Friday
Jul182014

Earnings and Revenue Beat Rates

Below is our first look at the earnings and revenue beat rates for the second quarter reporting period that began earlier this month.  Last earnings season, the earnings beat rate hit its lowest level of the current bull market with a reading below 60%.  So far this season, 64.2% of companies have beaten estimates.  Keep in mind that only 10% of companies have reported so far this season, so it's still very early.

The top-line revenue beat rate is a bit weaker than the earnings beat rate, coming in at 57% so far this season.  This is slightly better than the final reading of 56% that was registered last season.

Friday
Jul182014

Key Earnings Reports Next Week (7/21/14-7/25/14)

Next week will be the busiest yet in terms of earnings reports, with more than 550 companies set to release quarterly numbers.  As shown below, earnings peak on Thursday with 254 reports due.

Below is a list of the 40 largest companies set to release next week.  For each stock, we highlight its historical earnings and revenue beat rate that we collected from our Interactive Earnings Report Database, which is available to Bespoke Institutional members.  We also highlight the average one-day percentage change that each stock has historically experienced in reaction to its quarterly reports going back ten years.

The week starts off slow but picks up quickly on Tuesday with earnings from blue chips like Verizon (VZ), Coca-Cola (KO), United Tech (UTX) and McDonald's (MCD) in the morning.  Apple (AAPL) and Microsoft (MSFT) will obviously dominate the headlines with reports out after the close on Tuesday.  On Wednesday morning we'll hear from Boeing (BA) and Biogen (BIIB), and then Facebook (FB), AT&T (T) and Qualcomm (QCOM) will post results after the close.  3M (MMM), Ford (F), Caterpillar (CAT), General Motors (GM) and Celgene (CELG) report on Thursday morning, followed by Visa (V), Amazon.com (AMZN), Starbucks (SBUX) and Baidu (BIDU) on Thursday evening.  AbbVie (ABBV) and LyondellBasell (LYB) round out the week with reports on Friday morning.

Head on over to Bespoke Premium for more in-depth earnings season analysis.

Friday
Jul182014

VIX Spikes -- Snap Back Rally or a Continued Fade?

Below is an excerpt from a B.I.G. Tips report published yesterday after the close.  To access the entire report along with everything else we have to offer, sign up for a 5-day free trial to Bespoke Premium today!

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Friday
Jul182014

The Bespoke Morning Lineup: 7/18/14 Commentary

The below commentary is an example of what Bespoke Premium subscribers receive every morning in The Morning Lineup in addition to three pages of key headlines, charts, trends, and technical indicators.  We will be posting our commentary here each morning for the next several weeks.  If you're interested in receiving this report and our many others via email, try a 5 day free trial to Bespoke Premium today!

Yesterday’s moves were - in the context of a low volatility regime with steady gains in equity markets, and gently falling bond yields - terrifyingly sharp, with the VIX exploding through the top of its range, the S&P 500 moving more than 1% for the first time in months and an epic move lower in bond yields. Overnight those moves did not continue. S&P index futures are basically unchanged from yesterday’s close after some further losses very early in the US overnight session (pre-8:00 PM), but a slow, steady rally since. It seems that international equities have priced in some of the geopolitical risk premium we saw in US equities yesterday, but to a slightly lesser degree, while no new news overnight has left US markets where they were yesterday. Bonds, it appears, were overbought, and the selling in Treasuries represents a degree of mean reversion.

Following the sun’s departure from the United States yesterday evening, Asia-Pacific markets opened sharply lower, putting an end to their more localized regime of price moves. Early in trading, the Nikkei was off sharply (-1.6%), the ASX index of Australian stocks was down over 60 bps, Hong Kong was 1% lower and China started off 40 bps below Thursday’s close. But the universal reaction from these indices was for traders to buy the dip: every single major regional market gained steadily through the morning on the western edge of the Pacific, with gains of roughly 60 bps across the board, taking China and Australia positive on the day and all indices well off their early lows, which were not seen again. In other words, while a repricing took place (Hong Kong off 28 bps, Nikkei off 101 bps), there was no acceleration of concerns, and markets found a clearing price for the new risk premium with steady demand for risk assets in the face of lower prices.

