Market Recon Thursday

Good Morning,

                       Yesterday’s dramatic short squeeze in oil on settlement day for the May contract was most interesting (and fun), but today’s focus…at least in the early going will be Super Mario Draghi of the ECB, and what he’ll say at the 08:30 ET press conference.  There will likely be no policy moves made today at 07:45 ET, as the ECB already fired their big bazooka just last month.  What the ECB did not realize, probably due to their lack of experience with rocket launchers is that one must make sure when firing one of these bad boys… that the “back blast area is all clear”.  It apparently was not really all clear in March.  Inflation growth has been hard for Europe to come by (creak, creak), as has actual growth (crawl).  Btw, we’ll get our next read on ECB GDP in about three weeks.  So, apparently despite negative interest rates, and the central bank buying everything that they can get their hands on, with the possible exception of used tires (I think), results have been slow to come.  That Mario though…. he is a wordsmith.
                     There does seem to be a (perceived) bright spot, and that’s where Pres. Draghi will try to steer the media.  The ECB’s April Bank Lending Survey showed a rapid rise in the use of credit for the quarter.  The Euro-Zone saw a beefy 32% rise in mortgage loans (pennies from Heaven), as well as a 17% rise in corporate demand for credit.  That one is the important one here.  Then again, if you’re lending for free, who’s the fool?  Just to throw some kerosene on the fire, the TLTRO-2 (not a Star Wars character), which has not yet kicked off (June), will actually pay the banks to lend more dough.  Oh boy….. it’s  a beach party.  Bring your friends.
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Macro
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08:30 ET
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Initial Jobless Claims (Weekly):  The incredible winning streak for this item is now at 58 weeks, and very likely 59 after it’s release today.  That’s the number of consecutive weeks that less than 300K folks have had to file for Unemployment benefits.  Last week, the number came in at 253K, well below expectations, dropping the four week moving average to a cool 265K, which is just above today’s consensus view (264K).  Generally speaking, this is a positive, how could it be anything else ??  You know me, I worry.  My concerns over folks involuntarily working less than full time, and/or working multiple jobs are going nowhere.  I just personally know too many folks intentionally being kept under 30 hours at their jobs.
Philly Fed Manufacturing Index (April):  Here’s a chance to put one in the “W” column.  After I wrote that note yesterday, outlining the string of defeats for the economy of late, Existing Home Sales did edge out expectations yesterday.  That’s housing, this is manufacturing.  Well the one real bright spot last week was the Empire State print, a manufacturing number.  In March, Philly printed well into expansion, with exceptional strength in New Orders & Shipments.  Today, we think that we may see more where that came from.  Employment was the week spot in this space last month, look for some improvement there.  We all know that manufacturing is at incredibly depressed levels, so there is plenty of room for some positive movement in the space, and the pace of recovery will likely vary regionally.  With that in mind, we look for an 8.7ish print here.  A slowing of the pace ?? Yes, but the ball is still rolling.
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09:00 ET
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FHFA HPI (February):  You can check Wednesday night’s baseball scores at 9am.  Nobody’s trading off of this thing.  Case-Shiller is due next Tuesday.  You can wake up for that one.
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10:00 ET
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Leading Indicators (March):  Another macro-economic data-point not worth a mention in trading circles.  Financial media will report it’s release.  They have to.  Your customers won’t care. Irrelevant.  Maybe we should tell the Conference Board that we don’t care.  Nah… don’t do that, maybe it’s keeping someone employed.
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10:30 ET
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Natural Gas Inventories (Weekly):  This formerly insanely volatile report has become very consistent of late.  Last week, supply came in at a minute contraction of -3 billion cubic feet.  In case you are not an avid follower of all things statistical, we are quite used to seeing changes of well more than 100 Bcf on a regular basis.  For five consecutive weeks, the change has been 25B cf or less, and today should make it six with expectations for an inventory build of just 4 Bcf.
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Thursday’s Earnings Highlights
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Before the Open: BX (.40), CP (C2.40), DHR (1.03), GM (1.00), MAN (.93), DGX (1.12), SHW (1.61), LUV (.84), UNP (1.10), VZ (1.06)
After the Close: ETFC (.33), MSFT (.64), NSC (.98), SBUX (.39), V (.66), GOOGL (7.95)
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Note:  I hear your frustrations, I know some of you hurt right now. Real bad  Fear nothing, my friends.  Do your best…. fight until you’ve got nothing left.  If that’s not good enough, then the heck with it, you’ve given it your all.  You can walk next to me anytime.  Stay tough, ands stay hungry.

