ADVISORY SQUAWK BOX – WEEKLY HIGHLIGHTS (Week of December 3rd, 2012)

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Squawk Box Topics (Week of December 3rd, 2012)

Broader Market Recap & Previous Week Re-Cap:

PREVIOUS WEEK RE-CAP:  (11/26 – 11/30)

  • Monday (11/26) – The Dow and S&P 500 ended lower, pulling back from last week’s gains, as retailers fell on concerns about heavy discounts at the start of the U.S. holiday shopping season and the overhang of the “fiscal cliff” kept investors wary of making big bets. (S&P 500 -0.2%)
  • Tuesday (11/27) – The markets closed lower in a choppy session after Senate Majority Leader Harry Reid expressed disappointment that there has been “little progress” in dealing with the so-called fiscal cliff. (S&P 500 -0.5%)
  • Wednesday (11/28) – Stocks rose in volatile trade, after comments from John Boehner, the top Republican in Congress, on a possible compromise to avoid the “fiscal cliff” turned the market on its head.  New U.S. single-family home sales fell slightly in October and the prior month’s pace of sales was revised sharply lower, casting a faint shadow over one of the brighter spots in the U.S. economy. (S&P 500 +0.8%)
  • Thursday (11/29) – Stocks ended higher as investors bought on sporadic dips in a market roiled by conflicting comments from Washington about high-stakes negotiations to avoid the “fiscal cliff.”  The U.S. economy grew faster than initially thought in the third quarter as restocking by businesses provided a big boost, but consumer and business spending were revised lower in a sobering reminder of the recovery’s underlying weakness. (S&P 500 +0.4%)
  • Friday (11/30) – The markets closed mixed with the S&P 500 wrapping up its second positive week in a row, although it ended the day flat as politicians remain at odds about how to avoid the so-called fiscal cliff. (S&P 500 +0.1%)
  • For the previous week, the DJIA gained 0.1%, the S&P 500 gained 0.5% while the NASDAQ gained 1.5%.
  • To begin the current week, the S&P 500 is up approx. 12.6% in the year-to-date period.
  • Technical Update:
  • The S&P 500 extended its recent rebound, after coming under significant technical sell pressure over the previous few weeks, which has pushed the Index comfortably back above the important 1,400 technical level for the second week in a row.  Looking ahead, the market will be once again expecting support at this 1,400 mark, as a sustained move below this mark on the charts will lead to an increase in technically-related sell pressure market-wide.  On the upside, look for the 1,430 resistance ceiling to come back into play if we continue to push higher throughout the upcoming week.
  • Key Technical Levels (S&P 500):
  • On the upside (resistance) – 1,430, 1,440, 1,460, 1,475 & 1,500 are the next major levels in range on the charts.
  • On the downside (support) – 1,410, 1,400, 1,390, 1,375, 1,360, 1,335 & 1,300 are the major marks in range on the charts.  * 50-day moving avg. = 1,409 & 200-day moving avg. = 1,382

 Economic Data:

  • We are scheduled for a significant week on the economic data front, highlighted by Tuesday’s U.S. construction spending, Wednesday’s ADP employment report & U.S. factory orders, Thursday’s weekly jobless claims and Friday’s non-farm payrolls employment report for November.  See below for full list of weekly economic reports.

 Corporate Earnings:

  • Corporate earnings season continues to come to a close with only a handful of 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 $90 a barrel level & Brent Crude is trading near $112 a barrel.  Since September 14th, 2012, NYMEX WTI Crude Oil is down approx. 10% while Brent Crude is down approx. 4%.  In the YTD period, NYMEX WTI Crude Oil is down approx. 9% while Brent Crude is up approx. 8%.

Risk-On –bullish inverse “head & shoulders” on the S&P 500, positive currency action, and PMI data point to risk-on in the equity markets

