August 24—28, 2015 AT LEAST the WEEKEND MEDIA AVOIDED OCT. 1987 COMPARISONS I thought for sure, on Friday afternoon, the weekend
press would bring on Oct. 1987 comparisons but they didn’t. Perhaps that’s
because few writing today are aware of how a comparison might have been drawn. On the
other hand, that might be evidence of still too much complacency.
The good news for this week is the dominance of housing data on the Economic Calendar.
That’s good news because that’s been a bright spot in the economy. Tuesday is
the highlight, with the FHFA June House Price Index, S&P Case Shiller Homer Price
Index, and July New Home Sales but Thursday promises the Realtors’ July Pending Home
Sales Index, as well, a clean sweep of housing data. Furthermore, should refinancings have
not ticked up last week, they surely will by the time next week’s data is out, given
how the flight to safety drove down rates in the US, last week. The highlight, though, may
well be Friday’s July Personal Income & Spending, for the PCE derived from it..
That’s been Yellen’s favorite measure of inflation.
The K.C. Federal Reserve’s Economic Symposium, often referred to as, merely, the
Jackson Hole Economic Summit takes place towards the end of the week, starting on the 27th.
For reasons incomprehensible, to me, the K.C. Fed won’t release the Agenda until the
28th. I’ve included the link, should anyone be interested in checking it
out, upon release. Given the Federal Reserve touts its transparency and efforts at
communication, I can’t understand why the K.C. Fed would withhold the agenda until
the second day—unless there are unconfirmed speakers it’s hoping to land, by
then. But that, also, sounds ridiculous. Despite Janet Yellen’s decision not to
attend, I can’t imagine the reason for secrecy. It just flies in the face of
everything the Fed claims it’s been trying to do, for the past 9 plus years.
The Event Calendar is particularly quiet, as summer vacations beckon—one reason some
attributed to last week’s bloodbath. Healthcare & Energy dominate, even as
Jefferies & Stephens bothered
Which leaves the Earnings Calendar, completely dominated by retailers and Canadian Banks.
I don’t think we remain at the point that Canadian banks continue to outperform US
banks, though I’m not sure they’re handcuffed, yet, by the collapse in oil
prices. The Retailers reporting, though, will be quite a mixed bag, ranging from Dollar
General to Big Lots, from Abercrombie & Fitch to BEBE Stores & Chico’s Fas.
PVH, on Wednesday afternoon, might be a tell for the upcoming holiday season, even as
neither BEBE or Chico’s are back to school shopping sources. On Tuesday morning,
Children’s Place surely should be but much of its BTS selling season is still ahead,
with Labor Day not until Sept 7th, despite the many sales tax holidays that
helped lift August selling off the mat. Best Buy reports Tuesday morning, also, along with
Toll Bros, which may be two of the most closely watched reports this week, Brown Forman on
Wednesday morning a close 3rd. I not only don’t expect Abercrombie &
Fitch to please, I don’t think its management can be trusted, either. For all their
talk of doing away with logos, the big table inside the window of most A&F stores are
filled with graphic tees that bear a version of the company name, usually, the entire
company name. That’s not how to strip a store of logos or motifs, and deliver more
design. Likewise, I don’t think adding SuperMan and other character tees add design,
either. Hollister has had some success selling jeans for $25, and tees & tanks for
$9.95, here helped by the 10-day 6% tax holiday. But even the kids store, abercrombie,
with 50% off the entire store, couldn’t generate excitement, here. In fact, the only
retailer that really cleaned up was Nordstrom, but everyone knows that, now, after its
recent report. Furthermore, JWN didn’t suffer the immediate dip after its Anniversary
Sales, ended early Aug, thanks to all the sales tax holidays, around the country. This
past weekend, however, it began to suffer from its own earlier success.
I’ve had a number of friends and parents of friends call to ask if it’s time to
buy. I said I thought we wouldn’t see a V recovery this time, at least not until
after the Fed decision on 9/17. However, I do think the bulls will try to take a stand,
and the way I expect to see that happen is in the action in stocks like Facebook, Amazon,
Google, and Netflix. And it’s not by accident that I named Facebook, first. I’ve
come to realize it is the greatest disruptor of this young century, and dare to say even
Google’s search advertising is threatened by it. If I search for Julia Knight
servewear, because I want to buy a friend a piece she didn’t buy for herself, search
results are helpful, when they’re valid. (I’m talking to you Saks 5th
Ave, since you appeared at the top of the search result and don’t even carry her
work!). But most of the time, I skip to the 2nd or 3rd page of
results, and source with a company that is high on the list but not so high that they paid
to be there. There have just been too many Saks experiences, where paid search results
were anything but relevant, so I’d rather go to a site that rose near the top, by
virtue of the number of people who’ve wound up there, without it paying to be on top.
When Ron Johnson ran JCPenney, and was trying to salvage the holiday season, JCP was the
top search result, no matter what I looked for, even though I knew the designers I was
searching would never be at JCP. Google may list paid search advertisers first but farther
down on the list, it features the companies with the most links, and those are usually the
better results for my searches.
By I digress. I’ll be watching the momentum names to see when they stop going down.
And I’ll also be watching oils like Chevron & Royal Dutch Shell because their 5+%
yields are attractive for someone with a 3 or 4 year horizon. And there has to be a price
at which oil stops falling, even if we’re not there, yet.
So, I think the market is in for some choppy trade until after the Fed either moves or
doesn’t, on the 17th of September, while the best hope for bulls would be
good news out of the onslaught of investment bank conferences scheduled the first week of
September, before the Labor Day weekend. And as I told everyone who asked, watch the 2pm
and later trade, because that’s when both the margin clerks and PM’s in need of
raising cash get busy. ON Monday after last week’s bloodbath, there’ll be a lot
of traders on margin, and mutual fund managers tracking redemption requests, hoping for a
rally at the end of the day to spare them the pain of selling down another 15 points, or
worse, on the S&P. I suppose we’ll learn, this week, whether the media should
have hauled out the Oct 1987 week after the Friday massacre--whether complacency will sink
the market after all.
ECONOMIC: (Highlights here, only. Complete International
Economic Calendar here or look 2 wks ahead here)
© Sandi Lynne 2015 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the author’s,
alone, and should be just one factor in more complete due diligence.
August 17—21, 2015 RETAILERS DOMINATE EARNINGS, TECH & OIL ON the SIDE Housing, the Fed & Retailers, sums up the week in 4
words. Housing, because that’s dominant on the Economic Calendar, once one looks past
the FOMC meeting minutes, out Wednesday, at 2pm. Monday, the August Housing Market Index
and BuildFax’s Renovation Index. Tuesday, July Housing Starts & Building Permits.
Thursday, Realtors’ July Existing Home Sales.
The Earnings Calendar is filled with retailers, with a few techs that are household names.
Topping the list of Retailers, there’s Walmart, TJ Maxx, & Home Depot, Tuesday
morning, and Lowe’s, Staples and Target Wednesday morning. Normally, Staples
wouldn’t make a list of retailers to watch but with a pending merger with its
competitor OfficeMaxOfficeDepot (that’s how they print the name on their flyers), and
the biggest weekend for Back to School Sales Tax Holidays just finishing up, Sunday, I am
a little interested in what it has to say. Sunday I went into Walmart, and found the B-T-S
shelves nearly bare, the advertised printer paper (400 sheets for $2.50) completely sold
out, and what looked like sheer madness, as frustrated parents who face the first day of
school, here, tomorrow, forced to go to either Target or OfficeMax to fill the rest of
their list, since Walmart was no help. One can only wonder how a chain as big as WMT, in
business for as many years as it’s been, send out a BTS circular and be cleaned out
before 1pm on Sunday, the day before school starts? Don’t ya think they shoulda
gotten the hang of it, by now?
But I digress. Retail earnings reports continue Wednesday with L Brands, formerly Limited,
which bothered to rename itself but didn’t go so far as to use either Victoria’s
Secret, Pink, or Henri Bendel. Which got me wondering how two of the richest and smartest
guys in the country renamed their company Alphabet? Are they planning on non-search, ad,
or YouTube divisions that will gobble up all the letters of the alphabet? Will they now,
sue me for infringing on the name of their company? Did someone say, go through the
letters of the alphabet and try to pick out a few names for each letter, and someone else
said, "Why not simply Alphabet?" I mean, really, Serge & Larry, you’ve
got so many creative ways to burn your shareholders’ $70B worth of cash, you
couldn’t take a few minutes to come up with a name better than Alphabet?
Thursday, as it usually is, is the most crowded day for reports, with Bon-Ton Stores,
Buckle, cato, Stage Stores & SteinMart joined by Madison Square Garden, Tech Data, and
then in the afternoon, Gap Stores, Ross Stores, and The Fresh Market, with more of that
side of tech I mentioned: Hewlett-Packard, Intuit, and Salesforce.com. Friday, Deere,
FootLocker, and Hibbertts stand out, FL the real big winner over the last weekend,
especially at its CHAMPS division, though I did, also, see the first ever Lady Footlocker
shopping bag, in 9 years that it’s been right outside the food court at the mall.
I’ve never seen anyone go in there but, obviously, someone did, or the rest of the
chain ran out of shopping bags and borrowed some, because the mall boasts regular
FootLocker, and House of Hoops, in addition to that Lady FL & Champs.
Do you know how you can tell that the start of school is imminent, and there’s a
sales tax holiday? The shopping bags being carried are very different from the usual, and
retailers strain to bring down prices to qualify for the $100 maximum cut-off, after years
of topping out, here, in Florida, at $50. So Pink was big (White Polka dots on pink,
instead of the 2 shades of pink striped V.S. bag), Aldo, Journeys (GCO), Claire’s,
LuluLemon, Gap, Justice (ASNA), Skecher’s, American Eagle Outfitters, PacSun, and
Macy*s bags were everywhere, and more abercrombie & A&F bags than I’ve seen
in months. And true to form, this just finished weekend was the busiest, though the tax
holiday started on August 6th. In the past, the 4-day tax holiday was busy
every day, the final day the busiest of all. A 10-day holiday, this year, meant the final
weekend was when the big crunch happened, though it’s hard to tell whether
that’s because people get paid twice a month, and their paychecks hit their accounts
Friday, the 14th. I suspect there was some of that going on, too.
September Oil Futures Expire Monday, at 2:30pm est. With so many bearish bets (puts)
outstanding, at strikes as high as $85, many expect a huge move, predicting expiration
could be a $1B event, though there’s no agreement on the direction, even as some say
after expiration, oil should be free to continue to fall, as the bets supporting it run
off with settlement. I don’t usually follow crude futures, though I do make sure I
know what API said, before going to sleep Tuesday nights, and I just, recently, picked up
a domestic E&P, with a 5.0% yield, because I simply can’t help being a little
contrarian, when there’s such universal agreement that oil’s going down to the
$30’s. One storm heading for the gulf coast, and they’ll all be singing a
different tune. I understand that refineries down for maintenance and changeover to winter
blends will cause some more crude to back up but all those SUV’s & trucks bought
in the last 12 months are going to suck more fuel than the Corolla’s and
Altima’s did, so I’m all in on the concept of growth in demand—even if
it’s just in the millions of people who have jobs now, who didn’t a few years
ago. So I bought an American E&P small, with the express intent to pick up more by
selling puts, if producers go a lot farther down than they are now.
As for Events, it’s a slow time of year for that, too, though a smattering of I-banks
are back on the schedule. It’s trade events that will be the biggest this week. One
of the biggest events will be EnerCom’s Oil & Gas Conference, which got underway
Sunday, in Denver. It’s a short flight from there to Citi’s MLP/Midstream
Infrastructure Conference, starting Tuesday, in Las Vegas, or a longer flight to Houston
for NAPE, the North American Prospect Expo. .
MAGIC and World Shoe start in Las Vegas Monday, so Citi’s choice of locations might
not have been optimal. Not only will hotels be jammed but taxi’s will be hard to come
by, even as traffic should be bumper to bumper, out there. MAGIC, for those who don’t
know, started as a men’s & boys apparel show but grew to become the biggest
apparel show in the world, for men, women, girls, boys, and toddlers. It’s so big,
that World Shoe joined it, instead of meeting separately, as did the PGA Show, which also
starts Monday, in Vegas. In fact, the week isn’t just big for retail Earnings but
between MAGIC, and all the associated shows in Vegas, and the NY Int’l Gift Show in
New York, with all its associated sub-shows, like EX*Tracts, Gourmet Housewares, and more,
retail will be the star of the week. And where retail stars, so too does apparel
manufacturing and sourcing, which is split between NY and Vegas, depending on the stage of
development. For fabric, its NY & NYIGF, for sourcing overseas, it’s MAGIC, with
Women’s Wear Daily hosting a Fashion Forum, and the National Shoe Retailers
Ass’n Education Conference both on Sunday. Grocers are in Colorado, and Wearable Tech
in Las Vegas, only a matter of time before it adds @MAGIC to the event name, just as so
many other retail-related events have done—World Shoe & PGA, the two most
prominent. Plenty of analysts will be out there, schmoozing and dining with execs but
there’s no formal event of which we’re aware.
I wouldn’t normally point out VentureBeat GrowthBeat in San Francisco (8/17—18)
but the speaker line-up couldn’t be ignored. The even includes reps from Yahoo,
YUM’s Pizza Hut, LVMH’s Moet Hennessy USA, Belkin, Zillow, American Eagle
Outfitters, Priceline, Visa, PG&E, LendingClub, Coldwell Banker Real Estate (RLGY),
Nordstrom, Pinterest, LinkedIn, Zenefits, along with Scale Venture Partners. We could
quibble about some of them that aren’t, necessarily, in "growth beats" at
the moment but let’s not be unkind. For the most part, it’s a stellar list,
worth calling out.
Wednesday should be especially interesting as the FOMC Minutes hit hours after July CPI.
Other than Avian flu related price hikes, it’s hard to find really surging inflation
anywhere by at the pharmacy, Years ago, when I was in retail, selling ski, tennis and
swimwear, I found an Italian ski line that no one else was selling—possibly because
it was too inexpensive. I could buy terrific Goretex and fiberfill ski jackets in fashion
forward designs and land them for $30 each—at another time when the dollar was strong
and customs wasn’t much of an issue since the garments were so inexpensive, I
didn’t mind paying duties. I could mark those jackets at $180 each, and they’d
still be half the price of any other of the imported jackets I sold from Germany, France
or Italy. That helped me make up for the brands that had to be discounted, because of a
competitor cross town who never sold anything a full price. My staff used to joke that I
threw the jackets at the staircase and charged the most for the ones that held on the top
stair. That’s kind of how I feel about prescription drug pricing today. Prices keep
going up until patients and insurance payers refuse to pay for them, and seek
alternatives.
But again I digress. The point is, while employment is clearly nearing the FOMC’s
goal, I seriously doubt inflation will be sufficient, through CPI, to justify the rate
hike I believe is coming in September. Though the markets might have a convulsion, on
lift-off in September, I don’t think a quarter point hike will do much besides give
credit card companies an excuse to raise their already well about Fed rate levels.
Nonetheless, both coming on the same day, should make for interesting reading. Throw in
hedge funds examining the redemption requests they have to deal with at October’s
end, which should have arrived by Friday, for all those that require 45 days notice, and
what there is to fear is the fear of Septembers, in general, since it tends to be a cruel
month for stocks, just as it is for any kid who has to readjust to getting up in the dark,
to catch a school bus. On that score, Labor Day is late this year, on the 7th,
which postpones the start of school for most of the northern half of the country, which
should make parents more miserable than usual, and cause some extended vacations after
August ends, and the kids are back from camp.
All in, if you fear lift-off, then you must use every rally as an opportunity to sell, if
you’re long. If you believe September will be true to its usual form, and be down in
anticipation and reaction, then you must sell every rally. If you believe the only way out
of the purgatory of range bound trading is a serious test of the downside, after 6 years
of rally, then you must sell every rally. If you think PM’s will lighten up before
leaving for their Labor Day vacations, then you must sell any rally that you’re lucky
enough to see. Am I negative? Not really because I don’t believe the Fed will embark
on a series of regular rate hikes, and think stocks will be fine November into the New
Year. But in the short term, I am negative, because I think we’re more likely to
break the range to the downside, than we are to the upside, thanks to seasonality, and the
probability that the Fed does lift off, next month.
ECONOMIC: (Highlights, only, below. Full International Economic Calendar here or Look Ahead here)
© Sandi Lynne 2015 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the author’s,
alone, and should be just one factor in more complete due diligence.
August 10—14, 2015 EXPECT MORE
DOWNSIDE Someone who’d
been asleep for 50 years, parachuting in today, would be quite confused about what’s
going on. Commodities and the bond market are signaling deflation, or recession, at least,
at the same time all the talk is about the FOMC raising rates. A rate of even
three-quarters of a point would be far from normalizing rates and probably not
significantly throttle back the economy but the bond market is not signaling rising rates,
at all. Rates were higher throughout July. The week’s Treasury Auctions should be
interesting, especially Tuesday’s 3-yr & Wednesday’s 10-year Notes, not to
mention Wednesday’s 30-year Bonds. With rates expected to rise, should the Treasury
be selling only $16B 30-year notes but $24B, each, of the 3- and 10-year?
Stock charts don’t look particularly good. This is the week stocks usually celebrate
an earnings season that wasn’t nearly as bad as feared but with major retailers
reporting this week, that post-earnings relief rally may have trouble getting off the
ground. I’m fairly confident Nordstrom won’t disappoint, Thursday afternoon but
Macy*s Wednesday morning should emphasize exploration of options for its real estate since
I don’t expect strong earnings. How could earnings be strong when patient shoppers,
like me, can buy a $398 dress for $71? Granted, Macy*s has the power to force its
suppliers to eat part of the losses. And at Bloomingdale’s, there’s very little
merchandise that isn’t owned by 3rd parties who lease floor space. In
fact, one employee pointed to 2 shelves of jeans and said that and non-licensed jewelry is
all Bloomingdale’s hasn’t lease out…yet. Kohl’s reports Thursday
morning. I don’t get into that store, because no one asks me to but I find it curious
that it’s inserted a circular into the local Sunday newspaper week in and week out
since a week before Mother’s Day. That was the first time since Christmas it’s
circular had shown up. Same for Big Lots, Kmart & Walmart, though Walmart I
understand. It reopened a nearby location that had been closed for more than 3 years,
replaced by a superstore some 5 miles south. Then, suddenly, this past winter, the store
that had remained closed for those few years reopened. The parking lot wasn’t fixed;
the walls and bathrooms weren’t cleaned up but the store was once, again,
"stocked" and open. I put stocked in quotes because that’s debatable,
depending what you’re looking for. In many ways, it looks like a test market, with
Hostess Twinkies offered with strawberry, chocolate, or banana filling, or banana filling
dipped in chocolate, and many other varieties but chocolate Hostess cupcakes weren’t
to be found.
As it was last week, there’s a mini flurry of investment bank conferences on the
schedule, this week. I suspect each of them will get their share of attention, whether its
PacCrest’s Global Technology Leadership conference starting Sunday, Jefferies’
Industrials, Monday, Stephens Permian Basin Investor Trip to DNOW & MRC, or
JPMorgan’s Auto Conference—better understood as an auto parts conference. Credit
to BB&T for hosting (Tues.) a Coal Summit, since I doubt any other I-bank would want
to. Credit Suisse (Tues.) Transportation Conference might be the salve that index needs.
It’s summer travel season and the Transport index has looked like Debby Downer.
It’s too far from the quarter’s end for all optimism to be sucked out of
management. On the contrary, with the price of oil and its derivatives down, and more
people working, I’d be very surprised if planes weren’t flying full, the lower
cost of jet fuel flowing right to the bottom line. With the second string and back up
players reporting earnings, from here on in, the I-bank conferences are likely to be
closely watched for both what’s said and for "body language" an amorphous
posture that analysts believe they can decipher. With Cisco and Applied Materials
reporting this week, Micron Tech hosting an end of week analyst meeting, and FlashMemory
Summit, starting Tuesday, there’s be plenty of news about tech, even beyond PacCerst,
Oppenheimer’s Annual Tech, Internet & Communications Conference,
CanaccordGenuity’s Growth Conference, and Nomura’s Media & Telecom
Conference, or Cowen’s Communications Infrastructure Conference.
Friday, the 15th, could be a red letter day for hedge funds that require
redemption requests to arrive at least 45 days before quarter’s end. With September
often the worst month of the year, for stocks, and a Federal Reserve meeting, mid-month,
widely expected to result in lift off, for rates, August could become a very long month.
Making matters worse, Labor Day isn’t until the 7th, this year, which
could make it feel like August was extended by an extra week. In sum, should an earnings
relief rally materialize, I’d use it to prepare for the downside. The next 5—6
weeks could be exceptionally stressful and painful for longs.
ECONOMIC: (Highlights below, only. Full International Economic Calendar here, or take
a look a week ahead here)
© Sandi Lynne 2015 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the author’s,
alone, and should be just one factor in more complete due diligence.
August 03—07, 2015 LAST BIG WEEK OF
EARNINGS SEASON PLUS AN AVALANCHE OF DATA
This is the last big week of Earnings season but, even so, it’s a schedule filled
with volume without market leaders. Media companies dominate the schedule but there
isn’t a company on the calendar that could derail stock the markets with its report.
The Economic Calendar is filled with the data that accompanies every new month, including
Motor Vehicle Sales, Personal Income & Spending, Factory Orders, the Trade Deficit,
July Chain Store Sales, and the July Unemployment Report, as well as Consumer Credit.
Therein lies the biggest influence on stocks, this week, after Q2 Advance GDP
disappointed, the Atlanta Fed’s spot on GDPNow beating all the Street’s
economists who overestimated the pace of the economy. Many of the world’s largest
economies will be reporting similar data, though Europe is often a month behind in its
reports.
There’s a flurry of investment bank conferences expected, this week, a midsummer
fling in the middle of a quiet two months, that probably won’t trump the economic
data, either. Still, with most companies done reporting, it’s the time in the quarter
when presentations hold more optimism than recent earnings reports did. It’s human
nature to be optimistic, and with Sales Tax Holidays popular next weekend, across the
country, a little optimism is to be expected, even if some states, like my own, Florida,
offer low caps on spending to qualify for tax freedom. School supplies top out at $20,
while clothing tops at $100 per item, which one can get in New York, anytime. A few states
are very generous, offering $1,000 or more for computers, and throwing in hurricane
preparedness and/or energy star/Water Sense products besides, but a surprising number
besides Florida cap the BTS Sales tax holiday at $100, including Arkansas, Connecticut,
Iowa, Maryland, Mississippi, Oklahoma, and Texas, with Arkansas’ holiday completed
the first weekend in August, as I write. Missouri, next weekend, tops out computers at
$3,500, the most generous of all the states but, still, allows only $100 for clothing, and
$50 for school supplies. By August 9th, most retail chains will have a fairly
good idea of what this back to school season will look like but, no matter how cheap the
limits, parents do plan their shopping to take advantage of the sales tax holiday, which
can save as much as 8.5% in some states. Throw in retailers offering an extra 50% off
already marked down merchandise, promising savings to 70%, every little bit helps.
It so happens, New York started hosting the Spring Ready to Wear Fashion week, 08/02, with
Los Angeles and Chicago hosting their own, all in advance of MAGIC, in Las Vegas, later
this month. I wouldn’t expect big things out of Thursday’s Chain Store Sales
and, instead, would fear those retailers who’ll soon offer their quarterly sales
numbers. I have not seen so many 70 & 75% off sales signs in stores, since the winter
of 2008/2009. Nor have I seen so much merchandise offered at 70 & 75% off, since
shortly after 9/11. At Bloomingdale’s, which likes to hold itself out as a luxury
retailer, I bought for $71 a dress that carried an original price of $398, from Bailey
144. As department stores go, no other "luxury" retailers offer the discounts
Macy*s does at its flagship and its Bloomingdale’s chain, which is why management is
fanning the aspirational flames of a possible REIT structure for its properties. While
analysts and financial media like to call it the best operator, it’s a failed
retailer, which has never sold a garment at full price--loved by shoppers for the same
reason GAP is—because the discounts get piled on in a pyramid that means big savings
for consumers but slim earnings for the chain. July is a clearance month, meant to make
clear spring leftovers, to make room for fall merchandise on the selling floor. At 70%
off, the top line must be weak, while the bottom line is sacrificed. While early B-T-S
sales will be boosted by the sales tax holidays that consumers are smart enough to take
advantage of, it’s too soon to call fall a success, based on those sales. Likewise,
retailers reporting the week of August 10th, are likely to be deceived by the
strength of BTS sales, starting the 7th, when almost half the states start
their sales tax holidays that day. The only retailer really getting the job done, is
Nordstrom, which once again had a successful Anniversary Sale, supported by manufacturers
who provide JWN breaks on wholesale prices, to kick start its sale. While only its credit
card customers had access to the discounts from July 7th through 16th,
you would have thought it was giving the store away, it was so crowded with shoppers,
Anniversary Sale Bags the most dominate throughout every corner of the mall. JWN,
typically, pays the price for its success during the Anniversary sale, after the sale ends
but might escape the worst of thinned crowds next weekend, because of all the Sales Tax
Holiday, next week. And it marks its tags clearly, so shoppers can see the Anniversary
Sale price, and regular retail price, until the discounted price is torn off the bottom of
the tags, tonight, after the store closes. Nordstrom is the one retailer getting the job
done, year in and year out.
Note the number of hoteliers reporting this week, some of them REITs, even as Credit
Suisse hosts its Annual Gaming, Lodging, Leisure & Restaurants Conference, starting
Tuesday, in Boston. STR Hotel Data, is Smith Travel Research’s event, in Nashville,
while Susquehanna is hosting its Hospitality Forum in Boston, as well. There’s minor
overlap with UBS’ SMID Cap 1x1 Conference, while Inman’s Real Estate Connect has
a smidge of overlap, since it’s about connecting with customers online, which many
hotels do, very successfully. Boston is, also, hosting RBC’s Consumer & Retail
Investor Day, though it includes lunchbox and lunch out (restaurants) more than apparel or
footwear companies—at least based on the very few presenters I was able to confirm.
All these events start Tuesday,
There was some visible end of month activity, last week. Stocks, though, seem tired, and
ready for profit-taking before PM’s take some time off over the next few weeks into
Labor Day weekend. I’m waiting for transports to perk up, with crude prices so low,
though the decline hasn’t, yet, fully shown up at gas stations, either. The Economic
data will have to be exceptional, to boost stocks more, and then, exceptional economic
data hastens the arrival of lift-off, which would be a problem for stocks. In other words,
damned if they do, and damned if they don’t, without catalysts to drive stocks higher
from here. And honestly, watching the auto makers struggling to get out of their own way
after strong results, suggests little appetite to boost stocks from here. Meanwhile, the
more cars people buy, the less appetite they have for jeans and other schmatas, though
sometimes a new vehicle is celebrated at a restaurant. I distinctly recall the time my dad
picked up his new Cadillac, and hit the rear end backing out of a parking space, at the
restaurant at which we celebrated his purchase—back when you bought a car for cash,
or obtained a 2-year loan at most. Existing home sales were strong, too, though
that’s probably a function of the school year ending, as much as anything. But,
again, consumers don’t generally hit the mall for much more than necessities, after
buying a new house. And you’d never know home sales were strong looking at
Realogy’s earnings. All in, profit taking makes a lot of sense, right now, despite
the post-earnings rally usually seen in early August, on relief that the reports
weren’t as bad as they could have been—as bad as some feared. But a relief rally
here would be a gift—for longs to sell.
