Market Recon Monday

Good Morning,
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What Was That?
                    Just in case a faltering OPEC deal (pressure on Crude), multiple global central banking policy decisions (higher yields), a GDP surprise, Jobs numbers due this week, a strong dollar, better than expected earnings in general, Chinese manufacturing data due tonight, and a horrific miss for German Retail Sales (The ECB does NOT meet this week) weren’t enough, the US presidential election is nearing a point where it may be too close to call, forcing a certain amount of uncertainty to be re-priced by the marketplace.
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Central Banking.
                   The one bright spot in all of this is that the Fed is not likely to be one of the current uncertainties facing the markets. With a November (non) decision due this Wednesday ahead of the not only the presidential election, but another round of data from the BLS, the expectation for a December (not a November) rate increase is now up to 68%. The question marks around this election only cement expectations for another month’s delay. With the Federal Reserve taking a November pass, it is likely that both the Bank of Japan, and the Bank of England remain inert as well. The BOJ just announced their new policy of targeting of the yield curve in September, and the BOE has faced criticism over being to aggressive in the wake of Brexit. placing Gov. Mark Carney under some fire. The ECB does not meet again until December.
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Trader Focus.
                    With “Earnings Season” seemingly cruising at a beat rates close to 80% for EPS, and above 60% for revenues, you would think that the S&P 500 might be trading closer to the top of it’s four month range. In fact the index is currently testing four month lows. Why? Can it all be blamed on election uncertainly? Of course not, although a short-term position in VIX options sounds like a better hedge than it has for a while right now. There are, for traders… two culprits greater than next Tuesday’s outcome. Those two are currency exchange rates, and crude oil…and they often walk hand in hand, but not always. In October alone, the DXY has moved from below 96 to above 98.50. This comes after trading between 94 and 95 for much of the second quarter. If this condition were to persist, it’s probably easy to see earnings for multi-nationals falter in the fourth quarter (with a built-in excuse). While crude prices are somewhat dependent upon exchange rates, traders in that space must also contend with the likely unwinding OPEC deal that was never truly agreed to in the first place. Even if some kind of deal stands, the exemptions that may (will) be granted provide more immediate uncertainty to the Energy sector than even the US election (where the two major candidates contrast greatly).
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Macro
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08:30 – Personal Income (September): Expecting 0.4%, August 0.2% m/m.
08:30 – Consumer Spending (September): Expecting 0.5%, August 0.0% m/m. Over the last two months, Income has outpaced Spending, which is clear to see in last Friday’s preliminary print for Q3 GDP. That headline print was carried largely by exports, in spite of a severe drop-off in the pace of consumer participation. The thought here is that Spending catches up to Income a bit in September. Needless to say, these expectations are on the high side for both data-points, and would be quite welcome. If these numbers bear out, this could suggest increased velocity of money, but will be overshadowed by the simultaneous release of inflation data.
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08:30 – PCE Price Index (September): Expecting 0.2%, 1.0%; Aug 0.1% m/m, 1.0% y/y.
08:30 – Core PCE Price Index (September): Exp 0.1%, 1.6%; Aug 0.2% m/m, 1.7% y/y. As we have already seen in the September CPI data, we will likely see more headline growth than we will at the Core due to increased Energy prices during the month. The most highly focused upon macro-economic data-point of the day will be the year over year Core print in this space. The expectation here is that we will likely see a decrease in the pace of Core inflation today, as there also was in the CPI (released Oct 18). The markets will react to this information only if there is widespread belief that the probability of a rate increase in December has been damaged.
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09:45 – Chicago PMI (October): Expecting 54.1, September 54.2. Expectations are meaningless in this space, as the actual print is rarely anywhere near the consensus view coming into the print. That’s said, this item is pushing for it’s fifth consecutive month in expansion. For those who may be confused, the Chicago number is more a measure of business activity than it is a manufacturing index. At times, this print can move markets with a severe miss in either direction.
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10:30 – Dallas Fed Manufacturing Index (October): Expecting 1.1, September -3.7. Dallas has long been the weakest link in the weakest corner of a “weakish” US economy. That corner may be turned today. An expansionary positive number is expected from Dallas today. That would end an incredible 21 month losing streak for the district. This would also split the five major regional Federal Reserve district manufacturing reports 3/2 in favor of expansion for the third time this year. This print will not likely impact the marketplace.
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Monday’s Earnings Highlights
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Before the Open: CAH (1.20), CTB (1.01), DO (.03), L (.72), LL (-.21), ROP (1.61), SO (1.18), WMB (.17)
After the Close: APC (-.56), HMN (.49), THC (.17), TSO (1.42)

