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THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – July 17, 2013


As we look at today's setup for the S&P 500, the range is 45 points or 1.21% downside to 1656 and 1.48% upside to 1701.                                 

                                                                                              

SECTOR PERFORMANCE

THE HEDGEYE DAILY OUTLOOK - 1

 

THE HEDGEYE DAILY OUTLOOK - 2

 

EQUITY SENTIMENT:


THE HEDGEYE DAILY OUTLOOK - 10


CREDIT/ECONOMIC MARKET LOOK:

  • YIELD CURVE: 2.23 from 2.21
  • VIX  closed at 14.42 1 day percent change of 4.57%

MACRO DATA POINTS (Bloomberg Estimates):

  • 7am: MBA Mortgage Applications, July 12 (prior -4%)
  • 8:30am: Housing Starts, June, est. 960k (prior 914k)
  • 8:30am: Building Permits, June, est. 1m (pr. revised 985k)
  • 8:30am: Fed’s Bernanke written testimony for semi-annual report to U.S. House to be released
  • 10am: Bernanke begins testifying
  • 10:30am: DOE Energy Inventories
  • 12pm: Fed’s Stein delivers remarks at Fed conf. in D.C.
  • 1pm: Fed’s Raskin speaks to Exchequer Club in Washington
  • 1pm: U.S. to sell $15b 10Y TIPS
  • 2pm: Fed releases Beige Book

GOVERNMENT:

    • 10am: Senate Appropriations panel hearing on FY2014 budget estimates for Missile Defense Agency
    • 10am: House Armed Svcs Cmte hearing on security in Syria, implications for U.S. natl security, policy options
    • 10am: Senate Banking, Housing and Urban Affairs Cmte panel hearing on the consumer debt industry
    • 10am: Senate Commerce, Science and Transportation Cmte panel hearing on expansion of Internet gambling
    • 2:30pm: Senate Agriculture panel hearing on “Reauthorization of Commodity Futures Trading Commission”
    • 3pm: Republican Study Committee’s Energy Task Force meeting on repealing the renewable fuel standard

WHAT TO WATCH         

  • Bernanke seeks to divorce QE tapering from Fed rate outlook
  • Ally said to weigh raising $1b to pass Fed stress tests
  • Yahoo forecast trails ests. as Mayer builds products first
  • BOE votes 9-0 to hold bond program at GBP375b
  • Google said to discuss own Web TV service with media executives
  • Barclays, traders fined $488m amid U.S. energy probe
  • S&P loses final ruling on bid to dismiss U.S. fraud lawsuit
  • Apple said developing ad-skipping as part of TV strategy
  • Ford offers software fix as hybrids comes up short of promise
  • Prudential said to win support from DeMarco to avoid risk label
  • China won’t have large stimulus this yr, finance minister says
  • U.K. jobless claims fall most in 3 yrs
  • Novartis raises full-yr forecasts on lack of Diovan rival
  • Chevron signs $1.24b shale accord With Argentina’s YPF

EARNINGS:

    • First Cash Financial Services (FCFS) 6am, $0.56
    • Mattel (MAT) 6am, $0.32 - Preview
    • PNC Financial Services (PNC) 6:24am, $1.63
    • Bank of New York Mellon (BK) 6:30am, $0.57
    • US Bancorp (USB) 6:45am, $0.76
    • Bank of America (BAC) 7am, $0.26 - Preview
    • First Republic Bank (FRC) 7am, $0.72
    • iGATE (IGTE) 7am, $0.34
    • Northern Trust (NTRS) 7:30am, $0.83
    • St Jude Medical (STJ) 7:30am, $0.94 - Preview
    • Textron (TXT) 7:30am, $0.38
    • Abbott Laboratories (ABT) 7:44am, $0.44 - Preview
    • WW Grainger (GWW) 8am, $2.96
    • M&T Bank (MTB) 8:01am, $2.11
    • Platinum Underwriters Holdings (PTP) 4pm, $0.69
    • RLI (RLI) 4pm, $1.09
    • Plexus (PLXS) 4pm, $0.58
    • Covanta Holding (CVA) 4:01pm, $0.01
    • Greenhill (GHL) 4:01pm, $0.53
    • Intel (INTC) 4:01pm, $0.39 - Preview
    • Select Comfort (SCSS) 4:01pm, $0.24
    • Albemarle (ALB) 4:03pm, $0.98
    • American Express (AXP) 4:04pm, $1.22
    • LaSalle Hotel Properties (LHO) 4:04pm, $0.72
    • CYS Investments (CYS) 4:05pm, $0.29
    • El Paso Pipeline (EPB) 4:05pm, $0.47
    • International Business Machines (IBM) 4:05pm, $3.78 -Preview
    • Kinder Morgan (KMI) 4:05pm, $0.32
    • SanDisk (SNDK) 4:05pm, $0.93
    • Umpqua Holdings (UMPQ) 4:05pm, $0.22
    • Kinder Morgan Energy (KMP) 4:06pm, $0.60
    • Core Laboratories (CLB) 4:06pm, $1.32
    • eBay (EBAY) 4:15pm, $0.63 - Preview
    • SLM (SLM) 4:15pm, $1.00
    • Xilinx (XLNX) 4:20pm, $0.47
    • Astoria Financial (AF) 4:30pm, $0.12
    • Cathay General Bancorp (CATY) 4:30pm, $0.35
    • Cohen & Steers (CNS) 4:30pm, $0.43
    • CVB Financial (CVBF) 4:30pm, $0.21
    • East West Bancorp (EWBC) 4:45pm, $0.51
    • Noble (NE) 5pm, $0.56
    • Crown Holdings (CCK) 5:01pm, $0.93
    • West Fraser Timber (WFT CN) 5:01pm, C$1.79
    • HNI (HNI) 5:12pm, $0.25
    • Valmont Industries (VMI) 5:30pm, $2.92
    • Steel Dynamics (STLD) 6pm, $0.14
    • Kinder Morgan Management LLC (KMR) Aft-mkt, $0.67