ECONOMIC: (Highlights only, below. FULL International
Economic Calendar, here)
© Sandi Lynne 2015 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the author’s,
alone, and should be just one factor in more complete due diligence.
July 27—31, 2015
STILL ABOUT EARNINGS BUT WATCH THE FOMC STATEMENT
There are more central banks than usual on this
week’s Economic Calendar to make the point that there are central banks besides the
FOMC, BoE, BoJ, and ECB but even given that, and an FOMC meeting this week, it’s
Earnings that will matter most—even if the FOMC reinforces the point that it could be
ready to go in September.
So let’s get to the Earnings Calendar first, and dissect the breakdown of reporting
companies. Healthcare is well represented, especially big, old pharmaceuticals from both
sides of the Atlantic, as well as big biotechs Amgen & Gilead Sciences. Baxter, Bayer,
Merck, Pfizer, GlaxoSmith Kline, and AstraZeneca, TEVA Pharmaceuticals, to name just a
few—Merck & Pfizer reporting Tuesday morning, for some reason. But there’s
even more healthcare than that, including Anthem, Molina Health, Healthsouth, Cardinal
Health, Lab Corp, Quigen, Humana, Centene, Magellan, and more. Nearly every hotelier is on
this week’s calendar, both C Corps & REITs, including Wyndham & Wynn, Choice
Hotels, Hilton, Felcor Loding Trust, InterContinential, Starwood, Extended Stay, Host
Resorts, LaQuinta, Chesapeake, Diamond Resorts, and more.
Every major automaker reports this week, too, including Ford, General Motors, Nissan
Motors, Fiat Chrysler, Honda Motors, and their suppliers, like American Axle, Delphi, and
Eaton. In addition to the post-release conference calls they’ll all host, Ford has
scheduled a Fixed Income Call, as well, for later Tuesday morning. Also reporting Penske
Automotive.
Foreign banks are reporting this week, too, including Deutsche Bank, Barclays, and RBS.
The three major beer brewers report, ABEV, BUD, and SAM, all Thursday, which should keep
their analysts busy that day. Then major oils report this week, too, including BP and
Anandarko on Tuesday morning and afternoon, respectively, before the group all but wraps
on Friday, with ExxonMobil and Chevron, in the morning, with Occidental Petroleum, Murphy
Oil, Valero & Philips 66 reporting between those two days, to name a few, not to
mention the big pipeline company Enterprise Products (EPD). The Street largely expects
disastrous reports from the energy sector but will it get even uglier than that? How many
will have the balls to cut their dividends, in addition to CapEx they’d be crazy not
to cut even more.
There are a sprinkling of retailers reporting, like Big Five Sports restaurants I think
will attract more attention, including Panera, Buffalo Wild Wings, as well as Whole Foods
Market, Wednesday afternoon but it’s really the homebuilders I expect to sway
sentiment, more, starting with D R Horton, Tuesday morning, Ryland Thursday, and a few of
the more recently public ones, like A V Homes and WCI Communities.
It seems as if most of the cloud software providers report this week, including WageWorks,
Tableau Software, ServiceNow, Support.com, and both Twitter & Facebook, Wed. &
Thurs. afternoon, respectively, along with security companies, including FireEye. To store
all the data this group is generating, Seagate Tech & Western Digital both report this
week, as do Northrop Grumman & General Dynamics, that secure the government’s
servers—or don’t, as the case seemed to be at the office of Personnel
Management, though I don’t mean to imply either of them was responsible. I don’t
know who holds the contract for that or any other government office.
A few newly merged companies report, including Lafarge, Reynolds, and Zimmer Biomet, which
picked up a new ticker, ZBH, to go with the new name. While they’ll update their
forecasts, in light of their mergers, so too will the energy complex, which could be a big
problem for the market, after oil broke back below $50 a barrel last week. Meanwhile, Gold
and miners are hinting at what might be a bottom, for now. That needs confirmation but
most of the miners made new lows on Friday only to reverse up by a few pennies, in what
hints at capitulation and the end of the selling, for now—hints that need to be
confirmed.
Meanwhile, the FOMC statement will be out Wednesday, at 2pm et, and could well reinforce
Yellen’s point that rates are likely to rise as soon as September. The market
hasn’t been acting like it believes her—in fact, rates have been sliding for a
couple of weeks but it seems to me she made the point in her Congressional
testimony—she’s eager to lift off, even if rates then sit afterwards, into next
year. Her intentions have been well telegraphed, and there shouldn’t be anyone not
prepared, by now but Wall Street never fails to surprise in its density. I agree with
Gundlach, that an alien parachuting in today, looking at recent Economic releases and the
commodity complex, would guess a recession either started or is imminent but that could be
part of Yellen’s reason for wanting to lift rates—a statement about the economy
being better than some of the data and commodities suggest. Surely she doesn’t think
25bps would leave her enough room to cut rates if the economy did fall into recession.
Even a half point wouldn’t do much to help in the face of recession, either. So the
only logical conclusion is she wants to lift off so she can make the point that the
economy is strong enough to handle a rate hike—no matter how minor.
For now, the path of least resistance appears down, with even last week’s biggest
winners likely to give back some of those gains. Gold bears watching because it might,
just, have made an short term low, with Friday’s fresh dip and reversal. The selling
could even accelerate into Wednesday, as End of Month and T-3 converge. But then, that's
also the day the FOMC statement will be out, a confluence of coincidences that spell SELL.
ECONOMIC: (Highlights, below. Full International Economic Calendar here)
© Sandi Lynne 2015 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the author’s,
alone, and should be just one factor in more complete due diligence.
July 20—24, 2015 ALL ABOUT EARNINGS
It may have felt like Earnings started and
ended last week but it’s this week that’s the crusher. As usual, Monday is a
somewhat quite day before the number of companies reporting results crescendo on
Thursday—oddly, Thursday morning, rather than in the afternoon. I’ve taken the
liberty of emboldening those tickers I believe will attract either the most media
attention or the most influence on the major averages. In some cases, like IBM on Monday
afternoon, the report really doesn’t have many read throughs to other companies or
sectors but, due to its price, and the fact that the DJIA is price-weighted, they’re
influential, anyway. Throw in 3M Thursday morning, and between those two, alone, the print
in the Dow will be highly influenced by their reports, before we even discuss Microsoft,
Travelers, Verizon, & United Technologies Tuesday, American Express, Boeing & Coke
Wednesday, and DOW stocks AT&T, Caterpillar, GM, McDonalds, & Visa reporting
Thursday. While the S&P is just getting started, the members of the DJIA will have,
largely, reported, by the end of this week.
It’s very curious that, during the most recent Greek debt seize up, during which US
rates have been falling somewhat steadily, homebuilder stocks have been falling, too.
It’s as if the group is focused on Yellen’s steady drum beat for the first rate
hike this year, rather than the fact that rates have been falling, from 3.20 when the
month opened, to 3.11 on the 30 year, at Friday’s close (US Treasury data). Oil is
falling too, after a significant bounce, even as employment is still rising, (nevermind
weak wage gains). And to top it off, the two builders that reported earnings, in the last
month, both beat the Street. On the surface, the ingredients are there for a homebuilder
rally and, yet, we’ve gotten the opposite. With a handful of homebuilders reporting
this week, including Pulte on Thursday, and housing data out Wednesday & Friday,
perhaps their fortunes will improve. The Southeast Building Conference wraps up Sunday.
Of course, were I to list the reports that will be of most interest it would be a
different list, that would start with Apple, Chipotle Mexican Grill and GoPro on Tuesday
afternoon, Arm Holdings, AutoNation, Whirlpool, Discover Financial Services, and SanDisk
Wednesday. Or, perhaps, Celgene, Comcast, Credit Suisse, Daimler Motors, Dana her, Dow
Chemical, Group 1 Automotive, Southwest Airlines, STMicroelectronics, Sygenta, Under
Armour, Union Pacific Rail, United Airlines, & Waste Management, Thursday morning. In
fact, there are dozens of ways I could dice and slice the week’s earnings, but
believe, when all is said and done, the tickers in bold speak for themselves. Tegna was
given the highlight treatment since it was just thrown off of Gannett, a couple of weeks
ago, Evercore ISI already downgrading it in front of its first independent earnings
release. The point is, a different researcher or analyst would highlight many different
stocks but probably many that overlap with my list.
As befits summer, investment bank conferences are few and far between, Wells Fargo Telecom
Symposium a rare exception. The big event of the week is the first independent Men’s
Fashion Week in NY. Miami is where the Swim industry will meet, even as Men’s is in
NY. AH&LA is the Hotels & Lodging Association, running 3, one-day, separate
investment conferences, this week, with a different focus in each city: Destination
Hotels, Lifestyle segment, and Luxury, by the time it makes it from the east coast to the
west. Online retailing is the subject of 3 separate events but beyond those, it’s
healthcare that dominates. Alzheimer’s Disease, Nuclear Medicine, Molecular Biology
in Clinical Oncology, Genetic Recombination & Genome Rearrangements, AIDS & HIV
Prevention & Treatment, Echocargiographs, Dermatology, Heart Disease, and Clinical
Cancer Research take us from yesterday, through next weekend. The Southern Medical
Association’s "Focus on the Female Patient Conference starts Monday. Next
weekend’s South Atlantic Well Drillers Jubilee is not an energy event but, rather,
about water, while both DevCon5html and Uber Java Conference 2015 is about 2 other ways to
handle animated images—as in video, not handrawn images—fast on the heels of
Google & Facebook disabling Adobe Flash, last week, which in at least one case,
totally disabled a finance site I often visit, several times during the day.
Despite all the central bank related events on the Economic Calendar, the week will be
about earnings. Typically, stocks struggle the first three weeks of every earnings season,
before rallying during the 4th, when there’s a collective relief rally on
earnings that weren’t as bad as they could have been. However, last week, the banks
did what they haven’t done in years—pleased and mostly topped analysts’
estimates, helping stocks to rally even before Google blew the top off its range, claiming
a new all time high that dragged a couple of other tech stocks with it. That, however, may
have set up the potential for disappointment as more companies report. It’s probably
fair to ask if Amazon can pull another rabbit out of its hat, like it did last quarter,
after repeatedly disappointing to the point that, for a few quarters, anyway, growing
revenues without any earnings just wasn’t good enough any more. Could some analyst
point out that Netflix added more subs than expected but also earned a lot less than it
did a year ago—and is projecting more of the same? Euphoria is not a durable state.
It’s quite possible that stocks will pay, this week, for last week’s excesses
that served to deflect attention from a lot of the market eroding that didn’t get
much notice as banks, Google & Facebook notched all time new highs. A perfect example
is the homebuilders, with every reason to rise, yet didn’t. That’s troubling,
because they’re not alone. When the number of stocks making new highs is small, and
the rest of the market is falling far behind, that often means a top is near. Whether that
happens in the next couple of weeks or waits until the 4th week of earnings
season for the relief rally to push ‘em higher will depend on what the rest of the
earnings season looks like. We’ll get a real good sense of that by Friday.
ECONOMIC: (Highlights, only, below. Full International
Economic Calendar here or Full Week Ahead here)
© 2015 Sandi Lynne Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the author’s,
alone, and should be just one factor in more complete due diligence.
July 13—17, 2015 GREECE’S HOBSON’S CHOICE COMPETES WITH DOVISH YELLEN It appears Germany wants total domination of Greece, or
Grexit. What looked like capitulation from Greece, late Friday, failed to impress Germany,
as well as some other Eurozone members now demanding changes to pensions & taxes pass
the Greek parliament by Wed, or the EU will give it a 5-year time out. Saying trust has
been destroyed, even after Tsipras offered everything his people had rejected by
referendum, last Sunday, only Greece’s legislature passing laws to back up the
promises put forth in his Friday proposal, will generate more funds for Greece. And most
strangely, Merkel has told Tsipras there will be no debt restructuring if the legislature
passes the changed laws but might be possible if Greece takes a 5-year time out from the
Eurozone. The sum of the news reports Sunday, make it sound like Greece would be better
off telling Germany and the Eurozone to take a hike. (If you’re not reading
Rockefeller Treasury Services’ daily missives, you’re missing a lot of
information you’ll need before the open every morning. And there’s no denying
there’s a link between foreign exchange, and commodities—oil and gold, in
particular but US Treasuries, as well. Ask for a
sample, and tell her I sent you.)
Meanwhile, with Janet Yellen testifying in Congress, Wed. and Thurs., there was ONE line
that summed up the FOMC Minutes of the FOMC’s June meeting: :The risks to the
forecasts for real GDP growth and inflation were seen as tilted a little to the downside,
reflecting the staff's assessment that neither monetary policy nor fiscal policy was
well positioned to help the economy withstand substantial adverse shocks."
And that was a whole lot more dovish than any of the "moderate growth" and
"rising moderately" and other "moderates" the FOMC has given us in
many months. That all but eliminates any worry about the Fed’s Beige Book, out Wed.
And if that weren’t enough to make a week, there’s a BoJ meeting & Kuroda
press conference, and another from the Bk of Canada, later Wed., followed by an ECB
Meeting on Thursday, that wasn’t supposed to be about Greece, but rates but could
well involve a decision on whether the ECB should continue extending an olive branch of
cash to Greek banks, which common sense suggests is likely to stop if the Greek parliament
doesn’t pass the laws demanded by Wednesday.
US Data picks up, including June Retail Sales Tuesday, PPI Wed., NAHB July Housing Market
Index Thursday, then Friday June US CPI plus Housing Starts & Building Permits, not to
mention the 250 person survey by the University of Michigan, that’s said to measure
consumer sentiment, despite the ridiculously small sample.
All in, given the dovish FOMC Minutes, stocks might be able to compartmentalize, and treat
the Greek/EU antics like a crash at the side of the road you can’t take your eyes off
but really doesn’t, personally, involve you. But with so many major earnings
reports--money center banks especially, this week, the punches could keep on coming. To
wit: J&J, JPMorgan & Wells Fargo Tuesday morning followed by CSX & Yum!
Brands, that afternoon. Wednesday, Bk of America, Black Rock, Delta Airlines, PNC
Financial, & US Bank to start the morning, followed that afternoon by Intel, Kinder
Morgan, and Netflix which is also splitting, this week. On Thursday, BB&T, Blackstone,
Domino’s Pizza, Ebay, Goldman Sachs, MGIC Investment Corp, Phillip Morris Int’l,
Taiwan Semiconductor, Sherwin-Williams, and United Health Thursday morning, followed that
afternoon by Celanese, Google, Mattel, & Schlumberger. Friday, GE, Honeywell, Kansas
City Southern, SunTrust, Synchrony, and W.W. Grainger report, to round out a week with not
a lot of volume on the Earnings Calendar but power to make up for it. So it’s said,
Netflix splits 7:1 this week, while EBAY spins out PayPal (PYPL), both items on the Events
Calendar below.
While you’d think there can’t be anything on the Events Calendar to compete with
all the above, you might be wrong. SEMICON West starting Tuesday, includes InterSolar
North America. While biotechs were stealing the show by rising steadily for a few years,
Solar was mounting a big revival that’s failed to draw much conversation or press.
That will, surely, change this week, even if Citi is the only one to actually include
SEMICON and InterSolar on its conference calendar. Analysts will be out west in force,
their clients tagging along, perhaps not for enlightenment but to gauge analyst body
language, so they’ll now where to sink their money, if members of the group rise.
Clearly, last week was notable for the number of analysts looking to shave full year
estimates for Intel and other PC Centric companies, not least because AMD warned. Even
Wednesday’s meeting of NAED could be a bit of a downer. Despite improvement in
construction, PC’s are not, exactly, waiting with baited breath for Win10, even as
those who operate data centers have been building their own white boxes.
Who’d have thought that a dovish Fed, and lower for longer wouldn’t be enough
for markets? Greece appears to have been given a Hobson’s choice of abdicating its
national identity—ignoring last week’s referendum as nothing more than a silly
exercise of democracy without meaning—or walking out of the Eurozone. And if it does
abdicate, it won’t get a debt restructuring it can have if, like a 3 year old, it
takes a 5-year time out from Euro membership. Yellen won’t be suddenly more hawkish,
especially given the lack of resolution of Greece/EU terms, and the possibility that the
ECB will cut off Greek banks as soon as this week. The Earnings Calendar is loaded with
heavy hitters, and the usual inordinate number of big banks who haven’t been able to
keep most of their operations humming concurrently, even as regulation & oversight is
sapping what they must, surely, believe is the ‘creative’ financing that built
this great country. Even though trading should have picked up, thanks to Greece and its
impact on the Euro, that really didn’t happen until after the quarter closed. For the
money center banks, it’s another quarter of large fines and restitution, that it
doesn’t seem will ever end.
Last week, the major averages broke down. It doesn’t appear that they’ll recover
technical levels lost, anytime this week. Therefore, rallies are to sell, while dips
aren’t, necessarily, buying opportunities, yet. The S&P should retest support at
2040, with no guarantees it’ll hold.
.
ECONOMIC: (Highlights, only, Below. Full International
Economic Calendar here Two
weeks Ahead here)
© Sandi Lynne 2015 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the author’s,
alone, and should be just one factor in more complete due diligence.
July 06—10, 2015 SEASON FOR RERUNS, SO WHY NOT A RERUN
OF LAST WEEK? It’s
the season for reruns, and with the Greek referendum, apparently, decisively against
accepting the Troika’s most recent offer, it’s likely global stock markets will
see a repeat of last week’s sharp down move Monday, before spending the week sorting
out what the vote means—perhaps staging a recovery. We’re in all new territory,
and it’s foolish to believe anyone who claims to know what’s going to happen
next. Still, it’s hard to deny the likelihood of another strong day down for stocks,
on Monday, the rest of the week to be spent sorting out what the referendum means, and
where the troika and Greece go from here.
The offer Greeks voted against, Sunday, is no longer on the table but it’s widely
presumed PM Tsipras has his country’s support to refuse any offer that involves more
pension cuts or any other austerity measures. But, other than keeping Tsipras in office,
it’s hard to see what he accomplished with the referendum. The troika of the IMF,
ECB, and EU aren’t going to just keep throwing good money after bad, and throughout
the meetings planned for Monday & Tuesday, could be deciding whether to cut Greece
loose—toss it out of the currency union, or come up with the debt restructuring
Tsipras has sought, all along—the precedent that would set be damned! While ECB Chief
Draghi, and many other EU leaders have, repeatedly, said the union is
irreversible—the charter that established the euro makes no mention of a member
leaving, at all—it’s hard to imagine, at the moment, how Greece will be
resolved. The IMF released a report, last week, that said Greece needs another euro50B, at
a minimum, yet refuses to accept that the 2010 deal, reworked in 2012, was unsustainable,
from the getgo. In order to restructure Greece’s debt, the first admission must be
that Greece doesn’t stand a chance of repaying its creditors, now, let alone if more
funds are put up. Yet, there’s no avoiding the conclusion that Greece’s banks
need more euros, after being closed for all of last week. The surprise was the ECB’s
continuous support for Greek banks, even as the deadline for Greece to repay the IMF came
and went without any payments being offered. Greece and its banks are bankrupt. That
leaves two choices—either continue to support them with more funds from the ECB &
IMF, or pulling the plug on Greece’s membership, while doesn’t seem a viable
option in a union that’s long sworn it’s a one-way street into union.
There’s not much on the Events Calendar, of note. That will be true for most of the
summer, as a matter of fact, as I-banks packed up their hospitality offices, in June, with
barely a handful of meetings planned during the summer. The Allen & Co Annual Media
Conference, which should start by the end of this week, is an excuse for financial TV to
broadcast attendees’ interviews, from outside the host hotel, where they’re not
welcome. At one time a strictly media event, known best for the disastrous AOL/Time Warner
merger said to have grown out of meetings at the event, convergence means more and more
tech & telco companies attend. CIBC’s 7th Unlock the Rock Stampede
Energy Conference is the biggest event outside Allen & Co. Wednesday, BAC/MER’s
Annual D.C. Healthcare is more a legislative event, than a healthcare event, except to the
extent medical device makers will try to convince Republican legislators to remove the
surcharge on their devices, when it’s really the providers and pharma companies that
have benefited most from ObamaCare and, before that, the initiation of Part D, the RX
Coverage that predated ACA. The event that could get the most coverage is NAMM, for music
merchandisers but not because the event is market moving but because Apple just launched
its streaming radio service, and everyone will be trying to detect as much intelligence as
they can about subscribers—who don’t have to pay anything, for the first 90
days. Normally, IMAST for Advanced Spine Techniques would be shot through with news but,
in Kuala Lumpur this week, the pony express might as well be delivering the news
stateside. Leerink Swann’s healthcare conference are top secret, though we’ve
gleaned its about eHealth. Unlike its Feb. Healthcare Conference, and Sept. Healthcare
Leadership Conference, there doesn’t seem to be a single company to confirm a
presentation at Insights.
The only other conference I expect to make news, other than NAMAD for Minority-owned Auto
Dealers, ITLS, a Congress for Liver Transplantation Society, and Orthopaedic Society for
Sports Medicine, is the Annual Int’l Disaster Management ClinCon. At one time
strictly of interest to Gulf states, Hurricane Sandy changed all that, making it a much
more national conference. And with an El Nino formed in the Pacific, the entire West Coast
needs to be on alert, since that’s where hurricanes strike most, under that weather
pattern.
The Earnings Calendar is exceptionally slim, this week, with PepsiCo & Walgreens Boots
Alliance on Thursday morning, and little else to move heaven and earth. Yet, I highlighted
Grupo Televisa, on Monday, because there’ll be inevitable comparisons to the planned,
imminent, IPO of Univision. I also highlighted PriceSmart because it operates in the
Caribbean and Latin America, a region we didn’t hear much about, until Puerto
Rico’s Governor said the island couldn’t repay all its outstanding municipal
debt. Before that, what hit mainstream media was a smattering of environmental lawsuits
against big oil, and Mexico’s looming oil field auctions, for the first time, after
decades of handling its energy production through Pemex, exclusively. With Mexico about to
auction off oil fields to foreign companies, and P.R.’s debt prominent in
conversation, it’s time the region and PSMT got more attention. Some will, also, zero
in on CostCo’s June sales, due for release Thursday, because it is one of 11
companies that still report sales monthly. I’d note that SteinMart, which is, also,
one of the 11 that still report sales monthly, generally has one of its best months in
June, thanks to Father’s Day, when men seem to self-gift annually, and cheaply at
SMRT. Yet, its stock is acting like this year is an exception. So either the street has
SMRT completely wrong, and it’s a good risk for some cheap options, if they’re
available, or the street has it right, and Father’s Day never arrived for SMRT, this
year.
Which brings us to the Economic Calendar, and a few meetings post-Greece’s referendum
but, also, lots of early in the month data here, and overseas. To make it easier to spot
Greek-related events, I’m putting a couple of asterisks ** next to those
events. Outside Greece, in particular, I’m focused on the May US Trade Deficit likely
to spike, on the West Coast strike ended inflows of merchandise that had been bobbing out
at sea for, sometimes, months. Also of note, the Jun Labor Market Conditions, Monday,
JOLTS Tuesday, and especially, May Consumer Credit—the euphemism for debt consumers
take out to pay for homes, cars, education, and everything else on credit
cards—politely referred to as revolving credit. The biggy, under normal
circumstances, is the FOMC Minutes of last month’s meeting, on Wednesday afternoon. I
wouldn’t be surprised if Greece played a bigger role at the meeting, than the
statement or press conference led most to believe. If Janet Yellen and her merry minions
expected Greece & the troika to fail to reach an agreement on Greece’s debt and
needs for funding, surely they would have held back on seriously considering an imminent
rate hike. On the other hand, we don’t know if there was discussion of possibly
lifting off in July, despite the fact that there isn’t a press conference after that
meeting. Recall, the FOMC held a run-through with a teleconference with the press, after
the May meeting, explicitly stated as a way to prepare the FOMC to move on rates, at a
meeting when there isn’t a press conference scheduled.
And by the way, the BoE hosts a 2-day meeting that will end with Thursday’s
post-meeting statement and a likely press conference, the minutes for which will be
released on July 22. The BoE is worried enough about Greece to have scheduled a meeting
with Gov. Carney, PM Cameron, and Chancellor of the Exchequer Osborne, for Monday. And
I’d keep an eye on US Treasury auctions, this week, especially the10-year on
Wednesday and 30-year on Thursday. There’s reason to expect Treasuries to be bid for,
early in the week, post-referendum in Greece but there hasn’t always been sufficient
bids, lately, at the when issued price for longer dated notes & bonds.
In the scheme of things, Greece’s problems aren’t much of an issue for the US,
not banks, companies, nor the economy. Technically, the worst pain the US will suffer is
the IMF needing more money because its loans to Greece weren’t repaid. The US, of
course, one of the IMF’s biggest supporters. Greece’s economy, at 2.0% of the
eurozone’s, isn’t much of an economic problem to the EU, either. But as a matter
of pride, should Greece leave or be thrown out of the EU, it’s a big deal, with most
worrying that Portugal or Spain could be next. It’s hard to imagine a way for Greece
to stay, without more euros from the same entities it has no chance of repaying money
already fronted to it, since 2010, let alone its additional needs—immediately. So,
expect stocks to repeat their downdraft Monday, then later in the week, try to sort the
reality from the perception, in which case stocks, for the rest of the week, will again
try to recoup the losses for the rest suffered Monday. Futures are already down close to
200 points, though the prices seen at this hour are rarely correlated well, to the open.
Not to pull a Trump here but aside from olives, olive oil, Moussaka, ladies’ metal
belts, and leather goods, there’s not much industry, outside of tourism, that Greece
contributes to the world economy.
And yet, for a few hours, Monday, Greece will appear more important that it really is, in
the grand scheme of things. Not quite a Black Swan event but not one in the plan book
either. The difference is, now, markets everywhere are much more prepared for this outcome
than they were in 2010 or 2012—even as the truth is, we don’t know what comes
next for Greece. Markets hate uncertainty, you’ll hear said often yet, many will
quickly shrug and think, so what? In the grand scheme of things, what China is doing to
save its markets is a lot more significant than 61% of Greeks voting against more
austerity and higher taxes. On any other Monday, China’s exertions to save its
markets would be governing sentiment, and Greece a footnote. It’s possible
that’s not where we’re going to be by Friday, anyway.
ECONOMIC: (Highlights, only, below. Full
International Economic Calendar here or Look ahead here)
© Sandi Lynne 2015 Nothing contained in this commentary should be construed as a
recommendation to buy or sale any security. The opinions expressed are the author’s,
alone, and should be just one factor in more complete due diligence.
June 29—July 03, 2015 GREECE the GLOBAL STAR OF THE SHOW Whatever it was Greece was trying to accomplish, it’s
fairly safe to say it failed when its creditors didn’t blink. Worldwide markets are
selling off, and one would expect US Treasuries to rise tomorrow, pushing rates down,
again. For perennial bulls, it will be another buying opportunity. For the bears,
it’ll be the turning point—the trigger for a long overdue sell off and, perhaps,
the end of the bull run, altogether. Will the creditors blink, after all? I don’t
think so. I believe the ECB cutting off aid to Greek banks was the signal that the
creditors were done. In fact, I’d wondered all last week why the ECB continued to
front money to Greek banks—putting the country deeper in debt that it already was.
