ADVISORY SQUAWK BOX – WEEKLY HIGHLIGHTS (Week of October 15th, 2012)

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Squawk Box Topics (Week of October 15th, 2012)

 Broader Market Recap & Previous Week Re-Cap:

  • Monday (10/8) – Stocks slipped as a lack broader market news flow kept volumes thin and investors on the sidelines with the bond markets closed for the Columbus Day holiday. (S&P 500 -0.4%)
  • Tuesday (10/9) – Stocks fell led by losses in technology after brokerage downgrades of Intel and other major companies as worries increased about third-quarter U.S. earnings. (S&P 500 -1.0%)
  • Wednesday (10/10) – The S&P 500 fell for a fourth day, weighed down by disappointing news from Chevron and Alcoa as earnings season got under way. (S&P 500 -0.6%)
  • Thursday (10/11) – Stocks ended little changed, as equities sold off throughout the afternoon with the latest read on the U.S. jobs situation painting a cloudy picture ahead of key earnings from the banking sector due out before tomorrow’s open. (S&P 500 +0.1%)
  • Friday (10/12) – Stocks posted their worst week in four months, led lower by financial shares as results from Wells Fargo and JPMorgan ignited concerns about shrinking profit margins for big lenders. (S&P 500 -0.3%)
  • For the previous week, the DJIA lost 2.1%, the S&P 500 dropped 2.2% while the NASDAQ decreased 2.9%.
  • To begin the current week, the S&P 500 is up approx. 13.6% 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.
  • To begin this latest week, we have opened up at the very low of this range after seeing a minor breach of the market’s main support band in Friday’s trading session.
  • As previously stated, 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 1,430 to maintain the current bullish market trend.  In addition, please be aware that the S&P 500’s 50-day moving average is also sitting right around the 1,430 level at 1,426.
  • Key Technical Levels (S&P 500):
  • On the upside (resistance) – 1,440, 1,460, 1,475, 1,500, 1,523 & 1,545 are the next major levels in range on the charts.
  • On the downside (support) – 1,430, 1,426, 1,415, 1,405 & 1,400 are the major marks in range on the charts. (50-day moving avg. = 1,426; 200-day moving avg. = 1,369)

 Economic Data:

  • We are scheduled for a fairly heavy week on the economic data front, highlighted by Monday’s Retail Sales, Wednesday’s Housing Starts, Thursday’s Weekly Jobless Claims & Friday’s Existing Home Sales data.  See below for full list of weekly economic reports.

 Corporate Earnings:

  • Corporate earnings season gets into full swing this week with approx. 50 S&P 500 companies scheduled to report results.  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 $91 a barrel level & Brent Crude is trading near $114 a barrel.  Since September 14th, 2012, NYMEX WTI Crude Oil is down approx. 8% while Brent Crude is down only 2%.

Fed officials considering plans to let inflation run above the 2% goal, despite inflation signals picking up. Meanwhile, Chinese inflation cools.

 Asset Manager Fund-Flow Updates (Week Ending Oct. 10th):

  • Equity Funds (excluding ETFs) outflows continued, albeit decelerated from the previous week, with $1.6BN net outflows occurring compared to outflows of $3BN from the previous week.
  • Domestic equity funds saw $1.8BN in net outflows, compared to $3.5BN of net outflows the previous week.
  • Global equity funds saw $200MN of net inflows compared to $500MN of net inflows from the prior week.
  • Excluding ETFs, Healthcare saw the greatest equity inflows, while flows within the Utilities sector were the weakest.
  • Including ETFs, Energy had the largest capital inflows, while Technology saw the largest amount of net outflows.
  • The latest Lipper data conveyed that BlackRock Fund Advisors, JP Morgan Funds and State Street Global Advisors were among the largest asset manager contributors for buying equities. Conversely, Invesco Powershares, Columbia Funds and American Century were among the top asset managers taking money out of equities.
  • Of note, from the start of September through October 10th, State Street Global Advisors, BlackRock Fund Adv. and Vanguard have inserted $11.12BN, $9.9BN, and $1.5BN, respectively, into equities.
  • On the flip-side- Capital Group’s American Funds have extracted 5.2BN from equities; Fidelity and Columbia Funds have taken $1.9BN and $1BN out of equities. Importantly, Fidelity has been shifting its equity capital into Money Markets while Columbia Funds have been mostly shifting into cash and getting hit with redemptions.
  • Weekly asset manager fund returns were up down an average of 0.80% (+4.96% YTD)
  • Emerging Trends/Topics:
  • Fixed Income and Passive Equities still taking share from Active Equities
  • Active bond fund lows have accelerated to $57BN from $39BN q/q, as investors continue to redeem active equities, and shift money into bond and passive equity funds.
  • September Sales noted that T.Rowe, Invesco, and Franklin had a positive month, while Janus saw approx. $525MN in redemptions

______

MAIN EVENTS OF THE UPCOMING WEEK:  (10/15 – 10/19)

MONDAY (10/15)

 – 8:30 AM ET – Retail Sales – Sep – Expectations = 0.70%

– 8:30 AM ET – Empire Manufacturing – Oct – Expectations = -2.8

– 10:00 AM ET – Business Inventories – Aug – Expectations = 0.50%

– Citigroup Earnings – BMO

TUESDAY (10/16)

 – 8:30 AM ET – CPI – Sep – Expectations = 0.50%

– 9:15 AM ET – Industrial Production – Sep – Expectations = 0.30%

– 9:15 AM ET – Capacity Utilization – Sep – Expectations = 78.30%

– 10:00 AM ET – NAHB Housing Market Index – Oct – Expectations = 42

– President Barack Obama and challenger Mitt Romney debate Tuesday evening for the second time

– Goldman Sachs Earnings – BMO

– Johnson & Johnson Earnings – BMO

– Coca-Cola Earnings – BMO

– CSX Earnings – AMC

– Intel Earnings – AMC

– IBM Earnings  – AMC

WEDNESDAY (10/17)

 – 8:30 AM ET – Housing Starts – Sep – Expectations = 768K

– 8:30 AM ET – Building Permits – Sep – Expectations = 815K

– Bank of America Earnings – BMO

– BlackRock Earnings – BMO

– PepsiCo earnings – BMO

– U.S. Bancorp Earnings – BMO

– American Express Earnings – AMC

– eBay Earnings – AMC

THURSDAY (10/18)

– 8:30 AM ET – Weekly Jobless Claims – Expectations = 360K

– 10:00 AM ET – Philadelphia Fed – Oct – Expectations = -0.1

– 10:00 AM ET – Leading Indicators – Sep – Expectations = 0.20%

– China issues third-quarter GDP

– Danaher Earnings – BMO

– Morgan Stanley Earnings – BMO

– Phillip Morris Earnings – BMO

– Union Pacific Earnings – BMO

– Verizon Earnings – BMO

– Capital One Financial Earnings – AMC

– Google Earnings – AMC

– Microsoft Earnings – AMC

FRIDAY (10/19)

 – 10:00 AM ET – Existing Home Sales – Sep – Expectations = 4.70M

– General Electric Earnings – BMO

– Honeywell Earnings – BMO

– McDonalds Earnings – BMO

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