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DATE

RESEARCH REPORT

30-Dec-08	Market Outlook: No Quick Fix Our sense is that the market is predominantly looking at 2009 with an attitude of, "how can things possibly get any worse?" Accordingly, the prevailing belief is that the stock market is in store for a year of positive returns. We favor that view, although we see 2009 as a period where one will need to be more active than ever in managing investment holdings to capture outsized returns.
19-Dec-08	The Drybulk Industry A comprehensive view and outlook.
21-Aug-08	The Commodity Reckoning Analysis of the 2006 and 2008 commodity corrections.

21-Dec-09	Market Monitor: Risk Factors We turn our attention to a number of factors that could pose a risk to the positive stock market outlook.
18-Dec-09	The Upcoming Inflation Scare The U.S. is about to enter a period of extremely high inflation growth. However, there is nothing to be worried about. The entire reason for the high prices will be due to the remains of the oil shock.
14-Dec-09	Market Monitor: No Risk, High Reward In our strategy meeting, we discussed why the market has stalled in recent weeks. The consensus view was that money managers simply do not want to take any undue risks right now. For managers who have outperformed their benchmark, there is no need to as a bonus payment awaits.
07-Dec-09	Market Monitor: Seeing a Split Personality The United States equity market appears to be settling down, but whether it is the pause the refreshes or the pause that regresses remains to be seen.
30-Nov-09	Market Monitor: Bonded, but Not Ensured The S&P 500 has risen nearly 70% from its March low and is on track for its eighth monthly gain in the last nine months. With a track record like that, it is easy to think money has been pouring into equity funds. Actually, it has not.
23-Nov-09	Back to Business as Usual for the U.S. Auto Manufacturers? We thought an increase in auto production would be a key component in driving economic growth as the U.S. pulls out of the recession. So far, we have been wrong.
23-Nov-09	Market Monitor: A Peculiar Divergence We recently said we held a bullish short-term view that was predicated on a number of factors that included easy economic and earnings comparisons and anxious money managers fighting to catch up to performance benchmarks. The lack of a warning on asset prices, when the Federal Reserve Chairman had a chance to give one, can be added to the list.
20-Nov-09	Does a Highly Volatile Dollar Affect Asset Prices? Even though a falling dollar may help the broad economy, a weak currency is often thought to harm asset prices and stunt growth. A statistical analysis of stock and bond returns yields the opposite result.
17-Nov-09	Market Monitor: Little Has Changed Our perspective has changed very little over the past 3-5 months: This is a cyclical bull market that has a huge store of uncommitted money to pull in. Corrections will be short-lived and shallow. And the market will be broadly supported by a number of easy comparisons into year end.
13-Nov-09	Does the U.S. Need a Strong Dollar A weaker dollar provides strength and security in an economic recovery. We feel that the government will continue to talk tough about the dollar but provide no direct policy directives to try to change its value.
10-Nov-09	Market Outlook: A Split View In general, we expect the bullish bias that has prevailed since March to persist in the near-term. This is a market, though, where few things should be taken for granted. There is an irreconcilable conflict brewing between the short-term view and the long-term outlook. The former is encouraging. The latter is not.
09-Nov-09	Market Monitor: Easy Money, Easy Rebound Once again, we have seen the market nip its losses in the bud and reclaim a good portion of lost ground in no time at all.
02-Nov-09	Banks Have Hoarding Affliction Banks have plenty of money, they just are not lending it out freely.
02-Nov-09	Market Monitor: What Comes Next? Volatility is one of the few things that looks cheap these days. That is the view we held two weeks ago. Anyone watching last week's action knows that volatility is not as cheap as it used to be.
26-Oct-09	The Preemptive Demise of the Dollar Professional investors have had to protect themselves against declines in the dollar this year given the unprecedented quantitative easing cycle in the United States. The general contention is that the dollar is being fundamentally debased. But that protection has risen to such magnitudes that there may now also be heightened risk that shorting the currency has become an over-crowded, one-sided trade.
26-Oct-09	Market Monitor: The Irony of Earnings Season You could not ask for much more as far as the third quarter earnings reporting period is concerned. Well, actually you can. Top-line growth remains deficient in most cases. From an earnings headline perspective, though, things could not be much better.
23-Oct-09	Are Junk Bonds Getting Too Much Credit? In depth analysis of whether professional investors are putting too much faith in a high-yield corporate bond recovery.
19-Oct-09	Market Monitor: Still Climbing That Wall The market remains swept up in good news stories, almost to the point of being irrational in its exuberance at times or, at the least, too Pollyannaish with its thinking. To be fair, though, there is room to feel better about things.
16-Oct-09	Mind the Output Gap As the continuing claims number falls, predicting the unemployment rate from the continuing claims data leads to poor forecasts. Instead, it may be better to use the output gap as the leading indicator.
12-Oct-09	The Truth about Economic Survey Indicators While it is hard to dismiss survey indicators when they often push the market on the day they are released, it is important to understand that a long position should not be developed based on a sentiment reading.
12-Oct-09	Market Monitor: Something Has to Give In the near-term, we continue to think the market will grind its way higher, underpinned by the same factors cited above, as well as the recognition that easy comparison periods (and arguably plenty of pleasant surprises) lie ahead in the next few quarters. The longer-term outlook is more problematic in our estimation.
06-Oct-09	The Appeal of Build America Bonds In an effort to help stimulate the economy -- and with a tip of the hat to municipalities that implied they might know best how to address their fiscal needs and to keep people working -- the United States government announced a new subsidy program to help states lower their borrowing costs. The program is popularly known as Build America Bonds (BABs).
05-Oct-09	Market Monitor: Follow the Leader Something peculiar is happening in the stock market. Bad economic news is actually eliciting a negative response.
28-Sep-09	Bail Bonds Stocks are up. Treasuries and oil are up (or at least stable). Corporate bonds are up. Gold is up. Historically, all major assets classes do not rally together, but the market seems complacent. Instead, participants should at least pause to consider what the anomaly might mean.
28-Sep-09	Crude Oil Outlook -- Bearish Fundamentals Remain Our target range for the year is set at $60-80 per barrel based on expectations that third quarter gross domestic product data will support higher prices, coupled with a weaker dollar and strong non-OECD secular demand growth.
28-Sep-09	Market Monitor: Cyclical Bull, Secular Bear Our emphasis remains on favoring quality names at this juncture versus chasing performance in crowded trades.
25-Sep-09	When Will the Fed Raise Interest Rates? The market is anticipating a swift jump in rates starting in April 2010. However, using Taylor Rule estimates we believe the first rate hike will probably not take place until at least the end of 2011.
24-Sep-09	China Leveraging Up, but Near-Term Bubble Concerns Overblown The Chinese government already intervened to stop a potential credit bubble, but a subsequent rise in the country's equity and real estate markets has led to fears of an asset bubble. These fears are overblown as banks are still lending and participants have not cashed out of China's equity and real estate markets.
21-Sep-09	Market Monitor: Data Improves, but Market at Resistance The key positives we see are signs that the improvement in data appears to have some appreciable breadth, with production and sales picking up across the economy, rather than just in the automotive sector.
14-Sep-09	Market Monitor: A Historic Wall of Worry While it is undeniable that many longer-term obstacles sit firmly in our path, the stock market has nonetheless flown higher over recent months on clear signs that the unprecedented fiscal and monetary policy intervention measures have distinctly lowered borrowing costs, stabilized the banking system, and halted the economic "turtling" process across sectors.
11-Sep-09	Are Initial Claims Data Useful for Predicting Unemployment? Initial claims numbers are generally viewed as a leading indicator in forecasting the unemployment rate. But is this true? Can the unemployment rate be forecasted directly from the initial claims data? As it turns out, not very well.
08-Sep-09	Market Monitor: Take a New Aim September has a history and it is not the best history as far as the stock market is concerned. The Stock Trader's Almanac informs us that it holds the distinction of being the worst month for the stock market.
31-Aug-09	Market Monitor: Risk Aversion Lives At this stage of things, though, we are not all that enthused by what we are seeing primarily because what we are seeing is a speculative rush into high beta stocks (or into many of the garbage names if we are to use more pedestrian terms).
24-Aug-09	Market Monitor: The Shape of Things to Come? Short sellers are out of control. That is, they are out of control of the stock market, which has inflicted a lot of pain since early March, and certainly since mid-July, on participants making bearish bets.
17-Aug-09	Market Monitor: Seeing the W Through the V For us, the loss last week was not so much about the downturn as it was about the continued lack of conviction on the part of sellers.
16-Aug-09	Looking at the Jobless Recovery Ahead We are entering another jobless recovery that will be more protracted and have more economic impact than the jobless recovery following the 2001 recession.
12-Aug-09	China's Booming Auto Market; Its Implications on Oil Demand Americans may love their cars but China is the hottest automotive market in the world today. The country's urbanization and the rising standard of living over the last decade have created millions of new car owners, the impact of which is being manifested in many ways.
11-Aug-09	Long-Term Corporate Spreads Corporate bonds have been on a tear this year. Much of the rally has been built on the back of dramatically low prices that were reached during the fall of 2008 when participants went running for the exits on the thought that the United States might be headed for the next Great Depression (or worse, if that is possible).
10-Aug-09	Market Monitor: Every Rose Has Its Thorn The stock market keeps doing its thing, which is to frustrate the heck out of short sellers and to provide some comfort for long-only investors.
06-Aug-09	Market Outlook: Road Ahead Will Not Be Easy It might be true in business that the second million is easier to make than the first million, but that does not hold true for the stock market. The next 50% will be a lot harder to make than the first 50% -- and it will take a lot longer to make, too.
03-Aug-09	Market Monitor: Target Trading Range Revised Higher If you cry wolf long enough, eventually there will be a wolf. We are not crying wolf here, but we are crying for a short-term correction.
27-Jul-09	Market Monitor: A Case of Cost Cuts, Gridlock and Sentiment Happy days are here again for the stock market, yet a few months down the road we may be looking back and concluding that they were really more like delusional days.
20-Jul-09	Market Monitor: Having Trust Issues The bears were caught by surprise last week as a head-and-shoulders technical pattern in the S&P 500 that came to light with four straight losing weeks had plenty of participants thinking the worst.
13-Jul-09	Market Monitor: An Air of Uncertainty Lead, follow, or get out of the way. Right now investors seem to be getting out of the way, as incoming economic data has gotten them off the primrose path that was in full bloom throughout the spring.
26-Jun-09	Market Monitor: Stuck in a Rut The current market is a challenging one in many respects, not the least of which is the understanding that it cannot seem to make up its mind where it wants to go.
19-Jun-09	Market Monitor: The Wait Is On Things are less bad than before with the economy and earnings prospects. Recent market action (or the lack thereof), however, suggests the market is becoming more disinterested in that view, which is to say it is becoming more demanding of the headlines that drive the market.
12-Jun-09	Market Monitor: Caught Between a Rock and a Range Our belief is that the S&P will stay locked in a trading range between 825-1000.
05-Jun-09	Market Monitor: Speeding Through Potential Roadblocks Green shoots are everywhere -- or so it would seem based on the market's bullish bias that is plainly evident in rising stock prices, rising commodity prices, and rising Treasury yields. The question is do those green shoots have roots?
29-May-09	Market Monitor: A Resilient Market The month of May is over for the market and it was one of the more peculiar months of trading.
