Mid-Day Recon

Good Afternoon,

                       We did see an early, positive reaction to April Retail Sales.  Equity index futures markets did force a higher open than had been priced in overnight.  That move, however did not hold for long, and the better than expected Consumer Sentiment number did not have it’s usual impact.  Markets are for the most part sideways today on light volume.
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1) Let’s take a closer look at the macro.  Within those April Retail Sales, there are some moving parts that I think are of interest.  Building Materials weakened severely, after having been the positive force in retail through many much tougher overall reports.  we’ll get Q1 numbers from HD, and LOW next week.  There was a nice m/m pop for Clothing & Clothing Accessories.  Perhaps, reports of the imminent death of that retail line had been greatly exaggerated.  Grocery stores did nicely, and last, but not least…. there was confirmation of the change in consumer habits that we all know has happened.  For April, Department Store sales grew 0.3% m/m, but showed contraction (-0.3%) on a year over year basis.  Meanwhile, non-store retailers (wonder who that is) showed m/m growth of 2.1%, and y/y growth of a whopping 10.2%.  All hail the new king.
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2) The Treasury Curve continues to flatten The spread between the two year, and the ten year is now down to around 0.96, as bond traders sold the short end again after that Retail Sales print.  Fed Funds Rate futures moved higher quickly this morning, pricing in more than a 60% likelihood of another Fed rate hike at some point this year, up from something closer to 40% last night.
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3) Across the spectrum of investment vehicles…. Technology, and Health Care are your out-performing sectors, while the Transports are lagging behind.  Advancers vs. decliners are running very close to 50/50.  The US Dollar is strong today.  That’s hurting Oil a little, but not really impacting Gold all that much.  The VIX is coming in at this time.
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4) Energy traders…. pay attention, you may still get ambushed by the Rig Count number at 13:00 ET.

