Halftime Report for 4.24.2012

 In poor economic news, the S&P/Case-Shiller Home Price Index fell to its lowest level since 2002. Over the past 12 months, prices in the 20 cities measured by the index fell 3.5%, with nine of the markets hitting post-bubble lows. Those markets include Atlanta, Charlotte, Chicago, Las Vegas, and New York. No doubt Chairman Bernanke will be asked about housing in his press conference tomorrow. 

On the positive earnings front, AT&T (T) and 3M (MMM) are higher by 3.7% and 2.4%, respectively, after posting good EPS and overall earnings outlooks. Netflix, which beat estimates but warned on subscribers yesterday, is down 13.7% today. 

The 10-year treasury note is yielding 1.96%, while the 30-year treasury bond yields 3.11%. The US$ is down in trading, losing 40 pips against EUR to the 1.32-figure. USD/JPY is flat on the session.

In 1-day performance, Oats futures are up 4%, and Corn and Soybean futures gained nearly 3%. At the other end of the spectrum, Cotton futures are off 1.6% and Live Cattle futures dropped 1.5%. 

AAPL fireworks after the bell will be fun to watch. Then, tomorrow, you have the Bernanke-show. 

From the Barbers Chair 4.24.2012

Finally, this line of thinking is picking up more and more advocates. One is Megan Greene, an economist out of London. She says it so far better than I could:

Europe “is not a fiscal or debt crisis, but a growth crisis.” There is a “trade off between austerity and growth….Growth heals all economic wounds, and without it austerity becomes completely self-defeating.” Greene concurs that Europe’s current path is “economic suicide.”

Greene points out that austerity was self-defeating in Ireland—the more austerity enacted, the worse their economic situation became. She currently sees this happening in Spain, where more and more austerity is being pushed, and the situation is becoming worse by the day.

I would also point out the case of the UK. Under Mr. Cameron’s rule, austerity is the watchword of the day. Months ago, economists were pointing out that the US and UK provided a blatant contrast in economic policy. Under Bush/Paulson and Obama/Geithner, the US pumped money into the economy. The UK’s Cameron did the opposite—cutting spending and increasing taxes. Now, years later the UK is in a clear recession. The US is still struggling, but so far is avoiding recession and showing many signs of growth. Indeed, if the US is dragged into another recession it will likely be because of Europe, not because of domestic activities. Also, both our banking and auto industries are functioning and generally healthy, which is no small task indeed.

Pushing austerity is like drinking cool aid. It tastes good and feels refreshing. But it is not. It has unhealthy ingredients and provides no way out of a complicated mess. Recession—thy pseudonym is austerity.

Follow me at @USKOTM

Ms. Green’s full article is at http://www.independent.ie/opinion/analysis/megan-greene-this-is-not-a-fiscal-or-debt-crisis-but-a-growth-crisis-3088184.html

Morning Rage 4.24.2012

In earnings news… this morning, 3M (MMM) reported better-than-expected EPS, sending shares 2.8% higher. AT&T (T) also beat the street, and shares are indicated 1.4% higher in premarket. Coach (COH), which beat analysts EPS expectations, is being sold ahead of the open – falling 2.7%. 

In other news, Fitch upgraded Ford (F) credit rating to investment grade this morning, sending the stock 3% higher in premarket trade. Fitch notes significantly improved financial performance, balance sheet repair, and product portfolio as reasons for the move. 

In futures markets, today’s move is a bit of a return to trend. Equity futures are higher, as is Crude Oil, Gold, Silver, and EUR/USD. Natural Gas is lower as well, falling below the $2-handle.

Later today, the S&P Case Shiller House Price Index will be released at 9 a.m. ET, followed by New Home Sales at 10 a.m. ET. Traders will also be looking at Apple (AAPL) earnings later today as a main event. AAPL is expected to report EPS of $10.07, up from $6.40 a year ago. 

Today may also see some traders begin to jockey for position ahead of the FOMC announcement tomorrow – and Fed Chairman Ben Bernanke’s press conference. That show kicks off at 12:30 p.m. ET tomorrow.

Meadows on the Markets 4.23.2012

In currency markets, EUR/USD bounced off session lows and closed the day in the mid-1.31s, down 60 pips on the session. As the US$ strengthened, Gold futures sold off, falling to below $1,640 per ounce. Simultaneously, Crude Oil futures also were pressured, falling to $103.10.