26-May-09	Peak Oil -- Mexico's Economic Reality Peak oil is a highly controversial and hotly-debated subject that was amplified last year by record oil prices... Peak oil theorists may garner all the headlines, but resource nationalism has been a much more destructive force in the sustainability of natural resources and economic welfare. One country already suffering the harsh economic reality of peak oil is Mexico.
22-May-09	Market Monitor: Dollar Ship in Icy Waters "D" is for dollar and "C" is for clobbered, which is what the dollar got this past week. Put the two together and you have "DC," as in Washington, D.C., which sits at the intersection of the market's hopes and fears about the economy.
15-May-09	Market Monitor: Digging In Get it while the getting is good. That was the marching order this past week for a sizable number of companies that came to the market with secondary offerings of stock and debt.
11-May-09	Market Outlook: Time to Settle Down Since its March 6 low the S&P 500 has gained 39%. It gained 5.9% in the week of May 8th alone, as participants breathed a collective sigh of relief that the government's stress tests for the nation's 19 largest financial institutions were not as bad as feared.
08-May-09	Market Monitor: Easy Money Has Been Made The meeting of the minds in this week's Strategy Meeting did not produce a lot of new insight. The reason being is that our views were unchanged from the prior week.
04-May-09	Crude Oil Outlook -- May 2009 Oil is a boom/bust business. We are in the latter phase and it did not take long to get there.
01-May-09	Market Monitor: Getting Carried Away One of the stock market's indefatigable qualities is that it can rationalize anything.
24-Apr-09	Market Monitor: A Period of Wait-and-See It is not often one can say things unfolded exactly as expected, but we will go ahead and make such a claim considering that the S&P 500 closed the week less than 0.1% below where it began the week -- and that is after a 4.3% decline on Monday.
17-Apr-09	Market Monitor: Sailing Toward a Consolidation Period By and large, it can be said that the batch of reporters in the past week did not do any harm to the prevailing view that the worst of the economic slowdown and the financial crisis is behind us. Still, neither the earnings reporters nor the economic data created an impression that it is smooth sailing ahead.
09-Apr-09	Market Monitor: Shying Away from Risk Aversion The first quarter earnings reporting period is upon us and the market, reportedly, is nervous about what it might hear. As we begin here, we are going to put that report to rest.
03-Apr-09	Market Monitor: Market Finds Its Footing The market continues to confirm our view that an intermediate-term market bottom has been reached.
01-Apr-09	Market Outlook: Shaping Up, but Not Ship Shape The first quarter for the stock market was a good walk spoiled by a prevailing sense of uncertainty about the outlook. It was not the start to the new year most market participants had been hoping for. In many respects, it was the start we expected.
27-Mar-09	Market Monitor: A Shift in the Balance of Power In a dramatic reversal of fortune, the hits keep coming for short sellers as the market will log its third consecutive weekly gain, leaving it on track to record its biggest monthly percent gain since March 2000 when it jumped 9.7%.
20-Mar-09	Market Monitor: Floor of Support Has Risen In brief, we think there will now be less attention toward trying to pick the absolute bottom for this bear market and more conviction in initiating, or adding to, positions at a lower cost basis.
13-Mar-09	Market Monitor: The Return of a Rational Market John Maynard Keynes said, "The market can stay irrational longer than you can stay solvent." The good news for money managers is that the market has gotten more rational after the most painful adjustment period most have ever experienced.
06-Mar-09	Market Monitor: A Time to Accumulate Our strategy meeting this past week found us agreeing on one thing. That one thing is that an investable bottom in the stock market is close at hand.
27-Feb-09	Market Monitor: Capitol Hill Pilots Capital Flight When you have to look for direction from Washington each day, you run a heightened risk of falling victim to the over-promise, under-deliver slant.
20-Feb-09	Market Monitor: A Technical Take on Things Plenty of market observers were making note of technical levels in the past week, as key support areas were violated in a broad-based downturn led by none other than the woeful Financial sector, which plummeted 16%.
13-Feb-09	Market Monitor: Confidence Shaken, Not Stirred 007 is as smooth as they come, yet even he might have been rattled by what transpired in Washington this past week.
06-Feb-09	Market Monitor: Banking on a New Bank Recovery Plan Valentine's Day lies ahead, but the coming week should feel more like Christmas because the government is on track (we presume) to deliver some new recovery packages for the Financial sector and the U.S. economy.
30-Jan-09	Market Monitor: Stuck with Uncertainty With the month of January now complete for the stock market, we know a little more. What we do not know -- and what nobody knows for certain -- is how the rest of the year will unfold for the market. History is not kind in this respect, though.
26-Jan-09	Market Monitor: The Cheap Get Cheaper Last week was a historic one for the country with Barack Obama being inaugurated the 44th President of the United States. For the stock market, though, it was another bewildering week that was governed with a sense of uncertainty about the Financial sector and the timing of an economic recovery.
16-Jan-09	Market Monitor: A Sobering Start Any number of expressions can be used to sum up the first half of the new year for the stock market, but "ugh" is the most succinct expression we can think of to sum things up so far.
02-Jan-09	Market Monitor: A Moving Target 2009 is not going to be easy from an economic standpoint or from an investing standpoint. The ingredients seem to be in place for a reflation trade, yet the scale of the deleveraging process presents a fair amount of risk still to the outlook.

31-Dec-10	Executive Summary -- December 2010 Interest rates are low; inflation rates are low; earnings growth is strong; dividends are increasing; and both fiscal and monetary policy are geared toward driving stronger levels of economic activity that will help bring down the unemployment rate. In brief, fundamental forces continue to underpin a relative valuation argument for equities.
31-Dec-10	Wake-Up Call -- 31 December 2010 U.S. equity futures point to a modestly lower open for New Year's Eve. The thin-volume environment that has persisted throughout the week is almost certain to continue today. A number of foreign markets were closed for the holiday, including Japan and South Korea in Asia and Germany, Spain and Italy in Europe, while many others were/are open for only half a session. Today's Food for Thought: Comparing yield curve movements across countries
30-Dec-10	Data Detail: Jobless Claims - Dec. 19 - 25, 2010 Even if this week's remarkable drop below 400,000 turns out to be an anomaly, the steady decline in the initial claims level over the past few weeks has provided evidence that the labor market is improving.
30-Dec-10	Wake-Up Call -- 30 December 2010 U.S. equity futures are showing little direction this morning as global markets continue to experience thin trade ahead of the near year. Treasuries are down modestly following recent volatility. Today's Food for Thought: The global rare-earth mineral market
29-Dec-10	Year in Research Review ‘Tis the season for year-end lists, retrospectives and prognostications. The tradition (for good or bad) has become as much a part of the holiday season as inflatable snowmen, Christmas ties, and an over indulgence of all things chocolate. So, in the spirit of the season, we have put together our "Year in Research Review" list, which highlights some of our top research notes from 2010. Topics range from commodity price inflation to the convergence of yields to the super consumer.
29-Dec-10	Wake-Up Call -- 29 December 2010 U.S. equity futures point to a flat open on what is expected to be another thinly-traded, end-of-the-year session. The Treasury market appears to be stabilizing following Tuesday's sharp sell-off. Today's Food for Thought: Drivers of the S&P 500 since the Lehman Bros. collapse
28-Dec-10	Unconventional Wisdom: Poking a Hole in Rosy 2011 GDP Views Following the passage of the temporary Social Security payroll tax break, some prominent economists immediately updated their 2011 forecasts and included an additional 0.7 to 1.0 percentage points to GDP growth as a result of the stimulus. Historical precedent suggests, however, that the contribution to GDP growth from the tax cut will most likely be less than half of what those economists are expecting.
28-Dec-10	Data Detail: Consumer Confidence - December 2010 Perplexing. Confounding. Confusing. Head scratching. These are all adjectives that should be used to describe the unexpected decline in the December reading of the Consumer Confidence Index. Thankfully, however, "the start of a new trend" or "a new weakness is developing within the consumer" are not likely explanations for the December drop.
28-Dec-10	Wake-Up Call -- 28 December 2010 U.S. equity futures point to a modestly stronger open this morning due to a weaker dollar, despite Chinese markets selling off for a second session following the country's rate hike over the weekend. Today's Food for Thought: Comparing U.S. and OECD tax receipts.
27-Dec-10	Fixedated: Dec. 20 - 24, 2010 Treasury yields ended the holiday week slightly higher on fairly muted action and may have found a near-term trading range. High-yield corporates outperformed their investment-grade counterparts, while munis captured headlines as one analyst called for massive defaults over the next 12 months. We do not agree with the assessment.
27-Dec-10	Wake-Up Call -- 27 December 2010: U.S. equity futures point to a modestly lower start after China surprised markets with a rate hike over the weekend. Trading volume may be even lower than usual due to winter storms on the east coast. Today's Food for Thought: Small-cap equities lead U.S. year-to-date returns
23-Dec-10	GDP Monitor: Dec. 20 - 24, 2010 As we wrap up the final month of 2010, it is nice to know, not only are we finishing on a high note, but the sectors that are leading charge -- consumption, equipment and software investment -- are healthy and sustainable.
23-Dec-10	Data Detail: Claims, Durables, PCE, Home Sales, (Nov-10) As we have stated before, and are glad to state again, the "Super Consumer" charges ahead and continues to be the main leader of the economic recovery.
23-Dec-10	Wake-Up Call -- 23 December 2010: After hitting another fresh two-year high yesterday, equity futures are flat ahead of a bevy of economic data. Participation is expected to be light ahead of the long Christmas weekend. Note: equity markets today are open during normal trading hours while bond markets will close at 2:00 p.m. ET for the Christmas holiday. Today's Food for Thought: A greater percentage of people are working at large companies as smaller companies slashed a larger number of jobs during the recession
22-Dec-10	Data Detail: GDP - Q3 2010 - Third Estimate After all was said and done, the difference in economic output over the last two quarters had only to do with inventory growth. Pessimists would see this as weakness in the recovery. However, optimists would look at this as a sign of stronger confidence in demand in the quarters ahead.
22-Dec-10	Wake-Up Call -- 22 December 2010 Equity futures are flat in quiet trading. In upcoming economic data, the final third quarter GDP reading is due at 8:30 a.m. ET. U.S. growth is expected to be revised higher to 2.7% from 2.5%, according to the Briefing.com consensus. Separately, the existing home sales and FHFA home price reports are due at 10:00 a.m. ET. Today's Food for Thought: Divergence between the volatility of the dollar and commodities
21-Dec-10	Wake-Up Call -- 21 December 2010 U.S. equity futures point to another modestly higher open this morning, rallying overnight on strength in Chinese markets. Treasuries have found a slight bid over the last few hours while the dollar is trading modestly lower following volatility in the euro and the pound. Today's Food for Thought: The dollar and commodities
20-Dec-10	Fixedated: Dec. 13 - 17, 2010 The Treasury selloff did not hold as a rally that started last Thursday left the 10-year Note basically unchanged week-over-week. The rally plays into our previously stated belief that continued volatility will breed opportunity. Word is starting to circulate now that the BABS program will be recreated in some form after the first of the year. We echo that sentiment.
20-Dec-10	Wake-Up Call -- 20 December 2010 U.S. equity futures have rebounded from modest overnight lows and point to a slightly higher open to begin this holiday-shortened week. The dollar is around unchanged though Treasuries just rallied to their best levels of the morning. Today's Food for Thought: A Stocking Full of Coal
17-Dec-10	Seeking Yield: How the Sovereign Market Got Its Sanity Back For a time, the market seemed to forget one of life's great lessons: you cannot forget the fundamentals. From little league baseball, to basic math, to driving a car, disregarding the fundamentals more than likely leads to mistakes and erratic performance. With the introduction of the euro, the market, until recently, appeared to believe that there was an unseen emperor in Europe -- one that implicitly guaranteed sovereign debt. As such, yields of the eurozone members converged to the point where the various debt issues essentially traded as if they were basically the same.