Market Recon Friday

Good Morning,
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Oil/Russia….. Energy/Transports.
                    Like we said yesterday, when it comes to oil, all you need is a little smoke, no fire necessary. Crude prices are softer since hitting the top of the chart on Wednesday. That is as much a function of the stronger dollar as anything else. That is at least fundamental, but you are also dealing with words. Igor Sechin, who runs Rosneft (Russia’s largest oil producer) has been the heavy before, and as Mr. Sechin has done before, he is talking up the possibility of increasing production. Why is this important? Russia, the planet’s largest oil producer is already coming off of a record month in September, and as such has been at the center of rumors regarding a possibly coordinated cut/freeze between OPEC, and non-OPEC producer nations. Russia’s President, Vladimir Putin has been talking up such a possibility in public. He has to. Russia’s economy is depending on higher prices. Unfortunately, these mixed messages will continue right through OPEC’s meeting in late November. FYI, Russia’s Energy Minister, and Saudi Arabia’s Oil Minister are scheduled to talk this weekend.
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Trader Focus.
                   Given all of the swings in Dollar valuations, Treasury yields, Oil prices, and “sort of” mildly improving macro, the consistency of the overall equity market to virtually sit tight at these levels has been remarkable. There have been days that “they” buy this market, and days that “they” sell it, but they always seem to come back…. to SPX 2139. That was yesterday’s pivot point, and it was precise. In fact, over the last ten days or so, the S&P 500 has either turned or stopped right there more than a dozen times. Equity index futures are again under some pressure this morning, and that pressure again is coming from the stronger dollar/weaker oil relationship. As long as we do not see a sharp move below SPX 2128, this market is short-term tradable. That spot will be the spot where we start to take notice, and become concerned about more damaging levels that lurk between 2115/2120. Until then, nothing’s broken.
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Macro
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10:15 – Fed Speaker: Federal Reserve Gov. Daniel Tarullo is to speak in New York City on the method of teaching financial regulation. Tarullo is a permanent voting member of the FOMC, but is far more comfortable in the world of regulation, and will probably not address monetary policy, unless specifically directed to do so.
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13:00 – Baker Hughes Rig Count (Weekly): Last Week 539/432, up from 524/428. Oil and Energy have been the hot two way ticket this week, and as always, the last data-point of the week will come from that space. With the recent moves in Crude prices, I would think that the slow, incremental increase that we have seen in the number of US operational oil rigs will continue to rise. This could pressure WTI on a day where it’s already starting out weak.
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Fed Speaker: San Francisco Fed Pres. John Williams is set to speak from San Francisco. Williams may not be a voting member of the FOMC at this time, but he is considered close to Fed Chair Janet Yellen, and is not shy about voicing his opinion. A dove turned hawk, Williams is just as likely to mention raising inflation targets before they are reached, as he has done in the past.
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Friday’s Earnings Highlights
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Before the Open: GE (.30), HON (1.62), IPG (.29), MCD (1.49), MCO (1.20)
After the Close: Nothing Scheduled