Market Recon Friday

Good Morning,
                        Bank of Japan Gov. Haruhiko Kuroda spoke late last night (or early this morning, depending on where you live).  Good ole Haruhiko reminded me of the kid that was always on the cover of “Mad Magazine”….. “What Me worry ??”… Yup, yup, yup.  The BOJ Governor said that his crew “can still ease monetary policy substantially” (Terrific) He also thinks that Japan’s QE on steroids policy, and negative interest rates are working… they just need some more time (I’ll give you another twenty minutes).  When asked about the recent strength in the yen… oh, that was the fault of China, the Federal Reserve, and cheap oil.  Good thing he told us.  I kind of thought that 25 non-stop years of continuous economic failure might be blamed on the home team.  Oh, and btw…. the March Tertiary Industry Index looked real good there, sport.
                       We’re sorting through a literal ton of European macro this morning.  The good news so far ????  German Q1 GDP beat consensus, and many important nations such as France & Italy at least met consensus.  In fact, Germany’s 0.7% q/q tag for the quarter makes that economy, at this point…. the hottest ticket in the G-7.  Q1 GDP for the “Zone” did miss expectations, but did improve.  The bad news ??  Inflation for the month of April.  In Germany, there wasn’t any.  The promise shown in March simply rolled right off of the table.  Hey, maybe they too should try some easier monetary policy.
                       Just in case you’re up all night, feeding your inner nerd, China’s National Bureau of Statistics will release April numbers for Retail Sales, and Industrial Production at about 1:30 am ET.  Oh yeah.
                       Dudes…. I almost forgot to beat up on the IMF.  Well, for those who follow economics in the UK, and have less than a second grade education … The IMF warned on the Brexit.  I kid you not.  The IMF’s never ending effort to inform the public on matters that said public has known about many months ahead of said warning continues !!  The IMF warning says that the UK leaving the EU could “precipitate a protracted period of heightened uncertainty, leading to financial market volatility and a hit to output.  Does the IMF pay their people ??  Can’t be hard to watch the news, and repeat what you hear.  I’m sure a lot of every-day British folks were sitting on their hands waiting for the IMF to chime in.
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At Least It’s Friday
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08:30 ET
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Retail Sales (April):  Consensus here is for a nice pop from what we saw in March.  We’ve all heard that tune before, so it’s with some skepticism that we view this.  Sure would be nice though, and the retailers really could use some positive news.  At the headline, we’re looking for a month over month increase of 0.6%, after clawing our way through the last three months without seeing a positive number in this space.  Omit automobile purchases, and the Core number is expected to show an increase of 0.5% m/m.  This would be the “hottest” print in the Core space since August of last year.  A word of caution here…. the range for these numbers is very wide, and I see some economists looking for negative numbers again this month, particularly for the headline.  Keep in mind that those are outlier calls.  Equity index futures will react, and could even over-react to this release.
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PPI (April):  The PPI may not pack the market punch of the CPI, or the much focused upon PCE Price Index… simply because this is not a consumer level number.  That said, as far as inflation goes, this is all you’re going to get until next Tuesday.  Expectations for today are for 0.3% m/m growth at the headline, and 0.1% m/m growth at the Core (less food & energy).  If these projections come to fruition, that headline number would be tied for the most inflationary print in that space since last July, thanks to the obliteration of oil prices over that time span.  Now that oil has bounced, headline inflation numbers will start showing some life.  In the Core space, that 0.1% tag would still be the second highest number of 2016.
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10:00 ET
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Business Inventories (March):  This data-point covers the dollar amount of inventories currently held by manufacturers, and wholesalers, and retailers.  Obviously, there is an implication here for future production in the short term.  That said, this item is dated, and not all that sexy, so the market reaction will be muted.  The good news (hopefully), is that maybe businesses have finally started building up their stocks.  We look for a “pop” of 0.2% for this one today, which incredibly would be the closest thing we’ve seen to a surge here since July 2015.
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U of M Consumer Sentiment (May -p):  In April, Consumer Sentiment printed lower (at 89.0) than it had in the month prior for the fourth month in a row….. and the retailers had a lousy quarter. Hmmmmm.  Now you know why this item packs a pretty big punch every time it’s released.  We’re looking for a positive push here today.  Consensus is for 90.2, which is pretty much smack dab in the middle of the range.  That leaves room for possible downside.  Being alert to this print is probably a good idea.
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13:00 ET
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Baker Hughes Rig Count (Weekly):  The numbers here have continued to shrink, though the momentum has slowed.  Total US Rigs were down to 415 as of last week, with those devoted to oil production adding up to 328.  This print will cause a knee-jerk reaction for Crude prices.
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18:45 ET
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Fed Speaker: San Francisco Fed Pres. John Williams will speak on the US economy from Sacramento, California.  Williams is not currently a voting member of the FOMC, but he is a mush listened to voice at the Fed.  Williams has already spoken this week, sounding quite hawkish.  He, according to his words feels that 2 to 3 rate hikes for the year are still within reason.  You, and I both know that this is absurd, unless consumer level inflation gets much hotter, but the DXY has persisted below 95, and that seems to me to be the “play nice in the sandbox” level for the Fed.  Williams will be the fourth “hawk” to speak since yesterday, with no doves in sight.
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Friday’s Earnings Highlight
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Before the Open: JCP (-.36)
After the Close: Gotta make up for last week. and it’s gonna be gross.

