“The greatest pleasure in life is doing what people say you cannot do.”
Market Week Wrap-up
- Equity indices gapped lower this week in the face of growing risk aversion, with traders disregarding robust corporate earnings and a strong first reading of US GDP. The Shanghai Composite dropped below 3,000 for the first time since late 2008, while the DJIA closed within 44 points of 10,000 and commodities traded off hard. On Friday, advance GDP showed the US economy grew faster than expected in Q4, at an annualized rate of 5.4%. If the GDP reading holds up upon revision, GDP in the final quarter of 2009 would be higher than at any time since September 2003. Housing data was mixed: the November S&P/CS index gained for the sixth consecutive month, although the move up was modest. Meanwhile, December new home sales fell nearly 8% m/m (following an 11% m/m decline in November), prompting Yale Economist Robert Shiller to reiterate that he believes home prices could be faltering yet again. President Obama gave his first State of the Union speech on Wednesday, offering a trenchant defense of his first year in office while also admitting certain mistakes had been made. The President promised to double US exports over the next five years and make job creation a primary focus, and also said $30B in repaid TARP funding would be redirect to loans for small businesses. Ahead of the speech, the Congressional Budget Office released predictions for a $1.35T deficit for this year as the economy continues to slowly recover from the recession. After a flurry of Washington drama last week (full of implicit threats to Fed policy independence), the Senate handed Ben Bernanke a second term as Fed chairman in a 70 to 30 vote. For the week, the DJIA lost 1.1%, the Nasdaq dropped 2.6% and the S&P 500 fell 1.7%.
- Dow components Johnson & Johnson, DuPont, 3M, Procter & Gamble and Travelers all beat earnings estimates by respectable margins. Full-year EPS guidance ranges were largely in line with expectations. AT&T and Verizon met expectations and both telecoms saw big increases in wireless subscriber additions on a q/q basis. DJIA industrial names Boeing, Caterpillar and United Technologies offered strong quarterly results. On the other hand, full year EPS forecasts at Boeing and Cat were weaker than expected. Chevron's results were surprisingly mixed: earnings missed expectations while revenue was way ahead of the consensus view. The firm's upstream revenue was up by nearly 30% on a q/q basis, but the downstream operation racked up a substantial loss due to weak demand and excess supply.
- Leading tech names Microsoft, Apple, Amazon, Yahoo, Qualcomm, SanDisk and Juniper Networks all exceeded or greatly exceeded earnings expectations. Apple's launch of the widely anticipated iPad tablet computer dominated the newsflow in the tech universe, and Apple stock jumped $10 when CEO Steve Jobs announced the new product would start at an affordable $499. Exceptional demand for Microsoft's new Windows 7 operating system led to very strong top-line growth for the company. Traders should note that results from Apple and Microsoft were inflated to a certain degree by the adoption of new deferred revenue recognition accounting rules. Motorola offered in line results, while competitor Nokia's operating profit was twice the expected amount. Both firms expect very strong growth in smartphone sales this year.
- In other earnings, ConocoPhillips and Valero topped expectations, and COP crushed revenue targets. The outlook is not bright for integrated oils: Valero warned that there is too much inventory and spare refining capacity in the industry for margins to rebound quickly. Benefits administrator WellPoint offered excellent quarterly results, although its full-year forecast was a little soft. Ford's revenue results blew out expectations. CEO Mulally said Ford would be profitable on a pre-tax basis this year reiterated that the company would be fully profitable next year. Steel maker Nucor returned to profitability after two quarters of losses, with earnings more than twice the expected amount. Nucor's CEO warned that real demand is in for a long, slow recovery. Competitor US Steel reported a larger than expected loss.
- Nowhere was investor's diminishing risk appetite more apparent than in commodities. Following a roughly 3% move lower last week the CRB index declined another 4% this week. Softs continue to trend lower led by more steep declines in wheat and corn prices. Economically sensitive commodities moved through some key levels attracting more pronounced media attention. Front month crude now trades with a $72 handle and has closed the week below its 200-day EMA for the first time since last March. March copper finished the month down 8% while silver is off 4% in January. Concerns about China are weighing on industrial metals and March cooper is now below its 90-day EMA and testing the first Fibonacci retracement level just above $3 working up from the late 2008 lows. February Gold closed below its 90-day EMA for the first time since last summer making new multi-month lows below $1075.
- US bond markets felt the push and pull of key economic data, new supply, the FOMC decision on Wednesday and the deepening sense investor risk aversion. Treasury yields were ultimately unable to make much headway one way or the other as tailwinds from Fed Governor Hoenig's FOMC dissent, $118B in coupon supply and the surprisingly strong first reading of Q4 GDP was more than offset by the underlying risk aversion. The US benchmark 10-year yield looks to finish the week lower than where it began and roughly 10 basis points from the move up towards 3.7% made post FOMC decision. Volatility has been even more dramatic at the short end: the 2-year yield is also down nearly 10-basis points from mid-week highs made above 0.9%.
- Another week of intrigue in European sovereign debt markets has driven bond and currency markets, with claims, denials and counter-denials sending peripheral debt on a roller coaster ride to the upside. Greece's 10-year spreads rose from the Bunds+300 bps area on Monday to as wide as +400bps midweek when press reports of a €25B debt sale to the Chinese government were strenuously denied. Spreads regained ground as expectations for some form of assistance grew stronger, culminating in a report from the French press. Le Monde speculated that France and Germany were preparing a bailout that could be presented in Brussels on Feb 11 when various heads of states are scheduled to meet. Subsequently a chorus of EU officials, including Economic commissioner Alumina and Commission President Barroso, as well as French Finance Minister Lagarde, issued carefully hedged support for the country. Meanwhile, the Greek finance minister issued another series of pledges and promises. By Friday 10-year Greek paper offered yields 360+ basis points above Bunds.
- Greece was not the only hotspot within the EU. A preliminary look its 2010 budget failed to inspire much confidence that Portugal will be able to avoid the concerns surrounding the likes of Greece and Ireland. Portugal's 10-year spreads from Bunds rose another 13 basis points on the week and at Bunds+118 has nearly doubled in the last month. Spanish officials were much more forthcoming when presenting details for how they plan to tackle uncomfortably high debt levels, but nevertheless 10-year spreads there too widened 12 basis points by week's end.
- The greenback continues to benefit handsomely as European peripheral spreads move out to their widest levels against the 10-year Bund since the launch of the euro back in 1999. George Soros summed up the current situation aptly, noting that the Greek debt problem shows up the shortcomings of Euro Zone structures and the inherent weakness of not having a single Euro Treasury. Sovereign issues were also fueled by rating agencies. Moody's commented that Portugal needed a credible deficit reduction. Spain, Poland and Portugal all released budget proposals during the week, revealing the scale of the challenges ahead for their respective economies. Spain, for instance, is targeting about €50B in spending cuts by 2013, which amounts to nearly 5% of GDP. Standard & Poor's downgraded its outlook on Japan's AA sovereign rating and also released a reported indicating that it no longer considers Britain among the "most stable and low-risk" banking systems.
- Verbal Intervention also played a minor role in the dollar's strong performance. ECB Chief Trichet reiterated his view that he agrees with US authorities when they state that a strong dollar is in best interest of US and added it corresponds to the overall interests of the global economy, Europe and "currencies that do not float." The road ahead for the firmer USD would not be one-way street. Obama's State of the Union pledge to support exports made some traders wonder whether a stronger dollar might not suit the administration's plans double exports
- There was talk of an Eastern European option barrier at the 1.40 EUR/USD level that initially curbed the dollar's upside momentum. However, a more optimistic outlook by the FOMC on US growth prospects saw this psychological level give way, with EUR/USD moving out to the 1.39 handle, last seen in July 2009. Across the pond, the UK unconvincingly moved out of recession with a +0.1% GDP reading that undershot expectations, with many wondering what will sustain the recovery as the BoE is likely to hit the pause button on quantitative easing in February. BoE Governor Sentence commented that the BoE must be ready to adapt policies to changing circumstances since goods deflation would not hold down the UK inflation rate. He noted that the impact of sterling was feeding into CPI and that spare capacity might be lower than expected. If the combination of above-target services inflation and rising import prices persisted, Sentence believes it will be difficult for the MPC to keep inflation on target. GBP/USD ending the week hovering around the 1.60 handle.
