Keystone's Key Events and Market Movers for Trading the Week of 2/11/13

Key Dates and Times for the Week Ahead:

·         Keystone’s Comments on the Upcoming Week: Economic data is back on the table this week with the Retail Sales numbers and Consumer Sentiment most important.  Manufacturing data is on tap and lots of Fed speakers will be speaking and spinning the news. Earnings season is in full swing. The bulls continue to run higher with markets continuing gto print new highs although Friday saw paltry volume with the snow storm.  The oddity is the drop in the euro last Friday but the equities markets went higher, one of these is wrong, and the winner and loser will likely surface tomorrow.  The next political deadline is the Sequestration on 3/1/13, only 18 days away, followed by the Continuing Resolution on 3/27/13, only 44 days away, then the Debt Ceiling limit comes into play again mid-May, three months out. 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 negative for markets but will go on vacation next week with the President’s Day holiday. Congress will return and cause market grief for the last week in February and through March. President Obama’s State of the Union speech is Tuesday evening. Wednesday is typically an up day for markets since companies are pumped depending on the presidents favorite programs. The European debt crisis news directly dictates global market direction and is heating up with the Spain turmoil and rising bond yields.As the euro goes, so goes the equity markets, however, when the euro finally dropped like a stone last Friday, the equities markets did not. One of these two is wrong and will be exposed this week.  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 is reluctant to give up sovereignty and accept conditionality.  Spain and Italy stock markets are selling off.  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. European riots and violence continue with shooting now occurring in Greece. The slow-motion development of a European banking union continues.  Merkel wants Greece to stay in the euro until her election in September then will not care afterwards. The next ECB Rate Decision and Press Conference is Thursday, 3/7/13.  Draghi appears more dovish, that is why the euro dropped last week from near 1.38 to under 1.34.  Traders will be waiting for Draghi to announce a cut at some point forward.  The U.S. and Japan cannot destroy their currencies fast enough so Europe is standing by watching their manufacturing and exporter companies lose more business, business they cannot afford to lose.  If the European economy continues to falter, however, and the automobile sales are dropping significantly, and Germany dropping off, 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.  China talks a hesitant story but pumps in the background. They correctly worry about the new commodities inflation and asset bubbles that will be created (Chairman Bernanke incorrectly defends QE saying it does not create asset bubbles). China continues to provide lip service about easing measures and the markets bite each time raising copper, commodities, and equities on promises. New leaders President Xi Jinping and Premier Li Keqiang will supply economic targets in March. China professes a 7.8% growth rate 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. No wonder that many question the validity of the China data. CAT and YUM, key China bellwethers, are unenthusiastic moving forward. Watch DE this week. 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.  The sharp rise in Brent oil to 119 verifies the concern over Northern Africa and the Middle East. At the same time, WTIC oil drops on over supply issues remaining as well as a weakening global economy so the crude to Brent spread hits historic highs over 23.  Use Brent oil as a proxy for the Middle East turmoil. If Brent is above 112, now well above, it signals that tensions are rising. Calm is returning under 112.  As oil goes, so goes the markets. Interestingly, West Texas is going down and Brent is going up. The earnings season continues. 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. MAS is key as a gauge for the housing recovery.  CLF provides insight into iron ore and steel needs, KORs is high-end retail that will complement Retail Sales data, RAX is a gauge on the cloud, GT is a gauge on rubber a key economic barometer, KO and PEP for blue-chip beverages and snacks, CSCO for tech, DE a global economic gauge and Z for real estate.  As AAPL goes, so goes the Nasdq but not necessarily the SPX.  Apple popped last week as Einhorn pumped the stock since he is worried about losing money. Tech (COMPQ) and small caps (RUT) are not showing the broad market leadership they did one month ago. Volatility remains at a six-year low but the VIX is poised for a rebound.  The CPC put/call remains low verifying the market complacency.  Traders never doubted the positive outcome for the fiscal cliff and debt ceiling limit and those beliefs are now reinforced creating complacency.  A new moon occurs last evening so markets would be expected to be weak through the Monday close although OpEx Monday’s tend to be positive.  The markets also tend to experience a bullish period from a Tuesday low to a Wednesday high during OpEx week.  The market bears are absent this year thus far. There is upside momo in the markets currently but topping action and roll over is anticipated as the days and weeks play out. Q1 is anticipated to be a significant market topping area.

·         Monday, 2/11/12: New moon is yesterday so the markets tend to be weak from last Friday through today’s close. Monday’s during OpEx week, however, are typically bullish, so choose your poison. Earnings: CPST, CUTR, MNKD, MAS-a gauge for housing, NAT, SINO, TNH, TSLA.