Market Recon Thursday

Good Morning,
                        No doubt that not just the lousy quarterly numbers from Macy’s, but the discouraged, and beaten impression that they gave listeners and readers helped put the whammy on equities yesterday.  Obviously, concerns about not just consumer spending, but also the way consumers now spend have spooked the retail industry.  The technical damage could have been far worse, though.  Remember the SPX 2074 level that we spoke about yesterday ??  Well, it was still in play for most of the morning, with sellers knocking on that door at least four times before it finally opened.  When it did open, the index spent the rest of the day working toward that 2063 level that had been staunch resistance on Monday.  There was a close call, but the level was never truly tested.  Equity index futures are trading above fair value this morning.  Will the Macy’s problem be confined to the somewhat higher end of retail, or will we see broad evidence of broad change ??  There be squalls ahead.
                      Out of the Euro-Zone, this morning…. March Industrial Production missed expectations, and missed badly… on both month over month, and year over year comparisons.  In fact, this is the fourth month in five that European Industrial Production has decisively missed it’s mark.  European markets have celebrated by all together opening lower, and rallying higher.  Mario !!!!!  The Bank of England will likely leave policy alone when they step to the plate this morning.  Like the Fed, the BOE has long wanted to raise it’s Official Bank Rate, and found itself stuck in place amid weaker than desirable growth and sub 2% consumer level inflation.  Mark Carney’s press conference is scheduled for 07:45 ET.
                     The World Gold Council published their numbers for the first quarter, and the results are quite interesting, though, as I guy who never stops trying to make a buck…. I’m not sure how to interpret them going forward.  I will likely talk to a precious metals expert this morning, namely Dave Williams of Strategic Gold.  What I see is an overall increase in demand for Gold of 21% for Q1 2016 on a year over year basis.  If I’m looking at the data correctly, it looks like demand fro central banks has cooled a little (I want to know if Dave expected that), while demand for investment purposes absolutely exploded.  Dave is far better with these kind of charts than I am, and if he has me changing my allocation, you’ll hear about it right here tomorrow.  God willing.
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Guts & Macro 
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08:30 ET
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Initial Jobless Claims (Weekly): Last week this item “popped”, coming in at what looks like a nasty 274K, only when compared to recent data.  We continue to see sub 300K numbers in this space, which really is incredible, statistically, even if large scale usage of part-time labor does have a huge hand in this performance.  The four week moving average, which is really how one should view this slice of macro stands at a mere 258K.  The expectation today is for something close to 272K.  Another upside surprise from this level could rattle a few cages.
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Import Prices & Export Prices (April):  Inflation anyone ??  well, yes…if a US dollar that has weakened this year has anything to say about it.  Import Prices are expected to outpace Export Prices for the second consecutive month.  Look for growth on the Import side of something like 0.6% m/m on top of the 0.2% increase that we saw for March.  For Imports, prices were flat in March, and look like they’ll be somewhere between flat and very slight growth of 0.1% m/m for April.
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10:30 ET
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Natural Gas Inventories (Weekly):  The moderately increasing inventory build that we’ve seen for Nat Gas is expected to continue this week.  Projections are for added supply of 60 billion cubic feet on top of last week’s increase of 68B cf.
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11:00 ET
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Fed Speaker: Cleveland Fed Pres. Loretta Mester will speak on monetary policy from Reichenau Island, Germany.  Mester is a voting member of the FOMC, and she was sounding very hawkish back in April.  She did not however stand with Esther George in dissent of the April decision.
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11:45 ET
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Fed Speaker: Boston Fed Pres. Eric Rosengren is scheduled to speak on our economic outlook from Concord, New Hampshire.  Rosengren is also a voting member of the committee this year.  He has been out and about in recent weeks warning about the dangers of keeping interest rates too low, so I guess that makes him a hawk these days.  Rosengren also did not stand in dissent with Esther George at the April meeting.
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14:15 ET
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Fed Speaker:  Kansas City Fed Pres. Esther George will be in Albuquerque, New Mexico to talk about the economy.  George will be the third, and final (hopefully) voting member of the FOMC to speak during trading hours today.  Think we should normalize ?? …think we shouldn’t ?? Either way, one thing Esther George is not… is full of bologna.  She’s a hawk, and she dissents when she doesn’t agree with a policy outcome.  Even when she stands alone.  You can disagree with her position, but you have to admire anyone, when they show some “guts”.
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Thursday’s Earnings Highlights
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Before the Open: KSS (.38), RL (.83)
After the Close: DDS (2.54), JWN (.46)

