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.

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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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Tuesday
Jul152014

Looking For Action? S&P 1500 Most Volatile Stocks

For traders with a short-term time horizon who are looking for big moves over a short period, we have updated our list of the S&P 1500 stocks trading above $10 that have the largest intraday high-low ranges (based on the average percent spread between the intraday high and low over the last 50 days).  The stocks are grouped based on whether they have a rising or falling 50-day moving average (DMA).  Stocks highlighted in gray are new to the list this month.

If you thought there was a dearth of volatility last month, when only ten of the stocks listed had an average daily range of 5% or more, this month there are only four!  That's right, the only four stocks in the S&P 1500 that are trading above $10 per share and have average daily range of 5% or more are Sunedison (SUNE), Christopher and Banks (CBK), Penn Virginia (PVA), and GT Advanced Technologies (GTAT).  What this month's list does have, though, is symmetry.  As shown, there are an equal number of stocks listed that have rising and falling 50-day moving averages.  

In terms of pricing, there are no triple digit stocks in this month's list as the highest priced name is Synaptics (SYNA), which is trading in the mid $80 range.  On a sector basis, there is broad representation as nine out of ten sectors are represented.  With 14 stocks on the list, Technology has the greatest representation, followed by Health Care (10), and Consumer Discretionary (9).  The only sector with no stocks on the list is Utilities.

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Tuesday
Jul152014

Country Dividend Yields

The S&P 500 currently trades with an 18.09 trailing 12-month P/E ratio, and its dividend yield is 1.9%.  Compared to other major equity markets around the world, the 1.9% yield on the S&P 500 is low.  Below is a look at the dividend yields for 22 major country stock market indices.  As shown, four countries have yields above 4% -- Spain (IBEX 35), the UK (FTSE 100), Brazil (Bovespa) and Australia (S&P/ASX 200).  Spain's IBEX 35 has the highest yield of the bunch at 4.67%.

The US ranks 18th out of 22 on the list with its 1.9% yield, ahead of only Mexico, Japan, India and South Korea.  Countries like France, China, Russia, Germany and Canada all have yields above 2.7%.

Below is a look at the various country ETFs traded on US exchanges that we track in our daily ETF Trends report that's included as part of the Bespoke Premium membership.  For each country/region ETF, we provide its dividend yield based on its payouts over the last 12 months.  

As shown, the UK (EWU) ETF paid out 6.04% over the last 12 months -- not a bad source of income.  Other high yielding country/region ETFs include the Euro Stoxx 50 (FEU) at 5.11%, the Europe, Asia, Far East Value (EFV) at 4.32%, and New Zealand (ENZL) at 4.09%.

Investors looking for yield in this low-rate environment tend to focus on individual companies that offer attractive dividends.  As shown below, there are plenty of countries that also offer attractive dividend yields, and at the same time they provide international exposure for asset allocation models.  

Our daily ETF Trends report provides both traders and long-term investors alike with a unique tool to quickly identify which areas of the market are attractive and which ones to stay away from. A different set of ETFs is published each day of the week to cover indices, sectors, groups, styles, commodities, currencies, fixed income, and international markets.  Using a proprietary trend and timing score, we code each ETF based on its current trading pattern.   Long-term investors can use this tool to determine when to enter or exit a position, and active traders can use it to identify potential trade setups.   We also provide our proprietary “trading range” screen for each ETF to better analyze overbought/oversold levels.  The report is an easy way to stay on top of the multitude of ETFs offered today.

Our daily ETF Trends report is available to Bespoke Premium and Bespoke Institutional subscribers.  Click here view a sample of the report.

Tuesday
Jul152014

The Bespoke Morning Lineup: 7/15/14 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!

Fresh concerns over Banco Espirito Santos’ ties with other Portuguese firms and the rest of the European economy put a scare in peripheral equity markets and to core indices alike in early European trading. European markets opened to steep declines and spoos (SPY) hit the slopes at 3:00 AM. Even as we write, though, the market has turned higher, and the futures market is calling a positive open in the US cash equity market after multiple blue chips posted strong earnings.

For all the concern radiating outwards from European markets this morning, Asia Pacific markets felt none of it last night with the Nikkei moving 64 bps higher after a dovish Bank of Japan statement overnight. Governor Kuroda’s BoJ moved to maintain stimulus and made confident assessments of Japanese inflation’s progress upwards as the central bank continues to expand the monetary base by almost $700bn per year. Of note in this quest is the collapse in volumes for Japanese government bonds, where there were no trades in the morning session for a second day in a row. JGBs, like the Nikkei, trade in two separate sessions, with a mid-day break in between. For holders of the debt this lack of liquidity is a grave concern; the BoJs consistent buying means there is little incentive to trade the bonds actively, creating a dearth of liquidity.

