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R3: TGT, WMT, BBY, AMZN

 

R3: REQUIRED RETAIL READING

June 21, 2011

 

 

RESEARCH ANECDOTES

  • According to a Consumer Report study, the Simple Touch Nook has scored above the Kindle for the first time since inception. In addition to a longer battery life, one of the key features that give it an edge is that it supports e-book loans from public libraries something other e-book readers provide as well. With another line from Sony expected later this month, the pressure is on Amazon to not only match, but surpass its competition when the e-book loan friendly version arrives sometime “later this year.”
  • An increase in online grocery shopping has spawned a new service from Nielson Research called Online Basket View. The research giant noted that online shoppers now account for ~2% of total consumer packaged goods in the U.S. a category that’s expected to double in size by 2014 to $24Bn. With both Amazon and Wal-Mart testing new delivery services with “Amazon Fresh” in Seattle and “Wal-Mart To Go” in San Jose that will expand the number of goods they offer, legacy grocers are faced once again with an increasing threat from online competitors. While consumers are likely to expand the scope of buying online from diapers alone, there is something about picking out your own produce that will likely limit just how much share online concepts can capture from legacy grocers.
  • After this weekend’s performance, expect to see more in the way of endorsement announcements involving Rory McIlroy who became the youngest player to ever win the U.S. Open. With current deals including only hotel operator Jumeirah, Titleist, and Oakley, the young star some have already dubbed as the next Tiger Woods has undoubtedly attracted the attention of higher profile endorsers albeit at what is now a considerably higher price tag.

OUR TAKE ON OVERNIGHT NEWS

 

Supreme Court Nixes Class Action Against Wal-Mart - The U.S. Supreme Court ruled in favor of Wal-Mart Stores Inc. on Monday, stopping what would have been one of the largest gender discrimination class action lawsuits in history from moving forward. The high court ruled that the case cannot advance as a class action, which could have potentially encompassed 1.5 million current and former female Wal-Mart employees and exposed the nation’s largest retailer to billions of dollars in liability.  Gisel Ruiz, executive vice president of people at Wal-Mart, said of the ruling, “The Court today unanimously rejected class certification and, as the majority made clear, the plaintiffs’ claims were worlds away from showing a company-wide discriminatory pay and promotion policy.”<WWD>

Hedgeye Retail’s Take:  WMT did not only dodge a bullet here, but they dodged a full scale biological warfare onslaught.

 

No Union Victory for Target Workers - Employees at Target Corp.’s Valley Stream, N.Y., store on Friday voted to reject the United Food & Commercial Workers International Union by a margin of 137 to 85, the Minneapolis-based retailer said. “The results of Friday’s union election loss are being contested by the UFCW Local 1500,” said Bruce W. Both, Local 1500’s president, adding that the union plans to begin a campaign, “Target: Democracy,” at the 26 other New York metro-area Targets. The vote was closely watched by retail and labor experts because it was Target’s first union election in 14 years. Regardless of its outcome, it is predicted to have far-reaching implications. A union victory could embolden workers at other big-box chains, retail experts said. According to the UFCW, publicity surrounding the Valley Stream Target sparked interest from workers at other area stores. Local 1500 represents 23,000 retail food workers in the New York metro area.<WWD>

Hedgeye Retail’s Take: This was a pretty wide margin against unionization. We find that surprising, yet encouraging, for the retailers. Combine this with Macy’s peaceful resolution to the NY Union  contract, and the Supreme Court striking down the gender discrimination suit at Wal-Mart, and it gives the impression that labor relations in US retail is in its ‘happy place.’

