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September 3, 2014

September 3, 2014 - 1

 

BULLISH TRENDS

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BEARISH TRENDS

 

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THE HEDGEYE DAILY OUTLOOK

TODAY’S S&P 500 SET-UP – September 3, 2014


As we look at today's setup for the S&P 500, the range is 24 points or 0.86% downside to 1985 and 0.34% upside to 2009.                                                            

                                                                   

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: 1.92 from 1.90
  • VIX closed at 12.25 1 day percent change of 2.25%

 

MACRO DATA POINTS (Bloomberg Estimates):

  • 7am: MBA Mortgage Applications, Aug. 29 (prior 2.8%)
  • 7:45am: ICSC weekly sales
  • 8:55am: Johnson/Redbook weekly sales
  • 9:45am: ISM New York, Aug. (prior 68.1)
  • 10am: Factory Orders, July, est. 11% (prior 1.1%)
  • 11:30am: U.S. to sell $40b 4W bills, $15b 11-day bills
  • 2pm: Federal Reserve Beige Book
  • 6:15pm: Money Marketeers of New York University dinner featuring Fed’s Powell as speaker

 

GOVERNMENT:

    • Senate, House out on final week of summer recess
    • Obama in Talinn, Estonia, to meet with Baltic state leaders
    • 8:10am: Defense Undersecretary  Kendall delivers remarks on procurement ahead of ComDef 2014 conference
    • 10:30am: Fed to meet on liquidity rule, swaps margins
    • 12pm: WellPoint CEO Swedish among those at Natl Inst. for Health Care Management holds policy forum on Obamacare
    • 2pm: FDIC board vote on margin/capital rules for covered swap entities
    • U.S. ELECTION WRAP: Return of Corporate Raider; Usher for Nunn

 

WHAT TO WATCH:

  • Putin, Poroshenko largely agree on Ukraine cease-fire steps
  • Concur said to explore sale to software makers including SAP
  • GM, Ford, Chrysler give Aug. auto sales: SAAR Est. 16.6m
  • FDIC board votes on margin/capital rules for covered swaps
  • Warner Bros. studio said planning worker buyouts
  • Veritas Capital agrees to acquire BeyondTrust for $310m
  • U.K. services growth surges in sign of unbalanced recovery
  • Eurozone Aug. composite PMI 52.5 vs flash reading 52.8
  • Eurozone July retail sales down 0.4% m/m; est. down 0.3% m/m
  • Home Depot’s suspected breach adds pressure to bolster security
  • McDonald’s ramps up food safety checks to lure back China diners
  • Google unveils Quantum-computing initiative to speed up hardware
  • Google executive for satellite Internet access leaves: WSJ *Burger King claim that move won’t save taxes draws skepticism * Warburg Pincus said to invest almost $700m in Huarong
  • Steve Wynn joins Bain Capital funding stock-trading venue IEX
  • CVS to rename as CVS Health, halt tobacco sales: WSJ
  • Magellan sells 90% of BridgeTex oil pipeline capacity: Reuters

 

AM EARNS:

    • Alimentation Couche-Tard (ATD/B CN) 8:40am, $0.44
    • G-III Apparel Group (GIII) 7am, $0.16
    • Navistar International (NAV) 7:02am, $(0.71) - Preview
    • Vince Holding (VNCE) 6am, $0.24

 

PM EARNS:

    • ABM Industries (ABM) 5pm, $0.46
    • Bazaarvoice (BV) 4:05pm, $(0.12)
    • Dominion Diamond (DDC CN) 5:30pm, $0.19
    • H&R Block (HRB) 4:03pm, $(0.39)
    • PVH (PVH) 4:02pm, $1.43

               

COMMODITY/GROWTH EXPECTATION (HEADLINES FROM BLOOMBERG)

  • Crude Rises as Russia-Ukraine Cease-fire Seen Boosting Demand
  • Palladium Falls to Two-Week Low on Russia-Ukraine Peace Talks
  • Copper Falls as China’s Power Grid Investigation Holds Up Demand
  • Grains Drop as Export Prospects Improve as Ukraine Tensions Ease
  • Arabica Coffee Declines After Rally as Cocoa Rebounds in London
  • Carbon Credits Give $664 Benefits Per Ton, Imperial Says
  • Richard’s Bay Coal Prices Fall Close to Lowest Since 2009
  • Rebar, Iron Ore Drop to Record Lows on Supply, China Demand
  • Trader Who Scored $100 Million Payday Bets Shale Is Dud: Energy
  • China Steel Industry Confronts Grim ’New Reality’: Adam Minter
  • Glencore May Bid for Anglo American in 2015, Jefferies Says
  • Palm Oil Climbs for Second Day as Weaker Ringgit Boosts Demand
  • Indonesian Coal Sellers Delay Offers Following New Permit Rules

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



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CORELOGIC HPI DATA - THE DILEMMA

Takeaway: Corelogic data shows 1-month of stabilization amid what has been a steadily decelerating trend.

Our Hedgeye Housing Compendium table (below) aspires to present the state of the housing market in a visually-friendly format that takes about 30 seconds to consume. 

 

CORELOGIC HPI DATA - THE DILEMMA - Compendium 090214

 

Today's Focus: July/August CoreLogic Home Price Report

CoreLogic released its monthly home price report for July/August earlier this morning. Unlike S&P/Case-Shiller, which is a rolling 3-month average repeat sales index,CoreLogic is a single month index released on almost no lag. Essentially, it gives you information three months more current than what you get from Case-Shiller. 

 

The Data:  Home price growth accelerated +10bps to 7.4% in July vs downwardly revised June figures (June revised from +7.5% to +7.3%).  The forward looking projection for August estimates a MoM increase of +0.6%, which equates to flat sequential year-over-year growth of +7.3%. 

