.
Theres been much talk about the 11 trading sessions, the large-cap index has traded
in a range of 0.92% or less, which hasnt happened since 1970 according to LPL
Financials Ryan Detrick Plus, the alternating streak of higher and lower closes for
11 days is nearing the all time record. Of 14, from April 14 (13 in row in
15). These factoids are taken as constructive to technical analysts, who believe
tight consolidations of large gains are prelude to big breakouts to upside. And that might
happen but who knows when? Will it count if the break-out doesnt occur until after
the election, in November? Probably not but the entire week is likely to see stocks mark
time awaiting Fridays July Unemployment Report, which might (or might not) prove the
anomaly that Junes 287K added jobs appeared to be, following Mays 11K jobs
added. For the record, the Street sees 175K being added but look how poorly they did in
May & June.
Tuesdays July Motor Vehicle sales should be instructive, as well. GM reported a big
beat and optimism for the rest of the year, the SEC is investigating Fiat Chryslers
72 months, straight, of sales gains, even as Ford, last week, missed consensus Eps
estimates, and talked down the 2H. Heres what I think Fords problem is: My
treasurer and I went into the local Ford dealer when we were investigating a leased auto
for our homeowners associations security force. With $2,999.99 down, we were
offered the opportunity to lease a Ford Focus SE for $361 a month. Cross town, at the
local VW dealer, we were offered a Passat with nothing down, and $250 month, including all
taxesincluding sales tax, delivery, tags and title included. Looking for something
bigger, we were offered a Tiguan S (the name derives from Tiger & Iguana, which
doesnt make it any less stupid), the small SUV with leather interior & back up
camera standard, for $500 down and $250 per month, with all the taxes, delivery, title,
etc includedincluding the 6% sales tax. Ford is eating its own press, and is totally
mispriced for the market. Then, so is every other brand, compared to VW, which sullied a
100 year reputation with the diesel emissions scandal. Originally, I objected to even
checking out VW, because of the emissions lie, but as the head of sales pointed
outno one died because of the cheating, and VW is paying $15B in compensation and
fines. Takata has killed people and, because its all but bankrupt, no one has come
close to setting fines. Starting Monday, our guards will be outfitted with the new Tiguan,
the price differential too stark to ignore. Read any cheap lease deal small print and
youre likely to see up front costs of $2,999, are fairly standard.
While were on the Economic Calendar, do note that other than a 4-week bill auction
whose value hasnt, yet, been set, the US Treasury will be auctioning nothing but the
$37B 3-, & $32B 6-month Bills on offer Tuesdaya screeching deceleration in
offerings for the Treasury, which has regularly offered as much as $173B a week of debt.
With the BoE expected to lower rates from the current 0.50%, Thursday, US debt could prove
very popular this weekespecially with the yields on some of the favorite defensive
stocks falling precipitously while theyve been on a huge run up this year.
Thursday, the 9 retailers that still report monthly sales will report July sales, while
from Friday through next week, others will report their preliminary quarterly sales.
Retailers, you know, dominate the August Earnings Calendar. With August 5th
through 7th the biggest weekend for Back to School Sales Tax Holidays,
nationwide, youd think the malls would have been dead, this weekend but that
wasnt the case at all. Either people dont read newspapers, so dont know
they can save the sales tax next weekend, or theyre already sending kids off to
private schools and colleges, and just cant wait for next weekend. Schools here
start either August 15th or 22nd, depending on the county, and some
people cant wait. I mentioned Nordstroms successful anniversary sale, last
week, but will bring it up again because there are still bags of merchandise that was
pre-sold, waiting for pick up, and its shopping bags, again, dominated all bags seen
in the mall. L Brands Pink was the one brand I didnt see a single bag from
because it is temporarily closed, along with Bath & Body Works. The immense spread of
real estate that L Brands has in the local mall, owned by Simon Property, are all closed.
For July, a temporary space was set up for B&BWs yellow clearance sale. But as
July ended, that same temporary space was given over, completely, to Victoria
Secrets bras and panties, with nary a Pink sighting at all. A more crammed space
Ive never seen but, then, if LB does as good a job redesigning its stores at
Francescas (FRAN) did, it will be worth the wait. Unlike FRAN, though, which was
closed for 1 week, and completely overhauled, LBs B&BW was displaced for 4
weeks, and now is MIA, while the temporary space is given over to V.S. underwear,
exclusively.
Im encouraged by this past weeks mall traffic, and expect even more for the
Sales Tax Holiday, cheap as it is this year, in Florida. Cut back from 10 days last year
to 3, with all electronic equipment eliminated, after a one year appearance in 2015, even
the top line for apparel has been lowered to $60 from $100. Of course, with
Bloomingdales advertising up to 80% off, and designer duds at nearly 80% off at
Neiman Marcus, theres a surprising amount of merchandise that will qualify.
Saturday, I picked up a pair of Giorgio Armani pants, originally priced at $1,950, for
only $197, before gift card, at Neiman. My kind of sale!
The Earnings Calendar is as busy as it was last week but without the headliners of the
last few weeks. The calendar is dominated by Water companies, Healthcare Providers,
Restaurants, Hotels & REITs. Often, the latter 2 are one in the same. With REITs
nearing removal from the S&P Financials Index, to be separated into a REIT sector of
its own, I paid special attention to those reporting this week that often fly under my
radar. CVS, reporting Tuesday morning, wasted no time getting its name on our local Target
stores, that now feature CVS Pharmacy signs just feet from the Target sign. What do you
think that cost? Permits alone, in some cities, could run into the hundreds. As of its May
earnings release, Target boasted of 1,793 stores, and $322m of pharmacy related inventory,
down form $500m. Figure $3K minimum per sign, and its fair to assume that CVS has
incurred large costs to take over Targets pharmacies which could ding the coming
report.
Other 2nd banana headliners reporting this week includes AMC, the voracious
Dalian Wanda movie theater chain, First Data, Vulcan Materials, Carmike
CinemasAMCs intended brideVornado Realty Trust, Tenet Healthcare, Texas
Roadhouse Grills, and the spurned, one-time intended bride, Williams Co, Monday. Tuesday,
Aetna, Amerisource Bergen Brunswick, Archer Daniel Midland, Arrow Electronics, Cardinal
Health, Choice Hotels, Cummins, Discovery Communications many subdivisions, Hyatt,
Honda Motor, Mallinkrodt, Martin Marietta, Molson Coors Brewing, Mosaic, Royal Caribbean
cruise lines, Sabre, Wellcare Group, and Western Resources, before the morning bell rings
on Tuesdayadmittedly a full slate but none with the ability to bring the whole
market down. Be my guest, check out the rest of the highlighted symbols, or read the
Earnings Calendar ticker by ticker, and it adds up to a crushing number of conference
calls and analysts estimate revisions but none with the market cap to bring equities
to their knees.
The Event Calendar is respectfully quiet, as it usually is during the busiest weeks of
earnings season, compounded by summer, when I-banks strictly limit their scheduled
conferences. CAR (Center for Automotive Research) Management Briefing, starting Monday,
Piper Jaffrays Global Ag Symposium Tuesday, Wells Fargos Securities Services
Forum, and Needhams Industrial Technologies 1x1, are the highlights of the week, for
I-banks. Not, also, Inmans Real Estate Connect conference, Tuesday, is about
connecting with customers online. Also that day, KBWs Community Bank Investor
Conference will take place in NY. Wednesday, Credit Suisse is hosting Midsummer Annual
LatAm conference, also in NY, even though most of the world will be eyeing South America,
and the Olympics opening ceremonies, Friday, on NBC TV in the states, and on Discovery
Communications Eurosport in Europe. With respect to that Brazilian extravaganza, the
IMFs Managing Director, Christine Lagarde, will speak at a conference taking place
there, in the lead up to the Olympics.
Other Events of note include the 21st World Congress of Heart Disease, already
underway, the American Academy of Dermatology, also already underway, AACCthe
Clinical Chemistry Annual Scientific Meeting and Clinical Lab Expo, a Cardiology Update,
Thursday, in Sedona Arizona, subtitled "The Heart of the Matter, Thursday,
AAOMEDs Interventional & Regnerative Orthopaedic Medicine & Restorative
Injection Therapy Annual, starting Thursday, along with the Veterinary Medical
Associations Annual in San Antonio, TX, Friday, when the VI World Robotics Genecology
Congress will take place in NY.
Outside I-bank & healthcare events, Black Hat Briefing + DEFCON, a Windows Security
event and China Joy Expoan entertainment expoare taking place as I write.
RSPAs RETAILNow is about solutions for retailers, including inventory & supply
chain systems. CUNA, the organization for Credit Unions kicks off its Economics &
Investments Conference, Friday, but otherwise, the big event is the TV Critics Fall Tour,
which will visit Viacome, AMC Networks, Turner, Starz, Disvoery Channels, NBCUniversal,
Disney & ABC channels, along with YouTube, the Fox Sets of Last Man on Earth &
Life in Pieces, along with a HULU panel.
While you might just be returning from parents weekend at your kids summer camp, and
thinking about what youll be doing for the last 5 weeks of summer, TV critics will
be writing about the new fall shows, even as football camps are opening around the
country. Given the volatile year this has been, so far, the market is remarkably
complacent, with VIX back under 14, technicians and strategists, alike, predicting another
170 points, or so, will be added onto the S&Ps gains to date, by year end. And
thats despite whats turning out to be the strangest presidential election
cycle in this countrys history. August and September are known for being the
markets best friend. With GDP barely above a stall, despite extraordinary global
central bank support, I wish I could be as enthusiastic about stocks as the buyers have
been. Another week of consolidation wouldnt surprise but neither would a bout of
profit taking, which in years past has creeped in earlier and earlier, moving from fall to
late summerthe very reason August & September are not, usually, stocks friends.
Granted, were trading in unprecedented times but, still, human nature has proven
slow to change. Given that, the first signs of institutional selling could well spook the
markets, and a mass exit from stocks. Thats not a prediction for this week but a
caution about all the Kool-Aid the Streets been drinking and pouring out to clients.
.
ECONOMIC (Highlights, only, below. Full
July 2529, 2016 BULLS WILL BE
CHALLENGED THIS WEEK Lets
forget, for a moment, the hundreds of companies scheduled to report earnings this week.
And lets, also, forget, for the moment, that the ECB did nothing last week, and the
BoJ may not, this week, either. What were left with is an FOMC 2-day meeting, that
ends with the 2pm et statement, Wednesday, which could, well, put a rate hike back on the
table, before the election. September, sounds about right, despite James Bullards
change from hawk to dove. Working against the bulls, as well, is the US data, this week,
mostly concentrated on housing, and thats a sector thats slow and
steadysteadily rising far from its glory days, just like the economy.
Remarkably, the bulls ignored the fact that Draghi & Co didnt offer any
additional support, and neither did the Bk of England. They were cheered more than they
should have been by earnings that beat regularly lowered estimates. And they sent stocks
to new all time highs straight off a sharp Brexit pullback, with volume not all that
impressive, given it took 15 months for the break out to develop. This week also promises
Japanese & Chinese data, with no one particularly vocal about how similar the US is
looking to Japans long time low rates and stagnant economy. Of course,
"stagnant" might look a whole lot more robust, Friday, when Q2 Advance GDP is
announced, estimates ranging from the Atlanta Feds GDPnow, 2.6% to the Streets
estimates that are as high as 3.0%. Benchmark revisions to prior releases of GDP will also
be released, Friday, the last business day of the month, now an annual event by edict
I highlighted some of the tickers in the Earnings Calendar that are likely to attract more
attention than the others but thats a very subjective view. Give 25 people the
opportunity to emboldened the tickers they think will draw the most attention, and
thered be 25 different lists. Notably, an abundance of healthcare-related names will
report, along with some media companies, and the largest defense companies. Additionally,
most of the listed hoteliers will report, as well, along with energy names, Anandarko,
Total, Statoil, ExxonMobil, and Chevron, to name a few, along with a few major European
banks, including Barclays, Credit Suisse & Deutsche Bank. 3M, reporting Tuesday
morning, could do most to influence the DJIA, until XOM & CVX weigh in, Friday. Apple
reports Tuesday, Google/Alphabet & Amazon Thursday, that's all the Nasdaq Comp needs
to know.
Wells Fargo is hosting 2 Biotech conferencesreally one but starting it in Boston,
and moving it to San Francisco later in the week. AACR jointly with ASCO, the two biggest
cancer research & treatment organizations are hosting Clinical Cancer Research
Workshop, the Alzheimers Disease Intl Conference, in Toronto, both starting
Sunday, are likely to be the most talked about. Once again, a small biotech believes it
has a hot molecule for Alzheimers that probably is another false dawn. More money
has been invested in Alzheimers without results, than probably any disease.
Saturday, the 21st World Congress of Heart Disease kicks of in Boston.
The Automotive Seating Innovations Conference, Monday, has me wondering: do future cars
come with flat bed reclining seats, like first class airplanes, so the non-driver will be
comfortable and, perhaps, snag some badly needed zzzs while the car drives itself?
Cyber Security is another big topic this week, with a conference at Fordham University,
that starts Monday, and the one in Aspen, that starts Wednesday, boasting half the
secretariats in the Obama Administration, including the DoD, FBI, DHS, Natl
Intelligence, and more.
The Education Industry meets starting Wednesday, along with SEBCthe Southeast
Building Conference, and the Intl Multicultural Tourism/Hotel Ownership Summit, just
as nearly every major hotelier is slated to release earnings, as mentioned previously.
Believe it of not, even as thousands of adults are on their way to Parents weekend at the
summer camps their kids attend, the commercial world is readying for Back to School (BTS),
with the first of the BTS sales tax holidays slated to start Friday, July 29th.
Of course, if youve been in a mall, you know that backpacks started showing up July
4th weekend, and many parents would rather buy when needed. Still, the tax
administrators in So. Carolina, Michigan and Georgia lead off the BTS holidays, over 2 or
3 days of the weekend, depending on the state. The following week will be the biggest
weekend for BTS sales tax holidays, with 11 states participating, and Nordstrom lucky to
be concluding its anniversary sale, the weekend of that big mass tax holidayeven as
its shopping bags have been the most ubiquitous, during the last 2 weeks, thanks to early
access for its credit card holders, from the 14th to the 21st.
Interestingly, on Thursday, the American bank Assn is hosting Digital Currencies
& The Blockchain, in NY, even as Emerging Payment Systems will beheld in San
Francisco. And for those keeping track, and for procrastinators, Win10 is free for
upgrades of Win7 & Win8, until Thursday, after which Microsoft celebrates one year
since its release, on Friday, and everyone will have to pay to upgrade. Everyone I know
whos attempted to install the upgrade, themselves, told me that Geek Squad was
enriched, tremendously, by failed attempts. The going rate was around $400 for most. Good
to know, donchya think?
The Democrats hold their Convention from Monday to Thursday. On Sunday morning, one
reporter asked a delegate at the Republican convention where she stood on the downbeat
view Trump presented at the RNC counterpart. She mentioned she was from Norway, and her
family still there, her brother, in particular, always asks how it is that a country of
nearly 300m people cant do better than this years candidates. Hmmm. Ive
been asking myself that for a couple of decades. Its almost ironic that the TV
Critics Fall 16 Tour starts this week, since most of the legitimate press will be at
the DNC, just as they were at the RNC last week. Its quite ironic that
Wasserman-Shultz is resigning as head of the Democratic Party, just as the convention gets
underwayher resignation not official until after the convention. Some thought the
Dems would be better organized than the Republicans but the convention is not starting out
that way, is it?
I realize theres no overhead resistance to the S&P and DJIA but, still, I
cant help feeling the time of year, combined with a Brexit question mark, and the
likelihood that the FOMC will be back predicting at least one hike this year will combine
to derail additional gains. Should stocks consolidate their recent gainsbig as
theyve been since the Brexit result was announced, that would be a big victory for
the bulls. If the FOMC doesnt mention a coming hike in its post-meeting statement,
Id guess that would be to preserve what semblance of credibility it still retains,
given its forecasts have been so off the rails until now4 hikes this year the
original prediction. Count me impressed by the rally to date, and skeptical about
additional gains being added immediatelyeven as Im well aware of all the
arguments for stocks to continue higher from here. .
ECONOMIC: (Highlights, only, below. Full International
Economic Calendar here)
© Sandi Lynne 2016 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the authors,
alone, and should be just one factor in more complete due diligence.
July 1823, 2016 CAN THE
RALLY SURVIVE A BIG WEEK OF EARNINGS?
Last weeks big break out took a lot of people by surprise, not least of all me,
especially when the ECB stood pat. This week the ECB meets Thursday, Draghis press
conference usually during a respectable US hour. While Draghi has initiated plenty of
actions to support the EU, the currency union seems to bounce like a pinball, from crisis
to crisis, the latest Italian banks. Furthermore, his enduring ability to talk up Euro
confidence, at times without taking any actions, is quite the marvel. But as long as
Marios "got it," whatever that "it" is, the marketsbulls
in particularhave nothing to fear from the ECB this week.
US Economic Data will revolve around housing, from NAHBs July Housing Market Index,
to Tuesdays June Houseing Starts & Building Permits, followed by Thursdays
FHFA House Price Index, as well as the Natl Assn of Realtors Existing
Home Sales. Top top it off, a few builders report earnings this week, as well, including
DR Horton & Pulte Homes, NVR the topper.
Which brings us to the Earnings Calendar, the first week in which banks arent
dominantthough there will be plenty of those, even more that arent on our
list, because I dont cover any but money center banks and the largest regionals,
unless a bank is either a serial acquirer or regularly rumored target of rumored
acquisitions. Even with those limitations, the schedule is packed, with Bank of America
leading the way, Monday, Goldman Sachs Tuesday, Morgan Stanley Wednesday, along with
Northern Trust,, then in the afternoon, American Express. Thursday, bank related earnings
come from Alliance Data Systems, BB&T, Bank of New York, Capital One Financial, and
Visa, before Fridays SunTrust, & Synchrony Financial. Also this week, earnings
from Charles Schwab, TD Ameritrade, Interactive Brokers, and eTrade Financial.
A schedule like that would be quite sufficient but theres more, including EMC, IBM,
& Netflix, Monday afternoon. Then, on Tuesday, reports will be released by Ericsson,
Johnson & Johnson, Lockheed Martin, Philip Morris Intl, United Health, & W W
Grainger, before the opening bell rings. In the afternoon, Discover Financial, Intuitive
Surgical, Microsoft, and United Airlines. Cintas reports Tuesday afternoon, which I
highlight because its uniform business knows more about factory floors than most in the
executive suite. Wednesday morning, Abbot Labs, Amphenol, Canadian Pacific, Halliburton,
and St. Jude Medical are the cross section of reporters, before that afternoons
CoreLabs, Ebay, F5 Networks, Intel, LasSalle Hotels, Mattel, Mine Safety, Newmont Mining,
Qualcomm, SAP, and United Forest Products, to name the highlights. Thursday morning,
Alaska Air, Biogen Idec, Blackstone, Daimler, Dominos Pizza, General Motors,
ManPower Group, PPG Industries, Quest Diagnostics, Reliance Steel, Sherwin-Williams,
Southwest Airlines, Travelers Insurance, both Unilevers, and Union Pacific
Railway--another good cross section of the economy. Then, Thursday afternoon, American
Telephone & Telegraph, Athenahealth (the analyst love affair with which eludes me),
Boston Beer, Chipotle Mexican Grill, Crown Castle Intl, PayPal (on its 1st
anniversary as an independent company), Schlumberger, Skechers, Starbucks, Stryker, and
Werner Enterprises nicely fill in more of the economic story. Then on Friday, American
Airlines, General Electric, Honeywell, Stanley Black & Decker, VF Corp & Whirlpool
will light up any segments of the economy still in the shade.
The marvel of this week should be the number of times Brexit is mentioned on
earnings calls, and how little concrete information anyone will offer on its impact.
Markets, last week, seemed to downgrade the significance of Brexit, brushing off the
initial panic to rally to new highs. And it may well be that Brexit is far more of an
issue for the UK & Europe than it will be for the US. But with the Republican National
Convention starting Monday, and presumptive presidential candidate Donald Trump presumed
to be accepting his partys nomination, Thursday, therell be quite a contrast
between that mornings gentleman, Mario Draghi, whos played the role of world
savior, and Donald J. Trump who claims hes going to save the
"U.S.," by building walls, barring Muslims, and tearing up all the trade pacts
his running mate enthusiastically supported. The stark realty of Americas position,
even if Brexit doesnt ruin corporate earnings, should be laid bare this week, just
as the outlook for second half earnings will be, as well.
The Events Calendar is slim, not just because its summer but because the coming
three weeks will be the heaviest of the earnings seasonwhen 66% of all S&P 500
companies report. There are plenty of healthcare related events, but much less outside
that sector. Sure, the NRFs Shop.org is hosting "Digital Experience
Workshop," but, it seems, all of Wall Street had declared Amazon the sole winner.
Aside from those, its all earnings, all the time, until Mario Draghis press
conference, then afterwards, more earnings more of the time.
I suppose anything is possible but the bulls adding to their gains, immediately, strikes
me as too tough a task. At best, stocks should consolidate their post-Brexit rally, though
I have my doubts about that possibility, also. The coming earnings season is likely to be
a rude awakening for the bulls, especially because strong earningswhich arent
expected--could put a July or September interest rate hike back on the table. Last
weeks exuberance probably isnt sustainable, and neither are all the gains. The
higher the major averages have risen, the more dangerous theyve become.
ECONOMIC: (Highlights, only, below. Full International
Economic Calendar here)
© Sandi Lynne 2016 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the authors,
alone, and should be just one factor in more complete due diligence.
July 1115, 2016 ALL UP TO THE BANKS, THIS
WEEK, With a Dose of BoE to boot! FOMC members will be
speaking on both sides of the Atlantic, this week, with BoE Gov. Carney appearing on both
sides, too. Youd think Brexit would be topic one and it will for some of the UK data
being released, this week, some of it straddling the "leave" vote. But when the
Eurogroup FinMins meet this week, theyll be discussing Italian banks, and the
budgets of Greece, Spain, & Portugal. That tells you the world of hurt the Eurozone is
in, most of it having nothing to do with Brexit, at all.
I find it hard to believe that there were 11K US jobs created in May, and 287K in June,
unless the number of paid interns are taken into consideration. IF they are, its not
hard to believe that firms held off hiring, waiting for their interns to arrive in June.
But if thats what happened, then the June jobs created are temporary, and will
evaporate in September, if not sooner, when teachers and school support personnel are
"rehired," as they are in many states and counties. Well hear more about
jobs from the June Labor Market Conditions Index (LMCI) Monday, and a bit moldy May
JOLTSthe Job Openings & Labor Turnover the Federal Reserve created specifically
to gather more information about employment. Surely June CPI, Retail Sales & PPI will
count for something, in the US, just not as much as usual.
I could go through each of the Economic stats expected, and what they should mean to the
markets but that would be foolish, and counting the wrong trees in the forest. With
BlackRock and JPMorgan reporting Thursday, Citi, PNC Financial, US Bank & Wells Fargo
reporting Friday, you know thats what the Street is waiting for. Add in CSX, Yum
Brands, Delta Airlines, and Omnicom, that sums up where the Street will be concentrating,
no matter the busy Economic Calendar that, ironically, includes a Bk of England monetary
policy committee meeting, at which Carney could persuade his minions that more easing of
some sort is necessary, even though markets have calmed down. He already lowered reserves
for banks, and cant want to get too wild and crazy with the pound sterling crashing
to 31 year lows but does need to bolster confidence, and keep the economy rolling, the
advantage of a lower pound, perhaps, not in his original strategic plansbut then,
again, neither was Brexit. In fact, whats most shocking was how little prepared
anyone was for Brexit to win. .
The Events Calendar is slim, in deference to both summer & the Earnings Calendar,
which starts kicking into high gear, from here on in for the next month. Jefferies hosts a
Healthcare Conference, as does Leerink & Cantor Fitzgerald, even as the Medicare &
Medicare Advantage Summit meets, in addition to Healthcare Engineering, from the American
Hospital Association. Theres also something called "CONVERGE" from
MedCity, a publication thats unfamiliar to us
Wolfe Research tours the headquarters of energy names Apache, Anandarko, Occidental
Petroleum, Noble, & EOG Resources, with clients, even as CIBC World markets hosts its
annual "Unlock the Rock Stampede" conference. Both starting Tuesday. SEMICON
West meets in San Francisco, starting the same day, even as FX Week USA takes place in NY.
Once again, Ill recommend Rockefeller Treasury Services--a must read morning forex
newsletter. Request a free trial by writing to Barbara Rockefeller, and tell her
I sent you.
New York will host Mens Fashion Week, only the 2nd fall runway show the
menswear industry has held independent of the ladies fashion week. WT: Wearable Tech
Expo will be held in San Francisco on Tuesday. Bear in mind, as well, the Republican
National Convention will be upon us, by the time this week ends. Trump is expected to name
his running mate, on Friday, but some of the convention fireworks will already be
exploding by then. Delegates who write the Republican Platform and rules will already be
meeting by the time next weekend arrives. Like anyone else, I wonder wholl have the
guts to stand next to Trump, and spend the next 3+ months on his plane, campaigning with
the loose canon. Those who say Chris Christie will be his running mate are sillyyou
cant have a candidate from NY & NJ, and expect to win a national contest. Then,
again, I dont think Hillary can choose Warren and win a national contest, either,
though thats whos frequently mentioned as her possible Veep choice.
And perhaps I shouldnt neglect to mention the Chinese data expected this week, even
though it feels like Brexit has overrun worries about Chinas economy, even though
negotiating UKs exit from the EU could take two years or more, and wont even
start before the next prime minister is named in October. And in light of that, and the
opaque way Chinese data is collected and reported, with utmost skepticism, that reinforces
the fact that US banks will dominate the weeks conversation, and probably be most
influential for trading. While no one has talked about ForEx volatility in any way equal
to the earthquake the Swiss National Bank created when it stopped trying to manage the
level of its franc in relation to the Euro, thats not to say that no one got hurt.
How hurt remains to be seen with this weeks earnings, even if no one is talking
about it. In fact, with the Republican Convention to be followed by the Democratic
version, and a pretty unusual presidential election campaign to be fought, the UK may well
have installed a new PM and declared Article 50 effective, by the time the US markets
worry most about Chinas slowdown, again. Or perhaps its the recovery in
housing, there, thats papered over its growth problems for the time being. Either
way, its pretty crazy that stocks are making new all time highs, even as Treasury
yields are making new lows, something the economic books tell us shouldnt be
happening simultaneously.
So perhaps, when all is said and done, more easing by the BoE is markets will need to see
to all but ignore weak earnings reports from financials, here. We all know this will end
badly, some day but that doesnt mean its actionable todayunless last
weeks big highs were nothing more than a head fake. Thats possible, like
everything else in these markets but I wouldnt bet the house on it, either. The
markets have flipped from celebrating central bank easing, to worrying about how their
easing is holding back economies, and switched the other way, again. If you think you know
how the markets are feeling this week, fegheddaboudit! IF the BoE eases, this week,
itll be a whole new ball game and likely an excuse to send stocks higher, and
treasury yields lower, yet. You trade the markets as they are, not the markets you believe
should beas distasteful as doing so may be. Look how the builders suddenly shot up
last week, even though mortgage rates are not falling in lock-step with treasury yields!
Thats also sent Lowes to a new all time high, and probably will, eventually,
drag a good percentage of retailers along for the ride, with Back to School shopping
imminent. What were backpacks doing in stores pre-July 4th? Anticipating a
pattern that hasnt worked for a couple of years but still could. Throw out the rule
books and trade what is! Im saying that knowing its correct but just
cant seem to push myself to pull the trigger, to play along.
ECONOMC: (Highlights, only, below. Full International Economic Calendar
here)
© 2016 Sandi Lynne Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the authors,
alone, and should be just one factor in more complete due diligence.
July 0408, 2016 NOW THAT WE GOT THAT RALLY
OUT OF OUR SYSTEMS The entire week will be a drive
towards Fridays US June Unemployment Report. For those who might get excited or
disappointed by ADPs preview numbers, let me remind you: On June 2nd, ADP
said it saw May employment rising by 173K, better than Aprils 160K. Of course, as
everyone famously knows, by now, Mays BLS number was 38K. And just when ADP was, at
least, looking like it was finally nailing the direction, if not the number. The first 35K
jobs added will be dismissed, as Verizon striking workers returning to their jobs, after a
settlement was reached to end the strike. Honestly, Im not even sure whether ADP
will deliver its private sector number on Wednesday, or postpone until Thursday, because
of Mondays holiday but I dont carenot after last months big miss.
I dont mean to dismiss May Factory Orders, Tuesday, but the ISM & PMI Indices,
released last week, have provided June numbers, making May a bit moldy. And, if anything,
the BoE and Gov. Carney, in particular, might steal the spotlight Tuesday. In the wee
hours of Tuesday, in the U.S., the BoE will release its bi-annual Financial Stability
Report, accompanied by a nearly simultaneous release of a banking stability report, from
the Financial Policy Committee, both of which followed by Gov. Carneys presentation
of the report, and a press conference. Bloomberg, over the weekend, said Carney may offer
lower capital buffers to ease the banks turmoil on the vote for Brexit but I
wouldnt count on it. Often, BBGs reporting is wild speculation better placed
in the opinion section.