European equities are reflecting a similar mindset as the marginal buyer in Asia: geopolitical risk is priced in based on current information, and there is no need for renewed selling beyond the aggressive selloff that took place yesterday. European equities are all down, but have found an intraday range with no steady selling and plenty of ticks upward in price intraday reflecting a market that isn’t ready to roll over in the face of Middle East instability, already having a premium to build in. The ground invasion of Gaza by Israeli forces last night broke well after European markets had closed; the majority of the news flow out of Ukraine had already come by then and with hindsight was priced quite fairly in the market. The EuroStoxx 50 is currently down about a quarter of a percent, with healthy dispersion within the region; France is only a few bps lower on the day, as is Italy, while German stocks are down about 50 bps. There’s been much more aggressive selling in other markets (Denmark off 1.05%, Portugal,-1.44%, Greece -2.20%) but all of the European equities market has avoided an aggressive trend of losses and is range-bound for now.

Russian equities had been on a tear for most of the second quarter after bottoming in March, with a rally of over 32%, but the last few days have not been kind; Russian equities are down 2.36% in the Russian Trading System Cash Index, which measures performance in USD. The MICEX index is performing slightly better, down 1.98%. In other countries impacted by yesterday’s moves, selling has been muted: Israel is currently flat, while Poland, on the eastern edge of NATO, is down 38 bps, less than most European indices.

Earnings news this morning has been positive in EPS terms, but there have been some revenue misses from GE (GE, -1.52% yesterday, +0.86% pre-market), BNY Mellon (BK, -0.29% yesterday, -2.00% pre-market), and Johnson Controls (JCI, -1.01% yesterday, +0.74% pre-market); none missed by a wide margin though. Other firms including Shire (SHPG, +1.67% yesterday, -1.12% pre-market) and Honeywell (HON, -1.27% yesterday, flat pre-market) beat expectations on the top line though. IBM is set to open lower this morning following earnings after the close yesterday, while Google (GOOGL) is set to open higher by roughly 3% after reporting strong revenues last night.

Economic data today is light with University of Michigan Consumer Sentiment coming out at 9:55 AM (Expectations for 83.0 versus 82.5 prior) and the leading indicators index (0.5% expected versus 0.5% previous) at 10:00 AM.

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Thursday
Jul172014

The Closer Commentary 7/17/14 - Geovolatility

The below is an excerpt from tonight's edition of The Closer, sent to Bespoke Premium and Institutional clients each night along with graphs, analysis, and timing models for both single name equities and the market as a whole

US equity investors were hit with a bout of intraday volatility today as newswires, terminals, televisions and Twitter blazed with news related to the crash of a Malaysian Airlines flight over the Donetsk region of Ukraine.  Spoos got off to a rocky start long before the move in geopolitical events got the world’s attention, with S&P futures trading down sharply around 6:45 AM in tandem with new waves of selling in European equity indices.  The downturn in equities was reinforced by mixed economic data, but US stocks by and large started marching higher and the Dow actually ticked positive for more than half an hour.  But the markets started moving slightly down leading into the 11:00 AM hour, when selling started intensifying.  By 11:30, the Dow had shed 30 bps and the S&P 500 was over 50 bps off its highs, as reports of the plane crash trickled out.

Reports have been extremely mixed and speculative all day about the crash.  One certainty is that the loss of innocent civilians is tragic in the extreme, and that their families are in our thoughts.  The geopolitical implications of their loss played out today via telephone (it was discussed during a previously scheduled call between Russian President Vladimir Putin and President Obama), in the markets, and across the media.  Our take is two-fold: first, confirmable details are very, very light, and there has already been ample errant speculation.  Second, although this story was front-and-center today, we do not expect it to have long-term market impact. 

We have underscored repeatedly the talent that Russian Prime Minister Vladimir Putin has for walking the line, and although his foreign policy is drawing heat from the West, he knows exactly what he can get away with.  Therefore, this act was without doubt not official policy of the Russian government; whether they are in some way culpable via mistaken action by the Russian military (possible, but unlikely) or the actions of their proxies in the Donetsk region (the most likely scenario right now) is much less clear, and more details are needed.  Whether this geopolitical risk brings with it a new round of higher volatility remains to be seen.

