09:00 Bank of Canada Rate Decision
10:00 US Feb ISM Manufacturing*, Jan Construction Spending
11:30 US Treasury's 4-week bill auction
16:30 API Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
8:30:16 AM
*(BR) BRAZIL JAN TOTAL OUTSTANDING LOANS (BRL): 1.715T V 1.703T PRIOR; PRIVATE BANKS LENDING: 993.0B V 987B PRIOR
- Prior Total Outstanding Loans revised from 1.703T to 1.705T
- Prior Bank lending revised from 987B to 988B
8:30:03 AM
*(CA) CANADA DEC GROSS DOMESTIC PRODUCT M/M: 0.5% V 0.3%E; Y/Y: 3.2% V 2.8%E; QUARTERLY GDP ANNUALIZED: 3.3% V 3.0%E
- Prior GDP YoY revised higher from 3.0% to 3.2%
- Prior Quarterly GDP Annualized revised higher from 1.0% to 1.8%
8:30:24 AM
(US) Fed's Dudley: QE2 has aided the US economy, has not generated financial imbalances; US economic outlook has "improved considerably"
- Fed is still far from its inflation and job growth goals.
- Core inflation is stabilizing and inflation expectations are restrained.
- There is still plenty of slack in the economy, which will blunt inflation.
- Fed is watching for signs of commodity prices being passed through to consumers.
10:00:02 AM
*(US) JAN PENDING HOME SALES M/M: -2.8% V -2.3%E; Y/Y: -4.4% V -3.6% PRIOR
- Prior MoM revised lower from 2.0 % to -3.2%
- Prior YoY revised lower from -3.6% to -3.3%
11:03:20 AM
NY Fed: Purchased $6.69B in outright coupon purchase; dealers submitted $38.87B for consideration (bid to cover 5.81)
- Avg bid to cover over prior four auctions is: 4.6
- Heaviest purchase $5.42B in the 02/15/14 maturity
11:41:22 AM
(US) President Obama confirms plans for flexibility for individual states in the healthcare bill
- Affirms that states will be allowed to opt out of parts of legislation if they can prove a better system that meets the basic tenets of current legislation, including cost and coverage.
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.
"You can take from every experience what it has to offer you. And you cannot be defeated if you just keep taking one breath followed by another."
Market Week Wrap-up
- Turmoil in Libya and other Middle Eastern nations was the central focus for markets this week, as safe-haven flows drove funds into crude, gold and treasuries, much to the detriment of equities and the greenback. Anti-government demonstrations in Libya intensified as protestors seized control of much of the eastern portion of the country and some western towns. The government of Muammar Gaddafi responded by slaughtering its own citizens using militias, hired mercenaries and even jet aircraft. In perhaps one of the most bizarre speeches by a head of state seen in recent history, Gaddafi addressed the nation on Tuesday and blamed events on a variety of sources, including Al Jazeera, the Western powers, Al Qaeda and protestors taking hallucinogenic drugs. Most Libyan oil production was shut in and front-month WTI crude gained steadily to test $100/barrel through mid week and then spiked to $103/barrel on the growing violence in Libya and on reports that protests were being planned in Saudi Arabia. Brent crude remained above $106/barrel in the first half of the week and then spiked above $116/barrel, reflecting the relative importance of high-quality Libyan oil to European markets (Libya produces approximately 2% of the world's oil supply). Saudi Arabia's promise to make up any supply shortfalls, and a pledge from Gaddafi's son that oil facilities will not be sabotaged helped calm overblown fears on Friday. In the US, there was some positive economic data, as weekly initial claims again dropped below 400K and February consumer confidence indices released by the Conference Board and the University of Michigan hit their highest levels since early 2008. The headline January durables returned to positive territory after December's slight decline, whereas the durables ex transport figure was very bearish (analysts expect the latter to be revised higher). The Q4 GDP data was somewhat troubling, as the second reading of Q4 GDP was revised down from the initial installment, against expectations for a slight upward revision. For the week, the DJIA fell 2.1%, the Nasdaq dropped 1.7% and the S&P500 lost 1.9%.
- Quarterly results from Hewlett-Packard echoed those of Cisco two weeks earlier, as another leading US technology firm missed on the top line. HP missed revenue expectations in the quarter, guided well below consensus for Q2 and cut its FY11 revenue outlook. Executives blamed weak consumer PC demand and a lackluster showing at its IT services arm. General Motors' Q4 report closed out the automaker's first profitable year since 2004, compliments of the backing of the United States taxpayer. Fourth-quarter revenue topped expectations, although profits were impacted by charges incurred to buy back warrants from the Treasury. The three government-owned financial sector basket cases - Freddie, Fannie and AIG - reported better-than-expected results for their fourth quarters, although making sense of the results remains challenging.
- Many leading retail names reported fourth quarter results this week. The biggest earnings surprise was surely Wal-Mart, which shocked investors by missing revenue targets and racking up a negative comp sales result. The low price leader is under direct threat from higher commodity prices, and shares fell more than 7% on the week. Department stores Target and Kohls both met expectations, although Target's guidance was a little weak. Home improvement names Lowes and Home Depot offered solid results, while Radio Shack missed targets and offered a very broad range in its earnings guidance. Shares of Barnes & Noble fell dramatically after the ailing bookseller widely missed expectations and suspended its quarterly dividend, a week after Borders declared bankruptcy.
- In deal flows, Holly Corp. and Frontier Oil agreed to a merger of equals, in an all-stock transaction worth $7.0B. The deal values FTO at about $26.99/share. Clinical Data accepted a $30/share cash offer from Forest Laboratories, plus further payouts worth up to $6/share. The total deal is worth $1.2B.
- Fears about higher energy prices curbing economic growth boosted treasuries this week. The flight to quality brought on by unrest in Libya sent the benchmark 10-year yield through support levels around 3.55% to 3.41% by the end of the week, in the largest one week drop in yields since May of last year (when the flight to quality was caused by European banking concerns). The lower revision in the US Q4 GDP also contributed to higher treasury prices on Friday. Treasury auctions in the 2-, 5-, and 7-years were lackluster, however, with the bid to cover ratio coming in below the 10 auction average in each maturity.
- The dollar was left behind by safe-haven buying this week, an outcome FX traders blamed on a number of factors. One is that the greenback has been more sensitive to interest rate expectations than geopolitical concerns. Another has been repatriation of funds to home currencies rather than moves into the dollar sanctuary, with flows primarily benefiting GBP and EUR. In addition, funds have sloshed into gold and especially crude given the nature of the unrest. EUR/USD began the week around 1.3600 and tested above 1.3800 on Friday morning. The early February high of 1.3862 has been labeled the mother of all critical levels for the greenback, given the bleak technical picture that unfolds if there is any sustained move higher. Note that on Friday this level held despite the downward US Q4 GDP revision. Among factors aiding the euro was ECB speak wherein governors expressed concern over inflationary expectations and boosted the possibility of interest rate hikes. Hawkish inflation comments from Mersch and an observation by Weber that interest rates could only go "one way" underpinned sentiment. Late in the week USD/CHF hit fresh life-time lows at 0.9238 and USD/CAD hit fresh three-year lows below 0.9800.
