Today - Friday, March 27, 2015
- Shares of Kirkland's (KIRK +5.3%) are higher after Piper Jaffray comes in with an upgrade on the retailer to Overweight from Neutral.
- The upgrade follows a similar action from the investment firm on Conn's.
- Retail analysts have noted the out-performance of the S&P Retail ETF (NYSEARCA:XRT) vs. broad market averages over the last month has been aided by some beat-up or lesser-known specialty names gaining favor.
- ETFs: XLY, VCR, RTH, RETL, FXD, IYC, FDIS, SCC, UCC, PMR, RCD
- Emerging markets equity funds saw $2.4B in outflows for the week ended March 25, led by $2.37B exiting China A-share ETFs.
- Investors could be cashing in their chips after nice runs year-to-date, but there's also the widening spread between valuations in Shanghai and Hong Kong - the Hang Seng China AH Premium Index is at 136.47, i.e. Shanghai shares are 36% more expensive.
- YTD, the Deutsche China A-Shares Fund (NYSEARCA:ASHR) is up 8.6%, the MarketVectors China ETF (NYSEARCA:PEK) is up 11.2%, the KraneShares MSCI China A Share ETF (NYSEARCA:KBA) is up 10.9%. In comparison, the iShares China Large-Cap ETF (NYSEARCA:FXI) is ahead just 2%, and the iShares MSCI China ETF (NYSEARCA:MCHI) 3.7%.
- Source: Barron's Shuli Ren
- Previously: Shanghai premium grows despite Hong Kong connect (March 25)
- ETFs: FXI, EWH, PGJ, YINN, GXC, FXP, ASHR, YANG, MCHI, PEK, XPP, YAO, YXI, CHXF, FCA, CN, FCHI, ASHS, CNXT, CHNA, KBA, FHK, AFTY
- Returning to a focus on making loans to smaller and mid-sized companies close to its Rust Belt base, KeyBank (NYSE:KEY) grew commercial and industrial loans on its balance sheet by 12.3% in 2014, outpacing regional bank peers like Fifth Third (NASDAQ:FITB) and PNC Financial (NYSE:PNC), where they grew 4% and 10% respectively.
- The home-turf focus has helped the stock price - up 68% since the start of 2013 vs. 40% for the KBW Bank Index (ETF: KRE).
- “We’ve learned our lessons from the downturn,” says CEO Beth Mooney. "We value good execution over fancy strategies ... We want to be where we matter and can get paid for it ... and a predictable earner."
- Risks? The crash in energy prices could threaten at least part of the Midwest's industrial expansion, but analysts say the risk is less that the loans go bad and more than the bank's strong loan growth slows.
- Source: The WSJ's James Sterngold
- Stock index futures are all off in the area of 0.15% prior to the week's last trading day.
- Europe's posting modest gains, and the Nikkei's 0.95% decline was the big mover in Asia overnight.
- The 10-year Treasury yield is flat at 1.99%, gold is lower by $6 per ounce to $1,200, and oil is down $0.81 per barrel to $50.63.
- 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
- Lower oil prices and subdued consumer demand have again pushed Japan to the brink of deflation, underscoring the difficulties faced by policy makers to revive the world’s third-largest economy through its ¥80T a year stimulus program.
- Japanese core consumer price inflation, which includes energy prices but excludes food, fell to zero Y/Y in February, far below the 2% target the central bank had aimed to achieve by this spring.
- The Nikkei Composite Index dropped 1% on the news, falling to 19,286.
- ETFs: DXJ, EWJ, DFJ, NKY, DBJP, EZJ, EWV, JPNL, DXJS, SCJ, JSC, ITF, JPP, HEWJ, FJP, QJPN, JPMV, DXJT, DXJR, DXJH, DXJC, DXJF
- Saudi Arabian-led strikes on Yemen and a potential nuclear deal with Iran would have little near-term impact on oil supplies, Goldman Sachs said in an overnight note to clients.
- "We expect both events to have negligible near-term supply impacts, with the build in crude inventories set to continue in 2Q15. Longer term, a deal with Iran could lead to greater OPEC supplies although the timing of the sanction relief remains uncertain," the firm stated.
