prev

THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – August 23, 2013


As we look at today's setup for the S&P 500, the range is 29 points or 0.90% downside to 1642 and 0.85% upside to 1671.                                                 

                                                                              

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: 2.50 from 2.50
  • VIX  closed at 14.76 1 day percent change of -7.40%

MACRO DATA POINTS (Bloomberg Estimates):

  • Kansas City Fed Jackson Hole Economic Summit continues
  • 10am: New Home Sales, July, est. 487k (prior 497k)
  • 11am: Fed to purchase $2.75b-$3.5b in 2020-2023 sector
  • 1pm: Baker Hughes rig count

GOVERNMENT:

    • President Obama speaks on improving value of higher education at Binghamton University in Vestal, N.Y., and with Vice President Joe Biden at Lackawanna College in Scranton, Penn.
    • 11am: U.S. Chamber of Commerce briefing on TPP negotiations taking place in Brunei this week
    • Pentagon weighs firing thousands of civilians under 2014 cuts

WHAT TO WATCH:

  • Nasdaq says cause of connectivity issue has been addressed
  • Nasdaq shuts trading for 3 hours after computer errors
  • SEC’s White vows tech safeguards after Nasdaq failure
  • JPMorgan said to face London Whale fines as soon as next mo.
  • CFTC said near releasing high-speed trading regulation plans
  • Amgen said to push for lower Onyx price amid drug-data dispute
  • Koch Industries backs away from bid for Tribune’s newspapers
  • Moody’s mulls downgrade of big banks as U.S. support wanes
  • Mitsubishi aircraft gets U.S. airlines’ backing amid delays
  • AMR, US Airways want trial for U.S. antitrust suit in Nov.
  • Southwest blind spot eroding U.S. bid to bar AMR-US Airways
  • Alibaba said to ask HKEx to allow partners to nominate board
  • Wells Fargo eyes 20% ann. growth in Asia fund-services clients
  • ADM says Graincorp offer extended to Nov. 16 from Aug. 31
  • Richmond says bondholders’ suit over eminent domain too early
  • Baidu buys 59% stake in Renren website for $160m
  • Amazon said to have tested wireless network in California
  • U.K. economy grows a more-than-estimated 0.7% as exports rise
  • U.S. GDP, King Speech Anniv., Carney: Wk Ahead Aug. 24-31

EARNINGS:

    • Ann Inc (ANN) 7:30am, $0.65
    • Foot Locker (FL) 7am, $0.47
    • Hibbett Sports (HIBB) 6:30am, $0.38

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

  • WTI Crude Futures Head for Biggest Weekly Decline in a Month               
  • Gold Bears Take Over as Fed Members Back Taper Plan: Commodities
  • Sugar Exports From India Get Boost From Record Rupee Plunge
  • Gold’s Rout Spurs Surge in Indonesian Demand: Southeast Asia
  • Corn and Soybeans Rise as Midwest Seen Set for Heat and Dryness
  • Copper Climbs on Rebound Indications and Shrinking Inventories
  • Robusta Coffee Falls to 7-Week Low on Technicals; Sugar Advances
  • Rebar Rises as Data Signals Better Prospects for Global Recovery
  • Strike Threat May Cripple Money-Losing South Africa Gold Miners
  • Soybean Traders Most Bullish Since 2012 as Freeze Threat Looms
  • Coal Gets No Relief as Aussie Slide Deepens Glut: Energy Markets
  • Petrobras Outspends Exxon Researching Next Oil Frontiers: Energy
  • China’s Yunnan Tin Will Halt Lead Smelting After Price Declines
  • Soy, Corn Yields Seen Less Than USDA Estimates on Midwest Tour

 

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

 

 

 

 

 

 

 

 

 

 

 

 


INITIAL CLAIMS: CONTINUED IMPROVEMENT

Takeaway: The number of people filing initial jobless claims continues to drop at an accelerating rate year-over-year.

The Lowest Running Monthly Jobless Claims Level in 5 Years

 

In the most recent initial jobless claims series released this morning from the U.S. Department of Labor, weekly jobless claims thus far for the month of August is running at the lowest monthly level since November 2007.

INITIAL CLAIMS: CONTINUED IMPROVEMENT - bw2

With employers holding on to more workers to meet an improving economy, this U.S. labor series may continue to improve as the effects of Federal budget cuts and higher payroll taxes burn off in the second half of 2013. In addition, the incremental impact of Obamacare is likely driving a portion of the underlying improvement, with nearly 75% of the 1 million jobs created this year being attributed to small and medium sized businesses hiring part time workers.

 

The Data

 

Prior to revision, initial jobless claims rose 16k to 336k from 320k week-over-week (WoW), as the prior week's number was revised up by 3k to 323k.