For those that held onto stocks hoping to make it to the end of the Qtr/half, or who
scooped up stocks being added to the Russell Indexes, the next couple of days will
probably be painful.
Were we not facing what some believe will be another Lehman moment, we’d be talking
about asset allocation as the summer doldrums arrive, and perhaps, about the July 1st
anniversary of the launch of a Chinese/Macau edict that ordered UnionPay credit/debit card
terminals from casino floors in Macacu. That should make for easier comparisons and,
perhaps, allow casino company revenues to find a bottom. Of course, in light of the Greek
closure of banks, no one is going to want to dip into battered shares—not when
it’s probable that some, up til now strong shares will provide the opportunity for an
entry. Assuming anyone will want to enter any stocks, other than shorts covering positions
it didn’t look like they’d get a chance to cover otherwise.
So what about Greece’s referendum, next Sunday? Originally, PM Tsipras intended to
ask the populace whether they’d accept the additional austerity measures and taxes
the country’s creditors were asking for. Now. It might be a referendum on Syriza, and
EU membership. Given demonstrations in the streets of Athens, last week, that seemed to
support EU membership, next Sunday’s referendum might just be a vote on Tsipras, not
EU membership.
Either way, it would be a bad time to warn about Q2 earnings, as companies are often wont
to do, into a 3-day weekend we’ll get starting Friday. Did it ever make sense for
Greece to make its last loan repayment with SDR’s? Special drawing rights should have
never been accepted as loan repayments but Lagarde and the other leaders acting for
Greece’s creditors truly believe everything they’ve done was for the better of
Greece. Have Draghi & Lagarde ever been to any of the Greek isles, to see that
residents are often fisherman, bringing in their catch for local restaurants, or workers
in the tourism industry? Aside from metal belts, leather goods, and plaster casts of
national monuments, there isn’t much industry beyond tourism, outside the mainland.
One can only hope that NAR’s May Pending Home Sales, out Monday, please. Ditto June
Motor Vehicle Sales, on Wednesday. Because the Independence Day holiday is being
celebrated Friday & Saturday, the June Unemployment Report will be out Thursday
morning. That will pull in the ADP & Challenger employment reports to Wednesday, even
as the weekly Unemployment Claims data will arrive with Thursday’s June monthly data.
If the June Employment Report is as strong as May’s 280K adds, then the rush into
Treasuries Greece is about to cause, will clash with the data. Perhaps there’ll even
be a reversal of the move, later in the week, causing whiplash.
Either way, this week won’t be the quiet week most might have been planning into the
holiday. Some traders who expected to hang around Monday, to make the trades necessary for
the reconstituted Russell Indexes may be hanging around a little longer. One thing’s
for sure: All’s not quiet on the Western Front.
ECONOMIC: (Highlights, only, below. Full International Economic Calendar
Here)
© Sandi Lynne 2015 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the author’s,
alone, and should be just one factor in more complete due diligence.
June 22—26, 2015 ASSET RE-ALLOCATION COINCIDENT WITH
INDEX REBALANCES WITH GREECE & the
EUROPEAN UNION the GREAT UNKNOWN
S&P indices were rebalanced after last Friday’s close, while the Russell indexes
will be reconstituted on this coming Friday’s close. The coming quarter’s close
is a reason to asset allocators to re-allocate across the board—especially given
we’re deep into summer’s doldrums, and the historically "worst six months
for stocks."
The Economic Calendar is flush with Housing on Monday & Tuesday, central bank speakers
outside the US, the Treasury’s auctions of $163B in debt, this week—rarely good
for any markets—and the countdown on Greece’s end of month deadline to repay its
debt to its creditors. I agree that a Greek default shouldn’t upset US or even,
European or Asian stocks much, but it’s still going to be a big bang in a quiet time
of years, after years without a 10.0% drawdown in the US. I believe there area a lot of
trigger ready PM’s out there, who so want to assure they’ll be first out of the
gate, they could start a stampeded without even meaning to.
The US-China Strategic & Economic Dialogue will draw in top level officials from both
countries but, oddly, have made climate change central to their meetings—just days
after the Pope birthed his climate change position paper. In fact, there’s not much
"Economic" to the dialogue’s schedule, at all, which is very odd. I
don’t think anything within the "dialogue" will draw attention from the
count down to Greece’s default.
On 6/22, the abstracts accepted for this September’s 16th World Conference
on Lung Cancer will be announced. Despite their continued charge to new highs, expect
Biotechs--Oncology and Immuno-oncology focused companies, especially, to release notice of
their abstracts being accepted. Of course, later in the summer, posters & late
breakers will be announced, as well, so Monday isn’t the final deadline for that
conference, at all. But it will still act as a touchstone as the days march towards
quarter’s end.
Speaking of Quarter’s End, T-3 EOM is Thursday. While that hasn’t meant much for
many quarters, the Russell Index annual Reconstitutions guarantee this one is different,
and more significant. Which brings us to Earnings, a very slim calendar with major reports
that matter. In fact, it’s rare that there is such a high percentage of emboldened
tickers during any earnings week, except perhaps the week that includes most of the money
center banks, next month. I think the one I’m most interested in seeing is Micron
Technology’s (Thurs), because it’s rare that a stock has analysts so polar on
any name. Analysts either hate it, or think it’s totally undervalued, with almost
nothing in between. Monsanto (Wed.) should be all about its bid for Syngenta but with
droughts out west, and floods in the mid-country, the conversation isn’t as
one-sided. Lennar follows closely on KB Homes’ upside surprise, in a week filled with
housing data, even if FHFA is extremely stale. When preparing the Earnings Calendar,
Carnival & Darden were no brainers while I waffled over BlackBerry, even though I
think the train has left that station, without it. Once hackers broke into federal
gov’t personnel files, I think the mystic of BBRY’s security almost calls out
for hackers to attack it. But with a shriveling subscriber base, and Google’s Android
& Apple iOS dominating worldwide, I simply can’t buy into the theory that someone
buys BBRY for its secure messaging—not at the current market cap, let alone a
premium.
Barnes & Noble made the cut because of its coming separation, a popular theme on Wall
Street, at the moment. Darden (Tues.) because the activists did succeed in improving the
company, and Nike (Thurs.) and Finish Line (Fri) because there should be word on consumers
and retail from both of them. Question is whether the dollar has seriously hurt Nike
globally. On the one hand, Nike usually sells in dollars, and manufactures in currencies
that are weaker by comparison, which should mean it escapes dollar damage. But the truth
is, as a former NKE retailer, I can talk first hand about the pressure sales people exert
to get retailers to place future orders as much as 9 months ahead, and how easy it is for
a customer to simply call NKE (probably e-mail, today), and cancel any of those orders
before they arrive on the retailer’s doorstep. That’s why I’ve always been
suspicious of the applause analysts give to future orders. Then add to it the way limited
edition shoes dried up since last quarter, at least based on FootLocker’s postings,
and there are reasons to worry—even though NKE probably started shipping Back to
School merchandise, last in the quarter it’s reporting, a quarter in which summer
camp outfitting was probably the largest driver of US orders. Finish Line is a different
animal because of the shops within shops it’s built inside Macy*s stores. As you well
know, I do not think it’s the best department store operator around. On the contrary,
I’d dispute that with anyone and everyone who says so. And since Macy*s has been
drumming up business with a continuous series of 20% off coupons, FINL’s margins have
to be softer than they are in their own stores, volume the offset. Question is whether the
volume FINL is doing at M is the kind of volume it prefers. The people I see buying
sneakers at M tend to be blue-haired ladies, who purchase price or comfort but not for the
latest and greatest new style.
There’s a final rush of investment bank conferences before they all but evaporate in
July & August. It’s really hard for an analyst to organize an event that
hasn’t already been hosted since Q1 earnings season ended. Tuesday, both Jefferies
& Oppenheimer are hosting Global Consumer Conferences but JEF gets the nod for its
Nantucket location. Global Hunter Securities’ annual GHS 100 Energy is usually a
well-attended conference. DUG East, or Developing Unconventional Gas Conference in
Pittsburgh may have been poorly timed to overlap GHS, in Chicago. JMP has renamed its
Healthcare Conference a Life Sciences one but that’s well trodden territory, of late.
Credit Suisse goes to London for Global AG & Chemicals, formerly Global Ag
Productivity & Chemicals, but is in Boston for Basic Materials. Interestingly,
Mitsubishi is hosting Property REITs on Tuesday, when NAREIT just concluded, 3 I-banks
having hosted events related to that. Deutsche Bank is hosting Mortgage REITs on
Wednesday, and I’m giving the nod to DB, since Mortgage REITs, specifically, is a new
and hot topic. I’ll also, therefore, point out the 4th Bank & Non-Bank
Mortgage Servicing Compliance Conference, in Dallas, starting Thursday, given the OCC
scolding some of the major banks that entered into major mortgage servicing settlements.
The OCC faults a handful for not cleaning up their acts but we’ve yet to hear an
waivers canceled, and non-prosecution agreements converted into prosecuted ones.
Don’t you wish you were powerful enough to get away with 1/10th of what
the banks have pulled, without doing time? Traditionally, mortgage REITs have been the
worst performing group when the Fed starts hiking rates, and there’s little reason to
expect it to be different, this time. You can see the anticipatory activity in M-REITs and
property or mall REITs, in general. There’s an obvious expectation that rising rates
will decimate REITs, again, so some players have obviously been heading for the exits
before waiting to see when rates will first rise.
We have the Rebalances/Reconstitutions, and quarter end, the week after this but
that’s the week of July 4th, so another 4-day week. The quicker we march
towards quarter end, the faster we reach a Greek default, which seem inevitable. At best,
I expect European leaders to find a way to keep Greece within the Euro Union, even if the
country defaults, since it appears the Greeks, themselves, want to remain in the union.
And the last thing Merkel, or any other European leader wants is for the first exit from
the union—especially since no such exit is contemplated in the treaty that
established the Euro Union. One can be a bit cavalier, and say, ‘with so many
countries added, in the last 7 years, or so, what difference would it make if Greece
Grexited?’ Well, with a constitution that doesn’t provide for an exit, and fears
that other countries with their backs to the wall might seek the same redress, I expect
the European Council to work their tails off to keep Greece in—even if a year or two
down the road we all ask why they bothered. Just note how convincing Christine Lagarde
sounded insisting there’d be no postponement of the repayment of funds advanced by
the IMF—some euro1.5B due in July.
It might turn out Greece has nothing to fear from the European Council but plenty to worry
about from the IMF. And you might ask why the ECB has kept advancing funds to Greek banks,
as the run on those banks has picked up speed? Apparently, the Greek government is on the
hook for all the money the ECB has advanced to Greek banks. So every time you hear about
the ECB advancing more funds, you’re actually hearing Greece getting deeper into
debt. I’m sure the plan is to make Greek PM Tsipras come crawling to his lenders for
forgiveness—for mercy but the whole thing makes no sense from my seat. Greece has no
possibility of repaying its creditors, perhaps in the rest of my lifetime but surely not
by end of summer, by which time about euro2.5B is due. If I didn’t know better, I
would think the ECB and IMF were, indeed, helping Greece to exit the European Union, for
the good of everyone. Then, again, I don’t understand why Greece is so intransigent
about keeping the retirement age for women at 50, and men at 55—or why the European
Union founders thought Greece would make a good original member, anyway. The whole thing
makes no sense, which is why it’s likely to blow up in a why stocks are not visibly
anticipating. That’s a darn good reason for so many whales to be bulking up on
S&P puts, to protect the downside. Something to think about.
ECONOMIC: (Highlights below. Full International Economic
Calendar here or Look Ahead Here)
© Sandi Lynne 2015 Nothing contained in this commentary should be
construed as a recommendation to buy or sell any security. The opinions expressed are the
author’s, alone, and should be just one factor in more complete due diligence.
June 15—15, 2015 FOMC STATEMENT, DOT PLOTS, & JANET YELLEN PRESS CONFERENCE Plus
Kuroda, Draghi & Carney and more, oh boy!
As if the June 17th FOMC 2-Day Meeting that ends with Janet
Yellen’s Press Conference wasn’t enough, there’ll also be plenty of data to
chew on, and speeches from ECB’s Draghi, Nowotny & Praet, plus Japan’s
Kuroda. Normally, We’d be talking about NAHB’s May Housing Market Index, out
Monday, and May Housing Starts & Building Permits, out Tuesday, along with KB
Homes’ earnings release, Friday. But not this week, especially since whatever
happened in the past, regarding housing, could be meaningless, if the recent rise in
Treasury rates doesn’t keep topping as it did last week, with 10-years just under
2.5%. To really appreciate the Economic Calendar, this week, one has to visit the full International
Economic Calendar, and not just the highlights,
below.
And if we weren’t discussing housing data, we’d be looking towards May CPI out
Thursday, or some of the overseas data, that includes Unemployment Reports, PPI and CPI,,
from individual countries, as well as the Eurozone. Additionally, There’s a Swiss
Rate Decision due Thursday, as well as one from Norway, that day. Then, again, the BoE
Minutes of its June 4th meeting is out Wednesday. So absent such a big FOMC
meeting and press conference, there’d be plenty of other events, overseas, to
congitate, even before the BoJ meeting and Kuroda’s press conference, at the end of
the week.
The E3 Expo—Electronic Entertainment Expo—is this week, for a break from
investment bank conferences. If you’d care to watch EA’s press conference
broadcast from the E3 Expo, tune into e3.spike.com on the web, or Spike TV at 3pm edt. EA
will be unveiling its schedule for the rest of the year, with trailers for its games. The
official site for all the E3 press conferences, dubbed "The Future Revealed" is
at https://www.e3insider.com/press-conferences which starts with Microsoft at 9:30am pdt, Nintendo 9:30am pdt,
Square Enix 10am pdt, EA at noon pdt, Ubisoft 3pm pdt, and Sony 6pm pdt. The E3 Expo
doesn’t start until the 16th and runs through the 18th, a day
after all the press conferences. Activision used Licensing Expo 2015, the 9th
through 11th, as its venue to make most of its biggest announcements, rather
than wait for E3, getting a jump on competitors. Microsoft’s Xbox One has been $49
off for weeks, and supposedly appearing @E3 with a more powerful chip, while PS4 will be
available as a bundle that includes the Vita handheld. GameStop’s GameSpot is hosting
challenge matches and "theaters," as it continues to present reasons not to
bypass the retailer, including opportunities to download games from within its stores,
where it boasts of faster connections than most people have at home, or anywhere.
Interestingly enough, with Radio Shack leaving the mall at the end of the month, and
GoPro’s kiosk long gone with Christmas, Billabong, the Australian brand new to our
mall suddenly put up a big GoPro display in its window. Given how many kids arrive at the
mall on skateboards to go to Zumiez, and what a good fit GoPro is with Skateboards,
it’s a wonder that ZUMZ didn’t seize the opportunity, once RSH started running
its liquidation sale, 2 months ago. I’m liking Billabong all the more for seeing the
opportunity, and seizing it.
While the Earnings Calendar is the most compact of the quarter, it holds a higher
percentage of stocks the street cares about, than many of recent vintage. I didn’t
embolden BOBE—Bob Evans Farms but perhaps I should have, given the impact of avian
flu on its business. I’ve always considered eggs the best bargain in protein, and
still do, even 50c more for a dozen than they cost a couple of months ago. In fact,
I’m surprised they haven’t gone up more, given the number of hens that had to be
slaughtered. Otherwise, all the names highlighted on the earnings schedule are likely to
draw a lot of press and financial TV comment—hopefully, ending last week’s
endless talk of Dick Costello’s resignation from the top of Twitter.
BIG events, this week, other than E3 include the Paris Airshow, where Boeing has already
gotten the jump on competitors. From "Entertainment Tonight" to the local &
national nightly news, there wasn’t any show that didn’t run the clip of
Boeing’s new plane taking off at a nearly 90 degree angle. I’ll give BA’s
press machine credit for that, since it’s not every day a company can get its wares
on such a diverse group of shows. And that bodes well for its coming conversations at the
Air Show, where Paris still dwarfs them all. I could almost feel the Arab Sheiks watching
with envy. GM is hoping to attract some attention to the Advanced Automotive &
industrial/Stationary Battery Conference, in Detroit, at which it will, Tuesday, announce
what its Volt model batteries can be used for after they’re no longer suitable for
the car. Given Elon Musk’s recent battery press event, I feel like that’s a
topic we’ve already seen and did.
BIO International, in Philly, like the Paris Air Show, starts Monday, and should put
biotechs up front. Again. Another big event is Jefferies and Marine Money Magazine’s
Marine Money Week Conference, starting Wednesday. I’ve been watching Diana Shipping
(DSX) & Nordic Tanker (NAT), the latter the whole way up from the February bottom,
adding 50% and still rising. Of course, if you’re looking for an event for a group
that’s more compact that BIO, E3, and Marine Money, you could do worse than SunTrust
Robinson Humphrey’s Vacation Ownership & Exchange Conference. And no one covers
the group as closely as STI. Then, again, if you’re waiting for Greece to dig a
little deeper into the IMF’s & ECB’s side, then Tsipris speaking at the St.
Petersburg Economic Forum, at which Vladimir Putin will deliver the keynote. Greece has
been trying to threaten Europe with Russia for months, and it appears the Europeans no
longer care. Much as Merkel and the rest of the EU leadership would consider it a personal
defeat, if one of the members were to leave, I don’t think they’d care all that
much if that country winds up being Greece.
Which brings me back to the big FOMC meeting this week, and my worries about the Street
seeming too confident that Yellen & Co. won’t do or say anything this week, to
catch it off guard, a complacency and confidence with which the Street has approached all
markets this year, someday to its own detriment. Fed Governor Stanley Fischer has been
insistent that the FOMC has to surprise, more, and not make promises that it someday might
not want to keep. With the latest economic data proving the Q1 dip in GDP was as
"transitory" as Yellen claimed it was, I’m not as certain that the FOMC
Statement, Dot Plots, and press conference will be as benign as the Street seems to think.
On the contrary, with the updated forecasts at the Q1 FOMC meeting taking down year end
rates more towards the Street’s expectations, perhaps its time for some divergence,
at this Qtrly FOMC meeting with press conference, that includes updated forecasts. Surely,
Yellen has been insisting rates will rise this year, even when the data coming out was
weak. With stronger data to back her up, and real rates, now, moving up, as well, before
the FOMC has acted, it might just be time for Yellen to shake some of the complacency out
of markets, with a surprise that no one expects. Perhaps she already did, and no one is
reading the tea leaves properly: Last meeting, Yellen tested a video conference system,
with which she said she could communicate with the press, if the Fed moves at a meeting
without a press conference; then, she declined her invitation to the K.C. Fed Annual
Economic Conference, at Jackson Hole. From where I sit, the fact that Wall Street believes
it has the FOMC all figured out, is the biggest mistake it has made since offering
mortgages to people who couldn’t afford to repay them, based on appraisals that were
wholly unrealistic, except compared to other more inflated appraisals. What got my goat,
about the coming meeting, is the June 12th press release about the meeting, on
the 16th, that says it’s "For Discussion of Medium Term Monetary
Policy Issues," per the link provided in the Economic Calendar highlights, below.
When have we ever, before, seen a press release announcing the topic of a regularly
scheduled FOMC meeting?
Then, again, I’ve never been right about the FOMC, when I’ve departed from the
general consensus. The Street has always been correct, led to its conclusions by the FOMC,
itself, and its couple of financial writers who are believe to give voice to what the
powers want the Street to know. That means we should all be on guard for a diverging
thought from Greg Ip, Jon Hilsenrath, and any other journalist who it is believe to speak
for the Fed. And in the meantime, watch Treasury rates: They rose when everyone expected
them to fall, and are now rising long before everyone agreed they should. It won’t be
long before the Street will complain that the Fed has lost control of markets.
ECONOMIC: (Highlights only, below. Complete
International Economic Calendar here)
© Sandi Lynne 2015 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the author’s,
alone, and should be just one factor in more complete due diligence.
June 8—12, 2015 MORE LOSSES AHEAD
We’ll take a closer look at the Economic Calendar, first, because
it’s a week with little else to drive stocks. Before US markets open Monday, Japan
should release its final GDP and China its May Trade Balance. While the US Economic
Calendar includes more color on employment Monday and Tuesday, including May US Labor
market Conditions, and Tuesday’s April JOLTS—turnover & quits—it’s
not until Thursday’s May Retail Sales & weekly Jobless Claims, and Friday’s
May PPI and Final Demand, that anything meaty arrives for traders and economists to chew
on, domestically. Of course, the Treasury’s Auctions Tuesday, Wednesday and Thursday
bear watching, as rates have taken flight, anticipating more than the Fed is likely to do,
itself, even if lift-off arrives after June’s meeting. The Street seems fairly well
convinced that the FOMC won’t raise rates, for the first time, in July but I
don’t see why not. After the last Fed meeting, there was a test of video conferencing
which the Fed explicitly stated was in case the FOMC decided to move at meeting that lacks
a press conference. Granted, Chair Yellen hasn’t seemed in a rush—which a July
meeting raise would imply, and has oft stated her desire to prepare markets. In fact, even
Fed Gov. Stanley Fischer doesn’t want to surprise markets, though he’s expressed
a desire for the FOMC meeting statements to be a little less specific about when it’s
going to raise rates, so the committee retains some flexibility to remain data dependent.
But watch rates and the auctions because the market is tightening, even if the FOMC
isn’t, yet.
There’s not much to the Earnings Calendar, which has few tickers emboldened and one,
Sears Holdings, more an accident on the side of the road we all stare at as we pass,
relieved we’re not stuck in it. Sears & its Kmart division have inserted
circulars in every local Sunday newspaper since just before Mother’s Day. Then,
again, so has Walmart & Kohl’s, as if we’d all, suddenly, rush over to one
of those stores if we don’t, usually. I think there could be some genuine interest in
the other tickers emboldened, UNFI a "natural" food company, Hovnavian a
homebuilder, Lululemon the brand with the most cache, at the moment, Oxford Industries
owner of the Tommy Bahama brand, among others, Canada’s Hudson Bay Co owner of a
namesake brand of department stores in Canada, as well as Lord & Taylor & Saks 5th
Avenue, and Men’s Wearhouse still integrating Jos. A. Banks. Korn Ferry an executive
placement company Otherwise, Earnings include smaller companies, Burlington Coat Factory
perhaps the one most likely to deliver an upside surprise, though that’s not
something I’d bet on because the newly public company is likely to be subjected to
secondaries, on any and every bit of good news.
Which brings us to the Event Calendar, the Edison Electric Institute and NAREIT, Sunday
& Monday respectively. Both are near mass analyst meetings, their members both,
currently, suffering from higher Treasury yields that make theirs less attractive to
yield-seekers. Of course, REITs have been selling off so sharply, it won’t be long
before their yields are, once again, very attractive compared to ‘risk-free"
Treasuries. KBW’s US Regional Bank Leaders takes place in London, a head scratcher
since it would seem there aren’t enough US investors to see their virtues in a rising
rate environment. American Water Works in California makes more sense, at a time of
drought and usage cut backs. S&P Ratings 30th Annual Insurance Conference,
Tuesday, strikes me as a less worn out industry than Goldman Sachs’ Global Healthcare
or Morgan Stanley’s US Financials. It’s with some irony that I point out the
ABA’s Digital Banking Summit in Austin TX, even as Credit Suisse’ 4th
Annual Future of Commerce & Payments takes place in San Francisco. Then, again, Beauty
CEOs are meeting in Palm Beach FL, even as the HBA Global Beauty industry meets in NY.
The elephant in the room is Apple’s WWDC—Worldwide Developer’s Conference.
Not usually about new devices, it traditionally has concentrated on the operating system,
or OS. There was only one WWDC at which AAPL announced a new product, in my memory, and
then, only, to discuss the software kit it was releasing at WWDC, for partners to build
apps before the product’s fall release.
United Natural Foods’ results is not the only food-related event, this week,
FMI—the Food Marketing Institute Connect is the hub for many spokes, including
InterBev, just as MD&M East is the hub for many other spokes, including MedTech World
& Pharmapack. Gabelli & Co’s 7th Annual Movie & Entertainment
Conference, Thursday, often precedes deal announcements, the way Allen & Company used
to.
Of course, by Friday’s close, the Russell Indices will release their preliminary
lists of potential reconstituted & rebalanced indices which are changed only once a
year, at the end of June. That’s one release that can divert attention from the
upcoming FOMC meeting, the week after this. But this week could still see marking time,
waiting for that FOMC meeting, watching rates, and PM’s trimming their stock
holdings. About the best news is the strength in financials, as rates rise—good news,
anyway, if you’re holding them, and rates don’t give back their recent gains.
Otherwise, just as we’re inching closer to an FOMC meeting, so too is Q2 marching
towards its end, which often means earnings warnings. From here on in, every investment
bank conference is an opportunity for companies to warn about their quarter, except in
biotech. Most biotechs aren’t trading on their earnings but, instead, the promise of
the drugs they’re developing, and the possibility that a pipeline starved major will
scoop them up. Trouble for biotechs first begins when their first drug is approved, or
when a trial doesn’t go as planned. There’s no reason to expect any biotech p
resenting at Goldman to reveal something not already known. Other I-banks have covered the
same ground, leaving little new under the sun, except the rise in rates which is trouble
for stocks—probably more trouble than they’ve suffered in the last three weeks.
That leaves plenty of room below, even if there's a Monday morning celebration of the
Triple Crown winner to start..
ECONOMIC: (Highlights, only, below. The full
International Economic Calendar [updated 6/19] here)
© Sandi Lynne 2015 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the author’s,
alone, and should be just one factor in more complete due diligence.
June 01—05, 2015 HEAVY DOSE OF DATA & OVERSEAS CENTRAL BANK MEETINGS It’s the Economic Calendar that takes the spot
light this week, with central bank meetings in Australia & India Monday, the ECB on
Wednesday, Brazil’s central bank Wednesday, overnight, into Thursday morning, US east
coast time and the BoE on Thursday, though the culmination of those meetings, for US
investors, is likely to come Wednesday, when the Fed’s Beige Book is released, at 2pm
eastern time. It’s the Fed’s last word before its mid-month June meeting, whose
puzzle on its meeting to meeting data dependency before lift off sees another piece fall
in Friday, when the BLS releases the May Unemployment Report.
One happy group, this week, is surely casinos allowed to take sports bets, as American
Pharaoh will try for the Triple Crown next Saturday, at Belmont Park in Queens NY. As
pretty as the place will look on NBC’s broadcasts, next Saturday, this former New
Yorker knows that’s not how the place usually looks. Surprisingly enough, there is no
Triple Crown market indicator. The Street has formulated equity index outlooks on the
Super Bowl and other major events—the Presidential Cycle, especially—but there
are too few Triple Crown winners to make a case for stocks doing one thing or another
based on whether this is the year for a new Triple Crown. Still, I suspect a weak week,
this week, would see higher stocks a week from tomorrow, if American Pharoah gets the job
done, next Saturday.