- Crude futures -1.7% to $50.52/bbl.
- ETFs: USO, OIL, UCO, SCO, BNO, DTO, DBO, UWTI, USL, DWTI, DNO, SZO, OLO, TWTI, OLEM
Thursday, March 26, 2015
- The big banks have had a rough start to the year, but surging trading volume in bonds, currencies, and commodities in Q1 could make for pleasant surprises when the lenders report quarterly results next month, writes John Carney.
- The average daily trading volume across all U.S. bonds was up 10.6% Y/Y through the end of February, according to Sifma, with trading in corporate bonds up 18.1%, driven by a big rise in issuance. Trading in Fannie, Freddie, and Ginnie MBS was up 35.3% from a year ago.
- Goldman Sachs (NYSE:GS) could be a particular beneficiary, as about 25% of its revenue is generated by FICC, and Credit Suisse sees the bank posting its first year-over-year increase in that unit's revenue since 2009.
- Others of interest: Morgan Stanley (NYSE:MS), Bank of America (NYSE:BAC), Citigroup (NYSE:C), and JPMorgan (NYSE:JPM).
- ETFs: XLF, FAS, FAZ, UYG, VFH, IYF, IAI, SEF, IYG, FXO, FNCL, FINU, KCE, RWW, RYF, KBWC, FINZ
- The fallout in the energy sector thanks to oil's steep decline is no secret, but beyond reduced headcounts and spending in the oil patch, says Nomura, are hits to related industries like construction and engineering.
- While banks have low direct exposure to the oil sector, there's indirect exposure through things like mortgage-lending in Alberta.
- Then there's the impact of the oil shock on the investment portfolios of Canadian households, says Nomura, estimating 25% of household wealth is linked to domestic stocks, and 25% of that is energy-related. Canada's stocks have already been underperformers this year and should things worsen further, it could squeeze consumer spending.
- ETFs: EWC, FXC, CNDA, EWCS, FCAN, QCAN
- The unemployment rate rose to 5.9% in February vs. the 5.7% expected by economists. This as the central bank upped its inflation forecast for 2015 to 7.9% from 6.1% previously. The bank sees inflation falling to 4.9% in 2016 and 4.7% in 2017, but both are still above the 4.5% target.
- The Bovespa is lower by 2.4%.
- EWZ -1.9%
- ETFs: EWZ, BRF, BRXX, EWZS, BRZU, BRAQ, BZQ, BRAZ, BRAF, UBR, DBBR, FBZ
- Down as low as 1.89% earlier in the session, the 10-year U.S. Treasury yield has popped all the way up to 2.01%.
- The last 24 hours may be a red flag to Treasury bulls; The 10-year yield was at 1.86% early yesterday and rose throughout the session even as stocks fell sharply - the first time in memory both stocks and Treasurys sold off on the same session. The selloff is a minor one today, but yields remain on the rise.
- TLT -1.7%, TBT +3.4%
- ETFs: TBT, TLT, TMV, IEF, TBF, EDV, TMF, PST, TTT, ZROZ, SBND, TLH, IEI, TYO, VGLT, DLBS, DTYS, UST, UBT, TLO, VGIT, TBX, GSY, SCHR, TENZ, DTYL, TYD, LBND, ITE, DLBL, TYBS, DFVL, TBZ, FIVZ, DFVS, TYNS, SYTL
- Though the Nasdaq is nearly flat today, many security tech plays are rallying. CyberArk (CYBR +4.6%) is a standout, adding to Monday's post-lockup gains. So are Qualys (QLYS +4.7%), Vasco (VDSI +3.8%), and Proofpoint (PFPT +4.3%). Palo Alto Networks (PANW +1.8%), Fortinet (FTNT +1.9%), and Imperva (IMPV +2.2%) are up more moderately.
- Possibly helping the group: The House Intelligence Committee has unanimously passed a cybersecurity bill that will make it easier for companies to share information about attacks without risking lawsuits. A full House vote could happen by late April, and the Senate is working on a similar bill. The White House recently floated its own cybersecurity initiatives.
