Keystone's Key Events and Market Movers for Trading the Week of 3/11/13

Key Dates and Times for the Week Ahead:

·         Keystone’s Comments on the Upcoming Week: Economic data releases do not occur until the back half of the week.  Earnings continue with second tier companies reporting and the retail sector is most important. Retail Sales are also a key data point and market mover on Wednesday morning. Since earnings releases are trailing off, look to Japan, China and Europe for market moving events. The Sequestration is here and in force now.  The Continuing Resolution is on 3/27/13, only 16 days away, then the Debt Ceiling limit comes into play again mid-May, only 8 weeks away. Traders are no longer concerned of any market downside occurring due to these political deadlines. The politicians solved the Fiscal Cliff and the Debt Ceiling deadlines with can-kicking and this will simply continue on indefinitely, so there is no reason to price in any market downside moving forward.  Of course, if a stumble occurs, it would impact markets more greatly due to this complacency. Congress is in session which is a market negative. The European debt crisis news directly dictates global market direction.  Spain and Greece protests continue.  As the euro goes, so goes the equity markets although the lower euro is not having a negative impact on equities due to the Fed’s obscene liquidity pumping.  Italy election drama is ongoing and a decision must be made this week where either a coalition government is in place or new elections are required for April-May.  Watch the Italy 10-year yield to see if it blows out, or not. Spain is delaying their bailout request so the ECB’s OMT bond-buying program cannot be unleashed in full force, although simply having the OMT in place has greatly calmed Europe.  Spain, and other nations, are reluctant to give up sovereignty and accept conditionality as terms of a bailout package. European countries are denying that money is moving out of banks but denial is always the first sign of serious trouble ahead.  Italy wants Spain to request a bailout since the ECB bond-buying will immediately improve Italy’s debt situation. Look for a strong market bounce and rally if Spain requests a bailout. Cyprus needs a bailout within the next four weeks. Merkel wants Greece to stay in the euro until her election in September but will not care afterwards. The next ECB Rate Decision and Press Conference is Thursday, 4/4/13.  Draghi is walking a tightrope as the European manufacturing and export sectors weaken since the U.S., Japan and others are debasing while the ECB stands pat. Draghi will have to capitulate, perhaps on 4/4/13, which will send the euro lower, and traders will likely continue to move in that direction. Europe is standing by watching their manufacturing and export industries worsen while the U.S. and Japan devalues their currencies. If the European economy continues to falter, and the automobile sales are dropping significantly, and Germany dropping off, including the Volkswagen jewel, Draghi will have to cut to weaken the euro and help the Eurozone grow out of the debt mess.  The China hard versus soft landing saga continues. Watch for further China easing measures such as lowering rates or triple R’s, which will bounce copper, commodities and equity markets. As copper and commodities go, so goes the markets, but the equities markets move higher over the last month as oil, copper and commodities collapsed, verifying that the move up in equities is purely Fed-driven.  China correctly worries about the new commodities inflation and asset bubbles that will be created by their easy money policies (Chairman Bernanke incorrectly defends QE saying it does not create asset bubbles). New leaders President Xi Jinping and Premier Li Keqiang are in power now targeting a 7.5% growth rate for 2013. The China data continues to forecast blue skies ahead but no one asks how this is possible when their number one customer, Europe, is in recession and depression, the U.S. is flat, and uninhabited cities litter the China countryside, waiting for the urban shift to a domestic-led economy. China demographics are a mess due to the multi-decade one-child policy now causing a lack of workers to fuel economic health and the income figures show that the rural Chinese are making more money than the urban dwellers providing no incentive to move to the cities. The housing constructed in the empty cities is far too expensive for the average citizen tyring to make the move to the city.  Retail sales are lagging and manufacturing data shows a standstill. CAT, YUM, and DE, three key China bellwethers, are unenthusiastic moving forward but JOY is more upbeat. The Australia disinflationary and deflationary scenario must be studied closely moving forward. The equity markets continue to ignore the geopolitical landscape. Syria is out of control with refugee’s now threatening collapse of neighboring nations. Egypt remains in chaos creating trouble along the Suez Canal this weekend.  Use Brent oil 112 level as a proxy and the price is actually under signaling that the turmoil is not causing major concern.  WTIC oil drops on over supply issues and a weakening China economy.  As oil goes, so goes the markets but oil dropped like a stone and equities are moving higher. This verifies that the equities rally is due to the Fed’s money-pumping.  The earnings season continues with second tier companies now on tap. Companies are meeting lowered estimates although the percentage beats are slightly under the typical 70 to 75% expected. Top line revenues continue to be challenged and many companies are decreasing dividends.  Several retailers report this week with DKS and URBN setting the tone on Monday and a barrage of reports on Wednesday so watch the XRT and RTH all this week.  Tech (COMPQ) and the broad indexes were up about 2% last week with the small caps (RUT) up 3%, thus, tech is not leading, but the small cap boost adds credibility to the bull case.  However, the light volume questions the strength of the equities rally. In fact, not one of the volumes for any up day last week was able to overtake the selling volume day that preceded last week’s rally. The VIX dropped last week which provided the bull fuel for markets but the volatility should move higher for the days and weeks ahead. Continued market topping and roll over action is anticipated for the broad indexes moving forward. Q1 is anticipated to be a significant market topping area.

