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Retail: Waiting For A Fundamental Rebound

Takeaway: Retail spending stats are not getting better as the month draws to a close. Better consumer confidence is having zero impact -- yet.

We might be in a bull market, and that might create a wealth-effect as it relates to consumer spending, but we’re simply not seeing it yet. The Redbook (80 store sample) numbers released this morning peg department store spending flat yy, and the gap with Discount Stores continues to widen. This is the 5th week we’ve seen consecutive declines in the Dept Store component, and 4th week for Discounters. The Discount Store/Department Store gap traditionally widens when the consumer is stretched as people take down discretionary spending, and shift incrementally to the Wal-Marts of the world. The incremental changes are not massive, but have been enough to take Department Store spend from +1.7% around the holiday (partially driven by discounting) to flat today. 

 

Our top long ideas are RH, NKE, FNP (still), JCP and RL.

Top shorts include M, GPS, GES, UA and KSS 

 

Johnson Redbook Same Store Sales Index: YY % Change

Retail: Waiting For A Fundamental Rebound - redbook1


Front Running

Client Talking Points

Higher Yields

You’ve got to keep in mind that #GrowthStabilizing = good for stocks, bad for bonds and gold. In turn, yields on the 10-year Treasury hit higher highs this morning, with 2.01% acting as immediate-term TRADE resistance. There’s no intermediate-term resistance up to 2.41% and with employment, housing and labor markets cranking out positive data points week-after-week, higher yields are certainly possible. Fund flows are moving out of bonds and Treasuries and into equities as they chase they stock market.

Beat The Machines

A lot of investors and traders like to complain about “the machines” (aka the algos, the robots) taking control of the market and beating people at their own game. Well if you can’t join ‘em, beat ‘em. If you stick to a plan that works, you can front run the algos and stay one step ahead in this game called “the market.” We use our multi-duration (TRADE, TREND, TAIL), price/volume/volatility model to tell us what the machines are chasing and that way, we don’t have to worry about what some bank’s buy algo is doing because we’ve done the math and the homework. Right now, it’s sexy to be in names that have high short interest, high beta and high debt/EV. The market may seem toppy but there’s room to grow; just keep in mind that our S&P 500 line of TRADE support is at 1488. That’s the magic number.

Asset Allocation

CASH 46% US EQUITIES 18%
INTL EQUITIES 18% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 18%

Top Long Ideas

Company Ticker Sector Duration
ASCA

We believe ASCA will receive a higher bid from another gaming competitor. Our valuation puts ASCA’s worth closer to $40.

ADM

ADM has significantly lagged the overall market in 2012 over concerns that weakness in the company’s bioproducts (ethanol) and merchandise and handling segment will persist. Ethanol margins suffered from higher corn costs, as well as weak domestic demand and low capacity utilization across the industry. Merchandising and handling results were at the mercy of a smaller U.S. corn harvest. Both segments could be in a position to rebound as we move into 2013 and a new crop goes into the ground. With corn prices remaining at elevated levels, the incentive to plant corn certainly exists, and we expect that we will see corn planted fencepost to fencepost.

HOLX

HOLX remains one of our favorite longer-term fundamental growth companies given growing penetration of its 3D Tomo platform and high leverage to the 2014 Insurance Expansion from the Affordable Care Act.

Three for the Road

TWEET OF THE DAY

“bulls looking for another leg higher in equities. Bears praying for a rollover. FOMC tomorrow - perfect” -@allstarcharts

QUOTE OF THE DAY

“Eccentricity is not, as dull people would have us believe, a form of madness. It is often a kind of innocent pride, and the man of genius and the aristocrat are frequently regarded as eccentrics because genius and aristocrat are entirely unafraid of and uninfluenced by the opinions and vagaries of the crowd.” -Edith Sitwell

STAT OF THE DAY

Case-Shiller 20-city home-price index up 5.5% year-over-year


THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – January 29, 2013


As we look at today's setup for the S&P 500, the range is 22 points or 0.81% downside to 1488 and 0.65% upside to 1510.                              

                                                                                                              

SECTOR AND GLOBAL PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - 1

 

THE HEDGEYE DAILY OUTLOOK - 2

 

THE HEDGEYE DAILY OUTLOOK - 3

 

THE HEDGEYE DAILY OUTLOOK - 4

 

EQUITY SENTIMENT:


THE HEDGEYE DAILY OUTLOOK - 10


CREDIT/ECONOMIC MARKET LOOK:

  • YIELD CURVE: 1.68 from 1.69
  • VIX  closed at 13.57 1 day percent change of 5.28%
  • 10YR – higher-highs for Treasury yields again this week despite stocks having their 1st down day in 8 and the futures a tad lower this morning; 2.01% is immediate-term TRADE resistance; no intermediate-term resistance to 2.41%; employment and housing continue to support higher bond yields and fund flows out of Treasuries into stock market chasing.

