THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP - January 28, 2011

Equity futures are trading mixed to fair value after Thursday's uneventful day.  Overnight, Moody's said on the US 'Aaa' rating: "Although no rating action is contemplated at this time, the time frame for possible future actions appears to be shortening, and the probability of assigning a negative outlook in the coming two years is rising". Today we have the release of Q4 GDP and the final reading of January Michigan Consumer Sentiment.

 MACRO DATA POINTS:

  • 8 a.m.: Fed’s Joseph Tracy speaks in Orangeburg, New York
  • 8:30 a.m.: Employment cost index, 4Q, est. 0.5%, prior 0.4%
  • 8:30 a.m.: GDP, 4Q, est. 3.5%, prior 2.6%
  • 8:30 a.m.: Core PCE, 4Q, est. 0.4%, prior 0.5%
  • 9:55 a.m.: Uni. of Michigan confidence, Jan., F, est. 73.3, prior 72.7
  • 1 p.m.: Baker Hughes rig count, Jan. 28  

TODAY’S WHAT TO WATCH:

  • Amazon.com (AMZN) forecast 1Q oper profit $260m-$385m vs est. $474.4m
  • Boston Scientific (BSX) got sued by U.S. for selling certain defective cardiac devices
  • Chubb (CB) forecast 2011 oper. EPS $5.35-$5.75 vs est. $5.82
  • Digital River (DRIV) forecast 2011 non-GAAP EPS $1.13 vs est. $1.35
  • MarkWest Energy Partners (MWE) boosted quarterly div to 65c from 64c; first increase since Oct. 2008
  • Microchip Technology (MCHP) forecast 4Q adj. EPS 56c-57c vs est. 57c, posted 3Q rev. $367.8m vs est. $362.9m
  • Microsoft (MSFT) reported 2Q adj. EPS 77c vs est. 68c, unearned rev. $13.42b vs est. $14.1b, according to data compiled by Bloomberg
  • Monster Worldwide (MWW) forecast 1Q adj. EPS 1c-4c vs est. 4c
  • QLogic (QLGC) reported 3Q adj. EPS 53c vs est. 42c
  • SanDisk (SNDK) forecast 1Q rev. $1.2b-$1.28b vs est. $1.16b
  • Tessera Technologies (TSRA) said it sees 1Q charge $2.5m-$3m, cites job cuts
  • Thoratec (THOR) reported 4Q adj. EPS 28c vs est. 29c
  • VeriSign (VRSN) says on conf. call sees 2011 rev. $750m-$780m vs est. $772.2m
  • Timothy F. Geithner gives address in Davos today; agenda for his trip also includes meetings with ECB President Jean- Claude Trichet, U.K. Chancellor of the Exchequer George Osborne and Belgian Prime Minister Yves Leterme
  • BankUnited raised $783m in IPO yesterday; sold 29m shares at $27 apiece after offering 26.3m shares at $23-$25 each
  • Sara Lee holds conf. call at 10 a.m. to give update on “strategic initiatives.” JBS gave up efforts to raise financing for takeover bid, making a spinoff of SLE coffee unit more likely, person with knowledge of the matter said yesterday
  • Kraft is re-assessing its brand portfolio and may look to sell slower-growth units such as Oscar Mayer meats business, NY Post says, citing unidentified source 
  • 69% of investors in Bloomberg global poll say Facebook is overvalued after Goldman invested $450m in a deal that put co. worth at $50b

EARNINGS:

  • American Electric Power (AEP) 6:57 a.m., $0.39 
  • Dover (DOV) 7 a.m., $0.82 
  • Ford Motor (F) 7 a.m., $0.48 
  • Honeywell International (HON) 7 a.m., $0.86 
  • Idexx Laboratories (IDXX) 7 a.m., $0.55 
  • Oshkosh (OSK) 7 a.m., $0.91 
  • AirTran Holdings (AAI) 7 a.m., $0.05 
  • Alliance Holdings GP (AHGP) 7 a.m., $0.71 
  • Alliance Resource Partners (ARLP) 7 a.m., $1.60 
  • Amcol International (ACO) 7 a.m., $0.41 
  • Scotts Miracle-Gro Co/The (SMG) 7 a.m., $(0.91)
  • Dominion Resources /VA (D) 7:30 a.m., $0.66 
  • *T Rowe Price Group (TROW) 7:32 a.m., $0.68
  • AGF Management Ltd (AGF/B CN) 8 a.m., $0.34 
  • Arch Coal (ACI) 8 a.m., $0.41 
  • Chevron (CVX) 8:30 a.m., $2.40 
  • Synovus Financial (SNV) Pre-mkt, $(0.20)
  • Enbridge Energy Partners (EEP) 4:01 p.m., $0.70 

PERFORMANCE:

Yesterday, the XLP broke the Hedgeye TRADE line as the earnings calendar seemed to be the big headwind for the staples - 8 of 9 sectors positive on TRADE and 9 of 9 sectors positive on TREND.