17-Dec-10	GDP Monitor: Dec. 13 - 17, 2010 The risk to our 2011 forecast from inventory changes became a little clearer this week as retailers reported a surprise cutback in inventory levels. We knew that inventory growth needed to decelerate, and it now looks more likely that the slowdown is occurring in Q4 2010 as opposed to some time in 2011.
17-Dec-10	Wake-Up Call -- 17 December 2010 U.S. equity futures point to a slightly lower open this morning, moving into the red over the last two hours as the dollar regains its overnight losses against the euro and rallies against the pound. Today's Food for Thought: Comparing the rise in the 10-year yield to mortgage rates
16-Dec-10	Data Detail: Housing Starts (Nov-10), Claims (Dec 11) After witnessing a surge in the normally stable single-family construction sector, it should be no surprise that many economists have upped their housing starts forecasts for December. However, starts are only a part of the construction picture. The number of housing units currently under construction has remained the same for the previous three months. This gives an indication that builders are not yet ready to boost actual production.
16-Dec-10	Trend Watch: Nov. 29 - Dec. 10, 2010 In this Trend Watch, we discuss the first major U.S. index poised to regain its 2007 highs, as reported versus operating earnings, increased M&A activity in 2011, the relationship between municipal bonds and Treasuries, and the potential for increased automobile production.
16-Dec-10	Wake-Up Call -- 16 December 2010 U.S. equity futures are showing little direction this morning ahead of a large batch of economic data, though they did tick lower following a disappointing quarter from FedEx. Treasuries are rebounding, however. Today's Food for Thought: Investment in clean tech venture capital
15-Dec-10	Data Detail: Inflation (Nov-10), Production (Nov-10) Producer prices continue to pick up steam. Yet, firms remain in a difficult position in that they cannot pass on those higher prices to consumers without facing adverse reactions from consumers. In order to maximize their profits, firms are going to have to examine their pricing decisions in the coming year.
15-Dec-10	Agriculture - A Rationale for a Market in Transition A strained global agricultural market over the past few years has culminated in sharp increases in soft commodity prices. While periods of high prices are not remarkable, the concurrent escalation underscored a global agricultural market in the midst of a transformation influenced by population growth and global economic and policy shifts. Population growth, greater calorie and protein consumption, and biofuels production together are increasing global demand for agricultural commodities and food products.
15-Dec-10	Wake-Up Call -- 15 December 2010: U.S. equity futures suggest a modestly lower start. Overall it has been a slow news morning. Moody's put Spain's Aa1 rating on review for a possible downgrade, noting the170 bln euros in debt that the country will need to raise in 2011.� Separately, the Senate will vote and is expected to pass the tax cut package today. Today's Food for Thought: Forward price-to-earnings ratios of global equity markets
14-Dec-10	Data Detail: Retail Sales - November 2010 The consumer-led recovery remains on track as the 2010 holiday sales period started off on strong footing. While the fourth quarter is shaping up to be one of the strongest consumption periods since the recovery began, we are beginning to wonder if there will be a significant drop-off in spending after the new year.
14-Dec-10	Wake-Up Call -- 14 December 2010 The marketplace is quiet this morning ahead of U.S. economic data and the FOMC policy directive. The one market showing any direction is the currency market, where the dollar is extending yesterday's decline ahead of the Fed announcement as the euro and yen strengthen. That weakness has helped U.S. futures push into modestly positive territory after trading slightly lower overnight. Today's Food for Thought: U.S. companies starting to dip into their cash hordes
13-Dec-10	Fixedated: Dec. 6 -10, 2010 Treasuries continued to slide last week as the 10-year ended at 3.32% -- its yield is up nearly 80 bps in just five weeks. The move is being driven partially by an increasingly positive economic outlook. However, we do not discount the idea that some investors are getting out before U.S. debt becomes "the" story. From our vantage point, volatility will be strong enough to warrant moving in and out of positions in the near term.
13-Dec-10	Wake-Up Call -- 13 December 2010 Global equity markets rallied overnight after China did not raise interest rates over the weekend, despite hotter-than-expected inflation data. U.S. futures have not followed suit, however, only recently pushing into slightly positive territory. The dollar trading higher overnight may have been one reason, but it has since lost those gains and moved lower against currencies like the euro. Today's Food for Thought: How the Bush tax cuts impacted taxpayers
10-Dec-10	GDP Monitor: Dec. 6 - 10, 2010 The consensus believes the lowering of the Social Security payroll tax rate will boost consumption and thus GDP by 0.7 - 1.0 percentage points in 2011. That type of growth seems uncharacteristic of recent consumer behaviour. We think a minor upgrade to 2011 GDP is more probable.
10-Dec-10	Data Detail: Trade Balance - October 2010 The weakness in the dollar, which many media pundits have been complaining about for the past few months as a sign of deteriorating economic prosperity, has allowed U.S. exporters to experience their best month since August 2008.
10-Dec-10	Wake-Up Call -- 10 December 2010 U.S. equity futures are trading flat-to-slightly higher this morning as a decision by the People's Bank of China to once again raise its reserve requirement failed to earn much of a reaction from market participants. Today's Food for Thought: Comparing stock market volatility across periods
09-Dec-10	Wake-Up Call -- 09 December 2010 U.S. equity futures are trading modestly higher this morning as Treasuries steady following a sharp sell-off over the last two sessions and most global markets rally. Today's Food for Thought: A divergence among investment banks
08-Dec-10	Commodities -- A Structural Imbalance: Chart Book From energy to metals, the global commodity market is expansive and complex. In light of this fact, we have put together a chart book to supplement our "Commodities -- A Structural Imbalance" investment theme research, covering all the major producing and exporting countries.
08-Dec-10	Wake-Up Call -- 08 December 2010 U.S. equity futures have been in and out of negative territory this morning but currently point toward a flat open for the major averages. Treasuries, however, are under pressure for a second day. The 10-year yield is approaching 3.25% ahead of its auction this afternoon. Today's Food for Thought: The rising cost of a college education
07-Dec-10	Wake-Up Call -- 07 December 2010 Congress and the Obama administration agreed to an extension of the Bush tax cuts late yesterday. U.S. equity futures did not immediately react to the announcement, but have rallied over the last four hours and now point to a stronger open this morning. Today's Food for Thought: The trend of aging populations
06-Dec-10	Fixedated: Nov. 29 - Dec. 3, 2010 Helped by a disappointing employment report, Treasuries rallied back sharply on Friday, but could not hold onto the gain. Corporates took a hit as well as the YTW on both high-yield and investment-grade bonds rose to levels not seen since August and September, respectively. Europe remains a bit of guessing game as every bailout simultaneously applies a patch for today while exposing the lack of a long-term solution and Germany's growing uneasiness with its role. Treasury auction demand metrics bear watching this week.
06-Dec-10	Wake-Up Call -- 06 December 2010 Global equity markets are showing little direction today as participants digest mixed comments from Federal Reserve Chairman Bernanke. Safety assets, however, are on the rise ahead of a meeting of eurozone finance ministers. Today's Food for Thought: Breaking down the Fed's emergency programs
03-Dec-10	Institutional Long Equity Allocation - Q3 2010 In aggregate, institutional investors made modest weighting changes to their long equity allocation in Q3 2010 relative to the S&P 1500. Institutional investors remain overweight consumer discretionary, health care and technology, and continued to show a preference for small- and mid-cap shares relative to the S&P 1500 weighting.
03-Dec-10	GDP Monitor: Nov. 29 - Dec. 3, 2010 For the past 12 months, our medium-term economic view has called for sluggish growth in 2011 followed by a more moderate recovery in 2012. At the same time, we expected unemployment to remain near 10.0% for most of 2011. None of that has changed. In fact, the November employment report only added to the evidence that supports our view.
03-Dec-10	Data Detail: Employment Situation - November 2010 After staring at the headline employment numbers, it is difficult to get a feeling other than disappointment in the lack of job creation in November. However, the fact is that the payroll numbers are in-line with the low-growth scenario we have been predicting for the past year.
03-Dec-10	Wake-Up Call -- 03 December 2010 U.S. equity futures are showing little direction this morning ahead of the November employment report. Today's Food for Thought: Speculation continues about Google/Groupon
02-Dec-10	Unconventional Wisdom: A Case for Employment Growth It may be in a firm's best interest to forgo capital spending and instead increase its labor inputs. Since firms already own the necessary capital that is needed to keep capital intensity levels at the current trend, hiring growth can occur immediately and the jobless recovery could give way to a full-blown labor recovery.
02-Dec-10	Data Detail: Jobless Claims - Nov. 21 - 27, 2010 While we still believe that the initial claims level is on the verge of reaching an inflection point where payroll gains can experience unimpeded growth, firms pushed back during the week ending November 27, introducing more layoffs. Still, the growth in initial claims looks more likely to be due to normal volatility patterns.
02-Dec-10	Wake-Up Call -- 02 December 2010 Global equity markets are trading higher for a second day ahead of a speech by European Central Bank President Trichet. Speculation continues as to whether he will announce an expansion to the central bank's bond purchase program. Today's Food for Thought: Unemployment by state
01-Dec-10	Data Detail: Construction (Oct-10), ISM (Nov-10) While new construction spending has waned, spending on home improvements has soared. Unfortunately for homebuilders, as more homeowners choose to improve their current home, it leaves a smaller potential buyers pool for a new home. As a result, sales may weaken and leave builders with higher inventory levels or force them to continue to cut back on new construction.
01-Dec-10	Trend Watch: Nov. 15 - 26, 2010 In this Trend Watch, we discuss a possible convergence between the prices of new and existing homes, reasons to buy California's debt, the U.K. increasing its holding of U.S. debt, a net neutrality spat, and an expansion in global drilling despite increasing regulation following the BP oil-rig disaster.
01-Dec-10	Wake-Up Call -- 01 December 2010 European markets are experiencing a relief rally today after ECB President Trichet hinted that the central bank's bond purchase program could see a significant expansion. That is helping U.S. futures rally ahead of the ADP Employment report. Today's Food for Thought: Housing prices since 2000 and the bubble peak
30-Nov-10	Executive Summary -- November 2010 The ongoing need to repair government balance sheets remains a significant headwind for equity markets. The need for austerity in these countries to improve government financial conditions will reduce aggregate demand and curtail global economic growth. This problem, however, does not undermine the relative valuation argument for equities.
30-Nov-10	Data Detail: Consumer Confidence - November 2010 The recent growth in the employment sector, combined with a stronger performance in the equity market helped drive consumer confidence in November to its highest level since June 2010. As we expect the economy to continue to rebound, future employment sector gains should keep consumer confidence inching higher.
30-Nov-10	Wake-Up Call -- 30 November 2010 U.S. equity futures point to another lower open this morning while Treasuries push higher for a fourth consecutive session. The move is being attributed to continued contagion fears in the eurozone, though there have been no new developments. Today's Food for Thought: Reviewing the Fed's new outlook for GDP and unemployment
29-Nov-10	Fixedated: Nov. 22 - 26, 2010 Treasuries saw a wide trading range last week as yields were pushed higher by good economic data and weak auction results and pulled lower on European debt concerns. At this point, the safety trade may be the only thing supporting low Treasury yields. Corporates were weaker across the board. Munis managed to rally back a bit after the prior week's sell-off.
