prev

TALES OF THE TAPE: MCD, YUM, DRI, KKD, WEN, DRI

Notable news items from the last few days and Friday’s price action.

  • MCD can serve customers faster because of new methods of preparing food.  A machine that dispenses frozen fries into a wire-mesh basket for a deep fry in hot oil has reduced the time taken to about four seconds.  Previously, a basket of fries was loaded manually and took two-to-three minutes.  MCD announced Friday that the wages of its 6,000 rank-and-file workers will increase by an average of 20%, thanks largely to new machines and work systems that have enhanced productivity.
  • YUM has opened its first KFC outlet in Zambia.
  • U.S. food costs will rise 3-4% this year, unchanged from February’s estimate, according to the Department of Agriculture.  The increase would be the fastest since 2008.
  • Robusta coffee may rise 23% to its highest in at least three years because supply from Vietnam, the biggest producer of the coffee bean, will decline as demand from roasters is acclerating, according to F.O. Licht.
  • DRI highlighted gasoline prices as a significant headwind on its earnings call on Friday. 
  • KKD gained 4.9% on accelerating volume.
  • WEN declined 1.2% on accelerating volume.  I retain my positive outlook on WEN.
  • WEN was upgraded today from “Neutral” to “Buy” at Roth Capital.  The firm’s price target, per Bloomberg, is now $8.
  • DRI decined 5% on accelerating volume.  Poor performance from Olive Garden is a concern; traffic could be sacrificed for margin as commodity inflation weighs on Red Lobster.

 

TALES OF THE TAPE: MCD, YUM, DRI, KKD, WEN, DRI - stocks 328

 

Howard Penney

Managing Director


WEEKLY RISK MONITOR FOR FINANCIALS: MUNICIPAL SWAPS HIT NEW LOW AS EUROPEAN RISK METRICS RISE

This week's notable callouts include US municipal swaps tightening significantly, while European Sovereign swaps widened once again.


Financial Risk Monitor Summary (Across 3 Durations):

  • Short-term (WoW): Positive / 5 of 11 improved / 2 out of 11 worsened / 4 of 11 unchanged
  • Intermediate-term (MoM): Neutral / 4 of 11 improved / 4 of 11 worsened / 3 of 11 unchanged
  • Long-term (150 DMA): Positive / 5 of 11 improved / 4 of 11 worsened / 2 of 11 unchanged

 

WEEKLY RISK MONITOR FOR FINANCIALS: MUNICIPAL SWAPS HIT NEW LOW AS EUROPEAN RISK METRICS RISE - summary


1. US Financials CDS Monitor – Swaps were mixed across domestic financials, widening for 13 of the 28 reference entities and tightening for 15. 

Tightened the most vs last week: BAC, C, MET

Widened the most vs last week: CB, MBI, GNW

Tightened the most vs last month: C, WFC, UNM

Widened the most vs last month: ACE, XL, MBI

 

WEEKLY RISK MONITOR FOR FINANCIALS: MUNICIPAL SWAPS HIT NEW LOW AS EUROPEAN RISK METRICS RISE - us cds

 

2. European Financials CDS Monitor – Banks swaps in Europe were mixed, tightening for 17 of the 39 reference entities and widening for 22.

 

WEEKLY RISK MONITOR FOR FINANCIALS: MUNICIPAL SWAPS HIT NEW LOW AS EUROPEAN RISK METRICS RISE - euro cds

 

3. European Sovereign CDS – Sovereign CDS widened across Europe, particularly in Portugal, rising 21 bps on average last week. 

 

WEEKLY RISK MONITOR FOR FINANCIALS: MUNICIPAL SWAPS HIT NEW LOW AS EUROPEAN RISK METRICS RISE - sov cds

 

4. High Yield (YTM) Monitor – High Yield rates rose slightly last week, ending at 7.88, 7 bps higher than the previous week.  