- In other FX news, the yen showed signs of recovery despite Moody's decision to lower Japan's sovereign outlook to negative. The JPY was firmer against the major pairs and tested below the 82 handle against the USD late in the week. In the UK, the BoE minutes validated last week's market rumors of a freshly minted hawk as member Dale joined Sentence and Weale in calling for the bank to raise interest rates. GBP/USD tested 1.6274 in the aftermath of the minutes but saw its gains evaporate following the downward revision to UK Q4 GDP data. Although Her Majesty's government attributed the revision to lower production and services output data, as well as bad weather, sterling was still weaker for the week. BoE's Miles summed up the view when he noted that the UK economy remains fragile and the BOE's monetary policy is a balancing act.
- A violent earthquake shook New Zealand's Christchurch, the nation's second largest city, for the second time in six months. Although the 6.3 magnitude of the Tuesday quake was well below the 7.1 event that struck in early September, the death toll and destruction are estimated to be substantially higher. According to the latest projections, confirmed fatalities rose above 100 with scores still missing, compared to one death reported in September. The economic impact of the quake is also set to be far greater. New Zealand PM Key cited heavy damage to buildings and infrastructure and Auckland Airport and Air New Zealand commented on potential impact of tourism activity - a large part of New Zealand GDP. The Kiwi Dollar was the weakest currency among the major USD pairs, falling 2.4% to a two-month low of $0.7430 as fixed-income market expectations for the March 10th RBNZ interest rate decision tipped in favor of a rate cut.
- Less than a month after S&P's sovereign credit rating downgrade of Japan, Moody's lowered its outlook on Japan's Aa2 rating to Negative, citing "heightened concern that economic and fiscal policies may not prove strong enough to achieve the government's deficit reduction target." Japan's parliamentary deadlock and Prime Minister Kan's continued decline in popularity appear to be at the heart of the fiscal turmoil, with Moody's also noting "increasing uncertainty over the ability of the ruling and opposition parties to fashion an effective policy reform response to the debt and growth challenges." Recall that last week, 16 lawmakers of the ruling DPJ party pledged their loyalty to former party head Ichiro Ozawa. This week, the Kan cabinet formally suspended Ozawa, who is also currently facing an indictment. Separately, Japan's latest inflation metrics were a mixed bag, with January core national CPI showing the narrowest contraction since early 2009, but Tokyo core CPI for February falling to -0.4% from -0.3% prior.
Week of 2/28/2011 thru 3/4/2011
Monday, February 28, 2011
Economic
08:30 US Jan Personal Income, Jan Personal Spending, Jan PCE Deflator, Jan PCE Core, Canada Q4 GDP
09:45 US Feb Chicago PMI
10:00 US Dec Pending Home Sales, Feb NAPM Milwaukee
10:30 US Feb Dallas Fed Manufacturing Activity
11:30 US Treasury's 3- and 6-month bill auction
Tuesday, March 01, 2011
Economic
09:00 Bank of Canada Rate Decision
10:00 US Feb ISM Manufacturing*, Jan Construction Spending
11:30 US Treasury's 4-week bill auction
16:30 API Crude Oil/Gasoline/Distillate Inventories
*Note that the Feb ISM indices may be delayed
Wednesday, March 02, 2011
Economic
07:30 US Feb Challenger Job Cuts
08:15 US Feb ADP Employment Change
10:30 DoE Crude Oil/Gasoline/Distillate Inventories
14:00 Fed Beige Book
Thursday, March 03, 2011
Economic
08:30 US Q4 Productivity, Q4 Unit Labor Costs, Initial Jobless Claims, Continuing Claims
10:00 US Feb ISM Non-Manufacturing*, Canada Feb Ivey PMI
10:30 DoE Natural Gas Inventories
11:00 US Treasury's bill announcement
*Note that the Feb ISM indices may be delayed
Friday, March 04, 2011
Economic
08:30 US Feb Nonfarm Payrolls, Feb Unemployment Rate, Feb Manufacturing Payrolls, Feb Average Hourly Earnings
10:00 US Jan Factory Orders
15:00 US Jan Consumer Credit
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 Preliminary Q4 GDP q/q, Q4 GDP Price Index, Q4 Personal Consumption, Q4 Core PCE q/q
09:55 Feb Final University of Michigan Confidence
Todays Headlines
8:30:16 AM
*(BR) BRAZIL JAN TOTAL OUTSTANDING LOANS (BRL): 1.715T V 1.703T PRIOR; PRIVATE BANKS LENDING: 993.0B V 987B PRIOR
- Prior Total Outstanding Loans revised from 1.703T to 1.705T
- Prior Bank lending revised from 987B to 988B
8:30:30 AM
(US) Fed's Bullard: Rising inflation around the world may cause problems in the US; inflation targeting might make sense
- Inflation remains quite low in the US at the moment.
- Rising inflation remains a threat for nations with quasi-fixed exchange rates.
8:30:03 AM
*(US) JAN DURABLE GOODS ORDERS: 2.7% V 2.8%E; DURABLES EX TRANSPORTATION: -3.6% V 0.5%E
- Durable Goods Orders, Ex-Defense: +1.9% v 2.5% prior
- Capital Goods Orders Non-defense Ex-aircraft: -6.9% v -1.0%e
- Capital Goods Shipments Non-defense Ex-aircraft: -2.0% v 1.7% prior
10:11:34 AM
(US) Fed's Bullard: Would "never say never" to more easing; Fed continues discussions on adjusting QE2 - Q&A
- Could stretch QE2 out to Q3 of 2011, among many different options for the program, including cutting the size
- Higher inflation expectations are one of the successes of QE2.
- Would prefer a meeting-by-meeting evaluation of QE2.
- Oil prices are a significant factor for households.
11:03:16 AM
NY Fed: Purchased $5.0B in outright coupon purchase; dealers submitted $34.9B for consideration (bid to cover 6.97)
- Avg bid to cover over prior four auctions is: 4.2
- Heaviest purchase $1.58B in the 07/15/13 maturity
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 US Jan Durable Goods Orders, Chicago Fed NAI, Initial Jobless Claims, Continuing Claims
10:00 US Jan New Home Sales, Jan House Price Index
10:30 DoE Natural Gas Inventories
13:00 US Treasury's 7-year note auction
11:00 US Kansas City Fed Index, DoE Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
7:00:05 AM
*(US) MBA MORTGAGE APPLICATIONS W/E FEB 18TH: +13.2% V -9.5% PRIOR
- Refi's: +17.8% v -11.4% prior.
- Avg Rate on 30y mortgage: 5.0% v 5.12% prior.