 

Best Buy Expands Cloud-Based Online Music Platform - Best Buy Co., the world’s largest consumer-electronics retailer, is expanding a U.K. online music platform to the U.S. to challenge Amazon Inc. and Apple Inc. (AAPL) in so-called cloud-based offerings, the technology supplier said. Best Buy’s U.S. Music Cloud service, powered by Catch Media Inc., is available for mobile devices such as Research In Motion Ltd.’s BlackBerry smartphone and those using Android technology, Catch Media Chief Executive Officer Yaacov Ben-Yaacov said today in a phone interview. The platform, marketed as My Music Anywhere in the U.K., is designed allow users to stream content they have purchased to a computer, mobile phone or tablet, eliminating the need to transfer and store computer files, Beverly Hills, California- based Catch Media said in a June 14 statement. The service is similar to Amazon’s Cloud Player, introduced in late March, and Apple’s iCloud platform, which will be rolled out this fall. <Bloomberg>

Hedgeye Retail’s Take: Seems to us that we’re simply talking data storage here. As we see with external hard drives on computers, brand name is irrelevant. Our sense is that there will be three deciding factors; 1) Price, 2) Ease of uploading huge amounts of data to the server (Amazon’s Cloud is not perfect in this regard), and perhaps most of all, 3) Trust. 

 

China Planning to Reduce Taxes on Luxury Goods - China is planning to reduce or possibly even eradicate taxes on imported luxury goods, state media reported Monday.  The finance ministry will introduce a new tariff system for overseas products, including high-end goods, by the beginning of October, the 21st Century Business Herald said. The newspaper did not outline any specifics of the new plan, only reporting that taxes will be lowered or removed on cosmetics, perfumes, watches, bags, shoes and watches.  The aim of the new plan is largely to boost domestic consumption. The Chinese are now among the biggest consumers of luxury products globally, however millions of domestic consumers travel to Hong Kong and Europe to avoid taxes on luxury products on the Mainland that can be as high as 60 percent. <WWD>  

Hedgeye Retail’s Take: The interesting slant here is that its moves won’t account for production moves by luxury goods manufacturers. Technically speaking, there’s no reason why China cannot produce most luxury items --- yet they are looking to boost imports. Our sense is that they boost Consumption while they incrementally incentivize local factories to build up their own capacity. Then in another 2-3 years, we’ll have a luxed-out Chinese consumer with deflating local prices due to better manufacturing costs.

 

Chinese Sports Industry Sets Five-year Target - The General Administration of Sport of China has recently released the 12th Five-Year Plan (2011- 2015) for the sports industry, aiming to increase the added value of the industry up to RMB400 billion, accounting for over 0.7% of the total GDP, sources reported. The group set a target for the industry's industrial added value to increase over 15 percent annually. By 2015, the sports industry, including the apparel, footwear and accessories sectors, should hire a total of over 4 million employees. And the industry should become one of the important growth points of China’s economy, according to the report. <FashionNetAsia>

Hedgeye Retail’s Take:  China is not just talking production; it’s also research, design and marketing of the content we see today. But keep in mind that it also includes local branding and retail distribution of local brands, which we think, on the margin, are as big a threat to the broader industry as anyone.

 

Pressure Mounting for Taxes on E-tail - Shopping the Internet tax-free may soon be a luxury of the past. A string of states is pushing legislation to require online sellers to collect sales taxes, while the U.S. Congress also may enter the fray as soon as this month with a bill to do the same. The controversy surrounding the issue pits Internet-only retailers, and other so-called “remote sellers” like catalogue companies, against traditional brick-and-mortar storefronts, including those with e-commerce sites that typically are required to collect sales taxes in states in which they have stores. The controversy often is misidentified as being focused on small Main Street retailers struggling against e-commerce behemoths. However, large multistate stores are on the side of small retailers in complaining that they are at a competitive disadvantage when consumers calculate the added cost of sales tax before shopping with tax-free, Internet-only Web sites. <WWD>

Hedgeye Retail’s Take: Our stance on this has been clear. Internet taxation is something you can take to the bank. It will happen. More of the questions surround how the States will claim to the Federal government what they view to be their fair share. As they see that bucket go up to very large numbers – which it will – then everyone will want a piece. We’d be surprised to see them get a single dime.

