Market Recon Friday

Good Morning,
                     The Bank of Japan disappointed many last night.  They may have done the right thing by not taking their stimulus package to the levels that were rumored ahead of this meeting, but as witnessed by this morning’s strength in the Yen, there is some disappointment.  The BOJ will be increasing their ETF purchases, however they will not be increasing their purchases of Japanese sovereign debt, an arena in which the central bank already owns between a third, and 40% of the marketplace.  The BOJ also left it’s key interest rate at -0.1%.  Has the BOJ reached the limits of what it can do?  Does this provoke a fight between Abe and Kuroda?  More to come this Tuesday when the Japanese government presents a more detailed version of their economic stimulus plan than the Prime Minister did in his speech this week.  Word is that the actual fiscal stimulus may also be less significant than previously signaled.
                     Let’s take a look at Europe.  The headline macro all came in close enough to expectations.  Q2 GDP, Core CPI, and Unemployment may all be performing meekly, but overall conditions did not deteriorate from previously held levels.  There was some underlying weakness in some core countries however.  Germany, France, Italy, and Spain all caught a dose of softness in their data today.  Don’t forget… European Stress Test results for tonight after the NY close.  Pay attention to Italian banks.  The Euro is responding with strength to all of these numbers, and is now well above that 1.10 level. The Euro, and the Yen rallying together should be good for commodities.  You would think.
                     WTI Crude has broken below $41 a barrel this morning, and nearly traded as low as $40.50.  This is 20% below the top of last month’s rally that forced production back on line.  Technically, I think you may see a bounce from the $39 level if it gets there.  A break at $39 opens a door that could allow another $5 drop.  The top of this range, in my opinion is 44.50, and this range is still in play.  If you’re in the oil space, technically is how you would have to trade this, as Crude is selling off in the face of a weaker US dollar.  That tells you that something is wrong fundamentally.  On top of this, you will hear quarterly numbers from some big oil names this morning.
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Macro
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08:30 – GDP (Q2 -p): Expected 2.6% (???), Q1 1.1% q/q (SAAR).  Most economists had been looking for something close to 2.6% here, which would have been a dramatic improvement from what we’ve seen the last three quarters.  Unfortunately, just yesterday the Atlanta Fed’s GDPNow forecaster cut it’s Q2 view from 2.3% to 1.8% after adjusting lower both the contribution of net exports, and inventory investment to GDP.  The markets generally do not react to preliminary GDP numbers, but I really think that a sub 2% print after all of the positive momentum seen of late could actually hurt sentiment.
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08:30 – Employment Cost Index (Q2): Expected 0.6%, Q1 0.6% q/q.  This item, always consistently increasing over time, has become incredibly regular.  Not only do we expect that the cost of employing an individual increased 0.6% over the last quarter…that’s the very pace of growth that we have seen in this space for three quarters running.  This one won’t move the markets, but it can tell you when overhead is getting away from employers.
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09:30 – Fed Speaker:  San Francisco Fed Pres. John Williams will speak on tools at the Fed’s disposal from Cambridge, Massachusetts.  Williams, though not a voting member this year, is quite influential.  Williams, a former dove, has been outspokenly hawkish of late.  This speech could sneak up on market participants if they are unaware of it’s subject.
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09:45 – Chicago PMI (July): Expected 54.1, June 56.8.  Chicago is wildly unpredictable, and wildly volatile.  For that reason, the number isn’t really expected to be close to expectations.  Yes, you read that right.  Because of that, this item has lost some of it’s luster as a leading regional indicator.  Still, if there is to be impact, a miss would matter more than a beat, being that this one is coming off of it’s best number in a year and a half.
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10:00 – U of M Consumer Sentiment (July-rev): Expected 90.4, Flash 89.5.  For two reasons, you’ll likely see an upward revision here today.  One, that 89.5 mid-month print surprised big time to the downside.  Two, the Conference Board’s similar Consumer Confidence print remained at high levels for July as seen in Tuesday’s release.  Markets do react to Consumer surveys, and will likely react to this one should something awkward hit the tape.
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13:00 – Baker Hughes Rig Count (Weekly): Last week 464 total / 372 oil.  We have witnessed a steady weekly uptick in the number of oil rigs every week since Crude topped out in the low $50’s.  Now that WTI is more than ten dollars a barrel off of those levels, when does this return to production start to tail off?  Another increase today should put pressure on the commodity.  Then again, US dollar valuations may have more of say today as far as that goes.
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13:00 – Fed Speaker:  Dallas Fed Pres. Robert Kaplan will speak to the Independent Bankers Association of New Mexico, and he will open himself up to questions from the audience.  Kaplan, who is not currently a voting member of the committee, was hawkish as recently as two weeks ago.
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Friday’s Earnings Highlights
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Before the Open: BUD (1.25), AON (1.39), AN (1.04), CVX (.34), XOM (.64), SAVE (1.08), TYC (.53), UPS (1.43), XRX (.24).
After the Close: I think we may need a cold beverage, and a disgusting plate of nachos.

