Today - Wednesday, November 25, 2015
- The U.S. oil rig count falls by 9 to 555. One year ago it was 1,851.
- The total rig count of 744 is lower by 13 from last week and by 1,173 from a year ago.
- The news seemed to be enough to help crude to a modestly higher close at $42.93 per barrel.
- Previously: Crude inventories higher by 1M to 488.2M barrels (Nov. 25)
- ETFs: USO, OIL, UCO, UWTI, SCO, BNO, DBO, DWTI, DTO, UGA, USL, DNO, UHN, OLO, SZO, OLEM
- "It almost feels like 2008 a little bit," says Wasserstein's Rajay Bagaria, who woke up one morning to find his holdings in one issuer had fallen 19% overnight after a weak earnings forecast.
- Other recent free-falls include Chesapeake Energy, Men's Wearhouse, and Scientific Games. According to Deutsche Bank, the debt of the riskiest companies is selling off at four times the rate of the least-risky junk borrowers - typically to rate is 1.6x.
- "A less diverse group of investors hold a lot more bonds," says Citi's Stephen Antczak, pointing out concentration risk as an overlooked element contributing to big price swings. "The difference between incremental buyer is more now than it used to be. It takes a bigger move to get people interested."
- ETFs: HYG, JNK, HIX, HYLD, DHY, PHT, EAD, HYT, JQC, CIK, DSU, HHY, SJB, NHS, PHF, ACP, FHY, ARDC, MCI, VLT, KIO, CIF, AIF, MHY, ANGL, PCF, DHG, MPV, IVH, HYLS, JSD, UJB, CJNK, GGM, QLTC
- Smart Beta equity ETPs brought in $3B of new assets in October, according to ETFGI, bringing the year-to-date total to $53.7B. There are a total of 764 smart beta equity ETPs, with 1,336 listings, and assets of $399B.
- This compares to assets of $1.79T for market cap equity ETPs.
- The five-year compounded growth rate of assets in smart beta products is 39.3% vs. market cap at 18.6%.
- WisdomTree (NASDAQ:WETF) is the leader this year in smart beta net inflows with $20B, followed by iShares (NYSE:BLK) at $13.4B, and Vanguard at $6.4B.
10:30 AM| 10:30 AM | 30 Comments
- The average price for a gallon of gas in the U.S. has now dropped to $2.06 per gallon - a mark that is 27% lower than where gas prices stood heading into the holiday period last year. Despite the extra dollars in the wallets of consumers, most forecasts for holiday retail sales are on the modest side (below 4%).
- The extended period of sub-$3 gas prices in the U.S. hasn't exactly lit consumer spending across broad retail on fire (just ask Wal-Mart) - although it has stoked auto sales for the Detroit Three (GM, F, FCAU). The regional casino sector (ISLE, PENN, BYD, ERI, MTN, MCRI) and cruise line stocks (NCLH, RCL) have also benefited more than major chain stores. Some have suggested that lower gas prices are also an understated driver for Starbucks (NASDAQ:SBUX) and Netflix (NASDAQ:NFLX) which both score high on customer stickiness.
- What next? Seeking Alpha's Stock Pitch Contest on retail is still open until November 30 amid the reset on consumer spending expectations. Current long ideas include PLAY, FRAN, CASY, SKX, WMT, PSUN, HGG, PRTY, TJX, TA, VSTO - while short bets on WMAR, TIF, RT, AMZN, UA, LB, and OUTR are on record.
- Related ETFs: XLP, XLY, VDC, XRT, VCR, RTH, RETL, FXG, PBJ, IYK, IYC, FXD, PEJ, FDIS, RHS, FSTA, SCC, UCC, RCD, PMR, PEZ, UGE, PSL, PSCC, PSCD, SZK, BITE.