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Thursday
Jul172014

Philly Fed Strongest Since March 2011

Today's report on manufacturing activity in the Philadelphia region came in better than expected (23.9 vs 16.0), hitting its highest level since March 2011.  This report confirmed the strength in manufacturing that we saw in the Empire Manufacturing report earlier this week.

The table to the right breaks down the monthly changes in the Philadelphia Fed headline report and each of its components.  As shown, seven of the nine subcomponents increased this month, led higher by Shipments and New Orders.  On the downside, the only two components that saw a decline were Unfilled Orders (9.1) and Prices Paid (-0.3), which should provide a small sense of relief to investors concerned about inflation.  With regards to employment, while they didn't see the largest increases, both the Number of Employees and Average Workweek saw increases this month.  This was in contrast to the Empire Manufacturing report which actually showed a decline in the Number of Employees while the Average Workweek increased.

Finally, as mentioned above New Orders and Shipments both saw the largest m/m increases in July's report.  Following those increases, both sub-indices are now at their highest levels in 10 years!

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Thursday
Jul172014

Investor Sentiment Drops

Following a "sell-off" of less than 1% last week, and some weakness within small cap stocks this week, bulls are once again heading for the hills.  In the latest weekly survey of investor sentiment from the American Association of Individual Investors (AAII), bullish sentiment plunged from 37.64% down to 32.36%.  This was the sixth largest weekly decline so far this year and brings bullish sentiment down to its lowest level since late May.  In other words, the S&P 500 closed less than four points (0.19%) from an all-time high yesterday and less than one-third of individual investors are bullish.

Thursday
Jul172014

Jobless Claims Lower Than Expected

The trend in jobless claims continues to be lower.  While economists were expecting an already low level of 310K first time claims in today's report, the actual level was 8K lower at 302K.  This was the third lowest weekly reading since the recession ended in 2009 and was the lowest reading since early May.  While other areas of the economy have shown uneven improvement, the trend in employment recently has shown steady improvement.

With this week's lower than expected reading in weekly claims, the four-week moving average dropped to 309K, and represents a new post-recession low.  The prior low of 310.5K was in late May.

On a non-seasonally adjusted basis (NSA), jobless claims rose by 47.1K to 369.6K.  While the increase looks large, it is common for claims to increase at this time of year.  In fact, for the current week of the year NSA claims were lower than any other week since at least 2000 and well below the average of 471.1K.

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Thursday
Jul172014

The Bespoke Morning Lineup: 7/17/14 Commentary

The below commentary is an example of what Bespoke Premium subscribers receive every morning in The Morning Lineup in addition to three pages of key headlines, charts, trends, and technical indicators.  We will be posting our commentary here each morning for the next several weeks.  If you're interested in receiving this report and our many others via email, try a 5 day free trial to Bespoke Premium today!

We saw another trend-less night in Asia-Pacific trading last night as Japan popped on the open but then sold off throughout the day to finish slightly lower on the day. China retreated some 50 bps, India advanced 21 bps, and other markets were a total grab bag: Australia a hair higher, New Zealand a hair lower, Indonesia and Taiwan down 80 bps, smaller markets up 7 - 49 bps across southeast Asia. As we remarked yesterday, most markets in the region appear to be trading on local factors (earnings, economic data, geopolitical events, positioning) rather than global flows.

Europe, on the other hand, is once again trading in lockstep and a rough start to the day has gotten worse as we write this with the EuroStoxx 50, DAX, and CAC 40 all hitting a serious downdraft simultaneously this morning. Peripheral equities are caught in the same pattern of selling and are sympathetically heading south almost tick-for-tick in line with the core indices. There’s been no economic news, no headline tape-bombs, and nothing in terms of earnings that we can see to drive the sudden risk capitulation. As of this righting our run of European stocks has the EuroStoxx 50 off 1.26%, the France off more than 1%, Germany down 75 bps, England off almost as much, Italy down 1.25%, and Spain slightly more. The volatility in European equities has been huge the last few days relative to recent history; while some of the rapid swings last week were driven by headlines, today’s moves seem to be without those scare-catalysts, but still moving in lock step. The market is also trying to sort out the implications of much harsher sanctions against Russia, and the possible implications of an angrier bear to the east.