- Yesterday, FBR's Daniel Ives (bullish on the space for some time) forecast spending on "next-generation" security solutions will rise 25% this year, up from a prior 20% estimate. He thinks less than 10% of companies have fully invested in next-gen offerings, and sees evidence of a "surge in deal flow with a major upgrade cycle underway in 2015, as enterprises and governments 'fast track' cybersecurity initiatives across the board."
- Ives expects FireEye (FEYE +0.7%), Palo Alto, Fortinet, and Proofpoint to benefit from the trend, which he isn't sqeamish about hyping. "This once-in-a-multi-decade upgrade opportunity is poised to be a rising tide for all security boats ... with legacy security solutions no longer 'good enough' and next-generation products well positioned to replace traditional firewall and endpoint vendors over the coming years."
- ETF: HACK
- Previously: Three cybersecurity companies reportedly planning $1B+ IPOs
- Since the start of October (Bill Gross exited in late September), Pimco's (OTCQX:AZSEY) Total Return fund (MUTF:PTTRX) - ETF version BOND - has returned 3.73%, beating out 92% of its peers, according to the latest data from Morningstar. Year-to-date, the fund has returned 2.378%, ahead of 96% of its peers. The benchmark Aggregate Bond Index (NYSEARCA:AGG) has returned 1.736% YTD.
- Outflows at Total Return continue, however, with February marking the 22nd consecutive month of net exits. With AUM of $124.7B, Total Return is in danger of losing its title of world's largest bond fund to the Vanguard Total Bond Market Index fund (MUTF:VBMFX) - ETF version BND.
- "I am not invested with Pimco right now," says one wealth manager, willing to admit in print he moved everything out when Gross left.
- Source: WSJ
- Roughly €8B exited the banking system in February, bringing total deposits to €152.4B, the lowest level since June 2005. Over the last three month period, about €25B in deposits has been pulled out amid fears of capital controls or an exit from EMU.
- In the meantime, the government is rushing to put together a list of promised reforms necessary to secure more creditor cash to keep paying bills, and the ECB yesterday boosted the amount of money Greek banks can borrow under the ELA to €71.1B from €69.8B.
- Source: WSJ
- GREK -1.4%, NBG -3.7%
- "The underlying factors driving this trend [lower] are still there," says Marvin Barth, European head of FX strategy at the bank, noting the EU's large output gap has gone nowhere, thus depressing return on capital, especially when compared to the U.S.
- He also takes note of the ECB's commitment to hold rates near zero as facilitating the euro's (NYSEARCA:FXE) use as a funding currency, though the borrowing is not being used to invest in the European economy.
- Barclays moves up its forecast for euro/dollar parity by three months to Q3 of this year.
- The euro's lower by 0.4% today to $1.0920.
- ETFs: FXE, EUO, ERO, DRR, EUFX, ULE, URR
- Private-equity buyouts of $17.14B YTD are at their lowest level since 2012 as banks - with regulators looking over their shoulders - cut back on the amount of debt they'll extend for takeovers. Leveraged loan volume this year of $26.5B is 82% less than the same time frame in 2014, and the lowest since 2009.
- Fewer and smaller deals, along with less leverage means less risk, but also means lower returns for buyout firms. It also means lower prices for sellers.
- “The limitation on leverage has taken away some buying power and in some cases, created a gap between sellers’ expectations and the price that private-equity firms can justify paying,” says Carlyle Group's (CG -1%) Pete Clare.
- According to S&P Capital IQ, 21% of P-E deals this year have been financed with leverage at or above levels deemed risky by regulators; that's down from 35% in Q4 and 60% in Q3.
- Along with Carlyle, Blackstone (BX -0.9%) in its annual report warned leverage restrictions could hurt its business. Apollo Global (APO -1.7%) and KKR (KKR -1.2%) included similar language in both their 2013 and 2014 filings.