 

WEEKLY RISK MONITOR FOR FINANCIALS: MUNICIPAL SWAPS HIT NEW LOW AS EUROPEAN RISK METRICS RISE - high yield

 

5. Leveraged Loan Index Monitor – The Leveraged Loan Index rose last week to end the week at 1605.   

 

WEEKLY RISK MONITOR FOR FINANCIALS: MUNICIPAL SWAPS HIT NEW LOW AS EUROPEAN RISK METRICS RISE - lev loan

 

6. TED Spread Monitor – The TED spread fell from its highs last week, ending the week at 22.0 versus 23.7 the prior week.

 

WEEKLY RISK MONITOR FOR FINANCIALS: MUNICIPAL SWAPS HIT NEW LOW AS EUROPEAN RISK METRICS RISE - ted spread

 

7. Journal of Commerce Commodity Price Index – Last week, the JOC index rose to end the week at 35.1, 7.6 points higher than the prior week.

 

WEEKLY RISK MONITOR FOR FINANCIALS: MUNICIPAL SWAPS HIT NEW LOW AS EUROPEAN RISK METRICS RISE - JOC

 

8. Greek Bond Yields Monitor – We chart the 10-year yield on Greek bonds.  Last week yields rose 29 bps.

 

WEEKLY RISK MONITOR FOR FINANCIALS: MUNICIPAL SWAPS HIT NEW LOW AS EUROPEAN RISK METRICS RISE - greek bond

 

9. Markit MCDX Index Monitor – The Markit MCDX is a measure of municipal credit default swaps.  We believe this index is a useful indicator of pressure in state and local governments.  Markit publishes index values daily on four 5-year tenor baskets including 50 reference entities each. Each basket includes a diversified pool of revenue and GO bonds from a broad array of states. Our index is the average of their four indices.  As of Thursday, the most recent data available, spreads hit a new low of 121.8. 

 

WEEKLY RISK MONITOR FOR FINANCIALS: MUNICIPAL SWAPS HIT NEW LOW AS EUROPEAN RISK METRICS RISE - mcdx

 

10. Baltic Dry Index – The Baltic Dry Index measures international shipping rates of dry bulk cargo, mostly commodities used for industrial production.  Higher demand for such goods, as manifested in higher shipping rates, indicates economic expansion.  Early in the year, Australian floods and oversupply pressured the Index, driving it down 30%. Since then it has bounced off the lows.  Last week it rose slightly, climbing 54 points to 1585. 

 

WEEKLY RISK MONITOR FOR FINANCIALS: MUNICIPAL SWAPS HIT NEW LOW AS EUROPEAN RISK METRICS RISE - baltic dryu

 

11. 2-10 Spread – We track the 2-10 spread as a proxy for bank margins.  Last week the 2-10 spread widened slightly to 270 bps. 

 

WEEKLY RISK MONITOR FOR FINANCIALS: MUNICIPAL SWAPS HIT NEW LOW AS EUROPEAN RISK METRICS RISE - 2 10

 

12. XLF Macro Quantitative Setup – Our Macro team sees the setup in the XLF as follows:  0.9% upside to TRADE resistance, 0.8% downside to TREND support.

 

WEEKLY RISK MONITOR FOR FINANCIALS: MUNICIPAL SWAPS HIT NEW LOW AS EUROPEAN RISK METRICS RISE - XLF

 

 

Joshua Steiner, CFA

 

Allison Kaptur


THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP - March 28 2011


As we look at today’s set up for the S&P 500, the range is 40 points or -2.34% downside to 1283 and 0.70% upside to 1323.

 

PERFORMANCE:

               

As of the close yesterday we have 6 of 9 sectors positive on TRADE and 9 of 9 sectors positive on TREND.  The three sectors that remain Broken on TRADE are Financials, Technology and Utilities.   

