US STRATEGY – CONFIDENTLY MIXED

The S&P 500 finished higher on Friday and rose 2.5% for the week, despite some mixed MACRO economic data.  On Friday, the preliminary June Michigan Consumer confidence Index hit its highest level in more than two years in June, though retail sales unexpectedly fell in May for the first time since September.

 

MACRO data points for the week pertaining to the consumer pointed to mostly weaker trends. Consumer credit trends, mortgage applications, initial jobless trends and retails sales all showed softness.  Coming into Friday’s release of retail sales, consumer spending had been one bright spot since last October.  May Retail Sales declined 1.2% vs. consensus of 0.2%; ex-Autos (1.1%) vs. consensus 0.1%.  April Retail Sales was revised downward to 0.6% from 0.4%; ex-Autos revised upward to 0.6% from 0.4%. 

 

In contrast to the weakening macro data points, confidence showed stronger trends.  On Wednesday last week, the ABC confidence numbers showed a slight tick positive and on Friday the preliminary June Michigan Consumer Confidence also improved.  June University of Michigan Confidence (prelim) 75.5 vs. consensus 74.5; the final May reading was 73.6.

 

Technology shares climbed for a second consecutive day, and the NASDAQ ended up roughly where it started on Monday.  Strong results and optimism from chipmakers attempted to stifle concerns around a slowdown in the space. Pharma rallied around numerous upgrades and investors taking on new risk.

 

On Friday, the three best performing sectors were Materials (XLB) up 1.1%, Technology up 0.9% and, Healthcare up 0.81%.  With the S&P 500 up 2.5% on the week, the Hedgeye Risk Management models now have Energy (XLE) and Utilities (XLU) positive on TRADE; there are no companies positive on TREND.  The three worst performing sectors on Friday were Consumer Staples (XLP), Consumer Discretionary (XLY) and Utilities (XLU).  The XLP and the XLY were the only two sectors down on the day.   

 

The DXY rallied 0.4% on Friday and the Hedgeye Risk Management models have the following levels for the USD – Buy Trade (86.32) and Sell Trade (88.21).  The VIX declined 5.8% on Friday and 18.6% last week.  The Hedgeye Risk Management models have the following levels for the VIX – Buy Trade (27.11) and Sell Trade (36.41). On Friday, Treasuries gained modestly with the long-end outperforming.

 

In early trading, the EURO is trading higher by 1.1%.  The Hedgeye Risk Management models have the following levels for the EURO – Buy Trade (1.18) and Sell Trade (1.23).

 

A notable standout on Friday was Healthcare (XLV). The (XLV) was up 0.8%, led by strength in Biotech with the BTK +1.8% and Pharmaceuticals (IHE) up 1.4%.  The second best performing sector on Friday was Technology (XLK).  The S&P software index was up 2.2% on the day and the SOX improved by 1.4%. National Semiconductor’s earnings and upbeat guidance lifted its shares by +5.0%; May quarter revenues, earnings and gross margins all beat consensus estimates.  Coupled with TXN’s (0.3%) bullish outlook earlier this week, investors are beginning to get a clearer picture of how the second half could take shape in Semis.

 

In early trading, crude oil is trading above $75 on speculation of continued growth in the U.S. economy. The Hedgeye Risk Management models have the following levels for OIL – Buy Trade (73.73) and Sell Trade (76.40).

 

In early trading, Copper is trading higher for the fifth straight day.  The Hedgeye Risk Management Quant models have the following levels for COPPER – Buy Trade (2.89) and Sell Trade (3.05). 

 

The Hedgeye Risk Management models have the following levels for GOLD – Buy Trade (1,214) and Sell Trade (1,245).   

 

As we look at today’s set up for the S&P 500, the range is 22 points or 0.9% (1,082) downside and 1.1% (1,104) upside.  Equity futures are trading above fair value and close to session highs in a continuation of Friday's late rally and ahead of a busier week for economic releases which include May's CPI reading on Thursday.

 

Howard Penney

 

US STRATEGY – CONFIDENTLY MIXED - S P

 

US STRATEGY – CONFIDENTLY MIXED - DOLLAR

 

US STRATEGY – CONFIDENTLY MIXED - VIX

 

US STRATEGY – CONFIDENTLY MIXED - OIL

 

US STRATEGY – CONFIDENTLY MIXED - GOLD

 

US STRATEGY – CONFIDENTLY MIXED - COPPER


7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more

Got Process? Zero Hedge Sells Fear, Not Truth

Fear sells. Always has. Look no further than Zero Hedge.

read more