NY Fed Pres. William Dudley speaks Wednesday morning, then mingles with the press, before
Fed Gov. Tarullo discuss the intersection of regulation & monetary Policy. ISM &
PMI will weigh in, that day, with their non-manufacturing/service sector monthly indices,
just as we get a chance to cogitate the May Intl Trade Deficit. At least the dollar
had softened, some, before the UK referendum results were announced. Then, Wednesday
afternoon, minutes of the Fed June 14/15 Meeting will be released. Anyone want to bet if
there are surprises in it, like there were for the prior meeting? Donchya think at least
one member at the meeting suggested a rate hike could still be on, in either June or July,
if Brexit was spurned, as everyone expected? I mean, how many times do FOMC members have
to say one data point is not enough to get them to change their minds? That might have
made Mays lousy employment report seem less fretful, just 2 weeks prior to the UK
referendum. By today, just about all the FOMC members, except Mester, have backed
themselves into a corner of no rate hikes for the near term. Then, again, at the June
meeting even Mester didnt dissent on holding off on hiking rates.
US Chain Store Sales will be released, Thursday, all 9 still reporting such numbers
monthly. With bad storms across a good portion or the country causing flooding, and
tornados, its fair to say retailers had their work cut out for them, even without
the notoriously weak mall traffic this year. Furthermore, a year ago, Comps rose over
+3.0%, which pits the current June against tough year ago numbers. Trust me, the numbers
will be nothing to write home about. Even men, who usually shop around Fathers Day
were missing in action last month. In fact, Ive never seen mens departments as
slow as they were this yearno matter where I looked, from Huge Boss, to
Bloomingdales, to Saks & Neiman Marcus, all of whom could boast strength in
menswear, in past years. But you know some guys: If they bought all new shorts & golf
shirts last year, why would they need more this year? More troubling, however, was Saks 5th
Avenues clearance sale. With designer prices already at 50%, an additional 60% off
was offered. I havent seen Saks discount so deeply since 2008, after Lehman failed,
and everyone worried consumers would never part with a dollar again.
On July first, some laws passed earlier in the year, went into effect. The one that caught
my eye was in Vermont, which became the first state requiring GMO ingredients to appear on
food labels. But if you happened to see dry bulk shippers collapse last week, that would
be because of a new rule on weighing containers, before theyre loaded onto the
ships, some details left off the rule intended to avoid another El Faro.
The Europlace Intl Financial Conference offers too long a list of luminaries
speaking to name, including executives from AXA, Orange, Credit Agricole CIB, S&P
Global Ratings, Airbus, Morgan Stanley, Technip & BNP Paribas, balanced by high level
finance ministers & IMFs Lagarde, plus The European Stability Mechanisms
Managing Director Regling.. (See Economic Calendar for links) "New Challenges to the
Capital Markets Union" & "New Perspectives after UK Referendum" sample
topics, the latter of course, either added hastily after the vote, or ordered up in case
everyone was wrong about which way the UK would go. The only thing I want to talk about,
in relation to the UK, is Djokovic exiting Wimbledon early, felled by Sam Querreys
racquet, opening the door to another Andy Murray, home country victory, unless Roger
Federer can rise to the occasion. .Yeah, I know Murray isnt British but its
all the same over there, at least until Scotland finally passes a "leave"
referendum of its own.
NATO meetings, starting Friday, which could raise the temperature on Putin. Thats
just what the world needs, more geopolitical tensions, at a time when China is hosting
G-20 meetings, claiming several south seas islands as its own, despite objections from
every other quarter.
The Earnings Calendar has little to offer, other than Greenbriar & Walgreen Boots
Alliance, on Wednesday, and Pepsi on Thursday. Given warnings from rails, Greenbriar could
be the star. WBA is soon to close on Rite Aid, a poorly performing drug store chain if
ever there was one. Still, WBA & CVS have practically divided up the entire country,
between them. How WBA/RAD ever got through Anti-Trust reviews is beyond me but, especially
after it was allowed to buy Duane Reade, in 2010, both acquisitions big in NYC.
The Events Calendar is equally light, the biggest event the one reporters can report about
from a mountain outside but not from withinThe Allen & Co Annual Mogul Summer
Camp, as its come to be called. At one time a media event, the convergence of all
communications, all on demand, has grown the invitation list to far more than cable, TV,
and film execs that were one-time Allen & Co specialties.
Both Jefferies & Leerink Partners host separate Healthcare events, Thursday, while I
suspect the Haute Couture shows in Paris France will attract more ink. JPMorgan hosts a
Japan Forum, starting Wednesday but already, with Japan elections scheduled for the 10th,
some are talking about Abexit, or some variation on the theme, as hes failed to
deliver the reforms needed, despite a very support central bank.. Organ-on-a-Chip does
catch the fancy, starting Thursday, in Boston, as the potential to grow or print new
organs fascinates researchers and hospitals.
Which gets us to the star of the showUS Markets that refused to let the Qtr/Half end
without reversing the Brexit sell-off in spirited style. I cant help wondering
whether the rally would have gone as far as it did, were it not the end of the quarter
& half year. Then again, its fair to wonder how much farther it can go? Traders
have a habit of revisiting old highs, and is close enough to try for that. Then, again,
2100 remains an area thats thwarted earlier attempts to revisit the May 2015 all
time highs. I think traders will have to wait for another week, to repeat at the all time
high. Anyone who hadnt started taking profits by Thursday or Friday, will surely be
tempted to do so on any additional gains. With a questionable earnings season, virtually,
upon us, and earnings warnings to precede it, even as loose monetary policy hasnt,
really, allowed the economy to reach escape velocitynot to mention the likelihood
the FOMC will put rate hikes back on the table, if the S&P does repeat at the old, all
time highIve got a zillion, possible headline reasons scrolling through my
brain like credits after a movie, and all of them suggest markets will struggle here. Can
we start with the supply of oil bound to rise again, as drillers add back rigs in the US,
and Nigerias civil strife failed to depress its outputup 90K bpd in June?
Then, again, the UK is really leaving the EU, and that may be just the start of the
EUs bigger problems, as Italys Renzi scolds Draghi for not doing more to save
Italian banks. Got the picture? None of the pre-Brexit problems have been solved, while
data and earnings are unlikely to light a fire under stocks. I can almost hear the shorts
salivating to put on new positions, at these higher prices. And a quiet, post-holiday week
will only force them to postpone, not reverse those plans.
ECONOMIC: (Highlights, only, below. Full International Economic Calendar here)
© Sandi Lynne 2016 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the authors,
alone, and should be just one factor in more complete due diligence.
June 27July 01, 2016 REACTING TO UNCERTAINTY THIS WEEKS BUSINESS When I heard the talking heads claiming that
Fridays big sell-off was because of the uncertainty Brexit caused, I immediately
said "Hogwash!" The Street was heavily betting on "remain," so when
"leave" won, there were positions that built over the past 2 weeks that had to
be unwound. This week will be all about the uncertainty the leave vote creates, as no one
really knows what the EU will demand, or what costs UK companies will begin to incur, as
the UK withdraws from the EU. Tata Motors, in its last earnings release, estimated that
taxes on its JLR exports to the EU will be subject to a 10.6% tax, while imports of auto
parts will face a 4.6% tax, increasing its overall costsa problem for a company
whose vehicles are, already, some of the costliest in the world. Of course, that was
before pound sterling suffered a (-9.0)% decline on Friday, which helped offset almost all
those export costs, while increasing its import costs. And for anyone whos traveled
abroad, that 9.0% declineall of 12 pencedoesnt seem catastrophic.
Its ironic that FOMC chief Yellen, ECB chief Draghi, and BoE Gov. Carney were,
already, scheduled not just at the same eventthe ECB Central Banking Conference, in
Linto Sintra Portugalbut were long scheduled to participate in a panel, together.
Incredibly precipitous timing! And its not hard to imagine they might even come up
with a joint statement, at the end of the event. Their panelists on the 29th,
the same day the Federal Reserve will release the CCARComprehnsive Capital Analysis
& Reviewfor the 33 Mega-banks whose "stress tests" were released last
week, though that got lost in the shuffle. Despite favorable results across the board for
the Mega-bank stress tests, there might be too much optimism about the CCAR (Capital
Adequacy) tests. Because all their living wills failedCiti the exception--and must
be resubmitted, its altogether possible the Fed may restrain the banks
buybacks & dividend hikes until all their paperwork is in order and deemed
satisfactory. The Federal Reserve seems to relish in its power over the banks, so using
the wills as leverage to restrain payouts seems right in line with their attitudes towards
the banks, generally.
Some items emboldened on the Economic Calendar (please link to the FULL International
Economic Calendar, below), are some of the last pre-Brexit. And make no mistake about it,
Pre-and Post-Brexit will become new touchstones as the data roll out for the rest of the
year. I find it hard to believe the UKs withdrawal from the EU will be quite as
devastating as some are predicting but, then, no one really knows. Its just that the
UK retained the British pound sterling as its currency, and even a 9.0% decline
wasnt any worse than 9 pence, so it feels like the worst wont be quite as bad
as talking heads are predicting for the UK, though may be for the EU, if some core
countries elect to test the "leave" waters, themselves, and hold referendums on
leaving the EU. If anything, its Draghi who has the toughest job in the world, right
now, is promise to "do whatever it takes," somewhat meaningless if countries
decide to leave.
Most of the data on the US Economic Calendar concerns housing, with the S&P Case
Shiller April 20-city Home Price Index due Tuesday, May Personal Income/Expenditures/PCE
along with NAR may Pending Home Sales due on Wednesday. Of course, some will be watching
the EIAs weekly Petroleum Stats, while the ECB Minutes of their last Monetary Policy
Committee (MPC) Meeting might make for interesting readingwonder if any of its
members considered the risk of "leave" instead of lining behind
remain," which it seems most of the world did. Either way, from where I sit,
its a relief to have something to wonder aboutand worry aboutother than
the Chinese GDP slowdown. Then, again, with Junes US Motor Vehicle sales due out
Friday, when trading desks will be lightly staffed, there may be reason to worry about the
US slowdown, if analysts & economists are right.
We pride ourselves in publishing a complete International Economic Calendar but, this
week, events will move so fast we can be sure we have NOT captured all the International
meetings and events that will take place in the wake of Brexit. And while the UK
Parliament can vote to reject Brexit, it seems highly unlikely to do that, despite 3m
signing a petition for a revote, claiming they didnt really know what
"Brexit" would mean. I probably feel like so many options traderswhat
would it have cost to bet a little against the consensus? Probably not much, at all. I
feel especially foolish for not buying some puts, in case everyone was wrong about the
Brexit vote, because my niece has just returned from a semester in Bath, England, and 7
months of traveling around Europe, and shed been specific about the less wealthy
& less educated in England being strongly in favor of Brexitand therefore
motivated to get out and vote. Still, how wrong the pollsters and betting parlors were is
a warning for our upcoming election, if Trump becoming the presumptive Republican nominee
wasnt already lesson enough. And thats a good thing because political parties
will have an easier time convincing voters that every vote countsand to get out and
vote in November.
This weeks Earnings Calendar is light but not without some significant names.
Thursday is the big day, with reports from ConAgra, Constellation Brands, Darden
Restaurants, McCormickthe spice company, Paychex, and Schnitzer Steel, with Micron
Tech that afternoon. I think the Street is too negative on Nike, which reports Tuesday,
even as I admit its really slowed release of "branded" limited edition
shoes, compared to the winter pace, and big orders placed by stores going into a summer
Olympics often create an inventory overhang in the quarter or two immediately following
the Olympics. Still, even a resurgent adidas & Puma, and the failure of Sports
Authority, should not exert more than transitory pressures on the company. Ive long
pointed out its lack of success in womens apparel, and nothing has changed, there,
but it still posts billions in revenue from the category, no matter what short term trend
usurps its popularity. The loss of a prominent female player like Maria Schaparova (banned
for 2 years) is a loss of Nikes womens but tennis is too small a portion of
its overall results to make her exit from tournaments anything but a passing
inconvenience.
The Event Calendar is winding down as the July 4th weekend approaches. Energy
is, again, a popular topic for events, including Barclays EM Resources, which started
Sunday, JPMorgans Energy Equity Investor Conference, in NY, starting Monday, a day
when other energy events will include IPAA OGISthe independent petroleum
companiesand Credit Suisses Oil & Gas Conference, in Singapore, plus
Seaport Global, formerly Global Hunter, hosts an annual Global Energy Conference, in NY,
starting Tuesday. Murphy Oil meets with analysts, Wednesday, even as some of the Mid-Cap
& Mid-Small Cap overseas events will include energy names, and Williams
shareholders vote on the Energy Transfer Equity LP buyout, which ETE, apparently, is eager
to kill, a judge, last week, giving it permission to do so.
Mitsubishis Property REIT Conference, starting Tuesday, is just one of many that
will take place over the usually slow summer, as the S&P REIT index break out from
Financials is widely anticipated. Barron's was the first I noticed taking a skeptical view
of what the "financials" index and ETFs will look like, once REITs are removed
on August 31st. Barrons view is the REITs have been propping up the
financials, a leg up that will be removed with the REITS, just as financials were creamed
by Brexit. . .
NYSSAs Benjamin Graham Conference, in NY, on the 29th, themed
"Margin of Safety & Risk Management" includes, among other speakers, Omega
Advisors Leon Cooperman. After 35 years of covering events, including NYSSA events,
we just learned that Benjamin Graham founded NYSSAthe New York State Securities
Analyst Association! No doubt Cooperman will have a few thoughts on Brexit that the Street
will listen to intently.
All in, Brexit has made this week more interesting than it otherwise would have been.
While Im fairly certain Fridays big, global sell-off was unwinding of two
weeks of rallies that bullishly viewed the UK remaining, that still leaves some unfinished
business this week, as traders anticipate negative repercussions connected to Brexit.
Still, the vast majority of the sell-off is probably already discounted in stocks and
bonds, with the voices of Cooperman, Draghi, Yellen & Carney likely to offer some
stabilizing comments. The banks, if they do obtain permission for higher pay-outs &
buybacks, could start looking for a better level, this week, even as commodities still
need to adjust to a much higher dollar, if the US currency holds its gainsand
thats not assured, given rate hikes are probably off the table for the foreseeable
future. Monday could start ugly, a typical reaction to index rebalancing, which Russell
did for all its indices, on Friday. I cant help feeling that a familiar
level1950--80 on the S&P 500could be revisited again, and perhaps create a
bottom. Persistent buying since the February low suggests traders have a preference to
getting long at some level. They did at 2001.50 Friday but whether thats the bottom
remains to be seen. With a catalyst ahead of banks, I think the group hit worst could
represent fertile ground for a bounce into CCAR results. Catch a falling knife? Not
usually but this time, perhaps. Into Fridays close, I nibbled on some bank calls
that expire this week, which struck me as unusually inexpensive with as big a catalyst as
CCAR ahead. And you night recall that many banks actually announced their enlarged
buybacks and plans for higher dividends the day before the prior CCARs were released. The
only question in my mind about how stiffly banks are punished for all failing in their
living will submissions.
ECONOMIC: (Highlights, only, here. Full International Economic Calendar here)
© Sandi Lynne 2016 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the authors,
alone, and should be just one factor in more complete due diligence.
June 2024, 2016 BREXIT
POTENTIAL PROBABLY OVERBLOWN In
Barrons this weekend, one of the writers compared the talk of Britain leaving the EU
to the scare mongers who thought Y2K would cause electric transmission to fail, planes to
fall out of the sky, and every computer to stop functioning or, at best, roll their clocks
back to 1900. None of that came to pass. While some will claim that was because of all the
money spent, in advance, to prepare for the century to end, the truth is I did nothing to
any of my 5 computers, at that time, and my world didnt end. In fact, I still ran a
chart program on a Win95 machine, and it wasnt until the disk drive failed 4 years
after Y2K that the computer was put out to pasture. Over the weekend, one poll predicted
Stay would win by 75%, and apparently, thats what markets are believing into
Mondays trade. The better question is whether stocks, via futures, have already
started celebrating the UK staying put on EU affiliation, and whether sovereign debt keeps
scraping new lows in yields. Does a relief rally in stocks draw some money out of
Treasuries?
Thats not just an idle question. The US Treasury, this week, is Auctioning off $183B
in debt to a yield starved world, even as the UK vote on Brexit isnt until Thursday,
which will end with the Federal Reserve & FDIC releasing results of 33 Mega Bank
stress tests. At least we already know that the only one on the biggest that passed both
of the supervisory agencies is Citi. The supervisors split on a couple of banks, while 7
major US banks simply failed at both. Just wish Treasury would auction more long term debt
at current low, low rates, instead of concentrating on the short-term bills to the slight
of longer term ones.
Youd think Brexit was the only thing on any calendar but thats not true. FOMC
Chief will testify at the Senate on Tuesday, and the House on Wednesday, fit in an
appearance at the Financial Stability Oversight Council (FSOC) for some rulemaking on
insurance SIFIs, even as Neel Kashkari, of the Minneapolis Fed hosts his 3rd
"Too Bit To Fail" symposium, with help from the Peterson Institute for
International Economics. FSOC has to make some rules on insurance SIFIs after
MetLifes SIFI designation was tossed out on the lack of criteria. FSOC badly wants
MET redesignated a SIFI by criteria thats challenge proof. For it to meet that
standard, I suspect MET has years if not decades during which it will be free under that
court ruling. Half the Dodd-Frank rules required are still not written, and I suspect it
never occurred to FSOC that anyone would challenge its rulings. NYSSA hosts High Yield
Bonds Wed., even as the Global Borrowers & Bond Investors Congress is in London,
starting the day prior.
The Economic Calendar, also, promises a raft of monthly housing data, on Wednesday &
Thursday, in addition to earnings from Lennar & KB Home, Monday, that could sway the
stock and Treasury markets, for that matter. On Friday, the topper is May Durable Goods
Orders & Shipments, even as Monday will see post-S&P rebalancing trades.
Its always curious to me, that firms schedule similar conferences the same week. For
instance, Platts hosts its Moscow Oil Forum Monday, when Renaissance Capital hotds its 20th
Annual Russia 1:1 Investor Conference. Wells Fargo is on the West Coast for an Energy
Conference, even as Credit Suisse is hosting MLP & Energy Logistics in New York, at
the same time the 10th Annual US Renewable Energy Finance Forum is also in New
York. Yet, Roth Capital hosts Cleantech & Industrial Growth in London, even though PV
Production & InterSolar Europe will take place in Munich Germany, all of them Tuesday.
Roth, then, scheduled Renewables & Energy Innovation Investor Day Friday, in London.
Maybe its hoping some of the execs leaving interSolar Europe will stop off in London to
speak to investors. Oppenheimer & Jefferies both start separate "Consumer"
conferences, Tuesday.. Nomura is hosting its 6th Annual LatAm Conference, while
HSBC is also hosting its 6th Annual LatAm Conference, and donchya know it? Both
take place in New York, starting Wednesday.
Perhaps the most listened to streams of corporate presentations will be from Credit
Suisses Global Chemicals & Ag Conference Tuesday, or its Basic Materials
Wednesday, since neither are sectors that have been as widely overexposed as, say,
healthcare has been, since the bulk of Earnings Season ended in early May. That
hasnt stopped Citi from scheduling European Healthcare, in London, on Tuesday, or
Roth from scheduling a Healthcare Day Wednesday, its just likely to make Credit
Suisse one of the weeks stars. Bernsteins Global Future of Media &
Telecommunications Summit in Boston might, also, be well listened to, for its own scarcity
value, especially with Sumner Redstone shaking up the two big media entities he controls,
last week. Granted, he only replaced members of Viacoms board, while CBS has
performed well, but the balance of power has certainly shifted in the media properties his
National Amusements control. .
For once, Licensing will take a back seat to a host of other events, including Brexit
& Yellens Congressional testimony. Licensing is usually the biggest event of the
year for cross-cultural licensing, where the mix of video game, movie, TV, and toy brands
mingle to strike deals for their Intellectual Property. Speaking of IP, its been
something watching women, mostly, walk past Coachs mall boutique, seeing Mickey
Mouses ears sticking up from handbags, magnetized to enter the store and pick up the
bags, answering their own questionsis that Mickey Mouse? And it is, some of the most
effective pieces the ones with either Mickeys white glove or portions of his white
leather face against a black leather backgroundeven reduced to pieces as small as
keychains. The juxtaposition of something as whimsical as Mickey Mouses ears or
gloves against the, traditionally, old world Coach brand is stirring up
conversationthe best news out of Coach in years.
Other notable Events include Marine Money Week, in NY, co-hosted by Jefferies. REALcomm
Real Estate Technology is in Silicon Valley, even as Stephens hosts a road trip on Real
Estate Services, visiting several companies, like CoreLogics. SunTrust RH hosts its annual
Vacation Ownership & Exchange Conference but Hilton, notably, will be missing. Hilton
recently filed to split up into 3 divisions, and plans on spinning out its Vaca division
in the process. Hilton was not scheduled to appear, as recently as Friday, when I last
checked.
The Earnings Calendar is slight but packs some punch. Tuesday morning, CarMax &
Lennar, then in the afternoon, Adobe, FedEx & K B Home. La-Z-Boy also reports, that
afternoon, but the traditional day to indulge the man cave is Fathers Day, which is
finishing up as I type. Wednesday morning brings earningts from Winnebago, that afternoon
Barnes & Noble, Bed Bath & Beyond, plus Henry Miller & RedHat. Thursday
morning Accenture reports, in the afternoon, Synnex. If you know Tiger Direct, and
remember CompUSAs post bankruptcy revival, then youve encountered Synnex, a
value-added reseller of computers and servers, whose report might be picked apart for what
it says about the quarter Intel is in the process of closing. On Friday, Finish Line
reports. Its business has badly lagged competitors FootLocker but the latter
could still sell off more, if FINL disappoints, again. I suspect part of FINLs
problem is its stores in Macy*s, with the constant stream of 20% and 25% off coupons in
newspapers and mailed to "Redcard" holders. Even without coupons, Redcard
holders see 15% off merchandise charged to the cardjust as Macy*s does at its
Bloomingdales division.
Analyst Meetings are a mixed bag headliners including United Continental Holdings Uesday
afternoon, Equinox & GE Digital Thursday afternoon, the same day Cisco & Arris
Networks will hear from the ITC ANETs punishment for infringing 3 Cisco patents.
Disney is opening its "Frozen" exhibit at Orlandos Epcot, that day, but
called off a pre-opening press event, in light of the mix of tragedies suffered in that
city & on its property, last week. The NBA draft gets underway Thursday, also, with
the 76ers getting the first pickunless they trade it away.
Stocks have been trading very technically, of late. Last week, they undercut the 2080,
which had been containing selling. They admirably cut losses almost daily, last week,
finishing well off their worst levels. Many traders are waiting for the floor to fall out
from under stocks but that hasnt happened yetand may not while everyones
waiting for it to happen. In that respect, markets remind me of 2008. The failure of a
Brexit referendum may be an excuse for a short term rallyone quite big, even. But a
combination of indices rebalanced, summer doldroms, Earnings warnings season, are bound to
reduce the desire for stocksunless yields on sovereign debt goes so negative that
theres nowhere to hide but in stocks. There comes a time in almost every cycle when
people forget the return of capital is job one. That doesnt seem to have happened,
yet but still could. I believe rallies are to be sold.
By the way, I dont expect to complete a Weekly Outlook, in the detail its
usually done, for the week of June 26th. I'm taking some time. What Ill prepare,
instead, remains to be seen. Its probably best to expect nothing and be surprised if
I post at all.
ECONOMIC: (Highlights, only, below. Full
International Economic Calendar here)
© Sandi Lynne 2016 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the authors,
alone, and should be just one factor in more complete due diligence.
June 1317, 2016 YELLEN
PRESS CONFERENCE + CENTRAL BANKERS GALORE!
No doubt, the headline event is Janet Yellens Press Conference after
the 2-day FOMC meeting, on Wednesday. Because the Street expects her to update her outlook
for when rates will rise, meetings of the BoJ, SNB, and BoE will take a backseat. The BoE,
especially, can do nothing before the vote on Brexit but the sense is that the FOMC is
held back by that vote, as well, the uncertainty and possible ramifactions should the UK
exit from the EU unknown but, possibly, catastrophic, if other nations soon follow.
May US Retail Sales & CPI will benefit from higher gasoline prices at the pump, if
"benefit" is a word that can be used for data points the Street and Fed,
respectively, want to see move up for the right reasons. May PPI could, also, see the
impact of higher crude prices which are up over 80% since the low near $26or were
before last weeks end of the week dip. Also closely watched, Thursdays weekly
Jobless Claims, NAHBs June Housing Market Index, Fridays May Housing
Starts/Building Permits, and Baker-Hughes weekly US & North American Rig Counts,
which havent been falling, lately, and risk rising if crude stays above $50.
The main earnings reports to watch are Korn Ferry & Jabil on Wednesday, Kroger &
Oracle Thursday afternoon, as the wrap up of Earnings Season leads, inevitably, to the
coming Earnings Warnings season, still a couple of weeks away.
The weekend Media is a buzz with news expected at Apples WWDCWorldwide
Developers Conference and E3the Electronic Entertainment Expo. Sony already
announced it wont introduce its next upgrade to PS4 at E3, yet the media hasnt
seemed to have heard that statement. Microsoft is also expected to reveal upgrades to Xbox
One, while Nintendo is long rumored to be working on an upgrade or complete replacement to
Wii, though the Street and investors will be happy if it announces when its partnership
with DaNA will yield a Mario Bros mobile gameif at all.
IT is, perhaps, the fault of media that its so focused on tech that its all
but overlooked the ADA, Diabetes Assn Scientific Sessions, the Edison Electric
Institute Annual Convention, involving a group at all time highs, Morgan Stanleys
Financials Conference Tuesday, when Citi will, also, Host Industrials, and Piper Jaffray
Consumers, in its 36th annual Conference, in New York. And theyve
altogether overlooked the 10th Anniversary ConFab, starting Sunday, like EEI,
one of the largest Semi Equipment Events of the year, without which tech would be nowhere.
ConFab is in Las Vegas, which is why it strikes me a little odd that Credit Suisse will
host Semiconductor Supply Chain in Boston, while Wedbush will lead a Semiconductor summer
road trip to Silicon Valley, just as most of the industry will be packing up ConFab
displays.
Of course, come Wednesday, Goldman Sachs annual dotCommerce Conference wont
hold a candlestick to the FOMC Chiefs 2:30pm press conference that, politely, ends,
as a rule by 3:40pm, in time for programs to hit the S&P into the close. Its
also worth noting the number of analyst meetings, this week, especially BlackRock
Wednesday, or Disney Worlds Shanghai China park opening on Thursday. It goes without
saying that ConFab and E3 are every bit a mass industry analyst meeting, as is EEI, or
Apples Developers Conference, though none will attract the coverage of Apple,
E3, and Disney Shanghais opening.
Other of the weeks honorable mentions goes to HBA Global Beauty and Womens
World Dailys Retail 2020 Forum timed to coincide. HBA might just be timed for the
closing of Walgreens Boots Alliances close on Rite Aid, yet another pharmacy deal I
find it hard to believe the FTC will allow to proceed. Were already down to just 3
major pharma distributors, while WBA & CVS are intent are making sure theyre the
only two pharmacy retailers left standing. Patients---most of us--have no chance of saving
money on pharmaceuticals, as it is, and the FTC is allowing the market to slim down even
more.
Im bearish on stocks into the FOMC meeting, and into Brexit, though I find it hard
to believe the UK will vote to exit. If the rest of the world, including the US is feeling
anxiety about a possible UK exit from the EU, whats the rest of the world feeling?
Well, I think we can answer that by looking to the rates US Treasuries are scraping,
currently. Its great for builders, though youd never know by looking at their
shares. Its great for consumers, though not that they are benefiting via lower
interest rates on their credit card debt. And for what its worthand I never
get the FOMC correctly, an unfettered bagel in my recordI think Janet Yellen will
stick to her prediction that rates could rise in coming months, if the economy and
incoming data develop as expected. And if theres any doubt about those expectations,
updated FOMC forecasts will dissuade from that folly. I imagine Janet Yellen and her
cohorts walking around with their fingers crossed that they can raise rates above 1.0%
before the next, inevitable, recession hits. And to do that, they have to get a leg on,
six months between rate hikes no way to manage that. Its not hard to imagine the
program traders shooting for a repeat at the May 2015 highs in the S&P before stocks
sell off for their typical summer slump but its not unimaginable, either, that
Yellens press conference will squash any progress to that result.
ECONOMIC: (Highlights below, only. Full
International Economic Calendar here)
© Sandi Lynne 2016 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the authors,
alone, and should be just one factor in more complete due diligence.
June 0610, 2016 YELLEN WILL REPEAT, IF
ECONOMIC DATA DEVELOPS AS EXPECTED FOMC Chief Janet Yellen is
speaking twice, on Monday but the press has focused on the earlier of her two appearances,
at the World Affairs Council, in Philadelphia. On the Federal Reserves
"Whats Next" website, het topic is "Economic Outlook and Monetary
Policy." At an organization that calls itself, "World Affairs"
Council, she may well look around the world and talk of Brexit, Chinas slowdown, the
migrant problem in Europe, and how those externalities influence Fed decisions. In the
end, I suspect shell stick to the script from her Cambridge conversation with
Mankiw"if the Economy and Incoming Data develop as expected, it will be
appropriate to raise rates in the coming months." Shes a steady Eddy, not given
to flip flopping on a single data point, so Mays lousy jobs reportonly 38K
jobs added--isnt likely to move her to push out her expectations for another hike in
"coming months." And given how drastically some data, including the Employment
Situation, are revised in subsequent months, its too soon for her to throw in the
towel on higher rates..