As we’ve observed the last few days, Europe and the spoos are literally right on top of one another, but today there doesn’t seem to be any lead from Europe like there was the last few days. Regardless, the flow in the US has a distinctly transatlantic flavor yet again today, despite earnings and domestically focused US economic data today. Futures are currently pointing to an open almost ten points lower than last night's close, or 48 bps down. Dow futures are holding in better (calling a 31 bps lower open in the blue chips), while the Nazz is set to open 55 bps below yesterday’s levels.

In earnings today, Morgan Stanley (MS) continued the trend of expectation beating with an EPS print 5 cents higher than expected, revenue came in 5% above analyst estimates, and the stock is up over 1% pre-market. Elsewhere, Phillip Morris International (PM, +0.94% pre-market) also beat on top and bottom line, UnitedHealth (UNH, +0.88% pre-market) crushed EPS estimates ($1.42 versus $1.25 expected) and raised revenue and EPS guidance for the year. There was also bad news from Mattel (MAT, -8.28% pre-market) where earnings widely missed (3 cents EPS versus 18 cents expected, revenue over 10% below street estimates). Broadly speaking large-caps have been more positive than small firms this morning, but Novartis (NVS, -1.25% pre-market) had soft revenue numbers that missed expectations, while EPS was exactly in-line at $1.34/share.

Elsewhere in single-name equity news this morning, Microsoft (MSFT, +1.18% pre-market) announced today that it would be laying off 18,000 workers as part of its restructuring, 14% of its headcount and the largest in the firms’ history. The story of relatively new CEO Satya Nadella’s efforts to turn around MSFT is well known, but this is his most bold action yet.

Housing starts missed this morning (893K seasonally adjusted annual rate versus 1,026K expected and downward revisions to the prior figure), but jobless claims ticked down again to 302K versus 310K expected, another good sign for the labor market. Philly Fed is up at 10:00 AM (16.9 expected versus 17.8 prior), and we get James Bullard (St. Louis Fed President) speaking at 1:35 PM.

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Wednesday
Jul162014

The Closer Commentary 7/16/14 - Midweek Merger Madness And More

The below is an excerpt from tonight's edition of The Closer, sent to Bespoke Premium and Institutional clients each night along with graphs, analysis, and timing models for both single name equities and the market as a whole.

Stocks today trading well after European equities spiked huge this morning.  Europe ended up a sea of green after a broad risk rally sent indices from Spain to Finland up 1% or more.  Italy had a banner day with equities in the FTSE MIB index jumping over 3%.  Other peripheral indices turned in impressive gains including a 2.73% rally in Portugal and 1.84% rise in the IBEX 35 index of Spanish stocks.  Equity futures in the US responded appropriately and after staying flat until the open of European bourses, spiked upwards.  Respectable earnings this morning including a top– and bottom-line beat from Bank of America (BAC) had the market in a good mood at the open, with equities printing their first trades up 49 bps in the S&P 500, 37 bps in the Dow Jones Industrial Average and 67 bps in the Nasdaq Composite.  The Russell 2000 index of small cap stocks, while opening on par with its larger peers, began selling off heavily right out of the gates, hitting lows on the day late in the 11:00 AM hour.  The Russell badly underperformed large caps all day, and ended up 20 bps lower on the day.  Another loser on the day was the IBB (Nasdaq Biotech ETF), which collapsed almost 1.5%.

IBB has served as a solid leading indicator for small caps this year (see chart at right), tending to roll over and turn around earlier and harder than the Russell 2000.  The recent highs in the IBB actually coincided with the Russell, but the previous highs had the IBB as a leading indicator, as did the major turnaround that came in May for both indices. 

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Wednesday
Jul162014

75% of Stocks Remain Above Their 50-Day Moving Averages

As shown below, 75% of the stocks in the S&P 500 are currently trading above their 50-day moving averages.  This indicator has been trending slightly downward for about a month now, but it hasn't fallen below the 75% mark for quite some time.  Generally, whenever this breadth reading gets above the 80% level, the market is due for a breather.

All of the stocks in the Telecom sector are currently trading above their 50-days.  Unfortunately there are only 5 stocks in the sector!  The next two sectors with the highest breadth readings are Financials and Technology at 83.3%.  This is positive for market bulls since these are the two largest sectors of the market.  If Tech and Financials are doing well, chances are the broad market is doing well.  Three other sectors have breadth readings above the overall S&P 500's reading of 75% -- Energy, Health Care and Materials.  The four sectors with below-market breadth readings are Industrials, Utilities, Consumer Discretionary and Consumer Staples.  The two consumer sectors have the lowest percentage of stocks above their 50-days.  Discretionary is at 65.5% and Staples is at 60%.  While readings at 60% or above are strong, we'd like to see consumer sectors outperforming instead of underperforming.