29-Nov-10	Wake-Up Call -- 29 November 2010 U.S. equity futures traded modestly higher overnight, aided by reports of strong Black Friday spending, but have followed European markets into negative territory this morning. Today's Food for Thought: Stocks with the biggest changes to hedge fund ownership
26-Nov-10	GDP Monitor: Nov. 22 - 26, 2010 No matter how strong the economic data come in over the next several months, positive GDP growth will have a very difficult time overcoming the expected negative contribution from a deceleration in inventories.
26-Nov-10	Wake-Up Call -- 26 November 2010 Sentiment has changed once again today with U.S. futures pointing to a sharply lower open, trading down with European markets and the euro. A report this morning said pressure is being put on Portugal to join Ireland in seeking a bailout. Today's Food for Thought: Effective tax rates among tech stocks
24-Nov-10	Data Detail: Claims, PCE, Durables, Home Sales (Oct-10) During an employment recovery, the initial claims level needs to fall into a "recovery zone" where payroll growth outperforms normal cyclical job trends. Typically, the upper bound in the recovery zone is about 400,000. At this level, nonfarm payrolls grow in excess of 100,000 per month. For the first time since the recession ended, the initial claims level has fallen to the upper bound of this range.
24-Nov-10	Wake-Up Call -- 24 November 2010 U.S. equity futures point to a slightly higher open this morning ahead of a large and important batch of economic data that includes Durable Goods Orders, the jobless claims report and New Home Sales. The releases were moved to today's calendar due to tomorrow's Thanksgiving Day holiday. Today's Food for Thought: The price of Thanksgiving dinner
23-Nov-10	Market Monitor: No Real Surprises in FOMC Minutes The minutes of the November 2-3 Federal Open Market Committee meeting produced few surprises. That was not a surprise because the views expressed by Fed officials leading up to that meeting and the views expressed by Fed officials after that meeting were well known to market participants.
23-Nov-10	Data Detail: GDP - Q3 2010 - Second Estimate Newly-revised third quarter GDP data showed a much stronger economy than previously reported and continued to show that the economy is moving in the correct direction. However, we do not expect growth in excess of 2.5% to continue into the fourth quarter.
23-Nov-10	Wake-Up Call -- 23 November 2010 U.S. equity futures point to a sharply lower open on rising bilateral tensions after North Korea and South Korea exchanged fire on an island 75 miles west of Seoul. Today's Food for Thought: The 10 largest hedge funds
22-Nov-10	Fixedated: Nov. 15 - 19, 2010 The fact that Treasury yields did not push lower across the board last week amplifies how much less significant the safety trade -- as it relates to Treasuries -- has become even as Ireland and Portugal steal the headlines. Germany is flexing its muscle in the bailout talks, as we believe it should. The 10-year AAA muni broke through 3.00% -- it ran above 3.00% until early July when the 10-year Treasury was at 2.95% (close to its current level).
22-Nov-10	Wake-Up Call -- 22 November 2010 Global equity markets received a boost overnight after the EU and IMF agreed to bail out Ireland. However, U.S. futures and European markets have given up their gains while Treasuries and the dollar rebound. Participants expected Ireland to ask for aid last week, so it was most likely already priced into the market. Add in the fact that there is continued anxiety about contagion (i.e., Portugal) and that helps explain why equities were unable to hold their gains. Today's Food for Thought: Defense spending on the chopping block
19-Nov-10	U.S. Economic Outlook - Q4 2010 With low growth on the horizon, the Federal Reserve has enacted a second round of quantitative easing in an attempt to spur the economy. With demand for credit down and banks still holding tight to their excess reserves, it is uncertain at this time if the quantitative easing will have its intended effect. The U.S. economy is growing below its potential and is expected to continue to do so in 2011. However, we believe there is greater upside risk than downside risk to our conservative economic outlook.
19-Nov-10	Wake-Up Call -- 19 November 2010 U.S. equity futures point to a modestly lower open this morning as participants digest another increase in China's reserve requirement, continued uncertainty about the path for Ireland and a speech overnight from Federal Reserve Chairman Bernanke. Today's Food for Thought: GM, before and after
18-Nov-10	Data Detail: Jobless Claims - Nov. 7-13, 2010 The latest initial claims report might not have produced much of a surprise relative to the consensus estimate, yet it has provided surprisingly good news for the labor market as claims held below the 450,000 level for the second straight week without any special factors. This is the claims report that will factor into the November employment report. That should set an encouraging tone given that initial claims were at 455,000 in the week that factored into the October employment report, which subsequently showed a 159,000 increase in private-sector hiring.
18-Nov-10	Wake-Up Call -- 18 November 2010 Global equity markets are trading sharply higher today as the negative sentiment that has permeated through the market since last week seems to be dissipating. Ireland is holding talks today with the European Commission, the European Central Bank and IMF officials and participants are optimistic ahead of any announcement. Today's Food for Thought: Measuring market value to GDP
17-Nov-10	Data Detail: Inflation (Oct-10), Housing Starts (Oct-10) Producer and consumer price trends are moving in opposite directions, which does not bode well for future profitability. Producers continue to face an upward-moving commodity price path, but slack in the labor market and the concurrent decline in income make it extremely difficult to pass-through the higher commodity prices to consumers.
17-Nov-10	Wake-Up Call -- 17 November 2010 U.S. equity futures are trading around unchanged this morning. Participants shrugged off another decline in Chinese markets overnight as they continue to digest the prospects of a bailout of Ireland and await an important batch of economic data (Housing Starts/Permits, CPI). Today's Food for Thought: Those companies with exposure to Wal-Mart
16-Nov-10	Data Detail: Industrial Production - October 2010 The manufacturing sector continues to be a main source of economic activity as the economy continues to struggle to gain its footing during the recovery. While manufacturing still has a long way to go before output and capacity utilization reach normal levels, it is definitely on the right track and shows few signs of potential weaknesses.
16-Nov-10	Wake-Up Call -- 16 November 2010 U.S. equity futures point to another lower open this morning, led for a second time in three sessions by a sharp drop in Chinese markets. Continued worries about Ireland's debt situation ahead of a key meeting of eurozone finance ministers are also weighing on markets. Earnings from the likes of major retailers Wal-Mart and Home Depot are taking a backseat. Treasuries are confirming the move as they rebound following two sessions of sharp gains. Today's Food for Thought: Comparing corruption across the BRICs, the G3 and the PIIGS
15-Nov-10	Data Detail: Retail Sales - October 2010 With all of the so-called problems with the consumer, including high debt loads and a heightened unemployment rate, it would seem that a consumer led recovery would be the most improbable growth scenario. Yet, that is exactly what has happened over the last five quarters, and after the October retail sales report, it looks to continue into the foreseeable future.
15-Nov-10	Fixedated: Nov. 8 - 12, 2010 Treasuries took a hit all along the curve last week as the market began to see the end of the road for QE2 support. However, the 30-year sale was not the Titanic-like situation it was made out to be. Corporates were weaker across the board, but high-yield has noticeably outperformed over the last two months. California will be out with a debt sale scheduled to reach nearly $14 bln. We expect good demand despite budget woes.
15-Nov-10	Wake-Up Call -- 15 November 2010 U.S. equity futures point to a modestly higher open this morning, despite a rally in the dollar. U.S. Treasury yields are also higher. Today's Food for Thought: Likely opposition to plans to reduce public debt
12-Nov-10	GDP Monitor: Nov. 8 - 12, 2010 The revised data from last month continues to roll in at stronger-than-expected levels. While we still believe that growth will remain sluggish through most of 2011, the surprises have definitely shifted from the downside toward the upside.
12-Nov-10	Wake-Up Call -- 12 November 2010 U.S. equity futures point to a lower open this morning after Chinese markets plunged overnight on fears of further tightening measures, but are off their worst levels on rumors of an imminent Irish bailout. Today's Food for Thought: The roller coaster ride in the Irish bond market
11-Nov-10	Wake-Up Call -- 11 November 2010 U.S. equity futures are trading sharply lower this morning following disappointing earnings and guidance from tech bellwether Cisco. NASDAQ futures are seeing an even larger decline. The move lower comes with the U.S. Treasury market closed in observance of the Veterans Day holiday and as the G20 summit kicks off today in South Korea. Ireland remains the story in Europe as the country’s bond yields continue to surge. Today's Food for Thought: The Corruption Perceptions Index
10-Nov-10	Trend Watch: Oct. 25 - Nov. 5, 2010 In this Trend Watch, we discuss the super consumer, increasing crude oil prices and their possible impact on alternative energy stocks, potential unlocked value in REITs, and Toyota's declining market share.
10-Nov-10	Data Detail: Jobless Claims (Nov 6), Trade Balance (Sep 10) Following 12 grueling months of stable initial claims data, the labor sector may finally be reaching a turning point as the claims level broke below 440,000 for the first time since the beginning of the recession. When coupled with the 151,000 increase in nonfarm payrolls in October, the employment sector finally looks like it is on a stable upward trend.
10-Nov-10	Wake-Up Call -- 10 November 2010 U.S. equity futures are showing little direction this morning as the dollar trades mixed against the other major currencies. Treasuries looked to rebound overnight following three consecutive lower sessions, but have given up their modest gains and are trading lower once again this morning. Today's Food for Thought: Renewable energy sources
09-Nov-10	Financial Review: Fed Surveys Show a Lack of Loan Demand It will be interesting to see if the demand for credit, and the willingness to extend credit, increases in the wake of QE2, which occurred after the Senior Loan Officer Survey was conducted. While QE2 has started to stoke higher inflation expectations, the October survey is a reminder that broad inflation pressures should remain subdued for the time being. A separate report from the New York Fed indicated consumers were clearly in a deleveraging mind-set in 2009. If it persists, the U.S. economy seems likely to continue to grow below its potential which, in turn, should keep inflation pressures in check.
09-Nov-10	Wake-Up Call -- 09 November 2010 The inverse trade with the dollar continued overnight. U.S. equity futures have been trending higher over the last four hours, moving from slightly negative to slightly positive territory as the dollar trends lower against the other major currencies. The weaker dollar is pushing commodities higher, in particular precious metals. Today's Food for Thought: Comparing M2 and excess reserves
08-Nov-10	Seeking Yield: All Is Well. Nothing to See Here. "It could have been worse" appears to have become the post-recession victory cry and that mentality is contributing to what we believe is a sense of complacency in the fixed income market with regards to corporate debt. We would agree that the short-term default risks have been reduced dramatically. However, what defines short-term is debatable and what has supported this yield recovery is not guaranteed to continue in the coming years. While high-yield corporate debt may perform well in the coming days and months, we believe it is prudent for managers to start thinking about their allocation choices.
08-Nov-10	Fixedated: Nov. 1 - 5, 2010 Treasuries showed just how volatile they can be as participants struggled to define the risk factors currently in the market. The 30-year took the brunt of the selling and its upcoming auction could be interesting. Corporates continued to catch a bid as the investment-grade and high-grade indices we follow saw their yields head lower. The ML U.S. HY Mstr II Index is now just 27 bps away from its 10-year YTM low. European debt issues may be reaching another tipping point as Germany looks to mitigate future problems.