Market Recon Thursday

Good Morning,
                     It seems to me that the headline writers are scrambling a little this morning.  We hear that S&P futures are higher ahead of the BOJ policy meeting.  If that’s so, why is the Nikkei 225 lower, and why is the Yen stronger.  We hear that markets are reacting to a dovish Fed, when anyone reading the statement can see that this statement was clearly a step in a hawkish direction.  Maybe…just maybe, folks are unsure on BOJ policy, so they’re pulling back on that bet.  Maybe the equity market looks better because earnings have been better than expected, and the economy seems to be on firmer ground.  Lastly, maybe the bond market gets the final word on interest rates, not the Federal Reserve Bank.  There will always be demand where there is some yield without credit risk.
                    More on the Fed.  I think that they should seriously consider raising the Fed Funds Rate in September.  If not that, at least consider whittling down balance sheet risk while yields are favorable.  The simple fact is that there are eight weeks between yesterday’s meeting and the one in September.  It would have been irresponsible of the FOMC to not leave the door open to a rate increase with two months of data ahead of us, and the most recent month showed marked improvement across an array of data types.  Truly, it is improbable that there will be an increase that close to a national election, but should we see more positive numbers, and should inflation tick up even by their precious measure….even with a strong dollar, the hand may be forced.
                   Another story that nobody really wants to talk about are those previously mentioned earnings.  About 40% of the S&P 500 has reported at this point, and the drop in earnings is running at close to -3%, against expectations of -5.2%.  We see more year over year revenue growth than we’ve seen in recent quarters, and 56% of those already reported have beaten their quarterly revenue projections, which are a bit tougher to engineer than an EPS beat.  Three consecutive months of improved Core Retail Sales are starting to show up across the markets.  It could get better, the Retailers bat ninth in this line-up.
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Macro
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08:30 – Goods Trade Balance (June):  Expected $-61B, May $-60.6B.  For those uninitiated, the Census Bureau started releasing the Goods Trade Balance about a week ahead of the monthly Trade Balance data, of which this is a sub-component.  This effort was an attempt to reduce the wild swings in GDP revisions that we’ve seen in the past.  Crude is a “good”, so we almost always run a deficit.  Couple that with the fact that global demand has been week, and you see expectations like this.  The market will not react to the headline print.  The markets may react to a visible change in demand on one end or the other.
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08:30 – Initial Jobless Claims (Weekly):  Expected 262K, Prior 253K.  This remarkably consistent data-point has printed in the low 250K’s for the last three weeks.  In fact, the four week moving average is down to less than 258K.  We do expect a tiny pop today, within a very tight range.  Incredibly, almost everyone is between 260K and 265K on this one.  The market will not react in this space unless something comes in truly sideways.
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10:30 – Natural gas Inventories (weekly):  Expected 29B cf, Prior 34B cf.  Projections are for a fifteenth consecutive inventory build for Nat Gas.  Overall market impact will be insignificant.  The target audience here is truly limited to those trading Nat Gas futures at 10:30 am.
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11:00 – Kansas City Fed Manufacturing Index (July): June 2.  This one is relatively minor compared to some of the other regional Fed district manufacturing reports.  Of the five that we track, this one is a distant fifth in significance, and likely will not impact your trading day.  Today this one will be a tie breaker, with New York & Richmond printing in expansion, while Philadelphia & Dallas showed contraction.  Some might argue however, that the underlying responses in Philadelphia looked a lot better than they did in NY.
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Thursday’s Earning’s Highlights
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Before the Open: APD (1.90), BHI (-.60), BMY (.66), CL (.69), F (.60), HOG (1.53), HSY (.78), IP (.84), MA (.90), RTN (1.77)
After the Close: AMZN (1.12), BIDU (1.39), CBS (.86), WDC (.71), GOOGL (8.06)

