Posted on 04/06/2014 11:34:34 AM PDT by expat_panama
From BI:
Good morning. Here’s what you need to know.
Markets down. S&P 500 futures point to a negative open for U.S. stocks and indices across Europe are in the red, with the German DAX retreating the most, down 1.2%. Russian stocks are down more than 3% and the ruble is down sharply against the dollar today following an outsized rally that has boosted the currency since mid-March. In Asia, the Japanese Nikkei closed down 1.7%, and the Hong Kong Hang Seng fell 0.6%. In the risk-off environment that is ushering in the trading week, U.S. Treasuries are getting a small lift.
Earnings season. Q1 earnings reporting season kicks off this week when aluminum giant Alcoa releases results on Tuesday after the closing bell. Bed Bath & Beyond and Family Dollar Stores report on Wednesday, and JPMorgan Chase and Wells Fargo report on Friday. “The Estimize community is forecasting $1.44 EPS and $24.701 billion [in revenue] this quarter, which would represent year over declines of 9.4% and 1.7% respectively,” says Leigh Drogen, founder and CEO of Estimize, a platform that crowdsources earnings estimates. “Throughout the quarter we have seen downward analyst revisions from both Wall Street and Estimize which can be a bearish indicator.”
Supply in focus. The U.S. Treasury will auction $64 billion of 3-year, 10-year, and 30-year notes this week. “Providing a meaningful offset however will be $50.4 billion of maturities; rollover demand should be strong and net new cash needed is just $13.6 billion — less than $5 billion when accounting for the Fed’s buybacks,” says David Ader, head of government bond strategy at CRT Capital. “The absence of any major economic data this week and the tone set in the wake of Friday’s NFP report leave the auction process as the most compelling series of tradable events. The one notable exception to the dearth of incoming new information will be Wednesday’s FOMC minutes.”
Record money in ETFs. $11 billion of investor funds flowed into exchange-traded products in March, bringing global industry assets under management to a new all-time high of $2.45 trillion, according to data from ETFGI. “In Q1 2014, ETFs/ETPs have gathered net inflows of $33.0 billion, which is significantly below the $73.1 billion at this time last year,” said the research firm in a press release. “Fixed income ETFs/ETPs gathered $17.8 billion — the largest net inflows YTD — followed by equity ETFs/ETPs with $8.4 billion, while commodity ETFs/ETPs experienced the largest net outflows YTD with $207 million.”
Euro zone confidence. A measure of euro zone investor confidence produced by German research firm Sentix rose to 14.1 in April from March’s 13.9 reading, marking the highest level since 2011. However, confidence in the German economy fell. “The Sentix economic index (composite index) for Germany falls in April for the third time in a row,” said the firm in a press release. “While 6-month expectations have been dragging down the indicator over the past months, it is now also the assessment of the current situation which is not lending support to the composite index anymore. The German economy thus loses steam. The big question now is how the euro-zone economy will react to this. Still, it is looking robust: The composite index for the euro area increases, once more, slightly.”
German industrial production. Industrial output expanded at a faster-than-expected 0.4% monthly pace in February, but January’s 0.8% rise was revised down to 0.7%. The numbers were better than the consensus 0.3% advance expected by market economists. On a workday-adjusted basis, production was up 4.8% year over year, slowing from 4.9% in January.
Consumer credit. The only U.S. economic release on the calendar today is monthly consumer credit data, due out from the Federal Reserve at 3 PM ET. Economists predict total credit rose by $14 billion in February after advancing $13.7 billion in January.
