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(REVISED) MDSO: Removing Medidata Solutions from Investing Ideas

Takeaway: MDSO: Removing Medidata Solutions from Investing Ideas

Editor's note: An earlier email listed an incorrect return for the S&P 500.

 

We are removing Medidata Solutions (MDSO) from Investing Ideas today. Shares have risen +4% since it was added on January 5th.

 

According to Hedgeye CEO Keith McCullough:

 

My market view is getting less bullish and this one is tapping the top-end of my intermediate-term range, so I’d like to come back and signal buy again, lower  - like we did on the last short-term scare.

 

(REVISED) MDSO: Removing Medidata Solutions from Investing Ideas - mds1


MDSO: Removing Medidata Solutions from Investing Ideas

Takeaway: We are removing MDSO from Investing Ideas.

We are removing Medidata Solutions (MDSO) from Investing Ideas today. Shares have risen +4% since it was added on January 5th.

 

According to Hedgeye CEO Keith McCullough:

 

My market view is getting less bullish and this one is tapping the top-end of my intermediate-term range, so I’d like to come back and signal buy again, lower  - like we did on the last short-term scare.

 

MDSO: Removing Medidata Solutions from Investing Ideas - mds1


INITIAL CLAIMS | SLOWING IMPROVEMENT

Takeaway: Labor market improvement slowed this week, and energy states continue to deteriorate versus the US as a whole.

Below is the detailed breakdown of this morning's initial claims data from Joshua Steiner and the Hedgeye Financials team. If you would like to setup a call with Josh or Jonathan or trial their research, please contact 

 

This week's jobless claims show a slowdown in labor market improvement. Seasonally adjusted claims rose 31k week over week to 313k, exceeding consensus (290k) by 23k.  Additionally, the year-over-year change in NSA claims slowed for the first time in five weeks to -12.2% from -14.9%.  As a reminder, we would expect that the rate of change y/y will converge towards zero by the middle of this year as claims are at/near their frictional ~300k floor.  For more on this, see our note HERE.

 

The labor market in energy states, meanwhile, continues to deteriorate relative to the rest of the country.  Even as oil prices have bounced modestly off their recent $45 lows, their sustained low level inflicts pain on energy-heavy states. In the first chart below, the gap between our energy state basket and the US as a whole widened slightly from 26 to 27.  

 

INITIAL CLAIMS | SLOWING IMPROVEMENT - Claims18 normal

 

INITIAL CLAIMS | SLOWING IMPROVEMENT - Claims20 normal  2

 

The Data 

Prior to revision, initial jobless claims rose 30k to 313k from 283k WoW, as the prior week's number was revised down by -1k to 282k.

 

The headline (unrevised) number shows claims were higher by 31k WoW. Meanwhile, the 4-week rolling average of seasonally-adjusted claims rose 11.5k WoW to 294.5k.

 

The 4-week rolling average of NSA claims, another way of evaluating the data, was -12.2% lower YoY, which is a sequential deterioration versus the previous week's YoY change of -14.9%

 

INITIAL CLAIMS | SLOWING IMPROVEMENT - Claims2 normal  1

 

INITIAL CLAIMS | SLOWING IMPROVEMENT - Claims3 normal  2

 

INITIAL CLAIMS | SLOWING IMPROVEMENT - Claims6 normal  1  

 

 

Joshua Steiner, CFA

 

Jonathan Casteleyn, CFA, CMT

 


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A Picture Is Worth 1,000 Jobs (A Quick Look At U.S. Energy States' Labor Market Deterioration)

Labor market improvement slowed this week with jobless claims showing a slowdown in labor market improvement. Seasonally adjusted claims rose 31,000 week over week to 313,000, exceeding consensus (290K) by 23,000.  

 

The labor market in energy states continues to deteriorate relative to the rest of the country.  Even as oil prices have bounced modestly off their recent $45 lows, their sustained low level inflicts pain on energy-heavy states. 

Check out the chart below.

(Click to enlarge.)

A Picture Is Worth 1,000 Jobs (A Quick Look At U.S. Energy States' Labor Market Deterioration) - keithchart


McCullough: Fed's Bullard Is 'Exhibit A' Of Central Planning Bubble

 

On today's Morning Macro Call, Hedgeye CEO Keith McCullough pulls no punches when calling out the contradictory rhetoric of James Bullard, President of The Federal Reserve Bank of St. Louis.

 

Watch today's full 30-minute Morning Macro Call here.



Why the Heck Is the U.S. Dollar Up So Much Today?

Takeaway: We think #deflation is the root cause of U.S. dollar appreciation.

At 8:25am EST, the DXY was trading at 94.492. It’s since shot up in a straight line in conjunction with the release of fairly dovish inflation data. Insert Viagra joke HERE:

 

Why the Heck Is the U.S. Dollar Up So Much Today? - 2 26 2015 11 05 40 AM

Source: Bloomberg L.P.

 

Why the Heck Is the U.S. Dollar Up So Much Today? - CPI

 

So why the heck is the dollar up so much today? One possible explanation Keith and I are discussing on the desk is the stabilization in Core CPI in JAN. Perhaps this is a harbinger of prospective stabilization in Core PCE Inflation, which will be released Monday morning at 8:30am EST.

 

Why the Heck Is the U.S. Dollar Up So Much Today? - CORE CPI

 

Why the Heck Is the U.S. Dollar Up So Much Today? - CORE PCE

 

If stabilization in the Fed’s preferred inflation metric turns out to be the case, that would allow the Fed to look through the persistent weakness in Headline CPI, which should bottom in/around JUN (assuming no material incremental weakness in commodity prices). I believe the word you’re looking for is “transitory”...

 

Why the Heck Is the U.S. Dollar Up So Much Today? - HRM Commodity Price Sample YoY vs. CPI YoY

 

Why the Heck Is the U.S. Dollar Up So Much Today? - CRB YoY vs. CPI YoY

 

But is that an accurate assessment of what is actually occurring? Looking at Fed Funds futures curve, rates have only moved up +2bps and +3bps on the JUL ’15 and DEC ’15 maturities, respectively, on the day. That would seem to support another explanation Keith and I just discussed: today’s melt-up in the DXY isn’t all about a hawkish Fed.

 

Why the Heck Is the U.S. Dollar Up So Much Today? - FFF JUL  15

 

Why the Heck Is the U.S. Dollar Up So Much Today? - FFF DEC  15

 

So then, what is driving today’s bout of material USD strength?

 

We think it’s about #deflation. And the realization that real interest rates in the U.S. should continue to move higher, not lower, over the intermediate term. What you’re seeing today is not necessarily unlike what occurred in Japan for much of the past 30 years as the currency strengthened amid persistent deflation despite various Policies To Inflate.

 

Why the Heck Is the U.S. Dollar Up So Much Today? - 9

Source: Bloomberg L.P.

 

We reiterate our intermediate-to-long term bullish bias on the U.S. Dollar, having been there since last August. Please don’t short the EUR down here, though. The former is pinned at its immediate-term TRADE line of support at 1.12. The USD/JPY cross has a full big figure to go to its immediate-term TRADE line of resistance at 120.33.

 

DD

 

Darius Dale

Associate: Macro Team


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