It’s meetings like ASCO and ASM—the American Society for Microbiology—that
prompt us to repeat, on Sunday, those events still ongoing, over the weekend. ADA, the
American Diabetes Association’s Scientific Sessions starting Friday, will be another
medical society meeting that analysts will talk about most of this week. Otherwise, most
of the meetings, this week, are repeats of those already well covered since Earnings
Season largely wrapped, early last month. And the schedule is heavy, again, because all
the I-banks feel the need to get their events squeezed in before clients scatter for
summer vacations. WasteExpo Investor Summit, starting Monday, is one with a small enough
number of members to make for stock selecting short term trades. Curiously, there are 2
mortgage Finance vents, this week, first up KBW’s on Tuesday, when Credit Suisse
hosts its Annual HomeBuilding & Building Products Conference, as well, both in NY. FBR
does the other Housing Finance Conference, on Thursday but from the title—"Where
Private Capital Meets Public Policy," suggests it’s taking a different angle.
Citi is hosting US Insurance Thursday, in Montauk, NY, which is taking the conference to
where clients would prefer to be. I’d posit, asd well, that Credit Suisse’
Engineering & Construction Conference, Wednesday, is less well trodden territory, as
is Sandler O’Neill’s Global Exchange & brokerage, along with BKW’s
Asset Management & Capital Markets, both in NY, on Wednesday.
Speaking of Wednesday, OPEC hosts its 6th Annual Seminar, starting that day. It
wraps Thursday, before the Friday regular semi-annual OPEC regular meeting. It seems
obvious that Saudi Arabia has no intention of cutting back production, so we’ll all
have a front seat on how crude reacts. Many analysts and traders were unprepared for the
rebound in crude from the $40’s into the low $60’s. with Goldman still insisting
it’s going back down in an oversupplied marketplace. Given how deeply some work to
prove Goldman wrong, it might just be Energy’s week to outshine other sectors, as it
did Friday. AAPG, Petroleum Geologists hold their annual confrence, starting Sunday, as I
write. Credit Suisse has some big, international energy names at its London Conference,
starting Tuesday. IGU World Gas Congress takes place in Paris, France, starting Thursday,
the same day Concentrated Solar Power kicks off in Las Vegas. Just as all the drop down
MLP’s are being sniffed for re-consolidation, as Kinder Morgan has announced, solar
projects are being spun out as yieldco’s, as Barron’s wrote about this week.
Speaking of Goldman Sachs, its dotCommerce Conference, Tuesday, isn’t all public
companies. ON the contrary, many private companies present, as is also the case at a few
other conferences, as the performance of IPO’s has been one salvation for the big
houses, during another quarter when FICC has been just shy of a disaster.
Wall Street’s ingenuity never ceases to amaze. Last week, Morgan Stanley filed for a
ridiculous number of prospectuses for structured investments that are based on selected US
Equities, that pay higher yield coupons if the stocks they’re tied to are priced, on
the Auto-Call date, above a minimum price that tends to be at least above a certain price
10% below the price that security is trading at on the day of issue. Among the equities
they’re tied to is one jointly tied to Apple & Johnson & Johnson, another to
CBS, another to American Airlines. What caught my attention was the $10 price p/security,
clearly aimed at retail investors looking for yields of 6.75% to 8.0% or more, assuming
stocks don’t pullback more than 10% from the issue date, by the determination date.
The "Agent’s Commission & Fees" is only 25 cents per $10 security but
would add up fast, at the number Morgan Stanley filed to issue, the "contingent
income" the casino aspect that appeals to both the street, and those retail investors
who might, after a 5 year bull market, feel they’re playing with the house’s
money. In Scenario 3, in which a stock declines below the threshold level, the prospectus
warns "Investors will lose a significant portion, and may lose all, of their
principal in this scenario." Gee whiz, this all feels so familiar, doesn’t it?
And you know who’s bound to buy all of Morgan’s contingent callable securities?
Those who happened to make out like bandits, when they bought similar investments tied to
the S&P 500 back in summer 2009, many of whom made 40% on their 5-year investments
maturing over the last year. Difference is, back then, you needed to buy in $500 or $1K
investments, not the $10 MS is pricing them at, this time.
With the exception of Energy and Semi’s rising last week, the latter celebrating last
week’s Avago buy of Broadcom but only half heartedly betting on Altera’s take
over by Intel, now that their stand still agreement expired, with May’s end, stock
charts look pretty sick, and it appears the senior indices will give some back to close
the gap with the Transports, that have been selling off all year. Healthcare was a mixed
bag, with Bristol-Myers Squibb’s more detailed abstracts on Opdivo’s
disappointing activity in combination with docetaxel, while Gilead, until Friday, looked
like a stock being walked up for end of month. Many retailers continued to sell off, as
oil prices rose, which makes little sense, since they never seemed to benefit from lower
prices at the gas pump, yet are selling off because gasoline prices are now going up.
Financials seemed to be asserting some leadership but also sold off at the end of the
week, many of them now trading below all short term moving averages. With earnings warning
season upon us, and the dollar weaker than it was but still pressuring multi-nationals,
stocks look set to give up some more ground, before the next earnings cycle appears in
July—and even then, often sell off until weeks into the season, when earnings, once
again, will be declared not as bad as they could have been. Still, the odds favor more
selling ahead, with opportunities to get out at higher prices possible, if Friday’s
Unemployment Report disappoints (bad economic news is good for those who want the
continued postponement of the Fed’s lift off), or Greece and its creditors reach a
settlement. But make no mistake, the charts suggest outflows are stronger than inflows,
and the start of a new month may not change that, at least not for the first few days of
the month.
ECONOMIC: (highlights only below. Please see full International Economic Calendar
here)
© Sandi Lynne 2015 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the author’s,
alone, ande should be just one factor in more complete due diligence.
May 25—29, 2015 END OF MONTH DOMINATED
BY HOUSING DATA The
slug of housing data coming Tuesday through Thursday is usually split over two weeks,
rather than arriving in a single week. On top of April Durable Goods, Tuesday,
there’s the FHFA & S&P Case Shiller March House Price Indices. Wednesday,
there’s a 5-year US Auction to monitor and the Fed’s Lacker on the subject of
"From Country Banks to SIFIs—the 100-year Quest for Financial Stability, along
with a Bk of Canada rate meeting. Thursday, the usual weekly Jobless Claims, and
NAR’s April Pending Home Sales Index, before Williams, speaking twice this week,
speaks on banking supervision, at the Monetary Authority of Singapore Banking Supervision
& Regulation Joint Conference.
Weekly Oil stats will be delayed until Thursday, too, when the Treasury will attempt to
auction $29B 7-year Notes and $13B reopened 2-year Floating Rate notes. The occasional
auction hasn’t gone well, of late, so those with the longest dating bear watching.
One drawback of the recent recovery in rates is the extra expense the government incurs to
carry debt, which hasn’t been a big issue in recent years of zero rates and a Fed
that moved from buying short term debt to longer term debt, retiring some of the US’s
most expensive debt. Friday, the 2nd stab at 15Q1 GDP is expected, with a
negative number assumed, despite the San Francisco Fed’s argument that the seasonal
adjustments has been overly depressing Q1 GDP for a few years. Q1 PCE accompanies GDP,
Yellen’s favorite way to assess CPI. Two readings of May consumer sentiment, Tuesday
from the Conference Board, and Friday from U.M., causes reaction in the markets, for about
10 minutes, though I’ve never understood why. Consumers are more likely to spend more
when they’re depressed, than they do when they’re feeling fine, yet economists
always seems to think they’ll spend more if they’re upbeat. That’s a
disconnect I’ve never understood.
We can say the Earnings calendar is dominated by retailers, again, but there are nearly as
many Canadian banks reporting, as retailers. The highlight may well be reports, Wednesday
morning, from DSW, Michael Kors, Tiffany & Toll Bros, along with Brown Shoe, which
will change its name on Thursday, to Celares. Where it came up with that is beyond me,
even after reading its reason. That afternoon, Costco will report as well. I don’t
think most of Wall Street cares much about any other retailer reporting, this week,
except, perhaps, Signet, owner of Kay Jewelers and other brands, which has been benefiting
from the exit of Zale’s stores in many malls that already had Kay stores, even before
Signet’s buy of Zale’s closed. Signet, recognizing how few people would cough up
the dough it costs for 14K gold jewelry, dived into silver & gold plated jewelry, that
enlarged its margins and helped keep sales brisk. Snobs say plated jewelry is barely a
step up from fashion jewelry but, then, look at the performance of Signet compared to
Tiffany, and ask yourself who’s got the right idea, even as a decent percentage of
Tiffany’s sales have long come from its more affordable silver jewelry. Thursday
afternoon there’s a mash up of reports, including Avago, Deckers Outdoors, GameStop,
and Ulta Salons. In some respects, each of those is in their own orbit. Friday, Big Lots,
Genesco, owner of Journeys, LIDS, and other brands, as well as Bank of Nova Scotia report.
BNS has been on a slide, since September, As have the other Canadian banks, after
outperforming US Banks for most of the past 6 years. I hadn’t realized that until I
started preparing this week’s Outlook, so the performance surprised me, just as US
banks have been picking up steam. The 4.0%+ yields of the Canadian banks would be a draw,
if it wasn’t for the country’s 20% deduction for taxes taken before the dividend
lands in US accounts. And it’s rare that any US retail buyers would have sufficient
Canadian dividends to make filing a tax return there worthwhile.
The I-Bank Events calendar picks up considerably, this week, with most of them
self-explanatory except Sanford C. Bernstein’s mash-up of a conference starting
Wednesday. Speaking companies range from GE, to Gilead Sciences, to Bk of America, 3M,
Nielsen, Discovery Communications, McDonald’s, BlackRock, General Dynamics, Alexion,
JPMorgan Chase, Siemens, Boeing, Cobalt Int’l Energy, Las Vegas Sands, Edison
Int’l, Apache, Huntington Ingalls, and UPS, and those are just some names from the
morning sessions, when the event opens. You can download participating companies or the
Agenda at https://www.bernsteinresearch.com/brweb/Conference/Hone.aspx?csn=sdc2015
Cowen & Co’s Tech, Media & Telecom, D A Davidson’s Annual Tech Forum, as
well as Nomura’s Media event seem to trod well covered subjects, thanks to other
recent conferences. BEA—the BookExpo America is one reason why Media are being
covered by both of those houses, in NYC. In all likelihood, re/code’s The Code
Conference is likely to get a lot of press, thanks to a financial arrangement with CNBC,
and a speaker from Bloomberg. IN fact, the more I write about this week’s events, the
better and more original Bernstein’s Conference looks.
IN healthcare, despite Boston Biotech CEO Tuesday, ACTRIMS for Multiple Sclerosis
Wednesday, and Stifel’s more original Dental & Veterinary Annual Conference,
it’s ASCO, which starts at the end of the week, on Friday, that analysts will,
deservedly, be talking about. Its one of the two biggest Cancer conferences of the year,
the other AACR. And don’t dismiss out of hand next Saturday’s ASM, the American
Society for Microbiology, because every illness from Avian Flu to Ebola and seasonal flu
falls in their wheelhouse. After the recent bashing of airlines, the 35th
Annual North America AirFinance Conference, Thursday, might hold greater appeal.
Short weeks, this year, have often turned into roller-coasters that made the week feel
longer than 4 days—longer than 5 days, for that matter, even though they were only 4.
As May ends, there’s often selling into earnings warnings season, which has often
made June worse than most other months in the first half of the year. And despite VIX at
low levels, there doesn’t seem to be an outsized interest in betting on a downside
swoop, which is surprising. Perhaps it’s about time.
ECONOMIC: (Full US & International Economic Calendar here)
© Sandi Lynn3 2015 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the author’s,
alone, and should be just one factor in more complete due diligence.
May 18—22, 2015 COUNTDOWN TO 3-DAY WEEKEND It’s a surprisingly big week for events, given the 3-day
weekend that will cap the week. Monday, of course, is the first trading day after Options
Expiration which has generally meant a turn down in the morning—whether stocks open
up or down. Retailers dominate the Earnings calendar while the highlight of the Economic
Calendar is housing data. That means we’ll have a fuller sense of consumers, by the
end of the week, across all strata of income. Yet, there are even bigger events, this
week, not least of which are the AGA Financial Forum, and the EPG Electrical Products
Group Conference, 2 mass analyst meetings. And to top if off, the Federal Reserve Bank of
New York hosts a conference on Mortgage Contracts, the Bundesbank joins with NABE on
"Economic Growth, Monetary Policy & Structural Reform: Challenges ahead for US
& Europe, while the ECB holds a Forum on Central Banking." Throw in the
Fed’s Minutes from their late April meeting, and it all adds up to an exceptionally
busy week to wrap up the pre-summer Friday escape to the Hamptons.
Start with the Economic Calendar, and Monday’s NAHB May Housing Market Index, a
sentiment survey, more than concrete numbers, in which builders’ mood reflects how
many browsers walk through their model homes, as much as the number of contracts signed.
Traffic will do, even in the absence of signed contracts. Tuesday, April Housing Starts
& Building Permits are released, permits as important as starts, this time of year.
After a winter of frozen ground, starts should pick up, and Permits even more, perhaps
with more spec homes that can be closed, fast, before the school year resumes, in
September. Then Thursday, the Nat’l Ass’n of Realtors release April Existing
Home Sales. It’s worth remembering that builders sign contracts that can be canceled
before homes are built or if mortgage applications are denied. What NAR reports is
closings—the actual transfer of title to a new home owner. And NAR sells a lot more
existing homes than new homes, the latter struggling a little, of late, because of rising
prices that took new homes out of reach of first time buyers, especially. It’s ironic
that the NY Fed is hosting a forum on Mortgage Contracts, starting Wednesday, subtitled,
"Implications for Households, Monetary Policy & Financial Stability." Yet,
most banks aren’t totally sure what they have to do to approve mortgages that
won’t come back to bite them later. Yes, they’re supposed to check affordability
but ask any banker what would happen if they do that, and within the first 5 years of the
mortgage, there was a recession that cost the borrowers their job, and they’d
probably fear the mortgage can be put back to them—no matter how hard they worked to
assure the borrower was Kosher on the day they first borrowed the money.
Earnings includes a number of tech companies, including Take-Two, Analog Devices,
Autodesk, (both Tuesday p.m.), Wednesday afternoon Salesforce.com, Synopsis, then Thursday
afternoon, Brocade, Hewlett-Packard, and Intuit. Deere Reports Friday, almost alone, out
of left field, among industrials. The rest is all retail, most notably, including Urban
Outfitters, Monday, Dicks Sporting Goods, Home Depot, TJMaxx, and Walmart Tuesday morning.
Wednesday morning, American Eagle Outfitters Reports, along with Lowe’s, Staples, and
Target, and possibly, Sears Canada, though I couldn’t confirm that. Wednesday
afternoon L Brands & Williams-Sonoma report, before Thursday morning, when reports are
expected from Advance Auto Parts, Best Buy, Dollar Tree, and Stein Mart. Thursday
afternoon, Aeropostale, Gap Stores, & Ross Stores report, before Ann Stores &
FootLocker wrap up the week on Friday.
Which brings us to the Events Calendar, which returns in full force after dribs and drabs
during the earlier part of Earnings season. For once, all the healthcare conferences
won’t dominate the news. Instead, on Sunday, both the America Gas Association &
EPG—the Electrical Products Group both host separate mass analyst meetings, at which
I-banks host clients, along with lunches, dinners, and small group meetings with the
presenters. Were other industries to follow their tactics, the I-bank calendar would be a
lot less active. And if those two weren’t enough, the ICSC—the International
Council of Shopping Centers—hosts is annual REcon, the R & E capitalized because
it’s a real estate event, more about the REITs that own the malls, than the stores
that lease the space, though the latter will be attending in droves--some even exhibiting.
Just as it is for AGA & EPG, a number of I-banks are hosting clients here, along with
lunches and dinners, and small group meetings. Analysts covering those 3 groups will be
out of New York, to attend those meetings.
But just as the official start of summer—Memorial Day weekend—approaches, so do
all the analysts try to get in the last of their big 1H conferences—no matter how
many other firms have already covered the same space. What’s different now, is that
2/3rds of the Quarter is over, so companies have a pretty good idea of what the rest of
the Quarter will look like, based on their bookings. That’s, often been cause for
both good and bad news—bad news so much easier to release before a 3-day weekend,
n’est pas? That way, the sting is softened by next Tuesday, after the weekend. And
because no one wants to wait until Friday to escape to their summer home for the weekend,
most of the biggest events of the week kick off early in the week, so as not to keep
anyone in town longer than necessary. JPMorgan hosts Technology, Media & Telecom, in
Boston, UBS Global Healthcare in NY and Global Oil & Gas in Austin Texas, while
BAC/MER’s Payments & Card Conference, is in Scottsdale Arizona, (Note on the
Economic Calendar there’s another Cards & Payments event in Australia). Nomura
hosts a Gaming Leisure & Lodging Conference in New York, also Monday. AdWeek’s
Internet Week is a week long string of events, some of which are performances, rather than
conferences, though there are two conferences lasting 1-day each that might be news
worthy.
Tuesday, JPMorgan is back with Homebuilding & Building Products in NY, where Goldman
Sachs is hosting Basic Materials, and Wolfe Research its 7th Annual Global
Transportation Conference, and Wells Fargo Specialty Finance, and SunTrust RH its annual
its Financial Services Unconference, also in NY. Berenberg, which usually hosts its
conferences in Europe, booked a conference center in Tarrytown NY for its European
Conference, probably a good location for those who bought second homes north or west of
New York, including the Poconos in Pennsylvania. Most of the other conferences, this week,
are in Europe, where there’s no Memorial Day weekend to distract attention. The
SEMI.org ConFab starts Tuesday, also, the agenda so top secret, this year, even I
wasn’t able to hack into it. Then again, if check out the schedule below, you’ll
surely realize I hardly had the time.
Nobody gave the MLP space the memo about the upcoming holiday weekend. The
NAPTP—Nat’l Ass’n of Publicly Traded Partnerships hosts its MLP Investor
Conference in Orlando, starting Wednesday, when BMO’s Farm-to-Market Conference takes
place in NY. BMO holds most of its conferences in Canada, so it speaks volumes about how
popular this conference is, that it’s held in NY. From animal producers to fertilizer
companies, at one time, an especially popular area for traders.
So, with almost no sector left uncovered, this week, on the conference front, and more
than we might care to know about the consumer about to hit, whether traders ‘sell in
May and go away,’ or decide the economy is strong enough for the Fed to start lifting
rates, perhaps taking stocks to a new, higher level, could well be decided this week. And
this time, they, likely, don’t want to hear, only, good news from L Brands, or the
two off-price retailers they expect to perform—TJX & ROST—but also want WMT
& DLTR to suggest that consumers are, finally, spending their gas pump savings. The
likelihood of that happening, after the news delivered by Macy*s, Gap Stores, and
Kohl’s last week, seems slim. But that’s the good news, because it sets up the
kind of low expectations that TJX and ROST can please just by meeting expectations. And
that alone would be an improvement over the retailer results heard so far, given the nose
bleed levels Kohl’s stock had reached, and this false belief that Macy*s is the best
retailer around, when in fact, it’s the cause of all the pain retail has long been
suffering, because M has never priced a product at a retail price it intended to sell at.
Should you sell in May and go away? Probably not, as long as bad news for the economy is
good news for stocks, because it means lift off is pushed back again. The economy is not
as strong as stocks would have everyone believe, and for now, that suits traders just
fine, because they’re making money, even if Main Street is still suffering. And
trust, me, Main Street is still in pain, the average investor disillusioned by stocks, and
sure the market is more rigged than they ever thought before. It's unlikely they'll buy
stocks, even if they go on sale. They've learned to resist offers of 20 and 20% off, and
now only respond to 40% off of more. That kind of discount on stocks would bring out the
millennials and boomers who stopped trusting stocks in the last 3 crashes. It doesn't
appear they'll get that kind of discount to feed on, for the immediate future. .
ECONOMIC: (Highlights below. The Full International Economic Calendar is here.)
© Sandi Lynne 2015 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the author’s,
alone, and should be just the first step in due diligence.
May 11—15, 2015 RETAILERS START TO
DOMINATE THE EARNINGS CALENDAR
With the FOMC Meeting past, and the Minutes of that meeting not due until the 20th,
the Economic Calendar & Earnings begin to dominate, with consumers under the
microscope. The Economic Calendar includes a BoE Meeting to start off the week, Monday,
along with another loan repayment due to the IMF from Greece, along with more negotiations
on Greece’s reforms in its quest to have the $7.5B in aid released
Not often a focus in the past, the Treasury Auction Calendar should not be ignored, after
rates backed up over the past couple of weeks. Barron’s made it sound like US rates
took their cue from German Bunds, which also saw rate rises, and the bunds sell off.
Rising rates might not be what homebuilders want to see but could be just what they need
to light a fire under potential shoppers on the fence. For 7 years it’s seemed like
there was all the time in the world to buy a house or refinance. Refinancing finally
picked up, as has existing home sales but new home sales have seen a trough, and need
something to light a fire. If what’s going on around here is any indication, new
homes are so much more expensive than existing homes, there’s no decision about which
is the better buy. After 2 years of builders bragging about price hikes, the rubber has
met the road with existing homes taking new homes to the cleaners. Vanity rarely wins
friends and builders have won none among those seeking homes.
Economists had predicted gasoline savings would find their way to retailers but that
hasn’t happened. As I’ve argued from the outset of the fall in crude oil’s
price, those newly employed or benefiting from lower gasoline prices put their savings
into paying off debt and, evidently, eating out. There’s a good reason people
aren’t rushing into specialty retailers to buy another schmata—designers have
failed miserably, in the last two years, to produce anything to tempt shoppers other than
what everyone’s calling Athleisure. Well maybe it was all those peasant blouses that
sent everyone back to the 60’s, 70’s, and 80’s, the latter when athleisure
last made its way onto every woman and fashion conscious man. Back then, Ellesse, Fila,
Euro Head, and Tachini were the sport wear everyone had to wear to the beauty parlor,
supermarket, or the drop off line at the nearest elementary school. What’s notable
about this round of Athleisure brands is how much cheaper they are than the European
brands that dominated back in the 80’s, when the most desired warm-up suits cost
close to $400, and a tennis shirt from Ellesse or Fila could cost upwards of $300.
I’ve been waiting for one of the big name analysts to point out how deflation has hit
the Athleisure market, over the past 30 years, but none have. Let me be the first: An
outfit that might have set someone back some $500 in the mid-80’s today can be had
for under $150. No matter how competitive Victoria Secret’s or Gap’s Athleta
seems to be to Lululemon, there is no contest, The aspirational brand is LULU, and since
the cost of entry at LULU is a fraction the cost of a designer handbag from Chanel, Dior,
or Louis Vuitton, there’s a tremendous runway for LULU ahead. Significantly, the
customers I now see prancing around with small LULU totes are getting younger and younger;
preteens are now as often in the store as their parents or older brothers or sisters. With
an Athleta opened at the local mall 2 weeks ago, and so far not discounting like its
siblings Gap & Banana Republic, even with Gap Body is offering 30% off on much of the
same apparel, it’s only a matter of time before Athleta will be run—badly,
I’ll add—like it’s siblings, and the price differential, now small, will
grow. And it won’t matter, anyway, because LULU has as much cache in its niche, as
any LV handbag does in its niche, and LULU can continue to command what passes for premium
pricing, in yoga wear/street wear, and keep growing its business for as long as Athleisure
is the only thing stores have going for them.
With Macy’s, Ralph Lauren, JCPenney, Children’s Place, and Nordstrom reporting
this week, markets will be presented with a very split view of the consumer. Macy*s had a
good Mother’s Day sale, while JWN has been "price matching" even the
pre-sales of other dept stores, even as Macy*s ran a Friends & Family 25% off
promotion in both March & April, which is most unusual, before going to 40—75%
off. M can keep generating traffic that way, and cheapening its brand, ultimately, proving
that the biggest competition to Macy*s will be Macy*s Backstage, its newly planned
off-price chain that will open by fall, with 4 New York City area stores. Macy*s has never
sold anything at full price and, evidently, never intends to again. JWN, on the other
hand, with half the SKU’s that Macy*s stocks, which makes it look a world apart in
class, remains the #1 dept store in the mall, and off. People who shop its Rack believe
the prices there are cheap, so buy indiscriminately, even when the price is equal to the
full line store’s. It’s a study for psychologists, rather than retail analysts,
truth be known, just be careful with JWN this quarter. It’s stock price is in the
cloud, and this is the quarter often hurt by profit sharing.
As the Earnings Calendar turns more focused away from S&P 500 companies, with a few
stragglers like Cisco & Applied Materials set to report, alongside retailers, the
investment bank event calendar picks up, considerably. Surprisingly, Macquarie’s
Extreme Services may well be a highlight (Mon) alongside Wells Fargo’s gaming,
Leisure & Restaurants Conference, in Vegas (Mon.). D.A. Davidson’s Annual
Financial Services Conference involves the kinds of regional banks we don’t cover, in
this space. The conference with a surprisingly large roster of presenters is B Riley &
Co’s 16th Annual Investor Conference (Tues). Jefferies Global TMT
Conference (Tues.) has a large list of presenters, too, but unfortunately, there’s
nothing unique about it. The list is almost totally predictable, and no offense, but I
wonder why every I-bank still invites AMD to present, and note how many presenters at
Macquarie will do double duty this week, at Jefferies as well, after they’ve
presented at Mac. Goldman Sach’s Staples Summit in NY (Tues), may be timed perfectly,
if McLellan is correct about the markets about to back off by 5%, or more. If that
happens, then you’ll know the sell-off is in its later stages, when the very staples
companies that many seeks out in sell-offs join in the selling.
While Friday’s April Employment Report, combined with the March revision down by 40K,
to even worse numbers than the 126K reported, originally, was the perfect set-up for a
rally after a couple of weeks of one step ahead, two steps back, stocks will still yoyo on
every bit of data released this week. And with some of that data coming from retailers
like JCP, M, KSS, and JWN, there could be barbells of pre-and post-market hours painting
the tape, the morning reports colliding with Economic data to paint a picture of an
economy that’s mixed, I suspect, rather than smoothly churning out steady returns.
As many market wonks are wont to say, sell the rips, and buy the dips, unless you, too,
think stocks are set to be sold in May, not to revive until July. In that case, you had
the rip you needed, Friday, so what are you waiting for? You'll get another chance Monday
morning, as the PBOC cut both the benchmark one-year loan rate to 5.1% and the on-year
deposit rate to 2.25%. That should be enough to fuel animal spirits for another morning.
ECONOMIC: (Highlights, here, only. Full International Economic Calendar here)
© Sandi Lynne 2015 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the author’s,
alone, and should be just one factor in more complete due diligence.
May 04—08, 2015 RANGE-BOUND MARKET CONTINUES
UNTIL FRIDAY’S UNEMPLOYMENT REPORT There’s really nothing more to say: The S&P has been range
bound between 2080 and 2010, Thursday even dipping 4 points below 2080 before recovering
the range by day’s end, then pushing up from there, on Friday. But without any major
catalyst, until Friday’s Unemployment Report, there’s no reason to think stocks
will break out of the range—though they might break below.,
The volume of expected Earnings reports is still high but lacks the power to boost or
bring down the market. Granted, media is a highlight, and the sector could be rocked to
and fro, given the number of media companies reporting but none can seriously impact the
market. If they could, that would have already happened, when the Comcast buy of Time
Warner Cable had to be abandoned. Media will stand out even more because of the NCTA Cable
Show—the OneShow—and ancillary shows scheduled to coincide.
So, given that most of the S&P has already reported, investment bank events sneak back
onto the schedule. Credit Suisse hosts an energy tour, Chevron just one of those on the
tour. There’s a Gulf South Bank Conference, that’s not in our usual wheelhouse.