Other Asian equity markets had respectable gains overnight including China (+18 bps), Hong Kong (+49 bps), Indonesia (+99 bps) and India (+89 bps). It’s worth noting that the opening bell for equity markets in Europe (3:00 AM EST) didn’t have the same effect on Asian indices as it did on US risk assets, with the Indian equity market putting in some of its strongest results during the day between 3:00 AM EST and the close at 6:00 AM EST. Indonesia also put in a strong close while European markets were opening in the red.

Europe had a rough open, including a decline of over 1.6% in the FTSE MIB (Italy’s primary benchmark). Since about 6:45, though, European equity markets have reversed aggressively, bottoming on the day following as-expected economic data from EU countries, a respectable bill auction in Spain, and a very strong print in UK CPI that has the pound in the stratosphere this morning, up 58 bps from its morning lows around 3:00 AM EST. The flurry of news and activity in Europe has led to a fairly disorderly market in sovereign bonds too; spreads of peripherals had blown out versus the bund but are now in outright rally mode in the course of an hour. The entire episode feels like an effort at headline-selling gone very badly awry, with stronger, more patient hands stepping in with bids and kicking off a short squeeze.

One positive factor affecting the trans-Atlantic equity and sovereign credit markets is the positive earnings news from both JPMorgan (JPM) and Johnson & Johnson (JNJ), which both released healthy beats on the top and bottom line. Combined with solid performances from Wells Fargo (WFC) and Citi (C) over the last two days of reporting, this looks like a very good start to earnings season both in terms of revenues and profits, and the reversal in equity futures this morning owes as much to that result as it does to the bounce back in European risk appetites. In more good news M&A continues apace with a deal being reached for Reynolds American (RAI) to purchase Lorrilard (LO) for $27.4 billion.

Economic data today was confusingly mixed with a big beat in the Empire Manufacturing index (25.6 versus 17.0 expected and 19.28 prior) and a good reading in the Import Price Index month-over-month (0.1% versus 0.4% expected and 0.3% previous). But retail sales disappointed with a 0.2% month over month growth in headline spending versus 0.6% expected. The previous print was revised up from 0.3% to 0.5%, and the control group/ex auto and gas figures were much more encouraging. All told, though, this was a weak report and will hit GDP forecasts, and it stands in strong contrast to the Empire survey.

Fed Chair Yellen is on the tapes speaking to the Senate Banking Committee at 10:00 AM. Business inventories will also be released at that time.

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Monday
Jul142014

The Closer Commentary 7/14/14 - Mellow Monday

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.

Markets got off to a slow, if positive start this week, with indices immediately popping on the open then going precisely nowhere for the rest of the day.  While equities exhibited a slight downward bias intraday relative to the highs put in late in the morning, ranges were constrained and there were few violent moves.  At 4:00 PM, the S&P 500 stood at 1,977.10, up 48 bps.  The Nasdaq finished up 56 bps to 4440.42 and the Dow marked closing levels of 17,055.42, up 66 bps.  The last time the Dow outperformed the Nasdaq and the S&P 500 when all three were up was back on May 21, and led to average gains of 42 bps in the S&P 500 over the following three trading days.

Dominating the news flow this morning was Citi (C) earnings, which came in much stronger than expected after adjusting for the large mortgage settlement charge announced this morning.  Loan loss reserve drawdowns reflected a more optimistic view of economic and credit outlook, while net interest margin grew and revenues beat street expectations.  The financial sector as a whole remains very challenged among a muddled outlook for mortgage lending, historically low interest rates, and oceans of deposits driven by Fed quantitative easing.  Citi does seem to be outperforming of late, though, with two sentiment-beating reports in a row (we discussed the last one in “The Closer - Slow But Smiling” dated 4/14/14).  Having shrugged off poor sector sentiment and a scandal at its Banamex subsidiary last earnings season, C over-delivered once again in terms of earnings.  But the stock is still down 7% this year, a rough performance given the showings by Wells Fargo (WFC, +12.8%) the S&P 500 (+6.92%) or the S&P 500 Financials sector (+4.36%).  In the last quarter, even, the stock is underperforming with a paltry 1.62% gain taking it into positive territory on the strength of today’s report.  Much is also made of the fact that the firm trades at a discount to book-value, the only one of its peers to do so.  From our perspective, based on recent outperformance of Citi’s financial results, the stock looks cheap.  But sometimes you get what you pay for!

