Dave Lutz of Stifel, Nicolaus passes along the top stories that traders are chatting about this morning:
Good Morning, and Happy Friday! US Futures are showing a mild uptick this AM as we have Index rebalances and a “Quad Witch” options expiry today – Estimate that passive index funds will generate about $US10.8B per side in flows across the three indices — Also a reminder that S&P ETFs go Ex. Dividend today as well. Overseas markets continue to trend higher, led by a 35bp pop in Germany’s DAX, as it nears a new all-time high. Volume is very heavy in Europe on rebals — with volumes 50-250% above the recent averages. Eyes remain on Turkey’s market, which is bouncing small following this week’s sharp declines. In Asia, the Nikkei managed to eek out a small gain, but hits a new 6Y closing high as the BOJ affirmed a very accommodative stance. The eyesore was in China, however, as interbank rates surge sharply overnight, hitting Shanghai for 2% to it’s lowest in 4 months – The Shanghai Composite has fallen for nine sessions in a row, its worst run since 1994 — Aussie liked the cash injection — popping the ASX by 1% in heavy trade. The tide was mixed in emerging markets — with India continuing to surge higher, adding 1.7% – while Tapering flows continue to weigh on Indonesia, Thailand, Mayalsia, etc as US yields drift higher.
The 10YY in the USA rests near recent peaks at 2.94%, and seem destined to test the September 3% peak. Many bond players are seeing flows into 30Y, as the yield there continues to slide sideways/lower post-FOMC. The DXY is higher, mostly against Yen — while the € is off only small despite the S&P downgrade of the union. With the $US higher, we have a headwind for commodities — but industrial metals are showing a upward trajectory right now — but Gold continues to flounder near 3Y lows. WTI remains near yesterday’s peaks (induced by the Senate Iran sanctions bill?) — While Brent has a decent bid as yield projections from a major Norway field are reduced. Corn is under pressure again, as more headlines of Chinese rejected shipments mount. We have our GDP (3rd revision) today at 8:30, BLS State Unemployment at 10, KC Fed and a small POMO at 11 today.
For the rebalance today – In the S&P 500, ADS and MHK have the largest weight increase, while AAPL, PFE and XOM have the largest weight decrease. In the Midcap, BC, ODFL and TER have the largest weight increase, and ADS, MHK and ACI have the largest weight decrease. In the SmallCap, ACI, SCHL and RGS have the largest weight increase, while BC, ODFL and LINC have the largest weight decrease. Largest sector adds are IT and largest deletes Fins. (TY Camo Man)