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

  • Tin Shipments From Indonesia Seen Advancing 33% as Rules Eased
  • Gold Slump Revives Hedges Scrapped During Bull Run: Commodities
  • Copper Slides as Higher Production Fuels Concern About Surplus
  • Gold Declines for Third Day in Four as Investors Await Bernanke
  • WTI Crude Declines for a Second Day Before Bernanke Testimony
  • Wheat Rises on Speculation That Chinese Demand Will Increase
  • Rebar Climbs for Sixth Day on Iron Ore Rally, China Optimism
  • Robusta Coffee Gains as Indonesian Deliveries Drop; Cocoa Gains
  • China’s Iron-Ore Shift Helps Cargill at Ports: Chart of the Day
  • Barclays With Ex-Traders Fined $488 Million in U.S. Energy Probe
  • U.S. Gulf Oil Profits Lure $16 Billion More Rigs by 2015: Energy
  • LNG Price-Swing Risk Seen as Threat to Futures: Energy Markets
  • European Gasoline Prices Climb to Highest in 20 Weeks: BI Chart
  • Commodities Daybook: Gold Price Tumble Revives Hedging Prospects
  • Gold Imports by India Seen Shrinking as Curbs Increase Costs

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

 

 

 

 

 

 

 

 

 

 

 


THE M3: TABLES/SLOTS; HK-ZHUHAI-MACAU BRIDGE; MGM MARYLAND

THE MACAU METRO MONITOR, JULY 17, 2013

 

 

MACAU GAMING TABLES/SLOTS DICJ

At the end of Q2, Macau had 5,746 gaming tables and 15,310 slots, down 3 tables and 1,096 slots QoQ, respectively.

 

TWO MORE ROUTES TO CONNECT WITH HK-ZHUHAI-MACAU BRIDGE Macau Daily News

Zhuhai plans to add two more routes to connect Zhuhai with the Zhuhai-Macau Port Artificial Island aiming to boost Zhuhai’s economy by leveraging on the economic advantage of the Hong Kong-Zhuhai-Macau Bridge.  According to the new plan, a commercial city will be established in the north of the Zhuhai-Macau Artificial Island, and Gongbei Bay will be transformed into an inland lake, so that the Hong Kong-Zhuhai-Macau bridge can act to drive economic benefits to Zhuhai.

 

US REGULATORS PROBE MACAU TIES BETWEEN PANSY HO, MGM Macau Business

Regulators and law enforcement officers from Maryland in the United States spent last week in Macau, probing the suitability of MGM Resorts International to operate a casino there.  Investigators visited the MGM Macau.  They also spoke to junket operators as part of a mandatory inquiry into the financial capabilities and integrity of potential casino owners.

 

MGM is one of three candidates in the running to build and operate a US$800-million (MOP6.4 billion) casino-resort in National Harbour.  MGM said last year it expected inquiries into the relationship with Pansy Ho Chiu King, a part owner of MGM China and a daughter of gaming magnate Stanley Ho Hung Sun.


[VIDEO] MCCULLOUGH WARNS INVESTORS

Hedgeye Risk Management CEO Keith McCullough talks US stocks and economy, explains why investors need to stay far away from Gold and Treasuries, and why Bernanke remains an enormous risk.