- The yield on the US 2-year note encountered extreme volatility, whipsawing between 0.83% and 0.93% all week long. USD/JPY moved in lock step with fluctuating US yields. S&P's comments inspired promises of fiscal discipline from both Finance Minister Kan and his deputy Noda, all of which drove a reversal in fortunes for the yen. JPY took on a soft tone at the end of the week, attributed to Toshin fund launches and month-end rebalancing flows.
- On Tues, Japan December Exports rose for the first time since Sept of 2008 by 12.1%. The reversal for the export-heavy economy lifted shares of companies with substantial overseas exposure and prompted the chief Japan economist at Barclays to suggest that economic growth is likely to accelerate towards the end of this year, reducing the need for the BoJ to take further easing measures. That was ndeed the case for Japan's central bank in the prior session. With a number of economists calling on the BOJ to take a more pro-growth path by either expanding the size of its emergency-loan program or raising the monthly JGB buying, policymakers did neither, instead upgrading the current year GDP outlook to -2.5% from -3.2% and next year's view to 1.3% from 1.2%. In the same session, S&P was less upbeat, noting that the government's diminishing economic policy flexibility may lead to a downgrade unless measures can be taken to stem fiscal / deflationary pressures. To that end, CPI figures in the final trading day in Tokyo saw a second consecutive increase and a 7-month high in headline and core levels of inflation in evidence of Japan making progress of clawing out of deflationary depths.
- Australia's headline Q4 CPI figures topped estimates by a decimal point at 2.1% y/y and core levels printed in line at 3.2% - still above the central bank target band of 2-3%. The quarterly inflation data, seen as a "make-or-break" event for next week's RBA decision, solidified analyst expectations for a fourth consecutive 25bp hike on Monday evening, as overnight swaps showed the likelihood of tightening rising to 75% from around 65%. PM Rudd spoke after the CPI release, warning that interest rates may increase. Several analyst reports also suggested confirmation of RBA tightening by the CPI data, including BofA/Merrill Lynch, who said the CPI is "just enough" above consensus to confirm the hike.
- The Reserve Bank of New Zealand left interest rates unchanged at 2.50%, but reaffirmed its plans to begin raising rates in "mid-2010". Governor Bollard shrugged the disappointing Q4 CPI released last week that showed the first contraction since Q4 of 2008 by noting that inflation remaining comfortably within the target range and that household spending is increasing as the economy recovers. Later in the week, Kiwi data continued to deteriorate however, as December building permits showed the first m/m decrease in 6 months, suggesting there is still plenty of room for improvement in Kiwi economy for its central bank to join Australia's tightening cycle.
Week of 2/1/2010 thru 2/5/2010
Monday, February 01, 2010
Economic
07:00 Brazil Jan PMI Manufacturing
08:30 Dec Personal Income (last 0.4%), Dec Personal Spending (last 0.5%), Dec PCE Deflator y/y (last 1.5%), Dec PCE Core (last m/m 0.0%, y/y 1.4%)
10:00 Dec ISM Manufacturing (last 55.9), Dec ISM Prices Paid (last 61.5), Dec Construction Spending m/m (last -0.6%)
15:00 Treasury quarterly funding estimates
Tuesday, February 02, 2010
Economic
06:00 Brazil Dec Industrial Production
10:00 Dec Pending Home Sales (last m/m -16%, y/y 19.3%)
4:30pmAPI Crude Oil/Gasoline/Distillate Inventories
Wednesday, February 03, 2010
Economic
07:30 Jan Challenger Job Cuts y/y (last -72.9%)
08:15 Jan ADP Employment Change (last -84K)
09:00 Treasury's quarterly funding announcement
10:00 Jan ISM Non-Manufacturing (last 50.1)
10:30 DoE Crude Oil/Gasoline/Distillate Inventories
13:00 Mexico Jan Manufacturing Index, Non-Manufacturing Index
Thursday, February 04, 2010
Economic
07:00 BoE Rate Decision
07:45 ECB Rate Decision
08:30 Preliminary Q4 Nonfarm Productivity (last 8.1%), Q4 Unit Labor Costs (last -2.5%), Initial Jobless Claims (last 470K), Continuing Claims (last 4.602M)
10:00 Dec Factory Orders (last 1.1%), Canada Jan Ivey PMI, Mexico Jan Consumer Confidence
10:30 Natural Gas Inventories
16:00 Colombia Jan PPI
Friday, February 05, 2010
Economic
06:00 BrazilJan Inflation
06:30 ChileDec Economic Activity
07:00 JanCanada Net Employment Change, Unemployment Rate
08:30 JanNonfarm Payrolls (last -85K), Jan Unemployment Rate (last 10.0%), Jan Manufacturing Payrolls (last -27K), Jan Average Hourly Earnings (last m/m 0.2%, y/y 2.2%)
15:00 DecConsumer Credit (last -$17.5B)
16:00 ColombiaJan PPI
< BR>
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
08:30 Advance Q4 GDP q/q (last 2.2%), Q4 GDP Price Index (last 0.4%), Q4 Personal Consumption (last 2.8%), Q4 Core PCE q/q (last 1.2%)
09:45 Jan Chicago Purchasing Manager Index (last 58.7)
09:55 Jan University of Michigan Confidence (last 72.8)
10:00 Jan NAPM-Milwaukee (last 52)
11:00 Colombia Dec Unemployment
Todays Headlines
5:30:03 AM
*(US) DEC DURABLE GOODS ORDERS: 0.3% V 2.0%E; DURABLES EX-TRANSPORTATION: 0.9% V 0.5%E
- Prior Durables revised higher from -0.7% to -0.4%
- Prior Durables Ex Transportation revised higher from 1.5% to 2.1%
5:30:03 AM
*(US) INITIAL JOBLESS CLAIMS: 470K V 450KE; CONTINUING CLAIMS:4.602M V 4.593ME
- Prior Initial Claims revised higher from 482K to 478K
- Prior Continuing Claims revised from 4.599M to 4.659M
- 4 week average for claims at 456K v 448K prior
6:31:59 AM
(EU) ECB's Trichet: Must ensure that there are no credit constraints in the economy
- Banks must do their share to maintain lending to the real economy
9:37:50 AM
Preview: Treasury's $32B 7-year note auction results due out just after 1pmET
- $32B is unchanged from Dec auction.
- Prior bid-to-cover was 2.72 and 2.62 average over the last ten.
- Indirect bidders took 44.7% of competitive bids at the last auction, with 55.7% was allotted at the high.
- The When Issued note currently yields 3.14% which is roughly 2 basis points higher than the cash market.
10:01:22 AM
(US) Commerce Sec Locke: Blocking Chinese imports is not the answer to dealing with trade deficit, looking at steps to deal with industrial policy toward China
- Planning clean energy trade mission to China and Indonesia
`
10:01:41 AM
*TREASURY'S $32B 7-YEAR NOTE AUCTION DRAWS 3.127%; BID-TO-COVER RATIO: 2.85 V 2.72 PRIOR AND 2.62 OVER THE LAST 10
- Indirect bidders take 51.1% of competitive bids with 36.66% alotted at the high.
- Direct bidders take 11.8% (CNBC"s Santelli highlights this as a record high percentage), primary dealers 37.1%.
- Median 3.09%, low 2.97%.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
06:00 Brazil Dec Unemployment
07:00 Chile Dec Industrial production, Dec Unemployment, Dec Copper Production
07:30 Brazil Budget Balance
08:30 Dec Durable Goods Orders (last 0.2%, ex-transport 2.0%), Initial Jobless Claims (last 482K), Continuing Claims (last 4.599M)
10:30 Natural Gas Inventories
13:00 Treasury's 7-yr note auction
Todays Headlines
5:51:08 AM
Local Pennsylvania news outlets report that city Harrisburg Mayor Linda Thompson is set to propose deep spending cuts and tax hikes in budget tonight, stating "bankruptcy is not an option" for the city
- Harrisburg, the capital of PA, faces $68 million in payments this year in connection with a waste-to-energy incinerator. The council has until Feb. 15 to adopt final budget.
