Squak Box_05.07.12 Audio (major credit goes to Michael Pento at www.pentoport.com)

Squawk Box Topics (Week of May 7th, 2012)

Broader Market:

• For the previous week, the DJIA fell 1.4%, the S&P 500 dropped 2.4%, and the NASDAQ declined 3.7%
• After a nice rebound over the previous two weeks in the broader equity averages, the market experienced a significant leg down this past week, as U.S. economic data continued to confirm signs of a slowdown while political tensions across the Euro-Zone came back into focus.
• The main event of the week was April’s Jobs report on Friday, which came in well below Street expectations showing tepid U.S. job growth.
• As the week came to a close, investors across the globe turned their attentions towards political elections within the Euro-Zone with new leadership taking control in France & Greece, which has created new uncertainties around how the region will tackle its ongoing debt crisis.
• To begin the current week, the S&P 500 is up approx. 8.9% in the year-to-date period but down approx. 2.8% for 2Q12.

Technical Update:

• As of result of the latest pullback seen across the Street, the S&P 500 has moved back into the low-end of its recent trading range (1,357 – 1,397).  We should see some technical support in this 1,355 – 1,365 range.  However, a move below the 1,340 – 1,350 area will lead to increased technically-related sell pressure across the equity market.
• On the upside – 1,380, 1,390 – 1,400, 1,415, 1,420 and 1,440 are the major tops traders will be keeping on their radar screens (50-Day moving avg. coming in around the 1,378 level).
• On the downside – 1,365, 1,355 & 1,340 – 1,350 are the next major support ranges on the charts (200-day moving avg. coming in around the 1,314 level).

Economic Data: 

• We are scheduled for a fairly light week on the economic data front, highlighted by Wholesale Inventories on Wednesday & Weekly Jobless Claims on Thursday (See below for full list of weekly economic reports).

Earnings Season:  

• Earnings season is winding down with approx. 30 S&P 500 companies scheduled to report this week. Of the 423 index members to have posted quarterly results through May 3rd, 67% have beaten analyst estimates for per-share profit, 10% met and 23% missed, according to data compiled by S&P (See below for weekly highlights).

Crude Oil:

• To begin the current week, NYMEX WTI Crude Oil is trading around $97 a barrel & Brent Crude is trading near $112 a barrel.  Last week, we saw NYMEX WTI crude break out of its recent trading range ($101 – $105) to the downside and move below $100 a barrel for the first time since February of this year, as mounting global growth concerns and a looming increase in commodity trading margins by the CME exchanges forced traders to pull money out of futures markets in significant numbers.

Global Economic and Monetary Developments

• Japan’s Quantitative Easing – A future indicator of what’s to come in Europe and U.S.?
• Treasury considering whether to start issuing floating-rate bonds

Asset Manager Fund-Flow Update (Week Ending May 2nd):

• Equity Funds (excluding ETFs) saw $1.5BN of net outflows vs. $800MN in net outflows from the previous week
• Domestic equity funds recorded $1.3BN in net outflows, compared to $1BN of redemptions from the previous week.
• Global equity funds saw $200MN of redemptions, compared to $200MN of net sales from the previous week.
• Asset manager weekly fund returns were up on an average of 0.75% (+0.05% 1QTD)
• In terms of sector inflows/outflows, excluding ETFs, Real Estate was the strongest sector, while flows in the Technology sector displayed net profit taking.
• Including ETF’s, Real-Estate and Utilities were the strongest sectors, while Energy and Tech were the weakest
• Top and Bottom Weekly Asset Manager Performers (asset weighted returns): Cohen & Steers and Waddell & Reed were among the best weekly performers, while Wellington’s Hartford Funds and Janus were among the laggards, though both did have positive returns
• Recent Lipper Fund Flows (from APRIL 2012 through 5/2): 1) Eaton Vance and Columbia displayed a shift out of equities into bonds. 2) BlackRock Fund Advisors saw $2.9BN in net redemptions. Within a Reuters article (see below), BlackRock was criticized that the majority of its money was locked-up in indexed funds instead of actively managed accounts that generate higher fees. 3) JP Morgan Funds and Dimensional have displayed the largest net inflows in equities.

Emerging Trends

• Reuters Article- Fund managers struggled on shift from equity funds
• Analysts covering the asset management space noted a constant mixed flow in equities and fixed income
• A mix of “scarred and conservative” investors have been moving the markets
• Investors pulled $21 billion from actively managed large cap U.S. Stock funds during 1Q12

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MONDAY (5/7)

– 3:00PM ET – Consumer Credit – Mar – Expectations = $11.0B

– Electronic Arts Inc. (EA) – Q4

– Pitney Bowes Inc. (PBI) – Q1

– U.K. markets are closed

TUESDAY (5/8)

– DIRECTV (DTV) – Q1

– Walt Disney Company (DIS) – Q2

WEDNESDAY (5/9)

– 7:00AM ET – MBA Mortgage Index  – Prior = 0.9%

– 10:00AM ET –  Wholesale Inventories – Mar – Expectations = 0.6%

– Cisco Systems Inc. (CSCO) – Q3

– Macy’s, Inc. (M) – Q1

– Priceline.com Inc. (PCLN) – Q1

THURSDAY (5/10)

– 8:30AM ET – Weekly  Initial Jobless Claims – Expectations = 365K

– 8:30AM ET – Trade Balance – Mar – Expectations = -$49.9B

– 8:30AM ET – Export Prices ex-ag. – Apr – Prior = 0.5%

– 8:30AM ET – Import Prices ex-oil – Apr – Prior = 0.5%

– 2:00PM ET – Treasury Budget – Apr – Prior = -$40.4B

– Express Scripts Holding Co. (ESRX) – Q1

– Kohl’s Corporation (KSS) – Q1

– Nordstrom Inc. (JWN) – Q1

– Fed Chairman Ben Bernanke speaks at the Chicago Fed’s conference on bank structure and competition

– The Bank of England Interest Rate Decision – The bank is expected to hold interest rates steady

FRIDAY (5/11)

– 8:30AM ET – Producer Price Index (PPI) – Apr – Expectations = 0.0%

– 9:55AM ET – Michigan Consumer Sentiment – May – Expectations = 76.2

– Chinese data on inflation, including the consumer-price index and producer-price index, will be released

– Italy auctions treasury bills