·         Monday, 3/11/12:  Daylight Savings Time is in effect—adjust market clocks. No economic data today. The Sequester and CR Deadline drama continues.  This week is typically up over 80% of the time seasonality-wise.  A new moon occurs today so markets are typically weak into tomorrow. Earnings: CVI, DKS, EGLE, EXM, FLOW, FTEK, FCEL, HEK, MUX, RENN, SGMS, UNB, URBN, XNPT.

·         Tuesday, 3/12/13: NFIB Small Business Optimism Index 7:30 AM. 3-Year Note Auction 1 PM. Treasury Budget 2 PM. For OpEx week, there is typically an up move that occurs from a Tuesay low into a Wednesday high.  Earnings: COST, ENZ, GERN, JKS, KRO, OXGN, PPHM, TLF, USU.

·         Wednesday, 3/13/13: Mortgage Applications 7 AM—is the trend up or flat? (2/13/13 down; 2/20/13 down; 2/27/13 down; 3/6/13 up; 3/13/13 ?) Import and Export Prices and Retail Sales 8:30 AM.  Business Inventories 10 AM. Oil Inventories 10:30 AM. 10-Year Note Auction 1 PM. Earnings: CBK, DCTH, FTK, GES, HOTT, KOPN, MAG, MW, OREX, SIGM, VECO, VRA

·         Thursday, 3/14/13: Current Account, PPI and Jobless Claims 8:30 AM. Natty Gas Inventories 10:30 AM. 30-Year Bond Auction 1 PM. The second round of bank stress test results announcing changes in dividends-watch financials (XLF) closely.  Earnings: ARO, BKE, DSX-shipping, DYN, ECTE, KKD, ONTY, SOL, STEC, ULTA, ULTR, ZUMZ.

·         Friday, 3/15/13: Italy must decide if there is a new coalition government of if a new vote is require in April-May. OpEx. CPI and Empire State Mfg Index 8:30 AM.  TIC data 9 AM. Industrial Production 9:15 AM-this will provide a hint on whether or not QE is pulled back sooner rather than later. Consumer Sentiment 9:55 AM. Earnings: BWS, HIBB, HOGS, IEP, INO, KYAK, KERX, LORL, PGNX, TBAC, URRE.

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·         Monday, 3/18/13: Housing Market Index 10 AM.

·         Tuesday, 3/19/13: Housing Starts 8:30 AM.

·         Wednesday, 3/20/13: First Day of Spring.  FOMC Meeting Announcement and Forecasts 2 PM.  Chairman Bernanke Press Conference 2:30 PM. Markets will pivot in the 2 PM to 3 PM period as the news dictates.

·         Thursday, 3/21/13: Jobless Claims 8:30 AM. PMI Mfg Flash PMI 8:58 AM.  FHFA House Price Index 9 AM. Existing Home Sales and Philly Fed 10 AM—look for a market pivot point.

·         Friday, 3/22/13:

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·         Sunday, 3/24/13: Palm Sunday.

·         Monday, 3/25/13:

·         Tuesday, 3/26/13: Passover. Durable Goods Orders 8:30 AM. S&P Case-Shiller House Price Index 9 AM.  Richmond Fed Mfg Index, New Home Sales and Consumer Confidence 10 AM.

·         Wednesday, 3/27/13: Continuing Resolution (CR) is required to fund the government, otherwise the government will shut down. Full moon.

·         Thursday, 3/28/13: EOM. EOQ1.  Corporate Profits, Jobless Claims and GDP 8:30 AM. Chicago PMI 9:45 AM.

·         Friday, 3/29/13: Good Friday. U.S. Markets Are Closed until Monday. Personal Income and Outlays 8:30 AM.  Consumer Sentiment 9:55 AM.

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·         Sunday, 3/31/13: Easter Sunday.

·         Monday, 4/1/13: U.S. Markets Open for Trading. Construction Spending and ISM Mfg Index 10 AM.

·         Tuesday, 4/2/13: Factory Orders 10 AM.

·         Wednesday, 4/3/13: ADP Employment Report 8:15 AM. ISM Non-Mfg Index 10 AM. BOJ meets with new members and the money pumping and yen weakening continues.

·         Thursday, 4/4/13: Jobless Claims 8:30 AM.

·         Friday, 4/5/13: Monthly Jobs Report 8:30 AM.  International Trade 8:30 AM. Consumer Credit 3 PM.

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·         Sunday, 5/19/13:  16.4 trillion Debt Ceiling limit is hit.

·         In September:  Merkel (Germany) seeks re-election and will not want Greece to exit the euro before the election, but will not care afterwards.  Perhaps Greece and Germany will both exit the euro in the future.

·         In Q4 2013:  European bank stress tests will occur.

---------------------------------  2014  ----------------------------------

·         On Friday, 1/31/14: Chairman Bernanke’s term ends at the Fed, unless there is news during Q4 2013 that he will stay on.

·         In March 2014: ESM is officially ‘fully operational’. The banking union schedule has been delayed from January 2013 to January 2014 and now to March 2014.