49.8, way below expectations on 24 February. and that number is now what they look for today.
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10:00 ET
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ISM Manufacturing Index (February): The forces that will impact your day will watch this one closely.  The Service sector is the golden child of the US economy, and the pace of it’s expansion has been semi-sort (actually, it was more like a ball rolling off of a table between October and January) of weakening of late.  The Markit flash does not help.  we look for a 53.0 print today, which would still be a slowing of growth, but if so…would probably arrest fears of a manufacturing style collapse.
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Factory Orders (January): This release is somewhat dated, and will be overshadowed by that ISM number, but there may be good news here.  December was awful in this space, printing at -2.9% m/m, which was the second straight month of contraction.  Today, projections point of growth of 2.1% m/m, which would be the dandiest jump for this little guy since July.  Fingers crossed.
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10:30 ET
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Natural Gas Inventories (weekly):  Who doesn’t absolutely get fired up about anything they measure in billions of cubic feet ??  It’s like buying a car in yen.  Well, unless you have infinite tolerance for risk, or a serious gambling problem… you may want to take a pass on this “opportunity”.  The pros are looking for a draw of 60B cf today, coming after last week’s -117B cf.  This item has printed in a state of contraction for 13 consecutive weeks coming in.  Going to be 14.
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10:45 ET
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Fed Speaker:  Dallas Fed Pres. Rob Kaplan speaks on monetary policy from Austin, Texas.  He is not a voting member of the FOMC, and for the most part has kept a low profile since taking his post in September.  For some background, in January, he was sounding kind of hawkish in my opinion, and about two weeks ago, he seemed to be backing off of that stance.  You know what….  he did replace Richard Fisher, and is from Kansas where Tom Hoenig was President.  Out of respect for those two central bankers that actually were worthy of their positions (making them elite), we’ll let him speak for himself.
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Thursday’s Earnings Highlights
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Before the Open: BKS (1.03), KR (.54), NAV (-.68)
After the Close: COO (1.58), HRB (-.24), SWHC (.40)
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Unwanted Advice:  Bring home flowers tonight for no reason.  Thank me tomorrow.

Mid-Day Thoughts

Good People of the Mighty Marketplace,

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1)  Equity markets put in a solid half day of digestion after yesterday’s large mutual fund inflows.  Technical levels performing well.  SPX 1980 has stopped the advance twice, and a sloppy 1970 (the evolution of yesterday’s 1971) has been the bottom.
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2) Energy leads the way, after massive increase in Oil Inventories, proving that declining rig counts, and expected future cuts in production are more important right now than current fundamentals.
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3) Financials also strong…again, proving that recent economic statistics are improving slightly, and w/ Core CPI & PCE coming in a bit hot pof late that the Fed may be able to justify a rate increase if not now, within the first half of the year.  Who does the Fed work for ???  Da Banks !!
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4) Gold !! … holding it’s own even yesterday in a stronger dollar environment.  Starting to trade more like money than a commodity ???  Maybe.  Not sure yet.  You all did see me raise my allocation six weeks ago.
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5) Earnings Alert !!  COST tonight.  Looking for 1.28.  Options market pricing in three to four dollars worth of volatility with a bias to the put side.
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6)  You guys watching “Vikings” on the History Channel ???  You really should be.  Awesome.

