ADVISORY SQUAWK BOX – WEEKLY HIGHLIGHTS (Week of August 20th, 2012)

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Squawk Box Topics (Week of August 20th, 2012)

 Broader Market Recap:

  • Monday (8/13) – Stocks ended slightly lower, as fatigue set in after a six-day rally and disappointing Japanese growth data provided a fresh reminder of the headwinds facing the global economy. (S&P 500 -0.1%)
  • Tuesday (8/14) – Stocks ended little changed in what investors described as a fatigued market after the S&P 500 rose in seven of the past eight sessions. (S&P 500 -0.01%)
  • Wednesday (8/15) – Stocks spent another session in a tight range, with the S&P 500 ending a few points higher and extending a rally that seems to be happening in slow motion. (S&P 500 +0.1%)
  • Thursday (8/16) – The S&P 500 closed at its highest level since early April, after comments from German Chancellor Angela Merkel that appeared to support the ECB’s efforts to fight the region’s debt crisis. (S&P 500 +0.7%)
  • Friday (8/17) – The S&P 500 held near a four-year high, and the market’s key gauge of anxiety sank to its lowest since 2007, suggesting a belief that the problems stressing investors might be closer to a resolution. (S&P 500 +0.2%)
  • For the week, the DJIA gained 0.5%, the S&P 500 rose 0.9% while the NASDAQ added 1.8%.
  • To begin the current week, the S&P 500 is up approx. 12.8% in the year-to-date period.

 Technical Update:

  • In the last few weeks, the S&P 500 has moved above the technically & psychologically significant 1,400 level for the first time since May of this year (previous move above 1,400 – June 2008).
  • We have seen a notable increase around technical trading from short-term, aggressive, fast-money traders & electronic algorithms.  At the moment, the market has been stuck trading around this mark and institutional investors appear to be waiting for a sustained move above or below this 1,400 level on the S&P 500 before re-entering equities in any significant size.
  • Key Technical Levels (S&P 500): On the upside (resistance) – 1,415, 1,422 & 1,440 are the next major levels in range on the charts.
  • On the downside (support) – 1,405, 1,400, 1,390, 1,375, 1,365 & 1,350 are the major marks in range on the charts (50-day moving avg. = 1,371; 200-day moving avg. = 1,362).

 Economic Data:

  • We are scheduled for a quiet week on the economic data front, highlighted by Tuesday’s FOMC Minutes, Wednesday’s Existing Home Sales and Thursday’s Weekly Jobless Claims readingSee below for full list of weekly economic reports.

Corporate Earnings:

  • Despite U.S. corporate earnings season winding down, we do have a handful of market moving reports due out this week.  According to S&P, of the 469 companies that have reported earnings results through 8/15/12, 65% have beaten estimates, 24% have missed & 11% met expectationsSee below for breakdown of major earnings announcements scheduled for release.

 Crude Oil:

  • To begin the week, NYMEX WTI Crude Oil is trading around the $95 a barrel level & Brent Crude is trading just over $113 a barrel.  Since June 29th, 2012, NYMEX WTI Crude Oil is up approx. 13% while Brent Crude is up approx. 17%.

Rumors in Europe – ECB possibly considering interest rate caps: Spanish and Italian bond yields plummet, and US Treasuries yields on the rise

 Asset Manager Fund-Flow Updates (Week Ending August 15th):

  • Equity Funds (excluding ETFs) saw $1.2BN of net outflows vs. $250MN of net outflows from the previous week
  • Domestic equity funds saw $1.5BN in net outflows compared to $650MN of net outflows from the previous week.
  • Global equity funds saw $300MN of net sales compared to $400MN of net inflows from the prior week.
  • Excluding ETFs, Utilities emerged as the strongest sector, while flows within the Technology sector remained the weakest.
  • Including ETFs, the Real Estate and Technology emerged as the best performers, while the Industrial/Consumer space saw net selling.
  • The latest Lipper data showed that JP Morgan Funds, SunAmerica, and Dimensional displayed the largest inflows into equity markets. Conversely, ETF and Index managers such as SSGA, Russell Investment Group, and BlackRock Fund Advisors displayed net outflows in equities. SSGA in particular extracted approx. $7.3BN out of its equity holdings.
  • Of note, Fidelity continues to see steady inflows in its Money market Funds, but did not display any significant inflows/outflows in other security types (saw inflows of $6.2BN in its Money Market holdings).
  • Weekly asset manager fund returns were slightly up by an average of 0.06% (+2.39% 3QTD)
  • Emerging Trends/Topics:
  • Domestic Equity Funds continue to suffer redemptions, while int’l/global funds remain in positive territory
  • Notable outflows within domestic ETF’s
  • Janus’ Partnership with Dai-ichi; Fixed-Income Trend? – Dai-ichi announced that it would invest $2BN in Janus’ strategies, where a significant portion of the $2BN will go toward Janus’ fixed-income strategies, rather than the growth equity strategies. Janus noted that their Fixed Income funds have performed much better than its equity funds and supposedly the firm has a fifth fixed-income fund opening in January (the firm currently offers four fixed-income funds today).

_________

MAIN EVENTS OF THE WEEK

MONDAY (8/20)

– 8:30AM ET – Chicago Fed National Activity Index – July

– Lowes Earnings – BMO

TUESDAY (8/21)

– 2:00 PM ET – FOMC Minutes

– Best Buy Earnings – BMO

– Dell Earnings – AMC

– Federal Reserve Bank of Atlanta President Dennis Lockhart speaks on “The U.S. Economic Outlook and Implications for Latin America.”

WEDNESDAY (8/22)

– 10:00 AM ET – Existing Home Sales- July- Expectations = 4.55M

– Hewlett-Packard Earnings – AMC

– Toll Brothers Earnings – BMO

– IMF Chief Christine Lagarde visits Egypt for continuing talks on a $3 billion loan to help the struggling nation.

THURSDAY (8/23)

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

– 10:00 AM ET – New Home Sales – Jul – Expectations = 368K

– Salesforce.com Earnings – AMC

– German Chancellor Angela Merkel is scheduled to meet with French President Francois Hollande, one day before meeting with Greek Prime Minister Antonis Samaras.

FRIDAY (8/24)

– 8:30 AM ET – Durable Orders – Jul- Expectations = 2.5%

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