prev

THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – August 29, 2012


As we look at today’s set up for the S&P 500, the range is 17 points or -0.52% downside to 1402 and 0.69% upside to 1419. 

                                            

SECTOR AND GLOBAL PERFORMANCE


THE HEDGEYE DAILY OUTLOOK - 1

 

THE HEDGEYE DAILY OUTLOOK - 2

 

THE HEDGEYE DAILY OUTLOOK - 3

 

 

EQUITY SENTIMENT:

  • ADVANCE/DECLINE LINE: on 08/28 NYSE 386
    • Increase versus the prior day’s trading of -149
  • VOLUME: on 08/28 NYSE 516.47
    • Increase versus prior day’s trading of 2.41%
  • VIX:  as of 08/28 was at 16.49
    • Increase versus most recent day’s trading of 0.86%
    • Year-to-date decrease of -29.53%
  • SPX PUT/CALL RATIO: as of 08/28 closed at 1.49
    • Down from the day prior at 1.80

CREDIT/ECONOMIC MARKET LOOK:


BONDS – hoowah! what a move in the US Treasury market – the 10yr yield looks like the Chinese synchro diving team here, dropping straight back down to 1.62%, snapping TRADE support of 1.65% like a knife through water – today’s US GDP report will remind the March 2012 “growth is back” bulls that stocks may have rallied for 6wks, but not for the growth reasons they called for back then.

  • TED SPREAD: as of this morning 32.65
  • 3-MONTH T-BILL YIELD: as of this morning 0.10%
  • 10-Year: as of this morning 1.64%
    • Increase from prior day’s trading of 1.63%
  • YIELD CURVE: as of this morning 1.37
    • Unchanged from prior day’s trading

MACRO DATA POINTS (Bloomberg Estimates)

  • 7am: MBA Mortgage Applications, Aug. 24 (prior -7.4%)
  • 8:30am: GDP Q/q (Annualized), 2Q, est. 1.7% (prior 1.5%)
  • 8:30am: Personal Consumption, 2Q, est. 1.5% (prior 1.5%)
  • 8:30am: GDP Price Index, 2Q, est. 1.6% (prior 1.60%)
  • 8:30am: Core PCE Q/q, 2Q, est. 1.8% (prior 1.8%)
  • 10am: Pending Home Sales M/m, July, est. 1% (prior -1.4%)
  • 10:30am: DoE Inventories
  • 11am: Fed to purchase $4.25b-$5b notes 8/31/2018-8/15/2020
  • 1pm: U.S. to sell $35b 5-yr notes
  • 2pm: Fed’s Beige Book

GOVERNMENT:

    • Republican National Convention, Day 3: Speakers include Paul Ryan; John McCain; Mitch McConnell; Jeb Bush; Tim Pawlenty; Condoleezza Rice
    • House, Senate not in session
    • SEC meets to consider eliminating prohibition against general solicitation, advertising in securities offerings, 10am
    • CMS holds semi-annual meeting of advisory panel on outpatient payments for hospitals, 9am
    • International Society of Air Safety Investigators holds annual seminar, with NTSB Vice Chairman Christopher Hart, 8am

WHAT TO WATCH:

  • Daikin buys Goodman Global for $3.7b to expand in Nth. America
  • Hurricane Isaac beginning to move into Louisiana, NHC says
  • G-7 countries call for increased oil output to meet demand
  • KKR said to be in talks to buy Renesas for $1.2b: Nikkei
  • Italy borrowing costs fall at 6m bill auction
  • Republican convention continues in Tampa; Paul Ryan speaks
  • Morgan Stanley, Citigroup delay valuation of brokerage JV
  • Wellpoint searches for new CEO as Angela Braly resigns
  • Apple’s request for Samsung ban to be heard Dec. 6
  • Swedish FSA says banks can lend more amid tougher rules

EARNINGS:

    • Joy Global (JOY) 6am, $1.89 - Preview
    • Fresh Market (TFM) 6am, $0.27
    • Jos A Bank (JOSB) 6am, $0.73
    • HJ Heinz (HNZ) 7am, $0.81
    • JA Solar (JASO) 7am, ($0.96)
    • Zale (ZLC) 7:30am, ($0.83)
    • Genesco (GCO) 7:31am, $0.26
    • Brown-Forman (BF/B) 8am, $0.63
    • Tivo (TIVO) 4pm, ($0.24)
    • Oxford Industries (OXM) 4pm, $0.63
    • Pandora Media (P) 4:02pm, ($0.03)
    • Vera Bradley (VRA) 4:02pm, $0.35
    • Greif (GEF) 4:07pm, $0.71
    • Canadian Western Bank (CWB CN) 6:48pm, $C$0.57

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

  • No Return to Dirty ’30s as Farmer Sees Drought Relieved by U.S.
  • Oil Falls From One-Week High on Isaac, G-7 as Gasoline Declines
  • Timah Restarts Tin Spot Sales After Advances, Sukrisno Says
  • Big Coal Faces Steel Slowdown Amid Shale-Gas Pain: Commodities
  • Southeast Asian Buyers Seek Cheaper Soybean Meal, Corn Supplies
  • Soybeans Rise for Second Day on Signs of Increasing World Demand
  • Monsoon Revival Brightens Prospects for India Rice, Cane Crops
  • Gold Seen Falling in London Before Bernanke Speech This Week
  • Aluminum Premiums in Japan Set for Record High as Supply Limited
  • Cocoa Rises as West Africa May Have Little to Sell; Sugar Gains
  • Gold ETP Assets Jump to Record to Overtake Italy’s Reserves
  • Lingerie Delayed as $517 Billion India Jam Idles Trucks: Freight
  • Platinum ‘Correction’ a Buying Opportunity: Technical Analysis
  • Gold Calls at 2008 High on Jackson Hole Bet
  • Tin Declines as Restart of Producer Sales Eases Supply Concern
  • Palm Oil Drops on Speculation Stockpiles to Increase in Malaysia
  • Gold Calls at 2008 High on Easing Bets for Jackson Hole: Options

THE HEDGEYE DAILY OUTLOOK - 4

 

 

CURRENCIES

 

THE HEDGEYE DAILY OUTLOOK - 5

 

 

EUROPEAN MARKETS


EUROPE – lower-highs on lower volumes across the board in all of the major Eurocrat markets; finally, the apex of the short squeeze looks to be over as my most immediate-term TRADE lines of price momentum are all snapping (for the IBEX that line = 7416).

 

THE HEDGEYE DAILY OUTLOOK - 6

 

 

ASIAN MARKETS


CHINA – it’s not just U.S. consumers who couldn’t care less about 6 wk U.S. stock market rallies to lower highs; Chinese and Indian consumers do not like food/energy prices up here and neither do their stock markets; Shanghai Comp -1%, back to YTD lows.

 

THE HEDGEYE DAILY OUTLOOK - 7

 

 

MIDDLE EAST


THE HEDGEYE DAILY OUTLOOK - 8

 

 

 

The Hedgeye Macro Team


SLOTS: SURPRISINGLY STABLE PRICING

Takeaway: Solid pricing better than expected

Despite investor fears, ASPs remain stable

 

 

Investor concerns surrounding pricing pressure have weighed on the equipment stocks.  At least for the for-sale slot market we can confirm our suspicion that pricing held steady through Q2.  Following Aristocrat’s report today and combined with the other three large public suppliers (the public 4), the data indicates that ASPs actually increased in 1H2012.

 

On an as-reported basis, pricing for 1H12 increased 1.3% YoY.  Based on our estimates, 1Q pricing was up 2.0% YoY and 2Q pricing was up 0.3% YoY.

 

One of the factors that dragged down pricing in 1H12 was a higher than normal level of used unit sales.  IGT’s NA product sales included 1,700 used unit sales in the June quarter versus a normal quarterly run rate of 500.  Aristocrat also blamed an elevated number of refurbished units in their mix as a culprit for lower pricing.  If we assume that the used/refurbished units are priced at $8,000 and factor out the used units in 1H12 and 1H11 (500/Q for IGT), then ASPs for the public 4 look like they increased by 3.2% YoY.  Based on our estimates, 1Q and 2Q pricing was up 2.3% and 3.7% YoY, respectively.