08-Nov-10	Wake-Up Call -- 08 November 2010 U.S. equity futures are trading modestly lower this morning after the dollar rallied overnight. Today's Food for Thought: Breaking down the economic recovery in Germany
05-Nov-10	GDP Monitor: Nov. 1 - 5, 2010 The first GDP forecast for a quarter usually entails a lot of guess work. Most of the data in the third quarter pointed toward a similar view for the fourth quarter. However, the October employment report offered a new perspective. Private payroll growth may have finally reached an inflection point where future growth is not only expected but assured. As a result, it could generate stronger-than-expected consumption forecasts and drive GDP growth toward 3.0% in the near term.
05-Nov-10	Market Monitor: Free of Risks, but Not Risk-Free With the outcome of the midterm elections and the Federal Reserve's quantitative easing strategy now known, some key risks for the market have been eliminated, yet this is not a risk-free environment. We take a look at some additional near-term risks for the market, yet come back to the idea that there is still a wide gap between the forward four quarter earnings yield for the S&P 500 and the 10-year note that points to a value proposition in owning stocks versus bonds for the long term.
05-Nov-10	Data Detail: Employment Report - October 2010 A large schism has developed between sectors that are still feeling the squeeze from the recession - which explains the stable claims data - and those that are expanding. We can now say with assurance that the expanding subset is outperforming the weaker sectors by a wide margin and should continue to foster growth over the coming months.
05-Nov-10	Wake-Up Call -- 05 November 2010: Stock futures currently suggest a slightly lower start as traders await the October employment report due at 8:30 a.m. ET. A gain of 60,000 nonfarm payrolls is expected in both the headline and private readings, according to the Briefing.com consensus. The unemployment rate is expected to hold steady at 9.7%. Today's Food for Thought: Historic negative correlation between the S&P 500 and the Dollar Index
04-Nov-10	Despite Jumping the QE2 Gun, Risks Remain to Upside for Oil The unintended consequences of "QE2" may sound like a bad sequel, but the reality of the Federal Reserve's liquidity injection is the potential for another commodity price shock. While the Fed's aim is to spur economic demand and job creation, QE2 will serve to weaken the dollar further and push commodity prices higher. While prices are more macro-centric versus fundamentals, the latter is tightening. The swing factor will be the pace and trajectory of OECD demand, coupled with non-OPEC production growth.
04-Nov-10	Data Detail: Jobless Claims - Oct. 24 - 30, 2010 The biases from the Columbus Day Holiday were removed this week, and instead of pointing toward a trend of fewer layoffs, initial claims simply returned to the 450,000 - 500,000 range that they have stubbornly stuck between since November 2009. The lack of a downward move leaves little hope for a substantial positive surprise in tomorrow's employment report.
04-Nov-10	Wake-Up Call -- 04 November 2010 U.S. equity futures point to a higher open this morning, rallying as the dollar sold off, while the 30-year Treasury remains under pressure. Today's Food for Thought: Government and nongovernment debt issuance.
03-Nov-10	Wake-Up Call -- 03 November 2010 U.S. equity futures are showing little direction premarket as the midterm elections played out as the market expected and as participants await the FOMC policy directive, and the (potential) announcement of another round of quantitative easing, this afternoon. That will be preceded by the ADP Employment report a little later this morning. Today's Food for Thought: The Fed's balance sheet versus the Financial Stress Index
02-Nov-10	Wake-Up Call -- 02 November 2010 U.S. equity markets point to a higher open on midterm election day, trending up on a weaker dollar and strength in European markets. Today's Food for Thought: International trade
01-Nov-10	Data Detail: PCE (Sep-10) Construction (Sep-10) ISM (Oct 10) The personal income and spending report from the final month of the quarter is typically a redundant report as the data have already been aggregated into the third quarter GDP numbers. As a result, the report normally lacks new information on how the economic recovery is proceeding. However, the September data revealed a new trend in savings that could have a profound effect on long-term economic growth.
01-Nov-10	Fixedated: October 25 - October 29, 2010 Treasuries sold off last week on concerns that QE2 will not be as big as the market had hoped, but they recaptured about half of their losses by Friday. Corporates were mixed for most of the week, but closed out Friday basically unchanged. Munis gave up a bit of ground as the FactSet 10-year AAA yield broke through the 2.70% level for the first time since August 16. The big stories this week will be the elections and the "will he, won't he, and how big will the ring be" storyline of QE2 (FOMC meeting Wed).
01-Nov-10	Wake-Up Call -- 01 November 2010 U.S. equity futures point to a higher open this morning following better-than-expected economic data out of China and ahead of this week's two major events -- the midterm elections and the FOMC meeting. Today's Food for Thought: Revisiting the chances republicans taking over the House and Senate
29-Oct-10	GDP Monitor: Reconciliation with Q3 2010 GDP GDP growth accelerated in the third quarter, but still remains below the 2.7% - 3.0% needed to foster employment growth. Until GDP reaches this level, households will continue to feel as if the recession has not ended due to elevated unemployment levels, even though economic output has increased for five consecutive quarters. At the same time, the details of the GDP data do not showcase a single sector that could lead the U.S. into that type of a recovery.
29-Oct-10	The Ripple Effects from Structural Changes in Corn The agricultural sector made headlines this summer after a record-setting drought in Russia disrupted global wheat and barley supplies. The event served as a catalyst for the recalibration of fundamentals in a market that had become beset by complacency. Structural demands including socioeconomic-supported dietary changes, ethanol production and expanding retail gasoline blends in the U.S. and Europe, coupled with near-term supply stresses will remain constructive for agricultural prices over the near to medium term.
29-Oct-10	Wake-Up Call -- 29 October 2010 U.S. equity futures are trading lower this morning following weakness overseas and ahead of the release of the advance Q3 2010 GDP report at 8:30 a.m. ET. Specifically, Japan released a batch of September economic data overnight that disappointed market participants. They continue to digest third quarter earnings reports, though, with the move lower occurring despite better-than-expected results from tech bellwether Microsoft. Today's Food for Thought: Trends in smoking
28-Oct-10	Data Detail: Jobless Claims - Oct. 17 - 23, 2010 The hope that businesses finally decided to refrain from introducing more layoffs was dashed as the strongest initial claims level in over three months was negated by poor seasonal adjustment factors.
28-Oct-10	Wake-Up Call -- 28 October 2010 U.S. equity futures are trading around unchanged this morning as participants digest another large batch of third quarter earnings results. The dollar, however, has already given back its gains from yesterday while Treasuries are rebounding somewhat. Today's Food for Thought: Comparing GDP per capita
27-Oct-10	Trend Watch: Oct. 11 - 22, 2010 In this Trend Watch, we discuss the weaker dollar, a possible inflection point in private nonresidential construction spending, the effect of strong 2010 earnings results on 2011 earnings expectations, and corruption, taxes and the return (again) of sovereign debt fears.
27-Oct-10	Data Detail: Durable Orders (Sept-10), Home Sales (Sept-10) The latest durable goods report highlights the fact that the ISM report is an unreliable indicator for the manufacturing sector. While the ISM suggests the manufacturing sector is on unstable footing, the durables report shows production should remain steady for the foreseeable future. We updated our third quarter GDP forecast for the final time prior to Friday's release. Our forecast was revised up from 1.3% to 1.5% on stronger-than-expected growth in durable goods inventories.
27-Oct-10	Wake-Up Call -- 27 October 2010 U.S. equity futures point to a lower open this morning, with the move being attributed to fears any potential quantitative easing from the Federal Reserve may be smaller than expected, which sent the dollar higher. Today's Food for Thought: Unemployment by education
26-Oct-10	Data Detail: Consumer Confidence - October 2010 As the Conference Board's Consumer Confidence Index and the University of Michigan Consumer Sentiment Index Confusion diverge, the data suggest that consumers are left in a listless state of confusion.
26-Oct-10	National Broadband Plan -- The Cloud Computing Spark Plug? The FCC's National Broadband Plan aims to build the world's largest, fastest, and most widely-adopted network. If enacted as envisioned, there is no question that it would indeed be a strong stimulating force in the telecommunications sector. The increase in capacity and coverage in the wireless spectrum would enable cloud computing applications of much greater impact than are now seen. However, the political environment will likely determine how effective the plan becomes and which recommendations are adopted given the demand, legal, financial and political hurdles that currently exist.
26-Oct-10	Wake-Up Call -- 26 October 2010 U.S. equity futures are trading modestly lower this morning following lower trade overseas and as participants digest the next round of third quarter earnings reports. Today's Food for Thought: The negative TIPS yield from yesterday's Treasury auction should not come as a surprise.
25-Oct-10	Executive Summary -- October 2010 Our research continues to indicate moderate U.S. economic growth with upside potential above conventional wisdom. This, in conjunction with solid global economic growth, will lead to moderate earnings growth for S&P 500 companies in 2011 that will, over time, lead to a reduction in the risk premium and thus a valuation correction.
25-Oct-10	Fixedated: October 18 - 22, 2010 Treasury yields have continued to hold at low levels even as equities have rallied and money has flowed into commodities. The message? All is well -- so long as the Fed releases QE2 next week to receptive audiences around the world.
25-Oct-10	Wake-Up Call -- 25 October 2010 U.S. equity futures point to a higher open this morning as global markets rally and the dollar sells off following the G20 meeting. Today's Food for Thought: Measuring stock moves following earnings beats/misses
22-Oct-10	Wake-Up Call -- 22 October 2010 The focus this morning is on the G20 summit that begins today in South Korea and market participants are remaining cautious ahead of it. Treasury Secretary Geithner has already urged countries to not undertake structural currency policies in order to stimulate growth at the expense of their partners. U.S. equity futures have shown little direction overnight and currently point toward a flat open. Participants are also digesting the latest round of third quarter earnings reports, showing a mixed reaction thus far. Today's Food for Thought: Major net exporters/importers of grain commodities
22-Oct-10	GDP Monitor: October 18 - 22, 2010 Finally, the advance estimate for third quarter GDP will be released at the end of next week. After an up-and-down quarter, our GDP forecast ended close to where it started.
21-Oct-10	Wake-Up Call -- 21 October 2010 U.S. equity futures point to a higher open this morning. They noticeably improved at 3:30 a.m. ET, the same time European markets were rebounding from a modestly lower open following positive economic data. U.S. futures are also benefitting from another strong batch of third quarter earnings results. Today's Food for Thought: World population expectations
21-Oct-10	Caterpillar Sets up for a Breakout Year in 2011 Caterpillar plays a central role in our "Commodities -- A Structural Imbalance" investment theme. The company's machines and engines are involved in all aspects of the global economy, from mining raw materials to harvesting agriculture, powering electrical systems and off-shore rigs, and building roads, bridges and damns across every terrain around the globe. As such, we take particular interest in its quarterly results as a means to navigate global demand trends and end-market growth.
21-Oct-10	Data Detail: Jobless Claims - Oct. 10 - 16, 2010 The latest jobless claims report continued to reinforce the notion of a jobless recovery. On the surface, the initial claims level posted a moderate weekly decline. However, the level remains bounded between 450,000 and 500,000 as it has since November 2009.
20-Oct-10	Wake-Up Call -- 20 October 2010 The market looks to rebound today as U.S. equity futures point to a modestly higher open. The dollar has already given back a good portion of yesterday's rebound rally while participants have another round of earnings results to digest. Today's Food for Thought: Apple's growing balance sheet
20-Oct-10	Unconventional Wisdom: A Look at Inflation Expectations Since the Federal Reserve's implied inflation target is 2.0% - 2.5% in the CPI, the 5-year, 5-year forward breakeven should hold between those bounds as long the market believes the Fed is able to maintain its inflation target. Over the past several days that rate has spiked to 3.5%, the highest level in the history of the index, which calls into question the market's perception about the Fed's ability to keep inflation stable.