 

Tory Burch Unveils Madison Avenue Flagship Plans - Tory Burch’s Madison Avenue flagship, which is slated to open in September, is already making quite an artistic statement. On Thursday evening, a 60-foot-high hoarding went up at the store’s location at 797 Madison Avenue, unveiling a collaboration between the designer and street artist James De La Vega, which will extend into product in time for the opening of the 8,135-square-foot, four-story flagship. Madison Avenue will become the 54th Tory Burch store to open in the world. “It’s a big deal for the company, and for me personally,” Burch said of the Madison Avenue location. “Having a presence uptown was very important for us. We launched on Elizabeth Street in 2004 and it’s nice to come uptown now. I live uptown, and I used to eat at the Gardenia coffee shop [the site’s previous occupant].” <WWD>

Hedgeye Retail’s Take: Tory  Burch’s name is in the press every other week. The brand is hot – though to its credit, it has been managed since its 2004 launch in a way that is somewhat Ralph Lauren-esque. Our bet is that she becomes part of a bigger company within 12 months.

 

 


European Risk Monitor: Breath Holding Ahead of Greek Confidence Vote

Positions in Europe: Long Germany (EWG); Short Spain (EWP)

 

All eyes and ears are waiting for Greece’s confidence vote on PM Papandreou’s current government, scheduled to be announced by midnight local time, or 5pm EST tonight.

 

An expert on the Greek political state recently stated on a JPMorgan conference call that the probability that Papandreou’s leading PASOK party wins the confidence vote is around 75%. We think the number is realistic and expect, despite a few PASOK party dissenters in recent weeks, parliamentary heads to vote along the party line to secure their jobs.

 

Concerns over party defection should be put in context. Over the last 10 days 2 PASOK deputies resigned, meaning their seats were turned over to new PASOK members, and two members defected, meaning they refuse to vote for the party but don’t give up their seats. Currently PASOK has 155 seats in the 300 seat chamber, or a majority of 5 seats. While the party had as much as a 10 seat majority in 2009, history has shown that a party can rule with as little as a 1 seat majority.

 

The main opposition party, New Democracy (under the leadership of Antonis Samaras), currently polls around 30% approval, or around 10% higher than PASOK if elections were held today, awaits tonight’s vote. Commentators criticize New Democracy’s anti-austerity position and lean to renegotiate bailout terms with troika (ECB, IMF, EU) as short-sided and unrealistic for their positions are squarely against troika’s mandate that bailout monies will only be provided if the €78 billion austerity package [€28Bill in spending cuts and tax hikes and €50 billion sale of private assets by 2015] is passed. 

 

Risk, as reflected by Greek sovereign CDS spreads and bond yields, has come in over recent days reflecting the likelihood that Papandreou wins the confidence vote tonight and Greece receives future bailout funds (see chart below).  That said, risk in Ireland and Portugal continue to trend higher, and indicate once again that fiscal imbalances across the periphery are far from rear-view (see second chart below).  

 

European Risk Monitor: Breath Holding Ahead of Greek Confidence Vote - b. risky

 

European Risk Monitor: Breath Holding Ahead of Greek Confidence Vote - b. risk2

 

We expect to see EUR-USD support around $1.42 and trade up to $1.44 over the immediate term, bouncing on headline news, but ultimately finding support as big brother Troika steps in to aid Greece over the intermediate term.

 

 

Greece’s Timeline

If Papandreou wins the Confidence vote tonight, here’s a timeline of important events over the next weeks to keep ahead of:

 

Thursday, June 23-Fri June 24 – Summit of EU leaders to assess the 18-month-long debt crisis.

 

Thursday, June 30 – Greece votes on a €78 billion austerity package, the passing of which is a precondition, as defined by the European finance ministers, to get its next quarterly (€12 Bill.) installment of bailout money from Troika in July.

 

July 3 – Eurozone Finance Ministers meet.  Assuming the Greek parliament votes to pass the austerity/privatization measures, the next tranche of IMF money would be formally released following this Jul 3 gathering. 

 

July 11 – European Finance Ministers meeting.

 

 

Banks Indicate Risk

 

As is typical for our weekly European Risk Monitor, our European Financials CDS Monitor shows that bank swaps in Europe were wider last week, week-over-week.  35 of the 38 swaps were wider and only 3 tightened. The move is in line with the rising risk premium to own the perilous financial state of the periphery.

 

European Risk Monitor: Breath Holding Ahead of Greek Confidence Vote - b. risk 3

 

 

We do not currently see the weakness in Greek capital markets as a buying opportunity. For reference, Greek equities are down -27% since a high in February, and finished 2010 down -36%. We’d get short Spain or Italy at the right price. We’re currently short Spain via the etf EWP in the Hedgeye Virtual Portfolio.  We remain long Germany (EWG), despite a more cautious view given slowing high frequency data points over the last months, the newest data including ZEW’s 6-month forward looking economic sentiment survey that plunged to -9 in June versus 3.1 in May.