Market Recon Wednesday

Good Morning,
                       Alone at the top?  The two major political parties have obvious front runners.  Then again, they already did.  Did anything change?  Not really.  Still a long way from seeing anyone accept a nomination.  I do not think either party knocked off their second place candidate jut yet, but maybe… at least for one party that started with many, the race is now down to two.  That third guy on the right, with his 20% or so worth of support…. he may just hold the most power this morning.
                      Anybody else notice that Moody’s cut it’s outlook for China’s credit rating ?? No ?? The Chinese didn’t notice either, that’s for sure.  Unless they’re working on stimulus program number infinity.  The Shanghai  Composite soared more than 4% this morning, leading all of Asia, and most of Planet Earth higher.
                      Eurostat just released the Euro-Zone’s January PPI, and just like all other recently released inflation data out of Europe…it fell below expectations.  This really puts the ECB pow-wow next week squarely into focus.  I mean, we’re all pretty sure that Uncle Mario is going to pour some kerosene on the fire.  Just how they go about this is in the process of being priced in at this time by market participants.  Will they push interest rates further into the abyss ??  Will they expand their quantitative easing program ??  (That one may require some kind of product creation, just so there’s enough junk to buy.)  Will they put the whammy on the corporate side with some kind of loan program.  We’ll just wait till Mario sings on this one.  Sure is interesting though.
                      Wednesday !! Get some.
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Jobs, Acrobats, and Milk Cartons
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08:15 ET
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ADP Employment Report (February):  This is an interesting piece of macro.  Intended to be a predictor for the Private Payrolls portion of the Non-Farm Payroll print that you’ll see on Friday, there are months where they sync, and then there are months like January where they seem out of touch with each other.  FYI, last month, this item cam in at 205K, while Private Payrolls came in at 158K…. and yes, that was higher than the total NFP print.  Which one of the two is the more accurate?  Spin the wheel, kid.. everyone wins a prize.  Not like I’m gonna trust anybody in this space.  Expectations for today seem to be centered around 187K, with last month’s 205K at the very top of the range.  This one will most certainly impact the futures market at the time of it’s release, and then be forgotten by tomorrow….. maybe by the open.
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10:00 ET
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Fed Speaker:  He’s not a voting member of the FOMC.  This year, he’s not even an alternate… but folks do listen to this cat.  San Francisco Fed President John Williams will speak on his outlook for the economy from Los Angeles.  Williams has recently  been quoted talking up the economy (he’s a big fan), and seems to be (for now) supportive of the Fed’s rate hike plan.  (Marching orders??)
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10:30 ET
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Oil Inventories (Weekly):  Last week, crude supplies surprised to the upside with an increase of 3.5 million barrels.  The API number, which came out last night shows an increase of a whopping 9.9 million barrels.  Whoa !!  Word is that the industry is asking you to donate your empty milk cartons, and soda bottles to be used as storage going forward.  You must have the bottle caps, though.  Safety matters.  Projections (ahead of that release) for this one ranged anywhere from an increase of one million barrels to a repeat of that 3.5 million print.  All that I can promise you is that on this print, orders for Crude futures contracts will vacate the book with about two seconds to go.  Then we’ll get the number.  The price will zig harshly (really harshly), and then it will zag, and then it will zig again.  Some of you will high five (and still lose your shirt next week), some of you will learn a painful lesson, and the smart ones will be flat before ten thirty.  Experience talking.
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14:00 ET
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Beige Book: What could be more exciting than anecdotal economic evidence provided by the twelve Federal Reserve regional districts ???  I’m fired up already.  What to look for?  Oh, not much…..Tales of inflation mostly, backing up what we’re seeing in the Core CPI, and Core PCE.  We already know manufacturing will be weak, but even more than employment itself, wage pressure will be paramount.  Speaking of books, who remembers their Red/Green Monster ??  Inside joke.  If you get it…you really got it.  Color depends on age.
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Wednesday’s Earnings Highlights
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Earnings Notes: ANF went out last night with options expiring this Friday baking in about $1.80 worth of volatility.  Not bad for a stock trading under 30 clams.  For those who don’t know, WB is pretty much the Chinese version of Twitter, and SINA is the  media firm that spun them off.
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Before the Open: ANF (.99)
After the Close: AEO (.42), COST (1.28), SINA (.34), WB (.13)
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P.S. Is it baseball yet ??
P.S.S. I really need baseball.