Market Recon Thursday

Good Morning,
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ECB / Mario Draghi.
                    Though last night’s presidential debate will headline mainstream news this morning, the dominant story for financial market participants will come from the European Central Bank. The policy announcement will come at 07:45 ET, with the Mario Draghi press conference in tow at 08:30. Quickly scanning consensus opinion, it appear to me that any policy move today would come as a surprise, at least right now. Most market pros do expect a six month extension of the ECB QE program to be announced prior to the end of the year. Nobody expects a rate cut. With economic growth, and consumer level inflation still hovering well below expectations and targets, there are few calls for any tapering of purchases, and those that are looking for such a reduction of purchases would like it to coincide with an overall extension of the program. What will likely be impacted today will be exchange rates, and sovereign debt yields. Even that arena seems to be more of a Fed story right now than it does an ECb story, but never, never discount Mario Draghi’s ability as a speaker.
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Crude / Energy.
                    The Energy sector has been hot all month, heck all year in a sneaky, skittish, very inconsistent way. The sector led yesterday, as the underlying commodity ran up to $52 a barrel on that larger than life inventory draw. WTI is now trading around 51, which had been fairly stiff resistance for several sessions up until yesterday’s move. if this level is not held as support, there could be a retreat in the short-term to just below 50, or to better support way down around 48.25. As Crude, and subsequently reliant  equity market names have found, headlines are what move prices in this arena. Usually, where there’s smoke, there’s fire, but in this space, between non binding news out of OPEC producers, non-OPEC producers, and wildly differing numbers from different sources on inventory, all you need is smoke. This is a speculative play right now, and it has been for some time. When oil does well, it does benefit the overall market though. Can’t complain about that. If Mario Draghi manages to soften the Euro with his words today, the morning move here would be lower.
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Macro
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08:30 – Initial Jobless Claims (Weekly): Expecting 250k, Last Week 246k. Incredibly, the four week moving average for this item is now down to 249,250. We’re all aware that last week, the number of consecutive weeks of less than 300k persons filing for Unemployment benefits hit 84. The new streak is two. That’s the number of consecutive weeks below 250k. Though the success of this run is largely due to the amount of people working less than full-time, it remains a remarkable streak. This item will not likely impact trading this morning.
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08:30 – Philadelphia Fed Manufacturing Index (October): Expecting 5.8, September 12.8. The Philly Fed will be in some focus today, as  earlier in the week, the Empire State printed in surprise contraction. On top of that, in September, Philly’s headline print hit the tape deceptively high, as the only real strength was in pricing. New Orders are the one sub-component that truly matters here, and that needs to improve from the 1.4 that we saw last month coming off of a very low level.
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10:00 – Existing Home Sales (September): Expecting 5.35M, August 5.33M SAAR. The largest slice of the housing pie will be the highlight of the domestic economic day, especially now that September Housing Starts printed at the lowest level for any month in this series since March of 2015. Strength here would reassure.
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10:00 – Leading Indicators (September): Expecting 0.2%, August -0.2% m/m. From a trader’s perspective, this may be the single least important domestic macro-economic data-point. Nobody will make a decision based on, nor react to this number today. Next.
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10:30 – Natural Gas Inventories (Weekly): Expecting 71B cf, Last Week 79B cf. Look for a 26th build in this space in the last 27 weeks. This one will also pass quietly unless one is directly active in the space.
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Fed Speaker: Actually just one speaker, who will make three separate speeches. New York Fed Pres. William Dudley will speak from a financial services workshop in New York City at 08:30, at 9am, and again at 16:45. Dudley, who is a permanent voting member of the FOMC stated just last night that he expects to see a rate hike before the year is out. He also thinks that it will be no big deal. Maybe he hasn’t seen the DXY. That has consistently been his message for quite some time now.
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Thursday’s Earnings Highlights
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Before the Open: AAL (1.69), BK (.81), PHM (.44), TRV (2.34), UNP (1.40), VZ (.99)
After the Close: ETFC (.39), MSFT (.68), SLB (.22)

Market Recon Wednesday

Good Morning,

Chinese Data.

China’s National Bureau of Statistics did indeed report that miss for September Industrial Production that we spoke of yesterday. It was difficult to see that one item shaping up differently after Chinese exports suffered the way they have over the last two months. That however, was not enough to fully rattle world markets thanks to a slight beat for Chinese Retail sales, and a remarkably stable Chinese GDP.  Though over time, the rate of growth has come in, any economy the size of China’s that prints y/y growth at 6.7% for three quarters in a row most likely is not properly measuring it’s size. Global markets are mixed to lower in response, but not in any clearly defined fashion.

Trader Focus.

Pricing these markets has become increasingly tricky. Recent macro-economic data has been sporadic to positive. The September numbers to this point seem to be an improvement over August. Both ISM’s printed in expansion, with the service sector particularly strong. Retail sales were impressive as well. On the “not so hot” side, job quality and wage growth remain roadblocks to national success, and Industrial production remains near long-term lows. The Atlanta Fed is now tracking Q3 GDP at 1.9%, which will be adjusted after today’s September Housing Starts hit the tape (Give them a couple of hours). The bottom line is that nothing has happened to change the December rate hike narrative. My concern in that space is that so many Fed speakers have been talking this up for so long, that the quarter point increase may be close to priced in already. With almost two months to go until that hike is realistic, the US Dollar runs the risk of becoming over-valued, and yields on Treasuries may become artificially skewed to the high side.

Going Forward.

