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Squawk Box Topics (Week of October 8th, 2012)

 Broader Market Recap & Previous Week Re-Cap:

  • Monday (10/1) – The S&P 500 kicked off a new quarter with a modest rally, lifted by a surprising expansion in U.S. manufacturing in September. (S&P 500 +0.3%)
  • Tuesday (10/2) – Stocks were little changed in a volatile session as uncertainty over when Spain might apply for a bailout shackled a market struggling to build on gains that took the S&P 500 to its highest in nearly five years. (S&P 500 +0.1%) 
  • Wednesday (10/3) – Wall Street ended modestly higher on stronger-than-expected U.S. labor and service-sector data, but the Dow industrials were hobbled by a slide in Hewlett-Packard. (S&P 500 +0.4%) 
  • Thursday (10/4) – The S&P 500 extended gains to a fourth day, putting it on the cusp of a new high for the year if Friday’s jobs report shows encouraging signs for the labor market. (S&P 500 +0.7%) 
  • Friday (10/5) – The S&P 500 broke a four-day string of gains, ending lower as an unexpected drop in U.S. unemployment rate was overshadowed by concerns about the upcoming earnings season, which begins with Alcoa next week. (S&P 500 -0.1%)
  • For the previous week, the DJIA gained 1.3%, the S&P 500 gained 1.4%, while the NASDAQ gained 0.6%.
  • To begin the current week, the S&P 500 is up approx. 16.2% 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 once again opened up in the middle of our current range around 1,455.  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. = 1,424; 200-day moving avg. = 1,368)

 Economic Data:

  • We are scheduled for a quiet week on the economic data front, highlighted by Wednesday’s Wholesale Inventories & Fed Beige Book reports and Thursday’s Weekly Jobless Claims reading.  See below for full list of weekly economic reports.

Corporate Earnings:

  • The latest corporate earnings season unofficially kicks off in the U.S. with aluminum producer Alcoa reporting after the close on Tuesday.  See below for breakdown of major earnings announcements scheduled for release.

Crude Oil:

  • To begin the week, NYMEX WTI Crude Oil is trading around the $89 a barrel level & Brent Crude is still trading near $112 a barrel.  Since September 14th, 2012, NYMEX WTI Crude Oil is down approx. 9% while Brent Crude is down approx. 4% 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. 

Unemployment rate drops to 7.8%, but U-6 rate remains at staggering 14.7% – the Fed’s plan for QE4 already unleashed.

Asset Manager Fund-Flow Updates (Week Ending Oct. 3rd):

o    Equity Funds (excluding ETFs) outflows accelerated seeing approx. $3BN of net outflows compared to outflows of $2.6BN from the previous week.

o    Domestic equity funds saw $3.5BN in net outflows, compared to $1.4BN of net outflows the previous week.

o    Global equity funds saw $500MN of net inflows compared to $1.2BN of net outflows from the prior week.

o    Excluding ETFs, Real Estate emerged as the strongest sector, while flows within the Technology sector were the weakest.

o    Including ETFs, Healthcare/Biotech saw the largest capital inflows, while Energy saw the largest amount of net outflows.

o    The latest Lipper data conveyed that BlackRock Fund Advisors, JP Morgan Funds and Grantham Mayo Van Otterloo were among the largest contributors to injecting capital into equities, while Invesco Powershares, American Century Funds, and Columbia Funds were among the top asset managers taking money out of equities.

o    Weekly asset manager fund returns were up by an average of 0.76% (+4.96% YTD)

o    Janus and Wellington’s Hartford funds were among the best performers, while Federated and Alliance Bernstein lagged behind the asset manager pack

o    Emerging Trends/Topics:

o    Asset Managers seeing positive returns but having a tough time keeping up with redemption pressure

o    Long-Term Muni Funds saw net inflows last week, while flows within Taxable Bonds and High Yield Funds were mixed

o    Invesco Funds and Morgan Stanley Invst. Management each saw redemptions of at least $2.6BN last week



MONDAY (10/8)

– U.S. fixed-income markets are closed in observance of Columbus Day.

– Eurozone finance ministers will meet in Luxembourg to discuss the Spanish financial situation and proposals for euro-wide banking union.

TUESDAY (10/9)

– European Central Bank President Mario Draghi will speak at a public hearing at the European Parliament in Brussels.

– Alcoa Earnings – Unofficial Start of Corporate Earnings Season – AMC

– YUM! Brands Earnings – AMC


– 10:00 AM ET – Wholesale Inventories – Aug – Expectations = 0.60%       

– 2:00 PM ET – Treasury Budget – Sep – Prior = -$62.8B

– 2:00 PM ET – Fed’s Beige Book – Sep                    

– Costco Earnings – BMO

THURSDAY (10/11)

– 8:30 AM ET  – Weekly Initial Jobless Claims – Expectations = 370K         

– 8:30 AM ET – Trade Balance – Aug – Expectations = -$43.8B        

– 8:30 AM ET – Export Prices ex-ag. – Sep – Prior = 0.40%

– 8:30 AM ET – Import Prices ex-oil – Sep – Prior = -0.20%

– Vice President Joe Biden and Rep. Paul Ryan will debate in Danville, Ky. – 9PM ET.

FRIDAY (10/12)

– 8:30 AM ET – Producer Price Index – Sep – Expectations = 0.80%

– 9:55 AM ET – Univ. of Michigan Consumer Sentiment – Oct – Expectations = 78.5

– JP Morgan Chase Earnings – BMO

– Wells Fargo Earnings – BMO

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