Nigeria eclipses South Africa. Over the weekend, Nigeria’s statistics office released rebased GDP figures that propelled it to the top spot as Africa’s biggest economy, and the world’s 24th-largest. “The dramatic increase in GDP was largely due to services, which increased more than threefold in nominal terms,” says Yvonne Mhango, an economist at Renaissance Capital “Services’ share of GDP jumped to 53%, vs 29% previously. This is partly due to the surge in telecoms’ contribution, to 9% of GDP, vs 1% previously, and the emergence of a new sector, ‘Nollywood’ (1.2% of GDP). As we expected, agriculture’s share declined to 22% (vs 35%). The threefold increase in manufacturing/GDP, to 7% (vs 2%), was countered by the fall in oil and gas/GDP to 14% (vs 33%), which explains the decline of industry/GDP to 25% (vs 36%).”
Unemployment benefits in Congress. The Senate will likely vote to extend emergency unemployment benefits this afternoon, but Chris Krueger, a D.C.-based analyst at Guggenheim Securities, says the measure “has virtually no chance” of getting through the House of Representatives. “The ~$10 billion bill would retroactively restore for five months long-term unemployment benefits that expired on Dec. 28 (they would expire at the end of May). The program pays ~$300 per week to the long-term unemployed who had previously exhausted the 26 weeks of state-sponsored unemployment insurance. If passed into law, this bill would generate a retroactive payment of ~$4,000 to ~1.3 million Americans who lost their emergency unemployment benefits on December 28 and would then pay them the ~$300 per week until the end of May.”
Hedge funds not advertising yet. Research firm Preqin says the alternative asset management industry hasn’t yet taken advantage of new advertising rules. “Preqin’s recent survey of more than 150 private equity and hedge fund managers reveals that these firms have been slow to take advantage of the marketing opportunities presented by the JOBS Act, which allows them to advertise and perform general solicitations to showcase their funds to a larger number of potential investors,” said the firm in a press release. “Only 4% of hedge fund managers and 5% of private equity managers surveyed said they have registered to market under the JOBS Act.”
Huh. Must have been reading my mind...
NYSE MAC DESK MID-DAY MARKET UPDATE:
DOW 16,266 (-145 points), S&P500 1846 (-18 handles), Brent Crude $103.35/barrel (+$1.35), Gold $1,296.70/oz. (-$6.50)
MARKET DRIVERS: (Stocks are extending the broad weakness seen at the end of last week, as the selloff in high-growth technology and biotechnology stocks continues. Bonds are rallying.)
• In a speech on Fed policy this morning, St. Louis Fed President James Bullard indicated that a further slowing of inflation could prompt policy makers to suspend the tapering of bond purchases.
• German industrial output rose for a fourth consecutive month in February. Also, measure of euro-zone investor confidence produced by German research firm Sentix rose to 14.1 in April from March’s 13.9 reading; marking the highest level since 2011.
• In its most recent regional outlook, the World Bank cut its growth forecast for China to 7.6% in 2014 from 7.7%. 2015 growth was kept steady at 7.5%. The move was attributed to sluggish economic data to come out of China to start the year.
• In the M&A-space, Mallinckrodt Plc agreed to buy Questcor Pharmaceuticals Inc. for $5.6 billion.
• The IPO parade continues, as no fewer than 14 IPOs are slated to price this week, and nine the following week.
• Q1 earnings reporting season kicks off this week when aluminum giant Alcoa releases results on Tuesday after the closing bell.
In light of the fact that floor traders and the talking heads on the financial networks are sounding a bit “panicky” today about the recent sell-off in equities, we think that now is a good time for a little history lesson on “market corrections”. Corrections are a normal feature of the stock market, and they are healthy for the market. Since we haven’t experienced a correction since late 2012, market-watchers need to be reminded of their frequency. Since 1900, checkout these stats on how frequently corrections occur on average:
1.- 5% market corrections: 3x per year.
2.- 10% market corrections: Once per year.
3.- 20% market corrections: Once every 3.5 years.
