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CHIN MUSIC: APRIL RETAIL SALES

Headline Retail sales grew +0.1% sequentially while the Control Group measure (GDP input) declined -0.1% sequentially with electronics spending and the e-sales and dining-out proxies each decelerating on a MoM, YoY and 2Y basis. 

 

CHIN MUSIC:  APRIL RETAIL SALES - RS Control Group 

 

The positive revision to the march data will help drag 1Q GDP back to positive territory but the early read through for reported 2Q growth is less sanguine – particularly in the context of consensus estimates  which have increased ~20% over the last month to +3.3%.  

 

CHIN MUSIC:  APRIL RETAIL SALES - COD 

 

 

Meanwhile, sales-to-Inventory ratio’s continue to peak despite the spread between nominal spending and nominal earnings growth re-expanding in recent months. 

 

With wage growth running sub-2% and savings rates at a cycle low (& the very low end of the historical range) the upside to consumption growth over the immediate/intermediate term remains very much constrained, in our view. 

 

CHIN MUSIC:  APRIL RETAIL SALES - Nominal PCE vs Nominal Earnings April 051314

 

CHIN MUSIC:  APRIL RETAIL SALES - Savings Rate

 

CHIN MUSIC:  APRIL RETAIL SALES - IS ratio 

 

In short, with the ~24% of the domestic economy that is retail sales off to an inauspicious start, consumption has some significant hay to bale in order to best rising consensus growth expectations and re-capture last year’s slope of growth.

 

With the dollar and 10Y broken and food/energy/housing inflation taking down a greater share of wallet, we're not convinced that consumption acceleration materializes.  

 

CHIN MUSIC:  APRIL RETAIL SALES - Retails Sales Then vs Now

 

CHIN MUSIC:  APRIL RETAIL SALES - Retail Sales table

 

 

Christian B. Drake

@HedgeyeUSA


Daily Trading Ranges, Refreshed

Takeaway: Last chance to buy what’s been working all year? Slow-growth-yield-chasing is where the performance is at.

Editor's note: This unlocked edition of Daily Trading Ranges was originally provided to subscribers on May 13, 2014 at 7:22 a.m EST. For more information on how you can receive these levels every morning in your inbox click here.

 

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BULLISH TRENDS

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BEARISH TRENDS

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Video | McCullough: Only Wall Street Will Tell You It’s Not Inflation

In this excerpt from our daily macro call for institutional investors, Hedgeye CEO Keith McCullough and senior macro analyst Darius Dale talk inflation and why the Fed just has it wrong.


Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

Sell Growth: SP500 Levels, Refreshed

Takeaway: The weather turned, but the consumption data that matters most didn’t.

POSITION: 8 LONGS, 7 SHORTS

 

But whatever you do, don’t call falling bond yields (do not sell bonds here!) on today’s #ConsumerSlowing (Retail Sales +0.1%) print a US growth slowing confirmation. The weather turned, but the consumption data that matters most didn’t.

 

Across our core risk management durations, here are the lines that matter to me most:

 

  1. Immediate-term TRADE overbought = 1901
  2. Immediate-term TRADE support = 1866
  3. Intermediate-term TREND support = 1845

 

In other words, you have -1.8% and -2.9% immediate (TRADE) and intermediate-term (TREND) risk to the downside if you get plugged chasing the all-time SPY high here. So don’t do that.

 

Both the Russell2000 and UST 10yr yields remain bearish, because growth is slowing.

KM

 

Keith R. McCullough
Chief Executive Officer

 

Sell Growth: SP500 Levels, Refreshed  - SPX



Crickets in the Currency Market

Client Talking Points

UST 10YR

Don’t take my word for it – the bond market has had this nailed for 4.5 months. The 10-year yield of 2.65% (with immediate-term TRADE resistance of 2.67%) couldn’t care less about what high-multiple momo stock bounced on no volume yesterday.

USD

There are crickets in the currency market this morning as the Euro/Pound/Yen complex moves like 10 beeps. That’s not going to cut it in arresting the bearish TAIL risk the US Dollar Index has developed in 2014...neither will it slow #InflationAccelerating in the US.

VOLUME

Calling total US Equity Volume a cricket yesterday wouldn’t be giving it its due credit! On the “all-time-high” CNBC Dow cheers (RUT and QQQ are down -5% to -6% from their year-to-date highs) volume was down -10% and -31% versus one-month and three-month averages, respectively.

Asset Allocation

CASH 12% US EQUITIES 6%
INTL EQUITIES 10% COMMODITIES 26%
FIXED INCOME 24% INTL CURRENCIES 22%

Top Long Ideas

Company Ticker Sector Duration
HOLX

Hologic is emerging from an extremely tough period which has left investors wary of further missteps. In our view, Hologic and its new management are set to show solid growth over the next several years. We have built two survey tools to track and forecast the two critical elements that will drive this acceleration.  The first survey tool measures 3-D Mammography placements every month.  Recently we have detected acceleration in month over month placements.  When Hologic finally receives a reimbursement code from Medicare, placements will accelerate further, perhaps even sooner.  With our survey, we'll see it real time. In addition to our mammography survey. We've been running a monthly survey of OB/GYNs asking them questions to help us forecast the rest of Hologic's businesses, some of which have been faced with significant headwinds. Based on our survey, we think those headwinds are fading. If the Affordable Care Act actually manages to reduce the number of uninsured, Hologic is one of the best positioned companies.

OC

Construction activity remains cyclically depressed, but has likely begun the long process of recovery.  A large multi-year rebound in construction should provide a tailwind to OC shares that the market appears to be underestimating.  Both residential and nonresidential construction in the U.S. would need to roughly double to reach post-war demographic norms.  As credit returns to the market and government funded construction begins to rebound, construction markets should make steady gains in coming years, quarterly weather aside, supporting OC’s revenue and capacity utilization.

DRI

Darden is the world’s largest full service restaurant company. The company operates +2000 restaurants in the U.S. and Canada, including Olive Garden, Red Lobster, LongHorn and Capital Grille. Management has been under a firestorm of criticism for poor performance. Hedgeye's Howard Penney has been at the forefront of this activist movement since early 2013, when he first identified the potential for unleashing significant value creation for Darden shareholders. Less than a year later, it looks like Penney’s plan is coming to fruition. Penney (who thinks DRI is grossly mismanaged and in need of a major overhaul) believes activists will drive material change at Darden. This would obviously be extremely bullish for shareholders and could happen fairly soon driving shares materially higher.

Three for the Road

TWEET OF THE DAY

Italy's consumer prices remain relatively low as CPI comes in at +0.6% y/y APR #StrongEuro @KeithMcCullough

QUOTE OF THE DAY

“You miss 100% of the shots you don’t take.” – Wayne Gretzky

STAT OF THE DAY

49, the number of points LeBron James scored for the Miami Heat last night in a playoff victory against the Brooklyn Nets. That tied his career playoff high for points.


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