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Monday
Jul142014

Key Earnings Reports this Week

With earnings season kicking into full gear this week, below is a look at the 50 largest companies set to report through Friday.  For each company, along with its expected report date and time, we include its historical earnings and revenue beat rate using data from our Interactive Earnings Report Database.  We also include each stock's average one-day change in reaction to its historical quarterly earnings reports.  (For companies that report after the close, we look at the next day's change.  For companies that report before the open, we use that day's change.)

None of the 50 largest companies that report this week are set to release this afternoon, but tomorrow is a big day with Johnson & Johnson (JNJ), JP Morgan (JPM) and Goldman Sachs (GS) in the morning, and Intel (INTC), Yahoo! (YHOO) and CSX after the close.  On Wednesday we'll hear from Bank of America (BAC) in the morning and then eBay (EBAY), Las Vegas Sands (LVS), SanDisk (SNDK) and Yum! Brands (YUM) in the evening.  Thursday will be the biggest day for earnings this week with companies like Morgan Stanley (MS), UnitedHealth (UNH), Baxter (BAX), and Baker Hughes (BHI) set to report before the open, and Google (GOOG), IBM, Schlumberger (SLB) and Capital One (COF) after the close.  General Electric (GE) and Honeywell (HON) will close out the week with reports on Friday morning.

Of the 50 largest companies reporting for the remainder of the week, some of the names that have historically done the best on their report days include CSX, BlackRock (BLK), Morgan Stanley (MS), Blackstone (BX), PPG and Google (GOOG).  Names like Intel (INTC), Bank of America (BAC), Las Vegas Sands (LVS), and Seagate (STX) have historically averaged declines on their earnings report days.

For a closer look into how companies in your portfolio typically trade around earnings, be sure to access our Interactive Earnings Report Database.

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Monday
Jul142014

Big Week In Economic Data

Earnings season is here!  A post is forthcoming shortly highlighting some of the upcoming earnings announcements Bespoke will be watching, but in the meantime, today's lack of economic data gives us a chance to prepare for the upcoming week in releases.  It's a heavy slate, and when combined with earnings info and two speaches from Fed Chair Janet Yellen, there will be a lot keeping traders busy between Tuesday and Friday.

The week starts with a look at production (Empire Manufacturing), the consumer (Retail Sales), prices/trade (Import Price Index), and inventories on Tuesday.  On Wednesday PPI will provide more price data, while Industrial Production, Cap U and Manufacturing Production will give more insight into the industrial economy.  Housing data includes mortgage applications and the NAHB index.  The 16th also includes the release of the Fed's Beige Book summary of economic activity.  Thursday brings weekly jobs data and more housing insights via Building Permits and Housing Starts.  The Philly Fed Business Outlook survey is also released.  Friday closes out the week with the consumer (University of Michigan Confidence) and the Leading Indices for the month of June.

Fed speakers will also be on the tapes including testimony to Congress from Chair Yellen and two other speakers.  Their schedule is summarized below.

To stay on top of key economic releases, sign up for a five-day free trial of Bespoke Premium today!  Each edition of The Morning Lineup gives a summary of the day's data releases, while The Closer puts those releases in context, as well as breaking down the significance of Fed speakers, international data, and the market's moves in response to the day's developments.

Monday
Jul142014

The Bespoke Morning Lineup: 7/14/14 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!

Happy Monday! Risk assets are trading well this morning, led by a strong night in the Pacific Rim and continued improvement in European asset prices. Treasury yields are rising and spoos are up 34 bps, pointing to an open in the cash equity markets here in New York around 39 bps higher than Friday’s close. Earnings are rolling out this morning but there are no economic data releases scheduled for today. With earnings season kicking into high gear this week, there is also a heavy release schedule for data and Congressional testimony from Janet Yellen, so don't expect a slow week.

Asia-Pacific risk assets had a great night overnight with the Nikkei up 88 bps, China up 96 bps, Australia up 45 bps and Hong Kong gaining 49 bps. This flew in the face of a very disappointing release of Singaporean GDP late last night (US time) that had the small city-state’s economy growing at a seasonally adjusted annual rate of -0.8% versus 2.4% expected and 1.6% previously. Offsetting this negative macro news was a stronger-than-expected Japanese Industrial Production print of 0.7% month-over-month versus 0.5% previously. This figure is reassuring given the horrifically bad machinery orders release recently (discussed in The Bespoke Report, sent Friday). “Election” trades (based on bullish sentiment due to the election of reformers in Indonesia and India) underperformed, although India’s negative day was established on much less volatile intraday trading than we saw in its weak days last week.