- Yesterday, it was reported that Harrisburg City Comptroller called on the city to default on an upcoming $2.2M coupon payment and file for chapter 9 bankruptcy
- Proposed measures include reducing overtime for police and fire services and increasing real estate taxes
- Follow up 10:00: City comptroller notes Harrisburg "needs to explore bankruptcy as an option."
6:00:05 AM
*(RU) RUSSIA DEC REAL RETAIL SALES M/M: 20.2% V 17.9%E; Y/Y: -3.6% V -5.2%E
- Disposbale Income: 7.6% v 3.0%e (prior revised from 1.9% to 3.5%)
- Real Wages Y/Y: 0.6% v -0.25%e (prior revised from -0.7% to -0.5%)
6:37:10 AM
(PO) Hearing chatter that S&P likely to downgrade Portugals "A+" sovereign rating after release of preliminary 2010 budget
***Reminder: earlier today Fitch: reiterates its negative outlook on country's sovereign "AA" debt rating following budget announcement and commented that a sovereign downgrade was" more likely than not"
***Note: Portugal 10-year spread against Bund widens above 100bps
***S&P cut the Portugal Sovereign last Jan 21st 2009 to "A+" from "AA-" and lowered its outlook to negative in Dec 2009
7:30:09 AM
*DOE CRUDE: -3.9M V +1.5ME; GASOLINE: +2M V +1ME; DISTILLATE: +360K V -1.8ME; CAPACITY UTILIZATION: 78.5% V 78.3%E
- Distillate demand -98K bpd to 3.72M bpd
- Gasoline demand +17K bpd at 8.62M bpd
- Strategic Petroleum Reserve unchanged at 726.6M bbl
10:01:45 AM
*TREASURY'S $42B 5-YEAR NOTE AUCTION DRAWS 2.37%; BID-TO-COVER RATIO: 2.80 V 2.59 PRIOR AND 2.40 AVG OVER THE LAST 10 AUCTIONS
- Indirect bidders take 53% of competitive bids with 45.09% allotted at the high.
- Direct bidders take 7.4%, primary dealers 39.6%.
- Median 2.32%, low 2.25%.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
10:00 Dec New Home Sales (last 355K, m/m -11.3%)
10:30 DoE Crude Oil/Gasoline/Distillate Inventories
13:00 Treasury's 5-yr note auction
14:15 FOMC rate decision
Todays Headlines
5:42:27 AM
(SP) ECB's Ordonez: Data suggest that the worst of the Spain recession is over; sees economy slowly begin to grow this year
- Minority of Spanish have difficulties, as most Spanish banks are in solid form.
- More reforms needed on banks.
6:07:18 AM
Analysts at JPMorgan cautious in Brazil; Reduce exposure to domestic market Neutral (in line with exposure to emerging markets)
- States: domestic trade is over owned, exposed to rising local volatility associated with the rate cycle, fx/asset reflation concerns, and presidential election. Brazil not an UW. Do not overdo local risks.
6:17:25 AM
US Congressional Budget Office (CBO): FY10 budget deficit at $1.3T v $1.38T prior estimate - unconfirmed report
- Guides FY15 Budget deficit at $480B v approx $560B prior
- Guides FY20 budget deficit at approx $690B
6:30:48 AM
IMF's Blanchard: Prospects for the global economy have definitely improved, global financial industry remains fragile
- Expects commercial real estate losses to rise substantially.
- Sees funding pressure and writedowns limiting bank profits
- Expects to issue new writedown estimates in April report.
- Believes it is too early for advanced nations to withdraw stimulus spending.
- Sees little chance for a spike in oil prices.
6:46:14 AM
(US) Preview: Nov House Price Index (m/m) due out at 10:00ET
**consensus expectations: 0.2%e v 0.6% prior
- analyst estimate range between -0.2% to +1.0%
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
05:00 Brazil Jan Consumer Confidence
09:00 Nov S&P/CS Home Price Index (last 146.58), Nov S&P/CS Composite-20 (last -7.28%)
10:00 Jan Consumer Confidence (last 52.9), Jan Richmond Fed Manufacturing (last -4), Nov House Price Index (last 0.6%)
13:00 Treasury's 2-yr note auction
16:30 API Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
2:33:20 AM
(GE) German Econ Min: Banks should be making more business related loans
- German gov stands ready to act if financing problems grow
3:09:19 AM
(UK) PM Brown: Confident that UK economy to is emerging from the recession, though it remains fragile and must remain vigilant
- Repeats his efforts to halve budget by 2014.
- Protections and volatility in oil price are key growth risks.
- Danger of banks returning to 'bad old ways' on bonuses; extra receipts from these bonuses may aid it reducing deficit.
- Call for international levy gaining ground.
6:04:29 AM
EU and Japan preparing to make retaliatory moves at WTO against the US because of its continued use of "zeroing" in antidumping cases - Steel Business Briefing
- A US mill trade attorney told Steel Business Briefing the EU and Japan could impose duties on American exports to "pay for" America's failure to eliminate the WTO-inconsistent practice of zeroing - counting negative dumping margins as zero, thereby attaining higher average margins.
7:08:41 AM
(EU) European sugar markets expecting Commission ruling regarding export levels in 2010; Ruling seen as early as Tues Jan 26
- EU zone sugar exports have been caped at 1.37M tons following a trade agreement with major exporters that was crafted in 2004 (includes Brazil, Australia, etc)
- Consensus estimates that the EU will bump its output but current supply pinch, brought about by weather conditions in South Asia in 2009 could allow for a one off larger sale
- Analysts EU farmers have the capacity to export an additional 600-800K tons/year
8:30:15 AM
(EU) ECB's Weber: Exit from extraordinary policy will be gradual, 2010 rate policy depends on inflation risks - interview
- There is not timetable for exit measures after Q1.
- Sees low Euro Zone inflation risk, expects moderate economic recovery.
- Aid to individual countries is not part of the rules of the Euro Zone.
- Banks have not understood the extent of future equity requirements.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
“Life's challenges are not supposed to paralyze you, they're supposed to help you discover who you are.”
Market Week Wrap-up
Risk appetite vanished this week like Punxsutawney Phil on Groundhog Day, with political issues and lackluster quarterly reports from the big banks dominating trading. US markets were closed on Monday and performed relatively well on Tuesday. Weak quarterly results from Bank of America and Morgan Stanley together with President Obama's latest round of financial industry regulatory proposals drove a sustained three-day decline in the back half of the week. Adding to concerns, China took steps to curb lending and investment in key sectors in order to cool off its booming economy as it reported Q4 GDP growth well above 10%. The surprise victory by Scott Brown in the Massachusetts special US Senate election shook up the political scene in Washington DC, deprived the Democrats of their 60-vote supermajority in the Senate and put the viability of healthcare reform in question. Democrats fleeing from the coattails of a President with a sinking popularity and emboldened Republicans continued to press the Administration, as evidenced by the eroding support for Ben Bernanke's reconfirmation. By Friday afternoon, it became clear there was a strong possibility that Fed Chairman Bernanke would not be confirmed before the end of his current term, and might be replaced by skittish legislators looking for political cover. Needless to say, this did not reassure markets. Traders fled to the greenback and dumped commodities, while the VIX volatility index jumped nearly 60% to just below the 28 handle by the close on Friday, its highest level since last November. US stocks had their worst week since last March: the DJIA fell 4.1%, the Nasdaq dropped 3.6% and the S&P 500 declined 3.9%.