- Purchase Index: (Seasonally adj): +5.1% v -5.9% prior
10:01:06 AM
(US) FDIC Q4 Troubled Bank List: 884 v 860 q/q
- Total assets of problem institutions $390B v $379.2B q/q
- Deposit insurance fund now -$7.3B v -$8B q/q
- FDIC insured institutions net income $21.7B v $14.5B q/q
11:02:50 AM
NY Fed: Purchased $1.96B in outright coupon purchase; dealers submitted $9.94B for consideration (bid to cover 5.05)
- Avg bid to cover over prior four auctions is: 4.44
- Heaviest purchase $335M in the 02/15/40 maturity
12:30:33 PM
(US) Fed's Hoenig: US has to end too big to fail guarantee, which encourages risky behavior and distorted ratings
- Calls on legislators to restore Glass Steagall limitations, expand the Volcker Rule and split up the largest institutions.
- If implicit guarantees not removed, US could see a cycle of ever bigger crises with rising costs.
- Overshooting loose monetary policy risks another crisis.
1:30:19 PM
(UK) BOE's Miles: UK has an inflation problem; rapid interest rate tightening would not address risks from higher inflation and could only result in cuts next year
- Very gradual rate hikes assumed in report would offer better alternative to managing CPI
- UK GDP unlikely to grow above trend
- Inflation risks may rise
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 US Jan CPI, Jan CPI Core Index SA, Initial Jobless Claims, Continuing Claims, Canada Dec Wholesale Sales
10:00 US Jan Leading Indicators, Feb Philadelphia Fed
10:30 DoE Natural Gas Inventories
11:00 US Treasury note announcement
13:00 US Treasury's 30-year TIPS auction
Todays Headlines
8:30:03 AM
*(US) JAN HOUSING STARTS: 596K V 539KE; BUILDING PERMITS: 562K V 559KE
- Prior Housing Starts revised lower from 529K to 520K
- No revisions to Prior Building Permits at 627K
9:04:35 AM
Update: Robert Baird upgrading Hotel Sector to Overweight from Equal Weight
- Upgrade based on stronger 2012 outlook
- HST, IHG rated Outperform
- Baird Raised HST to Outperform from Neutral, price target: $24
9:15:03 AM
*(US) JAN INDUSTRIAL PRODUCTION: -0.1% V +0.5%E (first decline since June 2009); CAPACITY UTILIZATION: 76.1% V 76.3%E
- Prior Industrial Production revised higher from 0.8% to 1.2%
- Prior Capacity Utilization revised higher from 76.0% to 76.2%
10:11:02 AM
(US) US Treasury Sec Geithner reiterates cutting spending too quickly may harm recovery; reiterates consideration of a tax repatriation holiday
- Comments that deficits cannot be lowered by limiting cuts in spending to aspects only in the discretionary area of the budget
- Reform of the corporate tax rate could come before the individual tax code is adjusted
11:02:42 AM
NY Fed: Purchased $1.89B in outright coupon purchase; dealers submitted $11.19B for consideration (bid to cover 5.92)
- Avg bid to cover over prior four auctions is: 3.97
- Heaviest purchase $494M in the 11/15/21 maturity
11:13:05 AM
(CA) Canada Min: G20 should seek to address foreign exchange and measures aimed at controlling capital
- G20 will use current account measures to help determine global imbalances, which will be the main discussion topic this weekend.
- Says open to discussions about various SDR proposals at G20. SDR basket should be fully convertible.
- Food prices will be discussed at the meeting
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 US Jan PPI, Jan Core PPI, Jan Housing Starts, Jan Building Permits, Canada Jan Leading Indicators, Canada Dec Manufacturing Shipments
09:15 US Jan Industrial Production, Jan Capacity Utilization
10:30 DoE Crude Oil/Gasoline/Distillate Inventories
14:00 FOMC minutes
Todays Headlines
8:30:03 AM
*(US) JAN ADVANCE RETAIL SALES: 0.3% V 0.5%E; RETAIL SALES LESS AUTOS: 0.3% V 0.5%E
- Retail Sales Ex Auto & Gas: 0.2% v 0.4%e
- Prior Advanced Retail sales revised lower from 0.6% to 0.5%
- Prior Ex Auto revised lower from 0.5% to 0.3%
- Prior Ex Auto and Gas revised lower from 0.4% to 0.1%
10:40:18 AM
(EU) ECB's Draghi: Monetary union must have sustainable fiscal policies; monetary policy alone cannot be the only solution
- Calls for Europe to coordinate more on fiscal policies and methods to handle crises, including marcro economic surveillance tools
10:31:13 AM
World Bank: Food Price Index up 15% since Oct 2010, now only 3% away from record highs hit in 2008
- World Bank's Zoellick: Current prices for food are at dangerous levels and are cause for concern.
11:05:03 AM
NY Fed: Purchased $6.69B in outright coupon purchase; dealers submitted $31B for consideration (bid to cover 4.64)
- Avg bid to cover over prior four auctions is: 3.5
- Heaviest purchase $1.42B in the 12/31/15 maturity
12:05:53 PM
(US) Fed's Lacker: Watching inflation closely, not guaranteed that inflation will accelerate, but could do so at this point in the cycle - TV interview
- Know the mechanism that will be used to bring down size of balance sheet, timing and pace of exit strategy and monetary tightening is key issue.
- 5-year breakeven TIPS spread as guage for inflation. The Fed does watch overall inflation, not just the core.
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 US Feb Empire Manufacturing, Jan Advance Retail Sales, Jan Import Price Index
09:00 US Dec Net Long-Term TIC Flows
10:00 US Feb NAHB Housing Index, Dec Business Inventories
11:30 US Treasury's 4-week bill auction
16:30 API Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
3:17:41 AM
Fitch sovereign analyst Colquhoun: Asian central banks have been slow to address inflationary concerns; there are risks of severe tightening if CPI pressures spread
- Believes that Indonesia and South Korea have been slow to react to inflation risks.
- China's problem is whether the country can keep CPI 'in check'; The dilemma might be more acute later in 2011.
- Possible deterioration in bank-asset quality is key risk for China; country's transition to a consumption-driven economy could be 'bumpy'.
- Progress on Indonesian structural flaws would promote rating action; Tackling inflation and raising tax incomes would support Indonesia Credit.
- Philippine fiscal plans coupled with healthy economy would promote rating action.
3:35:48 AM
(GE) WestLB discussions to continue on Tuesday, as the German steering committee did not reach an agreement on Sunday related to the restructuring of the bank - financial press
- BaFin regulator is participating for first time in talks
- According to reports, savings banks are so far blocking the rescue of WestLb.
- Options for WestLb include a break up.
5:00:05 AM
*(PO) PORTUGAL Q4 PRELIMINARY GDP Q/Q: -0.3% V -0.3%E; Y/Y: 1.2% V 1.3%E
- Prior QoQ revised lower from +0.3% to +0.2%
- Prior YoY revised lower from 1.4% to 1.3%
5:13:27 AM
*(IT) ITALY DEBT AGENCY (TESORO) SELLS €5.18B v €3.75-5.25B INDICATED RANGE IN 2015 AND 2040 BONDS
- Sells €3.5B in 3% Nov 2015 BTPs; Avg Yield 3.77% v 3.67% prior; Bid-to-cover: 1.4x v 1.41x prior
- Sells €1.68B in 5% Sept 2040 BTPs; Avg Yield 5.51% v 4.80% prior; Bid-to-cover: 2.1x v 1.73x prior
11:03:09 AM
NY Fed: purchased $1.49B in TIPS securities; dealers submitted $5.83B for consideration (bid to cover 3.89)
- Heaviest purchase $331M in the 01/15/25 maturity
- Purchased maturities dated 04/15/2013 - 02/15/2040
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.