Market Recon Tuesday

Foolish Mortals,
                         Super Tuesday.  Rah.  Go team.  Normally we focus on the international festival of global manufacturing PMIs on a day such as this.  I still will, but as market participants, and macro nerds, I think we may fly beneath the radar as the wild comb-over man, and the Star Trek Next Generation surplus pant suit lady try to extend their respective leads, and cement their positions as prospective party nominees.   About those PMIs…. Europe performed mostly on or close to expectations outside of a nasty miss for the UK.  As for Asia, Japan missed, while Chinese manufacturing was again hit with the ugly stick.  Whack !!
                         Anyone else happen to notice that artificially low close for the S&P 500 last night?  One look at the way things went out amid rebalances, and month end closing imbalances, you could just tell that there would be an almost immediate positive reaction this morning.  The action was just incorrect around the 1934 support level.  If you take a look at the chart, you’ll see absolute precision on both sides of 1940, which is perfect, then you can see that they missed the last bus stop at 1934 due to ringing bell. You’ll get the quick fix this morning as long as a very strong futures session does hold up.
                          Call me the foolish mortal, but I’m starting to feel a little better about finding a way through the darkness.  True, the global economy is still in horrific shape.  True, the central planners are either clueless, or working against us.  True that robots are being positioned to take away more good jobs, but for those with entrepreneurial spirit, and the will to fight all day, and night, we can do this.  We can…..and we will.
                           Some of the macro is coming in decent enough, and with some upward revisions in tow as well, so that I am no longer certain about a recession later this year.  Hey, if they can revise their numbers, and those are the numbers that I study, then it stands to reason that I would be able to reconsider my opinion.  I told you to play defense on December 31, I told you to increase your allotment toward gold six weeks ago.  I am surely not always right, but I do pay attention.  I am not increasing my allotment for US equities at this time, but I will tell you that I am thinking that it may be time to get a little more aggressive with that 40%.  I am not yet willing to make a year end call for the S&P 500, but my gut instinct tells me that we are likely at some point this year to see a level far higher than this.  Volatility does that.  We also may see far lower prices.  Most probably we’ll see both.  You are going to need courage, and most importantly….  you have to ring that friggin’ cash register when your targets are met.  (You absolutely must have targets)  Basic discipline, gang.  Now, get out there, and act as if the welfare of your children depends on it.  Sarge out.
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Macro
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All Day
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Total Vehicle Sales (February):  Vehicle sales bounced back slightly in January, after falling off in December from the robust run of late 2015.  We expect something very close to that 17.6 million annualized units to be very close to repeated in February.  Safe to say that you’ll see the individual auto stocks move around on the data as it’s released.
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08:55 ET
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Redbook (Weekly):  When measured year over year, which is how this one is generally viewed, this report has been moving in the right direction since bottoming out three weeks ago.  Last week the print came in sporting 1.2% growth.  Beating that print this week would be, in my opinion difficult, but impressive.
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09:45 ET
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Markit Manufacturing PMI (February):  This item will most likely be passed over as traders wait upon the more highly focused on number that will be released in 15 minutes.  For those following, this item “flashed” at 51.0, but is expected to come in slightly higher than that, as 51 is the absolute bottom of consensus range for this one today.
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10:00 ET
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ISM Manufacturing Index (February):  The much hyped ISM number has printed well into contraction in each of the last two months.  In fact, those two months came in with a 48 handle, so those prints were not even that close to holding their levels.  Projections are for a third consecutive month of such performance, and it the various Fed district regional manufacturing surveys are any indication…then this will be the case.  Consensus  is for 48.5. Ugly stick.
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Construction Spending (January):  It may not be a robust number, but December’s 0.1% m/m increase for this space was a positive number.  The expectation/hope for today is for 0.5% m/m growth, which if true would be an absolutely fantastic number for January.  January, for obvious reasons tends to be a very tough month for this sort of print.
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Tuesday’s Earnings Highlights
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Before the Open: AZO (7.29), MDT (1.06)
After the Close: TIVO (.01)
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Note:  You are still undefeated if you never admit defeat.  YOU control this.