 

Matthew Hedrick

Analyst


CCL 2Q CONF CALL NOTES

Solid pricing.  Better than expected guidance.

 

 

"Our North America brands' revenue yields increased 3 percent in the second quarter while yields for our Europe, Australia and Asia brands were up slightly (constant dollars), having been affected by the geo-political events which unfolded in the Middle East and North Africa, as well as the earthquake and nuclear disaster in Japan.  The revenue yield improvement was more than offset by higher fuel prices which cost the company approximately $150 million, or $0.19 per share. Our North America brands continue to perform well, benefiting from the gradual economic recovery, with strong yield growth expected in the second half of the year. We expect lower yields for our Europe, Australia and Asia segment in the second half of 2011 as a result of the significant deployment changes in Europe. Despite the considerable challenges we have faced this year, the long-term fundamentals of our business remain sound."

 

-Carnival CEO Micky Arison

 

 

HIGHLIGHTS FROM THE RELEASE

  • 2Q2011 results:
    • EPS: $0.26 (consensus $0.22)
    • Current $ net revenue yields: +6% (above guidance of +4.5% to 5.5%)
    • Constant $ net revenue yields: +2.3% (higher end of guidance +1.5-2.5%)
    • Gross revenue yields: +5.8%
    • Constant dollar net cruise costs (ex. fuel): +2.7% (higher-end of guidance +2-3%)
    • Gross cruise costs: +10.3%
    • Fuel: +35% YoY to $673/metric ton (higher than guidance of $659), costing $0.19 in EPS
  • 3Q2011 guidance
    • Constant dollar net revenue yields: +1% to 2% (+5.5% to 6.5% on current dollar basis vs guidance of 5.9%)
    • Constant dollar net cruise costs (ex. fuel): +2.5-3.5% (+7.0% to 8.0% on current dollar basis)
    • Fuel: $670/metric ton; 860K metric tons
      • Fuel costs for Q2: $170MM or $0.21 EPS drag
    • EPS: $1.60-1.64 (Consensus: $1.74)
  • FY2011 guidance:
    • Reiterates implied guidance on June 13
      • Diluted EPS: $2.40-2.50
      • Constant dollar net revenue yields: +1.5% to 2.5% 
      • Previously announced, 15 cent (1% yield) adverse geopolitical impact from previous guidance (already includes the 5 cent cost benefit (fuel/FX) from Q2)
    • Current dollar net revenue yields: +4-5% (lower than guidance of +4.5 to 5.5%)
    • Constant dollar net cruise costs (ex. fuel): flat to +1% (unchanged from guidance)
    • Fuel: $639/metric ton (higher than guidance of $631/metric ton)
    • Fuel consumption: 3,415K (lower than guidance of 3,440K)

