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THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – May 31, 2013


As we look at today's setup for the S&P 500, the range is 33 points or 0.81% downside to 1641 and 1.18% upside to 1674.                  

                                                                                                             

SECTOR PERFORMANCE


THE HEDGEYE DAILY OUTLOOK - 1

 

THE HEDGEYE DAILY OUTLOOK - 2A

 

EQUITY SENTIMENT:


THE HEDGEYE DAILY OUTLOOK - 10


CREDIT/ECONOMIC MARKET LOOK:

  • YIELD CURVE: 1.79 from 1.82
  • VIX closed at 14.53 1 day percent change of -2.02%

MACRO DATA POINTS (Bloomberg Estimates):

  • 8:30am: Personal Income, April, est. 0.1% (prior 0.2%)
  • 8:30am: Personal Spending, April, est. 0.0% (prior 0.2%)
  • 8:45am: Fed’s Pianalto speaks in Washington
  • 9am: NAPM-Milwaukee, May, est. 49 (prior 48.43)
  • 9:45am: Chicago Purchasing Mgr, May, est. 50 (prior 49)
  • 9:55am: U. of Mich Conf, May final, est. 83.7 (prior 83.7)
  • 10am: Commerce Dept. issues benchmark revisions on retail sales data, wholesale inventories and sales data
  • 11am: Fed’s Liang speaks in Washington
  • 11am: Fed to buy $4.25b-$5.25b notes in 2017-2018 sector
  • 1pm: Baker Hughes rig count

GOVERNMENT:

    • House, Senate not in session
    • 1pm: VP Biden addresses media after mtg w/ Brazilian President Dilma Rousseff, Vice President Michel Temer in Brazilia

WHAT TO WATCH

  • U.S. consumer spending was probably little changed in April
  • P&G said planning to promote 4 as contenders to succeed CEO
  • Apple raises prices for some products in Japan after yen weakens
  • Apple ruling to revolve around who can use standard technology
  • Sony said to engage Morgan Stanley, Citigroup on Loeb plan
  • Treasury 7-Yr auction demand rises with yield at 13-mo. high
  • Boeing sells new 787 as Singapore splits $17b order
  • Dell investors sue over founder’s buyout bid
  • Japan’s April industrial production rose 1.7% m/m, exceeding the highest est. in a Bloomberg News survey
  • Euro-area April jobless rate rises to record 12.2%, est. 12.2%
  • Euro-area May consumer prices rise 1.4% in yr, est. 1.4%
  • Italy jobless rate reaches 12%, 36-yr-high amid recession
  • German retail sales unexpectedly fell for a 3rd mo. in April
  • EMA’s CHMP monthly announcements may include Sanofi, Roche

EARNINGS:

    • No earnings expected from S&P 500 cos.: Bloomberg data

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

  • China Gold Demand to Slow From April Surge, Association Says
  • Gold Traders Divided as Physical Buying Surge Slows: Commodities
  • Gold Falls on Speculation Demand May Slow After Price Rally
  • WTI Heads for Weekly Drop as Stockpiles Gain Before OPEC Meets
  • Copper Trims First Monthly Gain in Four Before Chinese Index
  • Soybeans Head for Best Month Since July as U.S. Supply Dwindles
  • White Sugar Gains on Africa, Middle East Demand; Cocoa Retreats
  • Battle Over U.S. Natural Gas Exports Increases as Permits Flow
  • ETF Investors Dumping Gold Add to Platinum Bet: Chart of the Day
  • Tea Output in India Seen at Record as Normal Weather Aids Yields
  • WTI Crude May Fall Next Week on Ample Stockpiles, Survey Shows
  • SHFE Copper Stockpiles Rise for First Time in Nine Weeks
  • Japan Pays Record Price for LNG Imports in April as Yen Weakens
  • Gold Premiums in Singapore at Record Seen Declining Next Month

THE HEDGEYE DAILY OUTLOOK - 5

 

CURRENCIES

THE HEDGEYE DAILY OUTLOOK - 6

 

GLOBAL PERFORMANCE

 

THE HEDGEYE DAILY OUTLOOK - 3

 

THE HEDGEYE DAILY OUTLOOK - 4

 

EUROPEAN MARKETS


THE HEDGEYE DAILY OUTLOOK - 7

 

ASIAN MARKETS


THE HEDGEYE DAILY OUTLOOK - 8

 

MIDDLE EAST


THE HEDGEYE DAILY OUTLOOK - 9

 

 

The Hedgeye Macro Team

 

 

 

 

 

 

 

 

 

 

 


MAY FLOWERS: STILL LONG GROWTH

Takeaway: The TREND in the economic data continues to confirm our Research and Risk Management views on improving domestic growth.

