Dave Lutz of Stifel, Nicolaus passes along the top topics about which traders are talking about today.
Good Morning! US Futures are starting sharply in the red this AM, and while the talking heads are pointing to EM again, I think Japan is a big factor. The Yen is jumping, as Japan’s Inflation posts the fastest rise in 5 years, prompting people to pull back on bets for the BOJ to ease further. Today is month-end, and to put the performance of the S&P 500 in context, the full extent of its drop this month merely erased the gains seen during the last two weeks of 2013. WSJ highlights that since 1950, there have been 24 years in which the S&P 500 fell in January — but in 13 of those 24 years, stocks rose over the final 11 months (January Indicator has a 50% hit rate). S&P Futures are off 80bp, and have taken out yesterday’s lows and nearing a 100dma test again. Nasdaq futures are faring slightly better on earnings reports, despite AAPL taking out yesterday’s lows in the pre-market (AAPL is the largest member of the NDX at 13%, and the S&P at 3%). Over in Europe, the DAX is getting whacked for 2% (Surprise drop in Retail Sales) in heavy trading. The EU fins are off 2%, as PIIGS Yields are bleeding wider and regulatory headlines hit. The Nikkei lost 70bp, and futures are indicating another 2% drop right now. Asia’s other major bourses were closed to observe the lunar new year holiday in China, Hong Kong, Taiwan, Indonesia, Singapore, Vietnam and Korea. Single stock movers include ZNGA (#s, Acq), CMG (#s), WYNN (#s), GOOG (#s) — Losers are AMZN (#s) — and we get CVX and MA before the bell. We do have the monthly Russell rebalance on the close.
We do have softness in EM — while Brazil and South Africa’s FX remain stable, Hungary is seeing the Forint taking out lows against the $US as concerns mount on upcoming Debt rolls. Turkey’s Lira is under pressure, but above yesterday’s lows — as Moody’s is out warning on economic impact of Turkey’s hike. The Ruble remains under pressure as Russia’s GDP contacts, and questions abound on the huge RSX put buying yesterday. Interesting, we are seeing a rebound in EM Asia — especially in countries most exposed to Chinese data (We get official PMI numbers over the weekend)
The 10YY in the US is taking out the week’s floor — pressing the yield closer to 2.65% (I maintain a 2.5% target) — as Fixed-income assets worldwide are posting their biggest January returns since 2008. The € is getting hit, as EU Inflation data comes in light (No Ratings reviews scheduled for today in EU), and the Yen is popping as their inflation print silences doves. Overall the DXY is flat, but we are seeing eakness in the Energy Complex, led by another 3% drop in Nat Gas, as margin calls reduce levered positions from the recent squeeze higher on the expiry roll. Both Silver and Gold are well bid, with the Yellow metal bouncing off the 50dma. Ahead of us today we have ISM Milwaukee at 9am, Chicago PMI at 9:45 (but paying subscribers get at 9:40), Univ. of Michigan Confidence at 9:55, The week’s largest POMO operation ($3.75-$4.75B) at 11, and Fed’s Fisher to Speak on Fed Operations at 1:15.
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