On the surface the S&P 500 looked like it had a good day, finishing mixed on Monday after spending the bulk of the day in negative territory.  The internals of the market were decidedly negative with volume down 11.6% day-over-day and the advance-decline line turning negative at -506, down 788 on the day.   


The news flow from global MACRO was a headwind yesterday, especially the news from China and Greece.  There were also some concerns surrounding comments from Moody's that both the US and UK have moved "substantially" closer to losing their AAA credit ratings, though note that CDS on US and UK government bonds were little changed.  As we have said many times, the ratings agencies are a lagging indicator. 


On the MACRO calendar in the US, industrial production rose a better-than-expected 0.1% in February, with a positive take away from the ability of production to increase last month despite the weather.  On the negative side, the only real disappointment seemed to be the NAHB Housing Market Index, which fell to 15 in March from 17 in February.


Yesterday, the SAFETY trade outperformed, while pockets of the market with outsized leverage to the RECOVERY trade underperformed today.  Notable decliners included Energy (XLE), Consumer Discretionary (XLY), Materials (XLB) and Industrials (XLI) was flat on the day. 


The bounce in the dollar was the big headwind too, with the move largely fueled by heightened tightening concerns surrounding China; the Dollar index was up 0.52%.  The Hedgeye Risk Management models have levels for the Dollar Index (DXY) at:  buy Trade (79.83) and sell Trade (80.79).


Yesterday, there was a lot of noise surrounding the regulatory uncertainty in the financial services and healthcare sectors.  Facilities names and Pharma posted modest gains today; managed care was a laggard with the HMO +0.2%, though the group did finish in positive territory.  There were several reports noting that Democrats currently lack the votes to pass the Senate's healthcare reform bill in the House.


Within Financials (XLF), the banking group was a slight outperformer yesterday with the BKX up 0.2%; however, investment banks along with money-center names were among the laggards yesterday.  The underperformance was attributed to the inclusion of the Volcker Rule in Senator Dodd's financial market reform bill released today.  


After lagging the broader market over the last few weeks, the consumer staples sector was the best performer yesterday.  In the Hedgeye sector models yesterday, outperformance over the immediate term put the XLP in an overbought position, so we shorted it.  Yesterday, WMT was one of the standouts on the back of an upgrade at Citi.  


One of the bigger tailwinds for the market seemed to be the continued pickup in M&A activity, with some high-profile deals yesterday in the apparel and E&P spaces.


Volatility improved 2.39% on Friday, while the VIX continues to be broken on TRADE, TREND and TAIL.  The Hedgeye Risk Management models have levels for the volatility Index (VIX) at:  buy Trade (17.15) and sell Trade (19.04). 


As we wake up today, equity futures are trading mixed to fair value ahead of today's FOMC rate decision and in the wake of yesterday's performance which saw markets eventually close flat having spent most of the day in the red. The focus of the FOMC meeting will be on any hints as to when the Fed might choose to lift rates.  As we look at today’s set up, the range for the S&P 500 is 22 points or 0.9% (1,139) downside and 1% (1,161) upside.


Today's MACRO highlights will be:

  • US Import Price Index
  • US Housing Starts (February) consensus 570K
  • US Building Permits (February) consensus 601K
  • ABC Consumer Confidence

In early trading, copper is trading higher as the dollar is trading lower.  The Hedgeye Risk Management Quant models have the following levels for COPPER – Buy Trade (3.24) and Sell Trade (3.45).


According to Bloomberg, gold rose for a second day in London as “investors sought a haven before the U.S. Federal Reserve’s interest rate decision and amid speculation about financial aid to Greece.” The Hedgeye Risk Management models have the following levels for GOLD – Buy Trade (1,094) and Sell Trade (1,122).


Also on Bloomberg today - “Saudi Arabia, the biggest and most influential member of the Organization of Petroleum Exporting Countries, said oil prices are in the right range and there’s no need to change production policy.”  Crude oil is trading slightly higher in early trading.  The Hedgeye Risk Management models have the following levels for OIL – Buy Trade (78.41) and Sell Trade (82.99).


Howard Penney

Managing Director














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

A 'Toxic Cocktail' Brewing for A Best Idea Short

The first quarter earnings pre-announcement today is not the end of the story for Mednax (MD). Rising labor costs and slowing volume is a toxic cocktail...

read more

Energy Stocks: Time to Buy? Here's What You Need to Know

If you're heavily-invested in Energy stocks it's been a heck of a year. Energy is the worst-performing sector in the S&P 500 year-to-date and value investors are now hunting for bargains in the oil patch. Before you buy, here's what you need to know.

read more

McCullough: ‘My 1-Minute Summary of My Institutional Meetings in NYC Yesterday’

What are even some of the smartest investors in the world missing right now?

read more

Cartoon of the Day: Political Portfolio Positioning

Leave your politics out of your portfolio.

read more

Jim Rickards Answers the Hedgeye 21

Bestselling author Jim Rickards says if he could be any animal he’d be a T-Rex. He also loves bonds and hates equities. Check out all of his answers to the Hedgeye 21.

read more

Amazon's New 'Big Idea': Ignore It At Your Own Peril

"We all see another ‘big idea’ out of Amazon (or the press making one up) just about every day," writes Retail Sector Head Brian McGough. "But whatever you do, DON’T ignore this one!"

read more