 

The headline (unrevised) number shows claims were higher by 13k WoW. Meanwhile, the 4-week rolling average of seasonally-adjusted claims fell -2.25k WoW to 330.5k.

 

The 4-week rolling average of NSA claims, which we consider a more accurate representation of the underlying labor market trend, was 

 

INITIAL CLAIMS: CONTINUED IMPROVEMENT - stein1


INITIAL CLAIMS: CONTINUED IMPROVEMENT YEAR-OVER-YEAR

Takeaway: The number of people filing initial jobless claims continues to drop at an accelerating rate year-over-year.

The Lowest Running Monthly Jobless Claims Level in 5 Years

 

In the most recent initial jobless claims series released this morning from the U.S. Department of Labor, weekly jobless claims thus far for the month of August is running at the lowest monthly level since November 2007. With employers holding on to more workers to meet an improving economy, this U.S. labor series may continue to improve as the effects of Federal budget cuts and higher payroll taxes burn off in the second half of 2013. In addition, the incremental impact of Obamacare is likely driving a portion of the underlying improvement, with nearly 75% of the 1 million jobs created this year being attributed to small and medium sized businesses hiring part time workers.

 

The Data

 

Prior to revision, initial jobless claims rose 16k to 336k from 320k WoW, as the prior week's number was revised up by 3k to 323k.

 

The headline (unrevised) number shows claims were higher by 13k WoW. Meanwhile, the 4-week rolling average of seasonally-adjusted claims fell -2.25k WoW to 330.5k.

 

The 4-week rolling average of NSA claims, which we consider a more accurate representation of the underlying labor market trend, was -10.3% lower YoY, which is a sequential improvement versus the previous week's YoY change of -7.8%

 

 

INITIAL CLAIMS: CONTINUED IMPROVEMENT YEAR-OVER-YEAR - 1

 

INITIAL CLAIMS: CONTINUED IMPROVEMENT YEAR-OVER-YEAR - 2

 

INITIAL CLAIMS: CONTINUED IMPROVEMENT YEAR-OVER-YEAR - 3

 

INITIAL CLAIMS: CONTINUED IMPROVEMENT YEAR-OVER-YEAR - 4

 

INITIAL CLAIMS: CONTINUED IMPROVEMENT YEAR-OVER-YEAR - 5

 

INITIAL CLAIMS: CONTINUED IMPROVEMENT YEAR-OVER-YEAR - 6

 

INITIAL CLAIMS: CONTINUED IMPROVEMENT YEAR-OVER-YEAR - 7 redo

 

INITIAL CLAIMS: CONTINUED IMPROVEMENT YEAR-OVER-YEAR - 8

 

INITIAL CLAIMS: CONTINUED IMPROVEMENT YEAR-OVER-YEAR - 9

 

INITIAL CLAIMS: CONTINUED IMPROVEMENT YEAR-OVER-YEAR - 10

 

INITIAL CLAIMS: CONTINUED IMPROVEMENT YEAR-OVER-YEAR - 11

 

INITIAL CLAIMS: CONTINUED IMPROVEMENT YEAR-OVER-YEAR - 12

 

INITIAL CLAIMS: CONTINUED IMPROVEMENT YEAR-OVER-YEAR - 13

 

INITIAL CLAIMS: CONTINUED IMPROVEMENT YEAR-OVER-YEAR - 19

 

INITIAL CLAIMS: CONTINUED IMPROVEMENT YEAR-OVER-YEAR - 14

 

 

Joshua Steiner, CFA


Jonathan Casteleyn, CFA, CMT

 


real-time alerts

real edge in real-time

This indispensable trading tool is based on a risk management signaling process Hedgeye CEO Keith McCullough developed during his years as a hedge fund manager and continues to refine. Nearly every trading day, you’ll receive Keith’s latest signals - buy, sell, short or cover.

[VIDEO] Our #1 Q3 Macro Theme

 

It's late August on Wall Street. Volumes are light, ideas sparse and the Hamptons is packed. We think now is as good a time as any to reiterate Hedgeye's top Q3 Macro Theme. At the top of the list? You guessed it. #RatesRising. 2.91% last tick on the 10-year.

 

Hedgeye CEO Keith McCullough discusses this generational paradigm shift in bonds and says we aren't likely to see the 2012 lows on 10-year bond yields ever again. (Yes, "ever" is a long time.)


SP500 Levels, Refreshed

POSITION: 8 LONGS, 3 SHORTS @Hedgeye

 

As my colleague Daryl Jones offered up as the opening volley in the Early Look this morning, “Volumes are light, ideas are sparse and the Hamptons are packed.  Welcome to summer on Wall Street!” We at Hedgeye are, however, not short on investment ideas (see our best ideas list included in today’s Early Look) and are keeping our eyes peeled on buying opportunities into this equity market correction.

