ADVISORY SQUAWK BOX – WEEKLY HIGHLIGHTS (Week of September 24th, 2012)

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Squawk Box Topics (Week of September 24th, 2012)

 Broader Market Recap & Previous Week Re-Cap:

  • Monday (9/17) – Stocks fell in light trading after a rally that drove the S&P 500 last week to its highest level in nearly five years and as falling oil prices hit energy shares.  (S&P 500 -0.3%)
  • Tuesday (9/18) – Stocks ended flat after Transportation bellwether FedEx cut its profit forecast and investors pulled back after last week’s rally on the central bank’s latest stimulus plan. (S&P 500 -0.1%)
  • Wednesday (9/19) – Stocks rose as investors dipped back into the market after the recent pullback from a rally that had driven the S&P 500 up to just shy of a five-year high. (S&P 500 +0.1%)
  • Thursday (9/20) – The S&P 500 finished marginally lower, but was able to rebound from most of the day’s losses, a sign that investor sentiment remains generally positive despite several weak manufacturing surveys from around the world. (S&P 500 -0.1%)
  • Friday (9/21) – Stocks closed flat, erasing earlier gains that came on hopes that Spain would seek a bailout. (S&P 500 -0.01%)
  • For the previous week, the DJIA fell 0.1%, the S&P 500 declined 0.4% and the Nasdaq dropped 0.1%.
  • To begin the current week, the S&P 500 is up approx. 16.1% in the year-to-date period.

 Technical Update:

  • Since the upside breakout witnessed in the broader market on 9/13/12, in reaction to the Fed’s aggressive QE3 announcement, the S&P 500 has traded largely range bound between the 1,450 to 1,475 level. We expect the market to remain within this range until additional macro-economic events unfold.  To begin this latest week, we have opened up at the low end of our current range around 1,450.  We will need to see a sustained move below this 1,450 mark for the chart watchers to turn more bearish with the next major downside support level for the S&P 500 sitting around the 1,440 level.
  • Key Technical Levels (S&P 500):
  • On the upside (resistance) – 1,460, 1,475, 1,500, 1,523 & 1,545 are the next major levels in range on the charts.
  • On the downside (support) – 1,440, 1,426, 1,415, 1,405 & 1,400 are the major marks in range on the charts. (50-day moving avg. = 1,412; 200-day moving avg. = 1,358)

 Economic Data:

  • We are scheduled for a fairly notable week on the economic data front, highlighted by Wednesday’s new home sales and Thursday’s weekly jobless claims, pending home sales & 2Q GDP releases.  See below for full list of weekly economic reports.

 Corporate Earnings:

  • U.S. corporate earnings continues to pick up this week with a handful of market moving reports scheduled for release, highlighted by Thursday’s earnings from Nike Inc. See below for breakdown of major earnings announcements scheduled for release.             

 Crude Oil:

  • To begin the week, NYMEX WTI Crude Oil is trading just below the $92 a barrel level & Brent Crude is still trading just below $110 a barrel.  Since September 14th, 2012, NYMEX WTI Crude Oil is down approx. 8% while Brent Crude is down approx. 6% with the commodity coming under significant pressure as a result of numerous factors including; rumors regarding a gov’t strategic oil release, rumors surrounding large long positions being unwound in the open market and general global supply concerns.

Currency wars heating up – Bank of Japan  expands purchases by 10 trillion yen – all eyes turn to China’s central bank

  • Asset Manager Fund-Flow Updates (Week Ending Sept. 19th):
  • Equity Funds (excluding ETFs) accelerated this past week and saw $3.05BN of net outflows vs. $1.7BN of net outflows from the prior week.
  • Domestic equity funds saw $3BN in net outflows compared to $1.5BN of outflows in the prior week
  • Global equity funds saw $50MN of net outflows compared to $200MN of net outflows from the prior week.
  • Excluding ETFs, Energy emerged as the strongest sector, while flows within the Real Estate sector were the weakest for the second straight week.
  • Including ETFs, the Financial/Banking index saw the greatest among of inflows, where the build-up in this sector was largely attributed to the home-sales data as banks still hold many housing related assets on their books. Conversely, the Utilities and Energy sectors saw net outflows, albeit modest outflows.
  • The latest Lipper data showed that BlackRock Fund, State Street Global Advisors, and Touchstone Advisors displayed the largest equity inflows for the second week straight. Importantly, BlackRock and State Street inserted roughly $10.3BN and $8.2BN, respectively, into its equity holdings. Meanwhile, Columbia Funds exited roughly $825MN out of equities, followed by Pioneer (-$695MN) and Davis Selected Advisors (-$585MN).
  • Weekly asset manager fund returns were upby an average of 1.15% (+5.88% YTD)
  • Trends/Topics:
  • Equity ETF inflows set a YTD record for the 2nd straight week following the QE3 announcement
  • YTD, ETFs have generated a 14% net inflow rate, with 28% into fixed income ETFs and 11% into equities.
  • Within mutual funds, inflows remain limited to fixed income and balanced funds, while equity mutual fund-flows intensified.
  • Heavy outflows from money market mutual funds
  • Notable Lipper fund-flows since August Through Sept. 19th:

– Vanguard inserted a little over $4BN into equities

– JP Morgan Funds nearly $1BN into equities

– American Funds has extracted $5.4BN from equities- shifting into cash

– Fidelity scaled back nearly $1.95BN from equities-shifting into money markets

MAIN EVENTS OF THE WEEK

MONDAY (9/24)

– 10:30 AM ET – Dallas Fed Manufacturing – Sept – Expectations = 0.5

– Lennar Earnings – BMO

– Paychex Earnings – AMC

TUESDAY (9/25)

– 9:00 AM ET – Case-Shiller 20-City Index – Jul – Expectations = 0.80%

– 10:00 AM ET – Consumer Confidence – Sep – Expectations = – 63

– ECB head Mario Draghi meets with Germany’s Angela Merkel in Brussels.

WEDNESDAY (9/26)

– 10:00 AM ET – New Home Sales – Aug – Expectations = 380K

THURSDAY (9/27)

– 8:30 AM ET – Weekly Initial Jobless Claims – Expectations = 379K

– 8:30 AM ET – Durable Orders – Aug – Expectations = -5.00%

– 8:30 AM ET – 2Q GDP – Third Estimate – Expectations = 1.70%

– 10:00 AM ET – Pending Home Sales – Aug – Expectations = 0.50%

– A bailout agreement between Spain and the EU could be announced, according to numerous market watchers.

– Italian Prime Minister Mario Monti speaks about the euro at the Council on Foreign Relations.

– Discover Financial Services Earnings – BMO

– Nike Earnings – AMC

FRIDAY (9/28)

– 8:30 AM ET – Personal Income – Aug – Expectations = 0.20%

– 8:30 AM ET – Personal Spending – Aug – Expectations = 0.50%

– 9:45 AM ET – Chicago PMI – Sep – Expectations = 52.9

– 9:55 AM ET – Michigan Sentiment Final – Sep – Expectations = 79

– External audit of Spain’s banking system is scheduled to be released.

– Walgreen Earnings – BMO

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