This note was originally published May 30, 2013 at 15:12 in Macro

With the TREND in the economic data continuing to confirm our Research and Risk Management views, the Hedgeye Redundancy Department has been at productive capacity since late November repeatedly highlighting the key factors at work supporting the ongoing improvement in the domestic growth outlook.  We’ll keep it tight here in highlighting May’s macro manifestations of domestic #GrowthAccelerating

 

First, to be clear, we don’t like everything at every price but, on balance, with the $USD still in bullish formation (Bullish TRADE, TREND, TAIL), commodity deflation persisting, and Labor, Housing & Confidence (and to a lesser extent Credit and now Real Earnings) working reflexively, we continue to like the Dollar and domestic, consumption oriented equities on the long side and Gold, Yen, and the broader commodity basket on the short side.   

 

 

INITIAL CLAIMS:  This morning’s Department of Labor data showed NSA claims accelerated to -8.3% y/y growth compared with -8.0% improvement the prior week and -2% two weeks prior.   So, not only is the labor market improving, it is doing so at an accelerating rate at present.  The organic improvement in the underlying labor market YTD has bucked the trend of the past three years, continuing to overwhelm the negative March-to-August seasonal distortion and any sequestration related drag.   

 

Source: Hedgeye Financials

MAY FLOWERS: STILL LONG GROWTH - Claims 1

 

MAY FLOWERS: STILL LONG GROWTH - Claims 2

 

REAL EARNINGS:  Mirroring the broader TREND in nearly every macro chart, real earnings growth troughed and inflected positively back in November.  The Trend on both a 1Y and 2Y basis remains one of acceleration and with modest comps and persistent commodity deflation, expectations for sustained positive growth appear reasonable.   

 

We would note that a continued rise in temp and part-time employment growth and corporate attempts to manage worker hours under the 30-hour threshold dictated under Obamacare is a trend we’re monitoring and one which, while positive for employment growth broadly, may serve as a drag to hours worked and weekly earnings growth as we move towards ACA implementation deadlines.   

 

MAY FLOWERS: STILL LONG GROWTH - Real Earnings 053013

 

$USD/Commodities:  The Dollar remains in bullish formation and with the domestic growth outlook improving on both an absolute and relative basis, deficit spending declining, and monetary policy more hawkish on the margin, we continue to think the dollar holds further upside.  

 

With USD correlations to the SPX (+) and Gold/Commodities (-) remaining strong across durations, #StrongDollar, long stocks, short commodities remains the baseline macro strategy playbook.   *Note: Keith bought the dollar via UUP this morning in our Real-time Alerts  

 

MAY FLOWERS: STILL LONG GROWTH - DXY 053013

 

MAY FLOWERS: STILL LONG GROWTH - Gas vs. Real Earnings

 

MAY FLOWERS: STILL LONG GROWTH - Inflation vs Real Earnings

 

CONFIDENCE:  The Bloomberg Consumer Comfort Index, Univ. of Michigan Consumer Confidence, and the Conference Board Consumer Confidence Index all accelerated in May while making fresh 5Y highs.  As we have highlighted, economic activity relationships with confidence have completely broken down over the last 4 years but, historically, consumer confidence has been a good-to-very good leading indicator for economic activity metrics such as new orders, consumer spending, and money velocity.  A sustained breakout of the trough channel we have been in since 2008 may augur a re-tightening in historical confidence-econ correlations.   

