Today - Monday, April 27, 2015
- Interest rates won't be moving higher after the FOMC's meeting this week, but investors will still be watching the language of the statement for signs on when such a rate hike might be expected.
- Also on tap for Wednesday is the preliminary first-quarter readout on GDP, along with some early April economic reports.
- The spotlight in Asia this week falls on Japan, where a flurry of data releases and a central bank decision could provide clarity on the direction of the world's third largest economy.
- Central bank meetings in Taiwan and New Zealand are also on deck.
- As the monetary easing by central banks across the globe keep yields at rock-bottom, investment officers predict that Japanese demand for U.S. debt won't ease up in the months ahead given the lack of alternatives.
- Japanese life insurers - some of the world’s largest institutional investors - plan to keep pouring money into U.S. debt this year, WSJ reports, outlining that Japan even overtook China in Q1 as the largest foreign holder of U.S. Treasurys.
- While the current 2% yield on the U.S. 10-year is a far cry from yields of 5% or more before the financial crisis, it is still miles apart from the 0.16% yield on German bunds and the 0.29% yield on the 10-year Japanese equivalent.
- ETFs: TBT, TLT, TIP, TMV, SHY, IEF, TBF, EDV, TMF, PST, TTT, ZROZ, VTIP, MBB, TLH, SBND, VGLT, IEI, SCHP, BIL, TYO, IPE, UBT, DLBS, DTYS, UST, TLO, LTPZ, PLW, STPZ, VGSH, GNMA, RINF, STPP, TIPZ, VMBS, SHV, VGIT, STIP, GOVT, FLAT, SCHO, TBX, SCHR, GSY, TENZ, TYD, LBND, DTYL, ITE, MBG, DTUS, DLBL, TYBS, AGZ, DTUL, SST, TUZ, TPS, DFVL, INFL, TDTT, FIVZ, TIPX, UINF, DEFL, TDTF, TAPR, TBZ, FINF, DFVS, TFLO, TYNS, USFR, SINF, SIPE, SYTL
Friday, April 24, 2015
- Is the retail rally over? After a 10-month period in which the SPDR S&P Retail ETF (NYSEARCA:XRT) outperformed the S&P 500 by 1.2K basis points, since April 2 the XRT has underperformed by 270 basis points - off 0.4% as the S&P 500 has added 2.3%.
- The reversal comes alongside a major bounce in oil, up more than 30% since bottoming in mid-March. The thinking isn't too complicated - falling oil prices put more money in consumers pockets to spend at places like Wal-Mart, and surging oil prices is pulling money out.
- As it turns out though, consumers didn't spend as much of the saved money as thought, with core retail sales shy of estimates for the last four months, and the savings rate hitting its highest level since December 2012.
- Source: Bloomberg
- Retail 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
- Mar. Durable Goods: +4% to $240.2B vs. +0.6% expected, -1.4% prior.
- Ex-transport -0.2% vs. +0.3% expected, -1.3% (revised from -0.4%) prior.
- "Boeing (NYSE:BA) only reported 39 aircraft orders vs. 72 in February, and the ISM index for March was weak both in terms of its overall reading and its new orders index, which mutes our overall enthusiasm.
- "As well, Caterpillar (NYSE:CAT) earnings call yesterday didn’t instil a whole lot of confidence, as the CEO emphasized a need to run through inventories and called 2015 an ‘uncertain and challenging year’ not least due to the dropoff in demand for machines from the U.S. energy complex.
- "New orders and shipments of capital goods (non-defense, ex-air) are a proxy for U.S. business capex on machinery and equipment which wends its way into the GDP figures, and it has been weak for the past couple of quarters.
- "Recent comments from industry are at least less-than-encouraging when it comes to hoping for a substantial pick-up in capex overall."
- U.S. investors have pulled $79B out of equities YTD, including net outflows in 9 of the past 10 weeks, according to Bank of America Merrill Lynch, even as stock prices continue to break out to new highs.
- "Correction risks will grow in the absence of fresh inflows in coming weeks," firm says.
- UBS Wealth Management, the world's largest wealth manager, has trimmed its positions in U.S. and U.K. stocks, betting that eurozone shares offer the best value and growth prospects due to a combination of QE, accelerating economic growth, and strong corporate earnings.