Market Recon Wednesday

Good Morning,
                    Even on Fed Day, it’s Japanese policy that steals the show.  Japanese Prime Minister Shinzo Abe, speaking this morning announced a 28 Trillion Yen (over $350B) economic stimulus plan.  Abe was not specific, but did say that almost half of this plan would be directed toward fiscal measures.  The Prime Minister did say that the plan would be put together next week.  On top of that, it appears that the Japanese Treasury is preparing to offer 50 year bonds in order to get this on the tape.  While not “helicopter money”, 50 year paper may be as close to Ben Bernanke’s “Perpetual Bonds” as the Japanese are willing to go at this time.   Mind you, this is separate from the increase in monetary stimulus that everyone is expecting from the Bank of Japan this Friday.  In response to all of this, the Nikkei 225 is your global equity index leader this morning, but the Yen itself has been all over the place, and is well off of it’s lows vs. the Dollar.
                    The Fed.  Remember those guys?  The FOMC will come out of their two day meeting today, and make a policy statement at 2pm ET.  There will be no dog and pony show today.  There is nearly unanimous understanding on the Street that there will be no policy movement announced here.  What traders will be on the prowl for will be the wordage.  Just how subject does the FOMC feel to global economic, and policy direction?  How sensitive is the committee to US dollar exchange rates?  Basically, the bottom line is…..just how live is September’s meeting?
                    A few noteworthy items came out of Europe this morning.  First, the UK reported Q2 GDP that beat estimates.  Before launching into a round of back-slapping, and high fives, keep in mind that Q2 included just one week of the post-referendum era, and there would have been no economic impact from any Brexit related actions at that time.  Germany.  Two items.  First. Those Deutsche Bank earnings are not a misprint.  They really are reporting a 98% drop in net income on a 20% drop in net revenue.  Second.  Germany offered 30 year bunds this morning, and while the yield awarded remained low, the bid to cover was very soft.  Guess we’re not the only ones.
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Macro
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08:30 – Durable Goods Orders (June): Expected -1.2% May -2.3% m/m, ex-Transportation Expected 0.3% May -0.3% m/m, Core Capital Goods May -0.7% m/m.  This has been a rough spot for our economy, printing in contraction in seven of the last ten months.  That shouldn’t surprise given what the manufacturing sector has gone through.  We expect to see a positive number once volatile aircraft purchases are omitted.  If that is how it plays out, this will be the fourth month in six, which is an entirely different looking trend.  A beat here at the Core, or even at the headline would put the finishing touch on a solid June for the economy.  It could also put upward pressure on bond yields.
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10:00 – Pending Home Sales (June): Expected 1.5% May -3.7% m/m. All of the other housing related number that we’ve seen for the month have shown improvement.  It’s no wonder that I do not find a single economist in negative territory for this print.  Regardless, this item, of all timely housing related data… has the least impact on day to day trading.
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10:30 – Oil Inventories (Weekly): Expected -2.4M barrels, Prior -2.3M barrels.  The expectation is for another significant drop in US supplies.  Last night, we saw the API print come in at a draw, but one of less than a million barrels.  Beware of rising Gasoline stocks.  That’s something that’s been moving in the opposite direction from Crude inventories, and it’s something that we’re likely to see more of today.  Obviously, this number will move the marketplace.
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14:00 – FOMC Policy Decision:  How to put September in play, without doing too much damage to the US dollar.  That’s not an easy task to tackle.  I am sure that Fed Chair Janet Yellen is thankful that there is no press conference today, and that the FOMC can get away with a policy statement.
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Wednesday’s Earnings Highlights
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Before the Open: MO (.80), BA (2.47), KO (.58), DPS (1.20), GD (2.31), GT (1.02), HES (-1.24), IR (1.30), NSC (1.35)
After the Close: AMGN (2.74), EFX (1.36), FB (.81), MCK (3.34), SFLY (-.61)