All of that said, Q3 earnings are off to a better start than many expected. It’s very early, so we’re not marking the score-book just yet, but there are a lot of outright beats being printed on the revenue side, with plenty of accompanying y/y revenue numbers that are just as impressive. The risk to Q4 earnings, getting way ahead of myself, will be the very risk just mentioned. That is the potential of an over-prepared marketplace to overshoot proper valuations for the currency exchange, and debt markets…….  and then there’s oil. The place to hide in that environment will likely be the small caps. The pain that they might be experience due to higher interest rates may just pair off against their aggregate lack of exposure to exchange rates.

 

Macro

08:30 – Housing Starts (September): Expecting 1.175M, August 1.142 SAAR.

08:30 – Housing Permits (September): Expecting 1.165M, August 1.139M SAAR. This is an item that has been rather stable all year. That said, August was the weakest month in this space since March. Home-builder optimism spiked in September, and held most of the ground gained for October. That optimism has been seen in New Home Sales data. it’s time to start seeing more of it here.

08:45 – Fed Speaker: San Francisco Fed Pres. John Williams is set to speak from Newark, New Jersey. The topic is diversity. That said, Williams, recently hawkish, will not vote until 2018, though he is well known in economic circles to have Chair Yellen’s ear. A Q&A session is expected after today’s speech.

10:30 – Oil Inventories (Weekly): Expecting -800k, Last Week +4.9M barrels.

10:30 – Gasoline Stocks (Weekly): Expecting -350k, Last Week -1.9M barrels. The API data, released every Tuesday night has become a better predictor than the consensus expectations that are compiled earlier in the week. Last night, API “surprised” again with some large numbers. The American Petroleum Institute reported a draw of 3.8M barrels for Oil Inventories, and a second straight sharp decline in Gasoline Stocks (2.3M barrels). WTI Crude has spiked in response, and is now trading close to $51.

13:30 – Fed Speaker: Dallas Fed Pres. Robert Kaplan, who will not have a policy vote until January will speak from Fort Worth. Kaplan, who keeps a rater low profile is on record favoring a rate hike in the near term, though he does not see the economy overheating. Neither do I. A Q&A session is scheduled for after this event.

14:00 – Beige Book: This item certainly can move the marketplace. It’s basically a check-up of economic anecdotal evidence compiled Fed regional district by Fed regional district that is released two weeks prior to every FOMC policy meeting. Given that we’ve seen some positive data (ISM Services, Retail Sales), and some not really horrible data (ISM Manufacturing, Industrial Production, Jobs, CPI), there is cause to believe that this Beige Book might contain some muted optimism.

19:45 – Fed Speaker: New York Fed Pres. William Dudley is scheduled to speak on economic history in New York City. New York has a permanent spot at the FOMC table, and Dudley has repeatedly stated that he expects to see a rate hike this year. FYI, I am currently tracking three speeches scheduled for tomorrow by William Dudley alone.

Wednesday’s Earnings Highlights

Before the Open: ABT (.58), HAL (-.07), MS (.63), STJ (1.01), USB (.83)

After the Close: AXP (.95), EBAY (.44), MAT (.71), URI (2.44)

 

Market Recon Tuesday

Good Morning,

Out of Europe.

Globally, equities are a bit higher this morning, as the US Dollar takes a breather. This has given some lift to commodities including Oil, and pushed yields slightly lower across the planet. Notice the price of WTI Crude moves one percent higher, and so does the Asia Dow, as well as Europe’s Stoxx 600. The European underperformer? The FTSE 100, still higher, but lagging the pack after UK consumer prices beat expectations at both the headline and the core for September. I don’t think that means that Mark Carney is about to tighten monetary policy in Britain, but it does mean that he’s probably not going to consider easing further. Keep in mind that when he ran the Bank of Canada, his truest instincts were quite hawkish. Consumer prices will also be the focus here in New York this morning, especially after Fed Vice Chair Stanley Fischer again leaned hawkish yesterday.

and into China.

Last week, Chinese export data bumped global markets amid concerns over forward looking global demand. Fed Chair Janet Yellen has used China as an excuse to slow down policy changes in the past. Then, the very next day, increased Chinese consumer level inflation put some of those fears on pause. Tonight, we’ll see a trio of Chinese macro-economic data-points that certainly could rattle some cages overnight, particularly along the Pacific Rim. At 10pm ET, the Chinese National Bureau of Statistics will release Q3 GDP (exp 6.7% q/y ann.), September Retail Sales (exp. 10.7% y/y), and September Industrial Production (exp. 6.4% y/y). In the case of GDP, this would be holding the level. The Chinese government has kind of made 6.5% out to be a line in the sand for GDP.  In the other two cases, the expectation represents minor improvement. The Retail Sales number is obviously domestic in nature, but a miss in industrial Production would be close to a confirmation of those troubling Export numbers that already hit the tape.

