ADVISORY SQUAWK BOX – WEEKLY HIGHLIGHTS (Week of July 2nd, 2012)

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Squawk Box Topics (Week of July 2nd, 2012)

Broader Market:

  • In a volatile & historic trading week, a few key global economic & political events drove trading for the week, further exhibiting the heightened level of headline sensitivity in the current market environment.
  • To begin the week, equities came under pressure in reaction to a mixed round of U.S. economic data and a lack of optimism ahead of the latest EU Summit. As a result, we saw Spanish & Italian bond yields surge in the first half of the week.
  • We saw the market take another leg down in reaction to Thursday’s historic Supreme Court ruling, which upheld the constitutionality of President Obama’s national health care plan. However, the market make a dramatic reversal to the upside late Thursday that carried over to Friday’s trading session, as news that EU leaders put together a new viable plan to tackle the region’s debt crisis caused a massive amount of short-covering across the globe in equity & commodity markets on the last day of the second quarter.
  • For the previous week, the DJIA advanced 1.9%, the S&P 500 gained 2.0%, and the NASDAQ climbed 1.5%.
  • To begin the current week, the S&P 500 is up approx. 8.3% in the year-to-date period but finished down approx. 3.3% for 2Q12.

Technical Update:

  • The S&P 500 has continued to trade above its current major support band (1,290 – 1,300), finishing out the latest week at the 1,362 mark. The market will need to hold this 1,290 – 1,300 support range in order to maintain its current bullish technical stance.
  • Key Technical Levels (S&P 500): On the upside – 1,365, 1,390 & 1,400 are the next major tops in range on the charts.
  • On the downside – 1,350, 1,340, 1,330, 1,310, 1,300, 1,290 & 1,265 are the next major support levels in range on the charts (50-day moving avg. = 1,338; 200-day moving avg. = 1,313).

Economic Data:

  • We are scheduled for another fairly significant week on the economic data front, highlighted by Friday’s job’s report for June. See below for full list of weekly economic reports.

Earnings Season:

  • No S&P 500 earnings reports due this week.

Crude Oil:

  • To begin the week, Crude Oil continues to trade at depressed levels despite its historic 10% rally to end the second quarter. Currently, NYMEX WTI Crude Oil is trading around $83 a barrel & Brent Crude is trading near $96 a barrel. Please note that NYMEX WTI Crude Oil & Brent Crude are both still down approx. 20% since May 1st, 2012.

Europe’s proposed single-supervisory mechanism for its banking system, and the ECB’s expected rate cut on Thursday

Asset Manager Fund-Flow Update (Week Ending June 27th):

  • Equity Funds (excluding ETFs) saw $650MN of net outflows vs. $700MN in net outflows from the prior week
  • Domestic equity funds saw $600MN in net outflows; same as prior two weeks.
  • Global equity funds saw $50MN of redemptions compared to $100MN of net outflows from the previous week.
  • Excluding ETFs, Healthcare emerged as the strongest sector for the second consecutive week as investors were buying ahead of the Healthcare Reform decision, while capital flows in the Technology sector remained the weakest
  • Including ETFs, the Healthcare/Biotech sector saw net inflows, while investors were shifting assets out of the Industrial/Consumer and Energy sectors
  • Weekly asset manager fund returns were down by an average of 1.2% (-4.27% 2QTD)
  • Nuveen and Federated were among the best weekly MF return performers, while Waddell & Reed and Janus had the worse weekly MF returns.
  • The Latest Lipper Funds through June 27th showed aggressive inflows into equities of at least $1BN from Invesco Powershares, JP Morgan, and MFS Investment Management, while BlackRock Fund Advisors shifted $2.25BN out of equities and inserted that capital into Taxable Bonds.
  • Fixed Income products captured the majority of inflows; Taxable Bond sales increased by $1.5BN vs. $800MN of net sales the prior week
  • Equity ETFs saw the largest weekly outflows in past 31 weeks of $8.9BN, coming just two weeks after a large weekly inflow of $9.8BN
  • Fund flows indicated net inflows into the Healthcare sector prior to Supreme Court ruling. Following the ruling, assets shifted out of insurance providers, spec pharma, and biotech names into Hospital focused names as these companies benefited the most from the ruling. Meanwhile, Utilities and Energy securities were seeing better buying during the Healthcare allocation shift on Thursday (6/28)

_________

MONDAY (7/2)

– 10:00 AM ET – ISM Index – Jun – Expectations = 52.2
– 10:00 AM ET – Construction Spending – May – Expectations = 0.20%
– Markets are closed in Canada, Hong Kong, Chile, and Venezuela

TUESDAY (7/3)

– 10:00 AM ET – Factory Orders – May – Expectations = 0.40%
– 2:00 PM ET – Auto Sales – Jun
– U.S. markets close at 2 p.m. in observance of the July Fourth holiday

WEDNESDAY (7/4)

– Independence Day in the U.S. – All U.S. Trading Markets Are Closed

THURSDAY (7/5)

– 7:30 AM ET – Challenger Job Cuts – Jun – Prior = 66.70%
– 8:15 AM ET – ADP Employment Change – Jun – Expectations = 105K
– 8:30 AM ET – Weekly Jobless Claims – Expectations = 385K
– 10:00 AM ET – ISM Services – Jun – Expectations = 53
– U.S. Retailers Report June Same-Store-Sales
– European Central Bank (ECB) Policy Meeting – it is likely that the ECB will cut the policy rate and reduce the deposit rate to zero. But a launch of a new long-term repo operation is unlikely anytime soon
– Spain auctions bonds

FRIDAY (7/6)

– 8:30 AM ET – Nonfarm Payrolls – Jun – Expectations = 100K
– 8:30 AM ET – Unemployment Rate – Jun – Expectations = 8.20%

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