ADVISORY SQUAWK BOX – WEEKLY HIGHLIGHTS (Week of November 19th, 2012)

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Squawk Box Topics (Week of November 19th, 2012)

Broader Market Recap & Previous Week Re-Cap:

PREVIOUS WEEK RE-CAP:  (11/12 – 11/16)

  • Monday (11/12) – Stocks were little changed in a lightly traded session, with investors limiting bets ahead of what could be a drawn-out battle over the “fiscal cliff.” (S&P 500 +0.1%) 
  • Tuesday (11/13) – The markets closed lower as a  slide in shares of Microsoft pressured stocks, though retailers were a notable bright spot after Home Depot said prospects for housing have improved in coming quarters.  The full cast of lawmakers in the U.S. “fiscal cliff” debate gathered in Washington for the first time since the elections, setting the stage for a week of trial balloons and rhetorical repositioning. (S&P 500 -0.4%) 
  • Wednesday (11/14) – Stocks tumbled to their lowest levels since late July, driven by uncertainty over U.S. budget negotiations and an escalation of violence in the Middle East. President Barack Obama pushed for his proposal to have the wealthy pay more in taxes as a way to tame the federal deficit, taking a hard line in his opening bid before he begins fiscal talks with U.S. lawmakers later in the week. (S&P 500 -1.4%) 
  • Thursday (11/15) – Stocks ended moderately lower as the prospect of a drawn-out battle over impending tax and spending changes left investors wary, while Wal-Mart tumbled after disappointing forecasts. Superstorm Sandy drove a surge in new claims for U.S. jobless benefits last week and weighed on factory activity in November, providing early signs of how heavily the storm could hit the U.S. economy in the fourth quarter. (S&P 500 -0.2%) 
  • Friday (11/16) – The markets closed higher as hope that U.S. politicians would find common ground to steer clear of the “fiscal cliff” boosted stocks, though the gains were not enough to offset the week’s losses.  Efforts to avert the “fiscal cliff” began as President Barack Obama met with top U.S. lawmakers to seek a deal to head off looming across-the-board tax hikes and spending cuts that could push the economy back into recession. (S&P 500 +0.5%)
  • For the previous week, the DJIA lost 1.8%, the Nasdaq fell 1.8% while the S&P 500 Index declined 1.5%.
  • To begin the current week, the S&P 500 is up approx. 8.1% in the year-to-date period. 
  • Technical Update:
  • On 11/7/12, we witnessed the S&P 500 break below its most recent trading range (1,400 – 1,430).  Since this technical breakdown, we have continued to trade lower across the broader market with notable support levels broken at 1,375 & 1,360.  However, the S&P 500 closed the previous week at the 1,359 mark and opened the current week around the 1,370 level.  Looking ahead, the market will be looking for support at this 1,360 mark, as a sustained move below this support line will lead to an increase in technically-related sell pressure market-wide.
  • Key Technical Levels (S&P 500):
  • On the upside (resistance) – 1,375, 1,390 & 1,400, are the next major levels in range on the charts.
  • On the downside (support) – 1,360, 1,335, 1,300 & 1,260 are the major marks in range on the charts.
  • 50-day moving avg. = 1,409 & 200-day moving avg. = 1,378 
  • Economic Data:
  • We are scheduled for a fairly notable week on the economic data front, highlighted by Monday’s existing home sales, Tuesday’s housing starts/building permits and Wednesday’s weekly jobless claims, consumer sentiment & leading indicators releases.  See below for full list of weekly economic reports.
  • Corporate Earnings:
  • Corporate earnings season continues to wind down this week with approx. 15 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 $89 a barrel level & Brent Crude is trading near $111 a barrel.  Since September 14th, 2012, NYMEX WTI Crude Oil is down approx. 10% while Brent Crude is down approx. 5%.  In the YTD period, NYMEX WTI Crude Oil is down approx. 10% while Brent Crude is up approx. 6%.

 FOMC minutes signal additional QE on the way, while Japan moves towards unlimited monetary easing – Dollar at 7-month high versus Yen.