From the beginning of the 5+ year Bull Market that began in March of 2009, we have experienced eleven bull market corrections of greater than 5%. Two of these corrections were greater than 10%: a 16% correction in mid-2010, and a 19.4% correction from July to October 2011. In other words, market corrections occur on a regular basis and are far more frequent than most people realize. They have always been a normal part of long-term equity investing and always will be. Historically, the average time between market corrections is 7.6 months. So, we are due, and if it happens, it’s no biggie… Was Friday’s NFP report the potential ‘catalyst’ for a corrective move?? Maybe. Market gurus took another look at the report and weren’t happy with what they saw. The less welcome components of the release included an unchanged, stubbornly high 6.7% unemployment rate, a slower pace of average hourly earnings, and a record level of temporary staffing workers as a percent of total employment… With earnings season kicking off tomorrow, and with Street expectations on the ‘very low’ end of the spectrum, perhaps a few upside surprises will bring the buyers back… We’ll keep you posted…
… Moving on, the Dow has drifted down to session-lows, and volume is heavier than normal, with ~295M shares on the tape at this time… Internally, breadth is mixed with issues and volume bearish while new highs to new lows are bullish (positive divergence). Advancing Issues: 1323 / Declining Issues: 2879 — for a ratio of 0.5 to 1. New 52-Week Highs: 91/ New 52-Week Lows: 37… Technically, we’ve ratcheted down our support/resistance levels in the S&P 500 to 1841/1853… Meanwhile, in the trading pits, the 10-year Treasury note is trading sharply higher again; moving the yield down to 2.692% while gold is pulling back from a one-week high in the wake of the reassessing of Friday’s NFP report… Big game tonight, people! Kentucky looks like an unstoppable juggernaut while UConn looks like a team on a date with destiny. We like Destiny, tonight, by one point over the juggernaut!… Have a tremendous day!
Sector Highlights brought to you by http://www.streetaccount.com/
• Consumer discretionary the worst performer with the S&P Consumer Discretionary Index (1.3%)
o Retail underperforming with the S&P Retail Index (%). A few sell-side notes out indicating low expectations for March comps amid the Eastern shift and ongoing weather distortions, and further margin pressure from excess inventory into Q2. AEO (6.6%) leading the apparel space lower following a downgrade at Cowen, which sees issues with consumers continuing to shift to Fast Fashion concepts. EXPR (5.5%) and ANN (3.5%) the other notable decliners. The latter was downgraded at Oppenheimer. PIR (2.7%), LOW (2.3%) and HD (1.8%) the notable performers in the housing-related space. Note BBBY (1.6%) reports on Wednesday after the close. Department stores mostly lower, with BONT (3.5%) lagging, while SHLD +0.8% outperforms after completing the separation of its Lands’ End business, receiving $500M in gross proceeds.
o Homebuilders underperforming with the XHB (2.1%). BZH (3.4%), DHI (2.9%), HOV (2.8%) and RYL (2.8%) the notable decliners. DHI was downgraded at Raymond James this morning, which also upgraded SPF (1.2%).
o Gaming space led lower by MGM (4.6%) and LVS (2.6%).
o Auto group underperforming. GPI (3.6%), GNTX (3.6%), PAG (3.6%) and HAR (3.1%) leading the space to the downside.
o Restaurants mostly lower. DNKN (3.1%) the worst performer following a negative mention in Barron’s regarding its extended valuation. CMG (2.4%), WEN (2.4%) and TXRH (2%) the other notable decliners. Upside limited with EAT +0.2% and YUM +0.2% the notable gainers.
o Other notable performers: MOV (5.3%), UA +1.2%. The latter was upgraded at Sterne, Agee.