20-Oct-10	Market Monitor: Think Globally, Act Locally (Supplement) In a follow-up piece to our report last Friday that examined the international sales exposure of companies in the Dow Jones Industrial Average, we have provided a breakdown of each component's exposure based on specific geographic segment data reported in their most recent 10K filing. Additionally, we have provided price-to-earnings and dividend yield data for each of the Dow 30 companies.
19-Oct-10	Wake-Up Call -- 19 October 2010 U.S. equity futures traded lower overnight following disappointing reactions to earnings from tech bellwethers IBM and Apple. While NASDAQ futures continued to trade sharply lower, S&P futures were trending toward unchanged until China surprised the market by raising its 1-year lending and deposit rates by 25 bps. Participants continue to digest earnings reports this morning from a number of market stalwarts, but also have a calendar full of Federal Reserve speakers, as well as housing data in the form of starts and permits at 8:30 a.m. ET. Today's Food for Thought: Internet download speeds by country
19-Oct-10	Data Detail: Housing Starts - September 2010 For the past several months, irrational expectations or possibly delusions of grandeur have led the construction sector into building more homes even though sales and demand have, at best, stalled. The data from September seem to reveal that homebuilders have come back to a more rational approach as future construction looks to be more in-line with consensus sales expectations.
18-Oct-10	Wake-Up Call -- 18 October 2010 U.S. equity futures sold off overnight as the dollar rebounded against most of the major currencies and Asian markets gave up their opening gains. European markets also opened lower, but they have rebounded and are trading modestly higher at midday. U.S. futures are also off their worst levels, but still point to a slightly lower open this morning. Today's Food for Thought: Gold exports/imports
18-Oct-10	Financial Review: Q3 2010 Bank Earnings and Sept. Trust Data The third quarter earnings reporting season began in earnest last week. Three major financial institutions have already released results -- JPMorgan Chase, GE Capital and Citigroup. We continued to look for improvements in the credit and lending market that would provide a read on credit demand. Bank earnings thus far, as well as Friday's September Trust data from banks and credit card companies, told us two things: 1) there is both statistical and anecdotal evidence that demand for loans has stopped declining and 2) credit quality continued to improve in the form of decreasing net charge offs.
18-Oct-10	Data Detail: Industrial Production - September 2010 For the past several months, the ISM manufacturing index has slowly decelerated, finally reaching a point where production growth was hedged solely upon gains in new orders. Due to the volatility in new orders growth, a one-time drop in orders could have a pronounced negative effect on manufacturing production. That seemed to happen in September.
18-Oct-10	Fixedated: October 11 - 15, 2010 Treasury yields pushed lower early in the week, but reversed course on generally good economic data and earnings reports. Corporates were mixed as high-yield debt continued to attract attention while investment-grade yields sold off with Treasuries. Munis were near their lows for the year as demand remained high for top deals.
15-Oct-10	Wake-Up Call -- 15 October 2010 U.S. equity futures are trading around unchanged this morning as market participants digest earnings reports from two major companies and await a crowded economic calendar. Earnings came in mixed as Google blew away bottom-line estimates in the third quarter but GE missed on the top line. Market participants have a large batch of economic data this morning, including Retail Sales and CPI, but they will be preceded by a speech from Federal Reserve Chairman Bernanke on monetary policy and inflation. Today's Food for Thought: Summarizing currency policy actions thus far
15-Oct-10	Market Monitor: Think Globally, Act Locally Market pundits continue to push the investment opportunities available outside the U.S., namely in the emerging and developing economies of Asia and Latin America. Large-cap, U.S. companies with global brands and reasonable earnings multiples offer a conservative pathway to investing in those regions since their sales prospects are linked to the faster-growing economies, and not the fast-money financial markets, of the emerging and developing nations. In this report, we take a look at the Dow 30 and specifically at their international exposure. We also highlight other multinational companies that have strong global brands and market share position that will enable them to benefit from the economic growth outside the U.S.
15-Oct-10	GDP Monitor: October 11 - 15, 2010 While there was nothing abnormal in the headline inflation data, the details -- specifically the way higher producer food prices were not able to be passed through to consumers -- increased the probability of deflation in 2011.
15-Oct-10	Data Detail: Inflation (Sep-10), Retail Sales (Sep-10) The discrepancy between the producer and consumer inflation data in September only enhances the theory that the U.S. economy is more likely headed toward a deflationary environment than an inflationary one.
14-Oct-10	Wake-Up Call -- 14 October 2010 U.S. equity futures have a slight bid this morning, ahead of a large batch of economic data at 8:30 a.m. ET that includes the weekly claims report, PPI and the trade deficit. The real story is taking place in currency markets, however, as the dollar moved sharply lower overnight as foreign investors price in further quantitative easing from the Federal Reserve next month. Today's Food for Thought: Some stocks beginning to hit new highs
14-Oct-10	Seeking Yield: Munis - Real Value or Capitulation? In the current environment, fixed-income purchases can often feel like an exercise in futility for relative-value buyers. Certainly, what qualifies as and, just as importantly, what defines a relative-value investment changes over time. In the not too distant past, munis were considered reasonably valued when their yields were around 85% of Treasury yields. As Treasury yields have moved ever lower, that relationship has broken down. Between June 22 and Oct. 1, the ratio exceeded 100% 31 times while falling below 96% only seven times. If yields are indeed converging, it is possible that munis have long been too cheap and are still cheaper than they should be. Indeed, investors might be hard pressed to find a better value.
14-Oct-10	Data Detail: Jobless Claims (Oct. 9), Trade Balance (Aug-10) Strong demand for imported consumer goods in August put a dent into our theory that a weaker dollar would contribute to a lack of import growth, and with it, a decline in the trade deficit. Instead, firms and consumers alike seem to have discounted currency moves and related price increases when making decisions on where to buy.
13-Oct-10	Wake-Up Call -- 13 October 2010 U.S. equity futures point to a sharply higher open this morning following a positive start to third-quarter earnings season and strong trading overseas. Today's Food for Thought: Sherman Antitrust violations
13-Oct-10	Trend Watch: Sept. 27 - Oct. 8, 2010 In this Trend Watch, we discuss the differences between U.S. economic projections from the Federal Reserve/IMF and their potential impact on any further quantitative easing, the effects of austerity measures on GDP, the effect of GDP expectations on the stock market, and the potential for a good third quarter earnings season to be already priced into stocks.
12-Oct-10	Wake-Up Call -- 12 October 2010 U.S. equity futures point to a lower open this morning following weaker trade overseas. The Treasury market, which reopened overnight following yesterday's Columbus Day holiday, is confirming the move as 2-, 3-, 5-, 7- and 10-year Note yields all hit fresh lows. $32 bln in 3-year Notes will be auctioned off later today. Talk in the marketplace continues to focus on the potential for further quantitative easing from the Federal Reserve. This afternoon's release of the FOMC Minutes from the Sept. 21 meeting will be closely read for clues on the central bank's next move. This week's major earnings announcements also begin after the close with Intel and CSX Corp. reporting third quarter results. Today's Food for Thought: The issue of obesity
11-Oct-10	Wake-Up Call -- 11 October 2010 Talk in the marketplace continues to focus on the potential for further quantitative easing from the Federal Reserve, in particular following Friday's disappointing employment report. The speculation has not created much of a bid this morning, however, as U.S. equity futures are flat to very slightly higher against fair value. Today's Food for Thought: GDP growth since the beginning of the recession
11-Oct-10	Fixedated: October 4 - 8, 2010 Treasuries had another strong week on data that pointed to a sluggish economic recovery and the belief that another stimulus package is on the way. The 2- , 3- , 5- , and 7-year Notes all touched record lows. High-yield and investment-grade corporates both showed gains as well. The ML U.S. 7-10 Yr Corp A index hit an all-time low of 3.70% on Friday (12-31-96 inception). Munis trended sideways while demand for new paper remained strong last week. Treasury auctions, another round of QE, and Q3 earnings will be the focuses for the week.
08-Oct-10	Wake-Up Call -- 08 October 2010 U.S. equity futures are trading modestly lower ahead of the September employment report at 8:30 a.m. ET. That is actually more direction than they usually show ahead of the highly-anticipated report, as weakness overseas and a slightly stronger dollar offset positive earnings from Alcoa. Today's Food for Thought: Corporate yields at new lows, but spreads remain wide
08-Oct-10	GDP Monitor: October 4 - 8, 2010 While the employment data do not feed directly into our GDP model, the failure of private payroll gains to offset the loss of government jobs is a little disconcerting for our medium-term forecast. The lack of job growth increases the likelihood of a second round of quantitative easing, which has the potential of increasing our short-term outlook before a payback period develops in 2011.
08-Oct-10	Data Detail: Employment Report - September 2010 The September employment report revealed the opposing sides to the future of the economic recovery. On the "hands off" side, private payroll growth continued unimpeded, albeit at a slow pace. On the quantitative easing side, chronic mismanagement at the state and local government levels wiped out all of last month's private sector gains. With fiscal stimulus out of the picture until after the midterm elections, the Federal Reserve will have to make a decision on which side is more likely to drive the economy over the next several months.
07-Oct-10	Wake-Up Call -- 07 October 2010 U.S. equity futures are showing little direction on a busy morning that includes European central bank decisions, a continued downtrend in the dollar and September same-store sales results. Today's Food for Thought: Housing vacancy estimates
07-Oct-10	Data Detail: Jobless Claims - Sept. 26 - Oct. 2, 2010 After a couple of weeks of near misses, the initial claims level finally broke through the 450,000 barrier for the first time since May and seemingly ended months of malaise in the weekly employment data. However, as much as we would like to break out the champagne and make plans for a ticker-tape parade, the move is largely symbolic and does not necessarily suggest new hiring growth is just around the corner.
06-Oct-10	Wake-Up Call -- 06 October 2010 Following yesterday's strong gains, stock futures suggest a relatively flat opening for the cash market after slipping from early morning highs; however, the ADP employment at 8:15 a.m. ET has the potential to shake things up a bit. The Briefing.com consensus expects an increase of 18,000 in private nonfarm payrolls. Today's Food for Thought: The S&P 500 faces a $262 bln pension fund shortfall
06-Oct-10	The U.S. Employment Situation: the Good, the Bad, the Ugly It is easy to listen to the media and think that the employment situation failed to improve following the end of the 2007 recession. Yet, by almost every measure, the recovery in the labor sector following the 2007 recession is moving at a quicker pace than it did following the recoveries after the 1990 and 2001 recessions. Moreover, it is only just slightly weaker by many measures than the recovery after the 1981 recession.
05-Oct-10	Wake-Up Call -- 05 October 2010 U.S. equity futures are trading modestly higher this morning following a number of developments overseas. The Nikkei outperformed, rising 1.5% after the Bank of Japan cut its benchmark overnight lending rate from 0.1% to a range of 0.0-0.1% and created a 5 tln yen fund to boost liquidity. European markets rallied in early trade this morning on better-than-expected economic data, but most have moved off their best levels and have only a modest bid at midday. Today's Food for Thought: State funding deficits, part II
04-Oct-10	Wake-Up Call -- 04 October 2010 U.S. equity futures point to a modestly lower open this morning, following European markets lower as the dollar rebounds against the euro. Economic data in the form of August Pending Home Sales and Factory Orders could act as a catalyst later in the morning. Today's Food for Thought: State funding deficits
04-Oct-10	Fixedated: September 27 - October 1, 2010 Treasuries could not hold onto their lowest levels of the week, but still ended on a positive note on mixed economic data. Investment-grade and high-yield corporates both gained last week as issuance -- and appetite -- remained high. The ML U.S. High Yield Mstr II Index yield reached yet another 52-week low while the ML U.S. Corp 7-10 Yr "A" Index is only 8 bps from its own 52-week low. Muni yields ended the week slightly higher and the 10-year FactSet AAA muni rose to 105.2% of the 10-year Treasury (2.65% vs. 2.52%, respectively).