 

Grounded behind our call on #GrowthAccelerating and #RatesRising, and with the SPX currently -3.4% off its year-to-date high (on 8/2), our core risk management durations for the SPX are:

  1. Intermediate-term TREND support = 1631, held
  2. Immediate-term TRADE support = 1642, held too
  3. Immediate-term TRADE resistance = 1670, then the all-time high = 1709

In other words, we like the risk/reward set-up of covering shorts and buying them here.

 

Enjoy your summer Thursday,

 

Matthew Hedrick

Senior Analyst

 

SP500 Levels, Refreshed - SPX 3month


Dog Days of August

Client Talking Points

#RatesRising

It's late August on Wall Street. Volumes are light, ideas are sparse and the Hamptons is packed. Now's as good a time as any to reiterate Hedgeye's three core Q3 Macro Themes. At the top of the list? You guessed it. #RatesRising. 2.91% last on the 10-year. It's been a monster move. A generational shift is going on. We are not likely to see the 2012 lows on 10-year bond yields ever again. Yes, "ever" is a long time. Meanwhile, as the slope for interest rates turns up, so much that has been tied to declining rates will unravel.

#DebtDeflation

Total global debt outstanding is 3X total equity. This has created a massive Supply/Demand mismatch, as the supply of debt dwarfs the availability of equities. Nearly every major investment class is broken on Hedgeye's macro screen including Gold, 10-year Treasurys, Emerging Markets and high-yield bonds. The trends have reversed, and you should expect the outflows to be just as poorly planned as the inflows were. Indeed, the real risk is that there is a rush for the exits, leading already-crumbling asset classes to implode. 

#AsianContagion

Ex-Japan, Asian equity markets do not look good. Just pull up a chart on India's Sensex. Or Thailand. Or Indonesia. Japan is after 2% inflation, and they may get it by Burning Yens. The trade is Short Yens and Long Japanese equities. There's a lot of upside in the deep, liquid Nikkei. I know it's a tough pill to swallow. Look, Asia is not for the faint of heart. The Weimer Republic tried all this monetary madness. It didn't end too well. Bottom line is get out of the way of these highly suspect Asian currencies in a rising rate environment.

Asset Allocation

CASH 26% US EQUITIES 28%
INTL EQUITIES 24% COMMODITIES 0%
FIXED INCOME 0% INTL CURRENCIES 22%

Top Long Ideas

Company Ticker Sector Duration
WWW

WWW is one of the best managed and most consistent companies in retail. We’re rarely fans of acquisitions, but the recent addition of Sperry, Saucony, Keds and Stride Rite (known as PLG) gives WWW a multi-year platform from which to grow. We think that the prevailing bearish view is very backward looking and leaves out a big piece of the WWW story, which is that integration of these brands into the WWW portfolio will allow the former PLG group to achieve what it could not under its former owner (most notably – international growth, and leverage a more diverse selling infrastructure in the US). Furthermore it will grow without needing to add the capital we’d otherwise expect as a stand-alone company – especially given WWW’s consolidation from four divisions into three -- which improves asset turns and financial returns.

MPEL

Gaming, Leisure & Lodging sector head Todd Jordan says Melco International Entertainment stands to benefit from a major new European casino rollout.  An MPEL controlling entity, Melco International Development, is eyeing participation in a US$1 billion gaming project in Barcelona.  The new project, to be called “BCN World,” will start with a single resort with 1,100 hotel beds, a casino, and a theater.  Longer term, the objective is for BCN World to have six resorts.  The first property is scheduled to open for business in 2016.

HCA

Health Care sector head Tom Tobin has identified a number of tailwinds in the near and longer term that act as tailwinds to the hospital industry, and HCA in particular. This includes: Utilization, Maternity Trends as well as Pent-Up Demand and Acuity. The demographic shift towards more health care – driven by a gradually improving economy, improving employment trends, and accelerating new household formation and births – is a meaningful Macro factor and likely to lead to improving revenue and volume trends moving forward.  Near-term market mayhem should not hamper this  trend, even if it means slightly higher borrowing costs for hospitals down the road.

Three for the Road

TWEET OF THE DAY

Another solid European #GrowthStabilizing data pt this morning with German PMI for AUG clocking a 52 vs 50.7 last @KeithMcCullough

QUOTE OF THE DAY

"Great minds discuss ideas; average minds discuss events; small minds discuss people" -Eleanor Roosevelt

STAT OF THE DAY

Americans spent $11.8 billion on bottled water in 2012. Americans account for 15% of total world consumption of bottled water, which stands at about 61.4 billion gallons annually. At an average cost of $1.22 per gallon, US consumers are spending 300 times the cost of tap water to drink bottled water.


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