Tuesday, July 12, 2005

Morning Comments... TS Emily.

Do I really need to remark on this or just cut and paste notes from Cindy and Dennis?

<>Oil +45c overnight. The $ drops to a 2 week low vs the Euro ahead of tomorrow’s trade deficit report, which is likely to have widened on the strength of the $ this year. CFTC data on Friday showed the largest net long $ position (vs Euro) since “I was dreamin’ when I wrote this, Forgive me if it goes astray” (1999, Prince). The S&P’s are 5 points away from their March highs.

Monday, July 11, 2005

Morning Comments... Oil trading down $1.10 to $58.50 as Hurricane Dennis stays east of most of the Gulf rigs. This storm was no repeat of last year’s Ivan the terrible, which knocked out multiple refineries and platforms along the Louisiana coast and leading to a $10 rise in oil. Oil bulls should be comforted by the fact that this is the strongest gulf storm on record occurring this early in the season. The coast is clear for now, but we are not out of the proverbial woods just yet. The week ahead should be interesting with the 10 year at a technically important 4.10% and the Thursday CPI and Friday PPI. Net longs were established in the 10 yr Treasury for the 1st time in a month in Friday's CFTC data. May Trade Deficit on Wednesday with net shorts in the euro at the highest level since Nov '99 and yen shorts near highest since mid '99. Net longs in crude rose by 10k contracts to highest level since Apr 12th. Both exports and imports in China's June trade report were much higher than expected.

Friday, July 08, 2005

<>Morning Comments... Leftovers from the emotion-driven rally yesterday will have to do with June payroll data this morning, but the good news for the bulls (or maybe the bad news) is that all signs point to a strong #. Expectations for the 8:30am release are for the creation of 200k new jobs. The 4-week average of jobless claims is running at the lowest level since February and the ISM Non-Manu is the highest level since Feb, both signals of an abundance in work. The Unemployment Rate is expected to hold steady at 5.1%, Average Weekly Hours expected unched at 33.8, and Average Hourly Earnings expected +0.2%. The $ is stronger vs the Euro and Yen on anticipation of a strong jobs report and a 50c move in oil overnight to $61.25 as Dennis the Menace becomes a Category 4 storm and is expected to make landfall in the Florida panhandle late Sunday night.

Thursday, July 07, 2005

Morning Comments... The day of the Spanish train bombings on 3/11/04, the S&P’s were down 17 points, but rallied 14 points the following day. $ lower vs the Euro and Yen, and the British pound dropped to a 1.5 year low vs the $. Oil traded $62 this morning on globex, but is now $60 on concerns the attacks will hurt demand. Jobless claims are expected 320k vs 310k last week. June payroll data tomorrow, but the market will be emotion-driven for the time being.

Wednesday, July 06, 2005

Morning Comments... Oil trading over $60 this morning as Tropical Storm Cindy runs over Louisiana, evacuating rig workers and cutting output. But, golly-gee Mr. Wilson, the real fear is TS Dennis may strengthen into a hurricane later on today and take the same destructive path as Cindy. Chatter is that we could see $70 if we have another destructive hurricane like last year’s Ivan. $ at a 2-year high vs the Euro after euro zone retail sales fall below 50. $ also at a 1-year high vs the Yen on the oil shock.

Mortgage aps rebound after two straight weeks of declines to 9.6%, with purchases rising 9.1%, and refis +10.2%. At 10am, June ISM non-manufacturing is expected 58.7 vs 58.5 (the 1-year average is 61). II#’s: Bulls 53.9 vs 55.1 Bears 21.4 vs 19.1.

Tuesday, July 05, 2005

Morning Comments... "Hello. Is there anybody in there?" Colorado State University meteorologists dire forecast of 15 tropical systems this season seems to be playing out as Tropical Storm Cindy heads for a late night arrival in Louisiana, which is the home of beaded awards for public exposure and also the US’s largest oil-import terminal. Oil is up 57c overnight, closing in on $60 again and sending global stock markets lower. $ stronger vs the Yen and Euro as the US economy seems to have an easier time “weathering” higher prices. At 10am May Factory Orders expecting up 3%, mostly due to the big aircraft orders reflected in the May Durable's #.

Highlights of the week ahead are the Wednesday kickoff to the G8 Summit in Scotland, where Bush will be shaking off flashbacks after Roger Waters’ “Comfortably Numb” over the weekend; same day, the IOC will tell New York to shoot for 2016; Thursday’s Alcoa earnings release kicks off the season; and Friday’s June Payroll Data, where the street consensus is for 192k new jobs.

Friday, July 01, 2005

Morning Comments... Investors looking for the Fed to signal that we are in the 8th inning of the rate hike cycle were disappointed and sold yesterday, taking the Dow down 99 points at the close. The end of rate hikes is usually good news, however, in this case, sluggish economic growth would be the culprit in ending the Fed's campaign. That is why additional hikes can be spinned as positive for economic growth. With Fed funds at 3.25% and inflation growing at roughly 3.25%, real rates are currently at zero, whereas the Fed's target has typically been 200bps over inflation (ie- Fed funds at 5.25%). It is this accommodative rate scenario which will continue the expansion (and the bubbles) for the near future, with the only caveat being excess growth leading to excess inflation.
At 10am, June ISM expectations are 51.4, unched vs May. Is the weakness we are seeing in manufacturing due to a draw-down in existing inventory and setting us up for a rebound in the next quarter? World markets are up overnight on a better than expected Japanese Tankan report and June euro region PMI. AMG reports equity outflow of $469mm.

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