- The big US banks have had a very bad week. After announcing $90B in fees on risky bank behavior last Friday, President Obama this week proposed that banks be prohibited from running proprietary trading operations or investing in hedge funds or private equity funds as a way to limit the risk of another financial crisis. White House Advisor Austan Goolsbee insisted that the proposal did not amount to a return of Glass-Steagall. The plan is the brain child of Paul Volker, and some commentators see it as a sign of Treasury Secretary Geithner's waning influence at the White House, and possibly as proof Geithner will be dumped soon (one analyst even speculated that White House Chief of Staff Rahm Emmanuel could be installed as Treasury Secretary). For his part, Geither said that banks will have choices on how they will comply with plan and that the government simply wants to limit risk-taking, not break up banks.
- Citigroup reported its ninth consecutive quarterly loss on Tuesday, although the loss was not greater than expected. Both Bank of America and Morgan Stanley missed expectations. BoA lost $5.2B in the quarter, even as the bank took a one-time $4B charge for repaying its TARP funds. Morgan Stanley's quarterly profit was less than half the expected amount. Goldman Sachs on the other hand crushed its estimates, disproving the naysayers who had consistently downgraded estimates over the course of the quarter. For the full year, Goldman earned more than $13B, almost as much as $15B earned by the five other big national banks combined. Goldman was not immune to the sharp selloff in the financial sector, however, as the President's new regulatory scheme seemed to be aimed directly at Goldman's lucrative prop trading business.
- Results out of regional banks were largely positive. Super-regional banking names Wells Fargo and US Bancorp outshined their larger brethren. Wells surprised with a small quarterly profit, versus expectations for a loss. That outcome included the $0.47/share charge for repaying the bank's in TARP funds. USB was largely in line with expectations and offered plenty of upbeat commentary on the bank's outlook. Smaller regional names Bank of New York, M&T Bank beat estimates roundly. Quarterly losses at Fifth Third, SunTrust and KeyCorp were smaller than expected.
- Quarterly reports from Dow components were relatively strong: results out of General Electric and IBM beat analysts' expectations, while McDonald's racked up positive December and Q4 comps across all regions and predicted modest sales growth in 2010 . American Express's results also exceeded expectations, although the credit card firm warned that depressed real estate and high unemployment will continue to present problems in 2010. In other earnings, Google had strong results, and tried to put a more positive face on its future in China after its scuffle last week with the Chinese government over censorship. AMD's loss was smaller than expected, although the company warned that revenue would fall next quarter. Starbucks beat Q1 estimates and hiked its earnings outlook for the full year. CSX was in line with expectations.
- A tough week for stocks resulted in rising Treasury prices and lower rates. Early on some traders wondered if the Massachusetts's election results would prove to be positive catalyst for the market, but quickly the focus shifted to concerns outside the US borders as overall risk aversion permeated out of the Asian and European trading sessions each day. Continued signals that China's central bank is getting more aggressive in withdrawing stimulus, along with ever widening 10-year Greek to Bund debt spreads propelled the flow of money out of equities and into the relative safety of government debt. By Thursday the unveiling of the Volcker rule kicked risk aversion trades into overdrive sending the 10-year yield below 3.6% and the long bond back to 4.5%. The week drew to a close with Treasury prices managing to consolidate the gains seen over the past two week's which has brought the US benchmark yield down some 20 basis points.
- Looking ahead a fresh round of $118B in coupon supply is set to hit the street next week. Though the paper is short term in duration and unchanged in overall size from the December auctions, the results will certainly be scrutinized closely especially in light of Tuesday's TICS data which showed declining Chinese US Treasury holdings. Also some are beginning to wonder whether the proposed restrictions on proprietary trading could have the unintended consequence of hampering banks ability to participate in US debt auctions. The European sovereign debt story is likely to remain center stage next week as well. Greek 10-year paper yields some 300+ basis points above Bunds making fresh post Euro inception highs after the Greece's Debt Agency confirmed plans to issue as much as €3B in syndicated bonds sometime in next two months. Tuesday's preliminary look at Portugal's 2010 budget could further stoke the fears that spiraling budget deficits in some EU economies will lead to more ratings agency downgrades and increased squabbles amongst member nations.
- Traders' desire to offload risk was not only evident in debt and equity markets. Commodity prices moved sharply lower across several main categories while stocks declined and the dollar rallied. Front month crude dipped below $75 for the first time in nearly a month as some noted EIA figures that suggested US crude demand has dropped below the worst levels seen during last year's recession. Spot gold tested its 100-day moving average of $1,086 for the first time since July. The Feb contract is down nearly $50 on the week at $1,090 and traders are eyeing some key support at the $1,074 (December low, October high) and $1,050 (uptrend line from November 2008 low). March silver is off more than 40 cents on the week to trade back below $17 while copper has been the most resilient metal, buoyed by strong Chinese GDP figures.
- Dollar- and yen-related pairs are benefiting at the expense of European and commodity components thanks to freshly risk averse traders. China's signal that it would enact curbs on lending and speculation about which emerging market nation would be the next to head for the policy exit only lessened appetite for risk. European officials continue to stress that Greece needs to deal with its fiscal problems on its own, while in the US the administration's latest financial industry proposals were seen as fresh headwinds for growth.
- Verbal intervention around the world sought to sooth market volatility on a macro basis. China noted several times during the week that it would maintain "moderately loose" monetary policy and insisted that any lending curbs were designed to avoid unusual swings in credit this year. Other cases of intervention were less calming: ECB's Stark commented that signs of deteriorating credit quality remain in the Euro Zone. The ECB's Sramko commented that it would take up to three quarters to confirm whether economic recovery was stable or not, adding that the ECB would find the "right moment" to exit accommodation.
- The euro was weighed down by continuing sovereign debt concerns and forecasts of uneven economic growth, with EUR/USD moving below its key 200-day moving average for the first time since May 2009 this week. Technical factors have some dealers seeing a potential retest of the pivotal 1.38 neighborhood in the pair. The dormant Eastern European carry trade issue was simmering again after ECB's Nowotny commented that FX consumer loans were extremely problematic and that banking in Eastern Europe was not just an Austrian affair. EUR/CHF cross continued to drift to pre-SNB intervention levels as it moved below the 1.47 handle.
- Economic data and further central bank activity kept China at the forefront of global economic news following last week's surprise decision by the PBOC to raise its reserve requirement ratio that further weighed on regional equities. Chinese central bank official Yi looked to diffuse fears of more aggressive policy, reiterating that the PBOC still plans to keep monetary policy loose in 2010 despite anticipating moderate growth in CPI in the coming year. Concerns were heightened in nervous investor sentiment on Wednesday, with the release of China Q4 GDP and December economic data. Q4 real GDP came in at 10.7%, better than the 10.5% expected, and the highest quarterly rate of growth since 2007. On annual basis, the Chinese economy grew 8.7% in 2009. Chinese inflation data was a cause for concern, with a 1.9% rise in December CPI (0.5% higher than expected), and 1.7% growth in PPI (0.9% higher than expected), the biggest jump in both readings in over a year. Overheated pricing pressures were particularly visible in food inflation, prompting speculation that Chinese central bank could take even more aggressive tightening measures as early as the coming week.
- Outside the monetary implications of strong economic data, Asian markets were shaken by a further threat of restriction on lending . On Tuesday, CBRC (China Banking Regulatory Commission) regulator Liu said that new leverage and liquidity ratios imposed on banks will restrict loan volume to CNY7.5T in 2010, down from CNY9.6T in 2009. That statement followed on the heels of a report that certain Chinese banks have been told to stop lending for the remainder of January, under a directive from Premier Wen to control the pace of new lending.