01-Oct-10	Wake-Up Call -- 01 October 2010 U.S. equity markets are pointing to a higher open this morning following another busy session overseas. Asia rallied overnight, helped by a better-than-expected PMI Manufacturing figure out of China. European markets opened higher earlier this morning, but are trading mixed at midday. Irish and Portuguese bond yields are coming in for a second day, though Greek bond yields are actually seeing the largest move lower. Today's Food for Thought: Gaming market dealing with weak console sales, delays
01-Oct-10	GDP Monitor: Sept. 27 - Oct. 1, 2010 The personal income, spending and construction data from August showed marked improvement compared to consensus expectations. At first glance, this data would seemingly confirm that the economic recovery was growing faster than anticipated. However, that would be the wrong conclusion. This week's data actually proved that faster growth will be a struggle in future quarters.
01-Oct-10	Data Detail: PCE (Aug-10) Construction (Aug-10) ISM (Sep-10) As much as we would like to believe that the stronger-than-expected growth in income, spending, and construction expenditures in August was the start of an accelerated growth phase, the details of the data confirm that the new found growth only occurred because the government decided to open up the till and hand out money.
30-Sep-10	Wake-Up Call -- 30 September 2010 U.S. equity markets are pointing to a modestly lower open this morning, having rebounded from lower levels overnight following busy sessions overseas. Today's Food for Thought: AIG and the Treasury finalize an exit plan.
30-Sep-10	Data Detail: Jobless Claims - September 19 - 25, 2010 After experiencing one week of seemingly unusual volatility, the initial claims level rebounded and returned to the 450,000 claimant level that it had settled at during the first two weeks of September.
29-Sep-10	Wake-Up Call -- 29 September 2010 U.S. equity futures are showing little direction this morning, even with HP issuing upside FY11 guidance yesterday after the close, but there has been a lot of action overseas. Today's Food for Thought: A look at the U.S. IPO market
29-Sep-10	Negative TIPS Yields Are Nothing to Worry About As the 5-year TIPS yield has been periodically falling below zero, we have been hearing reports that the move is signalling the market's belief that the Fed has lost control over monetary policy and that deflation is imminent. Do not believe those reports.
29-Sep-10	Trend Watch: Sept. 13 - 24, 2010 In this Trend Watch, we discuss two uses of corporate cash, the comparison between President Obama's approval rating and the S&P 500, and the "exchange-rate war" and its impact on U.S. multinationals.
28-Sep-10	Wake-Up Call -- 28 September 2010 Global equity markets traded lower overnight on persistent fears about the eurozone sovereign debt situation. However, they have since rebounded and U.S. futures currently point to a flat open for the major averages. Today's Food for Thought: Comparing Southwest Airlines to other U.S. airlines
28-Sep-10	Data Detail: Consumer Confidence - September 2010 Just as the character Howard Beale famously said in Network, "I want you to go to the window, open it, stick your head out and yell: ‘I'm as mad as hell, and I'm not going to take this anymore!'," consumers are listening and reacting to the negative political messages being broadcast about the economy.
27-Sep-10	Wake-Up Call -- 27 September 2010 U.S. equity markets are showing little direction on a slow morning to begin the week. This week's economic calendar is very thin, but there is another round of Treasury auctions beginning with today's 2-year Note sale. While equity markets are not showing much direction, Treasuries are notably higher this morning, regaining their declines from Friday. Today's Food for Thought: Ranking companies by assets
27-Sep-10	Fixedated: September 20 - 24, 2010 Treasuries rallied last week as the 10-year reached a 2.48% before retreating to a 2.61% on Friday as equities ran higher on solid durable goods numbers and a general turn in sentiment. The Treasury will reenter the markets this week with three major auctions (2-, 5-, and 7-year Notes). Corporates were mixed. Investment-grade debt saw a nice rally while high-yield bonds basically treaded water. Munis trended back toward their low yields for the year as participants snapped up last week's new issues.
24-Sep-10	Wake-Up Call -- 24 September 2010 U.S. equity markets have a modest bid ahead of a key batch of economic data this morning -- Durable Goods Orders at 8:30 a.m. ET and New Home Sales at 10:00 a.m. ET... There was plenty of volatility in Japan, overnight. The Nikkei traded sharply lower at its open, but regained all of those declines just after midnight as the yen spiked lower against the dollar. Speculation centered on the belief that Japanese authorities intervened in the currency for a second time, but nothing is official at this point. Perhaps because of that, the yen regained its declines against the dollar and the Nikkei closed back down 1%. Today's Food for Thought: Trading the midterm election
24-Sep-10	Market Monitor: The End of a Sovereign European Vacation? Sovereign debt issues in Europe are festering again, particularly with respect to Ireland. However, could the rising cost to protect against Ireland defaulting on its debt be the work of speculators more than anything else? We address that question and provide some performance data that might be helpful for risk management strategies tied to the idea that the sovereign debt issue in Europe is going to become a bigger issue again.
24-Sep-10	GDP Monitor: September 20 - 24, 2010 While business investment and housing data returned from previous lows this week, the overall growth trend has not deviated from our long-term viewpoint. We see a spike in GDP in the third quarter and a return to the sluggishness experienced in Q2 2010 in the fourth quarter.
24-Sep-10	Data Detail: Durable Orders (Aug-10), Home Sales (Aug-10) While the headline durable orders data may seem to suggest a weakening in economic activities, the fact is that the August durable orders report struck another blow against the notion that the economy is headed for a double-dip recession...Seasonal adjustment factors added a bonus to both new and existing home sales level in August, making the monthly growth rate seem stronger than it actually was.
23-Sep-10	Wake-Up Call -- 23 September 2010 For the second straight morning, U.S. equity futures traded modestly higher overnight only to sell off with European markets. Europe opened slightly higher early this morning, but sold off over the first 90 minutes of trade, along with the euro, after disappointing preliminary readings for Manufacturing PMI in August suggested a slowdown in the pace of the economic recovery. Helping keep markets at their lower levels was a poor second quarter GDP figure out of struggling Ireland. However, unlike yesterday, there are two potential catalysts on today's economic calendar that could influence trade -- the jobless claims report at 8:30 a.m. ET and Existing Home Sales at 10:00 a.m. ET. Today's Food for Thought: Blockbuster vs. Netflix
23-Sep-10	Commodity Price Shocks: Futures Prices & Inflation Commodity futures prices provide the most up-to-date pricing on commodity inputs, yet the pass-through of futures prices to firm costs and consumer prices are not that obvious.
23-Sep-10	Commodity Price Shocks: Agricultural Stocks & Futures Prices The pricing environment has been a volatile one for the past few years, so we thought it would be interesting to look at the data to see what statistical impact supply estimates have on futures prices. What we find is not too shocking. The WASDE ending stocks estimates calculated by the USDA have very little effect on changes in futures prices.
23-Sep-10	Data Detail: Jobless Claims - Sept. 12 - 18, 2010 Once the Census Bureau removed all of the temporary workers from the payroll, we expected that the initial claims level would fall below the 450,000 bound due to decreasing layoffs in the private sector. Given the latest data, the evidence now points to census workers having little to no effect on the heightened claims level while the private sector has seen continued layoffs.
23-Sep-10	Seeking Yield through Dividends The U.S. stock market could be facing a low-return environment for some time as the legacy of the Great Recession is felt through higher tax rates and a protracted recovery in the labor and housing markets. Nonetheless, a dividend-based approach has merit at this time given that the corporate sector has the means to pay increasing dividends and given that shareholders will be increasing their demands for dividend income.
22-Sep-10	Wake-Up Call -- 22 September 2010 U.S. equity futures indicate a modestly lower open this morning. They had a slight bid overnight, but sold off as European equity markets gave up their modest opening gains and moved lower in their first hour of trade. The major currencies have extended their post-FOMC gains against the dollar today. Today's Food for Thought: Firms that have missed TARP dividend payments
21-Sep-10	Wake-Up Call -- 21 September 2010 U.S. equity futures are showing little direction this morning ahead of the FOMC policy directive this afternoon. Housing data in the form of starts and permits will also be in focus. European markets are modestly higher at midday following successful debt offerings from Ireland, Greece and Spain that eased sovereign debt fears, at least for one day. Today's Food for Thought: Comparing the length of the recession
21-Sep-10	The Economics of Commodity Price Shocks The rapid price appreciation in agricultural commodities this summer triggered concerns that commodity inflation could lead to broader inflation. At the same time, there was also a belief that the price appreciation in agricultural commodities could temper deflationary forces. The data suggest neither connection is valid.
21-Sep-10	Data Detail: Housing Starts - August 2010 Even though the NAHB sentiment index remains close to its all-time low, signaling poor future growth, homebuilders decided to increase the number of new homes started in August. The seemingly irrational disconnect between homebuilder sentiment and their near-term sales expectations is a perfect example of the confusion that remains in the residential investment sector.
20-Sep-10	Wake-Up Call -- 20 September 2010 U.S. equity futures point to a modestly higher open on a very slow morning. Japanese markets were closed for a holiday overnight while participants remain cautious ahead of the FOMC meeting tomorrow. Today's Food for Thought: Agency and nonagency MBS issuance
20-Sep-10	Fixedated: September 13 - 17, 2010 Though the trading range for the 10-year Note was about 20 bps for the week, Treasuries ended relatively unchanged. Decent economic data and a lack of sales kept things in check. With no major auctions on the agenda this week, news out of Europe and the FOMC meeting will drive the action. Corporates saw good gains for the week as the ML U.S. HY Master II Index YTW reached another 52-week low. Munis continued to grind sideways on moderate sales. This week may provide several larger new issues for participants to tackle.
17-Sep-10	Wake-Up Call -- 17 September 2010 U.S. equity futures point to a modestly higher open this morning on positive corporate news. They had been trading even higher, but have come off their best levels. Technology companies Research In Motion and Oracle reported strong earnings results and guidance yesterday after the close. Texas Instruments also added $7.5 bln to its existing stock repurchase program. We have not seen any reason for the pullback, but would note the dollar, which had been trading lower against the other major currencies, has rebounded over the last 90 minutes. U.S. Treasuries, which also rebounded earlier this morning, have moved even higher over the last hour. Today's Food for Thought: Corporate debt issuance
17-Sep-10	Market Monitor: Heed the Earnings Yield Sign Based on the math of the Fed model, stocks look quite cheap relative to bonds right now. The problem is that the market does not believe in that math because uncertainty about global economic conditions has it doubting that earnings estimates are achievable. However, if one subscribes to the view that a double-dip recession will not come to fruition and that a deflation trap will be avoided, it is worth considering value-based investment strategies that utilize the earnings yield as a starting point. To the latter end, we have screened all S&P 500 members for their earnings yield, separating them by sector and ordering the components in each sector from highest earnings yield to lowest earnings yield.
17-Sep-10	GDP Monitor: September 13 - 17, 2010 This week's data confirm our viewpoint that a positive shock to both consumption and net exports will cause a strengthening in third quarter GDP. At the same time, though, the data overshadow productivity losses that will cause the weakness that occurred in Q2 2010 to return in the fourth quarter.