CONF CALL

  • 4 cent 2Q EPS beat: 2 cents from net revenue yields, 2 cents from misc. non-operating items
  • 2Q Capacity: +5%;
    • EAA brands up 9%; NA brand up 3%
  • 2Q Net yields: similar increases in net ticket and net onboard/other revenues
    • NA ticket yield: +3%
    • 2Q: flat Caribbean itineraries
      • On track with easing of pricing pressure as 2011 progresses
    • All other itineraries up except Europe (impacted by ME unrest)
    • EA ticket yield: +1%
      • Itineraries outside of Europe were higher
    • Net onboard and other yields:+2%
      • Driven by NA brands as EAA brands impacted by MENA itinerary changes
  • Net Cruise costs: saw inflation in food costs, travel, and rooms.
  • 10% change in price of fuel for rest of 2011 represents a $0.14 EPS impact
  • 10% change in FX for the rest of 2011 represents a $0.16 EPS impact
  • 2Q more challenging than expected, esp. European brands
  • Fleet-wide reduction will cost $0.20: $0.17 per share related to MENA, ~$0.02 NA brand reduced pricing, $0.01 for Japan
  • Significant increase in Mediterranean capacity was a factor in lower pricing
  • UK: recently, consumer confidence has rebounded and sees stables booking patterns 
  • 2H 2011
    • Fleet-wide pricing higher YoY (more higher in NA than EAA)
    • Occupancies are lower
      • Slightly lower for NA; lower for EAA
    • Looking at trailing 6-wk bookings show improvement
  • NA brands continue to perform well despite slower growth in US economy; this bodes well for 2012 bookings.
  • 3Q 2011
    • +4.8% capacity (NA: +3.3%, EAA: +7.2%)
    • Occu. a little lower
    • Local pricing nicely ahead YoY, despite Europe
    • NA brands: 36% in Caribbean, down YoY; 25% in Europe (17% last year); 23% all others (unchanged YoY)
    • NA pricing: "well ahead of last year"
      • Alaska pricing: higher YoY
      • Caribbean pricing: a little higher
      • Europe pricing: lower
      • Trailing 6-wk NA Booking volumes: "very little inventory left"
    • EAA brands: 83% in Europe
    • EAA pricing: slightly ahead
    • EAA occ: lower
    • Trailing 6-wk EAA booking: strong, with lower prices
  • 4Q 2011
    • +5.8% capacity (NA: +3.2%, EAA: +10%)
    • Pricing nicely higher
    • Occu: lower-- slighty lower for NA, lower for EAA
    • NA brands: 42% in Caribbean down from 50%; 14% in Europe vs 9% last year; 10% in Pacific (unchanged from last year)
      • NA Bookings strong
    • EAA brands: 71% in Europe vs. 64% last year
      • Pricing higher
      • Lower occu
      • Expect EAA pricing to continue to decline 
      • Bookings should pick up
  • 1Q 2012
    • +5.5% capacity (NA: +4.5%, EAA: +7.2%)
    • Pricing higher, occu slightly lower
    • Bookings encouraging
    • NA brands: 65% in Caribbean (unchanged YoY)
      • Caribbean pricing nicely higher with slightly lower occu
      • pricing for all others higher at slightly lower occu.
    • EAA brands: 22% in Caribbean; 20% Europe (23% last year); 18% in South America (16% last year)
    • EAA pricing slightly higher at slightly lower occupancies

Q&A

  • No visibility for summer 2012, which is normal around this time
  • 2012 NA capacity : +3.5% ; EAA: +8%; 
  • 2012 NA industry capacity: +3%; EAA: +6%
  • Not sure about Greece but hasn't been a significant problem yet
    • 8-9% of capacity in Greece in 2H 2011
    • Seabourn has major presence in Athens
    • Most of Greek islands not impacted
  • Relatively more exposure to MENA in Q4 but have already guided yields lower;
  • Conservative on Q4 outlook
  • Historically when Europe weakens, Alaska does well as an alternative destination
  • Thinks people who canceled MENA bookings went to book other itineraries at lower prices
  • The Q2,Q3,Q4 itinerary changes "have settled down"
  • Q2 five cent cost savings: improvement in fuel efficiency, nonoperating items
  • Onboard spending guidance: expected nomralized basis (up 2% for 2011); relatively stable
    • Up across all categories except casinos; nothing changed since previous guidance
  • Non-operating items:
    • Ships lease benefits
    • FX gains
    • May pick up another cent or two next year
  • No impact from Chilean volcano for Australia and New Zealand Cruises
  • Europe Q2 and beyond repositionings: nothing changed for MENA right now but will change if needed
  • Stopped calling in Israel in Q2 but will restart in the fall
  • No update on fuel hedging
  • Had a significant cost in 4Q 2010 due to fire on Carnival Splendor
  • Going forward on costs: 1/2 of inflation; long-term goal: 0-0.5 of inflation
  • Northern Europe doing well
  • UK brand capacity down slightly
  • Customer deposits: +$400MM (May to May), # has currency benefits
  • Will stop some calls in Tunisia
  • No change in dividend/repurchase decisions
  • Mexico situation--Princess pulling out--seems to be okay
  • "If you price fuel where it is today and we're off to a good start in 2012"
  • NA: premium, luxury Cruises and contemporary all strong 
  • Egypt elections in September could impact Europe redeployment decisions

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Squeezy: SP500 Levels, Refreshed

POSITION: no position in SPY

 

No position. Waiting. Watching.

