TODAY’S S&P 500 SET-UP – April 4, 2012

As we look at today’s set up for the S&P 500, the range is 25 points or -1.80% downside to 1388 and -0.03% upside to 1413. 












  • ADVANCE/DECLINE LINE: -889 (-2415) 
  • VOLUME: NYSE 817.21 (7.05%)
  • VIX:  15.66 0.13% YTD PERFORMANCE: -33.08%
  • SPX PUT/CALL RATIO: 1.67 from 1.86 (-10.22%) 


  • TED SPREAD: 39.28
  • 3-MONTH T-BILL YIELD: 0.08%
  • 10-Year: 2.24 from 2.30
  • YIELD CURVE: 1.90 from 1.93

MACRO DATA POINTS (Bloomberg Estimates):

  • 7am: MBA Mortgage Applications, week of Mar. 30 (prior - 2.7%)
  • 7:45am: ECB rate decision, press conference 8:30am
  • 8:15am: ADP Employment Change, March, est. 206k (prior 216k)
  • 10:00am: ISM Non-Manf. Comp, March, est. 56.8 (prior 57.3)
  • 10:30am: DoE inventories
  • 11:00am: Fed’s Williams speaks in San Francisco


    • President Obama hosts Easter prayer breakfast
    • Rick Santorum holds press conference with Rep. Tim Murphy, R-Pa., in Irwin, Pa. 11am
    • Mitt Romney speaks at American Society of Newspaper Editors conference in Washington, 11:30am
    • Obama signs “Stop Trading on Congressional Knowledge (STOCK) Act.” 11:50am
    • Treasury Secretary Geithner speaks at Economic Club of Chicago at 8am breakfast meeting, later tours Ford’s Chicago Stamping Plant at 12:15pm     


  • Burger King, taken private in 2010, to go public again after merging with a co. owned by William Ackman
  • European Central Bank will keep interest rates at record low 1%: Bloomberg survey
  • Mitt Romney won Republican primaries in Wisconsin, Maryland, Washington D.C.
  • JP Morgan may settle CFTC case this week over role in collapse of Lehman Brothers, pay fine $20m, NYT says
  • Spain sells EU2.59b in bonds, maximum tgt EU3.5b
  • New York International Auto Show begins; Nissan to introduce new Altima
  • Fiat shareholders meet to discuss share conversion, making it easier for Fiat to fully merge with Chrysler
  • Major League Baseball opening night
  • Amylin should pursue a sale process to let shareholders decide the co.’s fate, said Carl Icahn, its 3rd-largest investor
  • Service industries probably expanded in March, economists est.
  • Facebook accused Yahoo of infringing 10 patents; Yahoo had sued Facebook last month
  • GE debt rating cut as Moody’s to Aa3, cites finance unit’s funding risks
  • WellCare to pay $137.5m to settle false claims lawsuits
  • Sears Chairman Edward Lampert appears on CNBC, 7am; also watch AZO 


    • MSC Industrial Direct Co (MSM) 7:30 a.m., $0.95
    • Monsanto (MON) 8 a.m., $2.12
    • Acuity Brands (AYI) 8:19 a.m., $0.62
    • Schulman (SHLM) 4:01 p.m., $0.44
    • Ruby Tuesday (RT) 4:02 p.m., $0.16
    • AngioDynamics (ANGO) 4:04 p.m., $0.08
    • Bed Bath & Beyond (BBBY) 4:15 p.m., $1.32
    • Harry Winston Diamond (HW CN) Post-Mkt, $0.18
    • Pricesmart (PSMT) Post-Mkt, $0.68


  • England Challenges China by Reviving Strategic Mine: Commodities
  • Gold Falls for Second Day as Fed Stimulus Stance Lifts Dollar
  • Copper Falls for Second Day on Reduced Stimulus Expectations
  • Monsoon Rain in India Seen More Than Normal for Third Year
  • Oil Falls a Second Day on Supplies, Signs Fed May Halt Stimulus
  • Wheat Declines as Rains in U.S., Russia Improve Crop Prospects
  • JPMorgan Dealmaker Hannam in Eye of Storm Again With FSA Fine
  • LME May Get Up to $54 Million in Sale of LCH.Clearnet Stake
  • Silver Wheaton Seeks to Quadruple Output: Corporate Canada
  • Palm Oil Rallies to One-Year High as Demand May Gain From China
  • Gasoline Tops Commodities as Iran Spurs Oil Gain: Energy Markets
  • KGHM Seen Joining Mine Debt Boom With Debut Bonds: Poland Credit
  • Rare Earth Supplies in U.S. to Meet Defense Needs, Pentagon Says
  • Oil Falls on Signs Fed May Halt Stimulus
  • Rubber Declines for Second Day as Expectations for Stimulus Fade
  • Trash Worth $40 Billion When Saved From Waste Landfill: Energy
  • BHP, Rio Combined Diamond Asset Might Be Attractive, Nomura Says 