"I was always looking outside myself for strength and confidence, but it comes from within. It is there all the time."
Market Week Wrap-up
- It has been a relatively quite week in markets, with little consequential data on tap, earnings season slowly winding down and the eyes of the world glued to the dramatic scenes in Egypt. US and European equity indices have made further steady gains, driven higher by positive quarterly earnings and a handful of major merger announcements. The fall of Egyptian President Mubarak on Friday also helped goose markets a bit higher. On the other hand, emerging market bourses continued to move lower on fears about policy tightening to cope with troubling levels of inflation-Brazil's Bovespa, for example, hit its lowest levels since August. Indeed inflation has emerged more acutely as a real problem in the first months of 2011, with warnings on the issue heard again from numerous central bankers and corporate executives this week. In the UK, the January PPI Input index racked up its biggest y/y increase in more than two years. On Tuesday the PBoC raised key rates by 25 basis points, continuing its gradual policy tightening campaign to clamp down on an overheating economy, although markets took the move in stride. US Treasury yields rose markedly on more concerns about rising prices, and some hawkish Fed speak sustained the upward pressure. Fed Chairman Bernanke testified before the Senate, once again defending the QE2 bond buying program. Bernanke warned that the Fed will need to start withdrawing accommodative monetary policy before reaching more normalized levels of unemployment (defined as 5-6%), and also highlighted that financial markets are not indicating expectations for higher inflation. For the week, the DJIA rose 1.5%, the Nasdaq gained 1.4% and the S&P500 was up 1.4%.
- In perhaps the most controversial earnings report of the last several weeks, Cisco's second quarter results upset the market and saw its shares fall more than 14%, to their lowest level in a year and a half. Markets were disappointed by eroding margins and remain concerned that competition and dwindling public sector spending are capping the company's profits. Multiple analysts cut the name, although a few suggested the declines were a buying opportunity. The losses continue at Sprint, although the firm's metrics indicate it is creeping slowly towards a turnaround in its troubled business. Levels of churn dropped to near all-time lows, while net customer additions continue to grow, hitting all-time highs in the pre paid segment. Akamai fell sharply after meeting expectations in its quarterly results but offering weak profit guidance. Video game maker Take Two crushed expectations in its Q3 and raised guidance, while competitor Activision Blizzard met expectations in its Q4 and guided lower as it announced it would discontinue its Guitar Hero game, once a blockbuster franchise.
- Insurance giants MetLife, Prudential and Allstate reported fourth-quarter results yesterday evening. MetLife's performance was thoroughly in line, with no real surprises. Prudential's profits were well ahead of expectations. Allstate missed earnings estimates by a wide margin, and blamed the weather and other catastrophe losses for its poor showing.
- Various firms discussed the troubling impact that higher input costs may have during 2011. PepsiCo reported solidly in line results, but executives warned that 2011 commodity cost inflation would be +8-9.5% y/y. Kraft Foods also met expectations, although it cut its FY11 earnings outlook slightly. In comments accompanying the report, Kraft said it expects to face significant input cost inflation. Pilgrim's Pride's quarterly profits were way ahead of expectations. Executives from the poultry power warned that they were concerned about much higher grain prices, even though 100% of needs were covered until early August. Among other consumer facing stocks, Disney's Q1 results came in comfortably ahead of expectations, with strong y/y revenue growth seen at most of its key units. McDonalds reported very strong month of same-store sales gains for January.
- On Friday the Obama administration outlined proposals to wind down Fannie and Freddie and significantly reduce the government's role in the mortgage market. The plan would bring the GSEs' market share down to 40% over the course of five to seven years and make the private sector is the dominant provider of mortgage credit. In an interview aired on CNBC, Treasury Secretary Geithner said he expects the cost of mortgages will rise modestly over the long run if the plan is implemented, something he would like to see happen within two years. Analysts caution that whatever plan emerges will likely be molded and implemented by Congress, which presents substantial uncertainties. Private mortgage insurers, which stand to benefit substantially from the plan, gained significantly on the announcement.
- In M&A news, Ensco said it would acquire rival Pride International for about $7.3B, in a transaction that would create the world's second-largest offshore oil and gas driller. The deal sets the purchase price at $41.60/share, a premium of 21% to Friday's close. The media was abuzz with news that AOL bought the Huffington Post for $315M, valuing it at five times annual revenue, in an effort to build the content side of the business. Danaher closed a deal to acquire medical diagnostics name Beckman Coulter for $83.50/share in cash, for a deal valued at $6.8B. The Toronto Stock Exchange announced that it was holding advanced merger talks with the London Stock Exchange. A merger of the two companies would create the world's 7th largest exchange, with a market cap of £5.5B. This news was quickly overshadowed by reports that the NYSE/Euronext and Deutsche Boerse were back in talks for a tie-up.
- Uncle Sam began unloading $72 in coupon supply with a mediocre 3-year auction on Tuesday. By the next day the 10-year yield hit its highest level in roughly 10 months at 3.77%. A subsequent stellar 10-year auction helped put in a floor for prices that lasted through the remainder of the week. Similar to last week, short term rates continued to inch higher as well. The 2-year/30-year and the 2-year/10-year spreads were narrower on the week, sitting at around 390 and 280 basis points respectively. US mortgage rates have moved back above 5% for the first time since May.
- Much of the commentary this week focused on the debate emerging around the recent aggressive move up in rates. Bond vigilantes argued that this is just the beginning of dramatic cyclical move higher as investors price in growing long-term inflation expectations and deficit projections. Others counter that rates have come up too fast and may be reaching a point where Treasury yields will begin to look more attractive relative to other assets classes. Regardless of which side you are inclined to believe, it is clear investors' flourishing risk appetite continues to pull money away from the relative safety and modest returns in government bond markets. Major US equity indices were up eight straight sessions before minimal declines broke the streak on Thursday. It's even more telling that the average junk bond yield fell below 7% for the first time in more than five years and currently stands near an all-time low.
- The euro strengthened steadily through late Wednesday this week, aided by higher risk appetite and sovereign demand. Rebalancing FX levels in Asia continue to support the single currency on the dips in EUR/USD. More support came from the much lower than expected take up of ECB's 7-day liquidity operation, which was especially welcome given the looming stress tests for the EU banks. Debate raged over the sentiment driving higher yields on US Treasuries. FX dealers wondered about the impact on trading, asking themselves if the euro wasn't losing ground as US yields rose, what would happen if US yields fell in the wake of the upcoming round of auctions.