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KO Takes It on the Chin, But Room For Optimism

KO is trading down today as volume results for Q2 2013 came in below expectations (globally +1% vs +4% last quarter) with the company citing a challenged macro environment (U.S., Europe, Asia, and Latin America), social unrest, and poor weather conditions (wet and cold across multiple regions) that impacted consumer spending and demand. North America, which is ~ 44% of sales, saw volume down a disappointing -1% in the quarter.  

 

Performance was hit by tough Q2 comps given the especially good weather in 1H last year: Pacific volumes were +2% vs +10% last year; Brazil’s volume was even cycling +6% a year ago; and India’s volume grew +1% versus a +20% comp.

 

The company cited optimism around a turnaround in 2H for its key international markets (China, Brazil, Russia, Mexico, and India) on improvement in the macro environment, continued marketing support of its brands, weather improvements (India performs historically stronger in the back half), and its systems execution.

 

While we expect many of the forces dragging on confidence and demand to remain in the back half of the year,  including  high unemployment (especially in southern Europe), social unrest, and inflation, we like that the back half quarters of 2013 are lapping much easier comparisons year-over-year.  On the top line, the Q3 2012 comp is +0.8% versus this quarter’s +2.8%. Gross margin was pretty consistent throughout last year, however the operating margin gets easier in the final two quarters of last year (+23.6% and +21.7%, respectively) versus +26.1% this quarter.

 

The stock is currently trading above its intraday lows at around $40.45. Our quantitative levels suggest that KO has an intermediate term price TREND line of support at $40.14.

 

KO Takes It on the Chin, But Room For Optimism - v. KO

 

What we liked:

  • EPS inline with consensus at $0.63
  • Outperformance of still beverages, volume +6%  vs sparkling 0%
  • Packaged water volume up +6% and energy drinks +5%
  • Russia volume +11% with a strong marketing calendar tied to the 2014 Sochi Winter Olympics
  • COGS decreased -5%
  • Eurasia and Africa volume up 9% (benefitting from Aujan partnership)
  • New guidance on the effective tax rate of 23.0% for 2013 vs last quarter’s estimate of 23.5%

What we didn’t like:

  • Net Revenues were down -2.6%  in the quarter and missed estimates ($12.75B vs $12.96B)
  • Operating income fell -1.5% in the quarter
  • Europe volume -4% (vs -4% in Q1 2013) on colder weather and flooding in Germany and central Europe

 

Matthew Hedrick

Senior Analyst


#GotVolume?

Takeaway: Where's the volume?

Either everyone is at the beach… Everyone is waiting for our Central-Planner-In-Chief's latest messaging ("To Taper, Or Not To Taper") signal tomorrow… or everyone’s waiting for the guy next to them to make the first move.

 

But any way you slice it, it looks like no one has any real conviction on either side at these levels.

 

#GotVolume? - Volume YTD

 

Of course, depressed volume is not a new phenomenon as the trend in aggregate market volume has been one of decline as the 2nd chart below illustrates.  Soft volume month-to-date (around the July 4th Holiday) is not particularly surprising.

 

#GotVolume? - Volume LT

 

That said, this ain’t the stuff convicted new market highs are made of.  Keep your head up out there.


Morning Reads on Our Radar Screen

Takeaway: A quick look at some stories on Hedgeye's radar screen.

Keith McCullough – CEO

Elon Musk to Release ‘Hyperloop’ Tranport Plans Next Month (via Bloomberg)

Thousands of Greeks join strike against public sector layoffs (via Reuters)

Mexican Marines Captured one of World's Most Notorious Drug-Gang Leaders (via BBC)

 

Morning Reads on Our Radar Screen - earth1

 

Josh Steiner – Financials

Homebuilder confidence surges:  Strongest print since Jan 2006. (via NAHB)

Goldman Beats Estimates on Investment Banking, Debt Gains (via Bloomberg)

 

Tom Tobin – Healthcare

Johnson & Johnson results beat forecasts  (via Reuters)

HCA Jumps After Preliminary Earnings Top Estimates (via Bloomberg)

 

Jonathan Casteleyn - Financials

Tesla CEO Musk Morphs From Tony Stark to Henry Ford (via Bloomberg)

Charles Schwab profit misses estimates as expenses increase (via Reuters)

 

Matt Hedrick – Macro

Iceland Bucks EU Entry-Decision Plea Amid Mackerel Spat (via Bloomberg)

 

Kevin Kaiser – Energy

Celebrity house for sale: Wayne Gretzky (via Bankrate)

Huge disparity between US (6-year high) and European (2-decade low) car sales (via Bloomberg H/T to Bespoke)


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