Mid-Day Recon

Good Afternoon,

                       Sideways trade, what we’ve seen now…pretty much since the dust settled after Tuesday’s open… is acceptable to me.  Digestion in aftermath of a move to the upside feels a whole lot better than a spate of profit taking, don’t you think ??  If we can actually inch higher, even better.
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1) The early pivot point for the S&P 500 was 2099.  I know most of you will call it 2100, but in my neighborhood, precision still counts.  Our level to the up, now under pressure from below is 2106.  Should that one crack, we don’t go too far before hitting the next speed-bump…2111.
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2) WTI Crude has more than meandered back above the $41 mark.  It is now approaching $42.  When the contract rolls over tonight, it will seem like we got another boost.  This has carried with it the Energy sector.  Health care, and Financials are also in the green today.  The weakness so far today is in the Staples, and the Utilities.
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3) Away from those Utilities, the other safety devices are well mixed.  Gold has held on to yesterday’s strong performance, and Treasuries are acting well, but the VIX has now sunk into the mid-12’s.
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4) There are several significant quarterly earnings releases on tap for tonight.  Among them would be AXP, QCOM, and UAL…. all of whom have implied volatility of between $1.10, and $1.65 being priced into their options that expire this Friday.  The crown jewel of releases tonight will however, come from YUM.  That one is sporting an implied volatility of about $2.30.
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5) Chicken breast on a whole wheat wrap, with both raw bell pepper slices, raw carrots, and raw spinach on the side.  Beat that.

