The S&P 500 finished down 0.21% yesterday, but well off their worst levels of the day.  Thursday’s decline is largely a function of global MACRO headwinds, as the earnings season is in the rear view.   


Yesterday in the USA, initial claims rose 22,000 to 496,000 for the week ended February 20th, significantly above the 460,000 consensus.  Consequently, the 4-week rolling claims number rose 6,000 to 473,800 from 467,800.  This latest print pushes claims squarely outside our 3 standard deviation channel. For reference, our channel reflects the trajectory that's been in place since the March 2009 peak in claims. While we had been hesitant to call a reversal in the underlying improvement trajectory, the fact is that six weeks of data do make for a trend.  See our post on from yesterday for more details. 


On a global MACRO front, sovereign credit concerns were exacerbated after Moody's, the only ratings agency that still has an A-level rating on Greece, said that it may lower its A2 rating within months.   With the Moody’s data point a lagging indicator, the VIX was down 0.84% yesterday and has declined 2.6% over the past week and 20.9% over the past month.  The VIX is currently broken on all three durations (TRADE TREND and TAIL) and today’s Hedgeye Risk Management models have levels for the VIX—buy Trade (19.03) and sell Trade (22.82).


Yesterday, durable goods orders jumped a better-than-expected 3% in January, though upside was largely a function of stronger aircraft bookings, as orders excluding transportation declined 0.6%.  The Industrials (XLI), which is one of four sectors that is positive on both TRADE and TREND, was one of the three worst performing sectors.  Rounding out the bottom three performing sectors were Technology (XLK) and Financials (XLF). 


Yesterday, Technology (XLK) was the worst performing sector on the day.   Semiconductors were under pressure for much of the day; the SOX down just 0.3% on the day.  Since the beginning of the earnings season the semis seem to get out from underneath concerns about inventories and order cancellations. Additionally, the MOBILITY space took it on the chin with PALM down 19.3% after guiding Q3 revenue below consensus and catching multiple downgrades.


The two best performing sectors were Consumer Discretionary (XLY) and Consumer Staples (XLP).  The S&P Retail index gained 0.37% yesterday, following a 1.96% move on Wednesday.  Within the XLP, soft-drink stocks were in focus today after KO announced that it would purchase the North American operations of CCE, which was up 32.9%.  DPS also was up on M&A speculation and after the company boosted the size of its buyback and better than expected earnings and guidance.


On the MACRO calendar today we will see the first revision to Q4 GDP, February Chicago PMI, February final U. of Michigan Confidence, February NAPM Milwaukee and January existing homes sales.  Equity futures are trading above fair value in a continuation of the late rally yesterday which saw a majority of the session's losses erased by the close. The Q4 GDP report will be the main highlight of a number of economic reports today.  As we look at today’s set up the range for the S&P 500 is 26 points or 1% (1,093) downside and 1.5% (1,119) upside. 


Copper rose in London, paring its first weekly drop in three weeks, as the dollar declined and stronger Japanese industrial production fueled speculation that demand will remain strong.  The Hedgeye Risk Management Quant models have the following levels for COPPER – Buy Trade (3.18) and Sell Trade (3.40).


India, the world’s biggest consumer of gold, raised import duties on gold, silver and platinum to reflect higher global prices for the precious metals.  The Hedgeye Risk Management models have the following levels for GOLD – Buy Trade (1,097) and Sell Trade (1,124).


Crude oil is in position for the biggest monthly advance since October, amid speculation OPEC won’t increase output quotas and as the dollar is slightly weaker.  The Hedgeye Risk Management models have the following levels for OIL – Buy Trade (77.10) and Sell Trade (81.95).


Howard Penney

Managing Director














Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more

6 Charts: The French Election, Nasdaq All-Time Highs & An Earnings Scorecard

We've been telling investors for some time that global growth is picking up, get long stocks.

read more

Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more

Europe's Battles Against Apple, Google, Innovation & Jobs

"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”

read more

An Open Letter to Pandora Management...

"Please stop leaking information to the press," writes Hedgeye Internet & Media analyst Hesham Shaaban. "You are getting in your own way, and blowing up your shareholders in the process."

read more