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)