- Grupo BTG Pactual is lower by 20% in Brazilian trade after its billionaire founder and CEO Andre Esteves was arrested as part of the investigation into the pay-to-play scheme between a group of builders and Petrobras (NYSE:PBR). Police also detained the government's leader in the Senate, Delcidio Amaral, on suspicion of harming the probe.
- The action's "take the Petrobras probe to a whole new level," says Nicholas Spiro at Spiro Sovereign Strategy. "The scandal is becoming more debilitating by the day."
- PBR -4.7%, EWZ -4.1%, VALE -2.8% premarket
- ETFs: EWZ, BRF, BRZU, EWZS, BRXX, BRAQ, BZQ, BRAZ, BRAF, UBR, DBBR, FBZ
- Cowen and Company projects holiday retail sales will increase between 2% and 3%. The forecast is below the 3.5% to 4.2% consensus range of analysts.
- Analyst Olivia Chen notes the earlier start to the promotional season and that online is driving a larger percentage of revenue. Typically, online shopping leads to a smaller basket size when compared to brick-and-mortar shopping and a higher degree of fragmentation of sales. Both trends work against big-box retailers (TGT, WMT, COST, BBY]]).
- ETFs: XLY, XRT, VCR, RTH, RETL, FXD, FDIS, RCD, PMR, BITE
- Among the moves being considered by the ECB, according to Reuters, are two-tiered charges to banks leaving cash with the central bank, the purchase of regional bonds, and even the acquisition of ABS of distressed loans.
- "We have deflation, so you have to do something," says a source. "How this all looks in a few years, nobody knows."
- The ECB meets next week, so we won't have to wait long to hear the real story.
- The euro (NYSEARCA:FXE) has dropped below $1.06, and the Stoxx 50 (NYSEARCA:FEZ) is higher by 1.2%, led by Germany's (NYSEARCA:EWG) 1.5% advance.
- ETFs: FXE, VGK, EUO, FEZ, HEDJ, ERO, IEV, EPV, EZU, DRR, FEU, EEA, EUFX, EURL, ULE, FEP, UPV, DBEU, URR, ADRU, HEZU, FEEU, IEUR, FIEU, DBEZ, FEUZ, SBEU, HFEZ, HEGE, HGEU
- Additional stimulus moves being considered by the ECB include a two-tier penalty charge on banks leaving cash with the central bank, purchases of regional bonds, and even buying ABS on distress loans.
- The euro has tumbled below $1.06 and European stocks are higher by nearly 1.5%.
- U.S. stock index futures are up 0.25%. Asia was mixed overnight.
- The 10-year Treasury yield is down one basis point to 2.23%, gold is little-changed, and oil is off $0.81 per barrel to $42.07.
- ETFs: SPY, QQQ, DIA, SH, SSO, SDS, VOO, IVV, UPRO, PSQ, SPXU, TQQQ, SPXL, RSP, SPXS, QID, SQQQ, QLD, DOG, DXD, RWL, UDOW, EPS, SDOW, DDM, VFINX, BXUB, QQEW, QQQE, SPLX, SFLA, BXUC, QQXT, SPUU, LLSP, UDPIX, OTPIX, RYARX
- Investors across the world are closely watching rising geopolitical tensions between Russia and NATO member Turkey after a Russian SU-24 warplane was shot down by a Turkish F-16 fighter jet on Tuesday.
- Russia has warned its former ally and trade partner that diplomatic and commercial relations between the countries are at risk, calling the downing "a stab in the back."
- The incident also dims the prospects for a grand international coalition to change the course of chaos in Syria.
- ETFs: RSX, TUR, RUSL, RUSS, ERUS, RSXJ, RBL, TKF
- Minutes from the Bank of Japan's latest meeting show that some policymakers believe an output gap was one reason the country was taking longer to meet its 2% inflation target, highlighting a lingering worry that quantitative easing may not be working.
- An output gap is the difference between what an economy is producing and what it could produce if operating at its most efficient.
- Separately, Japan announced it will raise the minimum wage by 3% each year from the next fiscal year as part of a package targeting consumer spending and economic growth.