Mid-Day Recon

Good Afternoon,

                       Now, what does the Fed do?  With equity markets at or near all-time highs, with US Treasuries still yielding far less than could be considered normal, and with undeniably improving macro…….. Is it time?  Oh, and there was the Brexit referendum, which really never presented a threat to the US economy at all.  I think we can all agree that the FOMC’s hands are tied for this meeting.  Do they now set up September as a live meeting?  This close to a national election?
                       It will, or it should come down to the macro.  Almost all of your recent headline level macro events have printed at stronger than anticipated levels.  Just today, June New Home Sales printed at an 8 year high for the series, Consumer Confidence surprised to the upside after the University of Michigan print came in somewhat gnarly two weeks ago, and the Richmond Fed Manufacturing Index showed remarkably improved strength in New Orders, Shipments, and Capacity Utilization.  To expand on this, June was a strong month for Retail Sales, Core Inflation, Industrial Production, Housing Starts, and Non-Farm Payrolls.
                      The economy is undeniably ready for a smidge of normalization, and I think that the markets could handle a quarter of a point a year, which could hardly be called a “tightening cycle”.  There are problems though, such as divergent policy direction that in turn will cause US dollar valuations to increase.  That will hurt multi-nationals.  Then again, the bond market truly gets the final say on interest rates anyway.  The underlying economy is ready, though.  That’s my opinion, and I bet a few folks at the FOMC agree.  If they feel timid on rates, they should at least be moving to sell bonds out of inventory at this time in order to reduce balance sheet risk.

Market Recon Tuesday

Good Morning,
                    By now, I’m sure that you’ve noticed, and if you have not, you should notice that the Nikkei 225 is Asia’s softest major equity index this morning.  You probably should also take a look at the relationship of the Japanese Yen to the US Dollar.  Yep, a dollar bought you about 107 yen at one point yesterday.  This morning, the mighty buck will barely buy 104.  What’s going on ??  We all have been waiting for this Friday’s policy announcement from the BOJ for over a month, and an aggressive move by the central bank coupled with just as much aggression by the government on the fiscal side has largely been priced in.  Today, the Nikkei Business Daily laid out what that publication believes to be the fiscal package, and while on the surface, it seems whopping, the spending is spread out over time, and this plan disappointed Asian traders.
                  The good news is that this helps soften the DXY, which in theory at least, should put a bid under Gold and Oil.  At least Gold is seeing some of that support.  After WTI Crude cracked that 44.50 level, from a technical perspective, I could easily see this trade at $39 a barrel.  A little bearish news is all you need, and we will see the API number tonight ahead of tomorrow weekly inventory print.
                  Reason to trade.  Even with the FOMC beginning their two day meeting today, which is usually enough of a reason for some traders to take a powder, there are so many numbers being thrown around that prices will undoubtedly swing in the balance.  The outcome of this policy meeting is probably as close to a known entity as we’ll ever see, so it may be less of a deterrent to risk taking.  On top of this, today is our heaviest macro day of the week, and the industry will be inundated with high profile quarterly earnings releases not only today, but through the end of the week.
                  Did you ever think that you would see the New York Yankees, and the Chicago Cubs put together a late July trade where the Yankees were the seller, and the Cubs were the buyer?  Nothing ever stays the same.  Seems like only yesterday that not being able to find a payphone when you needed one was a real problem.
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Macro
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08:55 ET
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Redbook (Weekly): Prior 0.4% y/y.  This item came in a little light last week at y/y growth of 0.4%.  For today, I’d like to see this one get back to, and maintain a 0.5% y/y pace.  You’ve seen the multi-line retailers suddenly turn a corner of late with three consecutive months of respectable Retail Sales.  Retailer performance will have to maintain the arena’s recent performance for the economic narrative to remain positive.
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09:00 ET
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Case-Shiller HPI (May): Expected 5.6% y/y, April 5.4% y/y.  Except for the fact that this information is somewhat dated, home prices are about as important as anything else when you consider the “Wealth Effect” that was part of the Fed’s goals way back when all of this monetary hocus pocus started.  Home prices have steadily increased nationally (not seasonally adjusted) from between 5.4% to 5.7% year over year for eight consecutive months.  There is a skew to the upside in today’s expectation, with at least one published projection of 6.3%.  A beat today would be very well received by futures traders.
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09:45 ET
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Markit Services Flash PMI (July): Expecting 51.6, June Final 51.4. This barometer for the service economy has severely underperformed the ISM series.  In fact, the Markit series sported outright contraction back in February, and has scraped along just north of 50 ever since.  Good thing the markets don’t watch numbers posted by Markit.  You don’t have to either.  You will not see important data in this space until August 3rd.
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10:00 ET
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New Home Sales (June):  Expecting 559K (SAAR), May 551K (SAAR).  Do we continue with a June that showed a multi-faced improvement in US domestic macro-economic data?  I’m sure that most of you noticed that May’s 551K (seasonally adjusted, annualized rate) printed as a sizable minus tick from April.  What some of you may have missed, is that May was the second best print since 2008.  Clearly, the improving trend, for now…. is still intact.  The marketplace will watch this print, not just for the boost to the economy that a new home sale represents, but for all of the peripheral purchases that go hand in hand with buying a new home.
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Consumer Confidence (July): Expecting 95.8, June 98.0.  Any consumer level survey is closely watched by market participants, and so it is with this one.  The June number was a serious beat, and the expectation for a lower print in this space today has a lot to do with the lower number that we saw from the University of Michigan’s Sentiment survey that we saw two weeks ago.  This item will matter today, and then be forgotten by this Friday when that Sentiment print will be revised.
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Richmond Fed Manufacturing Index (July): Expected -5, June -7.  Richmond surprised us in a negative way last month.  This had been a manufacturing sector bright spot throughout the first half of the year, putting up a positive number four months within a five months stretch.  Those days are gone now, as Richmond is expected to print negative for a third consecutive month.  We have already seen disappointing prints out of New York, and Philadelphia this month, and surprisingly improved, though still negative number in Dallas.
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Tuesday’s Earnings Highlights
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Before the Open: MMM (2.07), BP (.05), CAT (.96), DD (1.10), FCX (.00), MCD (1.38), UA (.02), VLO (1.02), VZ (.94)
 After the Close: AMP (2.28), AAPL (1.38), BWLD (1.26), CB (2.23), X (-.54)