·         Tuesday, 2/12/13: NFIB Small Biz Optimism Index 7:30 AM-a gauge of how business owners view the economy. Fed’s George speaks 11:30 AM. 3-Year Note Auction 1 PM. Treasury Budget 2 PM. Markets are typically bullish from a Tuesday low to a Wednesday high during OpEx week.  Fed’s Plosser speaks 7:30 PM. President Obama’s State of the Union address; markets are usually buoyant the following day. Earnings: AVP, BWLD, CLWR, CLF-iron ore predicts steel production, DBD, FOSL, HERO, HUN, KORS-retail, LVLT, MMC, MLM, NILE, RAX-cloud, KO, GT-rubber, MHP, TRLA-housing, VAL, ZBRA.

·         Wednesday, 2/13/13: Ash Wednesday. Mortgage Applications 7 AM—is the trend up or flat?  Import and Export Prices and Retail Sales 8:30 AM. Business Inventories 10 AM-look for a stutter step. Oil Inventories 10:30 AM.  Fed’s Bullard speaks 11:10 AM. 10-Year Note Auction 1 PM. Earnings: ACOR, AEM, ATNY, AMAT, AVEO, CAR, CPN, CSCO-tech, CXW, DF, DE-a great economic gauge, DPS, DUK, ENOC, EQIX, H, IPI, KS, LGND, LO, MET, MSA, NSPH, NTAP, NVDA, OII, OVRL, SANW, SKX, TNGO, TRIP, VG, WFM, WFR, Z-housing.

·         Thursday, 2/14/13:  Valentine’s Day. Jobless Claims 8:30 AM.  Natty Gas Inventories 10:30 AM. Fed’s Bullard speaks 12:50 PM. 30-Year Bond Auction 1 PM. Markets are typically buoyant moving into a three-day holiday weekend; look for a potential bottom today. Earnings: A, ALXN, APA, BRCD, CAB, CBS, CRY, EEP, EOG, GNRC, GM, HMA, KEG, PEP, PTN, PPL, SGNT, SPW, STRA, SYNT, TGX, VECO, VMC, WM, XNPT.

·         Friday, 2/15/13: OpEx. Empire State Mfg Survey 8:30 AM. TIC data 9 AM-shows foreign investment. Industrial Production 9:15 AM.  Fed’s Pianalto speaks 9:50 AM.  Consumer Sentiment 9:55 AM-market pivot point. E-commerce Retail Sales 10 AM.  Earnings: AEP, BKW, CPB, SJM, KRFT, NHI, PPC, RUTH, SB, TRW, UPL, ZIP.

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·         Sunday, 2/17/13: Cyprus elections.

·         Monday, 2/18/13: U.S. Markets are Closed in Observance of President’s Day.

·         Tuesday, 2/19/13: U.S. Markets Open for Trading.

·         Wednesday, 2/20/13: PPI and Housing Starts 8:30 AM. FOMC Minutes 2 PM.

·         Thursday, 2/21/13: CPI and Jobless Claims 8:30 AM. Flash PMI 8:58 AM.  Existing Home sales and Philly Fed 10 AM.

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·         Sunday, 2/24/13: Italy two-day national election begins.

·         Monday, 2/25/13: Italy election results.

·         Tuesday, 2/26/13: New Home Sales and Consumer Confidence 10 AM. Chairman Bernanke speaks 10 AM.

·         Wednesday, 2/27/13: Durable Goods Orders 8:30 AM. Chairman Bernanke speaks 10 AM.

·         Thursday, 2/28/13: Jobless Claims and GDP 8:30 AM. Chicago PMI 9:45 AM. EOM.

·         Friday, 3/1/13: Personal Income and Outlays 8:30 AM. PMI Mfg Index 8:58 AM.  Consumer Sentiment 9:55 AM. Construction Spending and ISM Mfg Index 10 AM. Sequestration hits with one trillion in automatic spending cuts for government. An 85 billion hit takes place quickly as well as a 0.7% hit to GDP. Estimates are that over 600K people may lose their jobs, much of the cuts in defense industries.

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·         Moving into March:  New China President Xi Jinping and Premier Li Keqiang take over complete control and the ten-year transition of power is finished. China now sets inflation and budget targets moving forward. China is pushing to a domestic-led economy. The growth projections are important; 2012 grew at an average 7.8% rate.

·         Wednesday, 3/27/13: Continuing Resolution (CR) is required to fund the government.

·         In March and April:  The BOJ head’s will be replaced and strong QE will likely occur. Perhaps a pull-back and low in the Nikkei in February and March may provide a point of entry ahead of the additional money-pumping.

·         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.

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·         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.