Macro

08:30 – CPI (September): Expecting 0.3%, August 0.2% m/m.

08:30 – Core CPI (September): Expecting 0.2%, August 0.3% m/m. With the Federal Reserve Bank seemingly on the verge of tightening monetary policy, what could be more important than consumer prices? With that in mind, even though this item is not What the FOMC is specifically watching, it is what the rest of us are watching, and the year over year data will likely have as much market impact if not more so than the month over month numbers. The recent boost in energy prices will likely give the headline print a northerly nudge from the 1.1% August release, but it is the highly focused upon Core data that can move the marketplace. We see a tick up from August’s 2.3%, and you’ll see a tick up in the WIRP as well. This item is likely to at least print at 2% or greater for the eleventh consecutive (but, who’s counting?) month today.

08:55 – Redbook (Weekly): Last Week 0.5% y/y. Coming off of the prior week’s 1.3% y/y pop, we really needed to see that print around the 0.5% gain that we did see last week after several weeks of continuously sluggish growth. The trick for today will be keeping growth from falling below that level.

10:00 – NAHB Housing Market Index (October): Expecting 63, September 65. this item is also known as the Homebuilder Optimism Index, and optimism surged in September. In fact, 60 had been resistance in this space since last January, so even if there were to be a pull-back this month, anything between 60 and 65 is still going to be taken as generally positive.

16:00 – TIC (August): Expecting $45B, July $103.9B. This information prints with a lag, and will not move markets, but remains very interesting. July was a big surprise to the upside for US cross-border investment. US investors were net sellers of foreign long-term securities to the tune of $31.3, while foreign investors net purchased $72.6B worth of US long-term securities. When it comes to Treasuries, China net sold $7.7B worth of US debt in July, but easily remained the largest holder at 19.8%.

Tuesday’s Earnings Highlights

Before the Open: BLK (4.99), CMA (.78), DPZ (.89), GS (3.83), HOG (.64), JNJ (1.65), UNH (2.08)

After the Close: INTC (.72), YHOO (.14)

 

Market Recon Monday

Good Morning,

This Week.

The week in front of us shapes up as fairly active. From the S&P 500, we’ll see quarterly numbers from 87 corporations, and then there’s the macro. Last week, the looming September Retail Sales data, which turned out pretty good, dominated an otherwise quite week from a macro-economic perspective. This week, starting with today’s Industrial Production print, there will be at least one high-profile, possibly impactful item released every day through Thursday. From a policy point of view, there are scheduled Fed speakers every day this week, with the exception on Tuesday. The ECB will also make a decision this week, on Thursday, without the overhang of a BOE policy decision being made directly before or after. How Mario Draghi handles the press conference will be of heightened interest, even if no policy changes are announced. Since the last ECB policy meeting, there has been talk of both extending the central bank’s QE program past March, and also of tapering the program’s purchases. The BOE will not step to the plate again until 3 November, the day after the FOMC’s next decision.

Trader Focus.

Today’s focus, at least in the early going will be placed directly on weakening global sovereign debt. Particularly on European debt, but US Treasuries are experiencing some early morning softness as well. On top of the already mentioned policy hurdle facing the ECB, the BOJ’s Gov. Hiruhiko Kuroda spoke far less dovishly over the weekend than he had in the past. Add that to the belief that the FOMC will act at their last meeting of the year, and globally, there are many markets pricing in tighter monetary conditions. The direct pressures that this places on debt products and currency exchange rates in turn will move commodity prices, and ultimately in “tail wag the dog” fashion, the equity markets. If it were only it were just that simple. OPEC does not formally meet until the end of November, and then there is this earnings season that has just begun. With the US central bank being the only major central bank talking about not only being less accommodative, but tightening policy, exchange rates (already the 800 pound gorilla in the room) will only increase in market impact and corporate performance.

Macro

08:30 – Empire State Manufacturing Index (October): Expecting 1.2, September -2.0. This will be our first look at the state of manufacturing for the month of October. We expect to see that the New York region actually experienced some overall expansion this month, after a two month losing streak. Two of the five regional Fed districts did hit the tape in expansion for September as did the ISM Survey, showing marked improvement from the August data. Being released alone at 08:30, this item could impact the futures markets upon release.

