Market Recon Wednesday

Good Morning,
                        The “Ugly Stick” is still on the hunt this morning.  It would seem to me that market participants believe that the outlook for the EU is as weak as the ECB thinks it is, that future demand from within China is as weak as the Reserve Bank of Australia thinks it is, that Japan’s economy may actually be in a death spiral (like you didn’t think of that one on your own), and that the sudden weakness in the US dollar has put a June rate hike right back on the FOMC’s table.  Well then…. That’s an awful lot to price in, and it’s being priced in quickly.  Oh, there’s also Puerto Rico, Detroit, Chicago, etc, etc,  Then there’s the stuff that either isn’t getting much attention, or we haven’t even heard of yet.  Good thing we’ve got baseball.  Hey, Jim…..the Phillies aren’t awful this year… yet.  No truth to the rumor that futures markets are reacting unfavorably to John Kasich’s relentless march toward the Presidency.
                       All of that said, all you can do is your best, but your best is also th  very least that we  require here.  Everything for a reason, everything with some sort of intelligent protection.  Remember, all of this stress probably won’t kill you, and even if it does, nobody’s going to eat your remains, so don’t be a namby pamby, and have some fun.  That’s the first rule of managing your own dough, kids…. if you don’t love trying to master what is un-masterable, then maybe this just ain’t your sport.  When you win, act like this isn’t your first rodeo.  When you lose, you do what you said you would do, because you already have a plan.
                     Health Care is your second worst performing sector year to date, after having been a long-term market beast.  You may want to watch what comes out of Deutsche Bank’s Health Care Conference today.  Barron’s made mention of it over the weekend as something to keep an eye on.  Ok, gang, let’s get ’em.
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Macropalooza
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08:15 ET
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ADP Employment Report (April): …. and “Jobs Week” begins.  This once wildly inaccurate predictor of the Private Payrolls portion of Friday’s Non-Farm Payrolls number has been a lot closer than we have been used to in 2016.  For today, projections are for 198K, in line with the 200K that we saw in this space in March.  This print has a habit of slapping the futures market around at the time of it’s release, even though it will be largely forgotten by the end of the week.
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08:30 ET
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Non-Farm Productivity & Unit Labor Costs (Q1):  These two are among our peanut butter and jelly macro-economic data-points.  You need to compare them to each other, as well as their history in order to see the story they tell.  In the case of these two, Productivity has been in decline, while Labor Costs have been on the rise.  That’s generally not good for anybody, especially folks trying to stay employed.  These two items print quarter over quarter, and are then annualized.  They are also revised once a month later.  Today’s numbers are the initial print for the first quarter.  In Q4, we saw productivity get hit in the mush with a -2.2% tag.  Consensus view is for another decline in Q1, though less severe, say something like -1.3%.  As for the Cost of Labor, the Q1 expectation is for 3.2%, which is pretty much in line with the 3.3% revision that was bestowed upon us for Q1.
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Trade Balance (March):  The Balance of Trade has always been watched by currency traders.  That’s still true, but traders of all types now watch this release, not so much for the balance itself, but for the underlying Imports, and Exports prints as a barometer of both foreign, and domestic demand.  Due to the improved gap that we saw for Goods just last week, you can expect that the balance will be smaller than it has been in recent months, maybe even less than $-43B.  In February, Exports totaled $178.07B, and Imports ran up a $225.13 tag.  These are your numbers to watch for this item.
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09:45 ET
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Markit Services PMI (April):  Don’t waste your energy.  This item flashed at 52.1, just in case you happen to work for Markit.  The rest of the industry is going to wait the 15 minutes.
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10:00 ET
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ISM Non-Manufacturing Index (April):  This highly focused upon Service Sector thermometer had been cooling in it’s pace of expansion for four consecutive months, and given the trouble that the manufacturing sector has gone through, quite frankly… it had me worried.  The momentum made a turn for the better in March, printing at a “not so bad” 54.5.  Today we look for a slight increase on the pace of growth.  Consensus is for 54.7, which is right in the middle of the range.
Factory Orders (March):  February’s print was undeniably nasty in this space.  Kind of made us glad that it runs with such a sever time lag.  For March, the pros think that this item will have showed improvement.  Projections are for 0.7% m/m growth.  Keep in mind, though this one is important within the economy, because of that time lag, markets generally do not react to this print.
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10:30 ET
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Oil Inventories (Weekly): Those whom make up consensus on this one, ….and I apologized to last week, because they nailed it after I had mockified them, have now been pretty close for two weeks in a row.  These kids are calling for a small increase in supply, in the neighborhood of 600K barrels, down from last week’s 2M barrel inventory build.  The API print last night came in at an above expectations build of 1.265M barrels.
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17:30 ET
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Fed Speaker:  Minneapolis Fed Pres. Neel Kashkari will speak from Rochester, Minnesota.  Kashkari is not a voting member of the FOMC this year, and has not been extremely vocal on monetary policy either.  He has been vocal on “Too Big to Fail”, and the possible breakup of the banks.  Not sure where I stand on that, but I do think that he’s worth listening to.  Perhaps that’s because he’s got something on his resume other than running the “Dungeons and Dragons” club after school.
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Wednesday’s Earnings Highlights
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Before the Open: BUD (.91), CVC (.20), CPK (1.50), PCG (.75), PCLN (9.60), TWX (1.29)
After the Close: ALL (.75), CB (2.16), GDDY (.48), KHC (.62), MUR (-.69), SUN (.78), TSLA (-.65), TSO (1.03), WTW (-.18), ZNGA (-.01)