 

SLOTS:  SURPRISINGLY STABLE PRICING - 1


Currency Wars With Jim Rickards

This Wednesday (August 29th) at 11:00AM EST, we’ll be holding an expert call with Hedgeye CEO Keith McCullough and the one and only Jim Rickards, author of the book Currency Wars and a leading economist, lawyer and investment banker with over 35 years of experience on the Street.

 

Topics during the call will include the ongoing global currency wars at hand, correlation risk, examining the repercussions of abandoning the gold standard and monetary policy. The call will be made available for our Macro vertical subscribers in full but for those of you in the Twitterverse, we’ll also be live tweeting the call. If you’d like access to the call, please email info@hedgeye.com for more information.

 

Please follow @Hedgeye on Twitter and tune in at 11:00AM sharp for a tweet-a-thon of Keith and Jim’s discussion.

 

 

Currency Wars With Jim Rickards  - dollarswithguns




the macro show

what smart investors watch to win

Hosted by Hedgeye CEO Keith McCullough at 9:00am ET, this special online broadcast offers smart investors and traders of all stripes the sharpest insights and clearest market analysis available on Wall Street.

COMMODITY CHARTBOOK

Takeaway: Companies that are struggling from a top line perspective are unlikely to find much relief from commodity costs other than coffee.

During the most recent earnings season, as we wrote in our recent post titled, “BEAT & MISS TRENDS SHOW TOP LINE IMPORTANCE”, the top line is the key focus for investors in the restaurant space.  As we know, the commodity outlook and/or pricing power of restaurant companies are not unrelated.  The ability of restaurant companies to raise prices this year is limited given the relationship between CPI for food at home and food away from home. Companies like Darden that are posting decelerating traffic numbers are likely to struggle from a top line perspective and any commodity-related headwinds will only add to the bottom-line impact.

 

Summary View (charts below)

 

Coffee prices have been the outlier to the upside over the last week, largely due to gains posted yesterday as speculators wagered that Tropical Storm Isaac will “damage beans stored in warehouses in New Orleans”.  Robusta coffee is expected to become more expensive in 2012/2013 as demand for the cheaper cousin of Arabica is forecasted to rise roughly 6%, according to Volcafe.   All in all, we see the outlook as favorable for Starbucks and other coffee retailers from a coffee cost perspective. (SBUX, DNKN, GMCR, PEET, CBOU, THI)

 

Whole bird chicken prices gained modestly week-over-week.  Wing prices did decline somewhat but elevated corn prices spurring food processors (SAFM) to cut back egg production means that BWLD will remain in a difficult position for some time.  BWLD CEO Sally Smith said in late July, “This year highest wing prices we've ever seen at a sustained level. Now, there's nothing to indicate that wing prices are going to change.”

 

COMMODITY CHARTBOOK - egg sets wings

 

Dairy prices (milk and cheese) seem to be moving steadily higher as concerns mount over shrinking herd sizes in the United States.  This could be a potential headwind for CAKE which, during the first half of 2012, experienced better-than-anticipated favorability due in part to the price of non-contracted dairy ingredients.

 

Corn and wheat prices have declined over the past week as speculation mounted that Isaac will bring rains this week to the southern United States, helping to ease drought conditions. 

 

Beef prices have been moving lower recently as the drought has accelerated herd sell-off.  Longer-term, inventory numbers suggest continued elevated prices for beef.  TXRH, WEN, and JACK all have exposure to spot market beef prices.

 

COMMODITY CHARTBOOK - commod

 

Macro Callout

 

The drought is having an impact on commodity costs in many different ways. This article from Bloomberg describes the difficulty shippers are having moving petroleum, commodities, and goods around inland waterways in the U.S.

 

“More than 566 million tons of freight valued at $180 billion moved through inland waterways in 2010, including 60 percent of U.S. grain exports, 22 percent of domestic petroleum and 20 percent of the coal used to generate electricity, according to the Waterways Foundation in Arlington, Virginia.”

