Today - Wednesday, January 28, 2015
- An unconfirmed report says Bank of Greece Governor Stournaras is set to resign his position under pressure from new Prime Minister Alexis Tsipras. If true, it would suggest a Greek exit from EMU has become closer to a reality.
- GREK -10.8%, National Bank of Greece (NBG -21.6%)
- See also: Architect of Greek austerity policies may exit central bank (Jan. 28)
- “Despite the large declines in commodity prices, we see risks as still skewed to the downside over the near-term,” says Goldman Sachs.
- Of course, much of the price decline has to do with oil, and Goldman doesn't expect a whole lot more damage as prices have gotten low enough for investors to begin buying excess supplies and putting them in storage. While this may put a floor under the price, says Goldman, it also means prices are likely to stay lower for longer.
- Meanwhile, there's China, and slowing growth there means copper (NYSEARCA:JJC) prices have further to fall. Some metals to consider going long? Palladium (NYSEARCA:PALL), nickel (JJN, NINI), and zinc.
- ETFs: DJP, GSG, RJI, GSC, GSP, DJCI, CMD, UCD
- The 10-year Treasury yield sinks all the way to 1.75% following the FOMC statement which shows the central bank continuing on a path to rate hikes around mid-year. TLT +0.95%, TBT -1.9%
- Yields at the short end aren't moving a lot and continue to price in a 25 basis point hike by the fall.
- Stocks remain modestly higher, but financials (XLF -0.6%) - contemplating an even flatter yield curve - continue to underperform. KBE -1.1%, KRE -1.2%
- The ETFS Zacks Earnings Large-Cap U.S. Index Fund (NYSEARCA:ZLRG) and ETFS Zacks Earnings Small-Cap U.S. Index Fund (NYSEARCA:ZSML) were launched on January 20th, marking ETF Securities first stray from its commodities focus.
- Both new funds were developed to capture Zacks’ proprietary investment ranking strategy based on earnings estimate revisions and earnings quality.
- “We are delighted to be the first ETF provider to bring to market what Zacks is known for: expertise in earnings analysis," said Mike McGlone, Director of Research at ETF Securities, in a statement.
- Other U.S. earnings focused ETFs: EZM, EPS, EES, EXT
- The EIA reported oil inventories rising 8.9M barrels last week vs. 10.1M the week earlier, and expectations for a 4.6M gain.
- Last night, the API reported a 12.7M barrel gain in inventories.
- Gasoline (NYSEARCA:UGA) stocks fell 2.6M barrels vs. a small gain the previous week, and forecasts for another small gain.
- Distillates (NYSEARCA:UHN) fell 3.9M barrels vs. a 3.3M barrel decline last week and estimates for 1.7M barrels this week.
- WTI crude is bouncing on the EIA report, maybe as it's not as bearish as the API print. As low as $44.66 ahead of the 10:30 release, it's now at $45.28, down 2.1% on the session. USO -1.6%
- Previously: EIA Petroleum Inventories (Jan. 28)
- ETFs: USO, OIL, UCO, SCO, BNO, DTO, DBO, UWTI, USL, DWTI, DNO, SZO, OLO, TWTI, OLEM
- In its annual revision to employment figures, Statistics Canada says the country shed 11.3K jobs in December vs. the 4.3K originally reported. The unemployment rate is revised to 6.7% from 6.6%.
- Job creation for all 2014 totaled 121.3K, the least since 2009, when the economy lost jobs for the year.
- Statistics Canada: Labor Force Survey
- Previously: Unexpected rate cut for Canada (Jan. 21)
- Previously: Canada jobs numbers disappoint again (Jan. 9)
- The loonie (NYSEARCA:FXC) is lower by 0.4%, buying $0.8893.
- ETFs: EWC, CNDA, EWCS, FCAN, QCAN
- Starting Feb. 1, Schwab (NYSE:SCHW) will add 18 more ETFs to Schwab OneSource, bringing the number of ETFs available under the commission-free program to 198.
- OneSource had $38M in AUM as of year-end, with inflows of more than $10B in 2014 representing 43% of total ETF flows at the company.
- The added ETFs: IBLN, PIZ, PIE, PDP, DWAS, PAF, IGHG, ALTS, XOVR, QMEX, QKOR, QTWN, RSCO, LOWC, AGZD, HYZD, USDU, DNL
- Source: Press Release
- Stocks in Athens are off another 6.2% today, extending their losses to 13% in the three sessions following the coming to power of the anti-bailout Syriza party.