The Closer is a one-stop-shop for a summary of key trends from each trading day.  Each edition is packed with analysis, charts, tables and models to help you understand what happened in the latest market session.  The Closer hits your inbox with the following sections every evening after the close:

  • Featured Analysis.  Bespoke's trading and research team collaborates to bring you two pages of commentary on the day that was, including clear charts on individual equities, sectors & indices, and non-equity asset classes that are impacting the market.
  • The Tale of The Tape.  This intraday chart gives the key relationship we saw in equities on any given day.  The chart will change as the flows between equities, rates, currencies, commodities, and credit change.  Other days cross-asset flows won’t be as important as trends within equities themselves so we’ll occasionally show intraday comparisons versus recent history or between the S&P 500 and other key sectors or indices.
  • Biggest Movers. This simple table shows the top and bottom 1% of the US equity markets from today, with tickers and returns for the 15 stocks that performed best and worst in the S&P 1500.  We’ve also included the stocks that had the biggest volume days relative to their recent historical average trading volume.
  • Major Asset Class PerformanceThe Morning Lineup features a series of key asset class charts, and we think these are just as important to close the day as they are to open it.  Check here for updates on the performance of oil, gold, the USD index, long bond futures, the S&P 500 and the Nasdaq Composite over the last 15 trading sessions.
  • Key ETFs.  This easy to read list keeps you on top of how each market is moving, as we show performance on the day for the 47 ETFs Bespoke keeps a close eye on.  Also included are sparklines to give an at-a-glance view of how each ETF has done over the last six months, including highs and lows over that period.
  • Most Popular Tweets from Bespoke.  In this section, we highlight tweets from the day that created conversation on Twitter.  It can be tough to stay on top of everything going on in social media, so this section will give you a quick summary of the thoughts we shared during the trading day.  Want to keep track of what we’re seeing in real time?  Head on over to http://twitter.com/bespokeinvest any time.
  • Bespoke Market Timing Model.  Our model is a compilation of many widely (and not so widely) followed market indicators that formulates a prediction for the short term direction of the market.  While most investors have one or two indicators they rely on, we recognize that no indicator by itself is correct all of the time.  With this in mind, we set out to create a series of indicators from multiple disciplines in order to see what the 'crowd' of indicators are telling us.  Just as no individual is bigger than the market, we contend that no single indicator is more accurate at forecasting the market than the sum of them all.
  • Bespoke Stock Odds.  The Stock Odds report helps traders quickly identify the leaders and laggards of the market.  The product is unique, however, because it not only shows which stocks have recently had the biggest moves, but also how they typically react following similar moves.  Anyone can produce a list of the day's best and worst performers, but we have gone the extra step to focus on what it means going forward.

The Closer is included with Bespoke Premium and Bespoke Institutional memberships. 

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Wednesday
Jul162014

Updated S&P 500 Sector Weightings

Below is an updated look at sector weightings for the S&P 500.  As shown, Technology is still the largest sector of the S&P at 19.19%.  Financials ranks second with a weighting of 16.07%, so Tech and Financials collectively make up roughly 35% of the US stock market.  

Health Care is the third largest sector of the S&P at 13.19%, and then there are four sectors right around the 10% mark -- Consumer Discretionary (11.86%), Energy (10.74%), Industrials (10.49%) and Consumer Staples (9.49%).  Materials, Utilities and Telecom are at the bottom of the barrel around the 3% mark.

After today's rally in big blue-chip Tech names, the Tech sector's S&P 500 weighting actually reached its highest level since November 2012.  As shown, year-to-date, Tech's weighting has increased 0.60 percentage points.  This is the biggest jump of any sector, just ahead of Energy with a gain of 0.50 percentage points.  

Five sectors have seen their weightings decrease so far in 2014.  Consumer Discretionary has seen the biggest decline in its share of the S&P 500 at 0.69 percentage points.  Industrials has fallen the second most, followed by Consumer Staples, Financials and Materials.  It's notable that both consumer sectors have lost share this year.  