Here are companies that report earnings tomorrow: 
– 3M (MMM)

– AT&T (T)

– Coach (COH)

– Novartis AG (NVS)

– RadioShack (RSH)

– Western Union (WU)

That of course, is before the big game of earnings – Apple (AAPL) tomorrow after the close. 

Trade of the Day (NFLX) 4.23.2012

Profitable: I make money on this trade if NFLX closes between $76.74-$93.26 by April 27, 2012.

Break-even:  I breakeven on this trade if NFLX closes at $76.74 or $93.26 by April 27, 2012.

Unprofitable: I lose money on this trade if NFLX closes under $76.74 or above $93.26 by April 27, 2012.  The most I can lose on this trade is the Price of the Spread, $1.74.

UPDATE 4.24.2012  With time on my side and more potential profit to be made, I am leaving this trade on.  It is currently worth about $5.50, good for a triple.

UPDATE 4.27.2012  I will close this position out and it has worked very well.  This spread should be worth about $9 today.  

UPDATE 4.30.2012  I took every single penny out of this trade and when the stock was trading $84.50 on Friday, I took this trade off at $9.50.  This was a HUGE winning trade and another winner at KOTM. 

Read more about calls by www.keeneonthemarket.com

Halftime Report for 4.23.2012

Equity markets are pretty flat after a morning sell-off. All the major indices, S&P 500, NASDAQ, and DJIA, are down at least 1%. Overseas, these losses were magnified, with the FTSE closing down 1.8%, the DAX down 3.4%, and the CAC 40 lower by 2.8%. 

Treasury futures are higher, but not significantly so. 30-year bond futures gained 0.6%, and 10-year note futures rose 0.25%. The US$ index is also up 0.4% – lifted mostly by a sharp drop in EUR/USD to 1.3130 from above figure-1.32 on Friday.

With calm back in markets, I would not be surprised to see some losses pared in the afternoon. 

Today’s earnings will see the following companies report. Traders are selling the stocks into earnings – whether that is taking off positions or just in conjunction with the broader equity market decline is yours to decide:
– Ameriprise Financial (AMP): -1.5% today

– Netflix (NFLX): -3.2% today

– Rent-A-Center (RCII): -1.4% today

– Texas Instruments (TXN): -1.5% today

Morning Rage 4.23.2012

Investors are also keeping an eye on France to see how elections over the weekend will play out. Socialist Francois Hollande won 28.6% of the vote in the first round of the presdiential election, compared with 27.1% for President Sarkozy. Hollande favors a tax on financial transactions and renegotiating Europe’s fiscal accord. Markets are down sharply in Europe, with the FTSE 100 lower by 1.8%, the DAX down 2.9%, and the CAC 40 off by 2.2%.

Also, this morning, Pfizer (PFE) is reportedly selling its baby food business to Nestle SA for more than $10 billion. Shares of PFE are down 0.75% in early trade. This morning, ConocoPhillips (COP) and Xerox (XRX) report earnings.

Treasury yields are falling this morning in conjunction with a drop in equities. Prices on the 30-year bond and 10-year note are up 0.6% and 0.3%, respectively. The US$ is also stronger, gaining nearly 80 pips against the EUR (1.3130) and 40 pips against GBP (1.6080). USD/JPY has sunk to near session lows, trading at 81.10 ahead of the U.S. open. Gold is trading 0.7% lower, and Crude Oil futures are down 0.9%.

No economic data will be released this morning in the U.S. On Friday, the first estimate of Q1 GDP will be released. 

Meadows on the Markets

– This week shows that traders are looking for good companies. Companies that missed expectations are getting sold, hard. Sandisk (SNDK) lost 11%, Riverbed (RVBD) fell 29%, and Tempur-Pedic (TPX) shed 20% – just today

– The on-again, off-again relationship with Europe continues. Traders were concerned about Spain’s debt early in the week, sending Spanish 10-year notes to above 6%. One OK auction later, and Spanish 10-year bonds are back below that critical figure and the world is right again

– EUR/USD is set up for a move higher. Finally, the currency pair was able to close above its daily Ichimoku Cloud (1.3190). We would be a buyer at the open Sunday, and expect that prices could move towards the 1.35 level in the near term. Of course, that all depends on the G-20, IMF, and World Bank not screwing things up this weekend. Initial reports of a $430 billion fund boost is a good start

– Elections in France this weekend… with French President Sarkozy expected to lose to the Socialist candidate

Have a good weekend everyone.