Yellen isnt the only central banker speaking this week, though the press sure makes
it sound that way. Boston Fed Pres. Rosengren is speaking on "Brexit/US
Election/German Election," Monday, overseas. As a matter of fact, monetary policy
committees are meeting, this week, at the central banks of Australia, India, New Zealand,
South Korea, Russia, and possibly others that slipped by me. Each of them will be followed
by a statement and, in most cases, a press briefing of some sort. On Wednesday, the ECB
starts buying corporate bonds, as part of its QE stimulus efforts, even as Draghi,
ECBs Villeroy, and the European Stability Mechanisms Regling are speakers and
panelists at the Brussels Economic Forum 2016. Bk of Canadas chief Poloz and his
senior deputy will host a press conference on release of "Developments in the
Financial System Review,"
Tuesday, Ralph Lauren & Steve Madden will meet with analysts, adding to all the
comments from retailers, of late, few of which pleased. SHOO is one of the last affordable
leather shoe makers, whose "SALE" signs draw crowds, in the mall, even as
department store anchors, in the same malls, carry Madden shoes. Several other shoe brands
will meet with institutional investors, on this week, because NY hosts FFANY. FFANY used
to be "Fancy Footwear America New York," but as the last chance for fall/Back to
School orders, it includes names like Skechers & Wolverine Worldwide. FFANY brings in
buyers from across the country into New York, where all the above maintain permanent
showrooms, even as Footwear News hosts a CEO Summit @FFANY.. C.L. King is hosting clients
at several of the permanent showrooms in NY, with access to top management. Oxford
Industries reports this week. It has always flown under the radar of most analysts,
despite a stable of brands that includes Tommy Bahama & Lilly Pulitzer. But those more
expensive brands are offset by less costly ones, from its Lanier division, which licenses
Kenneth Cole, Ractoin by Kenneth Cole, Geoffrey Beene, Dockers, and more, in addition to
some of its own Oxford Golf & America brands. Alfani, a big part of Macy*s private
label efforts, is made by OXM, too.
As far as earnings go, I could have highlighted, just, OXM, United Natural Foods (UNFI)
& Lululemon (LULU) and called it a dayperhaps adding in TLRD, or Tailored
Brands, for those who gave up retail for dead, months ago or more. Its the holding
company that now counts Mens Wearhouse, Jos. A. Banks & K&G as
divisionsthe easier to someday spin off Jos. A. Banks, one of the worst retail
acquisitions in history. Im curious about CHKE, which lost Target (TGT) as its major
customer, as of this year, which begs the question, what next? Canadas HBC, also
reporting, owns Saks 5th Avenue & Lord & Taylor, while Mattress Firm,
like all mattress stores, leave us dumb struck. Who is buying all those mattresses?
Michaels Stores, Tuesday, can lose for winning; its private equity backers are sure
to sell shares on good news, yet wont, necessarily, be stopped by bad news, either.
UNFI gets the nod because United Natural Foods is a pure play on organic foods, which
every grocer cant get enough of, to hear their comments. Caseys (CASY) is a
report worth watching, as its customers tend to buy more high margin food and beverage
when gasoline costs less at the pump. Who wouldnt rather sell a giant soft drink
with 65% margins, than gasoline whos margins are fixed at 1114c, at most
convenience stores.
Equifax is meeting with investors Tuesday, at the Baird Global Consumer, Technology &
services Conference, then Wednesday, at Stephens Spring Investment Conference, both in
NYC, and claims it will meet with investors both days, 1x1, before going to Toronto
Thursday, to meet with investors there. Its a last a mad dash of analyst meetings
before the official end of most major corporate events, from July 4th through
Labor Day. It wont be alonemany companies are pulling multiple conference
duty, this week.
ASCO commentary will come hot and heavy again, early this week, before attention switches
to Diabetes and obesity, in advance of Fridays ADA Scientific Sessions. Likewise,
expect news from the Emerging Infectious Diseases & Biodefense: Vaccines,
Therapeutics, & Diagnostics, as Zika fears are reaching near hysteriaprobably
rightly so. When I heard that J&J was buying Vogue, and its OGX hair care products, my
gut reaction was to write to the CEO and beg him not to load the products with scents that
bugs cant resist. In fact, Id love just one company to come out with a hair
care line that says its specially formulated without any fragrance, to help women in
coastal states escape the scourge of infection carrying mosquitoes. For 2 years prior to
Zika, Chikungunya has been a serious concern, as well. And every time a major consumer
company buys personal care products, they load them with fragrances that make them
unusable, and sometimes, nauseating. Goldman Sachs 37th Annual Healthcare
Conference, in Rancho Palos Verdes, CA, is just another in a long list of Healthcare
Conferences that started with JPMorgans, in Jan. Several were more recent, while
Jefferies hosts Healthcare, itself, on overlapping days to Goldmans.
Novi Michigan, London & Munich host Automotive events, coincident with JPMorgans
London based European Automotive Conference. Tuesday and Wednesday are days worth studying
for events, since they peak on those 2 days, and Id be here all night if I had to
mention everyone of them. NAREITs REITWeek investor Conference is like the AGA
Financial Conference, or other industry events that are massive analyst meetings for an
entire industry, with a twist. REITs are the only industry getting their own S&P
index, in August, plucked out of "financials" when S&Ps REIT Index
launches. They were strong Friday, when the May jobs report seemed to take June off the
table for a rate hike, with Utilities gapping to new highs. REITs can finance property
purchases with cheap loans, and their yields are often twice what 10-year Treasuries
offer, making them winners 3 ways, this summer. For UTES, RBC Global Energy &
Power Executive Conference couldnt be better times. They dont offer the high
yields they did for the last generation but dont have to compare well against
Treasuries. If the Fed does pull the trigger on a 2nd rate hike, both REITs
& Utes may feel some pain but, more and more, the Street is getting hip to what Yellen
meant by normalizing rates gradually, and its not the staccato every 6 week hike of
a Greenspan or Volcker. Speaking of Volcker, on Tuesday, Representative Jeb Hensarling
will present the GOP plan to replace Dodd-Frank legislation. The banks could recover some
of Fridays post-jobs losses on that presentation but its something
theyre bound to do, anyway, after Fridays nose dive. While I understand how
hard it is for banks to make money when rates are low, truth is, most of the big 8 have
large credit card operations, and theres plenty of money to be made there, given
annual rates on many cards range from 18.99% to 23.99%, and more.
Sandler ONeills Global Exchange and Brokerage Conference has a worldwide mix
of the former, including some exchanges one doesnt often see present, like Moscow.
Gabellis 7th Annual Movie & Entertainment Conference arrives just as
another sequel disappointed at the box office. Ninja Turtles werent the draw
anticipated. Viacom, of course, and the mental health of its non-executive chairman
emeritus, Sumner Redstone remain a focus, as Viacoms CEO Philippe Dauman has a day
in a Massachussetts court, Tuesday, protesting his removal from Redstones trust
thats set to manage National Amusements, the majority owner of Viacom & CBS,
when Redstone either dies or is deemed unable to manage his own affairs. Viacoms
stock says it allDauman has overstayed his welcome. Ever try to buy any decent Dora
the Explorer-related toys or clothes at Christmas? They dont exist because Nick
licenses have been miserably handled. Some of Viacoms properties could be the
marketing & consumer juggernaut that reaches for Disney heights but is not. Not even
close.
EA "Mirrors Edge Catalyst" video came is features the musical group
CHVRCHES "Warning Call" a song that appears at the beginning and end of
the game, and is hidden in the City of Glass, for PS4, Xbox One, & Origin for PC.
Thats the first Ive noticed such a strong tie-in for a game that hasnt,
yet, been made into a movie. Speaking of consumer tech, the CTAConsumer Technology
Association, formerly the Consumer Electronics Associationhost a Q2 Outlook
Thursday. Dont get your hopes too high. Even a rosy view from that groups
economist wont change any analyst or investors mind. Everyone is waiting for
the next great thingand I dont see VR managing that, for now.
I have to hand it to the bulls. Theyve turned steep losses into small ones or
reversed them altogether, into gains to end many a day. From where I sit, it feels an
awful lot like 2008, when most intelligent traders knew stocks should be unraveling but
they simply wouldnt. If the May jobs report is a precursor to even worse economic
data ahead, stocks cant possibly beat back the bears indefinitely. But many a trader
has lost a small fortune buying puts, to make sure theyre prepared when the rug is
finally pulled out from under the markets. Sometimes, it makes sense to do nothing. Other
times, if makes sense to sell some puts on stocks severely damaged that shouldnt
have been beat down that low. But if the rug is going to be pulled out of the market, any
week or month now, youd better be darn sure you want to buy the stock youre
writing naked puts againsteven if using part of the put premium is used to hedge
against the worst by buying a lower strike put. I dont see many opportunities
but FootLocker seems to me one stock the Street has gotten totally wrong. Calls are very
expensive but so are puts, and its one that Id love to own under $50 because
its mall stores are busy, SIX:02 took off by its third week, replacing a Lady
FootLocker that was always empty, even as Sport Authorities demise will be
accompanied by more share for FL to gaineven if the eventual, end-stage liquidation
sale is tough makes it tough for a few weeks. Meantime, at 10% off, without any circulars
showing up in the local newspaper, many of my neighbors with kids assume the one in town
is already closed. Instead of focusing on the last days of SA, and possibly 60% off sales,
concentrate, instead, on the share FL will be able to grab, perhaps as soon as Back to
School shopping in Augusteven as its CHAMPS & FootLocker stores in the mall
remain some of the busiestwith Fathers Day just ahead!
ECONOMIC: (Highlights, only, below. Full International
Economic Calendar here)
© Sandi Lynne 2016 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the authors,
alone, and should be just one factor in more complete due diligence.
May 30June 03, 2016 WILL DATA
SUPPORT A RATE HIKE? Despite an
ECB meeting and Draghi press conference before Fridays US Unemployment Report for
May, along with a couple of other Economic stats that will be closely watched, its
the Employment Report that will bring the hammer down on bulls or bears, and that will be
flowed because of the Verizon strike. Over the last couple of weeks, the weekly employment
data was "Street-adjusted" to account for an estimated 30K+ wired line Verizon
workers out on strike. They were a factor not just for most of May but, also, for the week
in which the monthly snapshot is taken. By Friday, when a tentative deal was announced,
the number of VZ strikers was raised to 40K, and the Street, therefore, expects to see
160K jobs added in May, down from a fairly regular average of 200K+ until last month.
Both May and, even more so in June, sees students added to the job seekers, causing
participation to rise, and the Unemployment Rate to rise, even when jobs are exceptionally
strong. However, the BLS is famous for its "seasonal adjustments," including a
presumed number of new businesses opened and others closeda "birth & death
index," in addition to the adjustments made for all the students released from
classes, hoping for jobs. The point? Even without the Verizon strike, the BLS would have a
heavier hand in making adjustments to Mays data and , often, re-adjusts the
following month. Then, again, April data will be adjusted as well, and perhaps the weak
number that surprised the Street, that was dismissed as Verizon, will strengthen or
weaken. Either way, answers the Street hopes to find in the May Unemployment Report
isnt likely to be half the answer its hoped to be.
Im interested in the Bundesbanks "Regulating Financial Markets"
Conference, especially since its the ECBs regulatory authority that,
supposedly, replaced country regulation. That probably takes 2nd banana status
to SIFMAs Prudential Regulation Conference, a one-day event on Thursday, at which
Fed Gov. Powell will keynote. Theres nothing expected from OPECs meeting, also
Thursday, though nothing is expected to come of it, except, perhaps, a new Secy
General at the top. Draghis press conference cant possibly be as interesting
as some, since hes unlikely to say anything new but, rather, lay out proof that the
steps the ECB took, including negative rates, will continue working to stimulate the
Eurozone economy, and ultimately, push inflation towards the 2.0% it desires.
Wednesday, the Feds Beige Book should try and seek to highlight a district, or two,
that sees some improvement since winters pressures, and another weak Q1, while US
May Motor Vehicle Sales will be released, though even a terrific month may not dissuade
the Street from its belief that vehicle sales have already peaked. May Chain Store sales
will be far less interesting, given how few companies report monthly numbers, now, and how
many have already foreshadowed May numbers, in their recent earnings reports and outlooks.
Mothers Day was not the boon to mall based retailers they may have hoped but we
already could have inferred that from the last 3 weeks of reports & current quarter
forecasts. I suppose some will be curious about what Chicago Fed Bank Pres. Evans will say
on FOMC/ECB monetary policy divergence, overnight, into Friday morning, in the US, but
hes not an FOMC voter, this year, and not usually given to examining the effects on
US Exports, or manufacturing. The Swedish central banks conference on
"Rethinking the Central Banks Mandate," will hawkish Cleveland Fed Pres.
Mester probably gets lost in the after glow or Draghi, Thursday, compounded by
anticipation for the US Unemployment Report, Friday.
In the end, a very light Earnings Calendar, and the headline ECB meeting and US
Unemployment Report for May, are likely not to change anything. Maybe its Hovnavian,
Thursday morning, that can surprise to the upside, for a change, or Joy Global, that
morning, whose quarter will reflect higher gold prices, if not all the other ores its
equipment is used to mine.
The Events Schedule is packed with events, despite Mondays holiday in both the US
& London. CNBC would like everyone to believe that re/codes conference, starting
Tuesday, is the highlight of the week but there are a number of events that often good
competition, yet those CNBC cant boast of its partnership. Lets start at the
end of this week, first, with ASCO, the pre-eminent Oncology event, about which biotech
& pharma analysts will be in hot flush. Likewise, ACTRIMS for Multiple Sclerosis,
Wednesday. Both are hot fields of research, Immunotherapy the buzzword for higher stock
prices.
But lets give some credit to Deutsche Banks Financial Services Conference,
starting Tuesday, or Keybancs Industrial, Automotive & Transportation
Conference, Bernsteins 32nd Annual Strategic Decisionsif for no
other reason that its diversity, as the few names cited, below, proves. Then throw
in Boston Biotech CEO, and BookExpo America, ECTC for Electronic Components, Berlins
Air Show, Taipeis Computex, or, even, Stuttgart Germanys Automotive Interiors,
Dynamics & Components Testing, all starting on Tuesday, when Alphabet could be fined
by Russia, and Tesla is likely to host one of the better attended annual shareholder
meetings. Also should attract attention.
While OPEC may take a nothing done, at its meeting, the Street is talking to CEOs, at
BMOs Global Energy Invitational, even as the MLPAMaster Limited Partnerships
Association hosts its own conference, in Orlando. Also, Wednesday, both Bk of American
Merrill Lynch (BAC/MER to us) and D.A. Davidson host Technology Conferences, even as Cowen
will open its doors to its 44th Technology, Media & Telecom Conference,
BAC/MER the only one not in NY. KBW hosts Mortgage Finance, a topic that is twice hosted,
this week, as the Street awaits the separation of REITs from the S&P Financial index,
which its said will shine some light on mREITs, which wont be included, and are
largely lost in the current configuration of the S&P financial index.
Wednesday starts the CLIA Cruise3Sixty event, in Vancouver, the first time I can remember
it outside the US, let alone outside Miami. The group was battered, recently, so possibly
mounts some sort of recovery around this event. Also Wed., both Citi & Credit Suisse
host Retail & Consumer events, few found for Citis event. Maybe its just a
mall schlep! But there are more individual company events, that day, then thereve
been in awhile, albeit, perhaps not with the charisma of Teslas.
Thursday, the event schedule hardly slows down, with Credit Suisse Engineering &
Construction Conference, and the coincidence of KBW hosting an Asset Manager Conference,
even as RBC is holding a Canadian Asset Manager Conference. SIFMAs Prudential
Regulation sounds like an oxymoron to me, given its habit of closing the door after the
cows are gone. RBC hosts its 7th Annual Canadian Housing & Mortgage Finance
Investor Day, again shadowing KBW, whose Mortgage Finance is the day before.
Last week I mentioned being less negative. This week, Im more neutral, as its
do or die for the S&P bulls to take control, even as traction may be M.I.A. in advance
of Draghi, Thursday, and the BLS numbers, Fridayas fraught as those numbers maybe,
for May. As for the Beige Book, Ive been reading it on release since the internet
enabled that, over 2 decades ago. They are so full of on the one hand, and on the other
hand, with only veiled references to manufacturers, retailers, or dealers we can speculate
about, whatever value the FOMC finds, in them, is lost on me! Anyway, Im still hung
up on the April meeting minutes, which Im confident were doctored before release, to
emphasize the more hawkish comments a few," "many,"
"couple," or "some" members might have expressed. Why would the FOMC
have colored the minutes, so? To re-establish some doubt in traders & the Street, and
to cool some of the more heated rallies, while trying to offset some inflows into
Treasuries that were flattening the yield curve. Have you got a better reason?
ECONOMIC: (Highlights, only, below. Full International
Economic Calendar here)
© Sandi Lynne 2016 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the authors,
alone, and should be just one factor in more complete due diligence.
May 2327, 2016 LONG WEEKEND FAST APPROACHING
Ive often wondered whether theres a designated FOMC Minutes
fact-checker among the Fed Reserve members who attend the FOMC Meetings to brush up the
thrustperhaps color the viewpoint, at the last minute, to assure Wall Street
receives the message intended. Given it was days just after the April meeting that Janet
Yellen was dissing any conversation of 4 rate hikes in 2016not even certain
thered be 2flogging weakness in China, Japan, and other economies, for some
blowback uncertainty about how the US economy would evolve. Suddenly, whack-a-mole, the
April minutes sound like the lone dissenter, Esther George, put on her wicked witch of the
south hat and thought, "Im gonna show em whose boss here!"
The most star-studded meeting of the week is IIFthe Institute for International
Finance. Besides the speakers noted in the Economic Calendar, below, look for these as
well: Santander Exec Chair Ana Botin, JPMorgan Chief Market Strategist UK/Europe Stephanie
Flanders, HSBC Chair Douglas Flint who happens to chair IIF, as well, BBVA Chair Francisco
Gonzalez, DBS Bank CEO Piyush Gupta, MetLife Chair/Pres,/CEO Steven Kandarian, Banco
Espana Gov. Luis Linde, Blythe Masters, former JPM Exec &, now, CEO of Digital Asset
Hldgs, ECBs Nuoy, Turkey Depy PM Simsek, UBS Chair Axel Weber, and the King of
Spain, and those are just "featured speakers." Topics include "Cross Border
Resolution," "Banking and Blockchain," "Market Liquidity," and
"Commodity Prices: Where Nextfor the Roller Coaster?" For those sessions, and
more, everyone from ING, to BlackRock to Citi, Morgan Stanley, Goldman Sachs, & GE
Energy Finance are participating. And Ive barely brushed the Agenda See the link on
the Economic Calendar.
Even beyond IIF, though, central bank speakers seem everywhere, from Singapore, to Paris,
to Sydney and Tokyo, not to mention Beijing, as well, even as G7 FinMins supposedly
discussed the strong yen, and heads of state meet the 25th to 27th.
A week that features Federal Reserve members Williams, Harker, Kaplan, Bullard, and Gov.
Powell, will wrap, Friday, with Janet Yellen receiving the Radcliffe award, before
discussing with Harvard Prof. Mankiw "Building an Economy for Prosperity &
Equaltiy," in Cambridge. The other Fed speakers, generally, will mix with the press.
Neel "Too Big To Fail" Kashkari, Wednesday is speaking on Energy & Monetary
Policy. Thats like someone whos worn the same Arnold Schwarzenneger costume
for years showing up at the Halloween party dressed as Mathew Broderick in "Ferris
Buellers Day Off." And while I dont foresee Yellen saying anything to
rock the markets, Id watch, particularly, Fed Gov. Powell, Thursday, on "Recent
Economic Developments, The Productive Potential of the Economy, and Monetary Policy."
By the time hes done reading the title of his speech, wholl know what
hell have time to say? Then, again, Id watch, also, the Treasury Auctions of
52-week & 2-year Notes on Tuesday, $34B of 5-year Notes plus 2-year FRNs, on
Wednesday, and $28B of 7-year Notes on Thursday, when Street desks will be lightly manned.
Tuesday brings April new Home Sales, Wednesday the Trade Deficit & EIA weekly
Petroleum stats, as well as Thursdays April Durable Goods Orders & Shipments,
NAR April Pending Home Sales, before Fridays the 2nd stab at measuring Q1
GDP, the PCE component what Yellen is likely to focus on most, in that series.
The Earnings calendar is swamped with retailers, just a couple big enough to set the tone
for the group, CostCo Warehouse especially, but Williams-Sonoma, as well, because it
really doesnt sell anything that anyone cant live without, like Tiffany,
reporting, also, this week. The Street, though, is so prepared for TIF to whiff results,
that it would have to report a really atrocious quarter for all the puts purchased to pay
off. The argument against Signet, on the other hand, reporting this week, too, is that the
amount of credit its extended to customers will come back to bite it in the bottom
line. The problem with that thesis is timing, since another million or two newly employed
workers over the past year pushes out the fatal day the skeptics are waiting for. Best Buy
also Reports, but I dont think it can tell the Street anything not already
knownsmartphone sales have slowed, while laptops & desktops remain in the
doldrums. Only the ICSC (Intl Shopping Center owners) RECon can match the Earnings
calendar for retail & restaurants, because at RECon its not the speakers, mostly
REITs, as much as the Attendeesrestaurants & retailers that the analysts show up
to speak with. Bk of America Merrill Lynch, Wedbush, Raymond James, and other I-banks host
clients at RECon, often for 1x1 meetings with retailers & restaurants, Citi the only
one whos put its intentions to meet and mingle on its conference calendar.
And speaking of large, influential retailers, take Walmart, which found out, last quarter,
that the more it pays employees, the more they spend before their paychecks ever get out
of its stores. And its true more for WMT than most, because the extra $40 a week
its paying the lowest rung of employees probably has been going to food, toiletries,
and paper products like toilet paper & paper towels, items the poorest of WMT
employees had to scrimp to purchase previously. Recall a couple of years ago, the brouhaha
about managers suggesting some of its least well off employees apply for food stamps? But
the phenomenon isnt restricted to WMT. When I owned high end tennis, swim, and ski
stores, carrying only the top European brands, more than 60% of the people who worked for
me did so for the 40% employee discount, which was fine with me and them. Imagine if WMT
starts paying employees in more expensive cities $15 an hour instead of the $10
thats now its minimum?
Meantime, tech offers off more than a few tickers of note reporting their quarter, from
the recently separated two Hewlett-Packards, to Intuit, NetApp, & Palo Alto Networks,
a recent hedge fund darling. More tech will be attending JPMorgans Telecom, Media
& Technology Conference, in Boston, starting Monday. Presenters range from Digital
Realty, to AMC Networks, to MasterCard, Marketo, Tribune Media, Visa, Care.com, Synopsys,
Yahoo (this one surprise us!), Verizon, GoPro (another surprise, given that JPM analysts
have left it for dead), New Relic, Genpact, CommScope, OnDeck, T-Mobile, Monotpye,
Qualcomm, IMAX, Pandora (streaming radio), Sirius XM, Frontier Communications, Imprivata,
GoGo, Western Union, Calix, TubeMogul, AMD, Micron Tech, Uniken (Fintech start-up),
Mercadolibre, Lumentum Hldgs, Broadridge, Cognizant, GoDaddy, Aspen Tech, MDC Partners,
Vantiv, Juniper Networks, Lamar Advertising, Xilinx (which is also hosting its analyst
meeting), trueCar.com, LionsGate Entertainment, athenahealth, SeaWorld Entertainment,
EnerNOC, BCE (Bell Canada), Box, Googleyup! Google not Alphabet, TripAdvisor, IBM,
Microsoft, but Facebook had not announced participation as of Sunday, May 22nd,
at 10pm. Solar names are also fairly represented but will be dwarfed by both retail
reports and Display Week.
Star-studded industry events would have to include UBS Healthcare Conference, and
SIDDisplay Week, in San Francisco, which will include every type of display
imaginable, from TVs to Monitors, to wearable tech, smart devices, and Augmented
& VR devices, to LED lighting, plus a business conference, an investor
conferenceread analysts speakingand so much more. Usually, the high number of
Chinese University speakers at SID this week are seen only at the Japan, Korea, or Chinese
version. This year, only IHS is offering more speakers than Chinese universities.
Sometimes I just gotta laugh, preparing the Calendars; Whoever thought the National
Restaurant Association (Chicago IL thru 24th) & DDW (Digestive Disease
Week-San Diego CA thru 24th) meetings would wind up concurrent, ending on the same day?
What were the odds? Then, again, why the NRA schedule itself in Chicago, when RECon is in
Las Vegas? And Stephens is hosting a client field trip to restaurants, starting Wed,
traveling from Minneapolis to Dallas, thru the 26th.
Energy is well represented on the Events Calendar, with UBS hosting Global Oil & Gas,
in Austin, starting Monday, hart energy offering DUG Permian Basin, in Ft Worth TX, NAWTEC
for Waste-to-Energy, Wolfe Research sticking to Utilities but Platts offering
Northeast Power & Gas Markets, starting Tuesday, West Coast EMCEnergy Management
Congress.
You might keep an ear or twitter feed tuned to the Value Investor Conference in London,
Thursday, or note the very large number of companies offering analyst meetings or, in the
case of Eli Lilly, and R&D meeting with analysts. Clearly, theres a mad dash to
get "business" done before summer vacations make it harder to get large crowds
together, unless youre one of the I-banks that hosts a conference on Marthas
Vineyard or thereabouts, with an entire hotel booked for its guests.
Lately, theres been a tendency for stocks to cut their losses, Friday afternoons,
last Fridays miracle a near unched to small gains in all the indices. It feels like
shorts covering into weekends. With the 3-day Memorial Day weekend coming up, and the
official start of summer upon us, therell be added issues, this week, like volume
drying up towards the end of the week. Weve heard any number of talking heads refer
to lack of liquidityeven FOMC speakers have examined the issueso magnify that
by several times for the march into next weekend. IF markets are down Tuesday &
Wednesday, after some follow through to Fridays recovery on Monday, expect to see
shorts covering Thursday, rather than Friday, which could allow a drift up Friday on near
invisible volume. Then, again, maybe all those traders leaving early Thursday arent
heading straight out to the Hamptons but, instead, going home for a nap before dinner and
the midnight showing of "X-Men: Apocalypse." Summer is here, so enjoy the last
big blast of earnings before the summer doldrums hit hard. Two months since the last 3 day
weekend, were all overdue for some relief, and the bulls might get some this week,
given the tendency for stocks to rise into long weekends. As long as 2040 holds on the
S&P 500, the bulls must be given respect. .
ECONOMIC: (Highlights, only, below. Full International Economic Calendar here)
© Sandi Lynne 2016 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the authors,
alone, and should be just one part of more complete due diligence.
May 1620, 2016 STOCKS SHOULD CONTINUE TO MAKE NO
UPSIDE PROGRESS Housing data could top the week, in
combination with more retailers reporting earnings. Throw in April CPI, a month in which
oil prices rose, and the conversation could well switch from no rate hike until after the
election, to June being live againno matter how many will point to the UK referendum
on leaving the Eurozone, as reason Yellen wouldnt go then. That excuse sounds a lot
like the economists and strategists who were sure, last year, that the FOMC wouldnt
move in December, before the holidays, but thats just what they did. At least bear
that in mind.
Monday, NAHB releases its May Housing Market Index, a sentiment survey that reflects
traffic through model homes, and to a lesser extent, contracts signed. Bear in mind that
Texas, despite the trough in oil, was a very vibrant housing market but water logged homes
and building sites are never good for business, so remove that big state from the
equation. Tuesday, the Economic Calendar promises April CPI and Housings Starts and
Building Permits. One usually assumes theres a lot of activity in April, but again,
remove Texas and other states hit by torrential, relentless rains & tornados, and
regions will likely put up uneven stats. April US Industrial Production & Capacity
Utilization could, well, demonstrate that most of the country is stuck between winter
& spring, so utilities arent pushing out as much power, even as the Rig count
keeps dropping. Tuesday also brings a Politico event that features the Feds Williams
& Lockhard, even as Dallas Feds Kaplan with mix with reporters. I must admit to
some curiosity about ECBs Nouys comments at "The Present and The Future
of the Banking Sector."
Wednesday, in addition to EIA Petroleum stats, the FOMC minutes of the April 2627th
Meeting will be released. While there was only one dissenter on the record, when the
statement was released, the particulars of the meeting could be more interesting, given
the rising chorus pushing for a June rate hikealbeit not Janet Yellen or William
Dudley, the two most important voices on the committee. Speaking of Dudley, he is
scheduled for a monthly briefing on the U.S. Economy/NY Economy, even as the ECB Minutes
will be released, as well. Friday wraps with April Existing Home Sales and
Baker-Hughes weekly Rig Count. I expect Existing Home sales to be strong, if
activity here is any guidethough perhaps not the high end of the market in the most
expensive cities like NY & Los Angeles. Here, homes are getting multiple bids, and
even Fannie Mae has rejected bids that were at a 2.0% discount to the asking price. And if
the housing data werent enough for one week, theres also Housing Leadership
Summit in Laguna Nigel CA, and Single Family Rental Investment Forum, in Miami, not to
mention JPMorgans Homebuilders & Building Products Conference, starting Tuesday.
.
I was originally enthused about the RAPID 3D Prototyping Conference, with its Medical
Device division, and a Stephens hosted tour but that was before I saw the 60 Minutes piece
on polio being used to disable tumor defenses to treat glioblastoma. The Biomarker &
Diagnostics World Congress is another event to watch, given the push towards personalized
medicineeven some drugs winning FDA approval only in combination with genetic tests
for anomalies that some drugs treat better than othersespecially in immunotherapy.