  • One day: Dow +0.04%, S&P +0.22%, Nasdaq +0.58%, Russell 2000 +0.22%
  • Month/Quarter/Year-to-date: Dow +3.56%, S&P +3.33%, Nasdaq +3.86%, Russell +1.50%
  • Sector Performance - (6 sectors up and 3 down): - Financials +0.88%, Consumer Disc +0.79%, Industrials +0.37%, Tech +0.34%, Utilities +0.38%, Healthcare +0.25%, Energy (0.58%), Materials (0.83%), Consumer Spls (1.01%)  

EQUITY SENTIMENT:

  • ADVANCE/DECLINE LINE: 338 (-823)  
  • VOLUME: NYSE 990.18 (+8.95%)
  • VIX:  16.15 -2.94% YTD PERFORMANCE: -9.01%
  • SPX PUT/CALL RATIO: 2.66 from 1.06 (+151.57%)

CREDIT/ECONOMIC MARKET LOOK:

Treasuries were higher with help from another well-received auction

  • TED SPREAD: 17.35 +0.913 (5.555%)
  • 3-MONTH T-BILL YIELD: 0.15% -0.01%     
  • YIELD CURVE: 2.83 from 2.83

COMMODITY/GROWTH EXPECTATION:

  • CRB: 331.39 -0.43%  
  • Oil: 85.64 -1.94% - trading +0.12% in the AM
  • COPPER: 433.85 +1.68% - trading +0.27% in the AM
  • GOLD: 1,322.20 -0.65% - trading -0.47% in the AM

OTHER COMMODITY NEWS:

  • Oil’s link to U.S. equities has unraveled from its strongest level in at least 20 years as increasing inventories reduce the price of crude in New York. The 30-day correlation between these two benchmarks was at 0.28 yesterday compared with 0.82 on Nov. 16, the highest level since at least March 1991.
  • Natural gas dropped to a four-week low on speculation that a stockpile decline last week wasn’t enough to keep supplies from reaching a record by November.  Gas fell 3.9 percent after the Energy Department said inventories dropped 174 billion cubic feet to 2.542 trillion.
  • Copper rose the most in two weeks on speculation that low U.S. borrowing costs will buoy demand for industrial metals.
  • Better-than-expected US home sales data turned the sentiment positive in entire base metals at LME, and zinc future traded higher at $2,276 per ton on London Metal Exchange (LME).
  • Argentine rains in recent days were not enough to help corn crops recover from earlier dry weather, the Buenos Aires Cereals Exchange said.  The crop, which is about 99 percent planted, is forecast to reach 19.5 million metric tons, the same as a week earlier, the exchange said today in an e-mailed statement.
  • Bangladesh, South Asia’s biggest rice buyer, doubled its import target for this year to cool domestic prices that surged to a record in December as consumers and farmers hoarded supplies, a government official said.
  • Wheat fluctuated in Chicago as some investors liquidated contracts after prices reached a five-month high on demand from North Africa, where riots broke out this month over rising food costs.  The grain gained 9.1 percent in the past two weeks as rioting in Algeria, Tunisia and Egypt sparked demand for food commodities.
  • Cocoa prices capped the longest rally in more than three years, touching a one-year on increased speculation that supplies will be disrupted from the Ivory Coast, the world’s largest producer. 
  • Cotton futures in New York jumped to a record as growers struggled to meet surging demand from China, the world’s biggest consumer.  Prices have more than doubled in the past year as China’s imports climbed to the highest level since 2006 and adverse weather slashed global crops.
  • The total U.S. cattle herd at the start of this year shrank to the smallest size since the Eisenhower Administration, reflecting high feed costs, aging producers and drought that hurt pasture conditions.  As of Jan. 1, the nation’s inventory of all types of cattle and calves fell to 92.1 million head, down 1.7 percent from the same date in 2010, according to a survey of analysts. That would be the smallest herd for that date since 1958, according to government data. 

CURRENCIES:

  • EURO: 1.3703 +0.15% - trading +0.19% in the AM
  • DOLLAR: 77.727 -0.22% - trading +0.04% in the AM

EUROPEAN MARKETS:

  • FTSE 100: (0.78%); DAX: +0.11%; CAC 40: (0.05%) (AS OF 5:30 AM EST)
  • European markets trade mixed with peripheral European indices generally outperforming the region.
  • Indices opened lower before paring losses, an exception being the FTSE100 that remained near session lows. Declining sectors lead advancers 12-6 with healthcare (1.8%) and food & beverage (1%) leading fallers.
  • Financials lead gainers, banks +1% and insurers +0.8%, building on yesterday's advance, aided by optimistic comments from Bank of America's CEO in Davos.
  • The Irish Taoiseach says he will dissolve the Dáil on 1-Feb and announce a date for the General Election.
  • Spain's unemployment rate in Q4 rose to 20.3% from prior quarters 19.8%. US futures trade lower
  • UK Jan GfK consumer confidence survey (29) vs consensus (22) and prior (21)
  • The pound was pressured by the weak UK consumer confidence data and comments by Chancellor Osborne that the UK faced particularly acute challenges with the recovery likely to be slower than some other European countries
  • U.K. Jan. consumer confidence plunged most since 1994; fell 8 points from Dec. to minus 29: respondents have become more cautious on housing decisions, are worried about interest rate increases

ASIAN MARKTES:

  • Nikkei -1.13%; Hang Seng (0.68%); Shanghai Composite +0.13%
  • Most Asian markets fell today, with india down the most (1.54%)
  • China finished flat as new real-estate taxes in Chongqing and Shanghai harmed sentiment. Gains in small caps balanced weakness in property and financial shares.
  • South Korea fell (0.34%), but Samsung Electronics  rose 2% on results, and Hynix Semiconductor gained 5% on its outlook.
  • CNOOC dropped 7% to lead energy shares down in Hong Kong, and property counters fell on developments in China.
  • Energy Resources of Australia plunged 13% after canceling its dividend and reporting a 2010 net at the bottom end of guidance.  Australia treaded down (0.65%).
  • Megabanks fell on S&P’s ratings downgrade for Japan.
  • Japan December household spending (3.3%) y/y vs cons (0.6%). December retail sales (2.0%) y/y. December jobless rate 4.9% vs prior 5.1%. December core CPI (0.4%) y/y vs (0.5%) cons.