09:15 – Industrial Production (September): Expecting 0.2%, August -0.4% m/m.

09:15 – Capacity Utilization (September): Expecting 75.6%, August 75.5%. These numbers rolled off of the table for August after a couple of decent months in a row. Market expectations are that there was a positive rebound in September, both for Production, and to a lesser degree, Utilization. This is the highest profile macro event of the day, at east until Noon, and the equity markets will likely take their pre-opening cue here.

12:00 – Fed Speaker: Federal Reserve Vice Chair Stanley Fischer will speak in New York City. Fischer , a permanent voting member of the FOMC is considered hawkish at this time. He is on record recently calling the decision to stand pat on rates in September a “close call”.

Monday’s Earnings Highlights

Before the Open: BAC (.34), SCHW (.33), HAS (1.74)

After the Close: IBM (3.23), NFLX (.05), UAL (3.05)

 

Market Recon Friday

Good Morning,
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Earnings.
                    The almost immediate focus this morning will be on the Financial sector. This is a sector that has sort of snuck up on some folks, having outperformed the marketplace in general now for about a quarter, yesterday’s Chinese data inspired beating not withstanding. Though, officially, the unofficial start to “earnings season” came earlier in the week, it is today that we actually buckle in, as a bevy of high-profile banks, including JPM, WFC, and C all put their quarterly numbers to the tape. The worry is that US corporations will post a sixth quarter of diminishing aggregate profitability; earnings expectations for the S&P 500 are for a rough decline of 2% y/y. Starting with September, though volatile, US Treasuries have afforded US bank stocks the ability to move higher in price. The market’s expectation for a long coming slightly higher interest rate environment probably allowed the banks to salvage the quarter, and bodes well for the banks throughout Q4. However, that comes with a more expensive dollar, which will in effect, damage overall earnings in that same Q4 for much of the S&P 500.
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Friday Afternoon.
                   Once the morning’s earnings are out of the way, along with the highly focused upon Retail Sales print, there will be a few Fed Speakers to navigate around. We’ll hear from two hawks who dissented in favor of raising rates at September’s policy meeting, and lose their voting rights at the end of the year. Then we’ll hear from the Fed Chair herself. There are so many ways she could go as she discusses the economic recovery. Does she dare mention full employment with her own Labor Market Conditions Index deep in the hole? Will she acknowledge the re-emerging threat to stabilization that China represents? Will she simply skirt the issue, or will she drive home the belief that the December hike is probably very close to a done deal in order to further prep the marketplace. I think that latter. Mix this speech in with a little oil volatility after the 1pm Rig Count number, and this could be an interesting afternoon.
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Macro
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08:30 – Retail Sales (September): Expecting 0.6%, August -0.3% m/m.
08:30 – Core Retail Sales (September): Expecting 0.4%, August -0.1% m/m. Retail Sales rolled right off of a table in July, crashing at both the Headline and the Core. then things got even worse in August. Today, we have hope that there was a September rebound, so that Q3 does not end up being a complete loss in this space. If the economy is going to build any momentum going into year’s end, it’s not going to happen without the consumer. This will be the most important economic data-point of the week.
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08:30 – PPI (September): Expecting 0.2%, August 0.0%.
08:30 – Core PPI (September): Expecting 0.1%, August 0.1% m/m. This data-point runs hot and cold. August was cold. Producer Prices are far more volatile than Consumer Prices, and don’t seem to impact the financial marketplace al that much either. You would need a wild print in this space to move the needle.
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08:30 – Fed Speaker: Boston Fed Pres. Eric Rosengren will discuss this painful recovery from Boston. Rosengren dissented at the September FOMC policy meeting in favor of a rate hike. Rosengren, a dove turned hawk will lose his vote in January.
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10:00 – Business Inventories (August): Expecting 0.1%, July 0.0% m/m. This item is a little dated, and may pass by unnoticed by market participants. That said, it does directly impact GDP. We’ll look for a slight improvement here, even with the -0.1% m/m number that we’ve already seen for August Wholesale Inventories, which is a component of this release along with Retail & Manufacturing Inventories.
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10:00 – U of M Consumer Sentiment (October -p): Expecting 92.0, September final 91.2. The University of Michigan’s Sentiment number has been trending below the Conference Board’s Confidence number. That said, Sentiment was revised high for September from an initial print of 89.8, all the way to 91.2. That’s fairly dramatic improvement. We look for this item to at least hold it’s ground, and if those September Retail Sales hit the tape close to expectations, it should.  The market does sometimes move on this report.
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12:00 – Fed Speaker: Cleveland Fed Pres. Loretta Mester will speak from Cleveland. Like Rosengren, Mester both dissented in September, and will lose her place on the committee come January. Mester, an aggressive hawk, has gone as far as making a case for an increase in the Fed Funds Rate in November, regardless of the presidential election.
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12:30 – Fed Speaker: Federal Reserve Chair Janet Yellen will give the keynote speech at the same Boston conference that Eric Rosengren spoke at earlier. The sluggish economic recovery is the topic. I can’t imagine that she can speak on this without discussing monetary policy. Something said here will almost surely cause some market volatility.
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13:00 – Baker Hughes Rig Count (Weekly): Last Week 524 total 428 oil, up from 522/425. As always, this release will be our last market moving economic data-point of the week. Given where Crude has been trading ever since the “sort of, maybe” OPEC agreement to talk about a possible agreement later, it’s likely that the US added a few more oil producing rigs in the last week.
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Friday’s Earnings Highlights
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Before the Open: C (1.16), JPM (1.39), PNC (1.78), WFC (1.01)
After the Close: Weekend Awesomeness