Starting Tuesday, is Wells Fargo’s Industrials & Construction Conference, light
on builders but heavy on construction & industrials. Barclays starts Chemical Roc
STARS THE SAME DAY, ALONG WITH goLDMAN Sachs’ Small & Mid-Cap Symposium,
Citi’s Midwest Healthcare Access Day, Oppenehimer’s Annual NY Internet Investor
Day, and R.W. Baird’s 36th Growth Stock Conference. Other I-banks are
overseas for their conferences, including Citi’s Taiwan Corporate Day, and BMO
Capital Markets’ Annual Government Finance Conference, 2-days in Montreal &
Toronoto, as well as Credeit Suisse’s Mexico Investment Conference. OF course, with
both the SALT Conference in Las Vegas, and the Sohn Foundation Conference in NY, CNBC,
FOX, and Bloomberg on air personnel invited to host panels, you’d think they’re
the only events of the week when, in fact, The National Hardware Show is probably the
biggest of all, in terms of both attendees and exhibitors.
On Wednesday, Deutsche Bank hosts its 40th Annual Health Care Conference in
Boston, with the presenters most analysts won’t to see. With dozens of biotech
companies presenting, in addition to pharma & healthcare providers, it’s likely
to be the one conference that makes as much noise as Salt & Sohn put together. That
will make the Credit Suisse Anitbody Day on Wednesday, and its Therapeutics Day on
Thursday, both in NY, less well attended than it otherwise would be, were it not for most
of the healthcare world not in Boston. And, of course, the Society for Immunologists,
starting Friday, will put HIV, AIDS, Hep C, and even Ebola, back on the front pages of
every newspaper, so a topic for analysts who must have noticed Gilead’s recovery,
after its earnings report, last Thursday. Suddenly, neither the Senate’s talk of
investigating the high price of drugs, nor fears that AbbVie & Merck will steal
Gilead’s thunder seems to matter, for now. The truth is, the market is big enough for
all the players, at least until the population is largely cured.
Not yet cured, the optimism of stock traders who step in to "save" the major
averages, on every test of the lower bound of the range. One day they won’t but it
doesn’t seem that day will come until the FOMC clearly signals rates are going up at
their next meeting. In fact, I was a little surprised that stocks didn’t react more
violently, on learning the FOMC tested a video conference, after Wednesday’s meeting,
in case it decides to lift rates at a meeting that isn’t scheduled alongside a press
conference and updated forecasts. It seems to me, at least some of the FOMC members are
unhappy about how complacent the market is regarding lift off. Friday’s Unemployment
Report, especially if the adjustment to the prior two months includes a large adjustment
higher to the jobs added in March, may well be the shock therapy traders need. If it is,
then it might be time to stop betting on the range remaining in place. After all, stocks
rarely do especially well from May through September. While that truism has been broken
during the economic recovery, it doesn’t mean the rule’s been eliminated for
good. On the contrary, a little caution seems wise, as this week marches toward
Friday’s big report.
ECONOMIC: (Highlights, only, below, The complete International Economic
Calendar is here.)
© Sandi Lynne 2015 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the author’s,
alone, and should be just one factor in more complete due dilgence.
April 27—May 01, 2015 DON’T CARE
FOR THE WAY NASDAQ GOT TO ITS 15 YEAR HIGH
This is the busiest week of the quarter for Earnings—the sheer quantity astounds.
It’s also the biggest week of the year for shareholder meetings, I believe, as
there’s not one other kind of meeting listed on Reuters Weekly US Meeting Diary. I
would attach the list below, but I’d probably get into all kinds of copyright
problems. So you’ll have to find it yourselves.
To idle the time before the FOMC releases its post-meeting statement, Wednesday,
there’ll be a surfeit of speakers at the Milken Institute Global Conference. IT would
take the entire Outlook, and then some, to begin to list all the speakers at the Milken
meeting. It is the equivalent of the World Economic Conference in Davos, though it takes
place on the West Coast, and as far as I know, doesn’t require a $30K fee to attend.
From the CEO of Celgene, to Mohamed El-Erian, to Ben White of Politico, Shaun Donovan,
Dir. Of White House Office of Management & Budget, to Leands End’s CEO and the
Exec. Chair of Strayer Education to Tilman Fertitta, and Leon Black, to Ret. Army general
Wesley Clark, there’s no end to the corners of commerce and education from which
Milken draws its speakers
The market is totally unprepared for the FOMC to say anything but hint that the first hike
isn’t scheduled for June—lower for longer because of the strong dollar and weak
Q1. Were the FOMC to, instead, express a preference to stick to the June hike schedule,
assuming the data supports such a move, that would shock the market but that’s also,
unlikely to happen. Fed speakers emphasizing how surprised they are by the strong dollar
holding back corporate revenues all but guarantees the FOMC is in wait and see mode.
Once the FOMC meeting statement is in the past, talk should turn to the upcoming banner
weekend for Sports betting in Vegas, with Floyd Mayweather fighting Manny Pacquiao,
available on pay per view, and the first leg of racing’s triple crown, the Kentucky
Derby, taking place on Saturday, 05/02, also. What was supposed to be the first big
blockbuster movie of the summer opens this weekend, also. Is it fair to ask whether the
fight will impinge on the opening of "Avengers: Age of Ultron" opening in IMAX,
simultaneously with regular theaters? If the fight does impinge, will "Avengers"
suffer in comparison to "Futious 7?" .A FIGHT hurting attendance at Movie
theaters? Fhegeddaboudit! There’s room for everyone to win, from the cable & web
companies offering video on demand, to NBC, broadcasting the Kentucky Derby, to movie
theater owners, like Cinemark, Regal, & AMC, to big sport bet casinos like Wynn.
Before getting too exuberant about stock indices breaking out to 15 year highs, and an
FOMC on hold, there’s a lot to get through, the lease of which is Q1’s advance
look at GDP, on Wednesday, hours before the Fed statement. The worse it is, the happier
the market could take it, despite a near encyclopedic collection of companies reporting
this week, who’s revenues are sure to be dinged by the dollar. Still, despite how
many companies are expected to report, few of them have the power to pressure the markets.
Instead, March Pending Home Sales and the S&P Case Shiller Feb. Home Price Index are
likely to exert more influence. And Treasury Auctions may, well, turn out poorly. Despite
overseas investors looking at tantalizing US yields vs the negative yields in other big
countries, there’s currency risk, the dollar’s one way street suddenly reversed
recently. And then, there’s April US Vehicle Sales, on May 1st, when most
of the rest of the world will be closed for May Day or Labor Day, depending on the
country.
Outside healthcare-related conferences, other big conferences are all but on hold, in
deference to Earnings Season. Interop is not what it once was, leaving EMA & ERE,
Talent & Staffing Management & Recruiting Conferences, as well as Utility Scale
Solar Power to capture the imagination. Ironically, both First Solar & SunPower report
this week, as well. And, then, there are the digital content NewFronts, Upfronts for
digital channels, which still bring in a fraction of what Television channels do—even
as the latter are slip sliding to lower levels.
In short, there doesn’t seem to be a lot to fan the flames of indices that made new
highs, last week. In fact, when you think about it, absent huge moves by Amazon,
Microsoft, and Google, last week wouldn’t have, likely, notched a 15-year high in the
Nasdaq—especially not with the Semiconductors dragging. While history doesn’t
repeat itself its said to rhyme, and a new 15 year high in the Nasdaq, that was made on
the back of a 45 point move in Amazon, a money losing company that dominates online
commerce, is not exactly something to celebrate, given how closely that resembles the last
time Nasdaq made in all time high, in March 2000, from which it was a long, hard tumble to
the bottom. The exuberance is frightening and begs the question: what will stop it? While
I don’t have the answer to that, neither can I celebrate the Naz’s new high.
Then, again, I was one of the few people to beat an exit from money management on March 24th,
2000. I don’t feel the same urge, at the moment, but neither do I fell compelled to
put new money to work.
ECONOMIC: (Highlights below Full
International Economic Calendar here)
© Sandi Lynne 2015 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the author’s,
alone, and should be just one factor in more complete due diligence.
April 20—24,2015 THIS
WEEK’S EARNINGS, GENERALLY, DISAPPOINT
There are more central bankers speaking this week, Canada’s Stephen Poloz,
Australia’s Stevens, and the NY Fed’s William Dudley, right off the bat, on
Monday. Poloz is like a book end, this week, speaking again on Friday. They will, however,
likely take a back seat to housing data due out Wednesday and Thursday, as well as the
BoE’s Minutes, on Wednesday, as well. And the housing data won’t arrive, alone,
since quite a few builders are set to report earnings, this week, also while the Single
Family Rental Investment Forum starts Monday, also.
The headline event of the week is, unquestionably, AACR—Cancer Researchers. It’s
ironic that all the news out, so far, is to optimistic, because a friend of mine,
diagnosed with lung cancer, just before Thanksgiving, died last Friday. Whatever the new
immunotherapy drugs are doing, they proved no help to her and, probably, not to millions
just like her. No sooner will AACR wrap, than analysts will anticipate the Thoracic
Surgeons meetings, Mitral Valve Conclave starting Thursday, then next Saturday, the
AATS—American Association for Thoracic Surgeons—meet in Seattle, the two
meetings, together, though in different cities, the components of AATS Week. Earnings are
expected from both Amgen & Biogen Idec, soon to be just Biogen, Tuesday afternoon and
Friday morning, respectively.
Energy should get its due, as well, with IPAA & IHS CERA Week, both starting Monday,
as well. Noise, though, is most likely to come from CineCon, the meeting of NATO—the
National Ass’n of Theater Owners, especially with the kick-off movie of the block
buster season, "Furious 7" getting off to a huge start, anticipation rising for
it winding up the first $1B movie of the season (worldwide). Cruise3Sixty, Wednesday, is
one that could boost cruise lines, just as their biggest booking season has wrapped.
This week is one of the heaviest 3 for earnings, reaching a crescendo on Thursday, as it
usually does. Rails, airlines, the first of and biggest defense companies (LMT, RTN, UTX),
and a smattering of food companies are set to report, in addition to the homebuilders,
mentioned earlier. Brinker, Pepsi, Coke, Yum! Brands, McDonalds, Cheesecake Factory, and
Chipotle Mexican Grill, the latter Tuesday afternoon, are just some of the restaurant
names set to report. One advantage CMG & CAKE have over the others is their mostly
domestic orientation. Yum has been killed, in the last year, by its Chinese ops, while MCD
can’t seem to get its act in gear, at all. In fact, CMG is about the only growth
stock among those, of late, but then so is Starbucks, scheduled to report Thursday
afternoon.
Morgan Stanley plays clean up for the big investment banks but the schedule includes,
also, TD Ameritrade & E-Trade, as well, along with insurers Chubb & Travelers,
along with the custody banks, State Street & Bank of New York Mellon, along with
Northern Trust. And then, there’s big tech, including Microsoft, Google, Ebay,
Qualcomm, and Amazon, along with Facebook, which is likely to steal the limelight. A
bright spot could be ARM Holdings, Tuesday morning, because it books royalties with one
quarter’s lag, so the surge in Apple iPhone 6 & 6plus phones over the holidays is
what it’s going to report for Q1. Of course, no sooner does ARMH report a great
quarter than analysts decide the strength is unsustainable, as the dog days of summer
approach, and its strength rarely lasts long
The primary reason bulls should be hesitant about the week’s earnings lies in the
percentage of sales completed overseas, pressured by the strong dollar. That would apply
to all the tech names I mentioned above, as well as companies like Avnet, Illinois Tool
Works, Ingersol Rand, Procter & Gamble, and even, 3M, Stryker, AbbVie, Lear, Dow
Chemical, Danaher, Stanley Black & Decker, or any of the defense companies, already
named. And then, of course, there are materials and metals companies, like Freeport
McMoRan and Newmont Mining, suffering not just a strong dollar but weak commodity prices.
For the record, and so it’s said, the Target Lilly Pulitzer collection may be the
very best of all TGT collaborations. Not only are the fabrics/prints/colors true to LP but
the prices are pure TGT, with many of the dresses costing $30. An extensive collection of
beauty products range from under $8 to $24, making it, also, one of the most affordable
designer collections TGT has ever set out. The weekend press was critical because
it’s website crashed Sunday, when the line was first released but I’m not
surprised. TGT has redeemed itself with L.P.
Futures, right now, are predicting some sort of recovery Monday. In thinking about
Friday’s sell-off, I have no doubt Bloomberg terminals going down got the selling off
to start the day. Once the selling started, there was a bit of a rush to get out, as
everyone wanted to avoid being the last one out the door. Selling then begot more selling,
until the S&P 500 held 2072, which triggered a little covering into the close. With so
many multinationals reporting, this week, expect more selling, as the damage a strong
dollar has wrought to ding not only the reports but outlooks, as well. Travelers to Europe
from the US benefit the most from such a strong dollar but for companies, it appears,
there’s been a lack of hedging. The truth of the damage will, undoubtedly be the
story repeated again, and again, this week. If history is any guide, stocks should decline
this week and next, before the Street comes to the conclusion that earnings were not as
bad as they could have been, making it time to buy. The most concerning aspect of last
week’s selling was the devastation in consumer discretionary. TJMaxx one day made an
all time high above $71, and was under $66 just days later. Nordstrom, which seemed to be
floating for a year, discovered gravity, on Friday. Ross Store hasn’t come down as
much, yet, but its stock split should trigger selling later this week. Fund managers who
owned 250K shares might not want to own 500K, when they could take some profits without
losing their position in the shares. The shares won’t split until June 11th
but the record date is the 22nd, which is why I think we’ll see more
weakness there, later this week.
Weakness, though, is what I expect to see, in general, this week. With each passing day
the April FOMC Meeting draws closer. I wouldn’t be surprised if the FOMC tried to
communicate its commitment to a June lift off, if the data in April & May reverse some
of the weakness seen year to date. Much of what they do will depend on how the next two
months’ Unemployment Reports look and, on that score, there’s trouble ahead. A
new crop of college graduates will be entering the workforce, by the time the June meeting
rolls around. For many of those graduates, jobs will be very tough to land—especially
jobs that can pay their expenses as independent workers, while paying off their education
loans.. Of course, they won’t qualify for unemployment benefits, because they
won’t have had jobs to get laid-off from but the participation count should rise,
even if newly employment rebounds to the 200K a month level. And it’s clear that
investors following the central banks easing the most—like the ECB—are going to
be pulling money out of US shares to get over there. The dog days of summer may start
early, just as they’ve done in Florida, where daily temps are well into the
90’s, and humidity is up there, too. I expect sellers to take advantage of any bounce
in the averages. While the S&P could easily rebound to 2K, more selling should appear
there, if not sooner.
ECONOMIC: (Economic Highlights below. Full International Economic Calendar here)
© Sandi Lynne 2015 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the author’s,,
alone, and should be just one factor in more complete due diligence.
April 13—17, 2015 THIS WEEK ABOUT EARNINGS, IMF &
WORLD BANK Because Easter was so early,
and many events traditionally held in early April were pushed into this week and next, we
fell a little behind posting events, while cooking & cleaning for 2 holidays, and a
surprise 60th Birthday party. Therefore, we expect to be adding events all
week, even though events largely tail off during Earnings Season. At any rate, check the Free Calendar for events that don’t appear below because we don’t
anticipate them having much market impact. That’s true not just this week but every
week.
There will be an unusual number of Central Bankers talking up a storm this week, as the
IMF & World Bank Group hold separate meetings before hosting their Joint Spring
Meeting, which prompts a G-20 Central Bankers Meeting, as well as. IMF & World Group
separate meetings prompt press conferences before the Joint Meeting starts on the 17th,
which is reason for another press conference. Meanwhile, the Fed’s Beige Book will be
out Wednesday, March Retail Sales & PPI Tuesday, along with ECB & Bank of Canada
rate-setting meetings, also Wednesday. Topping it off, is Simon Potter, the NY Fed’s
new Eric Sachs, who’ll be in charge of moving interest rates where the FOMC wants
them, upon lift off, is speaking on "Money Markets & Monetary Policy
Normalization," at the Money Marketeers Dinner, also Wednesday. Normally, that would
be the highlight of the week but not when so many current and former central bankers are
scheduled for speeches and panels at the IMF and/or World Bank, even as former Treasury
Secretary Hank Paulson will be the speaker at the Nasdaq Market Site, where Politico is
holding one in a series of discussions under the banner of Politico America’s Fiscal
Future Events. IMF Managing Director, Chirstine Lagarde will be everywhere, this week, but
so too, will be many other banking luminaries, as part of the IMF/World Bank meetings, or
at related George Washington University sessions under the banner of Rethinking Macro:
Progress or Confusion, One such Rethinking Macro session is with Dr. Ben Bernanke, John
Taylor, and Martin Feldstein. But there are central bankers also outside the IMF/World
Bank meeting, at everything from the Levy Economics Institute of Bard College’s 24th
Annual Hyman P. Minsky Conference on the State of the US & World Economics, to
Fed’s Rosengren’s speech at Chatham House on the "US Economic Outlook &
Implications for Monetary Policy," in London, to Cleveland Fed’s Mester’s
appearance at the Forecasters Club of NY. Wolfgang Schauble will speak at the Council on
Foreign Relations. All that talk might make April Monthly Options Expiration, March CPI
& Average Weekly Earnings, on Friday, take a back seat.
If not, there’s always Earnings, during which major money center banks & brokers
will be the stars, along with Intel & Taiwan Semiconductor. Monday, will be a quiet
day but Tuesday, JNJ, JPMorgan & Wells Fargo report in the morning, CSX and Intel in
the afternoon. On Wednesday, Bk of America, Delta Airlines, PNC Financial, and US Bank
report in the morning, followed that afternoon by Netflix & SanDisk. Thursday morning
promises Alliance Data Systems, BlackRock, Blackstone, Citi, Goldman Sachs, Keybanc,
Phillip Morris Int’l, PPG, Sherwin-Williams, United Health & W W Grainger, when
the afternoon will bring American Express, Celanese, Crown Cork, Mattel, Schlumberger
& ServiceNow, before Friday’s GE, Honeywell & Seagate Technology. And those
are just the majors reporting. While heavily weighted towards banks, all but BAC expected
to post strong results, the crush of reports from headliners will make the week after seem
anticlimactic. But if one were to hand select companies to kick off earnings season, they
could do a lot worse than the companies slated to report this week, covering banks,
brokers, big tech, healthcare, healthcare providers, credit cards, a rail and airline,
chemicals, toys, energy service, and cloud software. Fasten your seatbelts because .
Which brings us to the Event Calendar, which is light on investment bank events, in
deference to the heavy earnings calendar. The Needham 14th Annual Healthcare
Conference Tuesday, should be biggest in sheer volume of presenters, therefore attracting
a surfeit of attendees. Google has chosen to report on April 23rd but that
won’t keep news from following it, because MIP-TV, in Cannes, includes both a Digital
Fronts—as in Upfronts for Digital Video--as well as the International Digital Emmy
Awards. All that occurs in France, even as Las Vegas will continue to host NAB Show, the
National Ass’n of Broadcasters, through the 16th. I-Gaming North America, also in Las
Vegas, is another outsized event but more hoorah than substance, as long as just a couple
of states allow internet gaming.
Please note, though, three events concerning Real Estate, including the NYU Schack
Instittute of Real Estate 19th Annual REIT Symposium, which kicks off
Wednesday, RealShare Net Lease Conference, starting the same day, through Thursday, both
in New York, even as Morgan Stanley will host a small Triple Net REIT Summit, in NY,
Friday. I say small because some of the best known triple net REIT firms hadn’t
confirmed by last Friday. Still, that’s an awful lot of REIT events for one city, let
alone one week, so reason to expect analysts to be hosting their favorite REITs for
dinners, or lunches and breakfasts. That’s just the way things go and why it’s
with some irony that I mention the ISC West Property Security Conference & Expo in Las
Vegas, when it appears New York would be a better location—at least this week. NYU
has snagged every REIT imaginable, though RealShare’s event is not too shabby either,
lacking most of the bigger shopping center REITs because they’re not considered
Triple Net REITs, even though that’s how their contracts are written. While
you’re at it, notice the number of European central government note and bond auctions
scheduled, as well, since rate expectations have exerted undo influence on REIT shares.
Typically, stocks sell off the first few weeks of earnings season, then mount a rebound
late in April, or early in May, as traders decide earnings are not as bad as their worst
fears, which is "good enough" once the majors have reported. This week, the
dominance of banks reporting should not only be an asset, because banks are seen posting
the most improved and largest y/o/y gains in earnings but because both Intel & Seagate
have already warned, which should remove much of the sting their disappointments would
otherwise cause. Barron’s has gone so far as to predict they’ll rise, even on
misses of earlier warnings that reduced estimates. That’s a bet I wouldn’t make.
But, then, I’m among those who believe the weak March job numbers haven’t
diverted the FOMC from its path to lift off, in June. I’d be persuaded otherwise of
the April & May numbers are equally weak but, then, I don’t expect that to
happen—at least not anything as weak as March was, which I expect to be modified as
January & February were, this time to the upside.
ECONOMIC (Highlights, only, below. The Full International Economic Calendar
is here)
© Sandi Lynne 2015 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the author’s,
alone, and should be just one factor in more complete due diligence.
April 06—10, 2015 IS BAD NEWS
STILL GOOD FOR STOCKS? Futures don’t think so Given March’s weak 126K jobs
added, in advance of a coming rate hike, whose timing is unknown, nasty looking US stock
futures go against the grain of Street maxim, ‘bad news is good news." Problem
is that, until now, stock traders had forgotten that a hike in rates is coming because of
a better economy. Weak futures suggest someone has remembered and decided that
March’s bad news means bad economy. So, either the Fed has to hold off lifting rates
off the zero bound, or the FOMC will be raising rates into a weakening economy—one
hurt by a too strong dollar, regular additions of low-paying jobs, weak participation
because of the lousy jobs available, and a still very large number of people working below
their training and education—not to mention oil that’s collapsed and has started
to take jobs down with it.
Of course, stocks could rebound before, or soon after, Monday’s opening. It
wouldn’t be the first time I was writing while glancing at very weak futures, only to
wake up to much less pressured markets or, even, gains. Traders could, well, look ahead to
a busy weak of Fed speakers, and central bank meetings, and decide March’s job
numbers were an aberration. Perhaps, all those speakers and central bank meetings
won’t matter, either. The Bottom Line is, really, the Earnings season dead ahead, and
probable warnings, if not on the coming Q1 reports, then on the outlook for Q2 and beyond.
Which isn’t to dismiss the RBA Monday meeting, or the BoJ’s 2-day meeting,
ending on the 8th (Karuda’s press conference Wednesday morning, in the
US), or even, the BoE’s Thursday rate decision. It’s possible, Dudley,
Kocherlakota, Lacker et al will dismiss the March Unemployment Report, like they did
weakness in February, the latter on weather, the former on what? Perhaps on the
machinations of Unemployment, that requires a lag before applications are processed and
checks start arriving, so Feb. lay-offs didn’t show up until March but still reflect
the pressure weather exerted on the economy, back in February.
Still, with the dollar hurting US exports, weather hurting the heavily populated East
Coast, the Port strike hurting businesses as diverse at HD Supply, Macy*s, and Pier 1
imports, on top of rig counts falling, as oil drilling plans are being mothballed, the
question is whether the US economy has already peaked, and is rushing headlong into a
coming recession, just as the FOMC will hike rates, just to get them off zero.
There won’t be much to move markets, or settle nervousness from the week’s
Earnings Calendar. Family Dollar, Bed Bath & Beyond, Constellation Brands, and
Walgreen Boots Alliance report but they’re all members of extremely small sectors.
While we can argue Family Dollar has more competitors than just the dollar stores,
including Walmart & Target, truth is, there’ll be 2 dollar stores, after a merger
is completed—assuming it’s approved by regulators, Walgreen competes most
directly with CVS, in terms of the number of drug stores operated, Rite Aid, reporting
Wednesday, not really comparable, even as some firms can’t decide whether CVS should
be covered by their drug store analyst or the one who covers PBMs. Constellation has no
US, direct competitors, distributing such a big sheer of beer and wine. And while Bed Bath
& Beyond can be said to compete with Macy*s, J.C. Penney, & Sears, truth is Linens
‘N Things was it’s only direct competitor, and that’s been gone for years.
I never considered Alcoa a big influence, despite how much the financial TV talking heads
would fuss about the ‘first DJIA stock to report results.’ It might turn out,
ironically, that the Dow Jones editors dropped AA just as the auto industry took
Ford’s lead, and decided to make cars out of its primary, lighter weight metal. That
would be quite typical of the bad timing the editors have displayed in the past, admitting
stocks as they peaked and began a sharp descent, while kicking out some that will go on to
outperform. But in the absence of more evidence of automakers going the Ford F-150 way,
there’s not much quaking stocks will do one way or another, when the week’s
scheduled companies finish up their reports. All in, I don’t believe the world of
equities will rise or fall on any particular report expected this week but the market has
a habit of seeing
The same might be said about the scheduled industry & investment bank events, this
week. It’s, simply, a slow week after Easter, with ConocoPhillips’ analyst
meeting, Wednesday, perhaps, the highlight. While E&P’s have been announcing
CapEx cut backs, COP’s meeting should be a more extensive conversation, perhaps with
Q&A, the analysts, no doubt, every eager to dig deeper into how hard the collapse in
oil prices is hitting earnings and, the prospect for dividends. E&P’s are not a
group I’ve covered in the past but I imagine the leaders in the space might feel
somewhat like boomers who saw their stock portfolios—and retirement
accounts—trashed by the 2000 dot.com bubble collapse and the 2008 financial
collapse—much more cautious, than they were in the past. Difference is, the E&P
leaders saw both their stock & retirement portfolios and their employers twice
devastated, which has to have seriously impacted how they’ll handle everything in the
future, if it didn’t, already. It’s just possible the majors swore that
wouldn’t happen to them again, so they better prepared for what oil has done in the
past 10 months. (One can hope, can’t they?)
The talking heads, who need to find something to blabber about, during air time, were
given the kernels of a story, over the weekend. Cnet reports that Apple’s watch will
be sold by appointment—so the 1m estimates for first week sales might be very
optimistic. There simply aren’t enough Apple retail personnel to manage that, maybe
not even if combined with its telco iPhone distributor personnel. Apple hasn’t, yet,
confirmed that one has to meet with its retail personnel before an order can be written
but, if it does, it would be my guess that it’s a ploy to hold back deliveries of a
product that might see better demand than supply. There have long been rumors of
manufacturing issues, with the screen, especially. And the number of apps that make the
watch useful as anything other than a conversation piece has to be extremely important to
Apple, as well. Apple didn’t need appointments to introduce a wholly new
product—the iPad or iPod—in the past, so I can’t imagine it would need to
make sure people know how to operate the watch before they allow orders—except
perhaps, for the $10K or $17K versions. In those cases—pun intended, since their
straps are made of expensive metals--Apple may need to justify such extravagant expense
for its watch, when that kind of money will buy watches whose expense and collectible
value has stood the test of time. Given the rapid upgrade cycle in tech, I’d like to
think those extravagant watches will be either upgradable, forever, over the air, or come
with a promise to change the watch—just the watch, itself, ex-the strap--with every
upgrade and update, in a way that will fit the bands for a lifetime. In the watch world,
replacement straps can be bought anytime, from almost anywhere. In the Apple watch world,
it’s the gold or platinum strap that will be the constant, the watch, itself, nearly
disposable, with each update. And I hasten to add that I bought an employee of my swim,
tennis and ski store in NYC the first Swatch to ever come out, and one like hers, in
nearly new condition, sold for over $40K, years later, though my cost, originally, was
probably in the neighborhood of $37.50. An expensive play watch, at the time, but a cheap
piece of junk, in retrospect. I think it’s not just Applonians or curiosity seekers
that will buy the first watch issued but, also, those who think at $349 it’s a cheap
shot at a collectible that might contribute to their retirement.