Market Recon Wednesday

Good Morning,
                        Today, we begin where we already have on so often an occasion… in Asia.  China to be specific.  The Shanghai Composite is leading global equities lower at this early hour, down a rough 2.3%.  Its small wonder too, given that UBS (over the weekend), and now Goldman Sachs have both increased their GDP guidance for the coming quarter, and for 2016.  More growth, less stimuli.  Seeing this news, struck me, as I was specifically asked this question on a Chinese TV special just yesterday.  My answer was simple.  Given the recent beats that we’ve seen for Retail Sales, Industrial Production, and New Loans, and then on top of that, throw in the recent surge in Exports, as well as demand for Crude…. well, I felt that either the Chinese was growing naturally, or the government was spending again.  Statistically, if not in economic purity…they both spell GDP growth.  My answer was the higher end of the 6.5% to 7.0% target for the second quarter.  Looks like the big shots are looking at the same data.
                       Tomorrow, the ECB holds their April dog and pony show.  Obviously, there are no policy moves expected at this meeting (they’ve done enough…. for now), so it will simply be up to Mario Draghi to entertain us…. which he is especially good at, btw.  Central banks are in season, next week we’ll hear from the FOMC, and one day later…. the Bank of Japan.  BOJ Gov. Kuroda is already rattling his “Currency” sabre.  The Governor has expressed displeasure with growth, inflation, and strength in the yen.  He then made sure that we understood that the BOJ does not target exchange rates.  Of course he did.  Markets will swing.
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Trending the Wrong Way
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                Yesterday’s severe misses for 1.Housing Starts, and 2.Housing Permits weren’t out of the blue… the economy has started missing projections on an everyday basis.  This may get tedious, especially if the sports section of the Daily News is your idea of reading the newspaper.  Since last Monday….. 3.Small Business Optimism, 4.Import Prices, 5.Retail Sales, 6.Core Retail Sales, 7.PPI, 8.Core PPI, 9.CPI, 10.Core CPI, 11.Industrial Production, 12.Capacity Utilization, 13.Consumer Sentiment, and 14. The Housing Market index have all missed consensus expectations.  (some of them quite badly) That’s fourteen items that are either headliners, close to it, or key sub-components of headliners.  In that same span of time, we have seen beats for just Initial Jobless Claims, and the Empire State Manufacturing Survey.  That’s a 2-14 record folks…. good enough to get you fired in any league.
                Is this bad for stocks ??  Not necessarily.  Fundamentals are less important in these times than is.. say….. monetary policy, and it’s impact on all investment vehicles.  Technical trading levels are still working well, and in the era of electronic trading, why the heck wouldn’t they?  You all heard Dennis Lockhart, President of the Atlanta Fed last week.  He does not vote this year, but he is influential, and he turned on a dime from hawkish to dovish after the CPI number hit the tape.  The central bank is handcuffed for now.  As for that nice guy or gal across the street who works all the time trying to feed his or her family, or the older ones who live on very little income, and what they’ve saved over a lifetime…. yeah, it might not be so good for those folks.  Aren’t they who we care about first ??
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Today’s Macro
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10:00 ET
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Existing Home Sales (March):  Today, we get this important item…important because this is the largest slice of the housing pie, a pie that is already Oh for three this week.  With the exception of December’s data, this one has been printing the mid 5 millions on a SAAR basis.  Last month (February), we saw a nasty drop off to 5.08 million units, off of January’s 5.47M, and badly missing expectations of 5.32M.  Today, we’ll go in looking for something in the neighborhood of 5.29M, which is close to right in the middle of a 5.2 to  5.4 range.  Simply put…. these guys are fairly certain that we’ll see an improved number in this space for March.  The economy sure could use a win right now.
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Oil Inventories (Weekly):  Forget expectations in this space, they are nearly always way off anyway, not even worth a mention.  What we’ll go off of is last night’s API number, which has been far more accurate than the pros in predicting the Wednesday print.  That number showed an increase in supply of 3.1 million barrels, which is well above the whisper numbers that I had heard.  Hence, Crude is a bit lower this morning.
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Wednesday’s Earnings Highlights
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Before the Open: ABT (.39), KO (.44), ITW (1.26), USB (.76)
After the Close: AXP (1.34), MAT (-.08), QCOM (.96), UAL (1.18), YUM (.83)

Mid-Day Thoughts

Good Afternoon,

                       New strategy…. just come in long everyday.  Okay, I am just kidding, gang.  But with multiple firms beating lowered EPS expectations on a daily basis, and with high-impact macro-economic data-points missing expectations (sometimes badly) on a daily basis…. this is what you are left with.  An FOMC that is likely handcuffed, and still high short interest, and cash levels.
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1)  The S&P 500 met both initial resistance, and then initial, and secondary support at 2099. Clearly, that’s your trading level right now.  The index peaked at 2104.  I believe that 2106 is the level to take, and hold for all to enjoy a happy commute home.  Should 2099 fail at some point, I would like to see a stand made at 2093.
2)  WTI Crude is approaching 41.50 where it should finally meet some resistance.  Those covering shorts in this space are finding out what a crowded trade feels like.  Not fun when you are fundamentally correct, and then end up chasing the market. Strength in this space is boosting Energy shares, as well as helping Financials.
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3) Transports are screaming today, perhaps short covering playing a role here as well.  Airlines, Railroads, and Marine shippers all moving in the same direction.
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4) Tech is weak today, led lower by IBM, which btw, is suffering a post-earnings beat-down.  Safety plays are mixed.  Treasuries, and Utilities are lower, however the VIX is flat, and Gold is much higher.  That last one is partially due to China’s efforts to launch a yuan denominated gold benchmark.
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5) Boston Fed Pres. Eric Rosengren actually stuck to his recent guns, and sounded quite hawkish last night.  Later this month, when the FOMC (of which he is a voting member) takes a pass on raising the Fed Funds Rate… Do you think, Mr. Rosengren will dissent ??