  • Asset Manager Fund-Flow Updates (Week Ending Nov 28th):
  • Equity Funds (excluding ETFs) saw $8.8BN of net outflows vs. $8.4BN of net outflows from the prior week.
  • Domestic equity funds saw $7.5BN in net outflows compared to $6.6BN in outflows form the week prior.
  • Global equity funds saw $1.3BN of net outflows compared to $1.8BN of net outflows from the prior week.
  • Weekly asset manager fund returns were up by an average of 0.96% (down 0.25% 4QTD)
  • The Industrial/Consumer and Utilities saw the largest amount of capital inflows, while Financials/Banking and Healthcare/Biotech had net outflows.
  • The latest Lipper data showed that BlackRock Fund Advisors, ProFunds, and MFS were among the largest capital contributors into equities, while Columbia Funds (over $1.3BN), Artio, and Guggenheim Investment Funds were taking money out of equities.
  • Recent Topics:
  • Equity Trading- Equity markets were mostly flattish in November, with the S&P 500 ~flat. U.S. volumes were up, with U.S. cash equities volumes up 1% and U.S. optionsvolumes up 14% m/m. London volumes were up 1% while CME equity futures volumes wereup 19% m/m. So far in 4Q12, U.S. cash volumes are +2% and options volumes are ~flat vs.3Q12 levels. Equity volatility (VIX) was down 17% m/m.
  • Asset Management – Equity Outflows & Bond Inflows Continue– Estimated November net domestic equity mutual fund flows were negative (~-$28bn), and foreign equity funds have seen modest outflows of $4.1bn. Fixed income mutual fund flows were strong in November, with estimated inflows from both taxable (~+$22bn) and munis (~+$5.6bn). Hybrid funds saw outflows (~$2.8bn).
  • MSCI Semi Annual Rebalance Took Effect on Friday (Nov 28th)
  • S&P Launches S&P 500 Minimum Volatility Index (Rebalanced Semi-Annually on the third Fri of March and Sept)
  • Retirement of Intech’s CEO and Impact On Janus’ Subsidiary- According to JP Morgan, a change at the top could impact sales in the near –term.although quantitative investing remains out of favor, the better performance figures at Intech should have eventually started to lead to falling redemptions and then sales. However, with the management changes, consultants could delay recommending Intech products, despite what is reasonably good 3- and 5-yr performance.
  • Equity Flows (Oct 1st Through Nov 28th)– BlackRock Fund Advisors and Vanguard top two equity contributors since Oct 1st through Nov, while State Street Global Advisors and Capital Research’s American Funds have been pulling money out of equities
  • Equity Fund Flows from Oct 1st Through November 28th:

  

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
Virtus Investment Partners Inc $0.462 $10.6
OppenheimerFunds Inc $0.410 $81.8
Charles Schwab Investment Mana $0.394 $41.5

  

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
PIMCO ($0.813) $48.9
Franklin Templeton Investments ($0.684) $121.7
Janus Capital Management LLC ($0.628) $65.5

 _________

MAIN EVENTS OF THE UPCOMING WEEK:  (12/3 – 12/7)

MONDAY (12/3)

 – 10:00 AM ET – ISM Index – Nov – Expectations = 51.2    

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

– 2:00 PM ET – Auto Sales – Nov – Prior = 5.2M

– Euro-zone finance ministers discuss terms of a Greek buyback that’s a key part of a debt-reduction plan.

– St. Louis Fed’s James Bullard speaks about the economy. Boston Fed’s Eric Rosengren, an FOMC voter in 2013, speaks at a mortgage conference.

TUESDAY (12/4)

– President Barack Obama meets with governors at the White House.

– Central banks of Australia and Canada review monetary policy.

– AutoZone Inc. Earnings – BMO

– Big Lots, Inc. Earnings – BMO

WEDNESDAY (12/5)

 – 8:15 AM ET – ADP Employment Change – Nov – Expectations = 125K

– 8:30 AM ET – Productivity-Rev. – 3Q – Expectations = 2.70%

– 10:00 AM ET – Factory Orders – Oct – Expectations = -0.10%

– 10:00 AM ET – ISM Services – Nov – Expectations = 53.7

– House Financial Services Committee looks at economic and market implications of Dodd-Frank on derivatives.

– President Obama addresses the Business Roundtable – Likely topic: the fiscal cliff.

 THURSDAY (12/6)

– 7:30 AM ET – Challenger Job Cuts – Nov – Prior = 11.60%

– 8:30 AM ET – Weekly Jobless Claims – Expectations = 382K       

– European Central bank & Bank of England hold policy meetings.  Most investors see the ECB and the Bank of England standing pat on rates

– H & R Block Inc. Earnings – BMO

FRIDAY (12/7)

 – 8:30 AM ET – Nonfarm Payrolls – Nov – Expectations = 90K

– 8:30 AM ET – Unemployment Rate – Nov- Expectations = 8.00%

– 9:55 AM ET – Univ. of Michigan Consumer Sentiment – Dec – Expectations = 82.4

– 3:00 PM ET – Consumer Credit – Oct – Expectations = $9.9B

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