Week of 1/25/2010 thru 1/29/2010
Monday, January 25, 2010
Economic
10:00 Dec Existing Home Sales (last 6.54M, m/m 7.4%)
10:30 Jan Dallas Fed Manufacturing (last 3.8%)
Tuesday, January 26, 2010
Economic
05:00 Brazil Jan Consumer Confidence
09:00 Nov S&P/CS Home Price Index (last 146.58), Nov S&P/CS Composite-20 (last -7.28%)
10:00 Jan Consumer Confidence (last 52.9), Jan Richmond Fed Manufacturing (last -4), Nov House Price Index (last 0.6%)
13:00 Treasury's 2-yr note auction
16:30 API Crude Oil/Gasoline/Distillate Inventories
Wednesday, January 27, 2010
Economic
10:00 Dec New Home Sales (last 355K, m/m -11.3%)
10:30 DoE Crude Oil/Gasoline/Distillate Inventories
13:00 Treasury's 5-yr note auction
14:15 FOMC rate decision
Thursday, January 28, 2010
Economic
06:00 Brazil Dec Unemployment
07:00 Chile Dec Industrial production, Dec Unemployment, Dec Copper Production
07:30 Brazil Budget Balance
08:30 Dec Durable Goods Orders (last 0.2%, ex-transport 2.0%), Initial Jobless Claims (last 482K), Continuing Claims (last 4.599M)
10:30 Natural Gas Inventories
13:00 Treasury's 7-yr note auction
Friday, January 29, 2010
Economic
08:30 Advance Q4 GDP q/q (last 2.2%), Q4 GDP Price Index (last 0.4%), Q4 Personal Consumption (last 2.8%), Q4 Core PCE q/q (last 1.2%)
09:45 Jan Chicago Purchasing Manager Index (last 58.7)
09:55 Jan University of Michigan Confidence (last 72.8)
10:00 Jan NAPM-Milwaukee (last 52)
11:00 Colombia Dec Unemployment
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
07:00 Canada Nov Retail Sales
10:00 Mexico Dec prelim Trade Balance, Dec Unemployment
14:00 Argentina Dec Trade Balance, Dec Industrial Production
Todays Headlines
5:30:03 AM
*(US) INITIAL JOBLESS CLAIMS: 482K V 440KE; CONTINUING CLAIMS: 4.599M V 4.60ME
- Prior Initial Claims revised from 444K to 446K
- Prior Continuing Claims revised from 4.596M to 4.617M
7:00:04 AM
*JAN PHILADELPHIA FED INDEX: 15.2 V 18.0E
Sub-Indices:
- Prices Paid: 33.2 v 33.8 prior
- New Orders: 3.2 v 6.5 prior
- Employment: 4.5 v 6.3 prior
- Inventories: -5.7 v -7.4 prior
- Avg employee workweek: 6.3 v 6.4 prior
8:00:08 AM
*DOE CRUDE: -470K V +2.5ME; GASOLINE: +3.9M V +1.8ME; DISTILLATE: -3.3M V UNCHANGED EST; CAPACITY UTILIZATION: 78.4% V 80.9%E
- Distillate demand -200K bpd to 3.82M bpd
- Gasoline demand -140K at 8.6M bpd
- Strategic Petroleum Reserve unchanged at 726.6M bbl
10:23:26 AM
Oppenheimer defending large cap banks, sees "re-regulation" fears as a buying opportunity (timing uncertain)
- Although the proposals are meant to insure the safety and the soundness of the banking system, the companies such as JPM and GS, the safest and soundest of the group, are getting hit the hardest.
- Believe greater regulatory burdens are invariably passed through to customers as a cost of doing business.
2:31:18 PM
(US) Fed balance sheet assets $2.23T v $2.27T prior
- Holdings of Treasuries +$8M (to $777B) v +$8M prior
- Holdings of agency securities +$1.4B (to $162B) v +$950M prior
- Holdings of mortgage-backed assets +$2.3B (to $971B) v +$60B prior
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
08:30 Initial Jobless Claims (last 444K), Continuing Claims (last 4.596M), Canada Nov Wholesale Sales
10:00 Nov Leading Indicators (last 0.9%), Dec Philadelphia Fed (last 20.4)
10:30 Natural Gas Inventories
11:00 DoE Crude Oil/Gasoline/Distillate Inventories. Treasury note announcement
Todays Headlines
5:20:19 AM
(US) Fed's Dudley: Unemployment is at punishing levels, economy is "far weaker" than the Fed would like to see
- Granting Fed an expanded regulatory role enhances monetary policy mission.
- Regulatory community should have raised the alarm sooner.
- Rate policy audits compromise the Fed's effectiveness, price stability would be harder to achieve under audit scheme.
- Expects to see recovery in capital markets ahead of banking.
5:30:02 AM
*(US) DEC PRODUCER PRICES INDEX M/M: 0.2% V 0.0%E; PPI EX FOOD&ENERGY: 0.0% V 0.1%E
- PPI YoY: 4.4% v 4.5%e (highest level since Oct 2008 and second consectitive positive reading)
- PPI Ex Food & Energy YoY: 0.9% v 1.2%e
6:00:32 AM
(RU) Russian Central Bank's Ulyukayev: Rate hike is possible in the second half of 2010
- CBR would shift from an easing cycle to a stabilization cycle, which will possibly be followed by a rate increase
- Forecasts Jan CPI MoM around 1.5% v 0.4% prior month
- Believes that inflation would peak in Jan and 'no higher' than 7.0% for 2010 overall
- Reiterates view of "economic basis" for rate cuts in the first half of 2010
- Opposes Brazil-style tax on capital flows.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
04:30 BoE minutes
07:00 Canada Dec CPI
08:30 Dec PPI (last m/m 1.8%, y/y 2.4%, ex food & energy last m/m 0.5%, y/y 1.2%), Dec Housing Starts (last 574K), Dec Building Permits (last 589K)
10:30 API Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
4:32:16 AM
Credit Suisse downgrades US Tobacco Sector to Market Weight
- LO cut to Neutral from Outperform, price target $84
- PM raised to Outperform from Neutral, price target $ 57
- Credit Suisse is cautious on MO, RAI, LO
6:21:39 AM
(GE) German Gov: Sees 2010 exports +5.1% y/y; Imports +3.4% y/y
- Private consumption levels seen -0.5% y/y
- Consumer prices +1.1% y/y
- Continue to see broad effects of credit crunch and USD depreciation risks
6:00:02 AM
*(US) NOV NET LONG-TERM TIC FLOWS: $126.8B V $30.0BE; TOTAL NET TIC FLOWS: $26.6 V -$13.9B PRIOR
- Prior Long Term TIC Flows revised from $20.7B to $19.3B
- Prior Total TIC Flows revised from -$13.9B to -25.4B
6:00:03 AM
*(CA) BANK OF CANADA (BOC) LEAVES RATES UNCHANGED AT 0.25% - AS EXPECTED
- See 2009 GDP at -2.5% v -2.4% prior
- See 2010 GDP +2.9%, 2011 +3.5%
- Inflation is expected to return to 2% target in Q3 2011
- Have seen core CPI reads slightly ahead of expectations
10:00:01 AM
*(US) JAN NAHB HOUSING MARKET INDEX: 15 V 17E
- no revisions
- NAHB Economist: "Home buying conditions have rarely been as good as they are right now, but consumers are still waiting to see significant positive signs of improvement in employment and confidence, and this is slowing buyers' return to the market,"
11:00:27 AM
(UK) BoE's King: Inflation accelerating possibly above 3% due to GBP decline; UK unemployment likely to remain high
- Expecting CPI to be volatile in the short term; MPC will evaluate data over time before deciding on further quantitative easing
- CPI should increase markedly in 1H10
- Sees eliminating the structural deficit as a key issue
- fiscal uncertainty has direct bearing on BOE policy
- considering making G20 into IMF governing council
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
09:00 BoC Rate Decision, Nov Net Long-Term TIC Flows (last $20.7B), Nov Total Net TIC Flows (last -$13.9B)
13:00 Jan NAHB Housing Market Index (last 16)
Todays Headlines
8:30:01 AM
*(US) INITIAL JOBLESS CLAIMS: 444K V 437KE; CONTINUING CLAIMS: 4.596M V 4.750ME
- Prior Initial Claims revised from 434K to 433K
- Prior Continuing Claims revised from 4.802M to 4.807M
- 4 week average for claims at 441K v 450K prior (lowestest since mid 2008)
1:00:08 AM
(IT) Italy Nov Total Trade Balance: -€790M v -€500Me; Trade Balance EU: -€760M v -€750Me
- Prior Total Trade Balance revised from -€710M to -€727M
- Prior EU Trade Balance revised from -€825M to -€841M
3:00:30 AM
(GE) German Bundesbank Monthly Report: Recovery in German economy expected to have contiunued in Q4; Outlook for exports improving
- Recovery in economy remains fundamentally intact
- Expansion in Q4 expected to be slower than in Q3
- Foreign sales seen as holding up through Q4
2:33:29 AM
Analysts at Credit Suisse initiate European Airlines sector Overweight
- British Airways, EasyJet, Iberia, Ryanair rated new Outperform
- Lufthansa, AirBerlin rated new Neutral
- AirFrance rated new Underperform
2:58:37 AM
(FR) French Fin Min: FY10 GDP forecast at 1.4% v 0.75% prior
***Reminder: On Jan 15 - France Fin Min Lagarde: French growth accelerated in Q4; guides 2010 inflation at 1.2%
3:55:01 AM
Standard Life: UK AAA credit rating is "extremely vulnerable"; Current mix of economic and political factors seen as 'toxic'
**Note similar comments made on Dec 15th - Moodys said the UK is running out of time in its battle to keep AAA sovereign rating - London Independent (Update)
- According to Moodys, buyers of gilts were not likely to continue supporting the UK, if a credible plan to retore the UK's public finances to health was not unveiled before the end of next year.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
It was a high counsel that I once heard given to a young person, "Always do what you are afraid to do."