Tuesdays a banner day for investment bank conferences, starting with BAC/MER
Services 1-on-1, JPMorgans earlier cited Homebuilding & Building Products
Conference (we wont be able to escape housing this week), Nomuras Annual
Gaming, Leisure & Lodging Conference, Piper Jaffrays GenomeRx Symposium, Goldman
Sachs Leveraged Finance Conference, JPMorgans Annual Global Consumer &
Retail Conference, albeit in London, where UBS will host Pan European Small &
Mid-Caps, in addition to Barclays Americas Select Franchise Conference, which
features American companies like 3M & JPMorgan. Citi is also hosting Frontier Markets
in New York but theres just too many other I-Bank conferences to feel excited about
the Frontier Markets, especially given Chinas mixed data dump..
Wednesdays MoffettNationson Annual Media & Communications Summit is well timed,
with Upfronts taking place in NY. Talk about big spenders, Jennifer Lopez is [Comcast)
NBC-Universals entertainment. Credit Suisses Shale Day perhaps less
interesting than Baker-Hughes weekly Rig Count. Also Wednesday, Deutsche Banks
Annual Semiconductor One-on-One, and Needhams Emerging Technology, which involves
some companies that arent public. BAC/MERs Business Services, Leisure &
Transport Conference may be taking place in London but its American companies, as
well as UK & European ones that are featured, especially in travel. In the mix of
weekend articles on professional portfolio managers performanceincluding
mutual funds, hedge funds, and even Jim Cramerits almost funny that
Institutional Investors US Investment Management Awards will be distributed in NY.
And then, if you dont think youll have enough of homebuilding, with all the
data scheduled, in addition to JPMorgans conference, theres always Deutsche
Banks UK Homebuilders Day in London, Thursday.
The Earnings Calendar is dominated by retailers, most small, though also a few big names
like TJMaxx, L Brands, American Eagle Outfitters, Urban Outfitters, Stage Stores,
Steinmart, Ross Stores, Target & Walmart, while in sporting wear, FootLocker, Dicks,
& Hibbett Sports, not to mention Lowes & Home Depot, plus Red Robin Gourmet
Burgers and Daves Famous, as well as Advance Auto Parts, the one bright spot in
Eddie Lamperts stable of investments. But outside consumer facing companies,
including beleagured Staples, Wed, Agilent, Analog Devices, Applied Materials, AutoDesk,
and Avago report in tech, plus Campbell Soup, and John Deere. I took the liberty of using
bold for retailers, and bold with underlining for every other report likely to generate
media interest that isnt consumer facing. Take Two Interactive reports this week,
also, and has two tough acts to follow, with EA & Activision having already pleased.
The two biggest events of the week are the AGA (Am. Gas Assoc.) Financial Forum, and
EPGthe Electrical Products Group, both of which host large analyst meetings, AGA in
Naples Florida, EPG in Longboat Key. The only other meeting I expect to make as much noise
is the Society for Immunologists, with Zika a big worry for the Olympics, and all of South
America, Latin America, and the Southern coast of the US, as summer approaches. (Here it
feels like its already arrived, with a Tuesday two weeks ago topping at 97 degrees,
and the weekend saved from the 90s only by clouds.)
The Internet & TV Expo, INTX, in Boston, seems odd so soon after the
"Newfronts," that digital media companies put on last week, even as the regular
TV & cable Upfronts are this weeks media business, in NYC. But, then, so is Mark
Zuckerbergs (FB) planned meeting with conservatives. I imagine him emerging from
that much like Paul Ryan did from his meeting with Donald Trump last weekmaking
hopeful comments without really getting behind them.
For some, the highlight of the week will be next Saturdays Preakness, at Pimlico
Park, where Nyquist, its assumed, will try for the 2nd leg of the Triple
Crown. The Triple Crown goes unawarded for decades between a horses that accomplish that
task, yet there will, undoubtedly be some wholl expect lightning to strike two years
in a row.
Memorial Day is late this year, not arriving until May 30th. Typically, crude
prices have started rising in late February or March but have given much of the gains back
by the time Memorial Day rolls around, or shortly thereafter, summer driving season
already discounted in its price. This year, gold & crude have exhibited pretty
stunning momentum but Id still expect crude to pull back, some, at least until a
hurricane is, supposedly, poised to threaten the Gulf Coast. Storms like Katrina &
Sandy are 50 year storms, yet, the weather people in hurricane areas are so afraid not to
properly prepare their viewers that they oversell the risk of a big one, every time a
tropical depression formssort of like the riproaring rally stocks have been putting
on, one day a week, for the past several weeks, that have proven to lack staying power,
despite all those hurricane warnings and spaghetti forecasts that have amounted to little
or nothing, for Florida, in the past 10 years. I don't think even my long time favorite,
TJX, will report as strong as quarter as it's pulled off the past year. In fact, I was
disappointed with its Mother's Day watch selection, which was 90% men's watches, and the
store wasn't particularly busy. That's after the Qtr ended, of course but traffic seemed
soft everywhere but at HomeGoods.
I remain bearish stocks, though less so about the homebuilders. My bank just offered me a
30 year mortgage for 3.73%, quite tempting if my mortgage wasnt just a couple of
years from paid off. With the Fed talking rate hikes, and rates again near historical
lows, this springs selling season should be strongit clearly is, here in
Florida, in both the existing and new home market, as developers gobble up all the former
agricultural reserve areas that Gov. Scott has turned into builders paradise, even
as existing hjomes are drawing multiple bids as soon as they hit the MLS. Strength here is
not all that surprising, with baby boomers retiring, especially given how much prices have
risen since winter 2014. Rising prices combined with low rates appear to be terrific
incentives for fence sitters. And, after all, doesnt one need a bigger garage to
protect all the new SUVs & Pick-up trucks that have been sold? But stocks? I think
that bloom is off the rose, perhaps until just before the election in November.
ECONOMIC: (Highlights, only, below.
Full International Economic Calendar,
here)
© Sandi Lynne 2016 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the authors,
alone, and should be just one factor in more complete due diligence.
May 09, 2016 UH OH! FRIDAY the 13th? The big news over the weekend was about Saudi Arabia firing
its oil minister, Ali al-Naimi, after 30 years in the post. Thats lifted crude
prices, even though Saudi policy isnt expected to change. Al-Naimi was the architect
of Saudi Arabias plan to squeeze hi-cost producers, like US shale producers, by
flooding the market with crude. Market players, obviously, believe, the loss of al-Naimi
means a change in Saudi Arabias flat out production, but his replacement, Khalid-al
Falih, chairman of Saudi Arabia Oil Co (Saudi Aramco), seems determined to maintain the
share al-Naimi worked for, and stated hes aligned with the plan to protect Saudi
Arabias crude market share.
Its another week of central bank speakers out in force, including the Feds own
"Too Big To Fail" Neel Kashkari whos not only holding another Town Hall
but, also, in two weeks, a conference titled "Ending Too Big To Fail." The UK
will see more Parliamentary hearings on Brexit, which I can only guess is being taken more
seriously across the pond than it seems to be here. Note, the US Treasury is auctioning
10-year Notes, on Wednesday, and 30-year Bonds on Thursday but the amounts on offer, $23B
& $15B, respectively, is so easily inhaled there should be no surprises.
Tuesdays NFIB Small Business Optimism Index and JOLTSthe Labor
Departments dicing of turnover & quits, should help fill out the information
obtained in last Fridays job report, April adding fewer jobs than weve seen in
many months. The Bank of England will announce its monetary policy committee decision,
Thursday, along with its QE Targets, and even the minutes that reveal who voted which way.
On Friday, well get US April Retail Sales, which could disappoint, given that Easter
shopping took place in March. Then, again, with Easter on 03/27, this year, against 04/05
last year, that puts an extra day of shopping on the calendar this year. IT snowed in the
northeast, Easter Weekend, so spring clothing sales would have been a tough sell. Also
Friday, April PPI & Final Demand, though not Yellens favorite view of inflation,
which is PCEPersonal Consumption Expenditures, rather than Producer Prices. Friday
will, also be when the market can react to the World Gold Councils Q1 Global Demand
Report, expected at midnight, Thursday, in NYC. China, Japan & the Eurozone will offer
up some important data that will be used by economists to retool their expectations.
The Earnings Calendar is in a bit of transition. Though Macy*s, Kohls, Nordstrom
& JCPenney will report, the only one that could have disappointed was JCP, since the
other 3 already saw their ratings & Street estimates cut, into earnings. JCP had been
the subject of steady optimism until last weeks NY Post article, supposedly citing a
memo to Penney managers to cut hours across the board, because the chain was at risk of
not making its promised numbers. So, now, the only question is whether expectations are
low enough? Some quick serve names are scheduled to report earnings, as well, including
Wendys, Jack in the Box, and Fiesta Restaurant Group. Other than McDonalds,
which has been riding the wave of breakfast all day, there must be other chains benefiting
from the customers Chipotle has been donating, since the CDC became involved in illness
linked to its restaurants. As the Earnings Calendar transitions to consumer names, with
technology widely disappointing, Electronic Arts is one of the few tech name surrounded by
optimism that Activisions report, last week, did nothing to discourage. Its
report is due Tuesday afternoon.
Because Earnings Season is winding down, the Investment Bank calendar of events is warning
up. So, how about this for the Ultimate Analyst Frat party, on I-bank expense accounts?
RCI Hospitality is holding its investor meeting at Ricks Cabaret in NY, a boom boom
club by another name. RCI Hospitality, of course, used to be Ricks but changed its
name to raise its respectability. Bada Bing!
Monday, Bk of America Merrill Lynch hosts Global Metals, Mining 7 Steel in Miami Beach FL.
Macquarie hosts eXtreme (Software & Services) Ideas, Morgan Stanley E&P & Oil
Service, Deutsche Bank its 10th Annual Clean Tech, Utilities & Power
Conference, Goldman Sachs London 9th European Small & Mid Cap
Conference, D.A. Davison its 18th Annual Financial Institutions Conference, and
Stephens its Semiconductor Investor Field trip to MSTI, SWKS, QRVO, & SLAB, on the
companys planes. Also Monday, the Robin Hood Foundation Annual Charity Extravaganza,
where everyone whos anyone in the hedge fund world wont dare missno
matter how badly theyre lagging the indices, this year. Make no mistake about
itRobin Hoods fundraiser is what the air waves & media will be filled
with, come Tuesday morning. And thats just Monday.
On Tuesday, Wells Fargo hosts Gaming, Leirue & Restaurants, Credit Suisse REITs,
Oppenheimer Industrial Growth, and Wells Fargo Industrial & Construction. Meantime,
Citi holsts Global Energy & Utilities, Deutsche Bank MLP, Midstream & Natural Gas,
while Stephens planes will be busy, again, for a Rail & Intermodal Investor plane trip
to UNP, HUB, KSU, Watco, JBHT, CSX, and Florida East Coast Railway. Also starting Tuesday,
the 10th Annual SALT ConferenceSkyBridge Alternative Investment
Conferencegot underway this weekend, speakers on the Agenda including Kobe Bryant,
Former Sen. John Boehner, Ken Griffin, Ron Howard, David Rubenstein, Robert Rubin,
Lawrence Summers, T Boone Pickens, Sam Zell, and more. Overseas, Tuesay, Telco Cloud Forum
takes place in London, while Citi hosts China Fintech in China, and also Taiwan Investor
in Hong kong. Citi also hosts Indonesia Corporate, the same day, while the Asian Banker
Summit meets in Vietnam, and BAC/MER hosts China: The Good, The Bad & The Ugly, a FICC
event in Singapore.
Wednesday, Jefferies hosts Technology, while the Academy of Sciences, in NY, hosts its 3rd
Annual Honest Buildings Real Estate Innovations Summit. JPMorgan is hosting Business
Services in London, where the Future of the Car Summit, from the Financial Times, also
takes place. Thursday, FT hops the pond to host US Healthcare & LifeSciences in NY,
while Mitsubishi hosts a small, focused Oil & Gas Conference in NY, too. But
thats just about when life science companies will have their eyes trained on London,
for the Advances in Immuno-Oncology Congress. How eager are the I-banks to get all their
conferences in, before the start of summer, Memorial Day weekend? Theyre even
hosting Friday conferences, like Citis Connecting the Data Points: Telecom, Cable
& Telecom Equipment IR Day (NY), JPMorgfans Amsterdam Investor Forum, in the
Netherlands, and Clarkson Platou Securities Mining & Shipping Roundtables (NY).
Onlne Media, especially, will be filled with stories about the "NewFronts,"
digital medias equivalent to TV & Cables UpFront pre-sales of advertising
time.
All of which will be a lot of noise, as the dollar seems to be leading crude, oil-related
names helping drive the recovery in the indices, despite talk of recession growing louder,
even as stocks are not far from their all time highs. But how long can crude keep rising,
in the face of a continuing glut, given the fantastic rebound since the Feb. lows?
Typically, without a falling dollar to provide the match to light the fuel, energy stocks
start moving up in March, in advance of summer driving season, sometimes peaking days
before Memorial Dayeven though the entire summer season is ahead, at that point.
Its a trade thats usually even more reliable than "Sell in May and Go
Away." Whether crude and energy stocks continue their rise into June, has often
depended on the weather, the mood of consumers, and employment. This year, the dollar more
than anything appears to be the influence, and that wont likely change, unless OPEC
actually takes coordinated action at its June 2nd Meeting. I can imagine it but
cant believe or rely on it in making trading decisions. Have you seen the yen since
the BoJ pushed rates into negative territory? In what world does that make sense? And
were long past when the March 31 end of fiscal year triggers yen repatriation. Oil
could as easily fall just as fast as it rose, in leaps and bounds, which would drag down
the major indices and send analysts and economists worrying whether the continued builds
in crude is a sign of weak demand, weak demand a precursor to recession. And make no
mistake, many believe the US is already slipping into recession but that may just be
recency bias, related the weak Q1 GDP print, followed by the less strong April jobs
report, which was the weakest in months. The charts are indecisive, for now.
ECONOMIC: (Highlights here, only. Full
International Calendar here)
© Sandi Lynne 2016 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the authors,
alone, and should be just one factor in more complete due diligence.
May 0206, 2016 TORRENT OF EARNINGS MAY NOT
AMOUNT TO HILL OF BEANS The number of companies reporting earnings,
this week, is an avalanche. Despite the quantity, I was hard pressed to find tickers to
highlight. A slug of REITs, Agrium and ADM stood out, along with the irony of AmBev &
Anheuser-Busch InBev both reporting before the opening bell on Wednesday, along with Hain
Celestial the same morning, CBS relesses its report Tuesday, and Time Warner & 21st
Century Fox, on Wednesday, News Corp on Thursday, when AMC Networks (AMCX) will report as
well, not to mention Anandarko Monday, Royal Dutch Shell on Wednesday, and Apache on
Thursday, the real market power players are already in. Pfizer reports Tuesday, Merck on
Thursday, along with the entire pharma wholesale distribution sector, this week . Those
stood out, along with Priceline Wednesday and Alibaba Thursday, but for all the volume of
reports ahead, I couldnt help feeling that the big hitters, with market-wide power
to take stocks up or down, have already weighed in. Furthermore, I suspect the press will
be more taken with the Interactive Advertising Bureaus schedule of
"Newfronts," the digital answer to TVs upfronts, than all but a select
group of earnings reports.
Central Bankers will be out in force, NY Fed Pres. William Dudley opening the Atlanta Fed
Financial Markets Conference, this evening, on "Getting a Grip on Liquidity: Markets,
Institutions & Central Banks," the title of the event and something his keynote
is likely to address, given the NY Feds position between dealers and the US
Treasury. The lone FOMC dissenter on holding off on new rate rises, Mester, moderates a
panel, Tuesday, at the same conference, where Lckhart will, also, speak. Draghi is
scheduled to speak at the Asian Development Bank, in Frankfurt, Monday at 10am et, while
the Feds Williams presents "Systemic Risk: Inevitable or Preventable?" at
the Milken Institute Annual Conference, Monday. Japan Prime Minister Shinzo Abe will be
visiting several cities in Europe, with EU Pres. Tusk in Brussels Tuesday, and in London,
Thursday, when that city will be electing a mayor. Abe will offer press conferences at
each stop on his circuit.
Which brings us to Events, before we double back to what will really counts thist week, At
one time, AUVSI Unmanned Systems No. America (New Orleans) was about drones dropping bombs
on enemies in Iraq and Afghanistan but its not your daddys unmanned systems
even anymore. This year it includes Women in Robots, Intelligent Robots, Automated
Vehicles & Drones Seems everyone wants in on Automated Vehicles. The American Hospital
Association Annual Meeting started over the weekend, always a newsworthy event, with some
of its members reporting this week, too. But its timber, and in particular, forest
products and pulp that stand out because we dont see conferences on those subjects
every week, yet this is a big week for the group. PwC offers up a Global Forest Products
Leadership Summit that leads off Intl Pulp Week, both in Vancouver.
Without slighting the Kidney Foundation, Radiation Oncologists, Neurological Surgeons,
Jefferies Complement Therapeutics, or the American Burn Association, the headline
event outside the Newfronts should be Deutsche Banks 41st Annual
Healthcare Conference, in Boston, starting Wednesday. Its start just happens to coincide
with the American Society of Gene & Cell Therapy Spring Conference, along with
SCAICardiovascular Angiography & Interventions, and Liver Transplantation,
starting the same day, along with the Annual Sohn Foundation Conference, which CNBC is
going to be all over, since its a partner with Sohn for the New York conference,
this week. (IS there anyone else grateful that Carl Icahn isnt on the roster of
speakers? Anyone else feel Icahn is CNBCs go to guy, no matter how boring he tends
to be talking about himself and his fund? Really? Only CNBC can turn Icahns exit
from Apple into a 45 minute interview.)
Thursday, the US Energy Association hosts its Annual Membership meeting & Public
Policy Forum, where commissioners from FERC, NERC, and ExxonMobil's Rex Tillerson will be
the headliners. I cant help feeling theres much to distract the Street from
Earnings, this week, no matter how numerous those reports may be.
Which brings us to what really will capture the Street, beyond all the Central Bank
speakers, and thats US PMI & ISM Indexes for April, both Manufacturing &
Services versions, with their price, orders, shipments, and employment segments, all in
service to Fridays April Unemployment Report. The Street is prepared for Vehicle
Sales, Tuesday, to have proved that theyve already topped, so any disappointment in
Aprils sales should be of the "I told you so," nature. However, they just
could surprise to the upside, since Easter fell on 3/27, which provides this past April
with an extra selling day, compared to last year, when Easter fell on April 5th, which
could set up an upside surprise. I just wouldnt count on it after Ford delivered
blow-out earnings and, then, announced, it would furlough an F-series factory for a week,
to control inventories. Huh????
ADP will offer its April Private Sector Employment Report Wednesday. Lately, ADP is better
at the general direction of the governments version than it has often been in
the past. Thursday, Challenger will offer April Job Cuts, while the 9 retailers that still
report monthly sales will weigh in with Aprils. The mall was quiet all month, with
Easter falling in March, and Mothers Day in May, pitting this April against the year
ago, when Easter was in Aprilearly in April, on the 5th, but still in
April. That puts an extra selling day in April this year but, unfortunately, at least
here, that was for naught because of the later Passover. I cant remember the roads
around here being as empty as they were the first weekend of Passover, April 22nd24th.
Our Bath & Body Works (LB) moved out of its large, central location to a leasehold 1/5th
the size, next door to Sears. That seriously cut its traffic, at least for April, though I
can't imagine that would be a chain-wide problem. Still, seeing Victorias Secret
offer athletic pants at 50% off to end the month, suggested to me that the chain was
reaching for sales to make its monthly numbers, even as social media is rife with rumors
that it will discontinue swim wear, with this season. Then, again, the number of chains
offering 60% and 70% off retail prices to move out spring goods tells me online sales are
not making up for weakness at malls. Heck! Even offers of 50% off new spring merchandise
is a bit unsettling, this early in the spring season.
The double whammy will be Friday, when the April Unemployment Report is issued by the BLS,
and later in the day, March Consumer Credit, at 3pm et. If the Employment Report again
delivers 200K new jobs, or there about, all the Street will need to keep the rally viable
is for oil to consolidate around its recent mid-$40s level, to keep the bulls
in chargedespite the sell off that started last week, which did a bit of damage by
Fridays close, to the Nasdaq, almost exclusively. We can probably thank the
yens unusual reaction to the BoJs lowering rates to negative territory, for
helping to cool off the dollar, which lit a fire under crude and gold, even as
Chinas stimulus has helped set off a rebound in industrials metals. But those trades
seem long in the toothand that comes from someone whos been recommending
Chevron as the name to watch for months. Im out, for now, and wouldnt hesitate
to revive the position, if crude managed a serious pullback to the low $30s.
Thats not generally what occurs in May, as summer driving is anticipated, and
refineries go off line to switch blends for hotter weather. But then, we dont often
see a 60 or 70% rise in crude prices, from February to April, either, ex-a war in the
Middle East. Then, again, I dont think the economy is hot enough to support the rise
in the major indices, either. At best, the economy is muddling through, and thats
only thanks to global central bank support. Thats both the shame and the stumbling
block as the candidates for President stop fighting to win their partys nomination
and turn their poison to the state of the economy, which the Republicans, anyway, will
make look so bad, itll be a wonder consumers spend any money at all, come Back to
School. I suspect this will be a year to sell in May.
ECONOMIC: (Highlights, only, below. Full International Economic Calendar here)
© Sandi Lynne 2016 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions presented are the authors,
alone, and should be just one factor in more complete due diligence.
April 2529, 2016 EARNINGS
CRUSH, & POSSIBLY, A LESS DOVISH FOMC
Recall back in September 2015, the Fed had laid the table for a rate hike,
then put it off, to the great disappointment of markets. At the time, global economic
uncertainty was cited as a reason among a couple of reasons. Fast Forward to December
2015, and the markets have recovered somewhat, from a fall swoon, and the FOMC raised
rates and predicted 4 more hikes to come in 2016. By the March meeting, after global
markets tanked in January, into Feb. 11th, FOMC Chief Yellen cited global
uncertainty, again, for delaying a rate hike, this time dialing back expectations for 4
hikes, saying the dot plot is not a promise, just opinions from the Fed Presidents and
others with input. After that meeting, it felt like Yellen was trying to justify not
hiking in March, by pointing again, and again, in her speeches and citations, to global
economic uncertainty and weakness, along with the millions of Americans under-employed,
along with those whod really like a job were too discouraged to continue posting
their resume, anywhere.
Which brings us to this weeks meeting, and the possibility Yellens merry troop
may dial back into relatively imminent rate hikes if the economy keeps developing as it
has been, using the recovery in stocks to put hikes back on the table, helped by
Chinas more stimulative policies since the March Meeting. Perhaps thats only
expressed by another FOMC member dissenting, like Mester did at the March Meeting but, one
way or another, the FOMC is likely to put rate hikes back on the table. .
OR maybe not, since Q1 Advance GDP will be released Thursday, and GDPNow from the Atlanta
Fed suggests it will be awful, though something weve seen in Q1 for the past few
years. As I prepared the Economic Calendar over the past many weeks, the number of high
level government officials in the UK appearing before Parliament to deliver speeches and
their opinions on how bad off Britain would be if it left the EU, it occurred to me that
its another factor that could stay the Feds hand. It appears, us Yankees are
just not taking the possible Brexit very seriouslyand perhaps not worrying enough
about the possibility. Of course, the UK referendum on EU membership does feel a bit like
the Scottish referendum to leave the UK, and we all know how that went. Any worries about
Scotland voting to withdraw was for naught. The vote was never as close as the media led
anyone to believe. Fool us once, but not twice.
Other items on the Economic Calendar this week includes March New Home Sales on Monday, US
Durable Goods Orders & Shipments for March on Tuesday, along with the
S&P/Case-Shiller Feb. Home Price Index. Does it really make sense to pay all that much
attention to an index thats almost 2 months old by the time its released, and
then, covers only FHA insured sales compared to previous sales of the same properties,
backed by the FHA? Wednesday will add to the housing intelligence, with Natl
Assn of Realtors March Pending Home Sales. From what I hear, even HELOCs
require so much documentation, even for people who dont have a mortgage, the Fed has
handcuffed home buyers without hurting the banks who were, largely, responsible for the
housing collapse, as the billions in fines paid suggest over billions in crappy loans the
banks sold to investors claiming they were Triple A. Watch, also, March Personal Income,
Spending & PCE, the latter the version of Consumer Prices Yellen likes best.
Of course, Energy has done as much to boost the indices as any group, since the low just
above $26 a barrel, in mid-February. I have long recommended watching Chevron & buying
the range but its, now, so far out of the range I was trading, puts seem like the
better bet, with Chevron & ExxonMobil reporting results Friday. Just a few hours
later, Baker-Hughes will reveal how many Rigs are still operating in the US & North
America, the count getting so low the only place left to go may be up, especially was oil
made it into the low-40s, since the Feb. nadir.
The Event Calendar is slim, in deference to Earnings Season reaching its stride, this
week, along with the Passover Holiday, that doesnt end until next Saturday. One of
the most interesting events, to my surprise, is the Rutberg & Co Summit in London,
starting Tuesday. Speakers from companies as diverse as Kering SA, BT & Vodaphone, to
Lenovo, Nissan Europe, Travelers, Verizon, TIAA-CREF, Visa & Visa Europe, Amadeus IT
Holdings SA, NBC Universal, Accenture, Nest labs, Disney Interactive Media Networks,
Accor, Henkel AG & Co KgaA, HSBC, BMW, and Turner Broadcasting, plus Unilever &
Equifax without a unifying theme. A hodgepodge of European & US companies, that serve
consumers and businesses, without a single theme. Also notable, the EEI/AGA Customer
Service Conference & Expo, which starts Monday. For those who dont follow the
Edison Electric Institute, and dont know AGA stands for Americas Gas
Association, wont get that its utilities servicing their customers. That occurs even
as CxFusion, the "Voice of the Consumer" meets in a different state, yet another
customer service conference.
The Nomura 5th Annual Retail & Restaurants Conference is replete with
fallen angels, like Bob Evans Farms, Coach, JCPenney, Macy*s & Walmart. Stephens
Automotive Retail Field Trip is to Autonation, Penske Auto, & CarMax. Since AN just
failed to deliver the sterling results the Street has come to expect, and KMX suffers from
sedans piling up on lots when customers want only pick-ups & SUVs, and the Street is
sure OEM sales have gotten as good as they will get, I dont think anyone visiting
the dealers will be persuaded to invest in auto-related names. Heck! At this point,
Americans are no longer holding onto their old clunkers which means the parts retailers
like OReilly, Autozone, & Advanced Auto Parts will face tougher times ahead.
Come Friday, the faithful will trek out to Omaha for Berkshire Hathaways Annual
Meeting, the Q&A on Saturday to be streamed, for the first time, by Yahoo. Warren
Buffett may be the best investor ever, or a man who always had plenty of money at the best
times to invest but he sure doesnt know when to fold em. In his recent years,
hes become the biggest huckster in the world, slapping Berkshire Hathaways
name on Auto dealers, Real Estate Brokers, and even warranty services sold to new home
buyers. As Chipotle found out, its not always good to have all your baskets invested
in one name.
Which brings us to the Earnings Calendar, and the question, "Where do we start?"
I highlighted First Data, because its newly public, again. Haliburton, of course, is
finding out that the anti-trust cops are taking their jobs seriously after years of
laissez faire. Lab Corp should be sitting pretty, with a few million more people insured
since Obamacare was passed into law. Banco Popular caught my eye because it is or was the
largest bank in Puerto Rico where the poor have always outnumbered the well off, and now
the country is on the verge of bankruptcy.
Ive highlighted Ethan Allen, Express Scripts, Heidrick & Struggles, Nabors
Industries, NXP Semiconductor, and Zion bank Monday afternoon for they can tell us about
consumers & businesses, and the energy patch. NXPI hasnt suffered, until now,
from the fall off in PCs but if the rumored slowdown in wireless smartphone turnover is
real, that would be another story.
I could walk you through day by day on the Earnings Calendar, but youd fall asleep
before Im through. Suffice to say each name highlighted wasnt a lark. Take
Fiat Chrysler reporting Tuesday morning, Ford later in the week, and Honda Motor still
later. Airlines? I counted 4 of them, along with 3 rails, 5 large restaurant chains, the
aforementioned Chipotle Mexican grill included. Hotels? Just about every one of the
American companies, except Hyatt, including a hotel REIT. Healthcare providers? Got those
too, along with 2 REITs that house healthcare providers, only. Exchanges? Will Nasdaq, CME
& CBOE suffice? Defense Companies? LMT, NOC, GD, and more. Builders? 6 of those, by my
informal count, plus suppliers like Owens Corning, Vale, & Whirlpool. Healthcare? From
Abbvie to Celgene, Gilead & ZimmerBiomet, got those too. What about internet names?
Will Baidu, Ebay, PayPal, Groupon & Expedia suffice? Those are just 4 off the top of
my head, with others reporting, too. What large companies with the ability to move
markets? 3M reports Tuesday morning, while Apple postponed its report until Wednesday, so
Tim Cook and other execs could attend Bill Campbells funeraland dont
forget, XOM & CVX may be smaller than they were but theyre far from small
companies. The recovery in those two and IBM has been enough to keep the recovery in the
DJIA one-step ahead of other indices. And if all this wasnt enough, theres
Valeant Pharmaceuticals late earnings release to look forward to, and possibly a new
CEO, if the rumors of Perrigos CEO Papa leaving to join VRX are true.