- The yield on the country's 3-year note is higher by 276 basis points today to 16.78% vs. 10.08% before Sunday's election.
- Adding a cute foreign policy angle to events, the new government questioned the West's move to impose more sanctions on Russia.
- GREK -6.8%, NBG -23% premarket
- Previously: Greek shares drop on privatization freeze (Jan. 28)
- Dow and S&P 500 futures are flat, but Nasdaq 100 (NASDAQ:QQQ) futures are up 0.9% behind Apple's 7.1% premarket gain post-earnings.
- Previously: Apple beats estimates, guides in-line (Jan. 27)
- Europe's modestly lower and Shanghai fell 1.4% in overnight.
- The 10-year Treasury yield is down two basis points to 1.80%, gold is flat, and oil is lower by $1 per barrel to $45.44.
- ETFs: SPY, QQQ, DIA, SH, SSO, SDS, VOO, PSQ, IVV, SPXU, UPRO, TQQQ, SPXL, RSP, QID, SQQQ, DOG, QLD, DXD, RWL, EPS, UDOW, SDOW, DDM, BXUB, QQEW, QQQE, SPLX, BXUC, SFLA, QQXT, SPUU
- In addition to plunging Greek bank shares, Greek utility PPC and Greece's biggest port, Piraeus Port Authority led the Athens' ATG stock index down 4.4% today, after the new Syriza government said it would freeze its privatization plans.
- The newly elected government also denounced a European Council statement in which European leaders blamed Russia for the escalating violence in Ukraine and raised the prospect of new economic sanctions.
- Having a Greek prime minister with with a strongly dissenting view could greatly complicate EU foreign policy, as further sanctions cannot be approved without a unanimous vote from leaders of every EU member nation.
- ETFs: GREK -3.8% premarket
- China is planning to cut its growth target to around 7% in 2015, its lowest goal since 2004, as policymakers try to manage slowing growth, job creation and pursue reforms to drive the economy, Reuters reports.
- Data last week showed that China's economy only expanded 7.4% in 2014, its slowest pace in 24 years.
- Sources say the growth target, which is set to be announced in March, was endorsed by top party leaders and policymakers at a closed-door Central Economic Conference in December.
- ETFs: FXI, EWH, KWEB, PGJ, YINN, GXC, FXP, ASHR, HAO, TAO, YANG, CHIQ, CQQQ, CHIX, MCHI, QQQC, PEK, XPP, YAO, YXI, CHXF, ECNS, FCA, CHII, CN, CHIE, CHIM, EWHS, FCHI, ASHS, KFYP, CNXT, CHNA, KBA, FHK
Tuesday, January 27, 2015
- Crude oil stocks rose 12.7M barrels, according to the API, versus a gain of 5.7M last week and estimates for just 3.75M barrels.
- EIA data is due tomorrow.
- Crude gained 1.3% in the regular session, but is lower by 0.3% to $45.58 per barrel in after hours trading.
- USO -0.9% after hours.
- ETFs: USO, OIL, UCO, SCO, BNO, UGA, DTO, DBO, UWTI, USL, DWTI, UHN, DNO, SZO, OLO, TWTI, OLEM
- Gold miner (NYSEARCA:GDX) earnings reports are on the way, and Barclays analysts foresee Q4 earnings to come in lower across the board with margins under pressure as metals prices fall; for gold, they see producers’ margins falling ~12% Q/Q.
- Barclays believes lower gold prices also will mean writedowns of assets for many companies, while mining depletion will combine with limited exploration budgets to bring down reserves.
- Most senior and mid-tier gold producers will not see Y/Y production growth in 2015, the firm says; Goldcorp (GG +2.9%), Agnico Eagle Mines (AEM +4.6%), Yamana Gold (AUY +3.2%) and New Gold (NGD +4.2%) should enjoy production growth, while royalty companies Royal Gold (RGLD +1.8%) and Franco-Nevada (FNV +4.6%) should have revenue growth despite lower commodity pricing.
- After first sweetening terms to try and attract buyers, Apollo Global yesterday pulled a $400M deal meant to help fund its purchase of Presidio Holdings. And Apollo isn't alone. "Anything with a little bit of hair on it is more challenged," says Pimco's Jason Rosiak. "People are being more selective."
- Outflows from high-yield funds began about nine months ago, and accelerated last week, with $738M in net redemptions bringing the year's total to $1.7B, according to Lipper.