Market Recon Monday

Good Morning,
                    Away from business and economics, there was more violence over night.  In Germany, and in Florida.  The easy route for all of us not immediately impacted when we hear of such things would be to avoid feeling it, to let it callous over.  Let’s not do that, folks.  Let’s all hurt every single time anyone hurts.  Sound naive ??  OK, then I’m naïve.  Only way this gets better is if people feel for each other.  Start today.  Maybe down the road, one person changes their mind.  Not you.  Not I.  Team.
                   Today brings us the quietest day of this week, both for macro, and for earnings.  As the week develops, you’ll hear from the FOMC, and the BOJ, and to say that there is some pressure on the BOJ would be putting it lightly.  We’ll also see Q2 GDP data from the UK, the EMU, and the US, and then there’s earnings.  Tis the season, and the season will hit it’s stride this week.  Seemingly, quarterly numbers have gotten off to a better start than many expected.  By the end of the week, we’ll know if that was simply a mirage.
                   This did not get much media attention, but under the radar, the IMF prepared a note for the G-20 concerning Special Drawing Rights, or SDR’s.  Without going into great detail, the IMF is exploring whether or not the International Monetary System would benefit from an expanded use for SDR’s.  Three forward looking roles will be studied.  The composite reserve currency asset function, issued and administered by the IMF; SDR denominated financial market instruments that could be issued and held by any party, and finally … using the SDR as a unit of account.  A step toward a global currency ? Possibly.  A strike at the US dollar as the planet’s major reserve currency ?  I think so.  We may be a long way off, but then again, we may not be.  I’d pay attention here.
                    Oh, the Democratic Party kicks off their party tonight amid lots of news.  It may, or may not be funny that neither major US political party appears to have their act together, but one thing is certain.  This is all very entertaining.
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Macro
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10:30 ET
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Dallas Fed Manufacturing Index (July):  Expected -14.1, Prior -18.3.  This will be a tough one.  You won’t see it impact the marketplace, mostly because everyone knows a tough number is coming.  Manufacturing has been the slowest slice of this economy to recover, and Dallas, thanks to what has happened to Energy prices over the last couple of years has been in a constant state of contraction since it’s last positive print in December of 2014.  After what seemed to be a semi-decent June for manufacturers, the Empire State and Philadelphia turned in mixed reports last week.  We’ll hear from Richmond, and Kansas City later this week.
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Monday’s Earnings Highlights
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Before the Open: DHR (1.22), KMB (1.47), COL, (1.59), S (-.08)
After the Close: CE (1.55), GILD (3.01), LVS (.56), TXN (.77)