 

After selling my long US Dollar position (UUP) and covering my only remaining S&P Sector Short (XLB) late last week, that’s what I have been doing.  Sometimes you just need to let Squeezy The Shark strap on the old feedbag and rally to lower-highs.

 

No matter where we go this morning here, are the refreshed risk management lines that matter across Hedgeye’s durations: 

  1. Intermediate-term TREND resistance = 1320
  2. Immediate-term TRADE resistance = 1294
  3. Immediate-term TRADE support = 1259 

There’s no need to get whipped around by this. The market is behaving within rational boundaries of what we’d consider probable. Just be patient and prepared to start selling more aggressively again on the way up.

 

Hedgeye is 17 for 18 in June on closed positions (longs and shorts). We’re in no rush to do anything until hands look forced. We’re getting there.

KM

 

Keith R. McCullough
Chief Executive Officer

 

Squeezy: SP500 Levels, Refreshed - 1


TALES OF THE TAPE: MCD, BWLD, DRI, CBRL, DIN, TXRH, PFCB, RUTH

Notable news items and price action from the restaurant space as well as our fundamental view on select names.

 

 

MACRO

 

“Deflating the Inflation” - U.S. wheat futures closed at a six-and-a-half-month low Monday as the advancing harvest increased inventories of the grain.

 

With corn planting now complete, 97% of corn in the top 18 producing states has emerged according to the USDA’s latest Crop Progress report released June 20.  70% of crops were in “good” to “excellent” condition, compared to 69% last week and 75% last year.

 

 

QUICK SERVICE

  • MCD UK say the introduction of Wraps  is the biggest introduction to its permanent menu in four years and says it has made more changes to its menu in four years than in the previous 30. The range includes a Grilled Chicken Salad Wrap and a Sweet Chilli Crispy Chicken Wrap, and has been packaged to make them easy to eat on the move. McDonald’s is also running a wrap of the day promotion offering one wrap at £1.99.

Hedgeye: Globally, MCD continues to try to build sales around the shoulder periods of lunch. 

 

 

FULL SERVICE

  • BWLD - Buffalo Wild Wings has pledged that if the players and owners compromise on their differences and come to an agreement to return to the field by July 20 - the first day players are scheduled to report to training camp - everyone who signs the "Save Our Season" petition will be awarded six free wings to be redeemed when the return of professional football is celebrated in September. 

Hedgeye:  I like this promotion, but it also tells you that sales trends without football are not going to be good. 

 

  • DRI - Interesting call out of Wells Fargo; Darden Restaurants estimates increased.  “Firm cites the new Seafood Feast promotion at Red Lobster and raises FQ1 and F12 estimates.”  As I wrote a few weeks back, the $15 price point at RL is an “extreme” discounting for that brand. 

Hedgeye: I know the SSS have accelerated, but the question remains about consumer preference for the promotion, especially given the double digit inflation the company is experiencing in seafood.

 

  • CBRL: Right when the company faces pressure from an activist investor CBRL names Coleman Peterson, apparently known as “America’s Top People Person,” to their Board of Directors. Previous executive experience includes time as the chief human resources officer for Wal-Mart Stores, Inc. 

Hedgeye: Maybe an indication the Mr. Woodhouse is just ignoring the thorn in his side.

 

  • DIN plans to expand IHOP to the Middle East.

 

  • TXRH gained on accelerating volume while PFCB and RUTH declined on accelerating volume. 

 

TALES OF THE TAPE: MCD, BWLD, DRI, CBRL, DIN, TXRH, PFCB, RUTH - stocks 621

 

Howard Penney

Managing Director


THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP - June 21, 2011

 

The USD down = Commodity and Stocks up, but lower-highs on low volume across the board.  Is the USD is back down for the week-to-date because:

 

A) Bernanke has his US Dollar Devaluation Presser in the next 48hrs?

B) Eurocrats are finding a way to hold $1.42 EURO/USD support?