To wrap, I’m fairly negative, still, on the economy, and find stocks as overpriced as
they’ve usually been in advance of earlier big descents. It wouldn’t surprise me
if the FOMC raised rates in June, just in time for the next recession, or held off until
September, December, or 2016. I’m too old and been at it too long to be surprised by
anything markets or the FOMC does. If reversion to the mean applies, at all, then either
Main Street has to start hitting the lottery, en masse, or the top 1.0% have a shock
coming to them, via a sharp sell off that lasts more than a few days, and breaks numerous
"supports," that it turns out, weren’t supports, at all. In other words, I
believe this experiment at zero rates—and sub zero, negative rates overseas—will
end badly, again. As it’s always been, the only question is the timing—on which
I have no answers, since there were many occasions in the past couple of years I thought
the timing could be ripe, only to see one central bank or another ‘save’ the
markets from their fate, again. At this point, rates rising to 0.25—0.50% might be a
relief, even if it does arrive just as the economy falls into recession, and everyone
blames the hike for the recession. Despite their defense to the contrary, six years of
central banks manipulating rates should have never happened, and leaves few conventional
choices, should the economy, indeed, fall into recession. And for all its efforts, our
emperor wears no clothes. It’s an awfully weak recovery for all the trillions the
FOMC has pumped into the economy. A point others have long been making, I know but it
seems worth reiterating as earnings season approaches, in light of the March employment
numbers. I’m as curious as the next gal to find out if the futures indicating a
triple digit loss will translate into losses on Monday. Not only doesn’t that
necessarily happen but the market has shown little move off the "bad news is good
news" mantra, because bad news means the FOMC remains on hold.
ECONOMIC: (Highlights, only, here. Full International Economic Calendar, here)
© Sandi Lynne 2015 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the author’s,
alone, and should be just one factor in more complete due diligence.
March 30—April 03, 2015 MORE
SELLING LIKELY While FOMC Chief Yellen did everything in her
power to reassure markets that rates will lift off this year but additional hikes
won’t be regular or predictable. Problem is, with the quarter ending Tuesday, and a
long weekend ahead for stock traders, especially, there's little reason to continue
supporting stocks favored by institutions, come Wednesday, in front of a 3 day weekend,
while some good reasons to cash out, once the quarter ends.
For one, Saudi Arabia has gotten its neighbors to rally round the effort to quash Yemen.
Libya is another powder keg, even as the US and its allies are bombing ISIS in Iran, Iraq,
and Syria. For all we know, the Sauds may join the West’s fight against ISIS, with
some history of conflagrations around Jewish Holidays probably in the minds of some, just
as Passover starts at sundown Friday. Granted, Passover isn’t the same as Yom Kippur
but the war on the latter holiday proved no holiday is sacred—even the most sacred of
them all. IF there isn’t a really good reason to be long into the Easter weekend
break, then traders won’t stay long. Add in earnings warning season, and how
companies have a habit of dropping bad news into weekends, and a weekend with an extra day
is even better for unloading bad news. But also, there’s the Friday March
Unemployment Report, that stock traders wouldn’t be able to react to until
Monday—even if they could usually, trade overseas that won’t happen Friday, when
it appears most of the world is on holiday--even Asian countries.
Speaking of earnings, there’s not much on the Earnings Calendar to move markets.
Other than CarMax Thursday morning, and Micron Tech that afternoon, there’s too
little support for stocks. And in Micron, perhaps, something to hurt tech more, after
Sandisk’s warning. As last week closed, there was talk of Intel in merger discussions
with Altera but, given how little last week’s merger Monday did for stocks,
there’s no reason to count on merger news saving this week, either. (You haven’t
forgotten 3G/Berkshire Hathaway announcing a deal with Kraft, already, have you?)
Central Bank speakers will seem like they’re everywhere, this week, as even the
abridged Economic Calendar below makes clear. While Fed Governor Stanley Fischer did, last
week, wake up to the pressure the strong dollar is exerting on companies and the economy,
it doesn’t sound like any of the Fedheads is eager to hold back on the first rate
hike because of it. On the contrary, the message from all but one Fed president is that
rates will rise this year, as well they probably should. While the recovery lacks energy
and enthusiasm, the economy is no longer in a crisis that befits zero rates.
The New York International Auto Show, put on by the Greater New York Automotive Dealers
Ass’n, is the impetus for a BAC/MER Auto Summit, as well as a J.D. Power Auto Summit
starting Monday. The doors of the Auto Show open on Wednesday for the Press, and Thursday
for the industry, when the World Car Awards are handed out, as well. For 2015 finalists,
in categories of: World Car of the Year, World Luxury Car, World Performance Car, and
World Green Car, to be awarded 04/02, click
here. The finalists were selected at the Geneva Auto Show, last month. What
surprised me were the number of awards for which VW is contending. Healthcare takes second
place this week, on the Event Calendar, closely followed by healthcare, a good portion of
the medical society meetings wrapping up by Tuesday.
Wolfe Research is hosting Energy & Power Deep Dive, in Houston, which started Sunday.
Hart Energy hosts DUG Bakken & Niobrara Conference, starting Monday, in Denver, even
as NYMEX is starting trades in oil storage contracts—just in time for there to be
little to no storage available. John Tumazos Very Independent Research hosts a mostly
metals conference, Monday, Come Wednesday, there’s nothing but the Auto Show and
related conferences, to divert attention or generate news. So, at least, a strong sector
is involved, February’s dip perhaps weather related, or the first sign of pent up
demand having been exhausted, by now. The problem with believing the latter, is the
American preference for leases, which sees a constant flood of 36-month contracts
expiring, rolling over into demand for a replacement.
Perceived wisdom has it that stocks are engineered to finish each month on a high note, so
more money will be attracted to stocks, when the new month opens. April, however, sees
last minute inflows into retirement accounts, offset by withdrawals of final payments for
estimated taxes—even from those who apply for an extension, which doesn’t extend
taxes due past April 15th, under penalty of interest and fines. The wealthy, in
fact, are more likely to file at the last minute, if not on extension, since they’re
well advised on legal ways to reduce the amount withheld, to avoid large refunds. That,
and the looming earnings season, which no one expects to show strength, are reasons to
protect against the downside, if not cash in some winners before prices fall more.
Estimates have been coming down, opening up a possibility that, as usual, the earnings
season will not turn out as bad as feared but that’s something rarely known until the
end of April, if not in May. IN short, expect more selling, especially on morning upside,
as we saw two days last week—if markets can muster any upside, at all, at any time of
the day. Not only do I have my doubts about any upside, this week, but the selling might
well ignore supports that held last week..
ECONOMIC: (highlights below. Full International Economic Calendar here)
© Sandi Lynne 2015 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the author’s,
alone, should be just one factor in more complete due diligence.
March 23—27, 2015 EARNINGS WARNING SEASON APPROACHING I expect the post-FOMC rally to, mostly sustain into End of Month, and
then see a stiff sell-off, in advance of earnings season and warnings, that will surely
precede earnings releases. Easter weekend is a 3-day weekend for stock traders, while the
bond market will remain open, Good Friday (04/03), until 1pm. Whether companies complain
about the strong dollar, the dock strike holding up inventory, or weakness around the
world that’s pressuring sales, doesn’t matter. The fact is, after a weakish Q4,
Q1 seems destined to be worse, albeit not, perhaps, as weak as it was a year ago. Many
companies mentioned both the dollar and inventory held up on the west coast docks, the
latter, especially, from retailers but so, too, did Home Depot. Strong dollar crimping
overseas sales? Plenty of those warnings, too, with some acceleration, last week, as
Tiffany (TIF) &. Air Products (APD) cited currency.
I’m not sure why Dana Telsey’s TAG calls its conference a Consumer Conference,
(NY, the 24th—25th). It should be called, instead, the REIT
conference, since at least half the presenters are REITs, with retailers and restaurants
in the minority. And speaking of consumer companies, CCA—Competitive (Telco) Carriers
boasts keynotes that include Coca-Cola. Whassup with that?
There’s an Alzheimer’s & Parkinson’s Disease conference in Nice,
France, that started over the weekend. Perhaps a place with some sanity will prevail over
the insane reaction to Biogen Idec’s somewhat premature optimism on its AD drug,
given that many other pharma companies have concluded clearing amyloid, alone,
doesn’t retard or prevent the disease, many promising drugs abandoned in Phase III
trials, after equally optimistic early trials. Watching BIIB fly, last week, proved
traders never learn a lesson—a lesson they won’t likely relearn for 2—3
years, when a trial with thousands of participants is likely to prove its drug no panacea,
either.
The biggest event of the week is Automate, with 6 sub-conferences, ProMat (materials
handling equipment) and Robotic Safety just 2 of them. Morgan Stanley’s European
Financials Conference, starting Tuesday, bears watching, for any warnings from banks or
insurers/reinsurers, stung by SNB’s decision to unpeg its franc from the euro. In
healthcare, Orhtopaedic Surgeons meet at AAOS, starting Tuesday, while the Orho
researchers start their meeting as that tails off, even as European Congress for
Osteoporosis & Osteoarthritis . start Thursday. CanaccordGenuity’s
Musculoskelatal Conference, at AAOS, could be the one that makes the biggest waves,
stateside, this week. Other possible standouts include Scotia Bank/Howard Weil’s
Energy Conference, which started Sunday, Barclays 5th Annual Emerging Payments
Forum, starting Monday, and Solar Power Finance & Investment Summit, also starting
Monday, in sunny San Diego. I supposed, Credit Suisse’s Global Trading Forum, in
Miami, starting Wednesday, could send out some ripples but so, too, could a competitor,
that day, the Alliance for Regnerative Medicine, in New York.
Holders of Intuitive Surgical should fear the SSO—Society of Surgical Oncology Cancer
Symposium, starting Wednesday, as well as SGO—the Annual meeting of the Soceity of
Gynecologic Oncologists, even as starting Sunday, the 22nd, was AAGL—the
American Academy of Minimally Invasive Gynecology, which started in Orlando.
Chemicals are a hot topic this week, with IHS hosting World PetroChemical Conference in
Galveston TX, starting Tuesday, followed, on Thursday, by Gabellli’s Annual Specialty
Chemicals, in NY, and Nomura’s Global Chemical Industry Leaders Conference, in
London. Meanwhile, the National Chemistry Society started meeting, over the weekend, in
Denver, Chemistry of Natural Resources, the topic for this year.
The Earnings Calendar is, somewhat, quiet, until Thursday, when a number of companies
reporting should attract talk. But, even then, other than ConAgra, there’s no single
company that will provide the kind of intelligence that can move markets.
Which brings us to the Economic Calendar, which is filled with central bank speakers all
over the globe, even as the two central banks meeting, both Thursday, rarely make any
waves. When’s the last time you heard or read about South Africa’s or
Mexico’s central banks? I rest my case. Yet, everyone from Mario Draghi to Janet
Yellen are scheduled to speak, along with some of their minions, and peers, including Bk
of Canada Gov. Stephen Poloz (London Thursday), BoE Deputy Gov. Broadbent, IMF’s
Olivier Blanchard, and Federal Reserve Bank presidents, galore, on top of the ECB’s
Monthly Bulletin on Monetary & Credit Developments, in which we might learn what the
ECB has been buying, in its first few weeks of QE, so traders can front run their plans.
Meanwhile, the US Economic Calendar, besides regional Fed Bank Presidents speaking all
over the world, promises Realtor’s Feb. Existing Home Sales, Monday, on Tuesday, CPI,
Real Avg. Earnings, & Jan. FHFA House Price Index, in addition to the US Feb. New Home
Sales numbers, making Tuesday a very busy day for housing data. And that may not be as
supportive of the rally as it might be for this month, since Feb. saw repeated snowstorms
that hit some of the largest markets in the country, crippling them. In case you
don’t know, mortgage companies, generally, don’t close if a home lacks
insurance, and insurers won’t bind a policy, if NOAA is predicting a storm. We think
of that situation in the south, when hurricanes are approaching but snow storms, that
could cause roof damage or lead to flooding, when there’s a melt, are other storms
insurers won’t step in front of to bind. Then, again, I’d watch the
Treasury’s $35B 5-year Note Auction Wednesday, and the $29B 7-year Notes Auction
Thursday. With US Rates, again, slipping,
All in, markets are marching towards the end of the month, with central bankers
speaking--all over the world, and US markets facing what’s likely to be weak housing
data, Treasury auctions whose reception remains unknown, even as earnings warning season
has begun. And while plenty of stocks rose on very strong volume, Friday, that’s
probably a function of the S&P index rebalance, after the close, rather than
fundamental enthusiasm for stocks. Given the rebalance Friday, some of the gains could be
reversed Monday morning, despite futures that show stocks looking peppy on the open. Be
careful out there!
ECONOMIC: (Highlights, only, below. Full International Calendar, here)
© Sandi Lynne 2015 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the author’s,
alone, and should be just one factor in more complete due diligence.
March 16—20, 2015 FEELING PATIENT?
It’s a full calendar everywhere but in the Earnings Calendar, though even that holds
some major companies with power to influence markets. That includes, especially, Adobe and
Oracle after hours Tuesday, FedEx Wednesday morning, and that afternoon, Jabil Circuits,
Silver Wheaton, and Williams-Sonoma. Thursday morning, Lennar & Tech Data report,
followed that afternoon by Nike, while on Friday morning, both Darden Restaurants & K
B Homes report. A slender calendar with power, nonetheless.
Of course, it’ll be the Fed statement, updated forecasts, and Janet Yellen’s
Press Conference, Wednesday afternoon that will be most spell binding. While economists
and Fed watchers almost universally see "patient" leaving the Fed statement,
with inflation so very far from the Federal Reserve’s goal, there are scenarios that
can be conjured under which patient remains. Instead, 13 months into her term as chief, I
think Yellen is worried enough about the global economy, and consumers’, apparent,
reluctance to spend, to be most eager to raise rates, so she has something to lower should
a recession hit. I'm not thinking of a steady, regular rate raising campaign, as those
conducted by Greenspan or Volcker but a lift above zero must be her fondest desire,
especially since her predecessor, especially, emphasized not shrinking the Fed’s
balance sheet, until escape velocity is assured, and rates have lifted off zero.
And therein lies the market’s dilemma. Having hemmed themselves in on their balance
sheet, and with nothing but new, additive bond purchases stopped, last October, the Fed
really does need to acknowledge the fact that the US economy, while not setting any
records, by any means, is no longer in the midst of the crisis that led to zero rates, and
a $4.5B balance sheet. In fact, the Street has become so laser focused on lifting off
zero, I can’t remember the last time there was any full-fledged discussion about
shrinking the Fed’s balance sheet though ,surely, that might be in order as well. I
never get the Fed right, so I’ll defer to the Greg Ips and John Hilsenraths who, it
is believed, have Fed birdies whispering in their ears, and agree Yellen & Co. will
drop patient from the Fed statement, leaving themselves open to a June rate hike, if the
economy keeps rolling along as it has been doing. So does the market celebrate a Fed with
a lack of patience? Does it celebrate that the omission of patience might signal good
things about the economy, that would be worth celebrating? Wouldn’t that be the most
perverse outcome of Wednesday’s meeting and elimination of patience?
Since it feels like stocks have rallied against all odds, for years, almost no matter the
news, the only question that remains is whether stocks will rally on the removal of
"patient," should that happen, or whether the sell off that began two weeks ago
has a new, and more serious leg down to come? Seems unlikely but so have many of the legs
up stocks have taken, over the past few years. I, for one, feel impatient waiting for the
Fed to remove that, one, word, and feel markets will be more frustrated if it doesn’t
come out this week.
ECONOMIC (Highlights, only, here. Full International
Economic Calendar here.)
© Sandi Lynne 2015 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the author’s,
alone, and should be just one factor in more complete due diligence.
March 09—13, 2015 ECB QE,
CCAR, and MORE Anyone else wonder
if the Employment Report showing 295K jobs added in February, benefited from all the
people in the northeast and mid-section of the country who couldn’t get out of their
driveway, let alone to an unemployment office to claim benefits, as record snow fell
across northern parts of the country for a good part of February? Suppose that is the
case, and prepare for catch-up in March.
Normally, we’d be talking about JOLTS, on Tuesday, Wednesday’s EIA Petroleum
Stats, Thursday’s Weekly Jobless Claims & Feb. Retail Sales, as well as
Friday’s PPI—FD but, honestly, the ECB’s QE, and CCAR, are likely to make
everything else, except the Treasury Auctions more like minor curiosities. Given how large
a move up Treasury Rates managed, last Friday, after the Unemployment Report,
there’ll be talk, any minute, about how expensive it’s going to be to finance
the US deficit, with rates rising. That conversation will arrive just as Treasury
Secretary Lew will be trying to convince Congress it needs to raise the debt limit,
immediately, even as everyone knows it’s tax season, and receipts between now and
April 15th are likely to make the debt limit less urgent, at least temporarily.
The Chinese National Peoples’ Congress wraps up on the 9th—and is
often followed by a rally in Shanghai shares. With Premier Li covering the lowered GDP
target of 7.0%, and the target deficit, on the day the Congress opens, its closure will be
overshadowed by the ECB implementing QD with its first Bond Buys on Monday. And that may
well be overshadowed, as well by the Federal Reserve’s release of the
CCAR—Capital Adequacy Tests @4:30pm et, on Wednesday. In past years, the banks have
jumped the gun and announced buybacks & higher dividends in the waning hours before
the tests were released, so everyone assumed there were no problems with the ones that
jumped the gun. Whether that will happen this year or whether the Fed’s told everyone
to muzzle it until the tests are released remains to be seen. Just know that the CCAR has
often been anticlimactic for all but the failures, and this year’s failuers may well
all bear foreign passports.
NABE, the National Association of Business Economists, boasts some high profile speakers,
like economists Greg Ip, Jason Furman, Peter Orszag, Alice Rivlin, Alan Kreuger, Brian
Sack (formerly of the NY Fed), & Glen Hubbard, plus Loretta Mester of the Federal
Reserve Bank of Cleveland, to name just a few. Even so, they’re not nearly as high
profile as some NABE speakers of the past, and most have done a good job of letting the
world know what they think, long before this conference started, Sunday. Still, it’s
not hard to imagine any of the speakers making last minute adjustments to their speeches,
given how sure the Bond Market has become that rates will lift off in the US, in June.
The Earnings Calendar is dominated by consumer facing companies—both retailers and
restaurants, along with Hovnavian, on Thursday morning. Still, it’s mostly the second
string, without the power to change the course of equities. There are actually more
investment bank conferences overseas, than there are stateside but a few will stand out.
Let’s start with Apple’s media event, presumed to be about the iWatch but I have
my suspicions that it’s not that, alone. If you checked the Sunday circulars, you
might have noticed Walmart, Target and Best Buy offering deals on Apple iPads. While the
media has been filled with stories about the mega sized iPad that Apple never announced
being delayed until September but major retailers don’t usually offer discounts on
Apple products unless they’re both sanctioned by Apple, and an effort to clear
existing inventory to make room for something new and improved. With Apple about to enter
the Dow Jones Industrial Average, a sneaky upgrade no one’s expecting would be
perfectly timed, to help the company avoid the fate that’s followed many an newly
included stock—a sell off.
Big I-bank conferences in the US this week include the three I lead with on Monday:
Deutsche Bank’s 23rd Annual Media, Internet & Telecom Conference;
Credit Suisse’s 17th Annual Global Services Conference; BAC/MER’s
2015 Industrial, Energy & Infrastructure Conference. Tuesday, while those are ongoing,
Citi hosts Asset Manager, Broker Dealer & Exchanges, a fortuitous event, given the
CCAR’s are out Wednesday, and presenters will know whether they’re capital
return wishes were granted, because the Fed gives everyone whose plan is rejected time to
resubmit a different plan, before the results are announced. Barclays, meanwhile, hosts
Global Healthcare, a subject that seems well covered, already, this year but for some,
there’s no such thing as too much repetition or another chance to read "body
language." And with the ACC’s Annual Scientific Sessions starting next week,
analysts will have cardiology stocks are their minds. Tuesday also promises RBC Capital
Financial Institutions, and KBW’s Cards, Payments & Financial Technology, as well
as Susquehanna’s Chemicals, Sandler O’Neill’s West Coast Financial
Services, Wells Fargo’s 6th Annual E&P 1x1, Mitsubishi’s Oil
& Gas Conference, Longbow Research’s Basic Materials, and Piper Jaffray’s
Tech, Media & Telecom. Citi’s Global Resources, Wednesday, is in London but US
companies will be presenting, as well. Goldman Sachs’ 6th Annual TMT
Leveraged Finance Conference, also Wednesday, could offer some new information on
companies who, often, issued debt that still trades at seriously wide premiums to
Treasuries, to make the speakers of interest, at the moment, even with government rates
rising.
All in, it’ll be a busy week for "news," with stock traders keeping an eye
on Treasury rates, like they rarely do. Having bought my first car with a 13.95% loan.,
and kept cash for months stashed in Dreyfus money market funds that paid over 18.0%, back
when, the fact that the FOMC might hike rates to 50 of 75% by the end of this year
doesn’t sound very threatening. Of course, many of the jockeys running big money
today were barely out of diapers back when rates were up there, so can’t be expected
to know what really high rates are. Still, with China, Japan, and the ECB easing, to name
the 3 biggest easers, without mentioning the many other central banks that have been
cutting rates, as well, it’s hard to see how stocks won’t continue to benefit
from cheap liquidity for months if not years to come. Sooner of later stock traders will
wake up to that fact, though perhaps not until the bond market eases its foot off the gas
pedal a bit. Rates rising because of a strong economy isn’t a deal breaker for stocks
but it remains to be seen if the economy, or even, the job market is as strong as
Friday’s jobs report made it look. As I said at the outset, I’ll be surprised if
snow and sub-freezing weather didn’t keep people from making it to their unemployment
office—not to mention the state offices that were closed, as well, because of the
weather, keeping anyone from applying for benefits. While stocks may continue down for
most of this week, I don’t think the final chapter on the job market has been written
yet. And because I’m more bearish on the economy than it appears some were, upon
release of the Feb Jobs report, I’m not ready to hammer the last nail into the
rally’s coffin, yet. Having said that, though, I find US stocks expensive, and
I’m pretty sure it’s a good time to dive into research on some European stocks
poised to benefit from the ECB’s QE, just as it’s set to launch.
ECONOMIC: (Highlights below.
Full International Economic Calendar here)
© Sandi Lynne 2015 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the author’s,
alone, and should be just one factor in more complete due diligence..
March 02—06, 2015 RBA,
BoE, ECB, Beige Book, Unemployment Report, and the Stress Tests, Oh My! This is one jam packed week in all but the Earnings
Calendar. Yes, more retailers will report earnings this week, including or, especially,
Costco & Best Buy, but the Economic Calendar features more outstanding data,
culminating in Friday’s Unemployment Report, even as some major conferences take
place, Citi’s Global Property CEO, apparently, leaving no one out.
It’s hard to even know where to begin with the Reserve Bank of Australia meeting
Tuesday local time, overnight Monday, for the US. The Bank of Canada meets Wednesday, even
as the BoE & ECB Meet Thursday. The ECB is starting QE this month though some are
worried about it having enough available bonds to buy. With Jan Personal Income, Outlays
& PCE, Yellen’s favorite inflation stat, plus Jan Consumer Credit & the
Unemployment Report out Friday, even as the Fed’s Beige Book is out Wednesday, and
Feb. Motor Vehicle Sales out Tuesday, there’ll be much to chew on, all week.
Thursday, the National People’s Congress starts at 5-day meeting in Beijing, at which
inflation and GDP targets will be set for the year. We come to expect the big
announcements to arrive after the meeting ends but, last year, much of the news worth
having was front end loaded, out the first 2 days of the event. Since China lowered rates
another quarter point, Saturday, it’s apparent growth isn’t coming in as hoped.
That surprise cut before the meeting helped turn futures, everywhere, positive but
it’s hard to believe additional rallies won’t, initially, attract a little more
selling. Markets tend to fear heights, and Nasdaq 5K, and new highs in the senior indexes,
are just the kinds of heights that markets often approach and withdraw from, before
arriving.
Israeli Prime Minister Netanyahu addresses a Joint Session of Congress Tuesday, invited by
House majority leader, Boehner, to Obama’s distress. The ostensible reason is the
upcoming Israeli elections but it seems to me, Boehner is willing to dig into Obama’s
side, whenever he can, to pay back Obama’s immigration executive order, demonstrating
neither intends to work collaboratively, to move legislation along. I can’t say I
blamed Boehner who, probably, felt it would win some Jewish voters, while he was at it.
Morgan Stanley’s TMT Conference used to be held at Mobile World Congress in Barcelona
but is taking place in San Francisco, this year. It starts Monday, when BAC/MER starts a
Consumer & Retail Conference, while Cowen & Co’s 35th Annual
Health Care Conference gets underway in Boston. It strikes me as equally strange that the
Game Developers Conference would start in San Francisco, Monday, also, when so many games,
now, are being played on Mobile Devices. Tuesday, UBS starts Utilities & Natural Gas,
a 1x1 Conference, that will limited the amount of news that comes out of it. Morgan
Stanley, Hosts MLP, Diversified natural Gas, Utilities & Clean Tech, also starting
Tuesday, when the noisier conferences is likely to be JPMorgan’s Aviation,
Transportation, & Industrials Conference, in NY. Meanwhile, also Tuesday, Barclays
holds MLP Corporate Access, while Barclays’ hosts MLP Corporate Access. But look down
the rest of Tuesday’s schedule, and there’s an incredible quantity of
conferences on both sides of the Atlantic, even as the Geneva Motor Show gets underway.
Consumers are the focus of UBS’ Wednesday start conference, as is Mitsubishi
UFG’s is hosting Consumers, as well, in Seattle, BAC/MER Refining. That would make
for a big week without other conferences but Thursday, in the hours before the Federal
Reserve’s Stress Tests are released, JPMorgan will start its Gaming, Lodging,
Restaurant & Lodging Management Access Forum in Vegas, even as Oppenheimer hosts a
Cloud Services 1-1 Conference, and Goldman Sachs hosts its 3rd Annual Housing
Finance Conference, which features Mel Watts, director of the FHFA who might well try to
talk up easier mortgages.
All in, expect a deluge of news all week, when what interests most traders, most, will be
Friday’s Unemployment Report, and the Fed’s Stress Tests. This is the first year
the Fed is separating release of the Stress Tests and CCAR-Capital Adequacy tests. And
it’s the last time either will be released in March, since the both are being shifted
to a full calendar year end time frame, with release later in the year, starting 2016.
