ADVISORY SQUAWK BOX – WEEKLY HIGHLIGHTS (Week of July 9th, 2012)

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Squawk Box Topics (Week of July 9th, 2012)

Broader Market:

  • After a few volatile weeks of trading, the broader equity markets quieted down somewhat in the latest holiday shortened week with volume drying and investors moving to the sidelines as a result of the continued dark cloud hanging over the global financial markets.
  • The main drivers of trading last week centered on another round of global central bank stimulus action and the latest read on the U.S. jobs situation. More specifically, we saw additional policy announcements from numerous central banks, as the European Central Bank cut interest rates to a record low of 0.75%, China announced a surprise rate cut and the Bank of England unveiled an extension of its current asset purchase program. Despite this news, investors continued to express significant concern over the health of the U.S. economy, which was further exacerbated by another weak U.S. Non-Farm Payrolls report that showed anemic job growth of only 80K in the month of June.
  • For the previous week, the DJIA declined 0.8%, the S&P 500 fell 0.6% while the NASDAQ gained 0.1%.
  • To begin the current week, the S&P 500 is up approx. 7.7% in the year-to-date period.

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 1,354 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 (resistance) – 1,350, 1,365, 1,390 & 1,400 are the next major levels in range on the charts.
  • On the downside (support) – 1,340, 1,330, 1,310, 1,300, 1,290 & 1,265 are the next major marks in range on the charts (50-day moving avg. = 1,342; 200-day moving avg. = 1,305).

Economic Data:

  • We are scheduled for a quieter week on the economic data front, highlighted by Wednesday’s FOMC minutes and Thursday’s Weekly Jobless Claims data. See below for full list of weekly economic reports.

Earnings Season:

  • U.S. corporate earnings season officially kicks off this week, with Alcoa reporting quarterly results after the close on Monday. However, we still have a light calendar of significant earnings this week with the schedule heating up in the weeks to come.

Crude Oil:

  • To begin the week, Crude Oil continues to trade at depressed levels…Currently, NYMEX WTI Crude Oil is trading around $84 a barrel & Brent Crude is trading near $98 a barrel. Please note that NYMEX WTI Crude Oil & Brent Crude are both down approx. 20% since May 1st, 2012.

LIBOR Scandal:

  • Largest rate rigging scandal in history with Barclays not alone – 20 additional banks under investigation

Asset Manager Fund-Flow Update (Week Ending July 4th):

  • Equity Funds (excluding ETFs) saw $550MN of net outflows vs. $650MN in net outflows from the prior week
  • Domestic equity funds saw $900MN in net outflows compared to $600MN from the previous week.
  • Global equity funds saw $350MN of net sales compared to $50MN of net outflows from the previous week.
  • Excluding ETFs, Healthcare emerged as the strongest sector for the third consecutive week as investors were buying Hospital focused names but selling in Insurance provider names following the Healthcare reform ruling; meanwhile capital flows in the Real Estate sector were the weakest
  • Including ETFs, we saw a reversal of course from the previous week as Industrial/Consumer securities rebounded from the previous week along with Energy and Tech names, while Financial/Banking and Real Estate names were virtually flat.
  • Weekly asset manager fund returns were up by an average of 2.78% (-2.49% 2QTD)
  • Lazard and Cohen & Steers were among the best weekly MF return performers, while Federated and Nuveen had a positive MF return week but lagged behind its peers.
  • The Latest Lipper Funds through July 4th conveyed aggressive inflows into equities from Passive investors such as BlackRock Fund Advisors (~$1.17BN), State Street (~$920MN), and InvescoPowershares (~$650MN). Conversely, high profile MF managers such as John Hancock Group, Hartford Funds (Wellington) and Allianz were seeing net outflows out of equities into taxable bonds, as the shift was likely tied to a 3Q12/2H12 allocation adjustment among various retirement funds
  • Fixed Income products and High Yield Funds remain the safe play for investors, as these security types saw net inflows
  • Equity rotation remains mixed, while Passive investors still taking the share
  • BlackRock remains the leader in the ETF market with its iShares equating to $482BN in AUM as of the end of June—up 33% over a two year period.
  • Traditional and Alternative Asset Managers begin reporting earrings in the 3rd week of July—BlackRock reports next Wednesday (7/18)

_________

MONDAY (7/9)

– 3:00 PM ET – Consumer Credit – May – Expectations = $9.5B
– Euro-Zone finance ministers meet in Brussels
– Alcoa Earnings – AMC: Unofficial start to U.S. corporate earnings season

TUESDAY (7/10)

– No significant market moving events scheduled

WEDNESDAY (7/11)

– 8:30 AM ET – Trade Balance – May – expectations = -$48.9B
– 10:00 AM ET – Wholesale Inventories – May – expectations = 0.30%
– 2:00 PM ET – FOMC Minutes
– Marriott International Earnings – AMC

THURSDAY (7/12)

– 8:30 AM ET – Weekly Jobless Claims – Expectations = 375K
– 8:30 AM ET – Export Prices ex-ag. – Jun – Prior = -0.50%
– 8:30 AM ET – Import Prices ex-oil – Jun – Prior = -0.10%
– 2:00 PM ET – Treasury Budget – Jun – Prior = -$43.1B
– The Bank of Japan Policy Meeting – The Bank is largely expected to ease its monetary policy

FRIDAY (7/13)

– 8:30 AM ET – Producer Price Index – Jun – Expectations = -0.60%
– 9:55 AM ET – University of Michigan Consumer Sentiment – Jul – Expectations = 73.5
– China reports its quarterly GDP growth
– JPMorgan Chase & Co. Earnings – BMO
– Wells Fargo & Co. Earnings – BMO

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