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Rjomrt-Blog Rjomrt Daily Previews 04-21-2014
Rjomrt-Blog Rjomrt Daily Previews 04-21-2014
Important Note: To receive this RJO MRT daily report, please sign up at http://www.rjomrt.com/content/complimentary-research.php. Weekly Preview -- The markets this week will focus on the Ukraine situation, Q1 earnings, comments on Tuesday from former Fed Chairman Bernanke, and the Treasurys sale of $96 billion of 2, 5 and 7-year T-notes. President Obama on Wednesday will travel to Japan to begin his four-country Pacific tour, with the other countries on his travel list including South Korea, Malaysia, and the Philippines. This weeks U.S. economic data is expected to support the thesis that the U.S. economy is regaining some momentum after the hit it took during the winter from the bad weather. The Bloomberg Economic Surprise index last Friday reached a 3-month high of -0.003, which indicated that the recent U.S. economic data has been the strongest relative to market expectations since mid-January. Strong U.S. economic data this week is expected to include todays March leading indicators report (expected +0.7%), Tuesdays Feb FHFA housing price index (expected +0.5%), Tuesdays April Richmond Fed manufacturing index (expected +7 to zero), Wednesdays March new home sales report (expected +2.3%), Thursdays March durable goods orders report (expected +2.0% headline and +0.6% ex-transportation), and Fridays final-April U.S. consumer confidence index (expected +0.4 to 83.0). Weak data this week is expected to include Tuesdays March existing home sales report (expected -1.1%), and Thursdays weekly initial unemployment claims report (expected +11,000). Leading indicators expected to show strong back-toback increase The market is expecting todays March U.S. leading indicators report to show a strong increase of +0.7%, adding to the +0.5% increase seen in February. The expected strong back-to-back monthly gains would tend to confirm that the U.S. economy this spring will improve substantially after taking a hit over the winter from the bad weather. On a year-on-year basis, leading indicators in February were relatively strong at +4.7%, just mildly below the 2-1/2 year high of +5.6% posted in Nov 2013. Q1 earnings so far beat expectations This will be a heavy week for Q1 earnings with 83 of the S&P 500 companies scheduled to report. Next week, 155 of the S&P
...covering global macroeconomics, central bank policy, and fundamentals of the equity, interest rate, currency, metal, and energy markets. MONDAY, APRIL 21, 2014
-0.200 -0.400 Bloomberg U.S. Economic Surprise index measures in terms of standard deviations how much the actual economic indicator data performs better or worse than economists' consensus expectations 1/11 4/11 7/11 10/11 1/12 4/12 7/12 10/12 1/13 4/13 7/13 10/13 1/14 4/14 -0.600 -0.800 -1.000
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500 companies will report earnings. Notable reports this week include Halliburton and Netflix on Monday; McDonalds, AT&T, and Yum Brands on Tuesday; Apple, Procter & Gamble, and Texas Instruments on Wednesday; Microsoft, Amazon, Visa, UPS, Starbucks, Time Warner, and Caterpillar on Thursday; and Ford and Moodys on Friday. Q1 earnings expectations improved to +1.7% from +0.9% a week earlier due to some better-than-expected earnings reports last week, according to Thomson Reuters I/B/E/S. Of the 83 S&P 500 companies that have reported earnings thus far, 63% have beaten earnings, which is right on the long-term average, according to Thomson I/B/E/S. After weak earnings growth for Q1, the market is expecting an improvement to +8.1% in Q2, +11.4% in Q3, and +11.2% in Q4. U.S. may soon decide on new sanctions on Russia since there has been no de-escalation of tensions -Vice President Biden will visit Kiev on today and Tuesday to meet with Ukrainian leaders in a show of U.S. support. Meanwhile, there has been no sign of de-escalation after Russia last Thursday agreed with the U.S. Europe and Ukraine to de-escalate tensions. Instead, Russian-supported separatists in eastern and southern Ukraine said they would not abide by the agreement and there were shoot-outs in eastern Ukraine over the weekend. We believe there is a good chance that the U.S. within the next 2-3 weeks will announce broader sanctions on Russia since the situation is not likely to improve. Two members of the Senate Foreign Relations Committee over the weekend (Democratic Senator Chris Murphy and Republican Senator Bob Corker) called for stepped-up sanctions on Russia, including sectorwide sanctions on Russias oil and banking sectors. The global stock markets will not take sector-wide sanctions on Russia well considering that they will hurt the European and global economies as well. Yet broader sanctions are likely necessary to discourage Russia from a continuous series of similar takeovers of its neighbors in coming years. Broader sanctions are also necessary as a warning to China not to engage in similar takeovers in the large number of territorial disputes it has with its neighbors. Overseas news dominated by Chinese and European PMIs -- In overseas news this week, the European markets are closed today for Easter Monday. Chinas HSBC April manufacturing PMI report on Tuesday night is expected to show a small +0.3 point increase to 48.3, reversing part of the -0.5 point drop to 48.0 seen in March. On Wednesday, Germanys April manufacturing PMI is expected to show a small +0.1 point increase to 53.8 while the Eurozone April manufacturing PMI is expected to be unchanged at 53.0,
Earnings Consensus: Annual: 2013: +5.8%; 2014 +11.3% Quarterly 4Q13: +9.9% 1Q14: +1.7% 2Q14: +8.1% 3Q14: +11.4% Source: Thomson One 4Q14: +11.2%
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both remaining comfortably above the expansion-contraction level of 50.0. The Bank of England on Wednesday will release the minutes from its April 9-10 policy meeting. Germanys April IFO business climate index on Thursday is expected to fall -0.3 points to 110.4. Japans March CPI on Thursday is expected to edge higher to +1.6% y/y from +1.5% in Feb.