  • One day: Dow +0.41%, S&P +0.32%, Nasdaq +0.24%, Russell +0.83%
  • Month-to-date: Dow (0.05%), S&P (1.01%), Nasdaq (1.41%), Russell +0.05%
  • Quarter/Year-to-date: Dow +5.55%, S&P +4.47%, Nasdaq +3.40%, Russell +5.13%
  • Sector Performance: Energy +0.90%, Materials +0.54%, Industrials +0.35%, Healthcare +0.28%, Consumer Discretionary +0.18%, Financials +0.28%, Tech +0.24%, Consumer Staples +0.00% and Utilities -0.03%

THE HEDGEYE DAILY OUTLOOK - daily

 

EQUITY SENTIMENT:

  • ADVANCE/DECLINE LINE: 939 (+2)  
  • VOLUME: NYSE 824.83 (-5.26%)
  • VIX:  17.91 -0.50% YTD PERFORMANCE: +0.90%
  • SPX PUT/CALL RATIO: 1.99 from 2.33 (-10.59%)

CREDIT/ECONOMIC MARKET LOOK:


Treasuries were weaker for a seventh day despite significant MACRO headwinds.

  • TED SPREAD: 22.89 +0.153 (0.672%)
  • 3-MONTH T-BILL YIELD: 0.09%
  • 10-Year: 3.46 from 3.42
  • YIELD CURVE: 2.67 from 2.70

MACRO DATA POINTS:

  • 8:30 a.m.: Personal spending, est. 0.5%, prior 0.2%
  • 8:30 a.m.: Personal income, est. 0.4%, prior 1.0%
  • 10 a.m.: Pending home sales, est. M/m 0.0%, prior (-2.8%)
  • 10:30 a.m.: Dallas Fed Manufacturing, est. 17.6, prior 17.5
  • 11 a.m.: Export inspections (corn, wheat, soybeans)
  • 11:30 a.m.: U.S. to sell $32b in 3-mo. bills, $30b in 6-mo. bills
  • 12:40 p.m.: Fed’s Lockhart to speak on U.S. economy in Atlanta
  • 1 p.m.: U.S. to sell $35b in 2-year notes
  • 3:40 p.m./4 p.m.: Fed’s Evans speaks in South Carolina
  • 6 p.m.: Fed’s Rosengren speaks in Boston

WHAT TO WATCH:

  • Libyan rebel forces advance westward with support from NATO air strikes targeting Sirte, Muammar Qaddafi’s hometown hours after the Western alliance agrees to take command of military operations from the U.S.
  • The highest radiation levels so far at the crippled nuclear Japanese power plant may have come from a meltdown of nuclear fuel 
  • Portuguese President Anibal Cavaco Silva may call early elections for June 

COMMODITY/GROWTH EXPECTATION:

  • CRB: 359.57 +0.30% YTD: +8.04%  
  • Oil: 105.40 -0.19%; YTD: +12.20% (trading +0.48% in the AM)
  • COPPER: 441.90 -0.12%; YTD: -2.15% (trading -1.66% in the AM)  
  • GOLD: 1,428.75 -0.34%; YTD: -0.18% (trading -0.90% in the AM)  

COMMODITY HEADLINES FROM BLOOMBERG:

  • Rice Planting in Fukushima May Be Abandoned Amid Soil Tainted by Radiation
  • Cotton Rally Peaking as Record Crop Means First Stockpile Gain Since 2007
  • Commodities Retreat for Second Day on Japanese Radiation, Merkel's Setback
  • Oil Drops for a Third Day in New York Following Victories By Libyan Rebels
  • Aluminum Stockpiles Climb on Two Locations as Demand Rising: Chart of Day
  • Copper Falls Most in Two Weeks as Japanese Carmakers May Suspend Activity
  • Wheat, Corn Gain as Japan May Boost Imports Amid Radioactive Contamination
  • Gold Declines on Rally to Record Price, Signs of Improving Economy in U.S.
  • Cocoa May Gain as Ivory Coast Unrest Heightens Shortage Risk; Coffee Falls
  • Qaddafi Has $7 Billion of Bullion to Fund War Against Rebels: Chart of Day
  • Mugabe Vows to Force Foreign Mining Companies  to Sell Stakes in Zimbabwe
  • Posco Extends Gains After Saying It May Raise Steel Prices as Costs Climb
  • Hedge Funds Boost Bullish Bets on Gas Most in Three Months: Energy Markets
  • Corn, Soybeans May Climb This Week on Stockpile Speculation, Survey Showss