Market Recon Wednesday

Good Morning,
                     Many confused faces looked at each other yesterday asking “Why the rally ??, and why such strength in the rally ??”  Well, it’s easier to tell you what did not push yesterday’s major equity indices higher than what did.  It wasn’t  the robust underlying macro-economy….  It wasn’t the “rip your face off” speed at which year over year revenue comps are growing on corporate earnings releases, and last, but not least… it was not the new Powerball winner in New Jersey bringing his or her newfound wealth to the marketplace
                     Quite simply, the directional move was led by the Energy, Financial, and Transportation stocks based on Oil strength, with the pricing action orchestrated by technicals.  You all saw, or should have noticed the S&P 500’s behavior at the 2074 level.  Precise resistance twice, followed by precise support, and then the springboard effect.  That springboard effect had a dash of evening earnings related hopium attached to it that did not come to fruition.  Add to this giant ball of wax, the fact that there is still a perception based on the already mentioned soft macro… that the Fed can not move in June.
                     What this does is create fear, but not your normal kind of fear.  It works both ways.  As equity prices in aggregate have really just moved sideways now for a year and a half or so, there is still an obvious overhanging feeling that traders who hold on to what may be a timeworn understanding of how markets trade could miss a significant move in either direction, because …honestly nobody has any more experience than anyone else in a market where fundamentals count for less, and less.  Is this perverse  ??  Are markets now distorted environments ??  Welcome to the funhouse, been that way for a little bit now.  Understanding a market sentiment that is the result of a mosaic of components may be your last great advantage.
                     I don’t have any Fed Speakers on my radar for today.  That doesn’t mean that they’re not out there.  Like cockroaches in a NYC apartment, you don’t have to see them to know that they may surprise you when you let your guard down.  As for the geo-political, Russia, the Ukraine, France, and Germany will huddle today to discuss the situation in the eastern Ukraine.
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Macro
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10:30 ET
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Oil Inventories (Weekly):  The number surprised to the upside last week, if you recall.  That was the fourth week in a row that the experts either nailed it, or the number came in above their expectations.  Consensus view for today is for a smallish build.  The numbers I see are all around 700K barrels.  Last night the API print came in at a whopping build of 3.4 million barrels.  The two are not often very close, but this is an extreme divergence, and it is the primary reason for WTI weakness this morning.
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14:00 ET
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Federal Budget Statement (April):  It’s very difficult for me to give you a range for this one today.  The expectations I see out there are all over the place.  Some very high positive numbers, as well as some extremely negative prints that would be in line with the recent trend.  That said, April is generally a positive flow month or the Federal government, and it usually adds up to more than $100B.  This won’t immediately impact equity trade, and therefore will not cause a reaction on the floor at the time of it’s release.
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Wednesday’s Earnings Highlights
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Before the Open: M (.37), WEN (.06)
After the Close: SINA (.03), WB (.04)

Mid-Day Recon

Good Afternoon,

                       Equity markets are moving north, at least for now.  all ten S&P 500 sectors are in the green, being led by Energy, and the Financials.
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1) Transports are also strong today, all owing to positive movement in crude prices that are, btw, not related to any movement in the DXY, which is flat.
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2) The S&P 500 saw initial resistance at 2074, and then after that level cracked, that is precisely where support was found.  Hence, you have yourself an early pivot point.  We go along ways before hitting anything solid in either direction.  For now, I see a bump in the road up at 2082, and the rally point, should we be forced into a retreat is down at 2063.
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3) Safety check….  The VIX, Gold, and US Treasuries are all a little soft today.  Though the Utility sector is in the green at the moment, it is the weakest of the ten sectors.
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4) Ok, gang… we held our fire when gold ran through that $1275 line in the sand two weeks ago  It took some discipline, especially when it traded above $1300.  At the moment, we look sort of smart.  Our allocation is still at 7.5% of investable funds.  We’re not worried about cutting our allocation unless the yellow stuff drops all the way to 1210, but should we see another upside run, with a Fed that seems timid about a rate hike, I think we go to 10% at that point.  Another lousy NFP number should do it.  You’ll never know that it’s the right time to act, but you will surely know that you missed it when you do.

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5) My head is still spinning after NY Fed Pres. William Dudley’s comments this morning regarding the Us Dollar’s status as the planet’s leading reserve currency.  Yes, I get that with that status comes some responsibility (and ticks some people off), but that status allows the Fed to export inflation when needed.  There is also no conversion costs when both sides of a trade are in one currency.  On top of that, it affords the US the ability to enforce policy without resorting to military means when diplomacy fails.  That last one is a big one.  Imagine no ability to impose sanctions on the world stage when a Russia, or an Iran start doing things that are not in the best interests of world stability.  Use your head, Bill.