Market Week Wrap-up
- The government's financial sector stress tests consumed markets this week, with rumors, leaks and then official results dispelling some of the uncertainty hanging over the financial sector.
Corporate results continue to be mixed as earnings season winds down, while April same-store sales showed a few patches of green among the dying weeds of the US retail sector. Housing and jobs data indicated again that the steep declines in these two key sectors are moderating somewhat. On Monday the March Pending Homes Sales index rose for the second straight month and March Construction Spending grew slightly after five straight months of decline. Wednesday's April ADP employment data and Friday's non-farm payrolls reading were both better than expected, with the latter coming in below 600K for the first time in five months. The unemployment rate rose to just shy of 9%, still its highest level since late 1983. For the week, the S&P 500 rose 5.9%, and the DJIA climbed 4.4%; the Nasdaq Composite lagged other indices but still managed a 1.1% gain, rising for the ninth straight week.
- After days of speculative media stories citing sources, most of the stress test results were leaked to the media on Wednesday, helping to take the edge off the official disclosure the following day.
Before the results dropped Treasury Secretary Geithner told PBS that none of the banks being tested were at risk of insolvency, and insisted that the results would be "reassuring." Regulators found that nine of the 19 banks being tested have enough capital to withstand a deeper recession, while the other ten need to raise a total of $75B to withstand potential future losses under the "adverse scenario." Bank of America, Wells Fargo and Citi were told to raise a total of more than $53B, with BoA alone requiring $33.9B. Banks in need of capital moved quickly to begin launching debt and equity offerings to satisfy government demands, with Morgan Stanley and Wells Fargo announcing offerings in the minutes before the official stress test results were released.
- It was a tale of three earnings this week, as mixed quarterly reports from Alcoa and JP Morgan and very strong results from Intel shook up equity trading. There were bright spots in all three reports, as well as decidedly darker data out of Alcoa and JP Morgan. Shares of all three giants and the broader indices lost ground after each report was released, and many noted the sell on the news scenario so evident following the strong Intel results could be a harbinger to a difficult earnings season still ahead. China was the other major factor, with record economic data and an initial policy tightening moving markets. December trade data showed that China has become the world's biggest exporter, replacing Germany, while auto sales numbers indicated that China has displaced the US as the world's biggest automobile market. In Washington, the newly convened Financial Crisis Inquiry Commission provided a steady stream of drama mid week, as Chairman Angelides grilled bank CEOs. Late in the week, the WSJ reported that top financial firms in the US may pay out a record $145B in bonuses in 2009, +18% y/y. Ironically the article came on the heels of a tongue lashing by President Obama when announcing a TARP responsibility fee aimed squarely at the big banks. Fed Governor Plosser reiterated that rates will have to rise as the economy improves, while the Fed's Lacker warned monetary stimulus would only be withdrawn when growth is strong and well established. Government bond prices moved higher and yields receded as strong auction results, mixed economic data and European sovereign concerns sent any vigilantes into hiding. For the week, the DJIA -0.1%, the Nasdaq -1.3% and the S&P 500 -0.8%.
- Alcoa missed earnings targets on Tuesday, and that was before hefty one-time restructuring charges. Revenue was well ahead of expectations, although investors are evidently shaken by selected sequential declines in various income segments (with the notable exception of flat-rolled products). On the conference call, executives were upbeat, noting that the aluminum market would grow 10% in 2010.
- Intel reported one of the most profitable quarters in its history on Thursday evening, beating earnings and revenue targets and racking up a stunning gross margin of 65%, with similar results expected next quarter as well. On the conference call, Intel's CFO said consumer demand has returned to normal levels and is driving PC demand, while also warning that businesses are not purchasing PCs. Despite the outperformance, shares of INTC were down nearly 3% on the day on Friday.
- JP Morgan offered a mixed earnings report on Friday morning, featuring strong bottom-line outperformance, a big revenue miss and disturbing trends in mortgage and card loans.
Revenue was off primarily due to a big sequential decline in investment banking revenue. Losses were seen in both mortgage and credit card lending. The firm expects losses at Chase card unit to only increase next quarter, while losses at WaMu unit could climb dramatically. CEO Dimon said that "while we are seeing some stability in delinquencies, consumer credit costs remain high, weak employment and home prices persist. Accordingly, we remain cautious." Citigroup was out on Friday with a similarly dire outlook, warning that it expects $1B in credit card losses in the first half of 2010.
- Google made headlines this week after threatening to pull out of China over allegations that entities linked to the Chinese government had hacked into Gmail and stolen mail from Chinese dissidents' accounts. There were scattered reports that other US corporations, including Juniper Networks and Dow Chemical, had suffered intrusions. In other tech news, analyst firms Gartner and IDC published Q4 PC market analyses, both of which show strong sales growth for the industry. Gartner saw global PC shipments up more than 22% y/y, IDC said the US PC market grew by 24% y/y in the quarter. Both firms noted the growth was driven by sales of small, low-priced devices including netbooks and small notebooks.
- US Treasury prices began the week on a stable footing as traders used the softer than expected Dec payrolls figures as an indicator the Fed is unlikely to change its stance in the near term. Buyers forced yields dramatically lower on Tuesday as money flowed to the relative safety of government bonds after the PBoC's reserve requirement hike rippled through markets. That afternoon a 3-year note auction led off $74B in reopened coupon supply in fine fashion, only adding to the positive sentiment. The subsequent 10- and 30-year reopenings were greeted with even more enthusiasm. The intensity of demand opened some eyes and speculation grew out of the unusually high percentage of awards to direct bidders. Whispers were heard that the enormous domestic bid could likely be the US government while others offered up darker hypotheses. Government bond bulls remained in charge as the week drew to a close further aided by sovereign debt jitters festering in Europe. Overall the US benchmark 10-year yield has declined a shade under 20 basis points on the week and remains roughly 8 basis points below what the mid-week reopening drew. With the 10-year yield back below 3.7% rates are at levels not seen since the middle part of December. The 2-10 year spread has come off of all time highs to dip back below 280 basis points.
- In currency trading, the greenback began the week on a soft note in the aftermath of the prior week's US payroll data and China's strong December trade reading. The euphoric sentiment that characterized early January continued to wane as the dollar suffers from the double whammy of lower yields in two-year instruments and dented prospects for economic recovery. At this point the themes that hampered the greenback throughout 2009 seem likely to resurface as skepticism regarding US finances grows. In Europe, the ECB maintained its key main refinancing rate at 1.0%, as expected. Verbal intervention from German Economy Minister Bruederle didn't help euro sentiment after he commented that Germany was not experiencing a self-sustaining economic recovery.