- Nikkei -0.4% to 19,848.
- ETFs: DXJ, EWJ, DFJ, DBJP, NKY, JOF, EZJ, JEQ, JPNL, DXJS, EWV, SCJ, HEWJ, JSC, JPXN, JPP, QJPN, FJP, JPMV, DXJT, DXJC, DXJR, DXJH, JHDG, DXJF, HEGJ, JDG, JPN, FXJP, HGJP
- Argentine President-elect Mauricio Macri is pledging to get the country's stalled economy moving again but needs to settle a decade-long conflict with holdout creditors before he can return to global credit markets.
- The debt battle pushed Latin America's No. 3 economy back into default last year.
- Removing currency controls and unifying the exchange rate are also on Macri's agenda, but opponents warn his proposal will trigger a "mega-devaluation."
- ETFs: ARGT
Tuesday, November 24, 2015
- Black gold had its best session in a few weeks today, but has given up some of that ground after hours following API data reportedly showing a 2.6M barrel gain in inventories for the week ended Nov. 20.
- Analysts had expected a decline of 200K barrels.
- Crude is trading at $42.62 per barrel after climbing above $43 earlier today.
- USO -0.5% after hours
- ETFs: USO, OIL, UCO, UWTI, SCO, BNO, DBO, DWTI, DTO, UGA, USL, DNO, UHN, OLO, SZO, OLEM
- From the intraday low on Aug. 24, the fifty stocks in the S&P 500 with the largest short interest are up just an average of 1%, according to Bespoke Investment Group. That's against an average gain of 8% for the other 450 members of that index.
- This bucks the trend of heavily-shorted names leading broader rallies, says the group.
- Also usually leading are smaller-cap names, but not this time - the 50 largest S&P 500 stocks are up an average of 11% vs. just 3.9% for the other 450.
- In divergence number three (although this could be a corollary to the first one), the most beaten down names usually bounce the most out of a correction, but the worst performers in the market selloff are continuing to lag in the rally.
- ETFs: CRF, VUG, VTV, VV, USA, SCHX, SCHG, SCHV, ZF, PWV, FEX, JKD, EEH, IWY, JKE, EQL, PWB, EZY, IWL, IWX, FTC, JKF, IELG, SYG, ERW, GVT, FWDD, RWG, ZLRG, SYE, SYV, SBUS, GSLC, USSD, USWD
- The Global X Guru ETF (NYSEARCA:GURU) - which tracks hedge funds' top holdings via 13F filings - is lower by 10% since the start of August, nearly 900 basis points worse than the S&P 500.
- The AlphaClone Alternative Alpha ETF (NYSEARCA:ALFA) - which tracks performance of U.S. stocks to which hedge funds and institutional investors have disclosed "significant" exposure - is down a whopping 19% over the same period.
- It's the "hedge fund hotel" effect, and those names popular with the Greenwich crowd - think Valeant, Community Health Systems, Ally Financial - are among those which have been especially punished in the last four months.
- Goldman tracks these favorites, and they outperformed the market from 2012 to 2014, but this year they've trailed the S&P 500 by 500 basis points.
- Previously: Rough time for hedge fund hotels (Nov. 23)
- ETFs: VQT, PHDG, VIXH, QAI, VSPY, MCRO, SPXH, HDG, VQTS, QEH, ALTS, TRSK, MULT, HHDG, DRVN, HHFR
- Reacting not to in-line Q3 GDP numbers (the government's 2nd estimate has growth at 2.1%), but instead to Turkey's downing of a Russian warplane, Europe down nearly 2%, and U.S. stock index futures at session lows, off 0.8%, the 10-year Treasury yield is lower by three basis points to 2.21%.
- The yield on the benchmark has now returned to nearly the level it was at prior to the October employment report - which more or less cemented the fact of a December rate hike.
- TLT +0.3%, TBT -0.6%
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