Market Recon Tuesday

Good Morning,
                        Everyday begins in the “Land of the Rising Sun”… That’s a fact of life, but today…. that’s where our story actually begins.  His name is Taro Aso.  He is Japan’s Finance Minister, and he talked the talk today.  Speaking before the Japanese Parliament he indicated that should the yen strengthen further that direct intervention would be appropriate.  If you take a look at the charts, you’ll see that after at first there was almost no reaction, then…slowly, the yen did soften versus the dollar.  The Nikkei 225 was soon to follow.  You may also notice that while most of the rest of Asia is just barely on the green side of the coin, those markets are all well off of their lows.  Aside from that, it looks like Chinese Rebar is still getting hit in the mush today.  Hi Ben.
                       Early this morning, NY Fed President William Dudley spoke from Zurich.  Mr. Dudley did not go anywhere near monetary policy in his speech, but he did mention the US Dollar’s place as the leading global reserve currency.  Dudley does not seem to be too worried about the US losing it’s 60% share of foreign exchange reserve holdings, and doesn’t think we should be too concerned either, if it’s for the right reasons.  I don’t know about you, but I’m a bit relieved.  I probably would have been worried without his sage advice.  I could have sworn forcing other countries to use dollars was a useful financial, and diplomatic tool, as well as keeping bad actors in check.  My bad.
                      I’m sure you noticed European equity markets move higher, despite March Industrial Production numbers badly missing expectations all over the continent.  Amazing what a few proposed adjustments to Greek fiscal policy can do to bring on hope that yet another can will be kicked down that road.
                     Okay, gang…. let’s do Tuesday like we mean it.  Focus from bell to bell.  Leave nothing on this field today.  Look in the mirror.  Would you hire the man or woman you are now ??  If not, fix it.  I do love you.
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Light on the Macro
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06:00 ET
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NFIB Small Business Optimism Index (April):  Released early this morning, this one printed at 93.6, which is still weaker than we like, but looks pretty good coming off of that 92.9 tag in March.  That number happened to be the least optimistic that small business owners that took part in this survey have been since early Spring 2014.  The majority of the hiring in this country has historically been done by smaller businesses, and the recently weakening national jobs data seems to correlate fairly well with what we seen here this Spring.
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10:00 ET
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JOLTS (March):  Supposedly Janet Yellen watches this item closely.  Not sure how true that is anymore, as there really seems to be little correlation between the headline totals for job openings, and rising wages… or quite simply competition on the demand side of the labor market.  You will likely miss this one, upon it’s release because you won’t know anyone trading off of the number.  Beside, it’s dated material.
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Wholesale Inventories (March):  It is said that companies will buy goods in order to restock once inventories are depleted.  Well, we’re ready gang.  This data-point has printed either at unchanged, or in outright contraction for five consecutive months.  That trend should end here according to those economists who comprise the consensus view.  Look for growth of 0.2% m/m.  This, however is another stale number, and traders are not likely to react.
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Tuesday’s Earnings Highlights
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Before the Open: AGN (3.02), DF (.38), WWE (.11)
After the Close: EA (.42), DIS (1.40)

Market Recon Monday

Good Morning,
                        Poof !!  The macro that captured all of our imaginations (and forced visions of central bankers dancing in our heads) for much of last week is suddenly very thin.  On top of that, the heavy batch of earnings seen over the last few weeks, now slows to little more than a trickle.  This is a tricky week.  This can also be a very fun week, ….or two.  The earnings calendar turns to the retailers, as it will this Wednesday morning when M prints their numbers, and then Friday we’ll get that April Retail Sales release from the Census Bureau.  The retailers, in my opinion are kind of like sports teams.  We all have ones we like, and ones we don’t, and I think, at least I do have rooting interests in a few of the names.  Separating personal bias from truthful analysis, and trying to decide just how honest your own answers might be… is really quite fascinating.  That’s why we do crazy things like watch individual consumer price tag response, measure parking lot capacity, and wait times.  Are we crazy ??  Of course…. but in the end, it’s always interesting to see if your little slice of Americana matches what transpires on a larger scale.
                      OK, about that Employment Report from Friday.  Yes the NFP number came in below trend, and there were some minor downward revisions to the last two months, but this truly is a really difficult report to find positives in… other than a slight bump in the Average Workweek. The lack of continued participation after that pop that we saw in the month prior is indeed, startling.  On top of that, the Household Survey was just devastating.  That survey showed severe job losses (-316K, of which more than 80% were full time jobs).  So, your choice here is to go worth either the Establishment Survey (which was just “regular” lousy, or the Household Survey, which was beyond lousy.  Either way, in an environment where the Fed had already normalized interest rates, the discussion around monetary policy would be about easing, not tightening.  You all know that I’m hawkish at heart, but these guys have likely missed their window.  It’s hard to overstate, from a policy perspective, the importance of the June 3rd release of the BLS Employment Report for May.
                     As for today, I’m sure you saw German Factory Orders for March crushed expectations.  Most of Europe is higher this morning on the news.  The Shanghai Composite however took a kidney punch after a report ran in “the People’s Daily” that insinuated that this Chinese recovery could look more like an L, than a U or a V, and that future monetary policy decisions could be less aggressively easy than previously thought.  We’ll see Chinese data on April inflation tonight.
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Fed Speakers 
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05:10 ET
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Chicago Fed Pres. Charles Evans spoke just a few minutes ago from London.  Evans is not a voting member of the committee this year, but he is a much listened to voice, at least for the media.  He is considered to be a perma-dove, and he took that tone this morning.  Evans expects to still see 2.5% GDP for the full year 2016, but would like to take a “wait and see” approach on interest rates at this time.  I really don’t like agreeing with him on this, but I think you have to, at this point.
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13:00 ET
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Minneapolis Fed Pres. Neel Kashkari will speak on the economy.  Kashkari, not a voting member of the FOMC this year, will open himself up to Q&A from the media after the speech.  He sounded a bit dovish last week.  At least that’s how I took it when he referred to the US economy as being in “Uncharted Waters”.  His strength is in regulation, not monetary policy.
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 Monday’s Earnings Highlights
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Before the Open: BID (-.20), TSN (.96)
After the Close: IFF (1.40), SCTY (-2.37), VSLR (-.59).