 

MAY FLOWERS: STILL LONG GROWTH - Consumer Confidence 053013

 

HOUSING:  Purchase Applications continue to accelerate in 2q13TD despite the recent back-up in rates, the NAHB (Home Builder) HMI advanced in May, Existing Home Sales remain strong and the latest New Home Sales, Pending Home Sales and Home Price (FHFA & Case-Shiller) data all accelerated sequentially. 

 

Admittedly, the comps on pricing continue to steepen and a significant, expedited back-up in rates may prove a marginal headwind but we continue to view the housing recovery as a multi-year story and wouldn’t view a move from the current low-double digit parabolic recovery to steady high-single digit HPA growth as a material negative.    

 

Mortgage Application and Pending Home Sales data suggests forward housing activity will remain healthy and, over the next few years, we continue to believe a move towards 2M housing starts represents a high probability scenario.   

 

MAY FLOWERS: STILL LONG GROWTH - Purchase Apps

 

Yield Spread (10’s-2’s):  In so much as a widening in the yield spread = expectations for QE Taper = Improving Domestic Macro is a transitive relationship, the recent expansion in the yield spread would serve as positive confirmation of an improving domestic growth outlook.  The positive price divergence from financials (+4%) MTD, negative divergence from Utilities (-8.7%) MTD and ongoing outperformance for Consumer Discretionary would seemingly concur as well.   

 

MAY FLOWERS: STILL LONG GROWTH - 2  10 Spread

 

Christian B. Drake

Senior Analyst 

 

 

 


THE M3: DYNAM JAPAN

THE MACAU METRO MONITOR, MAY 31, 2013

 

 

PACHINKO COMPANY EYES MACAU Macau Business

Pachinko arcade operator Dynam Japan Holdings Co Ltd says it is looking for business opportunities in Macau’s gaming mass market.  Dynam chairman Yoji Sato as saying the company is in talks about cooperation terms with Macau gaming companies.  However, he said there is no actual agenda yet.


Dynam has 362 pachinko arcades in Japan and has plans to increase its share of the market there by adding 85 gaming arcades this year and next.  The firm is also seeking to change its charter, allowing it to get into restaurants, manufacturing, selling coffee and lending to companies in Japan and overseas.  But it will still concentrate on pachinko arcades.

 

 



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Trade of the Day: NSM

Takeaway: We sold Nationstar (NSM) at 11:28am this morning at $42.70.

A beauty +5% intraday rip for Hedgeye Jedi Josh Steiner. NSM now moves to immediate-term TRADE overbought (within Steiner’s intermediate-term bullish TREND). We’re booking it. Profits are a good thing.

 

Trade of the Day: NSM - NSM


Keith's Top-5 Tweets Today

Takeaway: A look at some of Keith's top tweets today.

"Best month in Hedgeye history - big knucks to the fans and foes from New Haven, CT"

@KeithMcCullough 2:33PM

 

"You know Hedgeye is a cult right? We are crazy - we are accountable to our opinions and everything"

@KeithMcCullough 1:52PM

 

"Managing the risk of the markets range works in many ways; stay with the bullish bias until everyone capitulates"

@KeithMcCullough 1:24PM 

 

"Either I'll be really wrong here, or consensus stock bears/gold bulls will be right - game on"

@KeithMcCullough 10:11AM

 

"Pundits and English majors remain royally confused as to why buying each dip keeps working"

@KeithMcCullough 10:02AM

 

Keith's Top-5 Tweets Today - tweet


CHART DU JOUR: Q3 REVPAR ACCELERATION

Takeaway: HOT and H remain our favorite names in the strong hotel sector

Q2 is good but Q3 should be even better

 

  • We maintain our rosy outlook on US RevPAR growth for 2013 and beyond.  3Q should experience the best growth of the year.
  • With one week to go, there has been some concern of a slow May - month-to-date, US upper upscale RevPAR growth has been trending ~5%.
  • However, quarter-to-date, UUP RevPAR is tracking up 7.6% - above operators' 2Q guidance of 4.5-7.0% growth. June RevPAR of "only" 5% should bring growth back down into the higher end of that range
  • July should see a surge, up almost 8%, according to our model

CHART DU JOUR: Q3 REVPAR ACCELERATION - hh


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