Mid-Day Recon

Good Afternoon,

                       Well, well, well, we certainly didn’t lie to you this morning.  The “Ugly Stick” was ready, and it was really swinging.  Down goes Energy.  Down go the Financials.  Down go the Autos, the Miners… oh, and down go the Transports.  Why?  There’s enough blame to go around.  Chinese PMI’s, lowered growth outlook in the Euro-Zone, panic (at the disco) in Australia, Puerto Rico, and the weakened US dollar.
                       Weakened US dollar ??  I thought that was good for US multi-nationals !!  Yeah, me too, and it truly would be, if in fact it were sustainable.  Truth is that the DXY’s recent rolling off of the table sets the stage for some shuffling around by some global central banks, including the Fed.  You see, this may just give the FOMC the flexibility that they are looking for, with or without an increase in inflation, if indeed their banking masters have give them those much talked about marching orders for June.  On top of that… really… how long until the BOJ cries “Uncle” ??
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1) The S&P 500 found support at 2057 four times in a row this morning.  Having come in with a 2055 trading level, I had thought that maybe I had mniseread the chart….. until 2057 gave way, and we saw a little bounce at 2055.  For this afternoon, 2063 is our target, and 2014, though a long way off, is out rally point.
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2) How is safety acting today?  Well, Treasuries, and the VIX are seeing a boost, however, Utilities, while the best performing sector are still in the red, and Gold is seeing a little profit taking after it’s runabout.
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3) Lunch may not be as healthy today, as i had first intended.
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4) Is it Tuesday, already ??

Market Recon Tuesday

Good Morning,
                        A couple of items are rattling some cages this morning.  First and foremost among them are the comments made last night by San Francisco Fed Pres. John Williams.  Williams is not a voting member of the committee this year, but he is a “much listened to” voice at the Fed.  Williams was quite direct in his opinion that the economy was ready higher interest rates.  The whammy, however was this…  “broad sets of assets are going to see big movements downward” (as interest rates rise). Yeah, I guess that’ll do it.
                       On top of that we saw less than spectacular macro PMI numbers out of China regarding both manufacturing, and services.  Shanghai happens to be your best performing global equity index this morning, oddly enough, as market participants apparently clung to some cheerleading done by President Xi on Friday, and not economic disappointment.  Last, but not least, the Reserve Bank of Australia cut their Cash Rate from 2% to 1.75% in an attempt to tackle a strong Aussie dollar, and the same lack of inflation, the rest of Planet Earth is contending with.
                       Other than declining markets, we’ll be watching voters in Indiana, as well as feral cats in Chicago.  This is the lightest day of the week, from a macro perspective, but there’s still plenty of earnings to go around and there will be right on through Thursday.  There is a chance that the “Ugly Stick” could be calling your name.  Helmets, flak jackets, gas masks on the hip.  Make sure you have water, and clean socks. (Protect yourself)  Let’s go.
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Down Came the Rain
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All Day
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Total Vehicle Sales (April): In March, we got a nasty jolt in this space, with total sales printing a million annualized units below expectations.  In fact, this item has been running well below the gaudy levels seen in late 2015 all year, to date.  Today, we look (hope) for a rebound that gets the number back into the low to mid 17M’s.  Consensus is 17.3 million to be precise.  The consumer won’t be back without movement in this one, gang.
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08:55 ET
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Redbook (Weekly): This release surprised, somewhat pleasantly last week, with a 0.8% y/y printLike I keep saying, and it’s still true, this one will fly below the radar as along at the year over year growth stays at or above 0.5% growth.
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10:30 ET
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Fed Speaker:  Cleveland Fed Pres. Loretta Mester will speak from Amelia Island, Florida.  Mester is a voting member of the FOMC this year, and really has not been heard from in nearly a month.  In early April, she gave two speeches where she seemed supportive of gradual interest rate increases, and if felt, to me at least… that she is on board with the original plan, while making effort to neither sound hawkish nor dovish.
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19:00 ET
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Fed Speaker: Atlanta Fed Pres. Dennis (the Spider) Lockhart speaks on our economic outlook tonight from Jacksonville, Florida.  The Spider does not vote this year, but that hardly prevents him from being out front, and making some noise.  His latest flip-flop came in mid-April after seeing some weakening data on inflation.  At that point, he became dovish, after leading the hawkish charge.  With the dollar weak again, I wonder if he’ll be a hawk again today …..  I wonder if he even knows.  Think he changes his tie like ten or twelve time in front of a mirror before he leaves the house ??
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Tuesday’s Earnings Highlights
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Before the Open: ADM (.45), BCC (-.01), CLX (1.10), CVS (1.16), HAL (.01), TAP (.43), MYL (.76), PFE (.55), S (-.13)
After the Close: CBS (.94), PZZA (.63), PKD (-.21), WU (.38), ZG (-.09)