Today - Wednesday, January 28, 2015
- 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%
- Indirect bidders took down nearly 50% of today's $25.7B two-year Treasury note auction, with direct bidders winning 8.8% of the notes vs. a recent 16%. The bid-to-cover ratio of 3.74 stands against the average of 3.40 over the last four auctions.
- The two-year yield slipped to 0.51% after the auction vs. 0.515% earlier in the session.
- Treasury auction results
- Citing "solid" growth and "strong" job gains, the FOMC shows no sign of backing away from its near-pledge for a mid-year rate hike, but does say it can be "patient" - code for nothing coming in the next two policy meetings and thus meaning June would be the earliest date for tightening.
- As for inflation, it's expected to decline further in the near term, but then rise back towards the 2% target as the labor market strengthens and the transitory effects of lower energy prices dissipate.
Tuesday, January 27, 2015
- 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
- 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)
- Jan. State Street Investor Confidence Index: -5.5 to 106.7 vs.112.2 (revised) in Dec.
- The read from Redbook on retail sales through a good portion of the month indicates sales might decline around 3% M/M from December after the impact of auto and gas are backed out.
- The December retail sales showed a small decline from November.
- The Weekly Retail Chain Store Sales Index released today fell 0.6% W/W in another indication of softness in the retail sector, although on a year-over-year comparison the reading was up 2.6%.
- Related ETFs: XLP, XLY, VDC, XRT, VCR, RTH, RETL, FXG, IYK, FXD, IYC, FDIS, RHS, SCC, FSTA, UCC, PMR, UGE, RCD, PSCD, SZK
- "With the spring home buying season, and spring training, still a month or two away, the housing recovery is barely on first base," says S&P Dow Jones' David Blitzer, after U.S. home prices edged lower in November. "Prospects for a home run in 2015 aren't good."
- On a year-over-year basis, the 20-city composite index was higher by 4.3% vs. 4.5% in October.
- Blitzer notes most of the strong home price gains are concentrated in California, Florida, the Pacific Northwest, Denver, and Dallas.
- Full report
- Previously: S&P Case-Shiller Home Price Index (Jan. 27)
- Morgan Stanley has pushed back the timing of its expected first Fed rate hike to March 2016, reports Bloomberg.
- Earlier, the Caterpillar CEO - after his company dour 2015 forecast - urged the Fed to hold off this year, and over the weekend Felix Zulauf suggested disappointing economic growth will force the Fed to postpone tighter policy this year, and maybe the next.
- Meanwhile, Fed members from all sides of the dove/hawk split continue to promise a mid-year rate hike. The FOMC begins a 2-day meeting today.
- Earlier: Durable goods orders for December missed estimates by a mile
- The 10-year Treasury yield is lower by six basis points to 1.77%.
- TLT +0.8%, TBT -1.6%
- ETFs: TBT, TLT, TMV, TBF, EDV, TMF, TTT, ZROZ, SBND, TLH, VGLT, DLBS, UBT, TLO, TENZ, LBND, TYBS, DLBL
- "I think they gotta put it off," says Caterpillar (NYSE:CAT) chief Doug Oberhelman, appearing on CNBC after reporting a disappointing Q4 and guiding to a sluggish 2015. "When it rains, it pours. And this is one of those days."
- Previously: Caterpillar plunges on profit drop, lowered outlook (Jan. 27)
- Shares -7.4% premarket
- ETFs: SHY, BIL, VGSH, SHV, SCHO, DTUS, SST, DTUL, TUZ
Monday, January 26, 2015
- January Dallas Fed Manufacturing Outlook: -4.4 vs. 4 expected, 3.5 (revised) in December.
- Production: 0.7 vs. 16.4 prior.
- Capacity Utilization: 5.1 vs. 12.9 prior.
- New Orders -7.7 vs. 2.7 prior.
Saturday, January 24, 2015
- "I don’t see how the Fed can justify hiking rates when economic growth will disappoint, employment growth will fade, and inflation will overshoot on the downside," says Felix Zulauf at the Barron''s Roundtable. He wouldn't be shocked to see 2016 also pass by without tighter policy.
- The iShares 20+ Year Treasury Bond ETF (NYSEARCA:TLT) is the largest position in his portfolio (the 30-year yield was 2.53% when the Roundtable took place earlier this month; it's 2.37% today). "The U.S. bond market is mispriced," he says, noting long-term yields on these shores tower over those in Europe (they tower far more after the ECB's QE this week).
- Zulauf is also bullish on the dollar (NYSEARCA:UUP) - not exactly a contrarian view - but he says most don't understand the real reason for the greenback's strength: Basically the world is massively short greenbacks thanks to dollar weakness policies pursued by the Greenspan and Bernanke Feds. When the dollar corrects later this year on realization the Fed won't be lifting rates, it will be a good spot to get long.
- Expecting a correction in U.S. stocks, Zulauf would then put money to work in the Market Vectors Retail ETF (NYSEARCA:RTH) - a strong dollar allows retailers to benefit by buying their overseas supplies cheaper.
- Related ETFs: TBT, TLT, TMV, TBF, EDV, TMF, TTT, ZROZ, SBND, TLH, VGLT, DLBS, UBT, TLO, TENZ, LBND, TYBS, DLBL, UUP, UDN, UUPT, FORX, UDNT, USDU
Friday, January 23, 2015
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