CURRENCIES:

  • EURO: 1.4088 -0.70% (trading -0.27% in the AM)
  • DOLLAR: 76.217 0.74% (trading +0.18% in the AM) 

EUROPEAN MARKETS:


According to the Hedgeye models both the FTSE and the DAX remain bearish from an intermediate-term TREND perspective; this is new.  No major MACRO events today.

  • United Kingdom: +0.10%
  • Germany: -0.16%
  • France: +0.12%
  • Spain: +0.18%
  • Greece -0.36%
  • Italy: +0.10%

ASIAN MARKTES:


Japan down overnight and has at least another -8.5% downside from here; China remains bullish, up for the 6th of last 7 days.  We are currently long CAF.      

  • Japan: -0.60%
  • Hang Seng: -0.39%
  • Australia -0.19%
  • China: +0.21%
  • India: +0.68%
  • Taiwan: -0.67%
  • South Korea +0.11%

 

 

Howard Penney

Managing Director

 

THE HEDGEYE DAILY OUTLOOK - setup


get free cartoon of the day!

Start receiving Hedgeye's Cartoon of the Day, an exclusive and humourous take on the market and the economy, delivered every morning to your inbox

By joining our email marketing list you agree to receive marketing emails from Hedgeye. You may unsubscribe at any time by clicking the unsubscribe link in one of the emails.



THE M3: MASS MARKET; UNEMPLOYMENT, GDP, S'PORE HOME PRICES; PANSY HO PORTUGAL BANK BOARD

The Macau Metro Monitor, March 28, 2011


 

WHITHER THE MASS MARKET? Intelligence Macau

IM sees VIP revenues continuing to outpace mass revenues and that Galaxy Macau will open in a saturated mass market.  The catalysts for mass growth have been muted so far this year--visitation has, more or less, stabilized; infrastructure projects (e.g. Guangzhou-Zhuhai railway line) won't be completed until later this year; and the marketing campaigns of Macau's casinos, with the exception of SJM's 3rd party casinos, haven't reached many destinations beyond Guangdong.


EMPLOYMENT SURVEY FOR DECEMBER 2010 - FEBRUARY 2011 DSEC

The unemployment rate for December 2010 - February 2011 was 2.8%, up by 0.1% point over the previous period (November 2010 - January 2011).  Total labor force was 334,000 in the period and the labor force participation rate stood at 71.6%, up by 0.2% point from the previous period.  Employment of Hotels, Restaurants & Similar Activities and the Gaming Sector saw an increase.

 

GROSS DOMESTIC PRODUCT 2010 DSEC

Macau's 2010 real GDP rose 26.2% to MOP 217BN (US$27.2BN). Per-capita GDP is US$ 49,745.  Total visitor arrivals increased by 14.8% in 2010.

 

PRIVATE HOME PRICES DOWN SLIGHTLY IN FEBRUARY: NUS INDEX Channel News Asia

According to the NUS Singapore Residential Price Index, private home prices in Singapore fell 0.4% from January.

 

PANSY HO TO REPRESENT STANLEY HO GROUP IN PORTUGAL'S BIGGEST PRIVATE BANK macaubusiness.com

Pansy Ho will replace Patrick Huen Wing Ming as Stanley Ho Group's representative on the supervisory board of BCP bank starting at the bank's next annual general meeting on April 18.  Her term will end in 2013.


The Stanley Ho Group includes Stanley Ho's 0.64% share in BCP, plus STDM's 1.62% stake.


Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

next