Market Recon Thursday

Good Morning,
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China/Global Demand.
                    The Chinese economy hit a pothole last night. For the month of September, Chinese imports dropped 1.9% (dollar terms) from a year earlier. That concerns Chinese domestic demand, and it’s bad, but what is worse is the 10% (Dollar terms) y/y decrease in exports. This is versus expectations of only -3%y/y, and came off of the month of August. That month also printed in the hole. These numbers put the whammy on global equities this morning as this is a clear reflection on global demand. South Korea, and Taiwan have already reported weak export data this month. If the Chinese (and other Asian exporters) are selling less, it simply means that Europeans, and Americans are buying less. The hope was that the Chinese economy had stabilized. Globally, cages will be rattled this morning as the health of the engine behind much of the planet’s economic growth during the economic crisis will again come into question, as will prospects for consumer inflation.
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Trader Focus.
                Policy. Those looking to the Fed Minutes for clues to what direction monetary policy will take as the year winds down, were left knowing nothing more than they already knew. A sharply divided FOMC, heavily skewed in opinion toward raising the Fed Funds Rate in December if the economy doesn’t roll off of a cliff between now and then. I think that pretty much sums it up. The lack of reaction in the marketplace yesterday afternoon presents as evidence.
                Debt. US Treasuries are seeing something of a safe haven bid today in the wake of the Chinese data. After a semi-soft auction yesterday, this remains in focus.
                Crude. Oil is again, as it has been nearly every day of late, a huge story. On one side, there is Vladimir Putin agreeing to play ball with OPEC. On the other, you have subordinate Russian leaders talking contrarily. You also have an OPEC that continues to increase production in the face of their own (non) agreement. The American Petroleum Institute printed some bearish inventory numbers for Crude last night, and WTI prices did fall at the time. It seems that this $50 level has become the battlefield as far as Crude is concerned. I think it likely that in the absence of hard news, the commodity can trade between 48 and 53 simply on rumor, and weekly data fluctuations. To technically break either one of those levels will require a fundamental reason. the next formal OPEC meeting will be held on November 30th.
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Macro
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08:30 – Initial Jobless Claims (Weekly): Expecting 253K, Last Week 249K. This incredibly stable, even shrinking data-point no longer shocks the market due to the current composition of the labor market. The part-timers no longer lose their jobs due to schedule management. If the Employment Situation were so healthy, the Fed’s own Labor Market Conditions Index would not have printed in a state of contraction in eight of the last nine months.
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08:30 – Import Prices (September): Expecting 0.1%, August -0.2% m/m.
08:30 – Export Prices (September): Expecting 0.1%, August -0.8% m/m. These twin items can represent cross-border demand. The caveat is that Energy prices have been so weak as to skew Import prices lower, while Agriculture prices have been so weak as to skew Export prices lower. Even ex-those items, however, neither of these data-points would have printed positive for August. Today, we look (hope) for a mild push to the plus side for both. There will not be a huge market reaction to these numbers.
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10:30 – Natural Gas Inventories (Weekly): Expecting 89B cf, Last Week 80B cf. The growth in this space keep on going. Today, we look for the 25th build in the last 26 weeks. Almost non-stop growth for half a year. Incredible. Energy traders will be impacted alone by this release.
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11:00 – Oil Inventories (Weekly): Expecting +1.1M, Last Week -3M barrels.
11:00 – Gasoline Stocks (Weekly): Expecting -450k, Last Week +222k barrels. The good news is that the 3M barrels draw last week took US inventories under the 500 million barrel threshold to 499.7M. That bad news is that the historical norm is close to 330M. last night API reported a build of 2.7M barrels for Crude, and a build of 688K barrels for gasoline.  Now we look to the Federal numbers for confirmation. Obviously, this release will have great influence over the Energy sector today, maybe even the equity market in general.
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12:15 – Fed Speaker: Philadelphia Fed Pres. Patrick Harker will speak from Philly. Harker, who will not be a voting member of the FOMC until January said in September that he would support a “rate hike in December if growth stays on track.” Guess he really hasn’t been following GDP very closely this year.
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Thursday’s Earnings Highlights
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Before the Open: DAL (1.68), PGR (.33), WGO (.47)