Market Recon Friday

Good Morning,
                     Today is Flash PMI day.  Flashapalooza.  Not a big deal in the US, but a pretty big deal around the globe…..especially in Europe given that this is the first true post-Brexit read.  These numbers were a little tough to truly interpret.  French Manufacturing contracted, the German Manufacturing & Service sectors both showed expansion (yet their ZEW numbers were awful this week.)…in fact, EMU numbers in aggregate grew, and landed close enough to consensus as to not cause much alarm.  Where there might be some cause for concern were in the British data.
                     The UK Manufacturing & Service arenas both printed in a state of contraction, and for the service sector, it was deep into contraction.  The UK, much like the US depends very heavily on the service economy.  What does this mean to the trader?  It means that the British Pound took an immediate hit.  Mark Carney spoke about easing Bank of England monetary policy in August earlier this week, and if these figures are not northerly revised by the end of the month, the MPC (the UK’s FOMC) may actually have to go ahead and do it.
                    While the Pound tests 1.31 support, you’ll notice that the Euro, and the Yen are also weaker this morning, though to lesser degrees.  This has put early pressure on the commodity complex, including your favorites, Gold & Oil.  WTI Crude shows signs of retreating through the 44.50 support level again.  In fact, the level has been pierced a couple of time now, but not in significant fashion.  Should that spot become resistance, you could be talking about $38 Oil again in the not too distant future.  As for Gold, you know that I’m a closet bug.  It has not threatened the 1305 spot recently.  One thing to keep in mind is how crowded the “long the miners” space has become.  When Gold moves, it moves like lightning.  When the commodity hits 1305, it could just as easily hit 1275.  That may be a buy signal for the underlying commodity, but the move lower for some of these mining names will be exacerbated to the downside if that happens.  With the BOJ stepping to the plate next week, this trade is probably already priced at a premium.  If you are already sitting on found money, why wouldn’t you take some off?  Just thinking like a guy with a P/L.
                    The G-20 meets this weekend in Chengdu, China.  On the docket ?? Greece, Italy, Brexit… oh, and Jack Lew also warned against central banks’ competitive currency devaluation.  Key word…competitive.  Didn’t say anything about coordinated, did he?  Keep in mind that China, the host, has been on again, off again, aggressive on this front.
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Macro
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09:45 ET
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Markit’s Manufacturing Flash PMI (July -p): Expected 51.7, Prior 51.3.  This data-point usually does not catch much attention in the marketplace.  The revised print is released alongside the highly focused upon ISM print, so traders don’t really look at it at all.  Due to the fact that the Flash number has no competition, and that we’ve seen mixed signals from the Empire State, and Philadelphia releases, there could be some reaction if we see something way out of bounds here.  I would not bet on that happening though.  The range today runs from 50.5 through 52.5.
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13:00 ET
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Baker Hughes Rig Count (Weekly): Prior 447 total / 357 Oil.  There has been steady growth in both the total number of US rigs in operation, and also in the number of rigs solely involved in the production of Oil. Natural Gas is not going to move the marketplace, so the Oil rigs are what we focus on. I would think that with Crude well off of it’s peaks, and struggling to hold the 44.50 support level that this weekly increase will likely slow if not this week, then very soon.
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Friday’s Earnings Highlights
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Before the Open: AAL (1.66), GE (.46), HON (1.64), SWK (1.71), WHR (3.37)
After the Close: Stuff guys my age shouldn’t eat or drink.

