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SECTOR STUDY: XLK & XLY

As consumption continues to drive growth, it should come as no surprise that one of the best performing sectors this year is US Consumer Discretionary (XLY) stocks. And after lagging in the beginning of the year (due in large part to the decline of Apple's (AAPL) stock price), technology (XLK) is making a rebound. XLY and XLK are up +5.6% and +5.0%, respectively, over the past month. The S&P 500 itself is up +4.3% over the past month and continues to make new all-time highs week after week and remains in bullish formation.

 

SECTOR STUDY: XLK & XLY - BESTSECTORS


Growth Kills Gold

Gold (GLD) prices continue to fall lower as stocks head higher. Why's that? Consumption and growth. We're seeing a ton of consumption and growth as evidenced by last week's jobs data and the housing market and stock market. There's lots to like. As for gold? It'll continue to fall in price as we recover - we feel sorry for those that bought it at the top.

 

Growth Kills Gold - YTD GOLDchartmay


Treasuries: Fighting For Yield

The yield on the 10-year Treasury surged to 1.75% this morning as investors stopped worrying so much about having a safe haven for money and are keen to take advantage of the performance offered in other markets like the US stock market. Still, investors need to get bullish on growth ASAP. No point in putting your money in a low-yield device like the 10-year when the S&P 500 is making new all-time highs each week.

 

Treasuries: Fighting For Yield - USTperf


Early Look

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European Banking Monitor: Credit Markets Get Even More Comfortable

Below are key European banking risk monitors, which are included as part of Josh Steiner and the Financial team's "Monday Morning Risk Monitor".  If you'd like to receive the work of the Financials team or request a trial please email .

 

Key Takeaways:

 

European Financial CDS - Europe's financial system continues to heal, in spite of the occasional headline to the contrary. With the exception of one Greek bank, all European Financials saw swaps tighten. Big moves came in Spain, Italy, France and the U.K. 

 

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European Financial CDS - With the exception of one Greek bank, all European Financials saw swaps tighten. Big moves came in Spain, Italy, France and the U.K. 

 

European Banking Monitor: Credit Markets Get Even More Comfortable - pp. banks

 

Sovereign CDS – Sovereign swaps were tighter around the globe last week with the largest improvements coming in Portugal (-40 bps), Spain (-25 bps), and Italy (-20 bps). The U.S. tightened by 2 bps to 32 bps, while Germany and Japan were unchanged.

 

European Banking Monitor: Credit Markets Get Even More Comfortable - pp. sov1

 

European Banking Monitor: Credit Markets Get Even More Comfortable - pp. sov2

 

European Banking Monitor: Credit Markets Get Even More Comfortable - pp. sov3

 

Euribor-OIS Spread – The Euribor-OIS spread tightened by 1 bps to 13 bps. The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty risk. 

 

European Banking Monitor: Credit Markets Get Even More Comfortable - pp. euribor

 

ECB Liquidity Recourse to the Deposit Facility – Deposits were relatively unchanged week-over-week. The ECB Liquidity Recourse to the Deposit Facility measures banks’ overnight deposits with the ECB.  Taken in conjunction with excess reserves, the ECB deposit facility measures excess liquidity in the Euro banking system.  An increase in this metric shows that banks are borrowing from the ECB.  In other words, the deposit facility measures one element of the ECB response to the crisis.  

 

European Banking Monitor: Credit Markets Get Even More Comfortable - pp. facility


Burning The Yen

The value of the Japanese Yen continues to plummet thanks to the monetary policies of the Bank of Japan. The Yen is losing ground against the US dollar this morning, falling below our TREND line of support at 97.11. We'll look for a bounce to short it.

 

Burning The Yen - FXYYTD


Morning Reads From Our Sector Heads

Keith McCullough (CEO):

 

Yen Falls 3rd Day on Signs U.S. Economy Improving; Ringgit Rises (via Bloomberg)

 

Dinosaur Skeleton to Be Returned to Mongolia (via NY Times)

 

Kevin Kaiser (Energy):

 

Twilight of a Stock-Market Darling (via Barron's)

 

Matthew Hedrick (Europe):

 

Sweden a Crisis Casualty No More Shows How to Get Haven Glow (via Bloomberg)

 

Josh Steiner (Financials):

 

Bank of America Settlement Clears Hurdle (via WSJ)

 

N.Y. Plans Homeowner Enforcement Against Financial Firms (via Bloomberg)

 

Jamie Dimon might find strength in surrendering (via STL Post-Dispatch)

 

Brian McGough (Retail):


ILO Formulates Plan for Worker Safety as Rana Plaza Death Toll Increases (via WWD)

 

 

 

 

 






Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.28%
  • SHORT SIGNALS 78.51%
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