MACRO DATA POINTS (Bloomberg Estimates):

  • FOMC opens two-day meeting
  • 7:45am: ICSC weekly sales
  • 8:55am: Johnson/Redbook weekly sales
  • 9am: S&P/CS 20 City M/m, Nov. est. 0.7% (prior 0.66%)
  • 9am:S&P/CS Composite-20 Y/y, Nov., est. 5.5% (prior 4.31%)
  • 10am: Consumer Confidence, Jan., est. 64.0 (prior 65.1)
  • 11am: Fed to purchase $2.75b-$3.5b notes in 2020-2022 sector
  • 11:30am: U.S. Treasury to sell 4W bills
  • 1pm: U.S. Treasury to sell $35b 5Y notes
  • 4:30pm: API energy inventories

GOVERNMENT:

    • President Obama to speak on immigration in Nev.
    • Senate in session, House returns Feb. 4
    • Senate expected to vote on nomination of Sen. John Kerry, D-Mass, to succeed Hillary Clinton as Secretary of State

WHAT TO WATCH

  • Bernanke seen buying $1.14t in assets by early 2014
  • Goldman raises ~$1b from stake in China’s ICBC
  • Yahoo sees 1Q revenue below estimates as 4Q adj. EPS beats
  • VMWare sales forecast misses estimates; job cuts planned
  • AMR ad hoc bondholder group said to favor merger with US Airways
  • BS told by U.S. judge to give IRS data on Wegelin accounts
  • U.S. seeks criminal charges in RBS Libor settlement, WSJ says
  • Bausch & Lomb’s PE owners may favor IPO after buyers balk: WSJ
  • Japan’s govt. proposes 1st spending cut in 7 yrs
  • India cuts interest rates to revive growth as inflation cools
  • United States Bakery to buy Hostess bread brands for $29m

EARNINGS:

    • Tyco International (TYC) 6am, $0.39
    • Danaher (DHR) 6am, $0.86
    • Ashland (ASH) 6am, $1.36
    • Polaris Industries (PII) 6am, $1.23
    • Eli Lilly & Co (LLY) 6:30am, $0.79 - Preview
    • Harris (HRS) 6:30am, $1.19
    • CIT Group (CIT) 6:30am, $0.61
    • EMC (EMC) 6:45am, $0.52
    • Potlatch (PCH) 6:45am, $0.32
    • International Paper (IP) 6:58am, $0.65
    • Waddell & Reed (WDR) 6:59am, $0.58
    • IDEXX (IDXX) 7am, $0.71
    • Corning (GLW) 7am, $0.33
    • Pentair (PNR) 7am, $0.44
    • Pfizer (PFE) 7am, $0.44 - Preview
    • Tupperware Brands (TUP) 7am, $1.68
    • DR Horton (DHI) 7am, $0.14 - Preview
    • Harley-Davidson (HOG) 7am, $0.31
    • Metro (MRU CN) 7am, C$1.11
    • Ford Motor Co (F) 7am, $0.26 - Preview
    • Boston Scientific (BSX) 7am, $0.11 - Preview
    • Lexmark International (LXK) 7am, $0.90
    • Alliance Resource Partners (ARLP) 7am, $1.34
    • Alliance Holdings GP (AHGP) 7am, $0.79
    • United States Steel (X) 7:30am, $(0.76) - Preview
    • Canadian Pacific Railway (CP CN) 7:30am, $1.28
    • Monro Muffler (MNRO) 7:30am, $0.36
    • JetBlue Airways (JBLU) 7:30am, $0.02
    • T Rowe Price Group (TROW) 7:30am, $0.89
    • Anixter International (AXE) 7:30am, $1.32
    • BankUnited (BKU) 7:30am, $0.49
    • NextEra Energy (NEE) 7:32am, $0.95
    • Valero Energy (VLO) 7:40am, $1.20
    • United Bankshares (UBSI) 7:50am, $0.44
    • Affiliated Managers Group (AMG) 7:55am, $2.43
    • Illinois Tool Works (ITW) 8am, $0.91
    • Peabody Energy (BTU) 8am, $0.26
    • Gentex (GNTX) 8am, $0.26
    • Capitol Federal Financial (CFFN) 8:30am, $0.12
    • Nucor (NUE) 9am, $0.30 - Preview
    • Amazon.com (AMZN) 4pm, $0.27
    • Plantronics (PLT) 4pm, $0.68
    • Freescale Semiconductor (FSL) 4pm, $(0.17)
    • Vertex Pharmaceuticals (VRTX) 4pm, $(0.08)
    • Hub Group (HUBG) 4pm, $0.50
    • Manhattan Associates (MANH) 4pm, $0.67
    • Ace (ACE) 4:01pm, $1.28
    • Aspen Technology (AZPN) 4:01pm, $0.05
    • Wesco Aircraft Holdings (WAIR) 4:01pm, $0.28
    • Robert Half International (RHI) 4:02pm, $0.41
    • Parexel International (PRXL) 4:02pm, $0.33
    • Dolby Laboratories (DLB) 4:05pm, $0.56
    • Broadcom (BRCM) 4:05pm, $0.74
    • StanCorp Financial Group (SFG) 4:05pm, $0.84
    • Arthur J Gallagher & Co (AJG) 4:09pm, $0.38
    • Jones Lang LaSalle (JLL) 4:15pm, $2.62
    • Ryland Group (RYL) 4:15pm, $0.50
    • CapitalSource (CSE) 4:15pm, $0.13
    • Virtus Investment (VRTS) 4:15pm, $1.52
    • Unisys (UIS) 4:30pm, $1.49
    • PolyOne (POL) 4:35pm, $0.21
    • Silgan Holdings (SLGN) 4:50pm, $0.47
    • Boston Properties (BXP) Post-Mkt, $1.24
    • MB Financial (MBFI) Post-Mkt, $0.43
    • Buckeye Technologies (BKI) Post-Mkt, $0.68

