ADVISORY SQUAWK BOX – WEEKLY HIGHLIGHTS (Week of October 1st, 2012)

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Squawk Box Topics (Week of October 1st, 2012)

 Broader Market Recap & Previous Week Re-Cap:

  • Monday (9/24) – Stocks edged lower as disappointing German data increased concerns that global economic growth remains weak. (S&P 500 -0.2%)
  • Tuesday (9/25) – Stocks fell, pulled lower by declines in heavy equipment maker Caterpillar after it cut its profit outlook, the latest high-profile company to signal growth will fall short of expectations. (S&P 500 -1.1%)
  • Wednesday (9/26) – Stocks fell as protests in Spain and Greece over euro zone austerity measures, raising fresh concerns over Europe’s ability to get its debt crisis under control. (S&P 500 -0.6%)
  • Thursday (9/27) – The S&P 500 snapped a five-day string of declines in a broad-based rally, as Spain’s plans for economic reform eased some worries about one of the euro zone’s most troubled countries. (S&P 500 +1.0%)
  • Friday (9/28) – Wall Street closed its best third quarter since 2010 after a wave of central bank actions sparked a dramatic reversal in equity markets, but signs of weakness in the economy pushed stocks lower for the day. (S&P 500 -0.5%)
  • For the previous week, the DJIA fell 1.1%, the S&P 500 declined 1.3%, and the NASDAQ dropped 2.0%.
  • To begin the current week, the S&P 500 is up approx. 14.6% 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 1,430 to 1,475 level.  We expect the market to remain within this range until additional macro-economic events unfold with the upcoming November U.S. presidential elections acting as the main overhang on the market.  To begin this latest week, we have opened up in the middle of our current range around 1,450.  Looking ahead, we will need to see a sustained move below the 1,430 mark for the chart watchers to turn more bearish with the next major downside support level for the S&P 500 sitting around the 1,400 level.  On the upside, we would need to see a sustained move above 1,475 to confirm a bullish technical breakout with 1,500 the next major resistance mark in range on the charts.
  • 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. = 1,418; 200-day moving avg. = 1,363)

 Economic Data:

  • We are scheduled for a significant week on the economic data front, highlighted by Monday’s Construction Spending & ISM Index, Wednesday’s ADP Employment report, Thursday’s Weekly Jobless Claims data and Friday’s all-important Non-Farm Payrolls report for September.  See below for full list of weekly economic reports.

 Corporate Earnings:

  • Another light week on the U.S. corporate earnings front with no major market moving reports scheduled for release.  See below for breakdown of major earnings announcements scheduled for release.

Crude Oil:

  • To begin the week, NYMEX WTI Crude Oil is trading right around the $93 a barrel level & Brent Crude is still trading near $113 a barrel.  Since September 14th, 2012, NYMEX WTI Crude Oil is down approx. 6% while Brent Crude is down approx. 3% with the commodity coming under 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.

Chinese weak PMI numbers fuel continued hopes for additional PBOC stimulus, as yuan and gold surge to record levels. 

Asset Manager Fund-Flow Updates (Week Ending Sept. 26th):

  • Equity Funds (excluding ETFs) saw $2.6BN of net outflows vs. $3.05BN of net outflows from the prior week.
  • Domestic equity funds saw $1.4BN in net outflows, compared to $3BN of net outflows the previous week.
  • Global equity funds saw $1.2BN of net outflows compared to $50MN of net outflows from the prior week.
  • Excluding ETFs, Healthcare emerged as the strongest sector, while flows within the Technology sector were the weakest.
  • Including ETFs, the Technology emerged as the best performer, while Financial/Banking saw the largest amount of net outflows.
  • The latest Lipper data conveyed that State Street Global Advisors injected a little over $11.2BN into equities, followed by BlackRock Fund Advisors ($9.95BN) and Van Eck Associates ($785MN). Conversely, Columbia Finds extracted roughly $1.06BN from its equity portfolio; slight shift into FI but seeing increased redemptions. Davis Selected Advisors and Pioneer Investment Mng. each had outflows of approx. $750MN from its equity holdings.
  • Weekly asset manager fund returns were down by an average of 1.34% (+4.5% YTD)
  • Nuveen emerged as the best performer, while Janus and Cohen & Steers were among the biggest laggards on the weekly performance end.
  • Emerging Trends/Topics:
  • Overall equity flows from asset managers were still week despite the recent market rally.
  • The chase in ETF’s remains the preferable play for investors, and further Fed action has bolstered high-yield plays for investors
  • Money Funds saw net inflows of $12.9BN compared to $9.8BN outflows from the previous week
  • Fidelity Closes Three Funds, Opens Five More- Fidelity announced plans to close three funds to new investors in October, as it mulls the possibility of merging or liquidating them.

_________

MAIN EVENTS OF THE WEEK

MONDAY (10/1)

 – 10:00 AM ET – ISM Index – Sep – Expectations = 49.7

– 10:00 AM ET – Construction Spending – Aug – Expectations = 0.40%

– Fed Chairman Ben Bernanke speaks at 12:30 on questions about the Fed

– China’s markets are closed all week  – Also closed: South Korea, Australia, and Israel – Hong Kong markets are closed through tomorrow

TUESDAY (10/2)

 – 2:00 PM ET – Auto Sales – Sep

WEDNESDAY (10/3)

 – 8:15 AM ET – ADP Employment Change – Sep – Expectations = 133K

– 10:00 AM ET – ISM Services – Sep – Expectations = 53

– 2:00 PM ET – FOMC Minutes

– The first presidential debate between Barack Obama and challenger Mitt Romney begins at 9:00 PM ET

– Family Dollar Stores Earnings – BMO

– Marriott International Earnings – AMC

THURSDAY (10/4)

– 7:30 AM ET – Challenger Job Cuts – Sep  – Prior = -36.90%

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

– 10:00 AM ET – Factory Orders – Aug – Expectations = -6.00%      

– Retailers report September chain-store sales reported

– Euro Zone monetary policy meetings – interest rate decisions due from the ECB & the Bank of England

FRIDAY (10/5)

 – 8:30 AM ET – Nonfarm Payrolls – Sep – Expectations = 120K

– 8:30 AM ET – Unemployment Rate – Sep – Expectations = 8.10%

– 3:00 PM ET – Consumer Credit – Aug – Expectations = $5.0B

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