All in, as Alphabet & Microsoft disappointed, last week, there are dozens of new
opportunities for disappointment this week, not to mention an FOMC statement that might be
a little less supportive than Yellens comments have been in the last 6 weeks. All
shell need is two dissenters, Wednesday, to convey the less dovish position the FOMC
finds itself in. And she cant point to stocks as a reason for holding back on rate
hikesat least not until this week and next are put to bed. Yellens not known
for flip flopping the way some of the regional Fed Reserve presidents have but, come on?
Does stocks within spitting distant of all time highs suggest a weak economy? I believe
forward guidance might address weaknesses, when companies report but she and all her
predecessors claimed they dont target the stock market, even as they saw higher
stocks trickling down to boost the economy. Since June's UK Referendum might yet sink into
the US consciousness, eventually, before the June vote, there are already economists
claiming the Fed cant hike then, either. That leaves only this meeting, and Yellen
all but promised thered be no rate hike this month. So, what? Does she spend the
next 5 months waiting and warning that July could be a "live" meeting? Does the
BoJ ease more this week? So many questions and so few answers, even as I suspect equity
markets are too buoyant for the outlooks corporations will offeralbeit with a strong
dollar less of a headwind, now, than it was earlier this year. I expect two weeks of tough
sledding through earnings, which could make Sell in May and Go Away look good to lots of
portfolio managers.
ECONOMIC: (Highlights, only, below. Complete
International Economic Calendar here)
© Sandi Lynne 2016 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the authors,
alone, and should be just one factor in more complete due diligence.
April 1822, 2016 EARNINGS NOT GOOD ENOUGH From here on in? Theres no doubt that
the Earnings Calendar will take center stage, this week. One might think the worst is over
since the money center banks reported last week, while this week is more brokers than
banks but its almost everything in banking and energy that could surprise to the
upside on seriously depressed expectations. The danger is when sectors considered healthy
start reporting, and they disappoint.
So start with Monday, a light schedule but promising Hasbro, Morgan Stanley, PepsiCo, W.W.
Grainger, and in the afternoon, Celanese, IBM & Netflix. A goodly portion of the
DJIAs recovery from the Feb. lows, outside the contribution from Chevron &
ExxonMobil, has been the recovery in IBM from under $120. Given its record of lower
revenues for something like 11 out of the last 12 quarters, the recent optimism into
Mondays report is quite surprising.
Take a glance of the rest of the week, starting with Tuesday, with Goldman Sachs and
J&J, in the morning, and in the afternoon, Discover, Intel, Intuitive Surgical and
Yahoo. I cant remember the last time GS popped on an earnings beat, J&J has
tended to fall after reporting, while Discover started disappointing at the end of last
year, after getting into businesses, like mortgages, it wasnt in previously. Then,
add to the big brokers, E-Trade Financial, Interactive Brokers & TD Ameritrade, along
with Raymond James, and banks like US Bank, KeyBanc. Barrons says Intel could rise
25% in two years, as server chips become a bigger proportion of chips sold, and mobile
chips stop losing money. But even Barrons qualifies its optimism about the future by
saying wait until it falls after it reports, this week, and then buy it. Ill call
out Alphabet (Google) Thursday, because its such a big percentage of the Nasdaq 100,
and some heretics on the Street had the nerve to suggest its growth had slowed because
mobile is displacing desktop ads, and mobile ads still attract lower fees than desktop
ads. Also Thursday, Microsoft. And if were talking ads, Omnicom & IPG report
this week, too.
But do a deeper dive, notice more than a few rails report this week, including Union
Pacific, and Canadian Pacific, which has given up on its bid for a US rail. Major airlines
reporting inclkude American Air, United Air, Southwest, and Alaska Airlines, even as just
about the entire toy industry does, including Hasbro, Mattel & Jakks Pacific. On top
of that, the first of the restaurants report this week, including Brinker (EAT) Tuesday,
BJ Restaurants on Thursday, Yum! Brands Wed., Starbucks Thursday afternoon, and
McDonalds on Friday.
And if Toys, Airlines & Restaurants arent enough to find out where the consumer
is, theres always Hanes Brands & LaSalle Hotels, on Thursday, along with
Skechers and Steve Madden
on Thursday and Friday, respectively. For more on consumers, AutoNation, IMAX, and Boston
Beer report, as well. Want more on consumers? Discover, Tupperware, D.R Horton & Pulte
Homes, both builders Thursday morning, or their suppliers, PPG and Sherwin-Williams, not
to mention USG.
And even though the ranks will start thinning early Friday afternoon, in advance of
Passover which starts at sundown, therell be no relief from big earnings, that
morning, with Caterpillar, Daimler, General Electric, Honeywell, SunTrust Banks, &
Synchrony, the GE Financial spin off, among the names not mentioned earlier. And Id
be remiss if I didnt mention United Healthcare, Tuesday morning, since its one
of the biggest insurer/providers, and the first in its sector out of the gate.
Then, theres the Economic Calendar, which will be digesting Chinas better
property data, released Sunday. Monday, of course, is Tax Day, except in Maine &
Massachusetts, where state holidays push out the due date one more day until Tuesday.
Monday morning, after the Natl Assn of Home Builders releases their sentiment
index, NY Fed Pres. William Dudley steps up to speak at an event thats by
invitation, only but "is open to the media" under Chatham House Rules. That
means theres no recording or quoting by name, "for all but the keynote address.
Media may report on comments made during the event, but may not attribute remarks to
individuals or organizations." However, "European Commissioner Pierre
Moscovicis keynote speech will be on-the-record,." Bad enough that half the
articles written in financial publications are often seen as plants by the Fed, why would
the Pres. of the NY Fed speak but not for attribution? Then, Mr. Too Big To Fail, Neel
Kashkari is participating in a Q&A in Minneapolis, while Mario Draghi will take the
microphone Thursday, after the 2-day ECB meeting. But even the highlights below, make
clear there are central bank speakers out all over the world, this week, even if Janet
Yellen isnt among them.
Primaries are being held in NY State,Tuesday, with the most delegates outside California,
all but Cruz & Kasich able call NY their home state, even if Sanders moved to ski
country decades ago. Much as the only thing I like about Trump is the critical piece
Martin Wolf wrote in the Financial Times, last week, he will no doubt carry the Republican
side of the ticket, Tuesday, and re-energize his campaign. Wed. the Natl Assn
of Realtors release March Existing Home Sales, even as the FHFA dials it back to February,
for its House Price Index (HPI in every country but the US).
Oil was last down (-6.7)%, Sunday, after the Doha meeting of OPEC & non-OPEC Producers
failed to accomplish the production freeze stressed producers had hoped would result. As
mentioned, Chevron & ExxonMobil were big supports to the DJIA, after the Feb. low, and
particularly, in the last 2 weeks. Clearly, that momentum will evaporate for a couple of
days but with the summer driving season not that far away, and builders likely to discuss
early spring traffic, me thinks calls for crude to fall back into the high $20s is
not imminent, at all. Energy is the runner-up to earnings, this week, thanks to any number
of conferences, from Politicos Americas Energy Agenda Summit, in NY, the 17th
Intl Oil Summit in Paris, France, both Thursday, which just happens to be Earth
Daythe day the U.N. in NY is scheduled to host almost 100 signers to the Paris
Agreement on Global Climate Change.
And thats all before we discuss the Events Calendar, which is a little light,
because its earnings season, though not without a typical parade of
healthcare-related conferences, like the Inatl Vision Expo in NY, Womens
Health in D.C., Minimally Invasiv Gynecology Global Hysterectomy Summit (Not usually good
for ISRG, reporting this week), Osteoporosis & Osteoarthritis+ Musculoskeletal
Diseases, Neurology Surgeons, and the Europes Liver Congress, plus Antiviral
Research, all over the weekend, into this week. And there are more healthcare-related
meetings the rest of the week, too, the Natl Foundation for Infectious Disease
Conference on Vaccine Research, just one more opportunity for those researching the Zika
virus to share ideas, which as a Florida resident, is essential to me, living on the front
lines of the invasion from South America. .
Earthquakes in Japan on Thursday and Saturday have halted production at Toyota vehicle
plants in the country, and halted Hondas Kumamoto motorcycle plant, while Nissan
says it will resume production Monday. The damage has left parts in short supply, the
latest earthquakes the first to test changes made to the supply chain after the 2011
earthquake and meltdown at a nuclear plant, after a tsunami the tremors triggered. Sony
said it would halt operations at am image sensor plant in Kumamoto but was operating
normally at other plants that make those parts for smart phones and camerasincluding
for the iPhone, so I guess its to SNEs benefit that iPhone production has been
cut, according to rumors. For now, Toyota is anticipating only a one week suspension. Any
suspension probably pleases analysts, since theyre worried that 2015 was as good as
it gets. Anything that slows the number of vehicles reaching dealers, I probably a
positive, though I dont expect GM to admit that, when it reports on Thursday
morning.
Starting this week, the rubber meets the road for the bulls, who have disseminated the
recent breadth statistics, so that fence sitters may be drawn into the rally, "since
90% of the S&P 500 is above its 200 day moving average." Given oil returning to
the problem side of the register, after an agreement failed to result from the Doha
meeting, the danger lurking within earnings reports, and the fact that will breadth that
strong, it has nowhere to go but down. At least for the next couple to few weeks, as
lackluster earnings & outlooks provide no reason for stocks to rise more, from where
they are. Typically, stocks decline in the first 3 weeks of Earnings Season, then rally in
May, celebrating earnings that werent as bad as the worst fears. Last week, stocks
rose, helped in no small part by energy-related names looking forward to Doha, that are
likely to be a drag for the immediate future. Stocks may have some catching up to do to
the downside, after last weeks strength though, admittedly, the breadth statistics
may be telling us that stocks are a buy on an earnings-related pullback. Just not
immediately.
ECONOMIC: (Highlights, only, here. The Full International Economic Calendar here)
© Sandi Lynne 2016 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the authors,
alone, and should be just one factor in more complete due diligence.
April 1115, 2016 A MINSKY MOMENT?
On Wednesday & Thursday, Levy Economics Institute of Bard College will
hold its annual Hyman P. Minsky Conference, asking the question: "Will the Global
Economic Environment Constrain US Growth & Employment?" That question was at the
heart of William Dudleys Friday speech termed
"The National & Local Economic Outlook: An Update April 8,2016. In it, he stuck to the Janet Yellen view that "low levels of
energy & commodity prices may signal more persistent disinflationary pressures than
[he] currently anticipates, while renewed tightening of financial market conditions could
have a greater negative impact on the U.S. economy. Also, there is significant uncertainty
about economic growth prospects abroad and how this will affect the U.S. economic
outlook
..Given my outlook and risk assessment, [he] judged that a cautious &
gradual approach to policy normalization is appropriate." So, as March data starts
arriving, and some contrarians on the Street start talking up all the reasons the Fed
should make a move on rates, this month, ignore them. Keep that quote handy because,
surely, he and Yellen are on the same page; it is the Yellen Fed, after all.
But perhaps the better conversationthe one at least 2 on the Federal Reserve want to
have-- concerns whether the global economy is a whisper away from a "Minsky
Moment." And what, pray tell, might some younger traders wonder, is a Minsky Moment?
The phrase was coined by former PMCO bigwig, Paul McCulley, in 1998, to describe the Asian
debt crisis of 1997. Its defined as a sudden, major collapse of asset values, after
a drawn out period of speculation built on borrowed money. Minsky thought those collapses
were the result of long bull markets that spur traders and/or consumers to take on
inordinate riskby leveraging up. (The economist Hyman Minsky was a Levy Institute
distinguished scholar from 1990 until his death in 1996. He established the Levy
Institutes two ongoing research programs: Monetary Policy & Financial Structure,
and The State of the US & World Economies.)
Strangely, even as the bulls are cheering on the recovery I stocks from the Feb. 11th
lows, 30-year Treasury yields have only once before been lower, in my lifetime, than they
are now. That was in the days leading up to, and the days immediately following. When
30-year rates bottomed at 2.25%, on Jan. 30th & Feb. 2nd, 2015.
On Feb. 11th, this year, when stocks bottomed, the 30-year was at 2.50%.
Friday, (using US Treasury data) 30-yrs closed at 2.55%, hardly keeping step with the rise
in stocks, which is a bit worrisome. IF its all foreign investors, living under
negative rate regimes, than TICS should show that this week. If instead, as Bloomberg and
others have posited, based on readings of short sales & put purchases, theres a
big disconnect between fixed income and stock traders, then stocks could well be in
trouble. Either way, the discussion of Minsky Moments seems well timed.
Fed Gov. Powell testifies, Thursday, at the Senate Banking Committee on trends and changes
in the fixed income market. Surely, Dudleys "tightening" will come up.
While Fedspeak will be frequent, this week, its the Joint Spring Meetings of the IMF
& World Bank that will make D.C. the center of the world, not to dismiss the UKs
Exchequer, George Osborne, who is due to publish the UK Treasurys analysis of the
benefits and risks of Britains continued membership in EU. Likewise, the BoE meets
this week. While no changes in rates are expected, changes in the Asset Target is not
beyond the imagination. The Bk of Canada meets as well, though no change is expected
there, either.
Watch healthcare insurers/providers, since the CMS could release FY17 preliminary rates,
at anytime this week. US Retail Sales & PPI Wednesday, and CPI Thursday, all a side
show to Yellens preferred PCE, unless any of the data is way off expectations.
The Earnings Calendar is dominated by big banks, including, in order of their reportrs,
tsarting Wed. a.m. JPMorgan, Bk of America, BlackRock, PNC, Wells Fargo, and Citi. Outside
banking, former DJIA member Alcoa reports, with some waiting to see the benefits of
Fords switch to aluminum bodies for its F-series, and Boeings production of
planes to finally benefit AA. Rail CSX reports Tuesday afternoon, and Delta Airlines
Thursday morning. Infosys is emboldened because its the first offshore outsourcer to
report. Charles Schwab reports this week, though doesnt bother to pinpoint its date
until the day prior. SCHW plans an IR webcast on April 22nd, for the record.
The only question is whether estimates have been lowered enough for the big financial
names to not disappoint?
Healthcare conferences dominate, from ASBP Obesity Medicine, continuing over the weekend,
to the start of the Annual world Health Care Congress, Society of Gynecologic Surgeons,
Goldmans Alzheimers Symposium, Monday, Morgan Stanley Healthare Insights and
Guggenheims Microbiome, alongside Needhams 15th Annual Healthcare
Conference, (the latter 3 all Tuesday). Europe hosts ELCC For European Lung cancer, while
EASL is the Intl Live Conference,Intl Vision Expo (Thurs.), ECCEO European
Congress for Aspects of Osteoporosis & Osteoarthritis Diseases, with Friday promising
the Am. Academy of Neurology Surgeons Annual, and AAGL for Minimally Invasive Gynecology
Global Hysterectomy Summit. Energy takes 2nd place, with Wolfe Research hosting
Moodys Senoir Utilities, Power & Midstream analyst for lunch, FT Commodities
Global Summit (Mon., in Switzerland), CleanTech Forum Europe (Mon.), Bk of America Merrill
Lynchs Oil & Gas Conference (London), and the Canadian Assn of Petroleum
Producers/Bk of Nova Scotia Energy Conference (both Tues.), HSBC Latin America Investment
(in Florida, and surely to include some energy names), Mexico Gas Summit (Wed.), Credit
Suisse 2016 Energy Primer (Thurs), Wolfe Research Oil & Gas Earnings Preview, and, no
doubt, some energy comment at BAC/MER Global Emerging Markets Investor Spring IMF summit,
, along with the EPAs P3, Sustainable Design Expo & Awards, which supplies up to
$75K start-up money to promising ideas in sustainable design. And if all else doesnt
interest, theres always NAB, the Natl Association of Broadcasters, starting
Saturday, in Las Vegas.
Theres a quaint habit some analysts have taken to, in their commentary, referring to
the sharp decline that greeted the new year as "volatility," rather than calling
it the steep sell-off it unquestionably was. Volatility is when stocks are up big one day,
down just as big the next, and then up the following day, which fairly describes what went
on last week. With bank earnings teed up for this week, it might be hard for bulls to hold
up stocks. While the last two weeks looked like consolidation, the last 3 days of trading
look like the kind of volatility that precedes another decline. Barring upside surprises
on seriously cut Street estimates, out of bank earnings, the path of least resistance is
likely to be down, though energy related names might hold on to gains, into the meeting of
OPEC & non-OPEC producers in Doha, on a production freeze. next Sunday, the 17th. .
ECONOMIC: (Highlights, only, here. Full International Economic Calendar
here)
© Sandi Lynne 2016 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the authors,
alone, and should be just one factor in more complete due diligence.
April 0408, 2016 RESISTANCE NOT FAR ABOVE
Last year, Janet Yellen & Joseph Stiglitz keynoted at STLAR (St Louis Fed Research
Conference). Speakers, Thursday, lack that high of a profile this year. It features mostly
professors and Fed system economists who rarely see their name outside the footnotes of
Fed research cited by the bank presidents, when they speak.. However an even more curious
event will feature Janet Yellen, Ben Bernanke, Alan Greenspan & Paul Volcker, at
iHouse in New York City, Thursday lunch time. You have to wonder how long it took iHouse
to arrange for that line-up. Theyll be introduced by Morgan Stanleys James
Gorman, while their discussion will be moderated by CNNs Fareed Zakaria. Otherwise,
Fed speakers are out in force, Neel Kashkari of the Minneapolis Fed discussing "Too
Big to Fail," again, which is ironic, given the bank & holding company stress
tests & capital plans (CCAR) are due at the Fed Tuesday, for those banks and holding
companies with more than $50B in assets. This years stress tests used a much deeper
downfall for the economy for its worst case scenario, including some of the calamaties
that befell the economy in 20082009, including a serious decline in home prices, and
10% unemployment.
The Fed March meeting minutes are out Wednesday but, lets be honest: Janet
Yellens speech last week dispelled any reason to be fearful of the minutes. We know
five of the Fed Presidents think conditions could become ripe for an April meeting rate
hike but their leader all but guaranteed that wouldnt happen. Then again, consider
the Earnings season about to get underway. Whats the odds of the Fed raising rates
as corporations find it all but impossible to boost their earnings more than 1.0 or 2.0%,
if that mucheven excluding the energy sector.
Furthermore, April is one of the two times a year when banks review energy sector loans
which are, largely, based on reserves, whose value has done little but fall inter review,
even allowing for the big rebound off $26 and change earlier this year. And I
wouldnt look for much to please out of March Chain Store Sales, out Thursday, all
ten companies that still report such numbers, Steinmart the latest to drop out of the
monthly confessional.
Credit Suisse is hosting its Asian Conference in Hong Kong and among the special guest and
keynote speakers are luminaries from around the world, as detailed in the Economic
Calendar, below, the Secretary General of the U.N. among them, before he jets back to NY
to speak at the Wall Street Journals ECO-nomics Conference Wednesday, as well.
Thursday, look out for the release of US Consumer Creditdebt really, of the
mortgage, student loan and credit card variety, the latter referred to as revolving
credit.
The Earnings Calendar is slim, with only a few headliners, including Darden Restaurants,
Walgreens Boots Alliance, its intended, Rite Aid, along with Constellation Brands,
Monsanto, Bed Bath & Beyond, plus CarMax, ConAgra, PriceSmart and Ruby Tuesday. PSMT
is a good place to get a read on Latin America, while Ruby Tuesday is the first restaurant
company to report since its become apparent that both California & New York will
pass $15 minimum wage laws, which has to impact restaurants disproportonately, if
theres no allowance for lower salaries for those who work for tips. California
largely did away with tips.
The Events Calendar is quite a fw items of note, including the ACCAmerican College
of Cardiology along with TCT. Edwards LifeSciences was the big winner, as tests prove
outcome of the transcatheter Sapien 3 heart valve has even better safety stats in less
sick populations than those originally permitted to have such surgery, instead of having
their chest cavities cracked open. NADA for Auto Dealers, & ATD for Truck counterparts
finishes up Monday.
The EEIEdison Electric Institute Key Accounts Workshop, in Miami, covers nearly
every utility company in the countryand some who do most of their business outside
the country. But this particular workshop also includes many of the large companies that
buy energy, from Cinemark and TJMaxx to Staples & 7-Eleven, along with a smattering of
solar companies. Analysts will be talking that one up, though Wolfe Researchs Energy
& Power Deep Dive Conference is in Houston TX, while Mitsubishi UFJ hosts Utilities,
in NY, which is ironic, since energySmart meets in D.C. on overlapping dates, while
theres also WGES: World Green Energy Symposium, also in D.C. to coincide with
energySMart.. What were the odds that SEMI Spring North American Standards Meeting would
take place in San Jose & Milpitas CA, the latter at KLA-Tencor offices, while
CTAthe Consumer Technology Assn Standards Spring Forum would overlap, in San
Diego. Granted, SEMI is the equipment that makes chips, but theres not much of a CTA
without chips, the CTA formerly the Consumer Electronics Association, recently renamed.
Meanwhile Organic & Printed Electronics is meeting in Germany. Go figure!
Two other conferences that might catch attention are BIO-IT World Conference & Expo,
in Boston, starting Tuesday, and the ABAs Retail Banking Conference, in Las Vegas,
starting Wednesday. Given BIO-IT World, I dont think its surprising that
Jefferies plans to host Immuno-oncology Summit in the same city.
Last week proved a much needed consolidation week, after Janet Yellen gave the rally a big
boost. Another consolidation week wouldnt surprise, as earnings warnings will
probably punctuate the days ahead. Plus those paying the last of their taxes have often
pulled money from the market, just as the procrastinators finally fund their IRAs.
The money rotating from brokerage accounts into retirement accounts side by side with the
funds heading to the IRS have often made April a dangerous month, even without earnings
warningsdespite its reputation as one of the most consistently bullish months of the
year, which some say is why "sell in May" results. But April sometimes looks
like February just did, a slide early in the month that gives way to a rally, as the bulk
of earnings reports start arriving in week 3 & 4, even as retirement money finds its
way to mutual funds as fresh capital to invest. Its at least worth pointing out that
2,100 should represent stiff resistance for the S&P 500, and thats less than 36
points above. The Dow Jones Industrials could, well, face resistance at 18,000. Given the
mediocre earnings reports expected, Bespokes optimism on the month may prove
misguided. On the other hand, the bulls have proved they've taken the upper hand. When
there are that many cross currents, little progress is often the results. That could mean
a 2nd week of consolidation.
ECONOMIC: (Highlights only, here. Full International Economic Calendar here)
© Sandi Lynne 2016 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the authors,
alone, and should be just one factor in more complete due diligence.
March 28April 01, 2016 ENTER EARNINGS WARNING
SEASON After a consolidation week, and a 3-day holiday, stocks
often return and celebrate to start Monday. Data, however, returns starting Monday, too,
PCE a component of Febs Personal Income & Expenditures, with inflation ticking
up a bit. If the new data confirms it, and NARs Feb. US Pending Home Sales Index.
While Janet Yellen is not generally to flip flopping as fast as James Bullard, she is
speaking Tuesday, at an Economic Club of NY luncheon, and could comment on her pleasure in
seeing inflation start to move in the right direction, while Employment Data keeps
confirming some optimism in business owners who dont, usually, hire if theyre
as cautious as the S&P was when reporting Q4 earnings.
The EIA will delay the weekly Petroleum report until Thursday, the BLS will deliver March
Unemployment stats on Friday, the first day of AprilApril Fools Day, for the
record. At one time, it was a day for hackers to have some innocent fun but data breaches
at JPM, Home Depot, Target, and TJMaxx, among others, makes it harder for casual hackers
to succeed in, even, innocent fun. Malicious hackers, however, are everywhere, and one of
then got into one of my PCs on 3/16, exactly 6 days after McAfee installed its
latest (2016) anti-virus software in that very PC, and then tried to tell me thats
not what its "anti-virus" software is supposed to protect against, and it will
cost my $89 to have the Locky virus removed. Well, long story short, I stayed up until 2am
to help them with their remote access (they were insulting enough to tell me to bring it
into Office Depot, where I bought their software, since it took a techie to help them with
remote accessinsult on top of injury). Long story short, I have the PC back, but
eve3ry file in documents has been renamed with a long numeral and the date of 3/16, so I
have no idea which file is which, and was cautioned not to open any of them, for fear of
relaunching the virus. Lesson learned: If you get an e-mail from an unknown sender, with a
blue attachment, dont open it. Its not unusual for me to get e-mails from
unknown senders since Im the president of the homeowners association, and any of 703
owners could e-mail via the HOA website, which gets forwarded. I hope none of you have
that complication.
Also this week, ADP March private sector employment data, Challengers Lay-off
report, culminating in that Friday Unemployment Report. Several Fed speakers other than
Yellen probably dont mean as much because shell take the spotlight. That makes the
Economic Calendar a lot busier than either the Earnings or Events Calendars, though for
the latter, its analyst meeting that stand out the most. 3M meets analysts Tuesday,
while both Invesco & Nasdaq OMX host analyst meetings Thursday.
ACCAmerican College of Cardiology Scientific Sessions & TCT, in Chicago,
starting next Saturday, the same day as EB, for Experimental Biology, could be the talk of
analysts this week, as the meetings draw near. Also notable, the 6th Annual
Cancer Immunotherapy Conference, which should benefit from meeting in New York, besides
the fact that its the hottest area of cancer research. In Las Vegas, starting
Thursday, NADA hosts a convention (Auto Dealer Assn) concurrent with ATD, for
American Truck Dealers. Time was in the recession the two switched off each meeting every
other year, not together but this year theyre meeting simultaneously, and JD Power
will host an Automotive Summit to open the event.
Dont overlook Barclays Materials Conference, Monday, as the pundits insist the rally
theyve enjoyed cant last, even as Lennar, reporting Tuesday morning may have a
decent story to tell. HIV Vaccines meets in Steamboat Springs CO, where the Merck patent
win against Gilead may well be the story of the moment. Oddly, World Vaccine &
Emerging Diseases Congress takes place in D.C. starting Tuesday. The geographic separation
of the two Vaccine events makes no sense, even as Im sure Zika may be the took of
the town at the latter, given the startling speed at which its been infecting
Americans, especially in Florida, where trips to the Caribbean & South America are to
some residents what the Boston to NY or Washington corridor is to attorneys in NY. The
race is on to treat and find a vaccine for Zika, before the Olympics start in August,
though that seems as big a pipe dream as any scientific questif for no other reason
than the length of time it takes for the FDA approve any treatment or vaccine. .
All in, one has to respect the job the bulls have done to retain the gains off the
February low. Last weeks consolidation was just what the doctor ordered, after such
a big rally. As I said, Mondays after a long weekend are, usually, strong rally
days, though theres no guarantee the rally can be sustained. Still, there were
buyers to cut the losses, last week, which demonstrates a will to buy into a rally.
Bullards flip flop from dove in February, to hawk of late, talking up a possible
April rate rise is not the kind of behavior Janet Yellen is known for but I dont
doubt shes eager to see rates move higher, so shell have room to cut if the
economy slips into recession. Shes the wild card to watch this week. Recall in
September markets were well prepared for a hike but she backed off when it appeared China
was about to fall apart, then finally moved in December, when stocks had done an equally
masterful job of recovering. Any way you look at it, Yellen has been playing the markets
like Perlman on a Strad, so forget everything else and listen to what she has to say
Tuesday. While she might not be as heavy handed about signaling a hike in April, she might
well point out all the issues that stayed her hand in March, which now seem to be solving
themselves. Throw in Earnings warnings Season, and the cessation of buybacks during the
quiet period around earnings, and life becomes more complicated for the bulls. Can the
bulls hold on in the face of Yellen sounding less dovish than she did at the presser after
the March meeting? I doubt it. Whaddaboud you?
ECONOMIC: (Highlights, only, below. Full International Calendar here)
© 2016 Sandi Lynne Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the authors,
alone, and should be just one factor in more complete due diligence.
March 2125, 2016 SHORT
WEEK, LIGHT VOL AFTER MONDAY A.M. SURGE As I
prepared this weeks Calendars, I was shocked that so much was going on, given the
3.5 day week for bond markets, and the 4-day week for stocks, and the Earnings Calendar is
as slim as it gets. Even given only the highlights presented on the Economic Calendar,
theres plenty going on, especially Fed speakers and the entire kit and kaboodle of
presidential candidates, at the American Israel Public Affairs Committee (AIPAC) Policy
Conference. With Pres. Obama in Cuba, and headed from there to Argentina, it was a
surprise to see Veep Biden listed as a speaker, along with Sen. Paul Ryan whos
insisting the Republican Convention cant draft him as a candidate, just like he
insisted he didnt want the Speakers job. Note, some rabbis are calling for a
silent protest when Trump gets up to speaksuggesting all the rabbis should stand up,
turn their backs, and walk out when Trump starts. Ive got even money that only a
very few will actually do so.
Some of the central bank speaker topics are provacative, like Japans Vice
FinMins "Abenomics & the Japanese Economy," or Minnesota Feds
Harkers speech on "Growth and the Role of Economic Policies." Since when
do Fedheads make economic policy, other than the Chairs regular suggestions that
policy makers do their part, while the Fed does its part? And thats been true
through the ages, and at least the last 3 Fed Chairs.