- EUR/USD sentiment turned around as rising yields on Portuguese government debt fueled concerns that the nation would need to request a Eurozone bailout sometime soon. The outright yield on the Portuguese 10 year rose above the 7.5% area and the 5-year note was nearing 7.0%, reaching post-euro launch highs, and levels at which both Ireland and Greece were both forced to request aid. Portugal faces a huge round of debt redemptions in April. There are concerns that at this point Portugal could fall prey to speculators, prompting the ECB to step in and buy Portuguese debt. Portuguese officials expressed confidence that they would be able to continue to finance the nation in open debt markets. The fate of German Bundesbank hawk Axel Weber was another topic of great interest this week, as rumors made the rounds suggesting that he did not want to succeed ECB President Trichet after the latter's term expires in October. The week ended with Weber being summoned to Chancellor Merkel's office after which he promptly resigned, effective April 30, leaving the ECB President without a clear successor.
- Sterling approached 1.62 early on in the week after the Sunday Times reported that the shadow MPC expressed opposition to an interest rate increase amid rising inflationary pressures ahead of this week's MPC decision. Attention turned to news that the UK government raising its levy on bank profits to £2.5bln this year. On Thursday the Bank of England held its key interest rates steady at 0.50% and maintained its asset purchase target at current levels of £200B.
- USD/JPY was re-approaching last week highs of 82.50 as US rates headed higher. FX dealers noted a higher US 2-year interest rate usually corresponds with higher USD/JPY. One European dealer said that the last time the 2-year rate was around 0.78%, USD/JPY was above 90, while analysts talked about the growing impact the Chinese currency is having on other regional pairs.
- China came out of the Lunar New Year swinging. The PBoC announced a 25 basis point rate increase to key lending rates, the third such hike of the one-year benchmark rate since China embarked on a tightening cycle in October 2010. Expectations are for PBoC tightening to be front-loaded in early 2011, and central bank operations saw short-term yields rise beyond the 25 basis point policy action as it sold CNY1B in 3-month bills at 2.6242% v 2.2588% prior. An Economist at the Chinese Academy of Social Sciences (CASS) commented that the PBoC may be forced to act further if Jan-Feb CPI returns rise above 5%. There were also reports circulating that the PBoC was adjusting reserve ratio requirement (RRR) for smaller banks individually as a "punitive" measure, portending excessive lending in January new Yuan loans data to be released next week.
- Cautious official commentary in Australia and New Zealand battered their currencies to February lows against USD by Friday. New Zealand Finance Minister English warned that he could not rule out a recession in the latter half of 2011 in the absence of normal growth drivers of the economy, and his Australian counterpart, Wayne Swan noted that Q1 GDP may contract as a result of the extensive flood damage in the country. AUD was also weakened by a mixed employment report that showed the 11th straight month of job creation, offset by the first decline in the full-time employment component in three months. RBA Gov Stevens did more damage to the currency when he pushed back any expectation for renewed interest rate tightening into the 2nd half. This ran counter to a more bullish outlook from the RBA quarterly policy meeting late last week, when the central bank raised its 2011 GDP and CPI forecasts to 4.5% and 3.0% respectively.
Week of 2/14/2011 thru 2/18/2011
Monday, February 14, 2011
Economic
11:30 US Treasury 3- and 6-month bill auction
Tuesday, February 15, 2011
Economic
08:30 US Feb Empire Manufacturing, Jan Advance Retail Sales, Jan Import Price Index
09:00 US Dec Net Long-Term TIC Flows
10:00 US Feb NAHB Housing Index, Dec Business Inventories
11:30 US Treasury's 4-week bill auction
16:30 API Crude Oil/Gasoline/Distillate Inventories
Wednesday, February 16, 2011
Economic
08:30 US Jan PPI, Jan Core PPI, Jan Housing Starts, Jan Building Permits, Canada Jan Leading
Indicators, Canada Dec Manufacturing Shipments
09:15 US Jan Industrial Production, Jan Capacity Utilization
10:30 DoE Crude Oil/Gasoline/Distillate Inventories
14:00 FOMC minutes
Thursday, February 17, 2011
Economic
08:30 US Jan CPI, Jan CPI Core Index SA, Initial Jobless Claims, Continuing Claims, Canada
Dec Wholesale Sales
10:00 US Jan Leading Indicators, Feb Philadelphia Fed
10:30 DoE Natural Gas Inventories
11:00 US Treasury note announcement
13:00 US Treasury's 30-year TIPS auction
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 US Dec Trade Balance
09:55 US Feb prelim Univ of Michigan confidence
Todays Headlines
8:30:02 AM
*(US) INITIAL JOBLESS CLAIMS: 383K V 410KE (lowest since July 2008); CONTINUING CLAIMS: 3.888M V 3.9ME
- Prior Initial Jobless Claims revised higher from 415K to 419K
- Prior Continuing Claims revised higher from 3.925M to 3.935M
10:01:57 AM
IMF head Strauss Kahn: Must reform the worldwide monetary system in order to help the recovery and help prevent crises in the future
- Adding emerging market currencies (including the Chinese Yuan) to the SDRs would be of assistance; yet there could be technical challenges associated with adding the Yuan
- Capital flows framework will be issued shortly.
- Notes significant portion of inflation pressures being seen are due to global imbalances.
10:07:47 AM
(EG) Egypt Army high council to meet today; to issue statement by tomorrow to address protestors' demands - UK financial press
- Council says it will do everything necessary to stabilize Egypt.
- A separate report indicates one senior army officer is telling protestors their demands will be met.
- Note: the Army high council is headed by defense minister Muhammad Tantawi.
10:18:56 AM
(EG) Egypt PM Ahmed Shafiq: Mubarak may soon step down; situation will soon be clarified - BBC news
- A separate report says Mubarak may transfer power to the Army Chief.
- Follow Up 10:30ET: NBC news says sources are confirming Mubarak will step down tonight, likely the VP will take over as President. Separate reports indicate that Mubarak is still in negotiations over the structure of the transition of power.
12:03:37 PM
(SA) South Africa Pres Zuma: Budget deficit will fall to 3-4% by 2013; will increase tax allowances to help promote investment and jobs
- Current deficit stands at approx 7%
- Will initiate plans to receive electricity from renewable sources this 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.
08:30 US Initial Jobless Claims, Continuing Claims, Canada Dec New Housing Price Index
10:00 US Dec Wholesale Inventories
10:30 DoE Natural Gas Inventories
11:00 US Treasury's 30-year TIPS announcement
13:00 US Treasury's 30-year bond auction
14:00 US Jan Monthly Budget Statement
Todays Headlines
8:06:36 AM
(UK) UK Chancellor Osborne: To publish BoE regulatory proposals next week; overall business lending increases to £190B
- Banks to lend roughly £80B in SMEs this year v £66B prior year (£176B in business overall).
- Banks to disclose top seven executive pay; to lend more, increase in taxes paid, to be more transparent.
- Top 4 banks agree on bank bonus pay; Top 4 banks are Royal Bank of Scotland, HSBC, Lloyds, Barclays.
- Bank exec pay to be tied to SME lending performance.
8:41:16 AM
(US) Treasury Sec Geithner: US economic recovery is 'accelerating', sees more confidence in businesses - Q&A session
- Sees gradual improvement to continue.
- Must create a better business environment.
- Growth in manufacturing, high tech and exports are strong.
- US economy growing at faster pace than Japan and Europe
8:44:04 AM
UBS downgrades Emerging Market Banks; upgrades US Banks
- Downgrades Emerging Market Banks to Neutral from Overweight. Firm remains constructive on the sectors medium-term structural growth prospects, but believes it faces nearterm headwinds in four areas: 1) policy risk; 2) prudential measures; 3) rising risk-free rates; and 4) potential flow reversal.
- Upgrades US Banks to Overweight on the basis that US growth and sentiment are improving, the regulatory environment is becoming clearer, and the banking sectors fundamental trends appear to be inflecting.
10:00:31 AM
(US) Fed Chairman Bernanke: The US cannot grow its way out of fiscal imbalances; reiterates that while there is ground for optimism on jobs that employment won't normalize for some time; Fed is "unwaveringly committed to price stability"
- Believes pace of economic recovery will pick up in 2011.
- Will be several years before employment levels return to normal.
- Inflation is quite low and should remain stable.
11:04:21 AM
NY Fed: Purchased $7.51B in outright coupon purchase; dealers submitted $27.69B for consideration (bid to cover 3.69)
- Avg bid to cover over prior four auctions is: 3.41
- Heaviest purchase $1.83B in the 12/31/15 maturity
11:26:19 AM
(US) Fed's Bernanke: Must start withdrawal of acccomodative monetary policy before reaching more normalized levels of unemployment, around 5-6% - Q&A
- Need to reach "escape velocity" before starting exit strategies.
- Even with a more ambitious 4.5% GDP growth rate, it will still take four years to get back to to normal unemployment.
- Debt-to-GDP ratio needs to be held where it is now, would be a real concern if the ratio rose above 100%.
- Says Fed is "not buying into any idea" that allowing inflation to rise could get better employment figures.
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 US Treasury's 10-year note auction
Todays Headlines
8:45:24 AM
(US) Fed's Lacker: Distinct improvement in the US economy since the launch of QE2 means the program requires a serious re-evaluation
- Reiterates US FY11 inflation around 1.5-2.0%, sees US FY11 GDP +4%
- Hard to say how higher commodity prices will impact inflation.
- Measures of consumer prices are reflecting higher commodity prices, but remains unclear if these will be lasting effects.
- Indicators are pointing to an improved job market.
9:20:27 AM
(HU) Hungary Jan YTD Budget Balance (HUF): -122.8B v -869.8B prior (Dec)
- Gov't official:: 2011 Budget to GDP Ratio target of 2.94% is achievable; Shows that EU investments have commenced
-Insight: The Jan deficit is almost 20% of the expected annual total
11:03:47 AM
NY Fed: Purchased $2.19B in outright coupon purchase; dealers submitted $9.39B for consideration (bid to cover 4.29)
- Avg bid to cover over prior four auctions is: 3.96
- Heaviest purchase $430M in the 08/15/39 maturity
11:25:04 AM
(US) Fed's Lacker: Cannot blame Fed policy for rise in commodity prices; core inflation to remain subdued, and has bottomed
- Sees risk of headline inflation increasing rapidly even if core is contained.
- There are many options for winding down quantitative easing.
12:30:34 PM
(US) Fed's Lockhart: Inflation anxiety is rising, although inflation remains tame presently; sees inflation moving toward 2% by 2013
- Inflation expectations remain well anchored. Higher prices for some goods is not a sign of surging inflation.
- Believes that issues related to inflation are often misunderstood. Fed policy can impact cost of living and relative prices changes, cannot affect individual prices.
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 still holds true that man is most uniquely human when he turns obstacles into opportunities."
Market Week Wrap-up
- Equity indices ticked higher this week thanks to mostly positive data and earnings reports, even though the US January employment reports perplexed markets on Friday. President Mubarak's dramatic standoff with protesters in Egypt was in the background all week, pushing crude futures around, and leading to a lot of bets being made on energy stocks. In a rare appearance at the National Press Club in Washington on Thursday, Fed Chairman Bernanke spoke frankly with journalists, warning that the US economy is still in a "deep hole" and offered a trenchant defense of the FOMC's performance in helping the economy escape the Great Recession. The strong January ISM Manufacturing and Chicago Purchasing Managers surveys plus strong quarterly results from Exxon, UPS and Pfizer sent US equity indices higher on Monday and Tuesday. The ISM manufacturing survey hit its highest level since May of 2004, confirming that manufacturing continues to recover in 2011. The ISM manufacturing employment index reached its highest level almost forty years, raising hopes for Friday's January payrolls data. The January ISM non-manufacturing hit its highest level since mid 2005. January Eurozone CPI data came in above the ECB's 2% target, making inflation a key issue in Europe this week; in the US the December PCE numbers were unremarkable, with no sign of growing inflation. In another good sign for the economic recovery, the personal spending component of the PCE data continued to make steady but modest gains. The focus in the back half of the week was on the US January employment reports. Expectations were for a gain of 146K jobs in the non-farm payrolls data on Friday, but the actual figure came in at 36K, an outcome that confused and frustrated market participants. The Labor Department blamed the weather and others pointed at the very sizable 339K plug in the birth-death adjustments (ex birth-death adjustments, the headline non-farm payrolls number would have been about +372K). A lower unemployment rate of 9.0% hardly made the report clearer, and prompted PIMCO's Bill Gross to call the data schizophrenic. Also note that the Labor Department said various changes were made to the underlying data tables, which impacted the results. For the week, the DJIA rose 2.3%, the Nasdaq gained 3% and the S&P500 was up 2.7%.
- Exxon had its best quarter since late 2008, and easily beat top and bottom-line expectations. The company benefitted from renewed strength in crude and a big 19% y/y increase in production during the quarter. Like competitors that reported last week, downstream operations turned a tidy profit after losing money a year ago. Royal Dutch Shell disclosed very substantial y/y gains in profit and revenue, although they still fell short of market expectations. Shell's CEO said he expects OPEC's slack capacity may forestall oil price spikes in 2011. BP missed profit targets in its fourth quarter and also said it would reinstate the quarterly dividend at 50% of the prior rate, as expected. The company has said it is looking to shrink operations in order to help recover from the Gulf oil spill, and to that end it said output would decline by 11% in 2011, after a 9.4% drop in 2010. Refiner Sunoco's earnings beat the consensus view, while revenue was twice the expected amount. Shares of the company declined, however, after executives expressed some reservations about the amount of excess refining capacity available in the industry.
- Old media powerhouse Time Warner slightly exceeded analysts' estimates, authorized a large stock buyback and hiked its dividend. Analysts noted very strong growth in advertising revenue from the company's cable networks, underscoring the rebound for the traditional TV sector. In the semi space, Broadcom met expectations but warned critical segments could see lower revenue in the first quarter, while MEMC missed profit targets but handily outperformed on the top line and offered a very strong FY11 outlook.
- The big health insurance companies reported results this week. Aflac missed both top- and bottom-line targets in its Q4 report and offered a very broad guidance range for FY11, causing investors to duck. Aetna met expectations in its fourth quarter report and offered strong earnings guidance while also warning that revenue would be down slightly on a y/y basis. Cardinal Health modestly topped expectations and raised guidance. In Florida, another federal court ruling this week cast more doubt on the future of the healthcare reform law. The Florida judge ruled that the requirement in the health care reform legislation that all citizens have healthcare is unconstitutional, echoing a ruling issued by a federal judge in Virginia back in December.
- Shares of Visa and MasterCard declined following the credit card firms' tepid quarterly results. Note that MA's margins fell sharply on a sequential basis. Profits at Hartford Financial were very strong, and the company also increased its quarterly dividend. Asset manager Genworth Financial surprised traders with an unexpected quarterly loss, thanks to new mortgage insurance reserves in the face of a weakening housing market.
- UPS beat profits targets in the fourth quarter. The company said its earnings for 2011 would exceed the firm's prior all-time peak on higher average daily volume and expanding margins. Pfizer met expectations in its Q4 report and also announced that it would review operations to streamline the company. Executives said Pfizer would reduce R&D spending and look at the composition of its business portfolio. Archer Daniels Midland's quarterly profit was twice the expected amount in its second quarter, while revenue was way above par. Management was upbeat about the outlook for ethanol in 2011. General Motors reported very strong January sales, signaling that the recovery in the US auto sector is continuing. January sales were up more than 23% y/y, well ahead of market expectations. Ford's January sales rose 13% y/y, in line with December levels.
- Retailers' January same-store sales reports were generally strong enough to sustain the view that consumer spending continues to recover. There were some outstanding comps and a few laggers, but no real surprises. In the apparel sector perennial outperformer Limited Brands crushed expectations with a whopping 24% y/y comp and The Gap turned out a positive comp versus negative estimates. Mall chains were mixed, with recent outperformer Abercrombie slipping into negative comps and Aeropostale reversing recent misses by beating expectations. BJ's and Costco did very well, while Target's comps were disappointing. Department stores showed mixed results, with Dillard's and Stage Stores performing well and JC Penny and Kohl's below par.
- Treasury yields backed up aggressively this week as most of the US data releases fueled optimism that the economic recovery is gathering pace, simultaneously adding to growing market anxiety about inflation. Dealers preparing for $72B in coupon supply scheduled for auction next week also weighed on prices. Rates broke out with the US benchmark 10-year joining the long bond in offering their highest yields since last spring. The 10-year climbed more than 20 basis points for the week to 3.65%. For the first time in a while, short-term rates moved in tandem to the upside. Surging food and energy prices spurred some speculation that central banks in Europe and the US may need to start raising interest rates sooner than previously thought. The US 2-year is back above 0.75% and the Dec fed fund future saw the odds of a 2011 rate hike rise to more than 50% from less than 30%. The ECB, which is generally anticipated to be the first of the major central banks that will tap on the brakes, saw Germany's 2-year shatz yield soar more than 10 basis points briefly reaching 1.5% for the first time since the summer of 2009. Officials were quick to keep expectations in check though, highlighted by Trichet's less than hawkish tone at the ECB press conference and Bernanke's speech affirming confidence the Fed is charting the right course. PIMCO's Bill Gross said that despite the glaring move up in commodity prices the Fed is unlikely to raise rates anytime in the next 12 months.
- The continuing unrest in Egypt kept a cautious tone in FX markets as the week began, although risk appetite heated up in the wake of stronger US and European January PMI data after it became clear that the Suez canal would remain secure for the time being. The euro strengthened on the PMI data, as well as good demand from Middle East and Asia sovereign buyers. Investors were buying euros on reports that the EU was close to striking an agreement to purchase government debt in private placement. Thursday's ECB rate decision reversed sentiment abruptly, as traders zoomed in on the ECB's inflation position. Note that on Monday, the January Eurozone CPI reading came in above the ECB's 2% target for the second consecutive month, putting the ECB in a real bind. Current ECB thinking is that maintaining policy unchanged is best given the fragile recovery and the uncertainty around the peripheral economies, even though inflation remains a real threat to Europe. At the post-decision press conference, Trichet essentially reiterated his statements from January and offered no fresh commentary on inflation levels. Perplexed dealers concluded that the ECB might actually believe inflation risks were broadly balanced, damping prospects for higher interest rates. The ECB's dovish tone saw the euro-related pairs move lower, with EUR/USD dropping rapidly from ten-week highs around 1.3862. After the US employment reports on Friday, EUR/USD fell below 1.3600.
- The peripheral debt crisis remained in the background this week. Hopes were dashed that the Eurogroup might strike some sort of agreement for moving toward a concrete resolution of the crisis when French Finance Minister Lagarde said this week's meeting would only tackle energy issues and told observers to wait for the March EU Summit. S&P downgraded Ireland's sovereign rating by one notch, while a German government source indicated that Germany will oppose proposed plans to purchase government bonds via the EFSF. In addition, there were worries about economic imbalances among Eurozone member states: the overall Eurozone Dec unemployment rate came in at 10%, below expectations, while Spain's Jan unemployment registered at 20.3%.
- Sterling moved towards 1.59 after BoE hawk Weale aired his concerns about inflation over the weekend, justifying his reasoning for a vote to hike interest rate by 25bps. The pound continued to be the beneficiary of Middle-East drama and GBP/USD posted three-month highs above 1.6275. Hawkish comments from MPC members Sentence and Bean also helped. Bean admitted that a rate rise may be necessary. Dealers noted that the recent string of better data might prove that the recent contraction in the UK GDP was a fluke.
- USD/JPY began the week little changed, just above the 82 handle. The Japanese Finance Ministry said that it did not perform any currency intervention between Dec 29th and Jan 27th. Yen strength in the mid-part of the week was due to repatriation flows from redemptions of European bonds, which sent the pair to just above the 81 handle. The move threatened to reignite speculation that the BoJ might be forced to intervene and weaken the currency before rates put pressure on domestic exporters. BoJ's Kamezaki said that the central bank remains vigilant in watching the currency's strength.
- With much of Asia closed for the Lunar New Year, Australia saw an even greater share of global market spotlight this week. The flood-stricken mining state of Queensland continues to recover and economic news from Down Under showed marked improvement. The RBA rate decision was surprisingly more upbeat than expected. The central bank commented that private investment and the trade environment would remain robust, and indicated it would look beyond the near-term impact of the flood in setting monetary policy. Later in the week, the quarterly RBA policy statement saw an upgrade in 2011 GDP to 4.5% from 3.75% and headline CPI to 3.0% from 2.75%. The hawkish outlook and strong economic data (December building approvals rose at its fastest pace in seven months) boosted the Aussie dollar within 10 pips of $1.02 level against USD - a 1-month high - and within 60 pips of a multi-year high above 1.0250.
Week of 2/7/2011 thru 2/11/2011
Monday, February 07, 2011
Economic
08:30 Canada Dec Building Permits
11:30 US Treasury's 3- and 6-month bill auction
15:00 US Dec Consumer Credit
Tuesday, February 08, 2011
Economic
08:15 Canada Jan Housing Starts
11:30 US Treasury's 1-month and 1-year bill auction
13:00 US Treasury's 3-year note auction
16:30 API Crude Oil/Gasoline/Distillate Inventories
Wednesday, February 09, 2011
Economic
10:30 DoE Crude Oil/Gasoline/Distillate Inventories
13:00 US Treasury's 10-year note auction
Thursday, February 10, 2011
Economic
08:30 US Initial Jobless Claims, Continuing Claims, Canada Dec New Housing Price Index
10:00 US Dec Wholesale Inventories
10:30 DoE Natural Gas Inventories
11:00 US Treasury's 30-year TIPS announcement
13:00 US Treasury's 30-year bond auction
14:00 US Jan Monthly Budget Statement
Friday, February 11, 2011
Economic
08:30 US Dec Trade Balance
09:55 US Feb prelim Univ of Michigan confidence
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 Jan Unemployment
08:30 US Jan Nonfarm Payrolls, Jan Unemployment Rate, Jan Manufacturing Payrolls, Jan Average Hourly Earnings
10:00 Canada Jan Ivey PMI
Todays Headlines
8:31:42 AM
(EU) ECB's Trichet Reiterates that rates are appropriate with short-term upside inflationary pressures - Prepared remarks
- Reiterates that see longer term price stability and anchoring of expectations is essential. Low Money and loan growth should keep medium term inflation contained.
- Inflation to stay slightly above the 2.0% target for bulk of 2011but expectations firmly anchored. Price pressures within the production chain are in their early stages and could increase further.
- Reiterates that all non-standard measures are temporary in nature.
8:46:36 AM
(EU) ECB's Trichet: Regarding inflation, the ECB's view is very much in line with its January assessment - Q&A
- Notes today's decision was unanimous.
- ECB is following the new banking sector stress tests carefully.
- No prejudgment on inflation or growth forecasts; will wait for ECB Staff report in March. Medium term inflation outlook will be very important. ECB remains "permanently alert" on second round effects of inflation. The alerts also entends to geo-political factors
9:29:50 AM
(EG) Egypt Vice President states that Pres Mubarak's son will not run for President - State media
- REMINDER: before the current uprising, it was seen as likely that President Mubarak, 82, would step aside as the Presidential candidate for his party in Sept in favor of his son.
- VP also announces detained protestors that have not been charged with a crime will be released.
11:04:00 AM
NY Fed: Purchased $8.87B in outright coupon purchase; dealers submitted $23.52B for consideration (bid to cover 2.65)
- Avg bid to cover over prior four auctions is: 4.88
- Heaviest purchase $5.208B in the 01/31/18 maturity (longest dated)
12:30:32 PM
(US) Fed Chairman Bernanke: There is increasing evidence that the economic recovery is self sustaining, will be several years before employment recovers to trend
- Several indicators show that QE2 has worked as planned.
- Strength in consumer spending seems broad based.
- Inflation remains "quite low" despite higher commodity prices.
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 US Prelim Q4 Nonfarm Productivity, Q4 Unit Labor Costs, Initial Jobless Claims, Continuing Claims
10:00 US Jan ISM Non-Manufacturing, Dec Factory Orders
10:30 DoE Natural Gas Inventories
Todays Headlines
7:00:04 AM
*(US) MBA MORTGAGE APPLICATIONS W/E JAN 28TH: +11.3% V -12.9% PRIOR
- Refi's: +11.7% v -15.3% prior.
- Avg Rate on 30y mortgage: 4.81% v 4.80% prior.
- Purchase Index: (Seasonally adj): +9.5% v -8.7% prior
9:01:47 AM
(US) Treasury to sell $32B in 3-year notes, $24B in 10-year notes and $16B in 30-year bonds
- Now sees reaching debt limit (ceiling) between April 5th and May 31st and expects to keep coupon auction sizes stable in coming months
- Total package of $72B is unchanged from prior and raises $50B in new money
9:06:28 AM
(SP) Spain treasury director Nunez: To consider the issuance of European inflation-linked bonds if conditions allow
- Spain's bond redemptions for 2011 were timed to coincide with large tax revenue receipts.
9:28:06 AM
(SZ) Swiss Govt official: The economy has not shown signs of slowing down, no signs of a dampening effect from the strong Franc yet
- Swiss economy is being supported by good consumption levels and activity in construction market.
- Still wary of potential threat of the rising CHF.
11:03:22 AM
NY Fed: Purchased $2.2B in outright coupon purchase; dealers submitted $14.31B for consideration (bid to cover 6.49)
- Avg bid to cover over prior four auctions is: 4.1
- Heaviest purchase $1.02B in the 11/15/21 maturity
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 US Dec ISM Manufacturing, Dec Construction Spending
07:30 US Jan Challenger Job Cuts
08:15 US Jan ADP Employment Change
09:00 US Treasury's Quarterly Refunding Announcement
10:30 DoE Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
8:50:17 AM
(SP) Spain savings bank (caja), (BFA) Banco Financiero y de Ahorros, plans equity capital raise - US financial press (update)
- Banco Financiero y de Ahorros to set aside €9.2B for loan losses, write down the value of its real-estate holdings, possibly one of various provisions by smaller savings banks to prepare the search for private investment.
- Also plans share offering to raise capital to meet higher solvency requirements.
- The Spanish govt is requiring savings banks to raise capital through equity markets or face partial nationalization through cash contribution.
- The bank will need about €2B in capital to meet the 8% core tier 1 ratio.
10:30:02 AM
Market Internals update at 10:30ET
- NYSE volume 235M shares, about 11% above its three-month average; advancers lead decliners by 3.5:1.
- NASDAQ volume 490M shares, about 13% above its three-month average; advancers lead decliners by 2.8:1.
- VIX index -9.5% at just over 17.00
10:33:56 AM
(GE) German Govt officials have agreed to limit cuts in solar subsidies to 15% - financial press citing sources
- Reminder: On 1/20 Germany noted it was planning to cut solar subsidies by anywhere between 3-15% in July
11:03:15 AM
NY Fed: purchased $1.74B in TIPS securities; dealers submitted $4.04B for consideration (bid to cover 2.33)
- Heaviest purchase $549M in the 07/15/20 maturity
- Purchased maturities dated 04/15/2013 - 02/15/2040
12:10:27 PM
(RU) Russian Central Bank's Ulyukayev: Could raise rates in the first half of 2011
- Offer to RTS holders is values Micex at $3.5B
- Central bank may sell of its position in Micex within two or three years.
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.