- Into this environment, Dollar Tree is trying to raise money for its $8.81B takeover of Family Dollar, and PetSmart needs $1.9B of bridge financing to close its BC Partners purchase.
- "It's going to be a buyer's market," says one fund manager. "We’ll continue to see a bit of a premium.”
- ETFs: HYG, JNK, BKLN, HYLD, SJB, SRLN, SNLN, ANGL, HYLS, FTSL, UJB, XOVR, QLTC
- The Obama administration proposes opening up oil and gas exploration off the Atlantic coast from Virginia to Georgia, and will seek public comment on whether such a move is too environmentally sensitive.
- The Interior Department plan contemplates expanded drilling between 2017 and 2022, it would conduct one auction in the Atlantic and keep a 50-mile buffer from the shore.
- The plan comes as the administration also plans to limit oil and gas drilling in Alaska; Republicans don’t like the Alaska idea, and now the environmentalists don’t like the Atlantic proposal.
- ETFs: USO, OIL, UCO, SCO, BNO, DTO, DBO, UWTI, USL, DWTI, DNO, SZO, OLO, TWTI, OLEM
- Recalling the Fed's premature tightening of policy in 1937, Jeff Gundlach is worried the Yellen Fed could do the same. A June rate hike is "particularly dangerous," says Gundlach, as the data - particularly inflation numbers - look to be going in the opposite direction. The reason for the Fed's zeal to hike rates, says Gundlach, is its desire not be at zero when the next recession hits.
- "The consensus is that [10-year yields] will end the year 100 basis points higher ... It's amazing the triumph of hope over experience ... I think it's obvious the world is dealing with a deflation situation."
- Inside ETFs Conference notes
- As for the ECB's QE, count Gundlach as unimpressed ... No surprise given his opinion of the U.S. and Japanese QE efforts.
- ETFs: IEF, PST, IEI, TYO, DTYS, UST, STPP, PLW, VGIT, GOVT, FLAT, TBX, GSY, SCHR, DTYL, TYD, ITE, DFVL, TBZ, FIVZ, DFVS, TYNS, TAPR, SYTL
- Peabody Energy's (BTU -6.7%) move to slash its quarterly dividend to less than a penny a share is helping push coal company stocks (NYSEARCA:KOL) lower: WLT -1.6%, ACI -1%, CNX -1.8%, CLD -2%, WLB -5.4%, ARLP -1.2%.
- Cowen analysts see the move as "a prudent move amid uncertain coal markets," and Sterne Agee says the dividend cut will save BTU $100M in annual cash payments.
- Citigroup's Brian Hu maintains a Buy rating on BTU, saying that although management expects U.S. thermal coal demand to fall by 50M-60M tons in 2015, "BTU is better insulated due to their heavily contracted position and Y/Y improvement in Southern PRB rail performance.”
- “Challenges in energy and credit are likely to damp results,” says BofA's Mike Carrier, who expects the strongest quarter at Blackstone (BX -0.8%) and the weakest at Carlyle Group (CG -0.8%).
- A Bloomberg survey of analysts finds them seeing a 73% Y/Y profit decline at Carlyle, 63% at Apollo Global (APO +0.2%), 60% at KKR (KKR -1.4%), and Blackstone - the most diversified - at just 32%.
- The P-E industry is entering the later stages of a selling cycle which began in 2012 and has made investors a fortune, but now is under pressure to put a whopping $1.2T to work. It should find ample opportunity in the energy sector.
- ETFs: PSP, PEX
- The Consumer Staples ETF (NYSEARCA:XLP) is only down 1.01% despite the drag exerted by Procter & Gamble (-3%) and Coca-Cola (-1.5%) which account for over 22% of the fund's holdings.
- The fund also holds drugstore chains CVS Health and Walgreen Boots Alliance which pulls in a healthcare aspect to the total return of the consumer staples tracker.
- Tobacco stocks also sometimes zig when staples zag to help smooth out returns.
- Previously: Procter & Gamble misses by $0.07, misses on revenue
- Previously: Foreign exchange takes a toll at Procter & Gamble
- December new home sales coming in at a seasonally adjusted annualized rate of 481K was the strongest print since June 2008, notes the WSJ's Nick Timiraos, but the 2014 total of 435K only edged higher from 2013's 429K.
- In 2007, new home sales totaled 776K. At the bottom in 2011, they were 306K.
- ITB -1.2%, XHB -0.6%
- Previously: New home sales strong in December (Jan. 27)
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