Market Recon Wednesday

Good Morning,
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Equity Beat-down.
                    There were so many holes in the equity markets yesterday that it was hard to define the actual weak spot, or narrow the cause down to just one catalyst. Obviously Health Care led the way lower, both on bio-tech (ILMN’s pre-announced revenue miss), and Hillary Clinton’s now commanding lead in the polls, but the carnage was far broader than that. There was blood evenly spread across Discretionary names, Energy, Financials, Industrials, Tech, Mining, and Utilities. Fear. Fear over the coming earnings season. Fear over Dollar strength. Fear over what might be in today’s Fed Minutes. Fear over the fact that an OPEC deal still seems somewhat fantastical. Fear over the imminent release of seasonal data from the Financial sector, the one sector that is projected to be out in front this quarter. After all, yields did only start to give the banks some breathing room in the last 30 days or so. Even over that last month, the waters have been choppy. These Financials miss as a group, and this may turn into the “Season of giving…. back”.
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Trader Focus.
                   The British Pound finally caught a bid this morning as the UK’s Parliament filed a motion for a transparent debate on just how hard the break with the EU will proceed. Still, even with some Pound strength, the DXY stands close enough to 98 to probably make the Fed, and US multi-national corporations nervous. In the past, the Fed has given the appearance of a DXY preference closer to 95. This is the point where in other months, they would send out the doves. That does not seem to be the case this time around, and we will hear from two high profile voting members of the FOMC this morning prior to seeing those already mentioned Minutes this afternoon. The odds of a December rate increase are now close to 70% as interpreted through the Fed Funds Futures market. I have said in the past… if the FOMC as a group is afraid of something (and they do seem afraid of something), they’ll act whether it seems correct or not. economically.
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Macro
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08:00 – Fed Speaker: New York Fed Pres. William Dudley speaks from Albany, NY this morning. New York has a permanent FOMC vote, and Dudley, like most of his colleagues has been rather hawkish of late. It is unlikely that we’ll hear any change in his recent direction.
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09:45 – Fed Speaker: Kansas City Fed Pres. Esther George will speak from Chicago, Illinois. George has gone from being a lone voice in the wilderness to the leader of what has become a hawkish uprising at the Fed. George will lose her vote at the end of the year, and will likely push to get something on the tape before that happens.
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10:00 – JOLTS (August): Expecting 5.75M, July 5.87M. A slight pull-back is expected for August. This number has regularly been indicating what should be a strong hiring environment. The financial markets, like the actual labor market will not react to this item.
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13:00 – Ten Year Note Auction: Last Auction (Sept. 12) 1.70% 2.4. With the ten year trading at yields above 1.78% yesterday, and then re-testing that level later in the day, this auction will be closely watched. Not only will we watch for the yield awarded but also for the bid to cover, which has been weaker of late.  The level of foreign participation, will also be important, now that it has become inconsistent.
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14:00 – FOMC Minutes. With three dissenters at the last FOMC policy meeting, and with a few more that may have sat on the fence, these Minutes may hold more than stale information. In fact that fear may have contributed to yesterday’s sell-off. In what will likely shape up to be a light volume day, this could be, and likely will be a market moving event.
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Wednesday’s Earnings Highlight
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After the Close: CSX (.45)