Market Recon Tuesday

Good Morning,
                        Sometimes equities, and Crude move together, and someone who’s not really paying all that much attention will act like there’s still a close correlation.  Is there still some cross-impact ??  Of course there is, no kidding…. but the tightness of movement has been alleviated for a couple of months now… or basically since Crude bottomed.  Yesterday, for crying out loud…. Energy stocks (The day’s top performing sector) weren’t even correlated to the underlying commodity.  Smack, smack.
                        Something not being mentioned much right now….. the “buyback blackout” period that precedes what we call “earnings season”.  It would appear to me that as we approach the end of said collective blackouts that equity markets weathered that storm quite nicely.  Corporate Repurchase orders, which over the last couple of years have approached 2% of the aggregate bid side in equity volume have been largely absent throughout late March, and early to mid April.  You might thing that this would have spelled trouble.  Au contraire, the S&P 500 is up a rough 50 points since voluntary group blackout started.  Huzzah.
                        Where do we go from here?  As I have said for quite some time, I think that SPX 2100 is a speed-bump on the road to something like 2150.  That’s not a year end target, in my opinion…. But is a bus stop on the road we travel.  Do I see trouble at some point ??  I always see trouble, that’s why I spend on protection.  For now, though, the Fed is handcuffed as long as the macro is weak, and as long as Core consumer level inflation stays put.  The Standard & Poors 500 is trading at nearly 24 times past 12 months earnings, which is expensive, but only something like 17 times forward looking 12 months earnings….which really is not.  Are forward looking earnings filled with hopium ??  Probably (definitely), but there no denying that anyone placing fundamental values on assets these days…. has misunderstood the environment provided.  I honestly feel that someday, the global debt super-cycle does come crashing to Earth.  That day could be next month, and it could be in 25 years.  That’s a fiat currency confidence issue, and it requires somebody important, and highly integrated not being able to make a payment.  As always, part of my core holdings are a hedge placed specifically in preparation for that horrible day, but as a trader, I choose to adapt to, and excel in, that changed environment that I must live in today.
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Wee Bit O’ Macro
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08:30 ET
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Housing Starts & Permits (March):  Starts and Permits really do matter far more, even than many other “red star” macro-economic data-points.  Quite simply in order to break ground on a new home, construction workers are hired, and put to work.  Those individuals are then better suited to participate in their local economies.  The implication after that is that this house will be sold, probably on credit, which increases the velocity of money.  After completion, the new home owner becomes more of a consumer… appliances, fences, furniture, landscaping and everything else that make a house a home.  In short, as goes this one, so goes the economy.
                In 2008, Housing Starts rolled right off of a table, and really did not show any sort of sustained improvement until late 2011.  That improvement was more or less somewhat steady until mid 2015 when it peaked.  With some back and forth, we’ve gone sideways ever since.  Today, we look for a SAAR print of 1.17 million units, which would be down from February, but still in line with what we’ve seen since last June.  We also look for about 1.2 million Permits, which would also be considered in line.  A couple of things you should know.  Permits have been running noticeably above Starts since the holiday season.  The expectation for Permits is mid-range, but be alert to a slight skew to the lower end of a range for Starts that spans from 1.12 million to 1.19 million units.
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08:55 ET
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Redbook (Weekly):  Last week, we saw a nice 1.1% y/y print in this space, our third best week for y/y growth of this year.  I don’t think we’ll get two of those in a row…you did see Consumer Sentiment, didn’t you ??  We’ll go back to being okay with growth of 0.5% y/y/ if they’ll give it to us.
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Tuesday’s Earnings Highlights
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Before the Open: EAT (.99), CMA (.45), GS (2.63), HOG (1.29), JNJ (1.65), KSU (.97), UNH (1.72)
After the Close: INTC (.48), YHOO (.07).