• Financials underperforming with the S&P Financials Index (1%)
o Banks underperforming with the BKX (1.2%). Continued decline in Treasury yields a likely headwind. Sentiment mixed ahead of start of earnings on Friday. Some analysis citing pickup in C&I loan growth and attractive valuations relative to SPX, while others note concerns of soft FICC trading. Money centers all lower, with BAC (1.4%) lagging. C (0.7%) upgraded by HSBC. Regionals broadly lower with KRX (1.1%). Investment banks also suffering with MS (2.4%) and GS (2.4%). WSJ Heard of the Street column was cautious on the latter.
o Online brokers lower. Selling is not as intense as last week, but possible regulatory action on payment-for-order-flow continues to generate attention. WSJ quoted estimates of annual revenue in the hundreds of millions from the practice for AMTD (1.4%), ETFC (0.9%) and SCHW (0.2%).
o Insurers underperforming. Decline in rates a headwind. GNW (4.4%), LNC (2.9%), PL (2.7%) and PRU (2.6%) among the worst performers.
• Energy underperforming with the S&P Energy Index (0.9%)
o Brent crude lower after Friday’s rally, trading (-$1.35) at $105.35. Natural gas +1.5% today.
o Sector retreating after strong performance last week.
o Majors lower. HES (1.2%) and COP (0.8%) the laggards, while OXY (0.1%) outperforms.
o Coal outperforming. BTU +1.7%, ACI +1.6%, ANR +1.3% leading gains. JRCC (5%) the notable decliner, adding onto Friday’s ~7% loss and now down >47% on the year.
o Refiners mostly lower. VLO (3.4%) and MPC (1.6%) leading the space lower, while WNR +0.5% is the only notable performer to the upside.
o E&Ps underperforming with the EPX (1.4%), pulling back from last week’s outperformance. GDP (4.8%), PXD (3.7%) and WTI (3.1%) the notable decliners, while XCO +1.6% and SWN +0.3% outperform. UPL (0.9%) relatively outperforming after an upgrade at Raymond James.
o Oil services underperforming with the OSX (1.5%). RDC (3.3%) lagging after a downgrade at Morgan Stanley. BHI (2.1%) other notable laggard.
• Healthcare outperforming with the S&P Healthcare Index (0.4%)
o Biotech outperforming following its Friday sell-off, with the IBB +1.3% and NBI +1%. Some M&A activity today, with QCOR +17.5% being acquired by MNK (3.9%) in a transaction valued at $5.6B. AGIO +25.4% rallying after presenting positive Phase 1 data for AG-221 and a subsequent upgrade at JPMorgan. PPHM +7.1% also rallying on the back of trial data announced at AACR. BIIB +1.4% and CELG +0.3% the other notable gainers. MNKD (10.9%) selling off after the FDA extended PDUFA date for AFREZZA by three months.
o Pharma mostly lower with the DRG (0.4%). PFE (2.6%) in focus after reporting median OS for palbo + letrozole not statistically significant yet. Analyst reaction somewhat mixed, with some disappointed by the lack of improvement of OS rates with the use of palbociclib given high expectations around the study. LLY +1.5% and BMY +1.2% the notable outperformers in the space.
o Hospitals underperforming. UHS (2.5%), THC (2.1%) and CYH (1.9%) the notable decliners.
o Other notable performers: KND +4.5% and SEM +3.3%, following upgrades at RBC. BCR (0.8%), which was downgraded at BofA-ML.
• Consumer staples outperforming with the S&P Consumer Staples Index +0.4%
o Sector seems to be a beneficiary of continued rotation to value plays. WSJ also discussed how dividend-paying stocks coming back into vogue. Rate backdrop likely helping that dynamic.
o HPC group one of the better performers with CLX +1.6%, KMB +1.1% PG +1% and CL +1%. Outperformance coming despite a number of headwinds. UBS highlighted still-sluggish market data, likely signs of further devaluation in Venezuela and generally guarded commentary from companies on near-term demand trends.
o Grocers a notable laggard today. SVU (3.2%), TFM (1.5%) and WFM (1.2%). Pretty quiet day in terms of newsflow. Reuters said AMZN (0.9%) plans to roll out AmazonFresh grocery delivery service to 20 urban areas this year. Company also out with new handheld device that will allow users to add grocers and other household goods to their shopping lists while using Amazon.
o Food space mixed. GIS +1.7%, K +1.6% and CPB +0.9% the standouts. K extending last week’s outperformance. Bloomberg said options activity fit with potential takeover. Citi said today stock is cheap and an attractive asset.