In Europe, risk assets are also continuing to bounce off their Thursday lows with regional equity markets measuring consistent gains (Euro Stoxx 50 +51 bps, Bloomberg Euro 500 +64 bps), core equities up even further (Germany +72 bps, FTSE 100 +67 bps), and Nordics outperforming (Norway +98 bps, Sweden +103 bps). Austria, Spain, Portugal and Italy are all underperforming though, with negative days for Spain and Italy as of this writing. While the panic ofThursday has left European equity markets, there’s been an unconvincing move back upwards (most indices are still ~1% below last Wednesday’s closing levels) and peripherals continue to underperform. We reiterate our caution against panic, but even a more measured reading of the signals from European markets suggests only slight improvement and warns for more caution.

As mentioned, this is a light day for economic data in the United States with no releases. There have been market-moving releases of non-economic news this morning, though, including a $7 billion settlement between Citi (C) and a group consisting of multiple US regulators. The penalty comes with a cash payment of $4.5 billion and consumer relief making up the balance. The $2.5 billion of relief will come via financing for affordable multifamily rental housing, principal reduction and forbearance of mortgage and other residential loans, and other forms of relief. The $7 billion charge will flow to Citi’s bottom line as previously taken litigation reserves did not cover the entire amount; C management warned that the company would take a $3.8 billion pre-tax charge in 2Q ’14.

While a $7 billion expense on litigation is never a good thing, C is on relatively stable footing because investors were expecting a large settlement. Assisting shareholders was a strong earnings report this morning. Adjusted EPS came in at $1.24 versus $1.07 expected, and revenues beat by over $500 million versus expectations. Shares are up almost 4% pre-market.

C is the only major earnings release in the cards for this morning. Tonight, there are a smattering of smaller firms, but the earnings party really gets swinging tomorrow with JPM, JNJ, CTAS, CSX, INTC, and YHOO reporting, among others. We also get a very wide range of economic data this week, two days of testimony from Fed Chair Yellen, and other Fed speakers. A full list of key dates in the economic release and earnings calendar outlook for the rest of the week will be published on the Think B.I.G. blog later today and linked to in tonight’s edition of The Closer. For earnings release schedules, make sure to consult the 2nd Quarter Interactive Earnings Season Calendar: http://bspke.com/naxaajr8

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Friday
Jul112014

The Closer Commentary 7/11/14 - Weekly Recap

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.

The markets came off the 4th of July this weekend on a poor footing with the worst losses in over a month on Monday and Tuesday.  Wednesday was a turnaround on behalf of the Fed minutes, which threw fuel on the fire of a bond rally that had been underway since Treasuries started trading in the wee hours of Monday morning.  That rally totally reversed a move higher in yields the week before thanks to strong employment data.  Global economic data moved south and worries over Portuguese lender Banco Espirito Santos created a huge (by recent low volatility standards) move in global equities and yet more positive price action in lower risk bonds.  But the US equity bid persisted in the face of foreign worries with markets climbing off their morning lows Thursday and climbing modestly Friday. 

Alcoa (AA) and Wells Fargo (WF) got the second quarter earnings party started with better-than-expected results.  The week was a boring one in terms of economic data for the United States.  Overall, markets were down the most on the week since April, and the Vix kicked up from its lowest close since 2007.  Credit spreads also widened, and the USD edged higher thanks to concerns over global growth and European instability.  Data releases will once again grab hold of headlines in the US next week with a variety of output indices, price data and housing data set for release throughout the week.  Bespoke will be back on Monday morning with The Morning Lineup.  Have a great weekend!

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Friday
Jul112014

The Bespoke Morning Lineup: 7/11/14 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!

The market is thanking goodness it’s Friday as a minor relief rally has set in for Europe, with equity indices reversing notably off of their lows yesterday. American equity futures responded in kind with a quick 5 points in the S&P 500 following the open in European trading, but have since traded gently lower since. Spoos are now sitting at 1960 even, pointing to an open 10 bps higher than yesterday’s close. Bond yields have fallen (as usual) in the long end of the curve, down 1.75 bps, while shorter-dated tenors are much more stable this morning.