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Wednesday
Jul162014

Homebuilder Confidence Increases More Than Expected

Wasn't housing supposed to be rolling over?  After a winter of weak housing related data and confidence reports, things are starting to turn around.  Since the second half of June, every housing related economic report (Existing, Pending, and New Home Sales) has been better than expected.  Today's homebuilder confidence report for the month of July is just another example.  According to the National Association of Homebuilders (NAHB), homebuilder confidence improved more than expected in July.  While economists were expecting a level of 50 (which is the dividing line between optimism and pessimism), the actual reading came in at 53 compared to last month's level of 49.  That comes on the heels of June's reading which also increased four points and was better than expected.  This increase of eight points is now the largest two month increase since July of 2013.

The table to the right (charts below) breaks down this month's report by each of the index's components and regions.  Relative to last month, every one showed improvement.  The largest increase came in future sales which rose six points from 58 to 64.  On a regional basis, both the West and the Midwest saw increases of six points, while the gains in the Northeast and South were somewhat more contained.  Even after the improvement of the last two months, the headline index and its various components still have a ways to go before taking out their highs from last year, but they aren't exactly rolling over either.


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Tuesday
Jul152014

Retail Sales Weaker Than Expected

The docket of economic data got off to a poor start Tuesday morning, with a weaker than expected retail sales report.  While economists were expecting month/month (m/m) growth of 0.6%, the actual reading came in at just a third of expectations (0.2%).  While the headline number was disappointing, digging a little deeper into the report was somewhat more encouraging.  Ex Autos and Ex Autos and Gas, growth was only 0.1% below the consensus forecast of 0.5%.

Looking at retail sales growth across the different sectors also showed positive breadth.  Of the 13 sectors, only four showed a m/m decline, led lower by Building Materials which declined 1%.  To the positive, General Merchandise grew 1.14%, while non-store retailers (online) saw growth of 0.89%.  Rounding out the top four, Health and Personal Care and Clothing both also saw growth of more than 0.8%.

The table below shows each sector's share of total retail sales and how it has changed over the last year. Autos and Auto parts dealers have the largest share of total retail sales at just under 20% (19.9%).  The two other groups that have seen the biggest increase in their total share of retail sales (green text) are Nonstore retailers (online) and Health and Personal Care.  On the downside, the three groups that have seen the largest decline in their total share of retail sales (red text) over the last year are General Merchandise, Food and Beverage Stores, and Gas Stations. 

In the case of online retail, its share of total sales has been on a steady increase for several years now.  For more than ten years its share of total sales has been on a nearly uninterrupted increase as it continues to steal share from just about every other sector.  At 9.1% of total sales, online retailers' share is at a record high.

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Tuesday
Jul152014

The Closer Commentary 7/15/14 - Meandering Expectations Management

The below is an excerpt from tonight's edition of The Closer, sent to Bespoke Premium and Institutional clients each night along with graphs, analysis, and timing models for both single name equities and the market as a whole.

US traders walked in this morning to a rough vista: European equities rolled over from the open, peripheral spreads were blowing out, Treasury markets were in rally mode, and US equity index futures sold off their highs of the overnight session to call a negative open.  But just as analysts began to trickle in, European managers shook off the cobwebs, cracked their knuckles, and started lifting offers.  In the space of less than an hour the FTSE MIB and other peripheral equities catapulted off their lows of the day.  Shortly thereafter, JPM released its second quarter results, as did Johnson and Johnson (JNJ), putting a fierce bid in S&P 500 futures and sending the S&P 500 on a tear into 8:30 AM data releases, which were positive (more on that later).  While equity markets in New York had turned themselves around for the most part by the time Janet Yellen took the stage in Washington for her annual testimony to the US Senate, the message she delivered was much less kind to stocks than it was to bonds.  The S&P 500 finished the day down 19bps, the Nasdaq was off 4 bps, and the Russell 2000 was down 101 bps.  The Dow finished the day higher (0.03%) on the better-than-expected reports from three of its components.  The chart above and to the left shows just how much global news and earnings data contributed to a healthy dose of volatility today;  testimony from the Fed also played a part.  In a nutshell, today was all about adjustment to flows, whether in market momentum in Europe, or in terms of news domestically.

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