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P/E Ratio
Market Recap
Key News from Thursday, April 17
U.S. weekly initial unemployment claims rose +2,000 to 304,000, less
than expectations of +15,000 to 315,000. Weekly continuing claims unexpectedly fell -11,000 to 2.739 million, better than expectations of a +4,000 increase to 2.780 million and the lowest in 6-1/3 years. than expectations of +1.0 to 10.0 and the fastest pace of expansion in 7 months. tions of unch m/m and -0.7% y/y.
The Apr Philadelphia Fed manufacturing index rose +7.6 to 16.6, better
German Mar PPI fell -0.3% m/m and -0.9% y/y, weaker than expecta Market closes Stock Market -- The S&P 500 index on Thursday closed slightly
higher. Bullish factors included (1) the +2,000 increase in U.S. weekly initial unemployment claims, less than expectations of +15,000, (2) the +7.6 point increase in the Apr Philadelphia Fed manufacturing index to a 7-month high of 16.6, better than expectations of +1.0 to 10.0. Bearish factors included (1) disappointing earnings results from Google, IBM, and UnitedHealth Group, and (2) the ongoing crisis in Ukraine where there was no sign of the de-escalation that Russia agreed to last Thursday. Closes: S&P 500 +0.14%, Dow Jones -0.10%, Nasdaq +0.04%. tumbled to a 1-1/2 week low and closed lower as stronger-than-expected U.S. economic data on weekly initial unemployment claims and the Apr Philadelphia Fed manufacturing index bolstered speculation the Fed will continue to taper QE3 and may be closer to raising interest rates. Closes: TYM4 -20.00, FVM4 -11.00. found support on stronger-than-expected U.S. economic data (weekly initial unemployment claims and Apr Philadelphia Fed manufacturing index), which supported the outlook for the Fed to continue to taper QE3. Strength in stocks, however, limited the upside for the dollar on reduced safe-haven demand. Closes: Dollar index +0.074 (+0.09%), EUR/USD unch, USD/JPY +0.011 (+0.01%).
Forex -- The dollar index on Thursday closed little changed. The dollar
(-0.74%), SIK4 -0.038 (-0.19%), HGK4 +0.0195 (+0.64%). Precious metals retreated as stronger-than-expected U.S. economic data on weekly jobless claims and the Apr Philadelphia Fed manufacturing index bolstered the outlook for the Fed to continue to taper QE3. Copper prices gained as stronger-than-expected U.S. economic data improved the demand outlook for industrial metals. with May gasoline at a 7-1/2 month high. Bullish factors included (1) better-than-expected U.S. economic data on weekly jobless claims and the Apr Philadelphia Fed manufacturing index, which signals strength in the U.S. economy and energy demand, and (2) the ongoing Ukraine crisis and concern any further escalation of hostilities could lead to a disruption of energy supplies throughout Europe. Closes: CLK4 +0.54 (+0.52%). RBK4 +0.0165 (+0.54%).
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(ES) Bear & Bull S&P Option Strategies to Engage Key Nonfarm Payroll Report -by Dave Toth Technicals, Trade Strategies April 3, 2014; 9:20am In yesterdays Technical Blog we extolled the virtues of a still-constructive technical condition. With yesterdays recovery above 21-Mars 1877 high, the market has rendered the Mar sell-off attempt a 3-wave and thus corrective affair consistent with the secular advance calling for a ...more (HG) S-T Copper Failure Stems Recovery, May Re-Expose L-T Bear -by Dave Toth Technicals, Trade Strategies April 3, 2014; 6:35am Overnights failure below Tues 3.0170 minor corrective low confirms a bearish divergence in short-term momentum that defines yesterdays 3.0740 high as one of developing importance and possibly the end of what we suspect is a bear market correction. As a result of this momentum failure and ...more (CC) Cocoa Mo Failure, Waves, Frothy Sentiment Warn of Major Peak/ Reversal Threat -by Dave Toth Technicals, Trade Strategies April 2, 2014; 11:00am Todays clear break below 25-Mars initial counter-trend low of 2921 confirms a bearish divergence in momentum that well discuss in more detail below. The important by-product of this RESUMED weakness is the markets definition of TWO highs and risk parameters at ...more (S) Bearish Soybean Hedge, Spec Option Strategies to Engage Grain Stocks Report -by Dave Toth Technicals, Trade Strategies March 27, 2014; 10:10am This mornings Technical Blog describes the current constructive outlook on both old and new crop soybeans. For producers looking to take advantage of current lofty prices to hedge against a reversal lower and traders looking for a cautious way to speculate on a bearish Grain Stocks Report, the two option strategies below are advised to be considered. ...more
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