- The Greek sovereign debt situation continued to deteriorate. The Greek PM reiterated that Greece was not seeking any IMF bailout or planning to exit the Euro Zone, but then again he provided practically no details on how the country would finance its budget or drastically cut its debt-to-GDP ratio in order to meet the EU's Maastrict criteria. The ECB published its opinion on Greek debt restructuring law, stating that the move could hinder the flow of credit and hurt markets. On Friday, the ECB's Trichet talked tough, declaring that the country has a "major debt problem" and that "no government should expect special treatment," specifically mentioning both the Greek and Irish situations. His words pushed the 10-year Greek/Bund spread beyond the 280bps level. Spreads among other peripheral European debt have widened noticeably as well: the Ireland/Bund 10-year spread was at +162bps, while the Portugal spread was at over +95 bps, at its widest level since last April.
- Sterling was firmer against the majors pairs with dealers attributing the strength to mid-week press comments from BOE's Sentance. The central banker commented that the BoE had done enough to stimulate the UK economy and prompted a string of GBP short-covering. Sentance hinted at a potential move to a neutral bias as the recovery gets underway in the UK. The peripheral European sovereign concerns also aided pound sentiment.
- In Japan, newly installed Finance Minister Kan has already given up on the govt's new approach to the yen and redefined his initial FX views. Kan said FX rates should be left to the market and walks the standard G7 line on excessive volatility. He also noted that the Chinese currency might be discussed at the upcoming Feb G7. Dealers say a huge 91.25 option that expires later this month could contain the volatility in USD/JPY over the next two weeks. The 90.70 area continued to be weekly pivot point.
- Fresh evidence of strong economic recovery and a surprise reserve requirement hike put China in the macro spotlight. China's robust December trade figures saw exports rise for the first time in just over a year (+17.7% y/y) and imports advance at an all-time high pace of expansion of +56% y/y. Interestingly, the data showed China has become a net importer of fuel, in yet another sign of growing domestic demand. On Friday, Commerce Ministry official Yao said that despite the recent blowout trade numbers, exports and imports will see only slow recovery in 2010, constrained by weak external demand from Europe and US markets. Yao also suggested that Germany may yet take back the title of the world's top exporter.
- The PBoC's increase of the reserve requirement ratio by 50bps to 16.0% was the first move in policy since December 2008. The measure also followed consecutive days of 4bp increases in 3-month and 1-yr debt auctions this week as well as numerous warnings by the Chinese officials regarding excess speculation across asset classes. Nevertheless, regional markets were taken by surprise, with post trade data "risk-on" trade unwinding throughout the Wednesday session.
- Australia's jobless rate fell for the second consecutive month in December to 5.5% against expectations of a rise. Speaking after the release of the report, the Australian Deputy PM said the data proves that Australia's economy is outperforming others and that the fiscal stimulus is working. Subsequently, probabilities for a 25bp RBA rate hike in Feb repriced above 70% from below 60% after better than expected jobs data. Moreover, The Australian newspaper said that following better than expected Australia jobs data in prior session, economists now see peak unemployment at 5.8% reached in Jun-Oct of 2009 and falling below 5% in 2010. Formerly govt ministers were said to have anticipated unemployment reaching 6.75% peak.
Week of 1/18/2010 thru 1/22/2010
Monday, January 18, 2010
Economic
Bond and equity markets closed for the Martin Luther King Day holiday.
Tuesday, January 19, 2010
Economic
09:00 BoC Rate Decision, Nov Net Long-Term TIC Flows (last $20.7B), Nov Total Net TIC Flows (last -$13.9B)
13:00 Jan NAHB Housing Market Index (last 16)
Wednesday, January 20, 2010
Economic
04:30 BoE minutes
07:00 Canada Dec CPI
08:30 Dec PPI (last m/m 1.8%, y/y 2.4%, ex food & energy last m/m 0.5%, y/y 1.2%), Dec Housing Starts (last 574K), Dec Building Permits (last 589K)
10:30 API Crude Oil/Gasoline/Distillate Inventories
Thursday, January 21, 2010
Economic
08:30 Initial Jobless Claims (last 444K), Continuing Claims (last 4.596M), Canada Nov Wholesale Sales
10:00 Nov Leading Indicators (last 0.9%), Dec Philadelphia Fed (last 20.4)
10:30 Natural Gas Inventories
11:00 DoE Crude Oil/Gasoline/Distillate Inventories. Treasury note announcement
Friday, January 22, 2010
Economic
07:00 Canada Nov Retail Sales
10:00 Mexico Dec prelim Trade Balance, Dec Unemployment
14:00 Argentina Dec Trade Balance, Dec Industrial Production
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
06:30 Chile Dec Copper Exports
08:30 Dec CPI (last m/m 0.4%, y/y 1.8%; ex food & energy last m/m 0.0%, y/y 1.7%), Dec CPI Core Index SA (last 220.527), Jan Empire Manufacturing (last 2.55)
09:15 Dec Industrial Production (last 0.8%), Dec Capacity Utilization (last 71.3%)
09:55 Jan prelim Univ of Michigan confidence (last 72.5)
10:00 Bank of Mexico Rate Decision (last 4.50%)
14:00 Argentina Dec CPI (last m/m 0.8%, y/y 7.1%)
Todays Headlines
8:30:01 AM
*(US) INITIAL JOBLESS CLAIMS: 444K V 437KE; CONTINUING CLAIMS: 4.596M V 4.750ME
- Prior Initial Claims revised from 434K to 433K
- Prior Continuing Claims revised from 4.802M to 4.807M
- 4 week average for claims at 441K v 450K prior (lowestest since mid 2008)
8:45:42 AM
(EU) ECB's Trichet: ECB to gradually phase out non-standard measures, will absorb liquidity when necessary
- Govts need to implement ambitious fiscal consolidation, in 2011 at the latest
- Extra liquidity will be absorbed when price stability is threatened
- Large govt borrowing need can trigger changes in the mood of markets
- High debt and deficits can put additional burdens monetary policy
10:01:44 AM
(US) Philadelphia Fed revises Dec Factory Index to 22.5 from 20.4 prior
- Employment index revised lower to 4.5 from 6.3
- New order revised to 8.3 from 6.5
- Prices paid revised to 36.6 from 33.8
10:29:38 AM
Bulletin of Atomic Scientists adjust DOOMSDAY CLOCK away from Midnight by 1 minute to 6 mins to Midnight
- The last adjustment in 2007 was towards Midnight by 2 minutes to stand at 5 minutes to Midnight, citing risks in nuclear proliferation and global warming
- Citing a more "hopeful state of world affairs" in relation to the twin threats posed by nuclear weapons and climate change, the Bulletin of the Atomic Scientists (BAS) is moving the minute hand of its famous Doomsday Clock one minute away from midnight. It is now 6 minutes to midnight.