US DOLLARBernanke’s Bubbles are vast. All we need to see is the confluence of UST yields rising alongside the USD and Gold will come down in a hurry. Intense selling in the last 48hrs in Gold and Silver. Bernanke’s War is on. Remember, we’re explicitly fighting the Fed having a 0% asset allocation to Commodities and Treasuries right now.






GERMANY – first immediate-term TRADE line break in the DAX too (line was 6998), and the correction in German Equities is now -3.8% from the YTD peak (so keep that in mind with the SP500 only -0.4% from its YTD no-volume high). German economic data, like the rest of the world’s, has slowed sequentially in the last 6 weeks.






JAPAN – top question from clients is when does the sovereign debt crisis in Japan find its way into equities. Answer: after currencies. The Nikkei finally snapped its immediate-term TRADE line of 10,105 support last night, trading down a stiff -2.3%, taking its correction to -4% from its March high (to put the asymmetry of the SP500 in context, the US has only had 1 down day of more than -0.7% YTD).










The Hedgeye Macro Team


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NKE: NFL Uniforms Unveiled


Nike’s new NFL uniforms were unveiled today and we like what we see. Concerns over the potential for radical changes (a la Oregon Ducks) proved unwarranted. While fluorescents did make its way into the new Seattle Seahawks jerseys redesign, there was an obvious effort to respect league history (see pics below).


In typical Nike fashion, there are visible improvements to the finer elements (e.g. seem location and weight). Importantly, Nike didn’t need to make a big splash in its first big NFL reveal, it just needed to give consumers enough reason to come back and see what they come up with next and that is exactly what they did. As expected, the Nike/NFL era has started in favorable field position.



For additional perspective, here is a sense of the P&L contribution from our note titled "NKE: Eight Bucks:"


“By our math, the NFL deal, which flips from adibok to Nike in early April, will probably be around $200-$300mm in year 1. That’s the lower end of where Reebok had it. That’s also why we think Nike will double this rate in year 2. And likely grow it by 50% in year 3. If this is the case in year 1, then let’s say $200mm of it is set for delivery within Nike’s current futures window. Assuming that 85% of Nike’s US business is on the futures program, that suggests that the NFL deal helped futures by about 5%. So…22% minus 5% = 17% growth in North American futures. For what it’s worth, we have to look back to the Clinton Administration to find the last time the North American business grew at this pace – and back then the company was stuffing the channel with apparel product and was STILL half the size it is today.”


NKE: NFL Uniforms Unveiled  - NFL All 4 3 12


NKE: NFL Uniforms Unveiled  - NFL teams 4 3 12


Casey Flavin




ECB and BOE on Hold: Currency Update

No Current Position in Europe

We expect both the ECB (on Wednesday) and BoE (on Thursday) to keep their main interest rates on hold at 1.0% and 0.5%, respectively, and not to add any major non-standard measures or asset purchases.  We expect both banks to continue implementing a “wait-and-see” process to determine the impact of policy moves, including the LTROs, reduced collateral requirements, and reduced SMP sovereign bond purchases in the last two months by the ECB and increases in the BOE’s asset purchasing program (increased purchases by £50 Billion on 2/9 and remained unchanged on 3/8).


Below we present our quantitative views on the EUR/USD and GBP/USD over the near term TRADE and intermediate term TREND.


ECB and BOE on Hold: Currency Update - 11111111111. EUR


ECB and BOE on Hold: Currency Update - 11. GBP


We continue to highlight that despite pockets of optimism on the Eurozone and UK economies, recent data continues to be weak. Yesterday we received European Manufacturing PMIs, which, as the table below shows, largely declined month-over-month in March (the UK saw a positive inflection), or were at or below the 50 line that divides contraction (below) from expansion (above).  We expect a similar trend with European Services PMIs, which will be announced tomorrow.


ECB and BOE on Hold: Currency Update - 11. table


Matthew Hedrick

Senior Analyst

Daily Trading Ranges

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