Outside central bank & finance ministers speaking, the Economic Calendar, also,
promises Feb Existing Home Sales (Mon.), FHFA Jan House Price Index (Tues), Feb. New Home
Sales (Wed.), along with Feb Durable Goods Orders & Shipments (Thurs), and final 4Q15
GDP Friday, when government will be closed. That should mean the Final Attempt at guessing
Q4 GDP should be released Thursday but every trustworthy calendar I rely upon lists it for
Friday. And when all is said and done, it might be Wed. EIA Oil Stats & Fris
Baker-Hughes Rig stats that will be more influential than anything but the housing data.
Unless the final Q4 GDP is accompanied by a shock in the PCE segment.
I struggled to highlight any of the companies reporting their earnings, this week, because
only Nike can really lay claim to great influence. Its a Dow Jones Industrial
Average Stock, along with Apple, that marks its first anniversary in the index this week.
Speaking of Apple, its "loop" event is Monday, with anticipation about as
low as its ever been for an AAPL event. That could be beneficial, in that
theres less enthusiasm to cool on the actual news but, really? Even the local news
stations are reporting that it will unveil a smaller iPhone and iPad news. While analysts
have long called for a cheap iPhone for the masses in India & China, I thought AAPL
already had those, in their older models it still churns out and sells at discounts, every
time a new model has been introduced. The real news when it released the iPhone 6 & 6
plus was the introduction of leasing plans, which stole a lot of upfront and monthly fees
that the wireless providers used to capture to boost cash flow. But if the world really
believes AAPL has a smaller iPhone coming for the masses, Monday, the question really is
why didnt the stock sell off in advance of the media event? Signet already provided
holiday sales, so wont have much opportunity to surprise, except if its customer
credit metrics have worsened, considerably, with little reason to suspect that
happened.G-III, Oxford Industries, and PVH (formerly Phillips Van Heusen) are substantial
enough apparel suppliers to shed insight on how the retailers they supply are doing, this
quarter. They get the orders months before the delivery is scheduled, and often see
reorders for hot items, during the quarter. Want to know how well retailers are doing? A
better gauge, for me, has always been the inventory at TJ Maxx but since I cant
possibly get to enough TJ Maxx stores to know whether inventory I see at local ones is
representative of the rest of the chain, the comments from GIII, OXM & PVH are better.
Unbeknownst to most, GIII is a supplier on the high end, with its Andrew Marc leather
goods, and on the low end, at Walmart. Its not well known or well followed but is a
wealth of information across the spectrum of retail.
The first thing to watch on the Events Calendar is Mondays post-Options/Futures
Quarter Expiration, as it boosted volume considerably Friday, and the after effects will
boost traffic Monday morning, too. The rest of the Calendar has some key items, including
the Intl Congress on Hematologic Malignancies, which continued over the weekend. Did
you know that many leukemia patients now have a choice of 6 possible drugs? The Basel
World Watch & Jewellery Show has pavilions for the high and low end, the former where
Penta picks up the stories on watches that 60 people in the world can afford to buy. Both
OFC and the Scotia Howard Weill Annual Energy Conferences should be well attended.
Personally, as I move on in years, Im rooting for ASA Aging in
Americaespecially as the political scolds insist that "entitlements have
to be trimmed if the deficit isnt going to bury the next generation.
Expect more talk of Facebook & Google around the Ad Agencies Transformation
Conference/Tradeshow, starting Monday even as NYSSAs Insurance Conference is always
one of their better ones, this year co-sponsored by Raymond James. How much news comes out
of APEX All Payments Expo or TAT, the Intl Congress on Targeted Anticancer Therapies
may well depend on attendance. TAT is often a newsmaker, though its a bit ironic
that its meeting in D.C. concurrent with the Natl HIPAA Summit, on healthcare
delivery, in the same city, given how Clinton has issued a number of ads touting her plans
to cut prices of drugs. If consumer products are suddenly hot topics, thank General
Mills earnings, and CAGE, the Consumer Analysts of Europe event, Wed. and & Mon,
respectively. Thats if theres any reporter, online or off, available after
AAPLs media event sucks most in, Mon.
Tuesday is the surprise, with a Bk of America/Merrill Lynch Auto Summit coincident with
the J.D. Power Autoforum, Solar Power Finance & Investment, . plus TAG, the Telsey
Advisory Group Consumer Conference, all starting that day. Macquarie also hosts a consumer
conference, that day, in New York, like all but Solar Power Finance, even as Strategas is
taking clients to Seattle on a field Trip, which includes visits to management from
Starbucks, CostCo, Expedia & Nordstrom. How EXPE snuck into that trip will remain a
mysterygeography, I assume.
Deutsche Bank is hosting a Materials 1x1 Day in Boston, also Tuesay, while Wells Fargo is
hosting a conference on Asset Managers, Brokers & Exchanges, even as CME is offering a
new European Aluminum contract, starting Monday. It occurs to me that the exchanges are
the growth stories in the financial sector, which is why UBS Yankee Bank Capital
Conference (Tues) doesnt excite, especially after the FOMC backtracked on rate
hikes. Ford Motor is offering its CFO for one of its "Lets Chat"
investor events, Tuesday, before appearing at BAC/MERs Auto Summit the next day.
Wednesday, Gabelli hosts Specialty Chemicals, while Deutsche Bank is hosting a Shipping
Summit, Wed. a follow-up to Capital Links Monday 10th Annual
International Shipping & Offshore Forum, both in NY. By Thursday, with the bond market
closing early, and Global Energy in Switzerland, most traders will have their eye on the
door, and Fridays day off. The Nations capital Dental Meeting, in D.C.,
starting Thursday, is planned, annually, to coincide with the Cherry Blossom
Festivalwhen the blooms should open, and Easter.
Notable corporate events, beyond Apples & Fords, include Googles
Cloud Next 2016 Conference, in San Francisco, starting Wed, as well as its closure of
Google Compare, much to BankRates benefit, some analysts assume. That may true about
advertisers but Im not sure its true with respect to consumer visits. I
dont know of anyone who would have checked GOOG instead of RATE for credit card or
mortgage rates but Ill admit to knowing very few millennials, so I could be
mistaken. Dollar General hosts analysts Thursday, along with Pinnacle Foods, whose event
is a luncheon sponsored by CAGNY, the NY Consumer Analysts Group. Thursday is, also, the
deadline for VW to submit to a San Francisco federal court a concrete diesel emissions
fix, even as Wynn wont be opening its Macau Palace, as originally announced. The
delay has been blamed on the contractor, and is now scheduled for June.
As I said, a surprisingly busy week for a holiday week, given that its likely most
of the volume will be executed Monday, the clean-up after Fridays Quad Expiration of
Options & Futures. Its a week in which bulls will at least hedge to assure they
hold their gains through quarters end, if not lighten up by booking some profits,
even though T-3 clean-up can be conducted a week from Monday. Given what we know about Q1
earnings, so far, from companies that have already issued tepid guidance, and plenty of
others that guided down in the quarters earlier I-bank conferences, one should
wonder whether recent gains can be sustained into earnings season, next month, even as a
3-day weekend is the perfect time for companies to issue warnings. Granted, Janet Yellen
and her minions did everything they could to help the rally along, by not just doing
nothing on rates at last weeks meeting but, likewise, trimming their forecast for
coming rate hikes, this yeareven as four analysts insisted, just prior to the
meeting, that a data-dependent Fed should have gone ahead and raised rates last week. In
the bulls favor, beyond the favorable FOMC result, is the fact that OPEC &
non-OPEC oil producers plan on meeting on 4/17, a rare event, in itself, that proves
national producers are seeking for a way out of the corner the Saudis have backed
all producers into. As Ive said on multiple occasions, its Chevron Ill
be watching, side by side with WIT, itself, since its the best indicator for whether
stocks will ignore or trade with oil, as they have for months. IF anyone had told me, in
2009, when oil was at its heights, that weak crude pricing would hurt stock indices, even
excluding oil majors, I would have told them theyre nuts. But given the correlation,
of late, the two have served me wellmy options position in Chevron closed out last
week, into expiration. The best move has been to buy puts when I sell my CVX calls but
with that big meeting, 04/17, buying puts on CVX, now that I sold my calls, seems a bad
idea. Hope has supported crude regularly, and might this time, again, with a meeting
really scheduled for mid-April, rather than simply rumored. Throw in the weekend bid
Sherwin-Williams made for Valspar, and it's another bullish hook for bulls to pin their
hats on. The bears are likely to remain in hibernation this week, or tread very lightly,
making the week a draw, deespite the upside bias typical of shortened weeks into holidays.
.
ECONOMIC: (Highlights, only, below. Complete International
Economic Calendar here)
© Sandi Lynne 2016 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the authors,
alone, and should be just one factor in more complete due diligence.
March 1418, 2016 THREE
MAJOR CENTRAL BANK MEETINGS, FOMC MOST DANGEROUS This will be an exceptionally active week for central bank speakers and
meetings. The RBA (Australia) releases its Minutes Monday, overnight into Tuesday morning
eastern time, even as the BoJ will announce its rate decision, QE target, and hold a press
conference. Tuesday, East Coast time, the FOMC starts a 2-day meeting, which will end on
Wednesday at 2pm, with the release of the post-meeting statement and updated
forecastsaka dot plotsand wrap with FOMC Chief Janet Yellens press
conference, starting at 2:30pm, et. If that werent enough, and it very well should
be, the Bk of England monetary policy meeting is Thursday, which will wrap with a QE
target, and Minutes of the meeting that reveal the skew of the vote, along with the
SNBSwiss National Bank meeting, as well. While no one expects a move out of any of
the meetings, Janet Yellen may, just, decide that its time to re-prepare the Street
for more rate hikes this yeareven if its not as many as the four originally
contemplated. At least one analysts, at BAC/MER, has proposed that Yellen should do
exactly what the Street doesnt expectand hike Wednesday, now that markets have
shaken off their early in the year swoon but there isnt anyone else weighing in on
that side of the ledger.
There are plenty of other items on the Economic Calendar but they all pale in comparison
to the items already citedeven as primaries could well shake up the political
complexion. The Street may entertain itself with Tuesdays Feb. PPI & Retail
Sales, as well as the NAHB March Housing Market Index but truth be known, the FOMC
isnt about to switch up their intentions, at the last minute, to account for that
data. Ditto for Wednesdays Feb. CPI, Industrial Production & Capacity
Utilization, or the Feb. data on Housing Starts & Building Permits. More entertainment
before the FOMC decision & press conference, rather than market obsession.
I am curious to see the OPEC Monthly Oil Market Report, Monday, given the rise in oil
prices in the past few weeks, not to mention the reports power to sway prices upon
release. OPEC is between a rock and a hard place: while rumors of oils bottom have
done wonders for recent crude prices too frothy a price, right now, may well attract
restart of some shale wells that were shut down, finally easing supply. Does it aim to
boost prices or tamp down prices to keep shale frackers from re-engaging their rigs?
Coincidentally, St. Patricks Day is the day after the FOMC forecast release &
Yellens press conference, and a day thats traditionally seen stocks rise.
Bespoke pointed out that the clock change at 2am Sunday has often had a negative impact on
stocks. That may set up the rally on Thursday typical of St. Patricks day. The St
Pats Day tendency to be favorable for bulls may be pure coincidence but theres
something close to an 80% history of stocks rising on St. Pats Day. Typically, it
takes 24 hours for the Street to absorb the post-FOMC meeting information in the dot plots
and Yellens press conference before the direction of stocks can be trustedsort
of what happened, last week, after the ECB brought out its Howitzer. Still, with
stocks doing better than earnings are expected to, in Q1, and with the Quarter fast coming
to an end, all those Investment Bank Conferences on the Events Calendar should be accepted
as opportunities for companies to start warning the Street. Thats what happened with
major financials, themselves, last week, yet recovered handily after the ECBs triple
barrel easing.
Given the money center banks have already dissed Q1, Oracle may be the most important
report of the week, Tuesday, given recent strength in tech, albeit, not necessarily the
FANG stocks that led the way up late last year. Given how awful Tailored Brands was last
week, Im curious to see how Destination XL Group (DXLG) looks when it reports on
Friday. For awhile, during the post-2008 recovery, menswear was growing at a much faster
pace than womenswear. Within womenswear, plus size sales are growing faster than most
other apparel sales. DXLG caters to tall and hefty men, so could see some spill over from
the full figured womens renaissance, which included a plus size model in Sports
Illustrateds swimsuit issue, for the first time. Thats not a recommendation of
DXLG, by any means, since Id be last person on earth to weigh inso to
speakon hefty body types. But should the strength in menswear go the way of
enthusiasm for womenswear, the trouble for department stores could get a lot worse. Right
now, outside beauty, shoes and home, theres nothing good happening at any of the
department stores.
Markets often rise to a level thats hard to support, and sell off coincident to
events that really werent a trigger at all. A sell off afteror even in advance
of--the FOMC Meeting statement and forecasts wouldnt surprise, at all. I suspect
Yellen will signal data dependence but justification to believe more rate hikes will soon
be warranted, throwing cold water on the rally stocks have enjoyed since the Feb. bottom.
There cant be any doubt that the recent rise in crude prices will help boost
inflation. The one data point that hasnt cooperated for 3 years may now be ready to
breath some life into inflation, just as markets showed, early this year, theyre not
at all ready for higher ratesno matter the 2 years theyve been signaled, since
Bernankes May 2013 Congressional testimony when he first brought up tapering QE
purchases, or, at least, was first taken seriously by the markets. Theres little
fundamental support for US stocks to continue rising, except, perhaps, homebuilding
related stocks, as the spring selling season arrives, even as low rates remain in place.
ECONOMIC: (Highlights, only. Full International Economic
Calendar here)
© Sandi Lynne 2016 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the authors,
alone, and should be just one factor in more complete due diligence.
March 0711, 2016 RIGHT UNDER RESISTANCE First up, NABEThe Natl Assn of Business
Economists Economic Policy Conference, with a slew of present and former regulators,
including Fed Vice Chair Stanley Fischer. Sir Pual Tucker, & Dept of Commerce
Secretary Penny Pritzker. The Institute of International Bankers (IIB) features a number
of regulators and high profile speakers, including Fed Gov. Lael Brainard. Clear across
the continents, the National Peoples Congress got underway, on Saturday, and ends
with Premier Lis press conference on the 9thvery late on the 8th
US East Coast time. The Bank of Canada meets Wednesday, a rate decision not spoken about
at all, in the press. The ECB will finish its meeting Thursday, at which Chief Mario
Draghi has all but promised thered be more stimulus, whether even lower rates,
expanded purchases, or something else but this time he wont disappoint.
What struck about the Climate Change Leadership meeting is all the corporate officers
speaking, including at least one from MSFT, SE, CZR, WNT, Plum Creek, ALK, PG, WM, UPS,
ENC, INTC, ECL, EXC, PGE, HP, AMZN AWS, REI, TM, TAP, Aecom, INTU & more.
The big events this week are split between trade & investment bank meetings. In
healthcare, AAAI, the American Academy of Allergy, Asthma, & Immunology has often been
one of the most talked about events but theres been little talk of it this year.
Molecular Medicine Tri-Con has outgrown its name, since there are 9 subconferences taking
place under that umbrella. To condense it think personalized diagnostics & treatment.
Keystone Stem Cells & Cancer, is another multi-track conference concentrating on Stem
Cells & Cancer, Cancer Vaccines, & Antibodies as drugs. Havent heard much
expectation for Interventional Cardiovascular Disease, one of the big conferences taking
place over the weekend. Tuesdays Medicare Marketing & Sales Summit should nudge
some analysts to talk up healthcare providers, even as Cowen & Cos 36th
Annual Health Care Conference starts, in Boston, Monday, while Leerink Partners
Emerging Biotech Conference, occurs Tuesday.
Whats different about this weeks Event Calendar is the return of Investment
Bank conferences in spades, notably, Deutsche Banks Media, Internet & Telecom,
Monday, JPMorgans Aviation, Transportation & Industrials, Tuesday, UBS
Global Consumer, Wednesday, when Credit Suisse hosts Global Services, and Citi Global
Resources. Thursday, JPMorgan tops my list with Gaming, Lodging, Restaurant & Leisure,
because casino companies woke up last week, after Macau put out the smallest decline in
Gross Gaming Revenues (GGR) in over a year. Coupled with Wynn Resorts earnings, that
seemed to get the ball rolling, conditions were ripe for the bounce the group enjoyed,
providing the wind at JPMorgans back for its conference. Susquehannas 5th
Annual Semi, Storage & Tech Summit, in NY, has a reputation for stirring the stocks of
companies that appear there.
The Earnings Calendar lacks an abundance of headline reports, Navistar, perhaps, the
biggest report in terms of who may analysts will tune in. But in addition to a few tech
companies, like Finisar, Thursday afternoon, I was struck by the number of
consumer-related companies reporting, their market cap combined, probably less than the
revenue Walmart books a year. Still, the markets opinion of retailers has gone from
despondent, after Macy*s reported, to quite bullish since TJMax released its report,
mirroring the bi-polar activity in the markets. With an early Easter this year (03/27),
and Passover almost a month later, it cant be long before analysts start talking up
spring sales. Dont buy it: theres nothing in spring deliveries in stores, to
date, that makes think theres a top or bottom thats must have.
As for stocks, I got last week wrong. That big first of the month kick off to the rally
was something we havent seen in a long time. Now, though, the rally that started in
February is looking a little long in the tooth, with the major indices at technical
resistance. And even if they could break through, the upcoming FOMC meeting, updated
forecasts, and Yellens press conference, on March 16th, should be an
excuse to take profits this week. The markets problem is modest growth around 2.0%
or less doesnt feel like growth, while slippage closer to +1.0% brings up recession
fears. I suspect, the keys to the markets next move will be found in what
Chinas Premier Li says at his press conference to wrap up the NPC, and what Draghi
& Co do Thursday, when the ECB meets. Even if both events deliver the spark markets
need, that will only, by the 16th, point out the divergence in policy, the US
in tightening mode, no matter how slowly that happens. Yellen & Co want to raise
rates, to try and normalize them so theyre available the next time recession shows
up.
Unfortunately, the US economy doesnt seem to have reached escape velocity, so each
turn of the screw will really turn down economic activity. Look to take profits if you
believe, as I do, that Yellen will insist that more small, measured moves lie ahead, the
job market her justificationno matter that the 4.9% US Unemployment Rate leaves a
lot people making less than they did pre-crisis, and many working part time who want full
time work. Were it not for oil prices, and the fall in prices at the gas pump, the US
would probably be in recession. This past weekend, for the first time in a long time,
prices at the pump actually rose. IF the rise in oil is, this time, the start of something
more sustained, the consumer will get hit in the wallet, which will raise the odds of
recession. Therefore, it makes sense to me that oil & the S&P have been strongly
correlated. Watch for Chevrons security analyst meeting, on Tuesday, the 8th.
If management seems to waiver the slightest bit on sustaining its dividend, all heck could
break loose.
ECONOMIC: (Highlights only, below. Full International Economic Calendar is here)
© Sandi Lynne 2016 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the authors,
alone, and should be just one factor in more complete due diligence.
Feb. 29March 04, 2016 I-BANK CONFERENCES IN FULL BLOOM Traders can always tell when Earnings season is about over:
Investment bank conferences pop up like tulips in April. Barring a disaster from
Fridays February Unemployment Report, the conferences could, actually, be good news.
Energy, of course, is a disaster, while JPMorgan made clear the financials are still
suffering from low rates and near invisible NIM, then added in souring energy loans to
boot. But otherwise, its fairly early in the quarter for companys to warn, and
the lack of worse news may come to be construed as good news.
First, the Economic Calendar, which includes Jan. Pending Home Sales, on Monday, Motor
vehicle Sales Tuesday, and on Wednesday, the Feds Beige Book. Before Fridays
report on the labor market. The Treasury will create a near shortage, this week. Aside
from Mondays 3- & 6-month bills, and a 52-week bill offered Tuesday, the
Treasury will do little but offer its refunding plans, Thursday. Thursday, nine Chain
Stores will report February sales, down from 11 in January, as more retailers decide to
eliminate the monthly reason to see their stocks killed. Since most retailers end their
quarter at Januarys end, those who put analysts on notice that they were eliminating
the monthly confessional, no longer report.
Surely, at some point in time, with thousands of stores have been closed to rebalance the
availability of stores to the lower traffic now seen in malls, those with good news to
report will, probably, revive the monthly ritual. For now, its only a matter of time
until the few still weighing in monthly eliminate their reports, also. How was February?
With snow, rain, and tornadoeseven in vacation spots like southern Florida, which
attracts those escaping snow for the winter, the malls didnt really benefit much.
Then, again, what the heck does anyone have to go to the mall for, today, anyway?
Its a heck of a lot easier to soft on the web for the right size and color, rather
than through piles of clothes in cardboard boxes at stores like Express, Gymboree,
Abercrombie & Fitch, or any others. Problem is, the very best deals are at the mall,
as all those 70% off window signs attest. Want a Coach bag cheap? No reason to get a look
alike on Canal Street, in NY, or at the straw market in Nassau (Bahamas)!. At Macy*s,
theres a nice selection that are half price, then 25% off, then another 40% off.
$298 handbags for $58, if you know your malls and stores.
Its specialty retailers that are well populated on the Earnings Calendar, as are
shipping-related companies. In fact, having watched the Baltic Dry Index make lower lows,
this year, than it did in 2009, I was surprised by the number of shipping-related
companies still in business and ready to report, altogether. And perhaps its just
coincidence but what were the odds that two major theater chains would report their
quarters only hours after the Academy of Motion Picture Arts & Sciences finished
handing out the Oscars live, on ABC, a Disney channel?
I used to read every word of the Beiges but, finally, gave them up. Its very hard to
read that "sources saw softer bookings," or "contacts claimed customers are
reluctant to spend," when a paragraph later theres always a district or
industry that hasnt seen any changes, while a different district or industry saw a
pick up in phone calls and inquiries. And then, reading through the Street economists who
find 1 more source than the last Beige whos more negative or positive, when I could
probably write the document, myself, by now, playing on the one hand, then on the other
hand, getting little out of the drivel. I suspect the Street will derive a great deal more
information from the plethora of investment conferences this week. Start with the Personal
Care Products Council, which started Sunday, today, since thats a favorite group of
the big money looking to buy defense against more losses in the major averages.
Monday, Morgan Stanley kicks off its Tech, Media & Telecom Conference, in San
Francisco. When it was in Barcelona, concurrent with Mobile World Congress, it was TMT
but, back stateside, now that smartphones are no longer revolutionary, its switched
back to spelling out the sectors it covers. No sooner did MWC end than Best Buy and others
were advertising pre-orders for the new Samsung Galaxy S7 with Virtual Reality headset
companion. Id like something like that for an overseas flight but, otherwise, I
dont really see that fitting my lifestyle. But speaking of telecom, theres no
doubt the group will be well represented at JPMorgans High Yield & Leveraged
Finance Conference, also starting Monday. What were the odds that thered be two
"Emerging Technology" conferences this week, and two MLP related ones, all four
starting Tuesday? Theres a third MLP Forum, this week, starting Thursday, from
Capital Link. Right there, it says something about the rush to get the I-bank conference
season cranked up after taking a break for earnings season!
I suspect, BAC/MERs Global Agriculture & Chemicals Conference will be well
attended; Its in Ft Lauderdale, after all, starting Wednesday. Odd, though, that
Commodity Classic starts a day later, in New Orleans. Citis Asset Management, Broker
Dealer & Exchanges Conference, in NY, starting the same day. Its been hard not
to notice Nasdaq OMX making highs while the rest of the market was spiraling down.
Volatility? Good for exchanges, which is likely to be one of the starkest contrasts, this
week, as Asset Managers who didnt diversify away from mutual funds, into ETFs, sound
little better, at Citis conference, than JPM did at its analyst meeting.
One of the biggest medical conferences of the year starts Friday. That would be the
American Academy of Allergy, Asthma, & Immunology. As irony has it, the FDA Vaccines
& Related Biologic Products meets the same day, both likely to see conversation
concerning the Zika virus, and how fast an antidote or vaccine against its effects on
fetuses can be developed. Its barely 3 weeks since Zika started reaching mass media
and the number of cases in the US has grown exponentially. So far, though, there are more
questions than answers. Second to AAAI is the American Academy of Dermatology, also
starting Friday. And thats not the only instance when related events are separated
by geography: The 42nd Annual Gerontological Society Meeting starts Thursday,
in Long Beach CA, while Vancouver hosts Dementia Care. If youre an expert researcher
with hot news, do you fly from one to the other? Wouldnt it be better if separate
societies with similar goals coordinated?
Meantime, analysts meetings get into full swing, as well, with ExxonMobil, Honeywell
Intl, Huntsman, Luxottica Group SpA, and Target meet with analysts, Wednesday.
Anyone taking bets on Honeywell pleading its case for a tie-up with United Technologies,
as long as it has the analysts attention? And speaking of LUX, which also reports mid-day,
Tuesday, its LensCrafters in the mall has been so much busier since the year began than it
was at the end of the year, its hard not to believe that the new health insurance
year made the difference. Lucky for LUX, SunGlass Huts always do well here, in Florida
but, especially, when snowbirds and other visitors swell the population. I just wish
theyd leave their dogs in strollers and carriages home, when they go to the mall.
Have you seen the Armani sunglasses that are only $75, at the A/X Armani Exchange stores?
Yeah, I know, theyre just another pair of aviator style sunglasses but the frames
are very thin and lightweight and the reflective lenses come in several colorsa
refreshing change from the ridiculous prices LUX can extract for other designer
sunglasses.
Can we all assume the Street wants a February unemployment report thats not too hot
and not too cold? What if all the layoffs in mining & the energy industry hit full
force in February, just as retailers were seriously trimming their staffs, even in the
stores theyre not closing? In this weeks Barrons, one page says the
expectation is for 175K jobs added in February, while another says 190K. How would the
Street react to 130? Or worse? February has an extra day this year but since the report is
out Friday, and the month didnt end until 4 days prior, surely BLS has a way to
"seasonally adjust" the discrepancy. Theres, always, the birth-death
fiction it creates monthly. Sometimes, I see headlines about how Chinas economic
data cant be trusted and think, "Oh like, we do any better?" And therein
lies the problem. The economy is growing just enough to keep every data point from being a
disaster, and was helped, in December, by unseasonably warm weatherhelped, that is,
if you werent a retailer trying to sell puffers, boots, hats, and scarves, and
gloves.
And then, of course, theres Super Tuesday, this week, with a growing possibility
that Donald Trump will be the Republican presidential candidate. Heres the thing:
Often, in presidential election years, the party out of party concentrates on everything
wrong with the guy in the White House, and all the ways the economy suffered because of
him. We dont usually start January with the kind of slide into the abyss stocks took
this year but, ultimately, stocks are weak into the presidential election, and recover and
make up for lost time starting either days before the election, or on the day of the
election. The only thing different this year was how weak stocks were out of the
gatethey didnt wait for June or July, and the nomination conventions. It
probably doesnt help that more than half the voting population finds Trump a buffoon
who is totally unqualified to run foreign policyis so ignorant he didnt even
know who David Duke was, let alone took pride in Vladimir Putins compliments. The
presidential election is always a zoo but this year takes the cake. Pardon us if I think
stocks will struggle all yearof at least until it doesnt have to worry about a
President Donald J Trump. Thats not to say I love the other Republicans or
Democrats, for that matter, either. Congress should raise the salary for the chief
occupant of the White House to $4m annually. Maybe then wed get some
intelligent and impressive people running for the office. And dont think Europeans
dont care about US politics! On the contrary, many of them are reluctant to
money into a country thats so divided and divisive, which the Oscars did nothing to
dissuade. I see not reason to trust the rallydo not expect weve seen the last
of the downside. On the contrary, the Ides of March have often been cruel to stocks. This
year, there are millions of reasons for that to be true. And so its said, to not pay
attention to the Fischer or Brainard appearances Barrons listed. Both of those
conferences dont start until march 6th.
ECONOMIC: (Highlights, only, below. Full International
Economic Calendar here)
© Sandi Lynne 2016 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the authors,
alone, and should be just one factor in more complete due diligence..
Feb. 2126, 2016 BULLS
& BEAR HAVE AN OPPORTUNITY THIS WEEK But a Go-Nowhere Market is Just As Likely The weeks US data will be mostly about housing,
with both the S&P Case Shiller Dec. Home Price Index & Natl Assn of
Realtors Jan. Existing Home Sales data out Tuesday, followed on Wednesday by Jan.
New Home sales, and on Thursday, FHFAs Dec. House Price Index. And thats
before Fridays 2nd look at 15Q4 GDP, and Jan. Personal Income &
Outlays+PCE. December was unseasonably warm but January made up for it with more typical
temperatures and snow, the latter problem for those who need to have insurance bound
concurrent with a home purchase. And if that wasnt enough, theres also Jan
Durable Goods Orders & Shipments, to be released Thursdayorders especially clues
to the future of manufacturing.
In addition to data, there is an exceptionally rare spate of central bank speakers from
around the worldand not because G20 meets at the end week, at least not that I know
about. The Chinese site in English for G20 offers only the most limited information, with
blank pages for the agenda. But starting with the overnight speech from Royal Bank of
Australias Debelle, through the rest of the week, there is virtually no Fed Reserve
Bank head who isnt speaking, Janet Yellen among those opting outunless
shell be at G20, and her appearance hasnt finished its 2 weeks on the Federal
Register, keeping it from appearing on the Fed Reserves Whats Next website.