 

COMMODITY CHARTBOOK - RETAIL GASOLINE

 

Correlation

 

COMMODITY CHARTBOOK - correlation table

 

Charts

 

COMMODITY CHARTBOOK - crb foodstuffs

 

COMMODITY CHARTBOOK - corn

 

COMMODITY CHARTBOOK - wheat

 

COMMODITY CHARTBOOK - soybeans

 

COMMODITY CHARTBOOK - rough rice

 

COMMODITY CHARTBOOK - live cattle

 

COMMODITY CHARTBOOK - chicken whole breast

 

COMMODITY CHARTBOOK - chicken broilers

 

COMMODITY CHARTBOOK - chicken wings

 

COMMODITY CHARTBOOK - coffee

 

COMMODITY CHARTBOOK - milk

 

COMMODITY CHARTBOOK - cheese

 

 

Howard Penney

Managing Director

 

Rory Green

Analyst

 


LVS: Wonderfully Bullish On Macau

Takeaway: Las Vegas Sands' Sands Cotai Central will help boost the company's Macau presence over time $LVS

We’ve been a proponent of being long Las Vegas Sands (LVS) for several weeks now as part of our RIA Daily Playbook and Alpha Sheets. The main catalyst behind the bullish stance is that the company has reached and maintained 20% gaming share in Macau, due in large part to the new Sands Cotai Central (SCC). With the SCC remaining the talk of the town, we see that level of gaming share holding steady if not improving a little.

 

Keith bought LVS for the Virtual Portfolio at $42.05 yesterday. The stock is well off its $60+ high that occurred back in April due to a halt in VIP growth in Macau and a rough start at the SCC. With the stock down 30%, we believe concerns have been adequately discounted in the stock. Now that VIP growth is picking back up significantly (see this post: Rebound: The Macau Trade), we believe there’s buying opportunity here. Take a look at the chart below: the stock is currently above TREND support of $39.69 and has room to go to $44.47 at the upper echelon of the TRADE range.

 

 

LVS: Wonderfully Bullish On Macau   - LVS quantsetup

 

 

There’s also some positive catalysts in the mix for LVS. Sheraton is opening 2500 rooms at SCC, which should be a big boost and is considered the de facto top hotel brand in China. This is big considering that the Ministry of Public Security of Macau has eased travel restrictions on Macau that now allows people living in six mainland cities – Beijing, Chongqing, Guangzhou, Shanghai, Shenzhen or Tianjin– to get visas enabling them to visit and gamble in Macau.

 

The company also has significant free cash flow which could be used for a stock buyback or to fund another Cotai project. Simply put, our bullish case for LVS speaks for itself.


ISLE YOUTUBE

In preparation for ISLE's F1Q earnings release tomorrow, we’ve put together the recent pertinent forward looking company commentary

 

 

Pennsylvania Supreme Court Affirms PGCB Selection of Isle of Capri & Nemacolin Woodlands (Aug 21)

  • Expect to open Lady Luck Nemacolin 9-12 months after construction begins.

YOUTUBE FROM F4Q CONFERENCE CALL (JUNE 7)

  • We're currently renovating rooms in Lake Charles and Black Hawk, and adding a new Lone Wolf Bar in Waterloo.
  • Our Lady Luck rebrand at Vicksburg will be completed about the same time as the expected opening at Cape Girardeau, with upgrades that will enhance the customer experience, including a Lone Wolf bar and Otis and Henry's casual dining restaurant.  
  • We are currently finalizing plans for a major renovation of the pavilion in Lake Charles. We're working with the Kansas City Port Authority on the development of an RFP for a third-party hotel and other outburst of development opportunities at our Kansas City property, and we're evaluating a new concept for a land-based gaming facility in Bettendorf.
  • Vicksburg, we think we've turned the corner. We have made some improvements to the staff. 
  • Biloxi:  “Real softness in midweek hotel demand. Room rates are way down. We really haven't seen an impact from Boyd or New Palace. As you know, Margaritaville opened at the end of May, no real big impact there, but it's a very aggressive promotional war in Biloxi, probably more than anywhere.”
  • Kansas City Speedway opening promotional activity impact: “It hasn't got completely out of hand, but – and we don't necessarily expect anything long-term, but we have seen an uptick there.”

Attention Students...

Get The Macro Show and the Early Look now for only $29.95/month – a savings of 57% – with the Hedgeye Student Discount! In addition to those daily macro insights, you'll receive exclusive content tailor-made to augment what you learn in the classroom. Must be a current college or university student to qualify.

next