Think about how much has to go right with data, earnings., and conference announcements,
this week, before release of the Stress Tests, after hours Thursday, and Friday’s
Unemployment Report. Markets do climb a wall of worry, if Street cliches are to be
believed, but markets also hate uncertainty, and this week will be filled with it—at
least until Friday at 8:30 a.m. With stocks are new highs, and the Nasdaq threatening to
revisit an old higher, a little vertigo wouldn’t surprise. And then, with 2 out of
the 3 months of Q1 put to bed, there’s room for warnings at any and all of the
Investment bank conferences, this week. With the northeast snowed in for a good portion of
the quarter, that’s about the last thing traders expect, at this point. Then again,
it’s never a good time for bad news, when it comes to markets, yet it’s clear
the Federal Reserve might be tougher this year, in its bank and SIFI tests, than it was in
the past. Any celebration of the Stress Tests, this week, could, yet, be undone with the
CCAR, next week.
ECONOMIC: (Highlights below. Full
International Economic Calendar here)
© Sandi Lynne 2015 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the author’s,
alone, and should be just one factor in more complete due diligence.
February 23—27, 2015 END OF MONTH ALREADY???
Let’s start with the Economic Calendar, and in particular, Janet Yellen’s
testimony before the Senate, Tuesday, and the US House, on Wednesday. When she speaks of
the FOMC being data dependent, there could be some on the one hand, and on the other hand,
as economists are famous for, and a general indecisive posture towards lift off. As only
one commentator wrote, last week, after the FOMC Meeting Minutes were out, I believe
Yellen wants to impress on everyone that she’s so data dependent, she really
hasn’t made up her mind about whether June will see lift off, even if the data remain
in the range they’ve been in for the year to date. And then, if her 2 days of
testimony aren’t enough, there’ll be more later in the week.
NY Fed Pres. Dudley & MN Fed's Mester speak at U of Chicago Booth School of Business 2015
Monetary Policy Forum in NY. Ben Bernanke Keynotes,
while Fed. Gov. Fischer, ECB V.P. Constancio, and BoJ Deputy Gov. Nakaso are panelists.
The 2015 Theme: New Neutral. Also among the speakers, at the one-day event, Ehtan Harris
(BAC) & Jan Hatzius (GS) Part of the Inititative on Global markets (IGM), which
submits recommendations to the FOMC on a fairly regular basis, some of the other panelists
include JPM’s Michael Feroli, MS’ David Greenlaw, DB’s Peter Hooper,
Frederic Mishkin (Columbia U former Fed pres.). members of the IGM produce a report that
goes to FOMC. And then, next month, just get a load of all the central bank meetings,
featured in Weeks Ahead, under the abbreviated Economic Calendar below.
The Earnings Calendar is filled with energy support service companies, like KBR,
healthcare providers, like Tenet Healthcare and Healthsouth, some large restaurant chains,
including DinEquity, and major retailers. It’s the latter that will color the week,
as much as Yellen—and perhaps even more, since I don’t think Yellen gives anyone
a definitive date to zero on. Among the retailers reporting, Home Depot and Macy*s (Tues.
a.m.), Wednesday morning Dollar Tree, Lowe’s, Target & TJMaxx. Wednesday
afternoon, there’s more from L Brands, whose Victoria’s Secret has another
special on TV, this week. Thursday morning, earnings are expected from Kohl’s, and
more losses from Sears Holdings, even as that afternoon, more reports are due from Gap
Stores, JCPenney, and Ross Stores. Here’s what you need to know about retailers: The
year that just wrapped was a 53 week year, and as disappointing as the stretch between
Thanksgiving weekend’s end, and Xmas might have been, the post Xmas activity was
robust, straight into the new year, and didn’t really taper down until almost all of
fall’s leftover inventory had been well pruned. I was particularly impressed with
January traffic in the mall but couldn’t help wondering how much better sales might
have been, if only designers had managed to produce a more inspiring fall/winter
collection than they seemed to deliver. Fashion has been nearly bankrupt for 2 years,
holding back sales and enthusiasm for shopping.
I understand that some chains with heavy northern concentration have been hurt by the
snowy February—with Boston, and the surrounding areas having so much more than
schmatas to worry about, what with so much snow that roofs are collapsing under the
weight. But even the retailers who were late to build out their websites are now up and
running, and there must have been some boredom shopping going on. Surely, as I said last
week, Toro snow blowers must have been hot items, which should boost Home Depot &
Lowe’s sales, even as it’s easy to imagine snow melting rock salt selling like
hot cakes, side by side with shovels. And with such frigid weather, it’s not hard to
imagine people cuddling up near their fireplaces ordering food for delivery. The only
question is whether all the restaurants that saw orders were able to deliver the food,
through ice and snow.
Watch out, Monday, the first trading day after monthly options expire. In situations where
stocks surged into expiration, like they did Friday, there’s often payback that
starts shortly after the markets open. While retailers are not sounding as downbeat as
they did a year ago, watch out for the analyst meetings held by JPMorgan (Tuesday) &
State Street (Wednesday), where it’s hard to imagine regulatory pressure not arising,
and perhaps more of the ripple effects of the SNB’s decision to suddenly lift the
Euro cap. Recall, that while the ECB blessed QE, it doesn’t start until next month,
and no one knows exactly what it will look like, once it does start. The ECB will only buy
top quality bonds, and there are far fewer of those in Europe, than there are in the US.
To my knowledge, there’s no GSE equivalent in the EU, even as triple & double
A-rated paper is scarcer as well, on the national level, over there.
Given the weak Q4 earnings that were, already, released, I don’t think retailers are
going to hit the ball way out of the park. Margins were probably hurt by deep discounting,
even as sweaters, overcoats, and other big ticket items never really were needed, most,
until the season was already over, in February. In short, retailers will neither make Q4
earnings, overall, worse than they’ve been, but won’t raise the overall picture,
either. Given that, it’s fair to ask whether Friday’s big break out is deserved,
and the next leg up in a continuing rally or, perhaps, an explanation point on the long
rally that began in 2009, and is near its end. Granted, with the ECB and BoJ easing in a
big way, there’s still plenty of liquidity to drive stocks but does it have to be US
stocks? Quite a few long time bulls have become very vocal about it being time to leave
the US, and concentrate on cheap, undervalued European stocks. Granted, the Fed has
announced the release of stress tests on March 5th, and the Capital Adequacy
tests on the 11th, leaving one last booster for financials still ahead. But it
feels time to become a lot more specific about which stocks one buys. The Nasdaq Comp will
surely hit 5K any day now. Whether that’s another exclamation point that’s a
rally killer remains to be seen but it feels in my gut that the first touch there will
trigger profit taking. And perhaps stocks are due for more consolidation, at that point,
before we learn whether Q1 results are reason enough for the rally to take another leg up.
Stocks have always had a thing about round numbers. The Comp’s return to 5K could be
just another instance of investors getting shy at a big round number—at least until
there’s better reason to boost shares to all new territory. And, surely, the Street
will do its best to send stocks higher into end of month--or at least, T-3 EOM, since that
boosts inflows at a new month's open. So if I had to guess, financials and the Comp reach
for higher ground, but all bets are off once the Fed’s test results are known, and
Comp repeats at the 2000 all time high.
ECONOMICS: (Highlights below, only. Full International Calendar, here)
© 2015 Sandi Lynne Nothing contained in this commentary should be construed as a recommendation to buy or sell any security. The opinions expressed are
the author's, alone, and should be just one factor in more complete due diligence.
February 16—20, 2015 FOMC MINUTES
COULD SPOIL THE BREAKOUT
Not to rain on last week’s big break out but 2pm Wednesday could spoil the fun, when
the FOMC minutes are released. While there’s been much written on Wall Street and in
the press about June lift-off remaining on track, the Street rarely believes what it
writes until it’s forced to face the inevitable. The coming minutes will almost,
surely, reinforce the impression that the Fed is on an inescapable trek towards
lift-off—even if it backs off at the last minute, due to global pressures. Recall Ben
Bernanke mentioning the end of Q3 in May of ’13, and sticking to that position right
up until the September meeting, that year, when it didn’t happen. What the Fed wants
to do, and ultimately, will be able to accomplish, could diverge, depending on what
happens to the dollar, Euro & Yen, Ukraine, and ISIS for that matter. Another terror
strike in Copenhagen, over the weekend, is a reminder that terrorism takes no holiday.
The rest of the Economic Calendar is populated with other Central Bank events, including
the BoE releasing Minutes of its 2/05 Meeting, a BoJ meeting Tuesday, and the ECB Minutes
of their Jan. meeting, on Thursday. Still, data from the housing industry is more likely
to influence us markets, from the NAHB Feb. Housing Market Index, Tuesday, Jan Housing
Start & Building Permits, Wednesday, along with Jan. PPI, the same day. Don’t
forget to keep an eye on oil, as well as Baker Hughes’ Weekly US Rig Count, Friday,
which so far, isn’t influencing the quantity of oil produced, mostly because
what’s being idled are rigs that were digging hoped for new wells, rather than
producing wells.
There are a number of major events on the Event Calendar, including this past
weekend’s International Toy Fair, and CAGNY: Consumer Analysts of New York Week, which
started Monday.
36th Annual Cardiology @Big Sky doesn’t provide affiliations for its
"faculty" but it does provide a link to paid affiliations. Low and behold, we
were able to learn every Pharma or MedTech company sponsoring the research that’s
being presented. Unfortunately, the list was virtually every pharma & biotech/MedTech
doing any cardiology research, except LLY. Still, we wish every medical society did the
same, so we wouldn’t have track each company’s press release, separately.
While the markets reopen Tuesday, it’s a bigger day than that: Fat Tuesday kicks off
Mardi Gras and Carnival, worldwide, even as the and Lunar New Year, which arrives
Thursday, sees celebrations starting earlier. Also Tuesday, the apparel industry most of
us know meets at MAGIC, which runs until the 20th. Over the weekend just
ending, until the 19th, Mercedes-Benz Fashion Week has overtaken Lincoln
Center, the Piers, and much of the rest of New York, attendees surely glad it’s not
held in Boston, which has been buried by snow, this month, while New Yorkers merely dodged
the occasional snow flake.
Wednesday, Barclays hosts Industrial Select, which revives the I-bank
conference season, which won’t really hit its stride, again, until March. Thursday,
look for the USDA’s 91st Agricultural Outlook Forum (Arlington VA thru 20th),
arguably, the biggest event in agriculture, perhaps for the first half. Then, Friday,
AAAAI--the American Academy of Allergy, Asthma & Immunology will be the largest
medical society meeting, probably overshadowing Osteoporasis Diagnosis Management &
Prevention, and Hematologic Malignancies Focus on Leukemias, Lymphomas &
Myeloma, even as the weekend just ending included the 40th Annual
Cardiovascular Conference, American Society for Blood & Marrow Transplantation. While
the Healthtech Molecular Medicine Tri-Con, in San Francisco, is often a source of news, I
don’t see it cutting through the news from other events, at least not to the same
degree as it often has in the past.
I’m giving the Earnings Calendar short shift because, despite the large number of
companies reporting, there are few that could really derail stocks, among them. Hotels are
heavily represented on the schedule, along with the entire prison industry, precious
metals, almost the entire healthcare-related REIT industry, and energy service companies,
including MLPs. Walmart & Nordstrom are also on there, Thursday morning &
afternoon, respectively. Of all the reports scheduled, though, I’m probably most
interested in Toro. While known for lawn mowers and weed whackers, I have to believe it
has sold a tremendous number of snow blowers, this year, as this exceptionally snowy year
followed a snowy 2014. That’s also Thursday afternoon.
I’ll grant, the fact that the Russell small caps got in the groove, last week,
transmits more support to the break out of large caps, last week, helped, of course, by
oil’s rebound. But stocks seem in a bit of denial, ignoring the fact that ex-Apple,
neither revenue nor earnings grew much in Q4—which is more supportive of the initial
look at GDP of 2.6% seeing a revision down, than up, when the Advance looks is delivered
There’s no doubt that the US may look like the best house in a lousy neighborhood but
is that enough? I was surprised by the number of empty tables at the restaurant I was at,
Valentine’s Day, when its usually nearly impossible to get a table. More than the
usual number of mall shoppers picked up chocolate dipped strawberries for their Valentine,
but most chose the small ones at Godiva, where they were 6 to a pound, rather than the
palm of my hand sized ones at Palm Beach Confections, where 2 weighed a pound. And
there’s no doubt some major northeastern cities, like Boston, had bigger issues to
deal with than celebrating a greeting card made up day like Valentine’s Day, as the
governor of Massachusetts commandeered more parking lots as snow burial grounds. I sure
wish I could find what Wall Street is smoking, so I could join the celebration. And I
might yet, if the Street can look past FOMC minutes that are more than likely to
concentrate on the factors that support lift off in June. Not that I’ll revise my
opinion of how strong the economy really is but I’ll position my portfolio more
bullishly, if the FOMC minutes don’t derail the rally. Meantime, it’s clear,
what helped stocks most, last week, was the revival in the financials, which were already
seeing positioning in anticipation of the Stress Test & CCAR results, which the Fed
finally announced, will be released on March 5th & 11th,
respectively, instead of on the eve of March Monthly stock Expiry, as it’s been done,
for all the years those tests have existed. How come no one on the Street questioned why
the results are coming out so early? Does the Fed have bad news to deliver? Recall, it
heavily criticized the living wills banks submitted. So what’s it saying by the
earlier release of those tests, this year?
ECONOMIC: (Highlights, only, here. Complete
International Economic Calendar, here)
© Sandi Lynne 2015 Nothing contained in this commentary should be
construed as a recommendation to buy or sell any security. The opinions expressed are the
author’s, alone, and should be just one factor in more complete due diligence.
February 09—13, 2015 LOOKS SURPRISINGLY LIKE A YEAR AGO Don't Expect it to last Well, that was something! After a January quite cruel
to the bulls, someone flipped a switch in February, just like they did in 2014, and it was
off the races for the bulls, again. It remains to be seen whether the big run since the
month began is more playing tag with the range stocks have been in for awhile, or
something else—like a continuation of the bull run or a last chance to get out while
the getting is good. Clearly, Friday’s Jobs report provided more fodder for those who
expect the FOMC to lift off zero in June, yet the market wasn’t, necessarily,
terribly disturbed by that. Curious, no? Could it be even the bulls are weary of zero
bound rates and ready for something to go in favor of financials, for a change?
That was a characteristic of last week’s rally we hadn’t seen for a
while—financials actually benefiting quite a bit. While some may say that’s in
anticipation of next month’s stress test results and capital actions to come after
the Fed has finished its examination it feels a little too soon for that, doesn’t it?
It that was really it, then presume traders are, once again, more afraid of a rally
leaving the station without them than they were in January. Otherwise, perhaps, it could
have been a giant sigh of relief that, with Q4 earnings behind them, and the statute of
limitations closing in on the Dept of Justice & SEC, the financials might, finally,
have the worst behind them. Either way, the financials are still well off their December
highs and could continue to add to their recent gains—at least until closer to FOMC
Chief Yellen’s coming Congressional tesimony on February 24—25th.
The US Economic Calendar is a bit of a snooze, this week, except for the Treasury
Auctions, and Tuesday’s JOLTS. Jan US Retail Sales, out Thursday, could be a
confusing mixed bag. Continuing declines in gasoline will weigh on top line retail sales
but the blizzards will boost sales, perhaps considerably. Remembering Hurricane Sandy (no
relation), northerners cleaned out supermarket shelves, and probably swooped into the home
improvement stores for batteries, flashlights, shovels, snow blowers, and other aids to
enable them to dig out. A blizzard that knocks out power rarely cuts off heat, because
most of the north is heated by steam, natural gas, or furnaces powered by heating oil. So,
assuming they can still warm their houses and, even cook, on gas stoves, power outages is
not the same devastation up north as it can be down here in the south, where electricity
pretty much powers everything—especially in Florida, where the water table can often
be hit by digging no more than eight inches underground—16 inches at most, in many
deeper areas. That truth has been a discouragement to buried power and nat gas lines. Only
recently, has burying lines become a priority, as protection against hurricane
devastation.
The Economist is hosting its Buttonwood Gathering, Tuesday, with the title "Balancing
Government with Growth." Featured speakers include Joseph Stiglitz, HSBC’s
Stephen King, and the Russian Direct Investment Fund. There are equally big headliners at
the Investing in African Mining Conference, in Cape Town South Africa, from the 9th
– 12th. Speakers there include Former UK Prime Minster Tony Blair, former
Goldman honcho Jim O’Neill, KKR, and the World Bank. ON the flip side, I don’t
expect anything particularly earth shattering from Fed speakers, this week, which includes
Dallas Fed’s Fisher (Wed. & Fri). If anything, what Eurogroup Finance Ministers
say about Greece, after their Wednesday Meeting, or Baker Hughes’ US Weekly Rig Count
could shake up markets, more.
The Earnings Calendar is especially crowded, again, but hasn’t as much power to shake
markets to their core, as there was in the past few weeks. Some of the smaller airlines
report, healthcare providers, and a smattering of restaurants that will provide more
information about where consumers are spending their money. Techs pop up again, with
Applied Materials, Baidu, Cisco, nVidia, and NetApp Wednesday afternoon, but I suspect
there’s greater curiosity in hearing from Panera, Tesla, Tesoro, and Whole Food
Markets that same afternoon. A few healthcare providers are on the schedule, along with
the entire public sphere of the ad industry, including Omnicon, WPP, and Interpublic.
With a sizable portion of the S&P reports in the rear view mirror, the investment bank
conference schedule starts to pick up again, this week. Major events to watch for include
Credit Suisse’s 16th Annual Financial Services Forum, Stifel’s
Technology, Internet, & Media Conference, as well as BIO CEO & Investor
Conference, all starting Monday. Tuesday, BAC/MER (or BAML, if you prefer) hosts
Insurance, while Stifel makes a return appearance with Transportation & Logistics,
both starting Tuesday. and Goldman Sachs' Technology and Internet Conference, Also
Tuesday, the start of 3 major Agbusiness events, in Des Moines Iowa, Tulare California,
and Columbia Missouri. It’s the time of year for Ag events, because it’s between
planting season and harvest. Also starting Tuesday, in London, International Petroleum
Week, coincident with the 12th Annual Canadian Oil Sands Summit, in Calgary,
and NAPE’s Expo & Wildcatter’s Ball, in Houston.
Wednesday is the first day of Leerink partners’ Global Healthcare Conference. For
those who don’t know, Leerink is a small but well respected specialist in biotech and
healthcare, so it’s events are well attended, attracting top flight corporates to
present. Also starting Wednesday, Stern Agee’s 7th Annual Financial
Institutions Investor Conference, in Boca Raton, BB&T Capital Market’s 30 Annual
Transportation Services Conference, in Coral Gables, and the International Stroke
Conference, in Nashville TN, often considered the home of healthcare, though Charlotte NC
Might dispute that.. But it doesn’t end there: On Thursday, Morgan Stanley hosts
Chemicals Corporate Access Day, in New York, while BMO Capital hosts 2014 Auto Finance
Forum, in Toronto, about which we could pull up a heck of a lot.
Of course, those in New York City will think there’s nothing but fashion in the
world, by Thursday, because that’s the kick-off of the Mercedes-Benz New York Fashion
Week, which runs through the 19th. Also in New York, the Harbor Investment
Conference to Benefit Boys & Girls Harbor, a well known short-sellers and value
investor event, where guys like Bill Ackman post slide shows to support their positions.
All of that assumes people can get into and around New York, which the weatherman makes
sound doubtful, because of another snow storm expected to head that way. And if the
fashion world hogging taxi’s and Uber rides weren’t enough, the New York
International Toy Fair starts Saturday, Valentine’s Day, which is why both Hasbro
& Mattel are hosting analysts, Friday. It sometimes seems like half the adult
population, and maybe some not quite adults, will be lining up at movie theaters Friday
through Sunday, to see "Fifty Shades of Grey," the film based on the first in a
trilogy by El James. I imagine, if not for Kindle Readers, and their imitators and
successors, less than half as many readers would have felt comfortable reading those
novels on buses, subways, and at the beach. Fhegghedaboudit all the summer blockbusters,
"Fifty Shades" will rock movie theaters this weekend, and undoubtedly, boost
sales at sex shops, as well. "There’s a time for everything, and for everything,
there is a time."
As I write, futures are pointing to a weak opening but that rarely means much by the open.
And after weeks of higher openings that were sold off, there was a reversal, last week, to
down openings that were bought, mixing up with opening gaps up, that never let go. Friday
there was late slippage, after the ECB said it would not longer accept Greek national debt
as collateral. That’s reason enough for the Eurogroup FinMin meeting, Wednesday, to
hold power over which way stocks will head, this week. It’s no surprise that stocks
topped, last week, just above 2050, since that’s the upper end of the range stocks
have been traversing. While 1980—1990 have defined the lower bound. Keep those ranges
in mind because I don’t think we’ve seen the last of ‘em. Until further
notice, or until stocks post a new all time high, if they can, the range rules.
ECONOMIC: (Highlights, only, below. Full International Economic Calendar here)
© Sandi Lynne 2015 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the author’s,
alone, and should be just one factor in more complete due diligence.
February 02—06, 2015 BULLS HAVEN’T GIVEN UP, POINTING TO S&P500
HOLDING-- 4x at 1990 AREA DESPITE ALL THE FOREX PRESSURE on EARNINGS Well, the big surprise, last week, was the FOMC
upgrading its assessment of the US Economy, to expanding at a "solid" pace,
instead of the long time "moderate" pace, just as headwinds from weakness
abroad, and a very strong dollar, start eroding earnings. Not to mention "solid"
gains in employment, just as the on-shore oil & gas industry has started slashing
employment rolls, and CapEx. But I can’t understand how so many multinationals could
have been caught offsides on currency, other than Venezuela, which devalued its currency.
I owned a small chain of 3 sporting wear stores and sold, exclusively, ski, tennis and
swim wear imported from Europe. I either ordered in dollars, or bought enough lira and
deutchmarks to cover my orders, whenever in the quarter before it was most advantageous to
me. I ordered in January through March, for deliveries from September through November,
for my biggest season. If I needed francs, I bought those, and so happened to be operating
my stores at a time when the dollar was, like now, soaring against foreign currencies.
Traveling to Paris, Milan, and Munich, I met CEOs from across America, and each of them
was hedging their risk, the same way I did. So someone explain to me how P&G, or any
of the other big disappointers couldn’t manage to do the same? It simply baffles me.
Ironically, I haven’t touched a foreign currency since, except when traveling in
Europe or UK, for pleasure. But really, how is it so many companies saw their top and
bottom lines shaved by currencies?
As the first full week of the New Year opened, I started off by saying, "January has
a fabulous reputation for stock bulls, though it doesn’t always start gangbusters.
The Dow dropped 135.31 points on the first trading day of 2014, and 1,203.68 points, or
7.3% through Feb. 3, 2014, before starting the next rally." That’s even worse
than it was this year, and there was nothing special about the bottom that was put it by
Feb. 3rd, 2014. It was a Monday, not an Unemployment Report or any other
especially significant day though it did follow a January FOMC Meeting the week earlier.
And there’s no sugar coating the past 3 weeks, and last week in particular. That was
one ugly week and month, which looked a lot like last year but with a big difference: it
wasn’t just the banks that disappointed, this year. We’ve had a few weeks of
disappointment, to the point where it feels like Apple was the only company to top the
street, and that now becomes its biggest handicap for future quarters.
You know rates are really low when the British are, finally, paying off 218m pound
sterling of "Consols"—Pre-WWI War Bonds, held by 11.2K investors, some of
the consols going back to the South Sea Bubble financial crisis of the 18th
century, and used to fund the Napoleonic & Crimean Wars. These Consols were issued
without a maturity date so, presumably, a couple of hundred years later, rates are so low,
now, they’re worth paying off. It’s probable that MBA’s weekly purchase
& refinance applications surged again, last week, held back if at all, by the blizzard
that mostly spared New York.
I expect weekly jobless claims, Thursday, will see some payback for last week’s 35K
drop in claims, which I suspect were all blizzard related. Don’t forget that, even
though blizzard Juno didn’t hit New York City hard, the city and state announced
closures, as did all of New England. With unemployment offices closed, it should have been
no surprise that claims collapsed, and shouldn’t surprise that they’ll rise this
week, as payback. This Friday’s Jan. Unemployment Report will be augmented by the
BLS’ benchmark revisions, an annual occurrence. Still, with Unemployment at 5.6%, and
the Fed’s line in the sand presumed to be at 5.2%, revisions that make employment
appear even stronger, could trigger a bad reaction. I wouldn’t be surprised if
Australia lowers rates, as the resource based economy faces lower prices across the board.
There’s less likely to be any rate move from the BoE Thursday. At one time expected
to be first to hike rates, MPC members have since backed off that position, as Europe has
weakened.
The volume of Earnings releases cranks up to surpass last week but the number with power
to really move the markets are declines, this week, despite some big names like
ExxonMobil, BP, ADM, BP, HCA, and Merck, to name just a few, If anything, big pharma and
insurers will seem like the dominant reporting companies, though that’s just because
there are so many others that won’t make any ripples, at all.
Still, because of the volume of reports expected, the I-banks remain somewhat out of the
picture, hosting conferences out of the country, if at all. The number of analyst meetings
grows, now that Q4 reports are out of the way but none that could be earth—or
market--shattering, either. That leaves Cowen Group to break out with its Annual
Aerospace/Defense Conference & Transports 1x1 Forum starting Wednesday. Otherwise, the
Events calendar is dominated by more medical society meetings, healthcare one of only a
couple of groups that includes several charts that are outperforming the markets, in
general, where there’s a wide choice of stocks about all short term and long term
moving averages.
So will February 2nd be like February 3rd was, last year? A day for
stocks to bottom and reverse? It doesn’t appear so, for the moment. The charts
don’t have enough stocks testing bottoms made in either October or December, yet, and
the fact that the Nasdaq 100 could rise even with big gains by Google, Apple, and Amazon
to support it suggests there’s probably more selling ahead. At this point, I’d
think, money managers who were buying every dip to S&P 2000 in past months are a
little more chastened, for the moment. I don’t think the bears have control yet but
it does appear the bulls are losing control. And a too strong Employment Report, Friday,
could work against the bulls, as well. While I think the Fed really wants to get off the
zero bound, I also don’t think they’ll set out on a quarter point hike per
meeting scheme, initially. Not while Europe is so weak, and China is weakening. And not
while so many companies are suffering the effects of a strong dollar, causing earnings to
weaken considerably. While economists are calling for one and done, the Street hasn’t
bought into that yet. In the past, a first rate hike was the beginning of a steady process
of regular hikes, and it will be Yellen’s job, in March or later to convince the
market they’re so data dependent, they could hike once, and sit and wait for reason
to hike again. Yellen’s conversation will have to move off lift off to explaining
that data dependency means one hike won’t, necessarily, be followed by others,
automatically. I expect that conversation to start as soon as the March meeting, the next
one accompanied by a Yellen press conference. But she could discuss more measured hikes
even sooner—in her so-called Humphrey-Hawkins testimony to Congress, which should be
sometime this month, the dates, not yet, announced, or even earlier, in the FOMC Jan.
Meeting Minutes, out on the 18th..
ECONOMIC: (Below, highlights, only. See Complete International Economic Calendar, here)
© Sandi Lynne 2015 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the author’s,
alone, and should be just one factor in more complete due diligence..