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)


OIL – biggest headwind to our call on Global Growth remains higher oil prices; with Brent back in a Bullish Formation (long-term TAIL support = $111.48), it’s ok to start shorting favorite consumer ideas (we shorted Macy’s (M) in the US yesterday and still like DRI and KSS short).

  • Gold Assets Head for Worst Monthly Drop Since ‘11 on Rebound             
  • Tin Beating All Metals on Fourth Year of Shortages: Commodities
  • Brent Trades Near Three-Month High on Global Economic Confidence
  • Gold Climbs From Two-Week Low in London on U.S. Stimulus Outlook
  • Canadian Wheat Harvest Seen Gaining as Global Supply Rebounds
  • Copper Trades Little Changed at $8,053 a Metric Ton in London
  • Cocoa Advances on Speculation of Industry Buying; Sugar Retreats
  • Cotton Crop Shrinking Signals Rebound in Price: Chart of the Day
  • Rubber Declines as U.S. Home Sales, Chinese Purchases Decrease
  • Oil Supplies Rise in Survey as Production Climbs: Energy Markets
  • Rebar Ends Near Six-Month High on Chinese Growth Recovery Bets
  • Tanker Glut Worsening as OPEC Cuts Most Since Recession: Freight
  • Anglo Writes Down $4 Billion on Minas-Rio as Spending Climbs
  • Corn Rises for Second Day as Dryness May Reduce Argentine Crop

THE HEDGEYE DAILY OUTLOOK - 5

 

CURRENCIES

 

THE HEDGEYE DAILY OUTLOOK - 6

 

EUROPEAN MARKETS

 

THE HEDGEYE DAILY OUTLOOK - 7

 

ASIAN MARKETS


ASIA – mixed bag of signals overnight as China powers to another immediate-term TRADE overbought signal, +0.5% at 2338 on the Shanghai Comp; India down -0.6% on what we thought was a dumb rate cut (1st Asian major to cut in 2013, which is a lot different than last yrs 10,000 global easings).

 

THE HEDGEYE DAILY OUTLOOK - 8

 

MIDDLE EAST


THE HEDGEYE DAILY OUTLOOK - 9

 

 

The Hedgeye Macro Team

 

 

 


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THE M3: WYNN COTAI CONSTRUCTION; SANDS TABLES; PARISIAN

The Macau Metro Monitor, January 29, 2013

 

 

ACS: HOCHTIEF STARTS WORK ON ITS BIGGEST PROJECT IN ASIA Eleconomista.es, Macau Business

Hochtief has started construction of Wynn Cotai, according to the company controlled by ACS.  This is the largest project that the German construction group has achieved so far in Asia.  The company has been awarded the work and implemented through its subsidiary Leighton Asia.


The project is set to be completed in 2016.  The contract value is AUD$222 million (MOP1.85 billion), Bloomberg reports today.  Among the Macau projects in which Leighton has been involved are Wynn Macau, Wynn Encore, Macau Fisherman’s Wharf and City of Dreams.

 

NO REQUEST FROM SANDS TO SET UP NEW TABLES: GOVT Macau Business

The head of the Gaming Inspection and Coordination Bureau, Manuel Joaquim das Neves, says he has not yet received any request from Sands China to set up 200 additional tables.  Neves said, “The operator has to inform us where it is going to put the tables and when the tables will open. Afterwards, we will conduct an inspection.”

 

Yesterday, Sands CEO Edward Tracy said some of the new tables would be made available in time for the Lunar New Year holiday, which starts on February 10. 

 

THE PARISIAN BUDGET UP TO US$2.8 BILLION: CEO Macau Business

The cost of the French-themed casino resort The Parisian, the next Sands China Ltd project planned for Cotai Parcel 3, is likely to be at least US$2.8 billion (MOP22.4 billion), Sands CEO Edward Tracy said yesterday. This figure is up from the September estimate of US$2.5 billion given by Michael Leven, the president and COO of LVS.


He added that construction on The Parisian is likely to start in the second quarter of this year, and would take about 36 months to construct and complete.

 

In the meantime, Tracy also said that LVS has hired three former FBI agents to strengthen its fight against money-laundering, one of them has already been working in Macau for about one month.




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