 

The Dilemma(s): 

  • Revision to HPI estimate methodology:  Back in February, CoreLogic revised the methodology underpinning its month ahead HPI estimate from one based on hard, MLS price data to an econometric model consistent with its intermediate and long-term HPI projections.  Subsequent to the February methodology change, the volatility and magnitude of revisions seems to have increased significantly.  In short, the forward 1-month estimate has become a less reliable indicator of real-time HPI trends
  • June/July – A Tale of Shifting Slope:  Last months (June) release was consistent with the post-February HPI deceleration trend with home price growth slowing from 8.3% in May to 7.5% in June to +7.0% in July.  However, the estimate revisions in the July release completely shifted the slope in HPI – instead of consistent, ongoing 50-80bps deceleration in the rate of HPI change, the latest release shows a positive inflection in July and the expectation for 3-months of stable growth through August.   

 

The Decision:   Its worth re-highlighting our base conceptual framework for housing as its been effective across cycles:

 

(1) Demand leads HPI (& we know housing demand trends in real-time) ... (2) Home price growth follows the slope of demand on an 12-18mo lag ... (3) housing related equities follow the slope of home price growth

 

We have anchored on the 2nd derivative move in HPI trends as a key signal because, historically, equity prices across the housing complex have followed the slope in home price growth. 

 

This same dynamic has played out again in 2014 with housing related equities posting negative returns and significantly underperforming alongside the 4 months of discrete deceleration since home price growth peaked in February.   

 

Headfake or Inflection:  So, what do we do with a fledgling inflection in home price growth?  

 

Tactically, to the extent the market is discounting zero or low-single digit price growth into 1Q15, a flattening or slowdown in the rate of home price deceleration would be a positive catalyst for housing equities. 

 

The July HPI data is certainly a notable counter-trend shift but with just a single month of data, steepening comps in the back half of the year, and our demand model signaling an imminent peak in HPI, we’re hesitant to pivot on our bearish intermediate term outlook on housing.  Bottoms (& tops) are processes, not points, and, at present, we’re content to await confirmatory data.

 

It's worth noting that while sales comps ease through 2H14, price comps don’t begin to ease until Feb 2015 (hardest near-term comp is Oct which was +11.9% YoY). As such, we think the next 6 months of pricing data will continue weigh on the housing complex.

 

 

CORELOGIC HPI DATA - THE DILEMMA - Corelogic Aug YoY TTM

 

CORELOGIC HPI DATA - THE DILEMMA - Corelogic Ex Distressed Aug YoY TTM

 

CORELOGIC HPI DATA - THE DILEMMA - Pending vs Corelogic 15Mo lag

 

 

About CoreLogic:

CoreLogic HPI incorporates more than 30 years worth of repeat sales transactions, representing more than 55 million observations sourced from CoreLogic's property information database. The CoreLogic HPI provides a multi-tier market evaluation based on price, time between sales, property type, loan type (conforming vs. nonconforming), and distressed sales. The CoreLogic HPI is a repeat-sales index that tracks increases and decreases in sales prices for the same homes over time, which provides a more accurate constant-quality view of pricing trends than basing analysis on all home sales. The CoreLogic HPI covers 6,208 ZIP codes (58 percent of total U.S. population), 572 Core Based Statistical Areas (85 percent of total U.S. population) and 1,027 counties (82 percent of total U.S. population) located in all 50 states and the District of Columbia."

 

Joshua Steiner, CFA

 

Christian B. Drake


Why Semiconductor Stocks May Run Even Higher: Hedgeye’s Berger


8 Quick Takeaways on #Nike's Gut Punch to #UnderArmour (Courtesy of #KevinDurant)

Takeaway: UA will come back heavy within six months' time and endorse someone big.

8 Quick Takeaways on #Nike's Gut Punch to #UnderArmour (Courtesy of #KevinDurant) - kd1

 

NKE, UA - Durant spurns Under Armour to return to Nike

  • "With Durant's seven-year contract with Nike expiring, Under Armour offered him a 10-year deal worth $265 million to $285 million. According to ESPN, Nike exercised its right to match any rival shoe company's offer to the All-Star guard. Nike officials told Durant and his representatives at Jay Z's Roc Nation Sports on Saturday that they would match Under Armour's offer."
  • "Based on the ESPN report, Durant stands to make more money from Nike over the next two years than the $41.2 million the Thunder will owe him during that span."

 8 Quick Takeaways on #Nike's Gut Punch to #UnderArmour (Courtesy of #KevinDurant) - niked

8 Quick Takeaways on the Nike/Durant deal:  

 

  1. The extra $20 million dollars in endorsement spend per year needs to generate an incremental $150mm in footwear sales in order to make it margin accretive for NKE. 
  2. In other words, KD needs to eclipse King James as the leader in the basketball footwear marketplace. 
  3. For NKE that translates to 0.9% growth in its footwear business - for UA to make the $28.5mm deal margin accretive it would need to grow the footwear category by 76%. 
  4. Uner Armour's bid did not have much to do with ROI. 
  5. The reality is that Under Armour is big enough now that it probably needs a mega-star to grow its footwear business and elevate its brand. 
  6. Tom Brady (UA's biggest name currently) won't cut it. 
  7. When the brand was in its infancy, it could simply put basketball shoes on "C" players in the NBA, and it was enough to boost the brand. Those days are over. 
  8. Our sense on this loss is that UA will come back heavy within six months' time and endorse someone big. It already has Board approval for the capital outlay, and it won't let that money go unspent.  

Nike's video "THE BADDEST" from this spring.


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