Scan all the central bank speakers on the Economic Calendar, below, where I name names,
then add these names, also speaking at the 2016 US Monetary Policy Forum: MS David
Greenlaw, DBs Peter Hooper, JPMs Michael Feroli, U of Chicagos Amir
Sufi, and Columbia Us Federic Mishkin, along with Chicago Booths Randall
Kroszner, & Harvards Jeremy Stein, IMFs Maurice Obstfeld, & ECBs
Peter Praet, along with CNBCs Steve Liesman. And even more at IIF (International
Finance Institute) Forum. And thats all in addition to the usual Fed speakers at
more local events, including newest member Neel Kashkari, speaking at a Minneapolis event,
after arguing for breaking up the SIFI banks, last week. Add to the pressure, SIFMA
hosting a T-2 Symposium, which would require broker and clearing house computers to be
overhauled, given T-3 is what the computers are set up to handle. When it comes to
anachronistic practices, most of us, probably, wish the SEC & SIFMA would require
shortened periods for reporting insider buys and sales but its clearing that SIFMA
wants to accelerate.
The Earnings Calendar is replete with bigger retailers, like Best Buy, Kohls.
Macy*s, Target, TJMaxx, JCPenney & Sears, along with some smaller names like
Chicos. Fast casual restaurants are also well represented, with Cracker Barrel,
DinEquity, Popeyes Louisiana Kitchen, and Texas Roadhouse Grill, to name a few.
There are, also, more then a handful of precious metal miners expect3ed to report, along
with 2 water companies, one servicing parts of California, where the drought got as
extreme as it could, in the last few years. As always, Ive emboldened some names
that are likely to trigger outside media comment, even if I dont give a hoot
about them, personally, as well as some, like BlackHawk, on Tuesday afternoon, that sells
gift cards, and should help fill in the blank spaces traditional retail is leaving in the
wake of softer mall traffic and sales. HAWK sells gift cards for nearly every restaurant
& retailer, including some that exist on the web, alone. Racks of its offerings are in
my local supermarket, at the post office, and at Target, for that matter. The Street has
bemoaned all the gasoline and home heating costs saved with the collapse in crude &
natural gas prices that hasnt yet been spent at retail stores. We know a good
portion was saved and used to pay down bills but HAWK could prove, with its results, that
more of its went into gift cards than ever before.
Hotels have been hurt by Airbnb, Homeaway, & competitors (VRBO one I just learned of)
but the worst hurt has befallen the vacation share ownership sector. Interval Leisure
Group (IILG) and Marriott Vacations (VAC) and Im learning why: as President of a
Homeowners Association, who recently stumbled on owners and one tenant who have been
renting out rooms on Airbnb, by the night, week, and month. I happen to know a lot of
people who own timeshares they inherited, who could benefit from renting them out on
Airbnb & similar sites but arent allowed tothough the vacation rental
managements do rent out rooms when owners dont use them but turn over to timeshare
owners a fraction of what they could obtain, today, through the websites that facilitate
short-term rentals. The rental websites may deter some from buying into a timeshare but
probably wont deter those with inherited vacation shares, or those, like friends of
mine, wo bought their timeshare specifically to coincide with an annual industry trade
show, so they can avoid high priced hotels. It cant have helped the timeshare
industry that Beyonce used Airbnb to find an appropriate luxury hideaway to rent while she
was in the San Francisco area, for her Super Bowl half-time show appearance. Still, much
as Im fighting to end short term rentals in my HOA, which violates the governing
docs, marshaling the HOA lawyers to crack down on residents with big fines, and even,
canceling a properly approved lease because the tenant hasnt stopped accepting
"tenants," Interval Leisure (IILG) at less than 9x earnings with a 4.0%+ yield,
especially, could be in for a bounce when it reports this week. I dont see any
timeshare owners dumping their precious week or two, given they have a selection of cities
to choose from, rather than return each year to a single place. Some are more likely to
maximize their weeks by using Airbnb, if the front desk doesnt know them well enough
to prohibit such behavior, which they dont in most cases, collecting more for the
time they dont use than theyve been receiving from management companies, which
would hurt IILG & Marriots spun off Marriot Vacation version, ticker VAC but
both are pricing in annihilation, and that probably wont happen, either. Both report
this week.
Marketing.FWD Summit, in NY, on Monday, sounds innocuous but includes speakers from
Amazon, Facebook, Target, Oracle, American Express, GoDaddy, Moet Hennessy, Trip Advisor,
Starwood Hotels, Hudsons Bay, Adweek, Belkin, Wall Street Journal, Forbes,
Greenmountain Coffee Roasters, Dun & Bradstreet, and Harvard, organized by Venture
Beat. Other notable events include Credit Suisses 21st Annual Energy
Summit, starting Monday, in Vail CO, which is unfortunate, given IHS CERAWeek takes place
in Houston, starting the same day. GSMA MWCMobile World Congress, in Barcelona
Spain, also starting Monday, was a bigger event when smartphones were still evolving from
bricks & flip phones, and when Morgan Stanleys TMT conference was held
concurrent to the event, in the same city. Thats no longer the case, on either score
but doesnt mean there cant be any news or new bells or whistles added to the
nextgen smartphones that might be revealed there.
RBCs Global Healthcare Conference in New York, starting Tuesday, has usually been a
big event for smaller biotech companies. That isnt to say there arent any big
companies appearing because there are, including JNJ, CVS Caremark, TEVA, and HCA, for
instance. Still, its smaller names that dominate., and with the group down so
steeply over the past 8 months, perhaps theres room for some good news. Likewise,
the USDAs 92nd Agricultural Outlook Forum could move stocks, too,
Thursday, the same day NASS for Spinal Surgeons starts its annual Summit.
With the biggest of S&P 500 companies having reported, the analyst meeting schedule is
picking up. Monday Barrick Gold hosts analysts, while Tuesday its JPMorgan Chase
& Cos day. IBM is hosting an Investor Briefing at its J.R. Watson Research
Center, even as the company is hosting clients at InterConnect in Las Vegas. Friday,
its Eaton thats hosting analysts, as is Zions Bancorporation, even as
Berkshire Hathaways annual earnings report and Buffetts letter to shareholders
could arrive, after hours that day, as well.
Still, when I examine the three calendars for possible newsworthy events, its the
Economic Calendar that stands out most, for all the central bank speakers, as well as
those from the IMF, BIS, &, and the Chinese FinMin and chief of the PBoC offered at
G20 that stand out. Those who read "Investors Business Daily," or the work of
its founder, William ONeil, know that a rally like the one seen from Feb. 12th
through the 18th might not confirm its intentions until it makes its next move,
47 days later, after a few days of rest. I think its fair to say, Thursday
& Friday were days of rest, last week, after a strong 4-day rally that looked like a
short squeeze, rather than investors buying into beaten down stocks. Most stocks rose on
low volumes, suggesting index & futures buyers were responsible for gains in anything
that wasnt part of a short squeeze. Granted, the bulls didnt give up much
ground, even as the bears didnt jump to press their case or reload their short book.
The lack of volume during the rally, in all but the most heavily shorted stocks should
weigh against the bull case but until shorts are willing to reload, stocks could shop
around without doing much of anything. The biggest argument against a bull case is the
outsized weakness in financials. Therefore, I think its only a matter of time before
the bear claws come out again.
ECONOMIC: (Highlights, only below Full International Economic Calendar here)
© Sandi Lynne 2016 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the authors
alone, and should be just one factor in more complete due diligence
February 1519, 2016 EASY TO TRIM THE WEEK DOWN TO 3 ITEMS If
anyone asked me to narrow the week down to three events, it would be easy. Id point
to the FOMC Meeting Minutes on Wednesday, and both Walmart & Nordstroms
earnings, Thursday morning and afternoon, respectively. And of course, last Fridays
huge surge, attributed by the press and talking heads to stronger Jan. Retail Sales,
combined with Dec. revised up to a gain from original release of negative. Anyone
whos been around markets for more than a few years, pretty much knows, a good part
of Fridays rally was short covering into a long weekend, no doubt helped by Jamie
Dimons huge buy of JPMorgan stock, lighting a fire under a broken group.
IF we wanted to go deeper into the weeks potential market-moving calendar, we could
point to NAHB Feb. Housing Market Index, probably suffering from extreme weather in the
upper half of the country. Then, we could point to Fed speakers, including Tues. MN
Feds Kashkari, whos a newbie but sure knows all about TARP and every other
acronym deployed to get the economy back on its feet. Wednesday would be a big day, even
without the FOMC minutes, given 15Q4 eCommerce sales, Jan. PPI/Final Demand, and Jan.
Housing Starts & Building Permits, sure to have slowed since the unseasonably warm
December. And with Mario Draghi speaking to the EU Parliament, Monday, almost anything
could result, including an infusion of "whatever it takes" to light a fire under
overseas markets. Not to mention Chinese data including CPI, also Wed.
Crude oil was a big winner Friday, but its likely to give back at least a portion,
if not almost all the gains, waiting for Thursdays Nat Gas & Crude supply data
from the EIA, the latter delayed because of Mondays holiday. And speaking of high
flyers, few have flown as high as gold, this year, with quite a few miners reporting this
week, as well, including Barrick & Newmont Mining, both on Wednesday afternoon.
While were discussing relative strength, there are always consumer non-durables, or
staples stocks, who will the focus of quite a bit of attention, this week, as
CAGNYthe Consumer Analysts of New York join me down here, in Boca Raton, for their
annual winter meeting. At one time, the CAGNY schedule was the 2nd best secret
after the Allen & Co summer confab but, today, CAGNY has a relatively open website,
the schedule for this weeks meeting posted.
Another big event this week is MAGICthe apparel &, recently Shoe Show, in Las
Vegas, that attracts tens of thousands of retail store buyers. A good percentage of retail
& apparel manufacturing analysts from around the country will descend on Vegas, even
if the largest amount of actual order writing wont take place until MAGIC is over.
Aside from ASTRO Thursday, a cardiology and separate cardiovascular meetings out West, and
a stroke conference, Im partial to events on Wednesday, including Barclays
Industrial Seclect, in Miami Beach, Wells Fargos Cyber Security Forum in Boston, and
Re/codes Code/Media conference, even if I think the medical society conference that
will make the most news, after the cardiology & cardiovascular ones is ACTRIM for
Multiple Sclerosis, starting Tuesday, in New Orleans. The International Stroke Conference
starts in Los Angeles, Tuesday but the cardiovascular meeting will cover the topic, too,
just as the cardiology conference often offers sessions on the subject, as well. .
For people who dont write an Outlook on Sunday, it will be a short week driven by a
few key events and earnings releases. Walmart can hardly disappoint, after warning of all
the stores it intends to close, and charges it will take associated with those actions.
Therefore, WMT surprise to the upside, especially if gasoline savings are being spent in
its storesthe poorest people the biggest beneficiaries of lower gas prices, since
they have the least disposable income. Nordstrom is down so much it could, well,
disappoint and rally anyway, given how little is priced into its stock. Its store in the
local mall has been one of the steadier performers but steady at a much lower level of
traffic than it used to enjoy. On the upside, it hasnt been running the kinds of
sales Macy*s Incs 2 divisions run, like take an extra 40% off prices already marked
down by 40 or 50%, for discounts of 5075% off. At JWN, 40% is generally as deep as
discounts reach, except in seasonal merchandise, like Christmas candy so theres a
chance that margins, at least, could shine. After Kohls recent warning of a big
sales miss, and Macy*s earlier one, its hard to believe the Street could be much
disappointed in what JWN has in store. It didnt run up like KSS did, and has been
down since last quarters disappointing release.
And therein lies the rub. After good Jan. and revised up Dec. retail sales being credited
for helping spark Fridays big rally, weeks of retailer disappointments lie ahead.
Frigid weather in the upper half of the country, though, probably didnt stop people
from picking up Valentines Day cards, flowers, and chocolates, even if snow meant
much of those were ordered online. After all, thats been a familiar theme Q4
eCommerce sales should confirm. And given an historical slump in stocks in March, the
question isnt whether shorts will reload but, rather, at what level. I suspect that
will be somewhere shy of 1900 in the S&P, if not 18826, especially with winter
making up for time lost in December, and a possibility the FOMC Minutes won't reveal
members seriously worried about the impact of global economic weakness on the US economy.
Yellen backed off raising rates September 2015, on volatility caused by fear that overseas
economic weakness would hit the U.S. economy. She & her crew pushed back their
first hike until December, last year, for which they FOMC has been widely criticized. As a
group, the monetary policy committee might, just, have decided not to replay September
'15, and all but dismiss worries about stock market volatility. That would be a
significantl shock that could send stocks diving--just 2 business days after stocks
notched their best gain of the year.
ECONOMIC: (Highlights, only, here. Click for complete International
Economic Calendar)
© Sandi Lynne 2016 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the authors
alone, and should be just one factor in more complete due diligence.
February 0812, 2016 BULLS FINALLY RUNNING FOR COVER Lets be honest, despite an Earnings Calendar that
promises volumes of reports, this week will be all about FOMC Chief Janet Yellen
Semiannual Monetary Reports to Congress on 2/1011, at the House & Senate,
respectively. For the past 2 weeks since her appearances were announced by the media, US
House, & Senate, the events werent posted to the Board of Governors of the
Federal Reserve System "Whats Next" website because every agency has to
wait for events to be posted to the Federal Register, for 2 weeks, first, before they can
be posted at the agency level. This past weekend, Whats Next finally was able to
post what may turn out to be the 2 most important days of the quarter. (BTW: The 2 week
Federal Register rule applies, to all agencies, and is the reason the FDA doesnt
divulge information on its calendar, about upcoming CDERs that drug companies have already
announced to the world.)
Still eyes will be on the Chair, and her answers, one of the nice aspects of back to back
appearances in what used to be called Humphrey-Hawkins testimony, today called Monetary
Policy Report, is giving Yellen a 2nd chance to clarify a position or expound
on a comment, should markets stateside or worldwide over react to something she says.
China is closed this week to celebrate the Chinese New Year, closures in Hong Kong and
Singapore for nearly as many days. That means whatever the PBoC hasnt done to
stimulate the economy in advance of the celebrations, it probably wont do until late
in the week, if not next weekend. Iron fisted rulers have to have vacations &
celebrations too, you know. And unfortunately, the Fire or Red Monkey is not as auspicious
for prosperity as some other New Year symbols.
What struck me about this weeks Economic Calendar is the amount of short-term
funding the govt is selling. For several years, the Treasury has sold between $20
& $24B 3- & 6 month bills. This week, its selling $37B 3- & $30B 6-month
billsin line with its announcement that it would be selling more short-term debt.
But at $129B, including 3, 10 & 30-yr debt being sold this week, thats a lot of
paper when most of Asia will be on hiatus. Of course, so will South America and parts of
Latin America, what was Mardis Gras Fat Tuesday is this Tuesday, and why Carnival
coincides. Some of the biggest critics of zero interest rates and the federal
govts high debt are just waiting for an auction to fail. That probably
wont happen, this week, because the NY Fed has the ability to strong arm banks,
aided by reminders that stress tests will soon be due, so they should play ball. But golly
gee! Its a little frightening to read all the financial press commentary about
sovereign wealth funds liquidating as much as $220B in US securities, to raise cash,
because oil prices are so low, then thinking about what the absence of Asia, Latin &
South America could mean to a Treasury Auction. That, I suspect, is why there was an
announcement stating the Treasury would favor more short term paperto assure some
bank, hedge, money market, or mutual fund will step up to the plate and vacuum it all in.
I dont want to give short shift to NFIBs Small Business Optimism Index, Jan.
US Retail Sales, or any of the other data expected this week but Yellen clearly owns the
week, and worse, well be heading into next weekends 3-days off, a reason for
even longs playing for a trade to close out by the end of the week. The FXI and other
Chinese ETFs have often been good call option bets to position for a bounce after the New
Year holiday but Im not feeling it this week. Id rather save that trade for
after the Communist Partys annual March meeting, when stimulating the growth it
needs is bound to be a prime topic, even as many analysts & economists expect the
target for GDP this year will be lowered to 6.5% from last years 6.9%. But Id,
also, watch carefully the MBAs Q4 Mortgage Delinquencies & Foreclosure stats out
Tuesday. Any sign of an uptick in delinquencies will feed into fears of a US
recessionalmost no matter what Yellen says Wednesday & Thursday.
The Earnings Calendar will take a back seat this week, despite the number of so-called
blue chips reporting, including Coca-Cola, PepsiCo, Kellogg, CVS, and a good portion of
healthcare providers, like Centene, Humana, & Molina Healthcare, along with auto parts
sellers and suppliers, like OReilly, Advance Auto Parts, Borg WARNER, Allison
Transmissions, and Americal Axle, along with notable tech companies like Activision,
Akamai, Cisco, CDW, Tesla, and Zillow. Monday morning, all Chipotle Mexican Grills will
close for a headquarters broadcast on cleanliness and food safety. One has to wonder
if Wendys, Panera Bread, and Red Robin Gourmet Burgers benefited from CMG woes or
have been hurt worse, by the resurgent McDonalds. The only one Ive ever eaten
at is Panera, and wouldnt do it again. For $8.95, at a store near the Walt Whitman
mall, I received one thin, small slice of turkey rollnot even folded overjust
a small single level slicea piece of curly lettuceprobably Boston bibb, and a
small, thin slice of tomato. Ive heard their cranberry bagels are delish but that
one overpriced sandwich turned me off to the chain, while Ive never eaten at any of
the others I named. Ever.
The Events schedule has several healthcare conferences & expos, from Pri-Med (Primary
Medicine) to Home Care 100, to Osteoporosis, Urology, Chain Drug Stores, BIO CEO &
Investor, ASMmicrobiology, in this case "Biodefense & Emerging
Diseases," of which Zika is the newest concernthe link to Guillain-Barre as
frightening as the fetal microencephology. G-B is a nasty disease that can kill, and often
leaves permanently weakened muscles. Add to those, Leerinks Global Healthcare
Conference, NASS Spine Society Summit, ABGTAdvances in Genome Biology &
Technology, AAASthe American Association for the Advancement of Sciencealso
heavily biotech, this year, Osteoporosis, and the 41st Annual Cardiovascular
Conference. The I-banks are dribbling in more conferences this week, besides
Leerinks, starting Wednesday. Those include Credit Suisses 17th
Annual Financial Services Forum, starting Monday, Goldman Sachs Technology & Internet,
starting on the 9th, Stifels Transportation & Logistics Conference,
also the 9th, BAC/MERs Insurance Conference on the 10th, the
same day BB&T hosts its 31st Annual Transportation Services Conference.
Thursday, KBW hosts Financials, also. By Friday, events surrounding the New York
International Toy Fair kick off with both Hasbro & Mattel hosting analysts are their
respective showrooms, to introduce the toys theyre planning on launching this year.
Hasbro also reports, Monday.
With Fashion Week starting Wednesday, in New York, analysts and traders could be
particularly ornery. Despite attempts to concentrate all the catwalk shows on the West
Side, that concentration will make New York gridlock central, with taxis and Uber
competing for fares on the West Side, leaving the East side seemingly neglected but not
really; BIO CEO takes place in NY, as do Leerinks Healthcare, BACs Insurance,
and Womens Wear Dailys Be BEAUTY. And when it comes to Fashion Week where in
the city shows are held have little to do with where attendees stay. The French press, for
instance, prefer the Mondrian. The Italian press have their favorites, too. And with
fashion shows often not starting until hours after the invitations called for, there can
be limousines backed up all over the city idling, while waiting for their fares.
Yeah, figure traders will be ornery this week, worried about the coming 3- day weekend
enough that even if Yellen says all the right things, and Dudley reinforces it on Friday,
it still wont be enough to flip the switch to the bulls. And at any rate, Im
troubled by how low VIX has stayed, despite the massacre of once-high flying stocks, and
the indices, in general. If I had to guess, my best guess would be a Yellen inspired rally
of some size, Wednesday, that fades late in the day, gives up some more Thursday, then
cleans some clocks on Friday, on low volume, as many will take a 3-day weekend and turn it
into 4, or 5. Theres a song to the effect of "If youre happy and you know
it, clap your hands." Its been running through my head all weekend because, the
ones that are happy are the bears, who suffered 6 years waiting for just the kind of sell
off weve witnessedno more of the back and forth in a range stuff. If
youre not feeling happy, then youre long, and thats, obviously, a bad
place to be ,for now, and very possibly, until after the November election. It appears the
bulls threw in the towel, in the last few weeks but especially last week, when they gave
LinkedIn a beating that carried over to other cloud names, even as Amazon is off just
about 200 since it reported its biggest earnings ever (but missed the Street by 50c), and
Alphabet/Google is down by over 100 despite reporting what looked like fantastic earnings.
One-time entertainment darling LionsGate Entertainment was positively pummeled for
admitting that the last installment of Hunger Games (Mockingjay 2) missed its revenue
expectations by $100m, and blamed Star Wars:Force Awakens for its woes, then said it
wouldnt provide guidance until may. One by one the former starsincluding
biotechs, have been taken out to the woodshed and had their heads chopped off. Thats
exactly what it looks like when the bulls throw in the towel. While it wont take six
years for the bears to finish decimating stocks, Im certain theyre not done
yet.
ECONOMIC: (Highlights, only, below.. Full International
Economic Calendar here.)
© Sandi Lynne 2016 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the authors,
alone, and should be just factor in more complete due diligence.
February 0105, 2016 FRIDAY WAS THE FIRST TIME
BULLS GENERATED VOLUME After a weak Q4, with US GSP
Growth of only 0.7%, subject to two monthly revisions, this week we get the first data for
January, including manufacturing & services Purchasing Manager Surveys, and the
Institute of Supply Management surveys. Dec. Personal Income & Spending, and the first
of a few PCEs, that will sway GDP revisions, along with Jan. Motor Vehicle Sales
Tuesday, the more timely US Jan. Chain Store sales Thursday, and Fridays Jan.
Unemployment Report, as well as the annual benchmark revisions. I skipped Wednesdays
ADP private sector employment report, on Wednesday, despite its much improved
predictive value for the Bureau of Labor Statistics version Friday. The BLS does seasonal
adjust its numbers but I fear significant lay-offs by retailers could "color"
the January report.
Other notable events on the Economic Calendar include the Iowa Presidential Caucuses
Monday, Australia & Indias central banks monetary policy committee
decisions on rates, overnight Monday, into Tuesday morning in the US, the Bank of England
MPC meeting, its QE target & Minutes that reveal the votes each member of the monetary
policy committee pitched in towards the decision that, surely will consist of the BoE
standing pat, given Carneys speech, last week, saying the timing wasnt right
to move on rates. The ECBs Draghi and a couple of Fed heads will speak this week but
only Draghi seems to have a silver tongue with powers to really move markets. FOMC Chief
Yellen is testifying in Congress on the 10th, though thats not on the
Federal Reserve calendar, yet. The way it works, whether with her speeches or FDA meetings
is that something has to appear in the Federal Register for two weeks before it can be
announced on an agency site. Seems archaic in an internet of things world but thats
the way the US Government operates, and Congress hasnt, yet, moved to change that.
The Earnings Calendar is enormous, duly highlighted as is our process. With US banks all
but done reporting, the highlighted tickers are more spread out among sectors. That makes
it a bit unwieldy but given the larger number of companies reporting, that shouldnt
surprise. Of course, whats highlighted is strictly subjective but not completely
capricious. Even when I dont care a bit about a coming report, like Yahoos, I
know some portion of Wall Street and the media will dissect its report, and prospects for
its CEO, whether I care or not. No doubt Earnings will be one dominant theme this week.
Not so much the Events Calendar, which, once again, lacks big stateside I-bank conferences
in deference to the Earnings Calendar. Those few US I-banks willing to buck the onslaught
of earnings, are CanaccordGenuity on Tuesday, Cowen & Fig Partners on Wednesday. BMO
Capital & Macquarie host events, on Thursday, both in Canada, concentrating on
Canadian companies.
With Politics & Super Bowl 50 likely to dominate general media, the ministrations
& opinions of Wall Street analysts could get drowned out for all but the most tuned in
traders. Its notable that bulls not only exerted some influence last week but
managed some meaningful upside volume, Friday. We could argue that some of that was the
result of shorts covering, which no doubt is true. Its the first time, this year,
the shorts didnt press their advantage but, instead, started covering positions.
Multi-week rallies have started with less, and its a little unusual for stocks to
mount a counter trend rally, so early, in Earnings season; I dont think we can
declare the worst of the bear raid over, at least until this week ends. But what
historical behavior didnt support, the Fed statement and BoJ move to negative rates
did, and every rally starts with a spark. Theres resistance ahead, in the S&P,
at 1980, and 2000 above thereif it can even get there. The right question is when
the shorts will re-instate new positions, not how far the bulls can push stocks first.
ECONOMIC: (Highlights, only, below. Full International
Economic Calendar here)
© Sandi Lynne 2016 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the authors,
alone, and should be just one factor in more complete due diligence.
January 2529, 2016 ARE TRUMPS RISING POLLS HITTING MARKETS, AS CAUCUSES
& PRIMARIES NEAR?
This could be one of the busiest weeks of the quarter. A flood of earnings are scheduled
for release, theres an FOMC meeting whos risk is the committee sticking to its
intent to raise rates 4 times this year, the head of OPEC speaking, Draghi speaking, and a
slug of housing data thats more moldy than what we already heard last week. To top
it off, the US Treasury offering $132B in debt. Given rates have fallen, since the New
Year began, as stocks mostly fell, until the latter half of last week, no one can fault
the Treasury for bad timing, despite the large sum. Then, the icing on the week is T-3 for
End of Month, which will probably make the first couple of days of the week high volume
days.
For pharmaceuticals, the road could get rocky. A number of members report earnings, while
the House Committee on Oversight & Government Reform holds hearings on drug pricing,
with Valeants interim CEO appearing, but Shkreli declining. Watch the medical device
companies reporting, instead. The excise tax ACA (Obamacare) contemplated on medical
devices has been postponed, for a couple of years. Its possible it will be repealed,
altogether, under a new president of the US, no matter who that is. Many of the companies
involved, have not updated their outlook to account for the tax they wont have to
pay.
OF the Economic data, its Thursdays Dec. Durable Goods Orders & Shipments,
NARs Dec. Pending Home Sales, and Fridays first look at 15Q4 GDP, that will
probably influence shares most. Whether that will look like trades after T-3 EOM, rather
than the Economic Calendar remains to be seen. There are many people who want to spend one
last Christmas in the home theyre selling but that could still show strong Pending
Home sales. And given the warm weather in Dec. 15, there were optimum conditions for
house hunting, lift-off at the Dec. meeting an additional incentive to get off the fence,
if one were contemplating a home purchase, before rates got much higher.
As always, I emboldened the tickers likely to get the most attention, on the Earnings
Calendar but thats a strictly subjective judgment, that many might diss. For that
reason, let me point out McDonalds Monday, 3M Tuesday morning, Anthem & Boeing
Wednesday morning, Amazon, Amgen & Microsoft Thursday afternoon, and that hardly
scratches the surface. More than half the top automakers report this week, the majority of
the biggest defense manufacturerswhose future includes higher federal defense
spending, a smattering of deal and rumored deal stocks (JCI for TYC the latest), some
significant home builders (DHI, PHM, MTH, and NVR), and the largest market cap company,
Apple (is it still?), on Tuesday afternoon. Last week, of course, the DJIA would have
risen even higher if not for IBM and American Express, the problem with a 30-stock index.
With major biotechs--Biogen Idec, Amgen, Celgene, reporting this week, Apple and Softee,
the NASDAQ 100 is what many traders will be using to make a bet on its direction, based on
their assessment of earnings prospects. Well also learn more about Chinas
economy, and consumers, in particular, with Alibaba reports Thursday morning, out time.
Then, what were the odds Alliance Data Systems, Visa, MasterCard & Capital One
Financial would all report this week?
Which brings us to the Event Calendar, which promises few I-bank events, in the US, in
deference to the heavy earnings release schedule, yet both Stifels Senior Housing
& Healthcare Real Estate Conference (Monday), and BB&Ts 4th
Annual Senior Living & Charter School Investor Symposium (Wed.) are likely to feature
a lot of overlap. Cattlemens Beef, Iowa Pork, Intl Feed Production &
Processing, Intl Poultry Production & Processing, and ASTAs Seed &
Vegetable Annual all have something to offer to commodities traders, even as Utah Bankers
hold an annual Ag Outlook Conference starting Thursday. Also focused on commodities,
VRCthe Vancouver Resource Investment Conference (started Sunday), TD Securities
Mining both Conference and Hart Energy Marcellus-Utica Midstream Conference, starting
Tuesday, when Energy Mexico 2016 gets underway, as well.
Watch hotel companies, as Tour dALIS Americas Lodging Investment Summit starts
Monday, along with solar stocks, as CleanTech Forum starts the same day. Despite
ITExpos near dozen divisions, there is nothing to match the Comdex of old. Still
Wearable Tech @ITExpo will attract attention, as analysts wait to hear how many Apple
watches are soldwhich the company might not report. FitBit is almost guaranteed to
speak about volumes, yet its selling success hasnt equaled stock success, as yet
this year, and it isnt reporting this week, anyway, that we know of. At least FIT
announced an update--the FitBit Blazeat CES, earlier this month, while AAPL
hasnt updated its watch since its spring introduction.
Medical conferences include the ongoing Society of Cardio-Thoracic Surgeons & AATS
Tech-Con related to it, Winter Rheumatology and CHIP Hemodynamic Support, already
underway, with Health Benefits, Immunotherapies, and Novel Immunotherapeutics all starting
Monday, Yankee Dental Congress starting Wednesday, Society of Nuclear Medicine starting
Thursday, the European Generic Drug Association starting Thursday, and the 13th
Review of Hematology & Oncology Congress, starting this Friday.