Market Recon Monday

Good Morning,
                        Hey, wasn’t there a guy out there last week publicly calling the Doha meeting a ruse in order to push some $42 oil out the door while you still could ??  Wish I had that guy’s name.  Honestly gang, we’re not looking at a broadly coordinated output freeze until the immediate need for revenue by some of the players, and the intention of a certain big player to rid itself of some competition are no longer, quite simply… competing interests.  The nuances are of course, much more complex than this, but this is really the basic tenet here.  I don’t know if most of you guys have been paying attention throughout the night, but Crude, global equities, and US equity index futures have all recovered dramatically from Sunday night levels, perhaps getting some measure of help from that labor strike in Kuwait.  You all know how I feel about the WTI $39 level.  It’s a gateway, and right now it’s more like a swinging door.
                      Planet Earth is also dealing with major earthquakes, and emerging market impeachments this morning, so you will see some movement, particularly regarding the yen, and Japanese equity markets that appear disproportionate to market peers.
                      Get set for the beefy portion of earnings season.  After last week’s five day long macro-economic disappointment (Small Biz Opt, PPI, CPI, Retail Sales, Cap Utilization, and Industrial Prod… all missed) that pushed out Fed Funds Rate expectations, this week will be much more focused on corporate numbers, from a broad range of industries.  This is where the short term trader wins and loses, and not knowing how to, or being able to manage risk will leave on in a state of financial injury.  Good luck to you all.  Carry on.
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Triangulation
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08:30 ET
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Fed Speaker: New York Fed Pres. William Dudley speaks from New York City.  Last week, Dudley sounded quite cautious on raising rates, and also sounded like he did not trust what had been to that point…. steadily rising core inflation.  It’s as if he saw a preview of last week’s CPI.  Dudley is a voting member of the FOMC, as NY has a permanent vote.
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10:00 ET
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NAHB Housing Market Index (April):  This item leads off what will be a week full of housing data.  Despite what this data-point’s title implies, this is simply a survey of homebuilders regarding only current, and forward looking conditions in the market for new homes.  Thus, this is sometime referred to as “The Homebuilders’ Optimism Index”.  After spending eight consecutive months in the low 60’s (which is pretty good), this one rolled off of a table in March, printing at 58.  Consensus for April is for some slight recovery to maybe…. 59.
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12:30 ET
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Fed Speaker:  Minneapolis Fed Pres. Neel Kashkari is set to speak from that very city. Kashkari, who is not really a “monetary policy guy” is on record as being in support of Janet Yellen’s cautious movement on interest rates.  Kashkari has also been more than vocal about the whole “Too Big to Fail” storyline, and looking into breaking up the biggest banks.  That’s his thing.  He will answer questions after today’s speech, and that corner is where those questions will point.  He won’t move the general marketplace today.  He could budge the financial sector depending on what is said.  Be cognizant of this one.
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19:00 ET
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Fed Speaker: Boston Fed Pres. Eric Rosengren will speak from New Britain Connecticut.  Two weeks back, Rosengren sounded more hawkish than he has in the past.  He actually seemed surprised by how far out the Fed Funds Rate futures market was pricing in the next increase.  I’m not throwing stones here, gang.  The macro-economic data that we saw last week, as we’ve already spoken of…. could only be described as poor.  Rosengren is a voting member of the committee, and it would be very interesting to know if the recently weakening data did anything to often his viewpoint.
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Monday’s Earnings Highlights
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Before the Open: HAS (.24), MS (.47), PEP (.81)
After the Close: IBM (2.09), NFLX (.03).