Market Recon Friday

Good Morning,
                        We heard from several Fed speakers yesterday…and the message was a lot closer to being a “lukewarm” version of hawkish as much as anything else.  Williams stuck to what he has been saying as of late.  Lockhart has tried to stay consistent in his expectations that there could still be multiple hikes for the Fed Funds Rate this year.  Kaplan, as under the radar as he is, is more hawkish than most, and Bullard…is well…Bullard.  The macro is not strong, but it is not weak enough to deter another hike if that’s what is in the plan (Remember, these guys have a boss).  For supporting consumer level inflation, all you have to do is point to the CPI instead of the PCE (or ask anyone shopping for their family).  The resent surge in Euro, and Yen strength has softened the US dollar to the point, that at least for right now, that pocket of resistance has been removed.  I think that the uncertainty of this possibility is obviously at least partially behind the price action that assets have gone through this week.  So what is still in the way of a rate increase at the June FOMC meeting.
                        Well, actually, the glaring lack of global economic growth, and diverging global monetary policies aside, there are still two big buts, that get in the way of a move at this next meeting.  Number one would be the timing of the US presidential election in November.  I can’t even imagine that the FOMC would want to tangle with that mess.  That leaves the meeting of June 14-15 as really the last chance until the December meeting if they want to move cleanly.  Number two is in direct opposition to that logic.  The FOMC policy meeting is just eight day (23 June) ahead of the UK’s Brexit vote, or the referendum on EU membership.  Whatever that outcome, Forex markets should be heavily impacted, and to move ahead of this event could be playing with fire.  You know that mocking central bankers is one of my favorite sports… right behind wiffle ball, and roller hockey.  That’s why, as always, I am reachable, and ready to help should they feel the need.  I would laugh so hard, but I would help.
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Maybe we should say a quick prayer for the folks being displaced in Alberta before we move on.
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Da Macro
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08:30 ET
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Employment Situation (April)
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Non-Farm Payrolls: Consensus for this one today is for about 202K, with a fairly wide range that is skewed surprisingly (slightly) to the upside.  I say surprisingly because of that disappointing print that we saw on Wednesday for the ADP Employment Report.  Now, even if they miss by a smidge, I don’t think that markets will take it all that badly.  There’s just not that much room to play with when the headline Unemployment Rate is so low.  I understand that many of the jobs are of poor quality.  I’m not ignoring that fact, it’s just that, you are not going to get huge numbers in this space at this point.  This is your headline item, and the number that the futures market will react to upon it’s release.
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Unemployment Rate:  You all saw… actually most of you probably didn’t see that the Gallup Unemployment Rate that I love to tout every “Jobs Thursday”.  The “GUR” really dropped quite a ways in April, as the print fell from 6% all the way to 5.2%.  These two usually do trend together.  Does that mean that we’ll see a 4.9%, or even a 4.8% tag here ??  We did get a really lousy Challenger (total layoffs) print for April, so that does make me hesitant to expect that much of a decrease here.  The economists that I watch are fairly evenly split between 4.9%, and 5.0%.  This item does not move the market anyway.  It’s simply fodder for comic book readers, and reality show watchers.
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Average Hourly Earnings & Average Workweek:  After the NFP number, the next most “impactful” prints will be those that deal with compensation.  There are two ways that folks can earn more…either they get a wage increase, or they are quite simply afforded the opportunity to work more.  In March, laborers saw a 0.3% m/m increase in their hourly earnings.  We look for a repeat of that pace in April.  If so, this would be the third “not truly awful” month in this space in the last four.  Projections are that full time workers also saw a one tenth of an hour increase in their workweek to 34.5 hours.  If you get both of these along with an NFP that is not below 175K, nor above 250K, markets will take that as a positive.
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Participation Rate:  Still awful, but less so.  This data-point reached 63.0% in March, which actually surprised me a little.  I don’t think you’ll see upward movement here, but I think if the level can be held, that’s fine for the short term…especially if this can be done without having adverse effect on Unemployment.
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Underemployment Rate:  Here it is… the sore spot in the economy.  The BLS rate of 9.8% in March, and the Gallup Rate of 13.8% for April, down from 14.5% are not even close.  This is not an item that the market will react to at the time of it’s release, but it surely is one that the media will focus on at some time during the day, and therefore will have some impact.  If there is an upward move in participation, there should also be upward movement here (we have not yet seen this), as very few returing workers are hired full-time right away.
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Other Stuff
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13:00 ET
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Baker Hughes Rig Count (Weekly):  When I was a kid, the Wednesday Oil Inventories print was simply… “The Oil number”.  It was the one time a week, that equity traders who did not specialize in this space, actually focused on Crude’s timed reaction to a print during trading hours.  This second “Oil number” has made this ritual a twice a week affair.  Traders focus on this one at least as much as the supply release these days, so keep your helmets on, gang.
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15:00 ET
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Consumer Credit (March): In February, Consumer Credit grew by $17.2B, which is a smidge above trend.  The problem is that this was mostly student loans, auto loans, and other kinds of “stale’ debt.  Revolving credit, or “credit card’ debt made for only $2.9B of that total.  Hey, I’m with you, gang.  I try to use cash as much as I can.  Why let somebody beat me over the head, so I can end up paying more than I should have ??  Well, that’s what somebody somewhere long ago decided was “good”.  I don’t think that you’re not confident.  I think you’re being smarter than them. Rock and roll.
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Friday’s Earnings Highlights
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Before the Open: CI (2.15), MSG (-.42), WY (.19)
After the Close: Nothing gross, running a local 5k early in the morning.