Huh, Roost sure called that one.
My 5th grader is studying history and the textbook states that the government raising import tarrif’s were good for American businesses in the 1920’s........ I want my private school tuition reimbursement for that class...
” I want my private school tuition reimbursement for that class...”
LOL, indeed.
Of course anyone can go online and see how the % imports taxed was level in the 20's and rose going into the depression, but we live in an era where so many textbook publishers are being forced to ignore what they know as fact and publish the political left's dogma.
This mornings futures traders have metals soaring after yesterday's drop and today's stocks slightly down after yesterday's selloff. Sounds like the blame for this trend is being switched from Ukraine to April earnings season. In the news:
- Bruised stocks steady before U.S. earnings start A three-day sell-off in world stocks slowed on Tuesday, with the U.S. earnings season about to start and gains in China signaling a return of emerging-market demand. European shares and bonds both opened cautiously, amid renewed tension in Ukraine and signs the European Central Bank may not be as eager to begin large-scale stimulus as had been hoped. The region's main bourses in London (.FTSE), Paris (.FCHI) and Frankfurt (.GDAXI) were down 0.1 to 0.2…
- What's Driving Market Losses? Wall Street opened the week on a down note with a global sell-off continuing to follow last Friday's decline. Steve Wood, chief market strategist at Russell Investments North America, joins the News Hub. WSJ Live
- Profiting In Choppy Markets Requires Adjusting Strategy When the stock market is in a strong uptrend, it usually lifts all boats and gives investors plenty of room to run with their stocks. In a sharp downtrend, IBD readers know to stay away until the trend changes. But there are times when the markets are choppy and making a profit — even a small one, not the 20% to 25% variety — is frustratingly difficult. In some years, the indexes march higher in an irregular fashion, first dipping into a correction, then bolting out of it to a new high.... (Read More At Investor's Business Daily: http://education.investors.com/investors-corner/696160-profiting-in-choppy-markets-requires-adjusting-strategy.htm#ixzz2yHzdhsWN )
Of interest.
http://www.freerepublic.com/focus/news/3141980/posts?page=3#3
IRA rollover ruling stuns advisers and savers (govt changing the rules after the fact again)
Government is testing the waters on a small level. Their ultimate goal? Confiscation, pooling with SSN, and having everyone withdraw SSN type pension. Capped of course, meaning someone contributing $5,000 will get the same annuity payment as someone who contributed $5M. I figure we will be seeing this unfold sometimes about 2020.
Hard to say, these rulings are so erratic, they can contradict each other, I’m seeing more bureaucratic ego bindging here than conspiracy, though I’m not sure which is worse...
When the day reckoning on our nation's debt occurs, this will be their first place they will raid.
Maybe start with a 10% ‘wealth tax’ on ira’s > $1million, but we’re talking about only after they’ve already run up say, $30T more debt at huge interest and then confiscated corporation cash reserves (they weren’t using it anyway).
Mid-week already! Yesterday's bounce was in weaker trade --bearish sign, and this morning's futures are up for stocks and down for metals. Pundits are mixed:
The first place this will start is to further “means test” Sosha Security. This is already in place, by taxing social security if you have income in addition to SS. All that has to be done is ratchet that up as “needed.”
“Means test” taxing of gov’t payouts is another one of the methods used by the left of advancing programs. It allows hacks to avoid admitting that a proposed ‘reform’ is merely more welfare/charity. They can sell it as utility open for all, but once it’s passed they tax it until the affect is the same as that of more welfare.
this is not going to help the liquidity environment:
http://news.yahoo.com/largest-us-banks-ordered-raise-capital-buffers-212857178.html
It’s just typical government. They encourage the slaughter and then withhold blood transfusions from the victims.
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