Mid-Day Thoughts

Good Afternoon,

1)  The S&P 500 is virtually unchanged at noon today, as it was last night from Wednesday’s close.  That hardly begins to describe what has certainly not been a very boring day and a half.  The index found quick, and decisive support at the 2078 level, as it did on Thursday.  To this point, the index has peaked at 2083. I think the likelihood of a run at 2085 is possible before day’s end (this is where crude can help).  Expanded levels exist at 2069, and 2092.
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2)  Speaking of Crude, so far….there certainly is no correlation between stocks, and Crude today.  WTI Crude is down 3% ahead of this Sunday’s meeting in Qatar.  That price level is obviously subject to the rumor-mill as today’s trade works it’s way toward it’s conclusion.  Speculative Oil traders may ride this out, but I don’t think too many traders with limited tolerance for risk, or overly attentive risk managers will carry much baggage into the weekend.
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3) With equity markets largely trading sideways, safety devices appear to be performing better than one might expect.  The Utility sector is your market leader at this point.  US Treasuries are strong today, and Gold is seeing something of a relief rally, but the VIX is flat.  Perhaps this is simply money coming out of the Energy sector.
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4) How about this morning’s macro ??  Wow, talk about awful.  After a very positive Empire State print, Industrial Production suffered a larger than expected month over month contraction in March, it’s seventh contraction in the last eight months.  On top of that, Capacity Utilization dropped to 74.8%, it’s lowest level since October 2010… back when headline Unemployment was 9.6%.  The Mining, and Utilities sub-components dropped all the way to 73.7%.  Not pretty, no….not at all.  Btw, the University of Michigan’s Consumer Sentiment dropped to 89.7 from 91.0, when a rebound had been what was expected.  Guess those bloated health insurance premiums are really starting to hurt people now that Oil, and gasoline are well off of their lows.
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5) Thinking of something horrendous for lunch.  Probably something to do with bacon.

Market Recon Friday

Good Morning,
                        Once again today, as has been the case, there are so many moving parts, that we just have to slow them down, pick then apart, and decide what will impact our goals.  If you don’t need it, toss it.  Your brain does not need the extra noise.
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China
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          Chinese Q1 GDP came in at a disappointing 6.7%.  True, that 6.7% was consensus view on this, but the whispers were out there that the beat was in, so this number is far less exciting than many had hoped.  Is there cause for optimism ?? Without a doubt… at least in the short term.  We seen recent improvements in Chinese exports.  We’ve seen recently improved Chinese demand for Crude.  Just last night, with that GDP print, China’s National Bureau of Statistics also released data for Industrial Production, Retail Sales, and Fixed Asset Investment, and beats were in place for all three.  In fact the Industrial Production beat was rather decisive.  New Yuan denominated loans also came in at their second best level since last Summer.  These recent improvements in the underlying data could (likely are) just be a positive reaction to what can only be described as an aggressively easing PBOC over the last year and a half…. and we’ve all seen that monetary policy moves can be somewhat effective at doing certain positive things (while not actually improving standard of living) while the central bank still has wiggle room.  Outlook:  quiet optimism, not enough to change capital risk allocation thoughts at this time.
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OPEC
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           We all know that OPEC meets in Doha this Sunday.  Production freeze ??  Does it matter ??  We all know that Russia has been talking up the “Freeze” for a while now, I mean that’s what got some shorts off of the table earlier this week, and drove some spec buyers into Crude as well.  Will there be some kind of production freeze announced at the end of this meeting ?? I think that they have to announce something, and remember…. freezes before cuts, and ultimately they do have to cut.  The caveat here is Iran.  There’s no secret that they need to raise revenue, and that they have long standing geo-political issues with several of the other players.  Whatever is agreed to, might possibly be a paper only deal that is hard to enforce, or in some meaningless way not bind those who agree to whatever they need to.  Outlook:  There will surely be news on this by Monday morning, and quite simply, I think playing the commodity is just a speculative bet, from either side.  If you have a hunch, try a long dated option on an energy name, or if you’re drinking the hopium, grab some equity in a name that has not yet cut it’s dividend.  Far less risky that way, and gets you paid, even if you lose.  You’ll just have to hold at that point.
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Purple Rain
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08:30 ET
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Empire State Manufacturing Survey (April): It all started here in March, when manufacturing sector data for March historically…. came in at not completely disastrous levels.  Still quite sloppy and inconsistent, but there was growth in some areas.  We look for something close to a 2.7 release in this space today, which would be up from last month’s print that came in fractionally above zero.  Btw, last month snapped a seven month losing streak for New York.
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09:15 ET
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Industrial Production (March): This item is not exactly humming along.  Consensus for today is for a month over month contraction of -0.1%, which would actually be a better than average number here.  US Industrial Production has shrunk from the prior month in seven months of the last eight.
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Capacity Utilization (March): I don’t really know what to say here.  This has been a regular point of weakness, and expectations for today are quite simply…. just ghastly.  Cap Utilization has decreased in six of the last seven months, and today’s view is for a drop to 75.4%.  That number would be a dramatic drop from the month prior (76.7%), and would be the worst print in this space since 2010.  That’s six years ago.  Let that sink in.  That’s back when the official BLS Unemployment Rate was still banging around 10%.
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10:00 ET
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U of M Consumer Sentiment (April-p):  Got to love the American consumer.  They may not vote with their wallets (note the last three Retail Sales reports), but wow, they sure do seem optimistic when surveyed.  This highly focused upon twice a month release finished March at 91, and we look for something close to 92 for today’s number.  There are some economists up around 94 / 95 on this one.  If we see some crazy pop like that, the market will react very well.
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12:50 ET
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Fed Speaker: Chicago Fed Pres. Charles Evans speaks in Washington, DC.  Evans is not a voting member of the Committee this year.  Chicago regains their vote next year.  However, Evans remains a big name in central banking.  He is well known for his persistently dovish views, regularly showing concern for global economic dangers, and a willingness to let inflation run hot if it would.
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13:00 ET
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Baker Hughes Rig Count (Weekly):  The US rig count dropped to a total of 443 last week, of which 89 were Natural Gas rigs, leaving 354 oil rigs in operation.  To put this in perspective, a year and a half ago, the combined number was over 1600, so yeah… Houston….we’ve got a problem.
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16:00 ET
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TIC (February):  This one will hit the tape as you close your book for the week.  A very stealth way to release something of what I consider to be important.  Cross border investment has long been slanted in US favor.  That is until recently.  Three of the last four TIC prints have come in wearing minus signs.  Long-term securities have seen a net out-flow of $-41.4B over the last two months combined.  Chinese, and Japanese holdings of US Treasuries have both been sized down I recent months.  Today, most economists are looking for a significant rebound in this space.  We look for inflows of $32B or so…. that would be our largest since October.
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Friday’s Earnings Highlights
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Before the Open: SCHW (.29), C (1.09)
After the Close: Rest, Relaxation, and a long run…. maybe a really long run.