Mid-Day Recon

Good Afternoon,
                       So far, some things are moving higher, some things are moving lower.  Most things…Stocks, Treasuries, and Gold are kind of going sideways.  Crude is still up nicely, but well of of it’s highs for the day.  Can’t always count on wildfires in Canada, though you may be able to count on unrest in Libya.  Are we waiting for James Bullard to put his spin on things ?  He just started speaking at 11:50 ET.
                      Likely we are waiting to some degree for the Jobs number, especially after receiving some mixed signals from the employment arena over the last two days.  In case you have been pre-occupied, the April ADP print, and the April Challenger total for layoffs were both surprisingly poor.  Yet, Gallup, a firm that releases Employment data a day ahead of the BLS showed sharp improvement for the month.  Gallup’s data usually runs at higher levels than does the numbers put forth by the BLS, but they do usually trend together.
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1) Obviously, Crude is your lead story today.  WTI traded above $46, and is still above $44, which is a gateway to a lower range.  This has the Energy sector easily out-performing the rest of the S&P 500.
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2) Speaking of the S&P 500, we have already seen the 2053 level work twice today as support.  This is after that level worked multiple times as resistance for most of the Wednesday trading session. If we can get some breakaway speed this afternoon, I would like to see the index make a run at 2063.  If we are forced into a retreat, a stand could be made at 2046, but  2041 remains the level that get me a little nervous.
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3) You may want to take note today, that the weakest industries within the Consumer Discretionary sector today are the various types of retailers.  Chain Store sales startled traders to the down side this morning.  Most of the retailers start reporting quarterly earnings next week, and Retail sales will be highlight macro event for next week.  First, Jobs Day, but definitely food for thought as you prepare over the weekend.
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4) Let’s talk safety.  the trading public does not seem all that concerned at this point.  the Utility sector, and the VIX are lower on the day, while Treasuries of all maturities are fairly close to flat.  Gold is higher (small), despite a stronger US dollar, which may say more about Gold, than safety seeking.
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5) Mets, Cubs, Nationals.  The American League may have to drop the DH rule if they want to produce some offense.