Anyway you slice it, this week holds a number of minefields in energy, with Irans
leader prancing around Europe, and unleashing oil its long stored in tankers, on top
of earnings, and the FOMC post-meeting statement. Whether last weeks late rebound
has more upside is probably an open question many already contemplated into Fridays
close. Even strong earnings wont, necessarily, vanquish fears of a global slowdown,
since CEOs & CFOs are likely to be cautious about the futurethe East
Coast buried under feet of slow and ice just another reason to withhold enthusiasma
reminder of last years weak Q1 that probably saw some cities spending more on snow
removal than IT equipment. From where I sit, its safe to say the bears have been
emboldened by their success, so far this year, even as longs are looking for spots to get
out on rallies. That changes the whole complexion of the market, making the downside
easier than more upsidevicious rallies in bear markets par for the course but last
weeks, perhaps, already not far from a top. The only question to ask yourself is
whether Yellen & Co will seek to calm markets with its statement, Wednesday, or
whether they stick to the 4 rate hikes this year mantra. And even then, should they sound
like theyre backing offevaluating incoming data since their last
meetingtheres always the chance the minutes of this weeks meeting will
sound less dovish, when released, in three weeks, than this weeks statement, itself.
How quickly commentators started predicting the S&P should rally to 2000, when it
barely made it back over 1900, bothered me last week. When theres that much
optimism, after 2 and half weeks of stocks getting killed, theres something very
wrong with market commentators, if not the players, themselves. I would have been more
encouraged if the talking heads paraded through financial TV saying at what levels the
shorts will, again, reinitiated their positions. Im not ignoring the part the August
lows played in the reversal up, last week but the market is never that easy or technical
without additional challenges along the way. And if none of this is what youll be
pondering or watching this week, you can always stay up all night, watching the Australian
Open on ESPN 2, as the 2nd week of the tournament marches towards the finals. I
wrote the headline for this commentary, last Thursday, before I saw Barrons and
other media allude to the same thought. Just to set the record straight.
ECONOMIC: (Highlights below, 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 authors,
alone, and should be just one factor in more complete due diligence.
January 1822, 2016 EARNINGS, AGAIN, DOMINATED BY
BANKS If China keeps its markets & currency on a yo-yo
path, and Western markets continue crashing, in reaction, the World Economic Forum will
have a hard time making news, despite the number of corporate luminaries expected to
speak, in addition to those listed, by day, on the Economic & Events calendars,
Alcoas Klaus Kleinfeld, SAPs Bill McDermott, & Walmarts Doug
McMillon, are listed as speakers, even though I couldnt determine which day,
precisely, theyre expected to speak or participate in panel. Nonetheless, and thanks
to some of their on-air personalities being moderators, if not speakers, Fox Business,
Bloomberg, CNBC, and CNN will set up outside the main hotel with the beautiful Alps in the
background. Will anyone care?
The Economic Calendar includes Mondays OPEC Monthly Oil-Market Report, just as
sanctions have been lifted on Iran, which intends to start shipping 500K barrels,
immediately, and as much as another 500K in the next few months, though many doubt
thats possible. Tuesdays NAHB Jan. Housing Market Index and the Congressional
Budget Offices assessment of the 10-year projections for US Finances, just as the
budget deficit is due to start rising, after a year of mass shrinkage. The BoEs
chief, Carney, is set to make his first speech of the year, Tuesday, with the Eurozone
releasing Dec. CPI the same day. Anyone want to bet it fails to show any inflation? And
what will that do to influence the ECBs coming monetary policy decision, to be
released Thursday.
U.S. Dec. CPI and Housing Starts & Building Permits will be Wednesday, the same day
the Bk of Canada is set to release an interest rate decision, as well as a monetary policy
report that will be followed by a press conference with Gov. Poloz, and his Senior Deputy
Gov. Wilkins. As it happens, the Banco Central do Brasil monetary poiicy committee meets
Wednesday, as well. Friday, the National Association of Realtors will release Dec.
Existing Home Sales, about the same time ECB Pres. Mario Draghi takes the stage at the
World Economic Forum, also known as WEF. At least Mario is discussing a topic that should
attract widespread interest: "The Year Ahead: The Economic Outlook for the
Eurozone." I suppose it helps that Germany reported, last week, full year 2015 GDP
+1.7%, since thats the largest country in the EU.
The Earnings Calendar is, once again, dominated by banks, leading us to note more
regionals than we normally would. Normally, Google would report this week but in its
reorganized and renamed transition, which promised more granularity under CFO Ruth Porat,
Alphabet has announced it wont report until February 1st. Bank of
America, Charles Schwab, Morgan Stanley, Goldman Sachs, & TD Ameritrade are the
highlights of Tuesday & Wednesdays reports, along with Delta Airlines in the
morning, IBM & Netflix, on Tuesday afternoon. Dont overlook United Health,
Tuesday afternoon, as the eye is wont to do when there are so many emboldened tickers on
the top line. Also worth noting Wednesday, Brinker Intl, owner of low priced fast
casual restaurants Chillis Grill & Bar, and Maggianos Little Italy.
Thursday is the big day for Earnings, as it is most weeks, with Alaska Airlines, Bank of
New York Mellon, BB&T, Canadian Pacific, Fifth Third Bank, Huntington Bankshares,
Keybanc, MGIC Investment Corp (Bond insurer), PPG, the paint & glass company,
Southwest Airlines, Travelers, United Airlines, and Verizon, all before the markets open.
After hours, notable reports will arrive from American Express, Celanese, Intuitive
Surgical, Schlumberger, and Starbucks., to name the highlights. Friday, the week will wrap
with earnings from GE, Kansas City Southern railroad, Rockwell Collins, SunTrust, and
Synchrony, the latter delivering its first report as a bank without GE as its parent. The
question is: Will anyone care about earnings, or be watching oil instead?
The Events Calendar is not as filled with investment bank events, as its been for 2
weeks, in deference to Earnings Season. In fact, the 3 Airline events scheduled are taking
place in Dublin, Ireland. Also hosting overseas conferences, Credit Suisse, Daiwa, and
Unicredit Kepler Cheuvreux German, Austrian & Swiss Corporate Conference, while two
big ones are in Canada, CIBCs Annual Whistler Institutional Investor Conference, and
Peters & CO. Winter Energy Conference, one of several energy conferences scheduled for
the week. One event that could slip under the radar, on the list below, is DesignCon, a
chip & circuit board design event, the ETF representing the group killed Friday. Aside
from energy, healthcare is, once again, well represented on the schedule, with Dermatology
continuing Sunday, Retina 2016 starting Monday, Peptalk: Protein Science Week, a
collection of conferences under the Peptalk umbrella, Drug Delivery Partnerships,
Dialysis: Advances in Kidney Disease, SCCMthe Critical Care Congress, ASCOs
Gastrointestinal Cancers Symposium, NADL for Dental Labs, and the Clinical Congress of
Gastroenterology & Hepatology, all before next Saturdays Winter Rheumatology
Symposium and the Society of Cardio-Thoracic Surgeons Annual Meeting, concurrent with AATS
Tech Con, for the equipment and surgical procedures that equipment allows, not to mention
SLAS, the Laboratory Automation & Screening Expo, making for a very busy next weekend.
The NRF (Natl Retail Federation) puts on its BIG SHOW in NY but thats more
about the equipment and supplies that retailers use to run their businesses, rather than
about retailers, themselves.
Do bear in mind the first trades post the January equity expiration will take place
Tuesday. January expiration, of course, is when equity options that started as LEAPs as
far back as 2013 expired. Also note that VIX was higher, Friday, than the price for a
barrel of oil, which rarely happens. There are some arguing were near a bottom
because of that switch up. A bear for weeks, Im not sure a bottom is in but I did
note that, even with oil falling and closing below $30 a barrel didnt drag oil
major Chevron back under $80. In fact, Chevron was able to hold above $83, and its
not because of a dividend qualificationthat was the first thing I checked. On the
other hand, I did notice Schlumberger is at a price its rarely traded at, so there
simply isnt evidence to conclude the bottom is in. I believe it might be near, since
stocks like Alphabet, Amazon & Facebook got hit hard Friday, and the leaders
dont get hit until near the end of the decline. Unless, of course, you believe
another cataclysmic 20082009 decline has arrivedin which case the bottom is,
probably, far below current levels. I dont see the parallels to 2008, despite the
junk bond market hurting, thanks to debt laden energy companies who, truly, cant
survive on $29 oilwhich got as low as $28, while the US was closed.
And a lot of people arent sleeping well at nights, these days, as crude and stocks
unravel, and as they watch the markets reduce their 401Ks quicker than they rose. If
youre one of them, Showtime, a division of CBS, debuted, Sunday, its new series,
"Billions," kind of borrowed from Steve A. Cohen & SAC Capitals fight
with the NY AG, offering free trials in ads that have appeared on every other channel,
both network & cable. So, if youre not going to be up all night watching the
Australian Open, live, on ESPN 2 (DIS) from 9pm to 7am eastern time, daily through Jan. 31st,
you could always call your cable companyif you still have one--for the free trial
being offered to Showtime, and then binge watch all of Showtimes other shows, VoD.
Personally, Id rather be watching closely for a selling climax that signals
its safe to get into stocks for a tradable few days. And once again, Ill be
watching Chevron for continued resilience, even in the face of continued declines in oil.
Right now, WTI is trading $1.56 above the price of Brent, the resumption of US exports of
crude, no doubt, combined with fears of the oil Iran will dump on the market taking its
toll on overseas crude more than domestic.
ECONOMIC: (Highlights, below. Full International Economic Calendar here)
© Sandi Lynne 2016 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the authors,
alone, and should be just one factor in more complete due diligence.
January 1115, 2016 FOCUS ON BANK EARNINGS A packed Economic Calendar
probably wont trump the Earnings from banks, this week, which build to a crescendo
on Friday. First, though, a word last weeks "disappointing" Dec. Vehicle
Sales, and alleged high inventories, which fail to acknowledge severe storms that gripped
the middle of the country, with rivers overflowing their banks, flooding out homes &
businesses. Once the flood waters recede, and insurance checks start arriving, tens of
thousands of consumers will be looking to replace water logged vehicles totaled by their
insurance company adjusters. For that reason, Im fairly optimistic about Jan.
vehicle sales.
The Kemp Forum for Republicans, held Saturday morning, promised Jeb Bush, Dr. Ben Carson,
Chris Christie, Carly Fiorina, John Kasich, Marco Rubio, House Speaker Paul Ryan, and Sen.
Tim Scott, the latter two moderators. The event, hosted by the Jack Kemp Foundation, is
sponsored by Opportunity Lives, in partnership with the American Enterprise Institute, and
the Economic Innovation Group. Such a fuss for a half day event still puzzles me. And that
was held in advance of the Republicans next Presidential candidate debate, and even
earlier, the Presidents State of the Union address to a Joint session of Congress.
Im sure there are a number of Democrats as happy as Republicans to put behind them
the last Obama SOTU address. The Supreme Court is back in session, as well, with its first
case on forced union membership.
Fed speakers are out in force this week, while the Beige Book will be released, as well
(Wed.) yet its the schedule Treasury Auctions that might attract more attention, now
that rates pulled back as stocks fell. After all, how much interest can a summary of Fed
districts drum up, when it rarely sounds different from the half dozen that came before.
Some districts are growing, some arent, and others are holding in place. Are they
ever any different? Oter items of note, Mondays US Labor Market Conditions Index,
Tuesdays NFIB Business Optimism Index & Nov. JOLTSa high rate of job
quitters seen as a sign of more forgiving job market. Friday, PPI, Dec. Retail Sales, a
speech from NY Fed Pres. Dudley, Nov. Business Inventories, with a wrap at mid-day when
Baker-Hughes releases the North American & US Rig Count for the past week. Normally,
monthly option expirations arent a big deal except when theyre part of a
quadruple expiration of options and futures but the Jan. expiration is different. It
closes out what started as LEAPs, as long ago as 2013. For almost 2 years, since Ben
Bernanke first started talking about "taper" of the Feds agency &
treasury purchases, Jan. call options were how some chose to bet on higher rates improving
bank NIM. Last week pretty much wiped out any hope that those options will pay off. But
plenty of other options are still in play, with Friday the looming deadline.
The Bank of England meets this week and will release its monetary policy committee rate
decision, meeting minutes, and QE targets on Thursday. There was a time it was believed
that the BoE might quickly follow the FOMC rate increase with one of its own but its
members have sounded, lately, like theyre backing off that plan. As weve seen
in the US dollar, a rate hike can launch a currency into less competitive spheres, making
economic growth harder to come by.
The financial TV talking heads will try and make much of Alcoas earnings report on
Monday. Other than its supply deal with Ford, theres not much interest in
Alcoas results, after it just announced another smelter shut down to cut over
capacity. The first really big report will come from rail, CSX, Tuesday afternoon, then
another lull before JPMorgan reports Thursday morning, and Intel, Thursday afternoon. The
rubber really meets the road Friday, when BlackRock, Citi, PNC Financial, Regions
Financial, US Bank & Wells Fargo all report.
There are notable events, this week, as well, including the Detroit Auto Show, which
started over the weekend. The American Farm Bureau Federation Annual Meeting could, well,
be about the floods that came out of nowhere in December, setting farmers back after 2
years of drought. The biggest events of the week, though, are likely JPMorgans 34th
Annual Healthcare Conference, in San Francisco, and the 18th ICR Annual
Conference, formerly ICR Xchange. Both events attract investment bank meetings and forums,
attracted to easy access to the execs wholl be presenting. ICR is filled with
retailers, restaurants, and manufacturers supplying retailers or their own retail stores.
I have threatened for years to write a piece criticizing analysts for constantly referring
to Macy*s as a "best in class" operator, and Terry Lundgren as "the best
merchant" in the world. Hopefully, Ms own results have put such talk to rest.
Macy*s has never sold an item at full price, irritates customers with its coupons that
come with a slew of exceptions that make them virtually worthless, even as its buyers have
never been able to edit inventory down to the best choices. Ms ladies depts have
been completely overstocked for years, the faulty premise behind volume to drive cash flow
finally showing its cracks, this year, as cash flow collapsed by more than two-thirds.
Keep an eye on media stocks: The TV Critics Winter Tour gets into full swing, this week,
with the major networks competing against Amazon Prime, which will showcase its shows
Monday. Of course, the big question is whether stocks are stretched enough to the downside
to boomerang back, for a rally, no matter how brief that might be. Id suggest not
yet, the biggest problem being those who are looking to get out, in the presence of any
pop, no matter how wobbly. Thats part of what slapped Fridays rally back down,
and likely to continue to be stocks worth enemy, until later in the week, when the
banks have a chance to "save" stocks. Given the warnings on FICC & trading
banks discussed at December bank conferences, its probably too much to hope that
banks can save the market. At any rate, "hope" has never been a successful
trading strategy, and isnt likely to work out for any remaining bulls, now, either.
ECONOMIC: (Highlights, only, below. Full International Economic Calendar here)
© Sandi Lynne 2016 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the authors,
alone, and should be just one factor in more complete due diligence.
January 0408, 2016 A NOT SO HAPPY NEW YEAR! The week is punctuated by big events, not the least of
which are the Wednesday release of Minutes of the December 2015 Meeting of the FOMC, that
resulted in lift-off for ratesminor though that move was it was large in every other
way. Before then, the usual monthly PMIs and ISMs, along with Dec. Motor
Vehicle Sales, Tuesday. After the Minutes, theres Dec. Monthly Chain &
Comparable Store Sales, Thursday. Though only 11 retailers still report those, and one
more will drop out in February, a number of retailers who usually stay mum will report
Holiday Salesvarying from sales that include Thanksgiving Day through January 2nd,
when the December NRF "month" ended, to those that include both November &
December sales, through 01/02/2016. Friday is the December Unemployment Report though
thats a double edged sword. As mall traffic never reached the masses expected, those
retailers who didnt lay off workers before the month ended found many on commission
leaving, rather than wasting their time, showing up for nothing. And thats
especially true given the number of retailers who cut prices by 60% before Christmas, and
those who upped the ante to 60% off prices already reduced 5060% on clearance
merchandise. If one cruised the mall mid-week rather than on weekends, the discounts were
far steeper mid-week than they were on weekends, while a couple of stores switched up
promotions after 1 or 2pm on Saturdays and Sundays, amping up the discounts to attract
more shoppers when more shoppers were around, if they hadnt made their numbers
before those hours. Ive long observed that tactic being deployed by American Eagle
Outfitters, Ann Taylor & Loft stores, the latter two now owned by Ascena, which took
over the former Ann Inc, in August 2015, so had no input into the holiday deliveries.
The big events of the week include AEAThe American Economic Assn Annual
Meeting includes a session on "What We Learned from the Global Financial
Crisis," from Jan Kregel of the Levy Economics Institute of Bard College, The
American Real Estate & Urban Economics Assn meets at this, too, with prominent
speakers that include Martin Feldstein, Stanley Fischer (Fed Reserve Board), John B
Taylor, Jan Kregel, Alan Kreuger, Robert Shiller, Rchard Thaler, & Joesph E. Stiglitz,
while BlackRock hosts a reception for its $25K Applied Research Award for the best Job
Market Paper Presentation. But all kinds of universities hold alumni receptions here,
including Man U, Brown U NYU Stern School, Princeton & Tepper School of Business at
Carnegie Mellon Univeven Shanghai Univ. of Finance & Economics. The Presidential
Address is from Manuel Arellano "On the Econometrics of Household Income &
Consumption Dynamics." The opening Plenary is from Guy Standing, of the Univ of
London. The IMFs Olivier Blanchard will speak on "Dark Corners: Reassession
Macroeconomics After the Crisis." We havent even scratched the surface, though,
of the offshoots that hold meetings here, like the Journal of Financial & Quantitative
Analysis, or the Institute for Defense Analyses, or the American Society of Health
Economists. The SEC hosts a reception here, too. Theres even the 8th
Annual Economics Humor Session in Honor of Caroline Postelle. What seem to be missing in
16 are the high profile Federal Reserve, World Bank & IMF speakers of the past,
though the Reserve Bank of Indias Raghuram Rajan participating in a discussion on
"Crisis & Collapse in the Long Run," and the San Francisco Feds John C
Williams is discussing "The Equilibrium Real Interest Rate---Theory, Measurement, and
Use in Monetary Policy." Some Microeconomic Evidence," under the larger topic
"Historical Perspectives on the Financial Crisis, Banks & Regulation." .
Theyre all represented but none of their speakers are the household names most know.
SEC speakers are staffers discussing "Capital Markets after Dodd-Frank & JOBS
Act." You knew "Wage Inequality" would be a topic, with many of the
participants in that track from the US Census Bureau & US Bureau of Labor Statistics.
As for corporates speaking, Wall Street bank economists were notably absent, though Rand
Corp, Voya Investments, CBRE, & Booz Allen offered speakers, and under the
"Peer-to-Peer Rental Markets in the Sharing Economy," Google, eBay & Uber
Technologies offered "discussants." Facebook is participating in "People
& Cookies: Imperfect Treatment Assignment in Onlinbe Experiments," while Google,
Facebook & Microsoft discussants under "Uniform Inference with Endogenecity and
Big Data."
CESthe Consumer Electronics Show--keynotes include Intels CEO Krzanich,
VWs Dr. H. Diess, CTAs (Consumer Technology Assn) Gary Shapiro,
Netflixs Reed Hastings, GMs Mary Barra, IBMs Ginni Rometty, Samsung
SDS Dr Wp Hong, YouTubes (GOOG) Robert Kynchi, Robert Bosch GmbH CEO Dr.
Vokmar Denner, Mobileeye Chair Prof. Amnon Shashua, Qualcomm CEO Mollenkopf, US Dept of
Transportation Secy Anthony Foxx, Mediallink CEO M. Kassan, JNJs CMO Alison
Lewis, AT&Ts John Stankey, JPMorgans CMO Kristin Lemkau, Fox Networks CEO
Peter Rice, Universal Music Grp Chair Lucian Grainge. Supersessions boast FCCs Chair
Edith Ramirez, on "Inside Look: Industry Innovators & Government Join
Forces," The Next Big Thing is Typing Dead (CNET), IoT Business Strategies
Partnerships for the Sharing Economy, presented by Internet of Things World; Forecasting
the Future of Entrepreneurship with speakers from ABC News (Rebecca Jarvis), Steve Case,
GoPros Nicholas Woodman, "Making Disney Magic: Connecting the Digital &
Physical Worlds," presented by CTA, Global Innovation from CTA w/Fortune editor Alan
Murray, and Neelie Kores, a special envoy from StartupDelta. For the 1st time
we can remember, JPMorgan has NOT scheduled a Tech Forum at CES in 2016. CES exhibits are
expected to be flooded with vendors showing off automated cars, wearables, robots and
drones allegedly, hosting "three-and-a-half football fields 200K
sq ft worth of space for smart-car technologies alone. With Ford rumored to be working on
a deal to build Googles (excuse me "Alphabet") autonomous car, does it
debut here, or at the Detroit Auto Show, if at all? FBs Oculus Rift, a Virtual
Reality headset, is shipping with a free game, while 46 games & VR exhibits are
expected. The Rift, unlike other VR headsets, does not require a smartphone to work. Will
MSFT show off its augmented reality headset Hololens, with a fully development consumer
device? Also look for wireless chargers for smartphones. Is there a reason IBMs CEO
is a keynote, when it sold off its consumer divisions, and the company largely considered
a dinosaur that badly needs a turnaround?
Citi Internet, Media & Telecommunications (IMT) Conference is another big event though
it may not steal the headlines from CES. Still any comments about how Q4 closed would
reverberate for media stocks throughout an industry whose stocks were hot until Disney
talked about subscriber losses at ESPN. When what the Street considers the strongest
channel, thanks to broadcast of live sports events, sees erosion, its assumed
theres little hope for networks and channels without that advantage. In telecom, the
lowest common denominatorsSprint & T-Mobilehave upset the largest
carriersAT&T and Verizonboth of whom have made questionable acquisitions.
Everyone thought Verizon was done when it bought the minority stake in its wireless unit
it didnt already own. What it saw in AOL remains a mystery. AT&Ts DTV buy
may have more to do with its purchases of carriers in Latin America, where cable is not as
pervasive as it is in the states. When I lived in Puerto Rico in the early 80s, we
subscribed to HBO without having cable service in our building. Full circle, anyone can do
that today, on a mix of devices. I still dont know how they did it but HBO remained
working even as Hurricane David pulled caskets out of a nearby cemetery and floated them
out to sea.
By the end of the week, all eye will be on the Detroit Auto Show, as analysts worry how
the industry can top the year just completed. Before that starts, Fridays American
Farm Bureau Federation Annual Meeting could fly under the radar but shouldnt. After
devastating drought, farm country just suffered a more devastating flood, with so many
milk cows killed in Texas the price of dairy could skyrocket for a few months. Meanwhile,
I paid $2.76 a gallon for high test, on January 2nd, at Mobil station, the
least Ive paid since at least I cant remember when. Youd think the
low cost of gasoline would add shoppers to malls on rainy days though the difference has
been nearly imperceptible. The pre-Christmas last minute shoppers, and post-Christmas
bargain hunters mainly carried in more bag than they toted out, suggesting their mission
was returns, rather than shopping. How MasterCard can estimate at 7.9% increase in holiday
sales escapes me.
I do know my experience with a Visa $50 gift card will keep me from ever buying one again.
I used it at Grand Lux Café (CAKE), and was told the $50 card had only $41.67 available
to pay the $60 bill. I paid the balance with a credit card, including the tip on the whole
bill and went home to call Visa. I was told "20% was deducted for the tip, in case I
didnt leave one." So I trotted back to Grand Lux the next day and asked the
manager how that story jibed with their practices. He showed me the entire print out from
the night before, including my two transactions. Now $8.33 wasnt kept by Grand Lux,
as a "tip." It was kept by Visa, and probably becomes a bonus to its bottom
line, in many circumstances, because someone who receives the gift of a Visa card probably
assumes the transaction fee for the card ate up part of the $50. I called Visa again, and
was told the contract that accompanied the card explains the procedure, and they admitted
to keeping the $8.33 but promised me it would be credited back to my card within 37
days, after they could confirm Id left a tip in another manner. What crap that was:
the accompanying contract says no such thing, and I suggested the Grand Lux manager alert
his staff to the scam, and contact Visa to stop them from pulling that stunt at his
restaurant. A company with as many restaurants as CAKE certainly has more leverage than I
do alone.
The Earnings Calendar is slight, with Monsanto on Monday, Constellation Brands, KB Homes,
and Walgreens Boots Alliance on Thursday morning, an honorable mention to Finish Line
which has not kept up with the pace of growth competitor FootLocker can boast, because of
a less solid relationship with Nike, and its decision to open stores within stores
at Macy*s, whose never seen an item worth selling at a traditional retail markup. Instead,
all those 20% off coupons, and $10 off $25 or higher purchases, $25 off $100 purchase, are
eating into FINLs bottom line. Monsanto, of course, will have an opinion about what
weather has done to farms, and will do to its bottom line in the coming months. Obviously,
floods wipe out nutrients from the soil, so fertilizers and other restorative chemicals
will be needed but new seeds? Not if it appears an entire planting season for, say, winter
wheat was wiped out. Bed Bath & Beyond already warned. Of course, what farmers have
that retailers dont is crop insurance, backed by the USDA, that keeps farmers from
going out of business after a flood. Retailers, on the other hand, dont get
insurance proceeds for snow daysor floodswhen access to malls are closed, or
unusually warm weather kills the market for winter wear, like boots, sweaters and
overcoats. Instead, the really big retailers, like Macy*s, take out their losses on
suppliers, which means companies like VF Corps North Face and Deckers UGGS,
which may have to share the losses at retail with make ups, write offs, or other
adjustments, including accepting some percentage of returns of unsold goods. Take that
7.9% increase in holiday sales that MasterCard wrote about with a grain of salt. That may
be the online sales increase but certainly didnt happen in malls. There were a few
bright spots at the mall though, including Pandora Jewelers, Lululemon, and FootLocker,
its CHAMPS strong, the new SIX:02 a disaster to date, though not worse than Athleta,
a GAP Stores division.
Off the mall, TJX was the biggest winner with 14 registers open, at TJMaxx, and lines as
long as 10 minutes to get to them. At ROST, there were 2 registers and no one waiting for
them, either of the two times I stopped in. At HomeGoods, after Christmas pickings were
slim, with Valentines Day already on displayas it was at Williams-Sonoma,
which seemed less weighed down by Christmas foods than it was last yearpeppermint
bark the sole exception. A week before setting 2015 Christmas displays, WSM was still
selling leftover 2014 Christmas candy, cookies, and tins, at 75% off. I wonder who shopped
there for Christmas 2015 and wound up with stale cookies or candies leftover from last
year. Dont misunderstand, I saw plenty of Macy*s "believe" shopping bags
but the prices paid were so far below retail, the biggest joke among female shoppers was
that Terry Lundgren did everything short of paying them to take merchandise of Macy*s
hands.
So prepare for holiday sales to be similarly lackluster to what they were for Back To
School, online sales the bright spot for those retailers who prepared eCommerce as a
division equal to their bricks & mortar operations. That, of course, leaves out ROST,
again, since it has not really invested in eCommerce. Prepare for analysts to argue about
whether LULUs strong sales came at the expense of margins, though Id be
encouraged by LULUs traffic either way. GAP threw up discounts of up to 75% off, and
couldnt get shoppers into its stores. LULU was crowdedbumper to bumper
shoppers for over 10 days, solid. The fact that discounts attract shoppers is a win for
LULU. There are many stores that cant boast about that. And when buying beaten up
shares, to start the year, as traders are wont to do, avoid looking at by-products of
fallen prices, like Macy*s dividend yield, because its shares were deservedly beaten down.
Macy*s has long stuffed its floors with too much merchandise, and hoped deep discounts and
manufacturers give backs would save it. Im sure its using the new
Backstage at Macy*s division to try and entice manufacturers to grant more
"favors." This years M holiday coupons were largely valid, only, until 1pm
or 2pm, and built bad will with even more exclusions than usual, on top of the
unappetizing crowded floors the customers who can afford to shop refuse to tackle.
Shoppers cherry picked Macy*s, and didnt stick around to pick up more beyond what
they planned to purchase with those coupons. And when Macy*s refused to accept the
coupons, claiming exclusions, shoppers walked out without anything. That makes Ms
coupon campaign a pitiful failureand an irritant whose offense wont wear off
quickly with shoppers.
And theres little reason to get excited in anticipation of an early in the New Year
rally. This year, good news for the economy is bad news for rates, which the FOMC intends
to raise to something closer to "normal"even if "r" is a lower
level than it was pre-financial crisis. Of course, though Asian markets are being hit
hard, US markets seem to have been tied, lately, to oil prices, and those are up as Saudi
Arabia & Iran cut ties. Still, I wouldnt get optimistic before the Dec.
Unemployment Report is out.
BTW: If you expected "The Big Short" to explain to someone the financial crisis,
you might find yourself disgusted at the point John Thaler & Selena Gomez explain the
collapse in mortgage securities at a casino. To say the least, the film tried to be too
cute by half.
ECONOMIC: (Full International
Economic Calendar here)
EXCERPTS of 2015 OUTLOOKS HERE:
© Sandi Lynne 2016 Nothing contained in this commentary should be construed as a
recommendation to buy or sell any security. The opinions expressed are the authors,
alone, and should be just one factor in more complete due diligence.