Mid-Day Thoughts

Good Afternoon,

1) Market hanging in nicely throughout the morning, just one day after yesterday’s risk-on move.  Our S&P 500 levels have been 2077, and 2085.  With upward pressure now on that upper level, we look (hope) to 2092 as a possible target.
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2) On the macro side, the CPI came in a bit softer than anticipated.  Both the m/m pace, and the y/y pace of increase slowed a bit, though the Core rate is now at or above the Fed’s stated target for a fifth consecutive month.  Speaking of the Fed, Atlanta Fed Pres. Dennis Lockhart who had been concerned about rising inflation, and had been a proponent of three rate hikes this year, apparently backed up from that stance today.
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3) The Airlines are your front runner today, after DAL beat EPS expectations, and JP Morgan made positive comments on the industry.  Staples and Utilities are areas of weakness again today, after showing weakness yesterday.
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4)  As for other defensive plays, US Treasuries, the VIX, and Gold (It’s a DXY thing), are all also lower.  Dollar strength not really hurting Crude prices (still around $42 for WTI) ahead of this weekend’s bake sale in Qatar.
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5) So far, it’s good to bat lead-off.  CSX reports… the railroads run.  JPM reports…the financials run.  DAL reports…the airlines run.  Don’t think this goes on.  It’s just something fun that weird numbers guys notice.
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6) Chinese macro will have a huge impact tonight….  GDP, Retail Sales, Industrial Production.  Improved exports, increased demand for Crude…..  GDP beat ??  We’ll see.