 

We will get more bullish on Global Equities (China in particular) if the USD strengthens and we Deflate The Inflation - not the other way around.  As we look at today’s set up for the S&P 500, the range is 32 points or -1.51% downside to 1259 and 0.99% upside to 1291.

 

SECTOR AND GLOBAL PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - levels

 

THE HEDGEYE DAILY OUTLOOK - daily sector view

 

THE HEDGEYE DAILY OUTLOOK - global performance

 

 

EQUITY SENTIMENT:

  • ADVANCE/DECLINE LINE: +1069 (+296)  
  • VOLUME: NYSE 786.44 (-50.99%)
  • VIX:  19.99 -8.51% YTD PERFORMANCE: +12.62%
  • SPX PUT/CALL RATIO: 1.65 from 2.03 (-18.51%)

 

CREDIT/ECONOMIC MARKET LOOK:

  • TED SPREAD: 22.12
  • 3-MONTH T-BILL YIELD: 0.03%
  • 10-Year: 2.97 from 2.94
  • YIELD CURVE: 2.59 from 2.56 

 

MACRO DATA POINTS:

  • 7:45 a.m./8:55 a.m.: ICSC Retail/Redbook Retail
  • 10 a.m.: Existing home sales, est. 4.8m (-5.5% M/m)
  • 11:30 a.m.: U.S. to sell $58b in 4-wk bills
  • 4:30 p.m.: API inventories

WHAT TO WATCH:

  • Germany June ZEW economic sentiment (9.0) vs consensus (2.0) and prior +3.1;Germany June ZEW current conditions 87.6 vs consensus 89.5 and prior 91.5
  • Greek Prime Minister George Papandreou faces a confidence vote in his government
  • Jon Huntsman to announce he’s running for president
  • Spain Sells 2.4b Euros of 6-Month Bills - Avg 6-mo. yield 1.776% vs 1.766% at May auction.

 

COMMODITY/GROWTH EXPECTATION

 

THE HEDGEYE DAILY OUTLOOK - daily commodity view

 

 

COMMODITY HEADLINES FROM BLOOMBERG:

  • Copper Imports by China Slump 47% as Consumers Prefer to Drain Stockpiles
  • Oil Gains a Second Day as Euro Crisis Eases, U.S. Crude Supplies Seen Down
  • Copper Rises From One-Week Low on Reduced Concern About Greek Debt Default
  • Pork Prices in China Seen Staying at Highs as Domestic Shortage Persists
  • Raw Sugar Falls on Forecast for Increased Thai Production; Cocoa Advances
  • Corn Gains After Slump as Flooding Threatens China Crop Amid Rising Demand
  • Gold May Advance as Weaker Dollar, Greek Debt-Default Concern Spur Demand
  • Qaddafi Tanks Deprived of Diesel as Ships Shunning Libya: Freight Markets
  • Australia Keeps Sugar Forecast as Cyclone Damage Offsets Increased Acreage
  • Russia Fails to Win Back Egypt, World’s Biggest Wheat Buyer, After Halt
  • Rubber in Tokyo Declines to One-Month Low on Concern Demand Remains Slow
  • Rubber Production in India Jumping 22% as Car Sales Fuel Demand for Tires
  • Crude Supplies Fall in Survey as Gasoline Output Increases: Energy Markets
  • China’s Rare Earth Quotas May Limit Supply to Japan, Europe, Lifton Says

 

CURRENCIES

 

THE HEDGEYE DAILY OUTLOOK - daily currency view

 

 

EUROPEAN MARKETS

  • EUROPE: green across the board, but on low-volume to lower-highs; DAX back above my 7139 TREND line; Spain and Greece below TREND lines
  • S&P reaffirms view it would likely treat voluntary debt restructuring for Greece as a default, Moritz Kraemer, head of European sovereign ratings tells Die Welt

THE HEDGEYE DAILY OUTLOOK - euro performance

 

 

ASIAN MARKETS

  • ASIA: green across the board, with China (which we just bought) up +1% and India finally stopped making lower-lows, +0.33%.

THE HEDGEYE DAILY OUTLOOK - asia performance

 

 

MIDDLE EAST

 

THE HEDGEYE DAILY OUTLOOK - MIDEAST PERFORMANCE

 

 

Howard Penney

Managing Director


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