Asian equities had a mixed session last night that saw the Nikkei open low, rally significantly, then fall apart and rally again a second time during afternoon trading. At the end of the day it closed down 34 bps, which was well off its lows of the day. Chinese equities performed better, up around 20 bps, while the AEX in Sydney rode stronger than expected housing data to a 40 bps gain. Meanwhile, recent market darling Indonesia had a brutal downdraft of 1.28% on news that reform-minded presidential candidate Joko Widodo’s bid for election isn’t safe; a dispute over results (still not announced) of the July 9 vote is brewing and that makes bullish bets on a growth in investment much riskier. India, another election beneficiary, is also hanging tough. The benchmark Sensex index is down three days in a row from its post-election peak, including another 1.37% in constant selling today.

European equities are trying to recover today after a horrible performance yesterday on concerns that Banco Espirito Santo would spark another round of European financial stress. Italy has popped 1.1%, but the gains are looking speculative as the Dax is leading the European market off its highs of the day literally as we write this. The index turned negative on the day in the last five minutes, and while other European indices are sitting on much larger gains intraday, the quick turn is disconcerting. As of now though, Portugal, Greece, Spain, Ireland, France, the UK, broad European indices, and most other equity markets are in the green versus yesterday’s painful close but coming off their highs notably.

High yield credit blew out the most since February over the last two days with the BAML High Yield Master II index’s spread to government bond yields increasing 14 bps in two days, a reflection of concerns over risk assets generally following a rough going for US equity markets. The concerns over the Portugal have also translated to a smaller bid for risk than existed a few days ago. Credit spreads remain at historically tight levels, with the HY index spread at 362 bps above Treasuries.

Wells Fargo is on the tapes this morning with second quarter earnings and the company managed to beat relatively muted expectations on the top line ($21.1 billion versus $20.8 billion expected), and EPS growth coming in at 3% year over year to $1.01 per share, right inline with expectations. WFC will probably be extrapolated broadly to the rest of the major banks, which we think is rash, especially given the divergent results between Wells and its peers last quarter. One bad sign for the other banks was a decline in gain on sale margins, a measure of mortgage production profitability. The decline is a sign of a combination of increased competition in the space while total production volumes remain challenged amidst a depressed housing market for first time buyers and underwhelming homeownership rates.

There’s no real economic data today but we do get Plosser and Evans speaking and the Treasury budget announcement at 2:00 PM. As a note, the light economic data slate this week will give us a chance to cover some international data developments in The Bespoke Report tonight. Details of Fed Speakers are below. Have a great finish to the week!

Friday 7/11 11:15 AM – Philadelphia Fed President Charles Plosser (FOMC voter, hawk), entrepreneurial issues. 

Friday 7/11 2:00 PM – Chicago Fed President Charles Evans (FOMC non-voter) and Atlanta Fed President Dennis Lockhart (FOMC non-voter), efficacy of Fed policy.

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Thursday
Jul102014

The Closer Commentary 7/10/14 - Big Thursday Downturn

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.

All that being said, Europe is looking awful right now, and releases this morning (all figures month-over-month) revealed a miss on the final June print for French CPI (0.0% versus 0.2% expected), French industrial output (-1.7% versus –0.2% expected), and Italian industrial output (-1.2% versus 0.2% expected).  The Eurozone is struggling and needs more economic support than the ECB can provide, despite the central bank’s best efforts to boost liquidity and demand via policy easing.  There are reasons to be optimistic (the possibility of real QE if the German economy joins the rest of the continent, the new minimum wage hike in Germany boosting demand and inflation, a bounce off of lows) but from our seats the breadth on European equity indices today is all we need to know.  The table at right shows the number of companies in each index which gained value today, as well as the country associated.

Turning away from European equities, American indices had a rough day today, but the pain was more concentrated in several sectors: Energy got taken to the woodshed, off almost 1 percent, consumer discretionary was off slightly less at –93 bps.  Industrials (-62 bps) and Financials (-53 bps) also underperformed, with the Materials sector losing 45 bps, just slightly worse than the market.  Defensive sectors were up to basically flat today, with Telecoms and Utilities putting in solid gains while the Health Care and Consumer Staple sectors were almost flat.  While the bull market feels overdue for a significant pullback at first blush (no such event taking place since the difficult summer of 2011), the behavior of stocks during the January pullback of 6% earlier this year and the relentless buying today off of a horrible open suggest to us that a double-digit move downward from the July 3rd highs is unlikely here.  We would be loathe to suggest that it’s impossible, because it’s not.  We would simply rate it as unlikely.

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