- The firm cut its tactical allocation to U.S. stocks to the lowest in three years at "neutral" from "overweight" while initiating an "underweight" on U.K. stocks; Eurozone shares remain at "overweight".
- Just a day after clearing a Senate committee, the new Trade Promotion Authority bill has been approved by the House Ways and Means Committee, giving Congress the ability to vote yes or no on trade agreements, but without the ability to make amendments over the next five years.
- The bill would ease passage of the Trans-Pacific Partnership, which the Obama administration is currently negotiating with Japan and 10 other nations.
- Previously: Abe says U.S., Japan close to TPP deal (Apr. 21 2015)
Thursday, April 23, 2015
- At issue are the September 2012 FOMC minutes. In October of that year - one day ahead of the release of the minutes - Medley Global Advisors sent a report to clients including sensitive details of the minutes which the rest of the world got privy too the next day.
- A Fed probe found several staffers had contact with Medley ahead of the report, but didn't name names.
- Chairman of the House Financial Services Committee Jeb Hensarling last week requested the names by the end of business yesterday, but the deadline passed without a response from our central bank.
- Ignoring demands of Congressional leaders has to be as much fun as printing money with the hit of a return key on your keyboard.
- Source: WSJ's Pedro Da Costa
- Mortgage rates fell slightly in the past week, with the average rate for the benchmark 30-year fixed-rate mortgage slipping to 3.65% from 3.67% in the prior week, according to the latest Freddie Mac survey.
- The 15-year fixed averaged 2.92%, down from 2.94% a week ago.
- A year ago, the respective 30-year and 15-year rates averaged 4.33% and 3.39%.
- New homes at a seasonally adjusted annualized rate of 481K in March were 11.4% below February's revised rate of 543K (originally estimated at 539K). On a year-over-year basis, new home sales rose 19.4%.
- Northeast sales of 20K fell from 30K in February; Midwest 54K vs. 51K; South 267K vs. 317K; West 140K vs. 145K.
- The 10-year Treasury yield slips one basis point to 1.97%. TLT +0.2%, TBT -0.35%
- ITB -1.7%, XHB -0.6%.
- Full report
- Previously: PulteGroup -7.8% as Q1 results disappoint (April 23)
- Previously: New home sales see a sharp decline in March (April 23)
- The Bloomberg Consumer Comfort Index is 45.4 this week vs. 46.6 previous.
Wednesday, April 22, 2015
- The NAR reported the fastest pace of existing home sales in 18 months in March - a seasonally adjusted annualized rate of 5.19M, up 6.1% from February and 10.4% from a year ago.
- Inventories are also on the rise, up 5.3% in March to 2M existing homes available for sale (up 2% from a year ago).
- The median existing-home price in March of $212.1K is up 7.8% Y/Y.
- Flat before the number, the 10-year Treasury yield is up four basis points to 1.95%. TLT -0.75%, TBT +1.5%
- Full report
- Previously: Existing home sales jump to its highest annual rate in 18 months (April 22)
- ETFs: TBT, TLT, TMV, IEF, TBF, EDV, TMF, PST, TTT, ZROZ, TLH, SBND, VGLT, IEI, TYO, UBT, DLBS, DTYS, UST, TLO, VGIT, TBX, SCHR, TENZ, GSY, TYD, LBND, DTYL, ITE, DLBL, TYBS, DFVL, FIVZ, TBZ, DFVS, TYNS, SYTL
- Mar Existing Home Sales: +6.1% to 5.19M vs. consensus 5.03M, 4.89M (revised) previous.
- "After a quiet start to the year, sales activity picked up greatly throughout the country in March," said NAR chief economist,Lawrence Yun.
- "If we continue to have data that look like less than 2% growth, that would not be an environment that you would expect to produce a tightening in labor markets," Boston Fed President Eric Rosengren tells the WSJ's Jon Hilsenrath. "That wouldn’t be an environment where you would necessarily see inflation moving to 2%. Then that would be the condition that we would have to defer any monetary-policy tightening."
- "There has definitely been a weakness to the tone of the data. The employment report was weak. That was little bit of a surprise. It is pretty hard to disentangle weather conditions from underlying effects. Certainly what is happening globally with Greece and China would indicate that there may be more softness elsewhere in the world than we might have anticipated a few months ago. That is not a particularly positive development."
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