Mid-Day Recon (Thursday)

Good Afternoon,
Currency valuations were the story this morning, and yes, you can blame the central bankers, with some help from the media. First up, the Japanese Yen rallied hard when BBC Radio aired an old interview with BOJ Gov. Hiruhiko Kuroda. In that interview, the Governor ruled out “helicopter money”, or perpetual bonds. With the Bank of Japan widely expected to act aggressively next week, markets reacted at the time. The Yen did soften somewhat after news broke that the interview was dated. After that ridiculousness, the ECB held off on acting further, which was expected. At first the Euro spiked higher, most uncharacteristic behavior for that unit of currency while the ECB president is speaking. Draghi did eventually go into the preparedness of the central bank to act if post-Brexit conditions worsen, and the ECB’s ability to keep finding something, anything to buy. That sent the Euro back to it’s recent support level of 1.10 versus the US dollar.

The secondary story of the day would be the domestic macro that we saw this morning. The two items that most notably stand out are June Existing Home Sales, and the July Philly Fed. First, the Philly Fed… a -2.9 print that actually seemed a bit misleading, once one took a look under the hood. With New Orders, Shipments, and Unfilled Orders all moving the right way, this was hardly a discouraging report. Existing Home Sales then beat to the upside, close to the top of the range. This added to what was already a fairly strong month of June for the US economy. June was a month where we saw a strong NFP print followed by hot Retail Sales, improved Industrial Production, and some strength in Housing Starts, not to mention y/y Core Consumer level inflation of 2.3%.

Market Recon Thursday

Good Morning,
                    Although today is an ECB policy meeting day, surprisingly the central banking headline of the day has come from the BOJ.  I’m sure you noticed earlier today that the Japanese Yen bottomed out around 107, and a half per the US Dollar, and has strengthened rapidly over the last couple of hours.  The last price I see as I bang out this note is closer to 105 and a half.  So what gives?  BOJ Gov. Haruhiko Kuroda, in an interview on BBC Radio, indicated that there are no limitations to BOJ monetary stimulus if need be… like every central banker has said in every speech everywhere.  What moved the currency markets was his downplaying of the kind of stimulus that has at least had something of a hand in floating global equity markets.
                   He said that there” is no need, and no possibility for helicopter money”.  No word yet if that scream you heard in the middle of the night was the former Fed Chair’s cry of anguish.  The Governor also indicated that about all that they could do would be to expand existing policy.  It is interesting to note that since this interview, the Nikkei 225 is off of the day’s highs, but is still up on the day, and is in fact your global equity index leader at this time.  Perhaps there is still a large fiscal/monetary package on the way.  Maybe they simply still intend to keep score.  In chalk.  For now.
                  The ECB decision on the Minimum Bid Rate (which will be left unchanged) will be announced at 07:45 ET.  As always, the Mario Draghi press conference at 08:30 ET will be the big ticket item.  Draghi will stress that not enough time has passed since the June 23rd UK Brexit vote to make a policy judgement, and will set up September as the time to make that assessment.  September…. sounds familiar.
                  We, here in the states…actually have quite a full day of both earnings releases, and macro ahead of us.  The busiest day of the week for sure.  June Existing Home Sales, and the July Philly Fed both present market moving ability, while the corporate numbers will come from all corners without a sector, nor an industrial theme.  We have not heard from any of our central bankers all week, and you will not until after next Wednesday’s policy announcement.
                  For all of you Comic-Con weirdos out there, I’ve got a treat for you.  Google this….  “Edrio Two Tubes”.  You’re welcome.
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Macro
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08:30 ET
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Initial Jobless Claims (Weekly): Expected 267K, Prior 254K.  Those filing for Unemployment benefits will fortunately not amount to very high numbers today.  Though, we expect to see an increase in this space today, this item will remain at historically low levels, and probably just nudge the four week moving average up from the 259k where it now stands.
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Philadelphia Fed Manufacturing Index (July): Expected 5.0, Prior 4.7. Philly was one of three Federal Reserve regional district manufacturing indices that printed in a state of expansion in June, along with NY, and KC.  For July, we’ve already seen the Empire State repeat that trick, though just barely (0.6).  New & Unfilled Orders were a problem in that report, with delivery time being a strength.  The market will likely react to the Philly Fed as it is the country’s most focused upon regional manufacturing data-point.
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09:00 ET
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FHFA HPI (May): Expected 0.4% m/m, Prior 0.2% m/m.  Analysts may compare this narrowly focused home price index to Case-Shiller, but …. Case-Shiller is the only one that traders will notice.  That item will print next Tuesday.  Market participants won’t have to worry about this item.
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10:00 ET
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Existing Home Sales (June): Expected 5.48M SAAR, Prior 5.53M SAAR.  This data-point brings with it, a touch of danger today.  June, for the most part.. has been a stronger than usual month for the US economy, and though there’s really nothing wrong with a seasonally adjusted annualized rate of 5.48 million units, this would still be a minus tick.  With equity markets sitting on top of a mountain right now, a major item that prints in weak fashion could be the pin prick…. if anything can be right now.
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CB Leading Indicators (June): Expected 0.2% m/m, Prior -0.2% m/m.  Another non-event.  This is a composite index of ten other higher profile domestic macro-economic data-points.  You’ve already reacted to those.  Nobody you know will react to this one.
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10:30 ET
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Natural Gas Inventories (Weekly): Expected 44B cf, Prior 64B cf. Incredibly, this number is headed for a fourteenth consecutive inventory build in the space.  That came just a couple of weeks after a sixteen week stretch of consecutive weekly drawdowns had ended.  In my experience, I had found Nat Gas futures to be one of the toughest items to trade in the financial universe.  Good luck if that’s you today.  That said, this will not impact the equity markets in a big way upon release.
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Thursday’s Earnings Highlights
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Before the Open: BX (.41), DPZ (.94), GM (1.48), MAN (1.52), DGX (1.31), SHW (4.16), LUV (1.21), TRV (2.08), UNP (1.16)
After the Close: T(.72), SAM (1.95), COF (1.87), CMG (.93), PYPL (.36), SBUX (.49), V (.67)