Market Recon Thursday

Good Morning,
                        You are getting there.  Today is Thursday…. more miles behind you than ahead of you.  However, we’ve got some key macro, a nice batch of earnings, and a couple of Fed speakers to get through.  You are going to work your tail off today, which is never a bad thing.  Enough small talk, let’s crank this puppy up.
                        Let’s take a look at yesterday’s big earnings release, none other than JPM.  Forget the year over year number for a bit, we knew that we would not see a plus sign there.  Fact is that these kids did much better than expected.  More importantly than perhaps anything else….. they did it without help from trading or investment banking, historically two big areas of how these folks get themselves paid.  Now, JPM is either best in class, or darned close to it.  The financial sector is grossly underperforming the general marketplace year to date.  On top of that, earnings expectations for Q1 for this entire group are barely running at market perform levels, which themselves are poor.  All that said, this morning’s earnings releases are HUGE.  Basically confirmation, or denial.
                        Where was JPM’s actual strength then, if not from the traditionally lucrative parts of their business ??  I’ll tell you where, as simply (this is a short note) as I can.  Mortgages, Commercial Real Estate, and interest bearing assets.  That last one involves revolving credit gang, your credit cards, and it showed an increased yield of .07 over what they saw in Q4, and .16 over what they saw for Q1 2015.  That’s a nice gap on just one increase in the Fed Funds Rate back in December.  Hey, and who owns the Fed ??  Oh, yeah.  Okay, if real estate remains decent, AND these guys get another interest rate hike at some point, AND trading improves (as it already has started to), AND they land any deals at all…….. then Poof !! you’ve seen a bottom in this space.  Until next time.  For now, we await numbers from the rest of the sector.
                         Oh, and you still have to watch the DXY, Crude, Treasuries, Gold, the VIX, China, Japan, Europe, Political risk, Geo-Political risk, Regulatory risk, Headline risk, and your weight.  Have a nice day.
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My Beautiful Balloon
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08:30 ET
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CPI (March): What matters here, due to wildly fluctuating energy prices is the Core print.  Core inflation has been running a bit hot of late, with two consecutive m/m increases of 0.3%, and year over year growth of 2.3% in February, which was the fourth consecutive month that this item ran either at or above the Fed’s stated target.  Expectations for March are for increases of 0.2% m/m, and a repeat of that 2.3% y/y.  Projections for the far less focused upon headline number are for 0.2% growth, which would be the strongest print in that space since last October thanks to significantly higher energy pricing.  Let’s see if our recently rising inflation is as due to temporary factors as our Fed Chair thinks they might be.
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Initial Jobless Claims (Weekly): We are not looking for much change in this item this week, as consensus view is for 269K, up from last week’s 267K, and slightly above the four week moving average.  The odd thing is that this week, the range of opinion is quite wide, spanning from the low 250K’s all the way up to 280K.  Anyone who follows macro-economic data closely knows that the range for this release is usually (of late) just about 10K, maybe 15K, so this is different.  Guess we’ll know for sure if that really means anything when we see the number.
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10:00 ET
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Fed Speaker: Atlanta Fed Pres. Dennis Lockhart will speak on the economy from the Fed’s perspective from Chicago.  Lockhart, not really clearly identified as a hawk or a dove, has been vocal about leaning toward three rate hikes this year.  We have not heard from him in about two weeks, but at least he gets to see the CPI before the music starts.  Atlanta does not vote this year.
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Fed Speaker:  Federal Reserve Gov. Jerome Powell will testify before the Senate Banking Committee.  The topic will be the changing environment of the fixed income market.  I doubt much monetary policy talk is likely to come out of this, but really, that’s up to those who pose the questions (and they’re not so good at their job).
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10:30 ET
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Natural Gas Inventories (Weekly): Nat Gas supplies have been remarkably stable for about a month or so.  We expect maybe just a small build today, maybe a flat-line.  This one is likely to be close, much to the chagrin of bungee jumpers everywhere.
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Thursday’s Earnings Highlights
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Before the Open: BAC (.22), BLK (4.33), DAL (1.29), PNC (1.70), WFC (.98)
After the Close: CHKE (.13), MRVL (.10)