- Source: WSJ
- ETFs: PSP, PEX
- The Philadelphia Semi Index (SOXX -1.8%) is now down 6% over the last two days. Today's losses come after NAND flash giant SanDisk issued a Q1 warning and withdrew its full-year guidance - price pressure, soft enterprise sales, and delayed product qualifications were all blamed.
- Meanwhile, some are partly blaming yesterday's big selloff on cautious remarks from TSMC (has an estimated ~50% global foundry share) at a Credit Suisse conference. CS analyst Randy Abrams reports TSMC (NYSE:TSM) has observed "a slowdown in the past 4-5 weeks due to US$ strength impacting European and emerging market purchasing power," and that inventories "will be a few days above seasonal exiting 1Q15." Pac Crest downgraded TSMC two weeks ago on inventory concerns.
- Following an Asian trip, Susquehanna's Chris Caso has argued there isn't too much to be alarmed about, though he admits forex could be an issue. "There’s mixed signals here and there. We weren’t picking up anything that was tremendously different across the supply chain. PCs were the weakest area. That’s really not a surprise."
- RF chipmakers Skyworks (SWKS -4.6%) and Qorvo (QRVO -2.1%), among 2014's best performers, are again selling off; peer Avago is off only slightly. Also seeing further profit-taking are Ambarella (AMBA -3%), NXP (NXPI -3.6%), Freescale (FSL -2.8%), Cavium (CAVM -3.2%), and STMicroelectronics (STM -4.5%).
- Among equipment makers, Axcelis (ACLS -2.9%), Aixtron (AIXG -3.6%), Veeco (VECO -3%), and Kulicke & Soffa (KLIC -2.5%) are declining. A selloff in European equities could be affecting Aixtron, NXP/Freescale, and STMicro.
- Chip ETFs: SMH, XSD, PSI, SOXL, USD, SOXS, SSG
- Update: Credit Suisse, Goldman, and Deutsche have each offered thoughts on the chip selloff.
- Saudi airstrikes are targeting the military assets of Yemen's Houthi militants after (Saudi-backed) president Abed Rabbo Mansour Hadi fled the country yesterday.
- Iran chimes in, its foreign minister saying the Saudi actions will further destabilize the region.
- Gold (NYSEARCA:GLD) is up 1.1% on the session to $1,210 per ounce, and has now erased what previously were sizable losses for March.
- ETFs: GLD, IAU, SGOL, UGL, DGP, GLL, UGLD, DZZ, GLDI, OUNZ, DGL, DGZ, DGLD, AGOL, TBAR, UBG, BAR, GYEN, GEUR, BARS
- Investment-grade and junk-rated companies combined have sold $438B of new bonds YTD, according to Dealogic, topping the previous record of $384B in 2013. Bond sales related to M&A of $87B are also at a record YTD.
- Corporate treasurers no doubt are pushing out as much debt as possible to take advantage of low rates, but they're finding plenty of willing buyers.
- “I can’t see anything on the radar that’s going to slow things down materially,” says one fixed-income manager.
- ETFs: HYG, JNK, LQD, HYLD, CORP, SJB, CRED, ANGL, HYLS, UJB, XOVR, QLTA, QLTC, COBO, IGS, CBND, FCOR, QLTB, IGU
- "It's not the stronger dollar that irks the Fed," says Morgan Stanley. "It's the pace of appreciation." Since the middle of last year, the nominal trade-weighted exchange value of the greenback has appreciated nearly 22%, or an average of 2.3% per month, creating "substantially tighter financial conditions."
- Comparing this "dollar tantrum" to 2013's "taper tantrum" - in which the Fed didn't seem concerned with what markets were doing, until one day it did and then quickly cooled its hawkish talk - Morgan Stanley believes the central bank will raise rates later than expected.
- ETFs: SHY, BIL, VGSH, SHV, SCHO, DTUS, SST, DTUL, TUZ
Visit Seeking Alpha’s new Earnings Center
ETF Screener: Search and filter by asset class, strategy, theme, performance, yield, and much more
ETF Performance: View ETF performance across key asset classes and investing themes
ETF Investing Guide: Learn how to build and manage a well-diversified, low cost ETF portfolio
ETF Selector: An explanation of how to select and use ETFs