January 26—30, 2015 END of MONTH SHOULD BE
BULLISH My Foreign Exchange advisor, Barbara
Rockefeller, of Rockefeller Treasury Services says there’s nothing to fear from
Sunday’s outcome on the Greek elections. There won’t be a Grexit but, rather,
expect the new government to press the Troika to ease up on the austerity measures, and at
the least, to extend Greece’s repayment deadline, to give it more time. I suspect the
FOMC has similar advisors, telling it there’s nothing to fear from today’s Greek
election outcome. But with the ECB finally triggering QE, albeit, not until March, I
expect the FOMC message to focus on the recovering US economy, and the likelihood that
rates can lift off later this year. Whether that message pleases, or not, could determined
whether the month ends on a high note, or not. But for now, there’s little reason to
expect the FOMC to say anything that might upset the status quo. Lift off requires
continue signs of recovery, and that’s what the FOMC wants first and foremost.
Therefore, it will say nothing that could upset the current trajectory. And perhaps the
FOMC is relieved that the BoJ and ECB can take over the mantle of QE, leaving it to
finally get off the zero bound.
It’s a big week for other Central Bank meetings but none with the power to upset US
markets, outside the FOMC—with all due respect to the Reserve Bank of New Zealand,
The South African Reserve Bank, and the Banco de Mexico, as detailed in the Economic
calendar below. Friday’s Advance Q4 2014 GDP could even take a back seat to Q4 ECI
and PCE, the latter Yellen’s favorite way of tracking Consumer Prices. The week after
this, there’ll be meetings of the RBA (Australia) & the BoE which has been
sounding a lot less hawkish, lately.
The number of companies reporting Earnings picks up, this week, the tickers likely to
attract the most attention emboldened, on the calendar, as always. DJIA members will exert
the most influence on that index of 30, starting off with Microsoft Monday afternoon. 3M
picks up the mantle Tuesday morning, along with Pfizer & Procter & Gamble. Tuesday
afternoon, Amgen headlines for biotechs, Apple for the S&P, the company with the
largest market cap in that senior index. But Thursday, alone, contains a wonderful cross
section of the economy, and alone could cast the die for Q4 earnings. Whether you
concentrate on the emboldened names Thursday, or examine every company expected to report,
that day, it’s almost a summation of Q4, on its own. If you want to know how Q4 was,
before GDP is released, Friday, you could do worse than zero in on Thursday’s
reports, in toto.
Because we’re into the heart of Earnings Season, the Events Calendar slows down, with
most Investment Banks taking a hiatus after a jam packed first few weeks of the year.
There’s the usual collection of healthcare-related events, ranging from Rheumatology
& Cardio-Thoracic Surgeons, to Clinical Hematology, and Personalized Medicine, the
latter at the crux of Immunology’s quest to fight cancer by harnessing the
body’s immune system to kill cancer. As it turns out, Immunotherapies &
Immunomonitoring is the name of a conference that starts Thursday, in San Diego. Health
benefits Conference & Expo, starting Tuesday, should be an opportunity for insurers to
release preliminary totals of new Obamacare subscribers. Likewise, few events are as big
for chip and circuit board companies as DesignCon, subtitled, "Where the Chip meets
the Board," also starting Tuesday.
ITXpo (starts Tuesday) is a collection of several conferences, just as IPPE, which starts
the same day, is as well IPPE incluces Poultry Production & processing, Liquid Feec
Expo, and a Meat Expo, as well as a one-day Pet Food Conference. ITXpo, on the other hand,
formerly InterOp, includes Iot Evolutiong Expo, and an IoT Developers Expo, Telecom
Reseller Expo, M2M Machine Evolution Conference, ChannelVision Expo, and SDNZone Software
Telco Congress. I’d suggest it will take a backseat to reports, this week, from
Microsoft & Segate Tech (Monday, Philips, Apple, AT&T, Electronic Arts, &
Western Digital (Tuesday), along with Juniper Networks, Yahoo, VMWware, and more.
They’ll be followed, on Wednesday, by STMicroelectonics, Facebook, Lam Research, and
Qualcomm, and that’s before we even get to Thursday’s bonanza of the cross
section of the US economy.
Airlines & Rails are well represented on the Earnings calendar, along with jumbo
biotechs, like Biogen Idec and Celgene, in addition to the aforementioned Amgen. And
there’s more than a handful of builders, as well, though the 2 builders that already
reported, have paved the way for more disappointment. A big storm working its way from the
West coast East, to New York & New England almost assures the group will not end with
a flourish, this month. Tuesday, we also get the New Home Sales for December, and the
S&P/Case Shiller Nov. US Home Price Index. I find it ironic that the US plans to
auction $25B in 2 year notes plus $15B in 2-year Floating Rate Notes, Tuesday, when it
would seem wiser, at this point, to go with FRN’s rather than plain fixed rate
2-years. Thursday, we’ll get the National Association of Realtors Dec. Pending Home
Sales, after a surprise rise in starts and permits, announced last week. There’s
probably not much to worry about a failed 5-year note auction, Wednesday, or a 7-year, on
Thursday, since US Rates are still considerably higher than overseas rates, except,
perhaps, in Greece and Russia, but buying those takes an entirely different risk profile,
than US Treasuries, while foreigners buying US Treasuries might, also, be betting on
continued gains in the dollar.
And if you’re considering playing the consumer with hotels, than Tour d’Alis
American Lodging Investment Conference, starting Monday, would be a good place to start.
In fact, given how weak Europe has been, it’s surprising hotel stocks have done as
well as they have but they’re probably a better bet than most retailers. Given what
I’ve seen, so far, of Cruise & Spring, hotels are a better way to play the
consumer, and could start playing some catch-up to the airlines.
The bulls decided, last week, it doesn’t matter where easy money is coming from, as
long as there’s easy money still to be had. That should set up a continuation of the
rally, into month’s end—assuming the FOMC doesn’t douse the flames, and
that’s my assumption. Don’t forget, the guys who can goose the futures to the
upside, want to assure that retirement funds head their way, early next month. The best
way to insure that happens, is to get stocks running back to the upside—Friday’s
small give back not, necessarily, a rally killer. We all know this, too, will end badly
but, for now, that’s not what the market will concern itself with—as long as
this week’s earnings aren’t as ugly as the ones delivered by banks, opening week
of earnings season.
ECONOMIC: (Highlights only, below. Complete International Economic Calendar is here)
© Sandi Lynne 2015 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the author’s,
alone, and should be just one factor in more complete due diligence
January 19 – 23, 2015 DO NOT TRUST FRIDAY’S RALLY THAT MIGHT HAVE
BEEN NOTHING MORE THAN SHORTS COVERING BEFORE A LONG WEEKEND!
To be a fly on the wall as the hoi polloi meet at WEF
in Davos-Klosters Switzerland. Aside from complaints about how much more expensive the WEF
stay will wind up, thanks to the Swiss Franc soaring after the SNB’s surprise, last
week, complaints that no other Central Banks received a heads up—not even IMF Chief
Christine Lagarde--should be the core of the grumbling. The head of the SNB is one of the
speakers, though not on that topic.
I do NOT trade commodities, directly, though have dabbled in the oil-related ETF, USO, on
occasion, and sometimes have traded equities that directly react to the price of oil, even
if with a lag. But in puzzling over the total collapse in the price of crude over many
months, along with the high that arrived in early summer, which is the historical seasonal
pattern, I have considered one possible cause for the trap door to have opened. Does
anyone else think the collapse in oil started about the time all the big
brokers—JPMorgan, Goldman Sachs, Morgan Stanley, and others—started shopping
around their physical commodities businesses, which they must divest under the Volcker
Rule of the Dodd-Frank Financial Reform Act? Isn’t is possible that buyers, like
Glencore, Rosneft, et.al. for the first time, faced the raw, real numbers in those books,
proving the oversupply of crude, copper, aluminum, iron ore, and other commodities? And
isn’t it possible, seeing all the commodities floating out at sea and stored at
warehouses the big banks have to divest, brought home the fact that production exceeds
demand, and there was a whole lot more of everything than anyone expected? Add in
China’s decision to stop stockpiling copper, for awhile, and ipso facto, the
conditions for a crash were set. And for the record, JPMorgan’s divestiture closed,
Morgan Stanley was shut-out by sanctions against Russia. At some point, of course, margin
calls probably forced some liquidations, as well, and now, no one wants to touch any of
it.
While I’m on my high horse, what about that MarketWatch headline, Friday, that
"Gold Moved up On Weak Inflation Data?" Gold is supposed to move up on higher
inflation, not a drop in inflation. And how did rates act? Treasury Rates ROSE on weak
inflation data—data that said the US has moved even farther below the FOMC’s
2.0% target inflation rate. MarketWatch had another headline, equally puzzling, on Friday,
that "Rates Move up on Weak Manufacturing." Before we conclude economists should
toss out everything they’ve ever learned on their way to an MBA, it’s nothing
more than proof the financial press looks to force headlines to match whatever is going
on, no matter how little sense the headline makes. Still, gold and rates rose when
inflation was announced as falling, it’s a topsy turvy world, and not just very hard
for the press to make any sense of it. Traders are equally pressed to anticipate the next
move, especially when central banks surprise everyone, besides.
About the only sure thing was the likelihood that shorts were going to cover, into the
long weekend, and that they did, Friday. And poor, beleaguered Citi shareholders, forced
to face a possible $150m loss on currency after the SNB decoupled from the Euro and cut
rates to 3x more negative than they were the day prior. The New York bank is also one of
the biggest prime brokerages for FXCM Inc., the foreign-exchange broker whose shares never
opened Friday, but finally, it was announced, inked a costly deal with Leucadia, the
parent of broker Jefferies, for a $300m rescue loan, at 10.0% to start, keeping FXCM open,
unlike 3 other currency brokers that folded, by Friday, all of them outside the US. But
there was plenty of ink spilled about potential losses at Deutsche Bank, UBS, Credit
Suisse, and at other financial companies, on both sides of the pond.
So, is the crash in crude over, with Friday’s almost 5.0% gain, which helped crude to
manage a gain on the week, after 6 weeks of losses? 113 consecutive days? Didn’t
appear so, on Monday, when crude fell again, while US markets were closed. More likely,
shorts were covering their bets on crude falling some more, in front of the 3 day weekend.
Will shorts be white on rice pushing down oil & stocks down, again, Tuesday, after the
long weekend? That was the case Monday, while the US was closed. How about Treasury Rates,
after the long weekend? Altogether possible, though it’s time for short rates, which
the FOMC controls, to decouple from long rates, as the FOMC meeting draws closer, and
members keep insisting that rates will lift off mid-year. .
Tuesday, the President offers his State of the Union Address (to a joint session of
Congress). Expect him to ignore the fact that Republicans control both houses, and talk
about liberal ideas that don’t have a chance of succeeding. For most, the Presidents
speech, televised by every network, will be nothing but an inconvenience to those whose
favorite TV shows will be pre-empted. FCC Commissioner Mike O’Reilly’s noon
speech at the American Enterprise Institute, Wednesday, has greater likelihood of
impacting stocks.
Then, so too, does the ECB meeting announcement, on Thursday. Expected to unleash
Quantitative Easing, through the purchase of bonds—or support for each country to buy
triple AAA rated bonds, there’ll be hell to pay if it, instead, the ECB announces
plans to unleash QE before its next meeting, in March. It was assumed that the SNB acted
to end its minimum franc level against the Euro, because it received a heads-up in advance
of the ECB’s bond buying but that may be the dream of cooperation many hope for,
rather than reality. Granted, the ECB’s move to QE became easier once the European
Court of Justice released an initial opinion that the ECB is in its rights to buy bonds
but that’s quite another thing from actually starting to buy bonds. For the record,
the ECB has decided to start releasing minutes of its meetings, starting with this one,
after a short lag. I think the smartest trade would be one that protects the downside, in
case the ECB disappoints. The SNB’s moves, last Thursday, caused reactions in the
currency markets, mostly. The ECB declining to initiate QE, would upset
stocks—especially those in the Eurozone but would have reflections here, too. Just
hope ECB Chief Draghi talks about initiating QE, now, rather than talking about talking
about it for a future meeting. The Bank of Japan, Bank of Canada, and Central Bank of
Brazil also hold meetings, this week, with possible rate decisions but none are being
tracked as closely as the ECB. The BoE will release minutes of its early Jan. meeting but,
again, it’s all on the ECB.
Housing is dominant on the US Economic Calendar, with Tuesday’s NAHB Jan. Housing
Market Index, Wednesday’s MBA purchase & refinance data, and Dec. US Housing
Starts & Building Permits. Then Thursday, the FHFA releases its Nov. Home Price Index.
Friday, we hear about Dec. Existing Home sales, likely to be soft despite the enticing
rates, which didn’t really become irresistible until January. The real excitement
just started, in the MBA Mortgage applications, especially refinance apps, as 30 year
rates fell below 4.0%. I have only 4 years left on a 30 year mortgage taken out 12 years
ago but am tempted to do a cash out refinancing, myself. That’s how enticing current
rates are!.
The headlines, aside from the ECB, will come from the Earnings Calendar, which is the big
kahuna, this week. The number of companies reporting have been trimmed of most financials,
below, but the largest regional and money center banks, plus credit card companies
American Express, Capital One Financial, & Discover Financial are included. Quite a
few Dow stocks report, along with airlines, rails, a few major tech companies, and oil
service companies. After a really lousy week, last week, dominated by the big
broker/dealers and money center banks, most of which disappointed, it will be a nice
change to step out of that realm. Last week I said it was a ‘Shame the Earnings
Calendar was Dominated by the Banks.’ This week, there should be much less bad
news—though it’s an open question whether the airlines will benefit as much from
crashing crude as one would expect. Southwest Air (LUV), is least likely to benefit,
because it’s hedging program is well known and often its source of strength. Crude
has gotten so low that LUV’s hedge program will work against it. Meanwhile, precious
metals are suddenly on a renewed run, with even silver participating, after weeks of
ignoring the flows into gold. It’s a new day out there, and anyone’s guess as to
whether the Earnings Calendar will rescue stocks from a new, unfamiliar, long time in the
making, downtrend.
One thing’s for sure, I wouldn’t count on Friday’s stock rally being
anything more than shorts closing out positions in front of a long, holiday weekend. To
consider the rally anything more than that could be a major mistake, that could prove
costly. Stocks have begun a downtrend until proven otherwise. It’s something traders
may not be ready to accept but that’s the truth. And from here, there’s no 3-day
weekend to cause shorts to cover, again, until late in February. That’s also a
reality that the bulls will have to live with, if the downtrend resumes, Tuesday, as I
expect, after the low volume, outsized rally on Friday.
ECONOMIC: (Highlights below. Complete International Economic Calendar here)
© Sandi Lynne 2015 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the author’s,
alone, and should be just one factor In ,more complete due diligence.
January 12—16, 2015 A SHAME BANKS WILL DOMINATE THE EARNINGS CALENDAR It’s a shame the major money center banks lead
off the Earnings season, since so many of the headliners will be booking legal settlements
against their earnings, the DoJ quickening the pace as, even, the Dodd-Frank extended
statute of limitations quickly approaches. It’s a slim Earnings Calendar but a
heavyweight, with KBHome, CSX, JPMorgan, Wells Fargo, Bank of America, BlackRock, Citi,
Lennar, Tawian Semi, Intel, Schlumberger, Goldman Sachs, PNC Financial, and SunTrust
Financial, to name the most notable firms reporting this week—KBHome & Lennar,
possibly, as important as any bank, though I wouldn’t expect much out of either. With
early November winter storms discouraging house hunters, followed by holidays that are
rarely conducive for home buying, the builders probably saw a weak quarter. I’ve
intentionally left out Alcoa, despite the aluminum it’s supplying to Ford, for the
F-150, mostly because the only ones who really care a great deal about it "kicking
off earnings season," are the talking heads on financial TV who try to make news out
of nothing, daily. The rest of the earnings calendar is loaded enough, without trying to
make Alcoa into something when, in fact, Synnex could be more telling. It not only is a
large distributor of PCs & laptops, which happens to build white boxes as well, while
owning Tiger Direct and the former CompUSA stores, it’s proven quite profitable, in
releases past. What Synnex says about enterprise spending is more important than
Alcoa’s supplying the skins of trucks that didn’t go start rolling off
dealers’ lots until the end of the year.
The US Treasury is busy auctioning off debt, again, with three $24B auctions Monday,
alone. The Beige Book is out Wednesday, a little too soon after the Federal Reserve
meeting minutes, which were out only one week prior to the release of the Beige. On
Monday, Dr. Ben Bernanke is keynote at the NRF BIG SHOW (National Retail Federation) on
"Global Economic Challenges & Opportunities for Success" (9am). He’s
done a better job of keeping his mouth shut since leaving the Fed, than his two
predecessors have. But then, after reading testimony in the Starr International suit
against the Fed & Treasury, over their treatment of AIG, there’s good reason for
him to say little about current Fed policy. The NRF is more about register systems, and
other back office supply chains than actual retail sales, themselves. Bernanke should be
the highlight of the show.
Other big shows, this week, include the American Farm Bureau Federation Annual Meeting,
which started Sunday. JPMorgan’s 33rd Annual Healthcare Conference, in San
Francisco, starting Monday, could be the most talked about event of the week, with over
300 presenters, Shire’s purchase of NPS Pharmaceuticals, over the weekend, likely to
have analysts preparing new M&A lists. Shire is paying only a 7.0% premium to
Friday’s close, specifically because of the many rumors that already boosted the
shares.
Other big events this week, no doubt, include the 17th Annual ICRxChange
Conference in Orlando, and the North American International Auto Show, in Detroit. ICR
includes both retailers and restaurants, and throws in a couple of apparel manufacturers
whose retail ops are secondary to their wholesale divisions. ICR also has a separate
private company agenda, where recently taken private companies show up as often as those
expected to go public, soon. Think companies like Lucky Brands. The sponsors of ICR
Xchange are as notable as the presenters, because it includes nearly every investment bank
big and small, from BAC/MER, to Guggenheim Securities, to Goldman Sachs, Credit Suisse,
Robert W Baird, Stephens, Stifel, Telsey Advisory Group, Wm Blair, and JPMorgan, Credit
Suisse, and UBS, among about a dozen more. What attracts analysts to ICR is hunger to
extract intelligence about retail & restaurant earnings, most of which won’t
arrive until February. Meanwhile, Monday, Tiffany will release holiday sales, GameStop on
Tuesday, Best Buy on Thursday, and probably more I don’t follow, not on the calendar
below.
Likewise, though Deutsche Bank has a formal Global Auto Industry Conference out in
Detroit, to coincide with the Detroit Auto Show, it’s not alone in leading clients to
the expo. And with CNBC a big fan of auto news, viewers of that channel will feel like
they’re there, for the many press conferences to which analysts are barred but press
are invited.
For those curious, there’s NO EARLY CLOSE, for any market, on Friday, before the MLK
Jr celebration a week from Monday. A short week may be what the bulls will wish for, this
week, if the selling resumes, which appears a safe bet but, alas, that’s not on the
Agenda. It’s possible, we’ll see selling during the first 3 weeks of Earnings
Season, followed by a relief rally, in the 4th, as has happened during many an
earnings season—especially in July. Then, again, with an FOMC meeting at the end of
the month, Yellen and company might just save the markets, sooner. It’s not
something I’d bet on but neither would it surprise me. The last thing the FOMC wants
is for stocks to fall apart, when the wealth effect is a powerful motivater to spending.
Recall, last Wednesday, when more talk of the Fed being in no rush to raise rates sparked
a rally after 5 days of selling—right on schedule, as foreseen, in last week’s
Outlook. IT seems high time to worry about protecting the downside, rather than worry
about the rally train leaving the station without you.
ECONOMIC: (Highlights, only, here. Full
International Economic Calendar here.)
© Sandi Lynne 2015 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the author’s,
alone, and should be just one factor in more complete due diligence.© Sandi Lynne 2015
Nothing contained in this commentary should be construed as a recommendation to buy or
sell any security. The opinions expressed are the author’s, alone, and should be just
one factor in more complete due diligence.
January 05—09, 2015 BUSY ECONOMIC CALENDAR TO LAUNCH THE FIRST FULL WEEK of 2015 January has a fabulous reputation for stock bulls,
though it doesn’t always start gangbusters. The Dow dropped 135.31 points on the
first trading day of 2014, and 1,203.68 points, or 7.3% through Feb. 3, 2014, before
starting the next rally. The "January Effect," which is a rise in stocks lost
for dead during tax-loss selling, at the end of the prior year, is often kinder to the
prior year’s biggest losers, and small caps in general.
Jan. 1st triggered new fracking rules from the EPA, penalties for those who don’t
sign up for healthcare on an exchange, under ACA, the elimination of Amex cards at
Canadian CostCo’s, and the anniversary of Mexico’s 8.0% tax on high caloric
foods, like potato chips, chocolate, and ice cream. The tax on sugary soft drinks is worse
at 12.0% but with a full year of the taxes behind them, companies whose sales were hit by
the assessments no longer have to comp against the months when there was no such
tax—good news for Coke & Pepsi, Hershy, Mars, and Nestle.
Also, as of Jan. 1st, the largest banks/holding companies must start reporting the higher
capital levels they’ll need to hold by 01/01/2018, when reporting earnings, and face,
as well, a new, higher quality liquid asset rule. And while we’re talking about new
rules handed down by the FSOC and its members, the Federal Reserve’s new rules that
limit bank size are in effect as of the 1st of the year, as well.
On January 3rd, The ECB should announce the, newly, reduced number of meetings
it till hold in 2015, along with the date for release of the Minutes of its Dec.
meeting—also new to the ECB.
On the 5th, all Bank/Holding Companies and designated SIFI must submit their
annual Stress Tests & Capital Plans, with ‘resubimissions’ omitted, last
year, from Citi, HSBC, RBS Citizens, Santander, which should include updates with this
year’s plans. Starting next year, the schedule will change, making April when
submissions are due, but for this year, March announcements remain in place—in all
likelihood, on the eve of March Options Expiration. On the 6th, the FOMC
Releases Minutes of the 12/16—17/2014 Meeting (2pm), when "patient"
replaced "considerable time." We’ll, hopefully, learn how worried the FOMC
participants were about crashing oil prices and Europe’s deflation.
Thursday, the eleven retailers that still report Monthly Same Store Sales & Gross
Sales will release those for December, most for the holiday season, as well. What defines
"Holiday" is up to the retailers, some of which will count from Black Friday,
others of which will start counting the Sunday before Thanksgiving. Some of the retailers
that depend on the holidays for 30% or more of their annual sales will still be weighing
in next week, rather than this week. Discounting was ridiculously widespread, with not all
retailers building in extra margin to account for those discounts. WetSeal, here, appears
to be leaving, after converting the former Arden B store to WetSeal, and still not getting
customers in the door—not even at 70% off storewide. The day after Christmas, here,
was the busiest day at Simon Properties’ Town Center Mall in its history. With a bad
back, I literally feared for my welfare as shoppers jostled for position in crowded
corridors, made more crowded than usual by the unusual crowds and kiosks lining the
middle. The crowds weren’t gone until January 3rd, when a still crowded
mall looked more like usual, during a holiday week when tourists, visitors, and snowbirds
are all crowding into the same space. Since the discounts were, for the most part, no
larger after Christmas than they were the week before, except at Nordstrom, the crowds did
no better than they could have before the holiday. The store with the most customers on
line with exchanges and returns was Victoria’s Secret but, then, it’s flagship,
PINK, Bath & Body Works and Henri Bendel were 4 of the biggest beneficiaries of
pre-holiday shoppers, after Pandora Jewelers, which needed velvet ropes and iPad equipped
sales people to control the crowds waiting to get into the store.
Friday, of course, brings the December Unemployment Report, which is expected to be a
little softer than the most immediate, earlier report, at 230K. The question is, of
course, when package delivery, the post office, and retailers scheduled their seasonal
lay-offs and, on that score, there usually isn’t wholesale separation in December.
Instead, retailers, especially, issue schedules they think will meet traffic, then call in
the morning to tell temporary staffers not to come in, that afternoon, if traffic
doesn’t match expectations. GAP has used that system throughout the year, and learned
it can’t just call staffers who haven’t been on the schedule for weeks, and
expect them to remain available for a few hours of work. Of course, GAP never did have to
worry about having sufficient staff; It was one of the slowest chains in the mall, over
the holidays, except at Kids/Baby.
The Earnings Calendar includes Micron Technology, Tuesday afternoon, and Monsanto
Wednesday morning, after which it plans on offering an R&D update. Thursday morning,
Constellation Brands & Schnitzer Steel report, Bed, Bath & Beyond in the
afternoon, along with PriceSmart, and The Container Store, which blew the whistle on
consumers, during its last report. TCS is back to 30% off Elfa Shelving &
Installation, and I’m not sure it had a great holiday, at all. Who buys gift wrap for
$14.95 a roll? Or, even, $8.99? When any number of stores offer holiday wrap for
$2.50--$5.00, the latter for 90 sq ft at Target, vs 20 sq ft at TCS at $8.99. TCS’
problem with consumers is its prices, given that shoppers are not quite as stupid as they
think.
The Event Calendar includes a slug of Asian Financials conferences, by a host of different
Investment Banks. Those will take a back seat to speeches and panels at AEA—the
American Economic Association, which is an umbrella for a host of sub-group economic
meetings, as I hope our full International Economic Calendar makes clear. CES—the
Consumer Electronics Show, starts Tuesday, with a keynote from Ford Motor Pres./CEO Mark
Fields, as in-car technology again captures the electronics industry. Citi’s Global
Internet, Media & Telecommunications Conference has always been a highlight of the
many forums that take place at CES, most of those listed, below, as well.
Away from CES, Goldman’s Healthcare CEO Unscripted, and its Energy Conference, are
two that usually bring news that can break through the mass of press releases from CES.
Expect the Wolfe Research Oil & Gas 1x1 Refining Conference, in Boston, Tuesday, to
break through, as well. Sunday night, Holly Frontier broke news, even before that
conference starts.
Meanwhile, Surf Expo, Bass & Salt Water Fishing Expo, and the Craft & Hobby Mega
Show, with Thursday through Friday starts, are industry events that might draw out
commentary from Bass, Dicks, Hibbetts, and other sporting goods retailers, though they
haven’t scheduled holiday sales calls, of which I’m aware.
I don’t think we’ve seen the last of the selling, at the end of the year or
during Friday’s trade. Rather, I think we’ll see more until, at least, the
release of the FOMC Dec. Meeting Minutes, Wednesday, if not, Thursday’s Chain Store
Sales and Friday’s December Unemployment Report. How deeply the selling may cut
could, well, depend on all three of those, as well as earnings warnings, which the New
Year will bring, just as sure as night follows day. Nervous longs will be less reluctant
to sell, now that tax implications can be put off for, at least, the quarter. And as
unattractive as Treasury rates are to Americans, they look a whole lot better against
Japan & Europe’s rates. That’s one asset allocation most American portfolio
managers won’t make but with banks required to release new asset information with
earnings, there’s still incentive for them to park more than makes sense in
Treasuries. It appears, the one thing we don’t have to worry much about, for the
immediate future, is rising rates. With Samaras talking Grexit, again, it wouldn’t be
surprising to see more Europeans inclined to park their money in Treasuries.
If the New Year is going to bring a new rally, it probably won’t be this week.
ECONOMIC: (Highlights, only, below. The Full International Economic Calendar is Here.)
© Sandi Lynne 2015 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the author’s,
alone, and should be just one factor in more complete due diligence
EXCERPTS of 2014 OUTLOOKS HERE: