Hedgeye - THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP - January 14, 2011

Equity futures are trading below fair value, tracking European/Asian markets, despite last night's bullish outlook from INTC. China has again raised its bank reserve requirement by 50bps.

MACRO DATA POINTS:

8:30 a.m.: CPI, Dec., est. 0.4% M/m, ex. food and energy est. 0.1%
8:30 a.m.: Advance retail sales, Dec., est. 0.8%, ex. autos and gas est. 0.3%
9:15 a.m.: Industrial production, Dec. est. 0.5%, capacity utilization est. 75.6%
9:55 a.m.: Uni. of Mich. Confidence, Jan., P, est. 75.5
10 a.m.: Business inventories, Nov., est. 0.7%
12:45 p.m.: Fed’s Jeffrey Lacker speaks on economy in Richmond
1:15 p.m.: Fed’s Eric Rosengren speaks at mortgage expo. in Connecticut

TODAY’S WHAT TO WATCH:

The SEC has started a broad investigation involving several financial firms to determine whether they made improper payments to secure investments from sovereign wealth funds
The biggest U.S. banks, facing tighter scrutiny and higher capital requirements, are pressing regulators to force hedge funds, money managers, insurers to share the pain. The newly created Financial Stability Oversight Council plans to discuss guidelines to determine which non-bank financial companies are systemically important at a meeting in Washington next week
Google may face an antitrust lawsuit by U.S. Justice Department over its $700m acquisition of ITA Software. Department officials haven’t made a final decision about whether to sue to block the purchase by Google
AIG’s recapitalization deal is set to close today, giving Treasury ~92% ownership of AIG
Coinstar (CSTR) cut 2011 rev., EPS cont ops forecasts
Dendreon (DNDN) to offer $250m shrs
Intel (INTC) sees 1Q rev. above est.
Sealy (ZZ) 4Q rev. missed est.
Sunstone Hotel Investors (SHO) plans to Buy $1b of hotel properties this year

PERFORMANCE:

One day: Dow (0.20%), S&P (0.17%), Nasdaq (0.07%), Russell 2000 (0.09%)
Last Week: Dow +0.84%, S&P +1.10%, Nasdaq 1.90%, Russell +0.53%
Month-to-date: Dow +1.33%, S&P +2.08%, Nasdaq +3.11%, Russell +2.17%
Sector Performance - (Only two sectors positive) - Materials (0.86%), Healthcare (0.53%), Financials (0.35%), Energy (0.28%), Consumer Disc (0.16%), Tech (0.08%), Utilities (0.09%), Industrials +0.10%, Consumer Spls +0.20%

EQUITY SENTIMENT:

ADVANCE/DECLINE LINE: -271 (-1545)
VOLUME: NYSE 924.63 (4.04%)
VIX: 16.39 +0.92% YTD PERFORMANCE: -7.66%
SPX PUT/CALL RATIO: 1.39 from 1.29 (+7.97%)

CREDIT/ECONOMIC MARKET LOOK:

Treasuries were stronger today with support from the Fed's $8.4B buying operation. The uptick in claims and pullback in stocks also seemed to help, though the bond auction seemed to be a disappointing.

TED SPREAD: 16.32
3-MONTH T-BILL YIELD: 0.15%
YIELD CURVE: 2.75 from 2.79

COMMODITY/GROWTH EXPECTATION:

CRB: 333.00 -0.56%
Oil: 91.40 +0.50% - trading -1.41% in the AM
Crude Oil Falls a Second Day as U.S. Economy Signals Slowing Fuel Demand
COPPER: 437.70 -0.78% - trading -0.46% in the AM
Copper Falls on Speculation Higher Stockpiles Signal Weaker Chinese Demand
GOLD: 1,384.47 +0.06% - trading -1.12% in the AM
Gold Demand in India Is `Good' as Incomes Increase, Biggest Exporter Says

OTHER COMMODITY NEWS:

Commodity Options Traders Make Record Bearish Bets After Oil, Metals Rally
Corn Heads for Biggest Weekly Gain Since October on Concern About Supply
Cooking-Oil Crunch Looms as Growing China Wealth Boosts Diet: Chart of Day
Palladium May Rally to $1,000 on Car Sales, Russian Supply, Ikemizu Says
Cocoa Prices Rebound in London Trading, Following Advance in New York
Rice Stockpiles in Vietnam Decline by 41% After Record Exports, Group Says
Palm Oil Has Biggest Weekly Slide in Four Following Rally to 34-Month High
Tin Output From Indonesia's Timah, Largest Shipper, May Be Level in 2011
Cooking-Oil Imports by India Drop for a Second Month as Local Supply Gains
Copper Stockpiles Climb to Seven-Month High in Shanghai, Aluminum Decline
Sugar May Gain Next Week on Speculation Demand Will Increase, Survey Shows

CURRENCIES:

EURO: 1.3355 +2.08% - trading -0.07% in the AM
DOLLAR: 79.191 -1.05% - trading +0.19% in the AM

EUROPEAN MARKETS:

European Markets: FTSE 100: (1.20%); DAX: (0.60%); CAC 40: (0.35%)
European markets trade lower after a mixed open as news that China has raised banks reserve ratio 50bps sent indices to session lows.
Initially, gains amongst technology shares following Intel's (INTC) results overnight were mitigated by weakness in banks, basic resources and household products sectors.
ARM Holdings rose as much as +10% before paring gains.
Germany Dec Final CPI +1.7% y/y vs prelim +1.7%
UK Dec core PPI +2.9% y/y vs consensus +3.0%
Eurozone Dec final CPI +2.2% y/y vs consensus +2.2% and prior +1.9%
European Automobile Manufacturers' Association (ACEA) Dec new passenger car Registrations for the EU+EFTA (2.7%) y/y

ASIAN MARKTES:

Asian Markets: Nikkei (0.86%); Hang Seng +0.18%; Shanghai Composite (1.29%)
Asian markets were mixed today, with more markets falling than rising on disappointing USA initial unemployment claims.
South Korea +0.89% - Oil refiners fell on concerns that the government will pressure them to lower gas prices to fight inflation
Banks rose, offsetting weakness in resource shares and leaving Hong Kong slightly up on the day. Tsingtao Brewery fell again, extending losses another 3% on fears that higher food prices will hurt its bottom line.
Australia finished flat, with banks rising to support the market, but miners falling on lower commodity prices.
Japan went down when weak January options settlement and a stronger yen resulted in profit-taking. Reaction to Prime Minister Naoto Kan’s new cabinet was limited.
China sank on talk of interest rate increases over the weekend. Banks were broadly weaker, and coal miners plunged.
China told banks to set aside more deposits as reserves for the fourth time in two months, stepping up efforts to rein in liquidity after foreign-exchange holdings rose by a record and lending exceeded targets.
Japan December domestic CPGI +1.2% y/y. December consumer sentiment diffusion index (51.7), (9.6 points) from prior.