 Asset Manager Fund-Flow Updates (Week Ending Nov 14th):

  • Mutual funds generated net sales of $29.6BN in October, which was down from $36.7BN of net sales in Sept.
  • Overall, domestic equity funds saw a net redemption increase to $7.5BN in Oct. from $1.3BN in Sept.
  • Global equity funds have fared better, with sales improving to $7.2BN in Oct. from $5.4BN in Sept.
  • Over the most recent week, Equity Funds (excluding ETFs) saw $1.8BN of net outflows vs. $2.4BN of net outflows from the prior week.
  • Domestic equity funds saw $2.1BN in net outflows compared to $$1.9BN in outflows form the week prior.
  • Global equity funds saw $300MN of net inflows compared to $500MN of net outflows from the prior week.
  • Healthcare/Biotech and Utilities saw the largest net inflows, while the Energy and Financial sectors saw net outflows (Sector Flows Include ETF/Index traded funds).
  • The latest Lipper data showed that BlackRock Fund Advisors inserted just shy of $2BN into equities. JP Morgan, ProFunds, and Dimensional were among the lead equity contributors last week. Meanwhile, State Street Global Advisors scaled back approx. $1.4BN from equities last week, followed by Artio and Columbia Funds which each extracted a little over $500MN from its equity holdings.
  • Weekly asset manager fund returns were down on an average of 1.96% (-2.84% 4QTD)
  • Emerging Trends/Topics:
  • Domestic equity redemptions increase after showing signs of improvement in September; anticipated increase of capital gains tax in 2013 remains a concern
  • Passive fund managers remain the leading asset gatherers– Top Equity asset holders through Nov 7th are Vanguard ($1,1102.8BN), Fidelity ($605.7BN), American Funds ($599.5BN), and BlackRock Fund Advisors ($367.2BN).
  • Fixed Income strategies dominate active fund sales
  • Redemptions for Janus and Federated- Federated postednet redemptions of $110MN last monthandfixed income fund sales slowed to $133MN. Janus has had net redemptions of $683MN in Oct and $742MN in September; fixed income funds remain largest driver for Janus
  • Equity Fund Flows from Oct 1st Through November 14th:

 

Distributor Equity Flow Change (Bil) Equity Assets (Bil)
BlackRock Fund Advisors $5.348 $376.6
Vanguard Group Inc $4.607 $1102.8
JPMorgan Funds $0.881 $75.4
MFS Investment Management $0.719 $70.5
Van Eck Associates Corporation $0.699 $31.0

 

Distributor Equity Flow Change (Bil) Equity Assets (Bil)
State Street Bank and Trust Co ($9.578) $289.6
American Funds ($4.395) $599.5
Invesco Powershares Capital Mg ($2.017) $47.4
Fidelity Management & Research ($1.557) $605.7
Columbia Funds ($1.486) $100.0

 _________

MAIN EVENTS OF THE UPCOMING WEEK:  (11/19 – 11/23)

MONDAY (11/19)

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

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

– Lowe’s Companies Earnings – BMO

TUESDAY (11/20)

– 8:30 AM ET – Housing Starts – Oct – Expectations = 840K

– 8:30 AM ET – Building Permits – Oct – Expectations = 870K

– Fed Chairman Ben Bernanke addresses the Economic Club of New York at 12:15 PM ET

– The Bank of Japan Policy Meeting – The BOJ isn’t seen loosening monetary conditions, despite remarks from the front-runner in next month’s elections that he wants the bank to consider below-zero interest rates.

– Best Buy Earnings – BMO

– Campbell Soup Earnings – BMO

– H.J. Heinz Earnings – BMO

– Hewlett Packard Earnings – BMO

– Salesforce.com Earnings – AMC

WEDNESDAY (11/21)

 – 8:30 AM ET – Weekly Jobless Claims – Expectations = 423K

– 9:55 AM ET – Michigan Sentiment – Nov – Expectations = 84.5

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

– Germany auctions bonds

– Deere & Company Earnings – BMO

 THURSDAY (11/22)

– Thanksgiving is celebrated in the U.S. with all equity & bond markets closed

– Spain auctions bonds

– The European Union’s seven-year budget tops the agenda as the EU summit begins. Britain threatens to veto the $1 trillion budget unless it includes steep spending cuts. France threatens to reject the budget because of proposed agricultural-subsidy cuts.

FRIDAY (11/23)

 – U.S. equity and fixed-income markets close early at 1 PM ET – Markets are also closed in Japan for Labor Thanksgiving Day

– Shoppers get a jump on holiday gift buying on Black Friday

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