Market Recon Wednesday

Good Morning,
                     You’ve all seen the old Japanese monster movies.  The people run, the people hide.  One or two giant monsters show up and slug it out either with each other, or the Japanese military.  In the process, the city (Tokyo) is ruined.  Well, in today’s version, the monsters are very small, and the problem is that they did not come to Japan.  “Pokémon Go”, the recent sensation that has everyone in your town walking into traffic with their heads down, was scheduled for release in the land of “the Rising Sun” for today.  That release has been delayed without a published date for rescheduling.  Nintendo shares, recent stock market darlings, were hit with a rush to take some profits at that time.  NTDOY is down more than 12% in Tokyo.
                    The ECB begins their two day policy meeting today.  You will not hear anything from them until tomorrow, and I would not expect any new policy even then.  They’re already buying everything except goods and services, and on top of that, they have managed to steadily devalue the Euro form it’s peak in May.  Keep in mind that this is the first ECB meeting since the UK’s Brexit vote.  Did you guys see those ZEW numbers yesterday ??
                    On the topic of central banking, next week is when you’ll likely see divergent policy direction in action.  You’ll have the Fed on one hand… not acting, but probably talking up a live meeting in September.  Now that Housing Starts have joined Retail Sales, Core y/y CPI, and Industrial Production in making June one of the better months that the US economy has seen in a long time, they will have to at least make a small rate hike seem to be a realistic option.  On the other hand, much is expected of the BOJ at this meeting.  Next week will not be boring.
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Macro
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10:30
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Oil Inventories (Weekly): Expected -2.1M barrels, Prior -2.5M barrels.  The headline oil supply number has printed in contraction for eight consecutive weeks.  The general expectation today is for another decline (-2.1M barrels), and consensus expectation has been rather accurate over the last four weeks, meaning that we have not seen a miss of more than 400k barrels in that time.  The API print came in at a draw of -2.3M last night, so everyone is pretty much in line today. Beneath the surface, Gasoline stocks have increased in three of the last four weeks.  These numbers usually do impact not only Crude prices, but can move the equity market as well…. and today this is the only game in town.
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Wednesday’s Earnings Highlights
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Before the Open: ABT (.53), HAL (-.19), MS (.60), TUP (1.11)
After the Close: AXP (1.72), CCK (1.11), EBAY (.42), INTC (.53), MAT (-.06), QCOM (.97)