Market Recon Thursday

Good Morning,

                        You’ve all seen the cartoon, though it may have been a while.  Elmer Fudd asks what he thinks is a police officer (actually Bugs Bunny) for directions.  Bugs Bunny then tells him to go “thataway”, and crosses his arms pointing in both directions.  Welcome to money management, 2016 style.  Stocks, Bonds, Commodities…. Currencies.  Which way will they go ??  Thataway.  This does not mean that we throw our collective hands in the air, and say that this is impossible.  This is not impossible.  There is, and always will be a way.  You are going to have to be prepared to stay on an even keel, though.  The volatility in asset prices that we are currently experiencing may just be getting started.  After all, none of the hurdles facing financial markets are close to being successfully resolved.  Sick to your stomach ?  That’s an excellent place to begin.
                       As far as today goes, that wildfire in Alberta, Canada put an early bid under Crude, and equity index futures, but those futures are well off of their highs.  At the same time, European markets, that were all in the green earlier, are now mostly in the red.  Keep in mind that today is Ascension Thursday, and while most major European equity markets remain open, trading volumes are extremely light.
                      Climate change.  You’ve heard of it, no?  Well, the Climate Action Summit will convene today in to our nation’s capitol in order try to push implementation of the Paris Agreement to mitigate global warming.  That the planet is warming is beyond dispute.  The degree of mankind’s role in this is highly disputable, and quite frankly… unknowable.  Obviously, it is in our best interests to try and slow the pace at which, the planet is warming… if we can.  Let’s not lose sight of the fact, though… that the Vikings grew crops on Greenland 900 years ago.  There are forces greater than ourselves at work here.
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The Wishbone Offense
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08:30 ET
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Initial Jobless Claims (Weekly): The four week moving average for this one has fallen all the way to 256K, with last week’s number rolling in at 257K.  That average, by the way, is now at a 42 year low.  A 42 year low !!  How could that be, in a miserable economy ??  The positive, gang is that less, and less people are losing their jobs, and filing for Unemployment benefits.  Now the negative here, that may perplex a few economists / central bankers is that when a company employs a largely part-time body of laborers, that they just cut hours when they need to lower overhead, not people.  There are neighbors of yours being reduced to 4 or 7 hours a week.  They are not eligible for benefits.  How do I know ??  I talk to them.  They are angry, and they are not just data..
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Gallup Unemployment & Underemployment (April):  Nobody else seems to follow this one.  That’s okay.  I don’t have to drink the Kool-Aid, because I’m not trying to sell you anything.  I just love my country.  In March, Gallup (Gallup does not seasonally adjust) printed US Unemployment at 6.0%, and US Underemployment at 14.5%.  For those who believe everything they’re told, the BLS prints last month came in at 5.0%, and 9.8% for those two items respectively.  Add a tenth of a percent to both in order to remove the seasonal adjustment.
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10:30 ET
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Natural Gas Inventories (Weekly): This item “popped” last week, so to speak.  That print showed an inventory build of 71billion cubic feet, after not having moved much at all since mid-February.  Expectations are for another moderate increase this week.  The pros that I see are looking for growth of something like 59 B cf.  Cowabunga, dude.
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11:50 ET
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Fed Speaker: St. Louis Fed Pres. James Bullard will speak on the economy from Santa Barbara.  Bullard is a voting member of the FOMC…. Though usually quite outspoken, it has now been about a month since we’ve heard from him.  He is well known for rapidly changing his mind on the future course of monetary policy, so it’s almost impossible to predict how he will feel about this on any given Thursday.  With the DXY below 95, I’m guessing hawkish.
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19:15 ET
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Fed Panel Discussion:  There is a planned central bankers’ group hug at Stanford University in Palo Alto, California, and they’re bringing some headliners.  The intended topic is international monetary policy, and the panel will include St. Louis Fed Pres. James Bullard (it will be almost eight hours, let’s see if his message changes), Dallas Fed Pres. Robert Kaplan (non-voter this year, hawkish), Atlanta Fed Pres. Dennis Lockhart (sounded hawkish on Tuesday), and San Francisco Fed Pres. John Williams (sounded hawkish on Monday).  If you don’t get some kind of market moving headline here, I will be amazed.  Again, funny… that the doves don’t get out much when the DXY is weaker.
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Thursday’s Earnings Highlights
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Before the Open: BABA (.56), APA (-.89), BDX (2.01), CHK (-.11), K (.94), MRK (.85), OXY (-.39), USAK (.13)
After the Close: Y (7.50), FLR (.84), GPRO (-.59), HLF (1.09), MHK (2.32), TSRO (-1.68), YELP (.03)