-The decision by the BAS Science and Security Board was made in consultation with the Bulletin's Board of Sponsors, which includes 19 Nobel Laureates
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
10:30 DoE Crude Oil/Gasoline/Distillate Inventories
13:00 Treasury's 10-yr note auction
14:00 Fed's Beige Book, Dec Monthly Budget Statement (last $51.8B)
Todays Headlines
7:16:09 AM
(GE) German Econ Min Bruederle: Germany does not yet have a self-sustaining economic recovery; risk remain to outlook
- Economic recovery will be bumpy in Germany
- Q4 Growth below expectations; 2010 GDP forecast to reflect Q4 growth
- Exports are a uncertainty for 2010
- Winter having "dampening effect" on economy
7:58:05 AM
(PO) Moody's sovereign analyst: Portugal has more time to act on its economic situation compared to Greece
- Expects the next UK Gov't to tighten fiscal policy
- States that the current path of both Greece and Portugal are on a 'slow death' economic trend due to low competitiveness and high budget deficits; risk of 'slow death' is negligible
9:00:23 AM
(GR) Greece PM Papandreou: Seeks a new and fair tax system; 2010 budget in line with pre-election commitments
- Gov't stability program to be submited by end of week and pension system reforms to be concluded by end of month
- Finance Ministry has support from whole Greek government
10:30:03 AM
*DOE CRUDE: +3.7M V +1ME; GASOLINE: +3.8M V +1.5ME; DISTILLATE: +1.4M V -1.5ME; CAPACITY UTILIZATION: 81.3% V 80.2%E
- Distillate demand +68K bpd to 3.61M bpd
- Gasoline demand flat at 8.74M bpd
1:00:29 PM
(US) Fed's Evans: Caution for spending in businesses and households will 'impede' recovery; unemployment will fall 'only modestly' in 2010
- Rate changes are too small to address asset bubbles; could be ineffective
- Sees core PCE near approx 2% in the medium term; core inflation may rise to 1.75% in 2012
1:01:38 PM
*TREASURY'S $21B 10-YEAR NOTE REOPENING DRAWS 3.754%; BID-TO-COVER RATIO: 3.00 V 2.62 PRIOR AND 2.70 OVER THE LAST 5
- Indirect bidders take 29% of competitive bids, with 49.95% alloted at high
- Median 3.7%, Low 3.618%
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
10:00 Mexico final Nov Trade Balance (last 92.9M)
10:30 Q4 Bank of Canada Senior Loan Officer Survey (last 6.7)
13:00 Treasury's 10-yr TIPS auction
Todays Headlines
6:01:57 AM
*(CH) CHINA PBOC RAISING RESERVE REQUIREMENTS BY 50BPS; effective Jan 18th; first move in reserve requirement since Dec 2008
- Noted that the reserve requirement ratio at Rural Credit Agencies will not change
***Insight: first such hike since Beijing adopted a moderately loose monetary policy back in November 2008
- The reserve requirement was last increase in July 2008 when it was raise by 100bps to 17.50%
10:01:17 AM
US FDIC proposes possible plan to connect banker compensation to FDIC fees
- plan could reward compensation structure that includes restricted stock; banks with riskier pay structures could pay more in FDIC fees
10:29:14 AM
(GE) German Government to hold talks regarding nuclear power in January 21- WSJ citing sources
***Note: German gov is in the process of extending the life-time of current nuclear power plants
1:01:38 PM
*(US) TREASURY'S $40B 3-YEAR NOTES DRAW 1.49%; BID-TO-COVER RATIO: 2.98 V 2.98 PRIOR AND 2.78 AVG OVER THE LAST 10 AUCTIONS
- indirect bidders take 38% of competitive bids
- 79.2% allotted at high
- Median 1.452%; Low 1.388%
2:16:13 PM
(US) Fed is implementing rules in regards to Credit Card Act; consumers must comply with most aspects of the rule by February 22
- Protect consumers from unexpected increases in credit card interest rates by generally prohibiting increases in a rate during the first year after an account is opened and increases in a rate that applies to an existing credit card balance.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
"Inaction breeds doubt and fear. Action breeds confidence and courage. If you want to conquer fear, do not sit home and think about it. Go out and get busy.”
08:30 Nov Trade Balance (last -$32.9B)
10:00 Jan IBD/TIPP Economic Optimism (last 46.8), Mexico Nov Industrial Production (last -5.2%)
13:00 Treasury's 3-yr note auction
16:30 API Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
8:34:21 AM
(US) Fitch affirms US AAA rating, notes US govt remains "exceptionally creditworthy"
- Fitch Ratings has today affirmed the United States' (US) Long-term foreign and local currency Issuer Default Ratings (IDRs) at 'AAA', respectively. The rating Outlook on the Long-term ratings is Stable. Fitch has simultaneously affirmed the US' Country Ceiling at 'AAA' and the Short-term foreign currency rating at 'F1+'.
10:43:18 AM
(UK) UK gas reserves are down to six hours as imports fail to arrive - UK Guardian
- National Grid issued an appeal for more gas to be pumped to the UK after unusually cold weather led to a shutdown of the Ormen Lange processing centre in the Norwegian Sea, interrupting gas flows to the UK at a time of peak demand.
12:40:19 PM
(US) Fed's Lockhart: Sees US GDP at 3.0-3.5% in second half of 2010; consumer spending remains cautious
- Pace of expansion will be slow which warrants low rates
- Concerned about emerging proposals for measure that could politicize the input from regional banks
- "Reasonably comfortable" with projections noting inflation will remain in check for the immediate future
1:01:39 PM
*(US) TREASURY'S $10B 10-YEAR TIPS DRAW 1.430%; BID-TO-COVER RATIO: 2.65 V 2.51 PRIOR AND 2.14 AVG OVER THE LAST 5 NEW ISSUES
- indirect bidders take 40.7% of competitive bids with 95.63% alotted at the high
- median 1.3%, low 1.23%
3:31:15 PM
(GR) EU Commission: More revisions to Greece's deficit and debt data are possible, unless changes are made debt data will remain questionable
- Current Greek statistics institutions do not guarantee independence or accountability.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
08:30 Nov Import Price Index (last m/m 0.7%, y/y -5.7%), Nov Advance Retail Sales (last 1.4%, ex auto 0.2%)
09:55 Dec prelim Univ of Michigan confidence (last 67.4)
10:00 Oct Business Inventories (last -0.4%)
Todays Headlines
8:20:50 AM
(UK) DMO to sell £225B in Gilts (prior £220B) in current FY
*note: It was erroniously reported during Chancellor Darlings pre-budget speech that the FY Gilt sales would be held at previous target
8:30:43 AM
(US) USDA December Crop Report: All cotton production +1% m/m, All orange production -1% from Oct
- Cotton production is forecast at 12.6M 480-pound bales, up 1% from last month but down 2% from last year.
- U.S. all orange forecast for the 2009-10 season is 8.20M tons, down 1% from the October 1 forecast and down 11% from the 2008-09 final utilization. The Florida all orange forecast, at 135M boxes (6.08M tons), is down 1% from the previous forecast and down 17% from last season's final utilization.
8:30:01 AM
*(US) INITIAL JOBLESS CLAIMS: 474K V 455KE; CONTINUING CLAIMS: 5.157M V 5.450ME
- Prior Continuing Claims revised from 5.465M to 5.460M
10:01:56 AM
(DE) Danish Central Bank: Cuts Key interest to 1.20% from 1.25% (ninth rate cut for 2009)
- CD interest rate cut to 0.95% from 1%
**Note: Denmark has made numerous interest rate cuts in recent quarters with FX purchases cited as a factor. The Central Bank has cut interest rate 11 tiimes in the current easing cycle from 5.50% level seen on Oct 2008
12:00:15 PM
(US) Fed reports Q3 Flow of Funds: Household wealth up $2.67T, to $53.4T in total
- Home mortgage debt annualized rate -3.5% v -1.5% q/q
- Consumer credit annualized rate -3.25% v -6.5% q/q
- Household debt annualized rate -2.5% v -1.75% q/q
- Domestic non financial debt annualized rate 2.75% v +5% q/q
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
SchoolOfTrade.com and United Business Servicing, Inc. are not registered investment or trading advisers. The services and content provided by SchoolOfTrade.com and United Business Servicing, Inc. are for educational purposes only, and should not be considered investment advice in any way. U.S. Government Required Disclaimer - Commodity Futures Trading Commission. Futures and Options trading have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results. cftc rule 4.41. These results are based on simulated or hypothetical performance results that have certain inherent limitations. Unlike the results shown in an actual performance record, these results do not represent actual trading. Also, because these trades have not actually been executed, these results may have under-or-over-compensated for the impact, if any, of certain market factors, such as liquidity. Simulated or hypothetical trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to these being shown. Testimonials may not be representative of the experience of other clients. Testimonials are not a guarantee of future performance or success. No compensation is ever paid in exchange for any testimonials. Testimonials have not been independently verified.