17-Sep-10	Data Detail: Inflation - August 2010 Analysts and economists were looking for new disinflationary trends in the August inflation reports that would suggest consumers or producers are entering a deflationary cycle. So far, the reports show a weakening in price growth, but there is no evidence as of yet that suggests price will turn negative for an extended period.
16-Sep-10	Wake-Up Call -- 16 September 2010 U.S. equity futures are trading modestly lower this morning on what could prove to be a busy day. It began with slightly disappointing earnings results/guidance from FedEx, which will be followed by tech companies Oracle and Research In Motion after the close. There are a number of economic releases today, highlighted by the jobless claims and PPI reports at 8:30 a.m. ET. There is also another large batch of companies presenting at industry conferences. Finally, Treasury Secretary Timothy Geithner testifies twice today on exchange rate policy, the second time specifically on China. Today's Food for Thought: Average real income by segment
16-Sep-10	Institutional Long Equity Allocation - Q2 2010 Institutional investors overall made modest changes to their long equity allocation in Q2 2010 relative to the S&P 1500. Institutional investors continued to show preference for small- and mid-cap shares relative to the S&P 1500 weighting. In aggregate, institutional investors are overweight consumer discretionary, health care, technology and materials compared to the S&P 1500.
16-Sep-10	Data Detail: Jobless Claims - Sep. 5 - 11, 2010 We believed that the trend in the initial claims level should have started moving in the downward direction this week, especially after the number of temporary census workers remaining on payroll shrunk to roughly 15,000. However, firms remain overly cautious regarding future consumer demand and layoffs seem to have continued unabated.
15-Sep-10	Wake-Up Call -- 15 September 2010 Despite volatility in Asia, U.S. equity futures are showing little direction this morning ahead of an industrial production figure at 9:15 a.m. ET and another large batch of companies presenting at industry conferences... Japan surprised participants by intervening in the foreign exchange markets for the first time in six years to weaken the yen. The dollar surged back above 85 against the yen while the Nikkei spiked 2.3% on the session. However, the announcement has not had an effect on global markets. Today's Food for Thought: Topping action recently in spread between 10-year Note and 3-month Bill, but remains above historical average.
15-Sep-10	Trend Watch: Aug. 30 - Sept. 10, 2010 In this Trend Watch, we discuss a potential silver lining to the first negative capital stock reading since World War II, the catalyst for the recent surge in the Chinese renminbi, and what companies are telling the government about the expiration of the Bush tax cuts.
15-Sep-10	Data Detail: Industrial Production - August 2010 All of the talk regarding the sluggish economic recovery and specifically the doom and gloom in the manufacturing sector took a back seat to another strong and steady data point as manufacturing production continued on its upward trend in August.
14-Sep-10	Wake-Up Call -- 14 September 2010 U.S. equity futures are lower this morning ahead of the August retail sales report at 8:30 a.m. ET. Markets overseas have shown little direction, though there were some notable developments. Japanese Prime Minister Naoto Kan was reelected overnight, but the announcement sent the yen to a fresh 15-year high against the dollar of 83.07. European markets are modestly lower at midday after Germany's ZEW economic sentiment survey came in at -4.3 in September, well below expectations. Today's Food for Thought: High-yield corporate bond yields move back to lows.
14-Sep-10	Data Detail: Retail Sales - August 2010 Last month, strong headline consumption data masked a weakening in the core spending base that we expected to drive a consumer-led slowdown in economic growth this fall. However, the data in August countered that viewpoint and revealed a consumer that was much stronger than we had anticipated.
13-Sep-10	Wake-Up Call -- 13 September 2010 U.S. equity futures point to a higher open this morning, led by financial stocks after the Basel Committee released its new capital standards under Basel III that were in-line with expectations and gave lenders a longer-than-anticipated transition period. Asian markets rose overnight, also aided by Chinese economic data for August that, while in-line, showed the country's economy is still growing at a steady pace. European markets opened higher and have held those gains into midday. They were also aided by the EC raising its 2010 GDP growth forecast for the eurozone from 0.9% to 1.7%. Today's Food for Thought: CEO compensation
13-Sep-10	Fixedated: September 7 - 10, 2010 Treasury yields rose sharply as the 10-year rose from a low last week of 2.56% to close at 2.79% -- its highest yield since hitting 2.82% on August 9. Corporates were mixed. High-yield bonds gained and investment-grade debt sold off with Treasuries. The ML U.S. HY Mstr II hit its lowest yield (8.05%) since April 30, 2010. Munis held their own again on slim supply over the holiday-shortened week.
10-Sep-10	Wake-Up Call -- 10 September 2010 U.S. equity markets look to continue their recent momentum as futures point to a modestly higher open this morning following mixed trade overseas. Today's calendar is very thin, however, so we expect the low-volume trading environment that has persisted this week to continue today. Today's Food for Thought: Comparing jumps in unemployment rates
10-Sep-10	Unconventional Wisdom: No Double-Dip in the Treasury Market A lot has been made of the rally in the Treasury market, so much so that the precipitous drop in yields has been said to be a harbinger of a double-dip recession in the U.S. economy. The economic data and other key indicators, however, suggest otherwise.
10-Sep-10	GDP Monitor: September 6 - 10, 2010 Even though the data this week were impressive regarding third quarter GDP growth, they created some uncertainty about how the economy is going to perform over the next few quarters.
10-Sep-10	Sovereign Debt: Focus Shifts to Ireland The €750 bln eurozone aid package briefly narrowed sovereign spreads this summer, but did little to cure the region's underlying debt problems. Risks are now resurfacing in Ireland, which faces rising spreads and the failure of nationalized Anglo Irish Bank. This is likely just the first such reminder we should see over the medium term as the mountain of bad paper has nowhere left to go.
09-Sep-10	Wake-Up Call -- 09 September 2010 U.S. equity futures are trading with European markets for a third day. After Europe opened modestly lower, markets trended higher from there, showing modest gains at midday. U.S. futures did the same and currently indicate a slightly higher open. In a reversal of yesterday's session, banks are leading the rally in Europe today. Today's Food for Thought: Expected growth in internet traffic, video.
09-Sep-10	Data Detail: Jobless Claims (Sep 4), Trade Balance (July-10) While the initial claims level remains bounded between 450,000 and 500,000, which has been the case since the middle of November 2009, the move toward the lower bound brings added hope that the labor market is finally showing signs of breaking out of its malaise...The paradox of strong GDP growth yet weak economic demand may come to fruition in the third quarter as the net export sector surges ahead.
08-Sep-10	Wake-Up Call -- 08 September 2010 U.S. equity futures are tracking European markets for a second day. They opened lower, but have regained those losses over the last two hours, helping U.S. futures move into modestly positive territory. Today's Food for Thought: A look at year-to-date returns on benchmark indices.
07-Sep-10	Wake-Up Call -- 07 September 2010 Following a mixed session in Asia overnight, European markets sold off this morning on capital fears in the banking sector and fears of a potential tax in the mining industry, pushing U.S. futures into negative territory. Today's Food for Thought: Forward versus trailing earnings estimates.
07-Sep-10	Seeking Yield: One Man's Trash Is Another Man's Treasury The concept of relative value should be reformulated in the aftermath of the Great Financial Crisis. In this low-yielding, uncertain environment, where spreads are quickly disappearing and corporate balance sheets look healthier than most sovereigns, considering the relative value of historically non-comparable credits is prudent. For the foreseeable future, participants should be willing to cast aside formerly reliable starting points and paradigms in order to unlock real and measurable relative value opportunities not just within, but across, fixed-income asset classes.
07-Sep-10	Fixedated: August 30 - September 3, 2010 Treasuries were whipsawed last week as the 10-year Note and the 30-bond Bond traded within spreads of more than 29 bps and 36 bps, respectively. High-yield corporates rallied a bit while investment-grade company debt followed Treasuries and ended the week slightly off after moving through the 4.00% yield level earlier in the week. Munis were relatively unchanged on light supply.
03-Sep-10	Wake-Up Call -- 03 September 2010 As expected, U.S. equity futures are trading around unchanged ahead of this morning's highly-anticipated August employment report at 8:30 a.m. ET. Asian markets edged higher overnight following the extension on Wall Street yesterday, and European markets are trading modestly higher at midday. The Treasury market is seeing more movement as the yield on the 10-year rose to a three-week high just over an hour ago. Finally, the dollar is showing little direction ahead of the data. Today's Food for Thought: The price ratio between gold and oil.
03-Sep-10	GDP Monitor: August 30 - September 3, 2010 The economic data were clearly disappointing last week. Things quickly changed this week, though, as better-than-expected consumption, manufacturing output, and employment data reversed the needles and pointed back toward a stable recovery.
03-Sep-10	Data Detail: Employment Report - August 2010 After reading through the details of August's employment report, it is clear that the labor market, while still sluggish, is improving at enough of a clip that it should prevent a double-dip recession.
02-Sep-10	Wake-Up Call -- 02 September 2010 U.S. equity futures are showing little direction this morning as market participants sift through a number of items, including August same-stores sales results from retailers and interest rate decisions from foreign central banks. Today's Food for Thought: Apple's changing revenue drivers.
02-Sep-10	Data Detail: Jobless Claims - August 22 - 28, 2010 The labor market continues to run in place as claims remained bounded between 450,000 and 500,000 as they have been since the middle of November. There is nothing in the labor data that suggests substantial job growth is on the horizon, but there is some inkling that new firings may fall in the near future.
01-Sep-10	Wake-Up Call -- 01 September 2010 U.S. equity futures are pointing to a sharply higher open this morning following positive economic data overseas. U.S. Treasury yields are rebounding, with the 10-year moving higher off yesterday's fresh 52-week low of 2.470%. However, all of that can change at 8:15 a.m. ET when the ADP Employment figure is released for August. Today's Food for Thought: The effect of temporary census workers.
01-Sep-10	Data Detail: ISM Index (Aug-10), Construction (July-10) Economists have been so downbeat regarding the economy over the past few months that it seems whenever a piece of economic news surprises to the upside, like today's ISM report, suspicion arises. After looking at the underlying details, those suspicions are unfounded.
01-Sep-10	Trend Watch: August 16 - 27, 2010 In this Trend Watch, we discuss the relationship between earnings growth and the safety trade, homebuilders outperforming the market despite very weak housing data, and the potential effects of "hardship withdrawals" from retirement accounts.
01-Sep-10	Legally Avoiding Taxes: MLP Closed-End Funds As a follow-up to our July 23, 2010, article "Legally Avoiding Taxes," we take a brief look at MLP closed-end funds as a way to gain exposure to MLPs in retirement accounts without raising tax issues.
31-Aug-10	Wake-Up Call -- 31 August 2010 U.S. equity markets are set to extend yesterday's declines this morning as futures point to a lower open. Sentiment overseas is very weak as Asian markets closed lower overnight and European markets are lower at midday. Japan continued to lead the way as the Nikkei plunged 3.6% on the weakness on Wall Street yesterday and continued disappointment that the Bank of Japan did not intervene in the yen, which pushed closer to last week's 15-year high overnight. Today's Food for Thought: Smaller banks struggle to repay TARP.
31-Aug-10	Data Detail: Consumer Confidence - August 2010 Worries about a potential double-dip recession seem to be more of a concern for market analysts and media commentators than the consumer, as the consumers surveyed by the Conference Board strengthened their viewpoint that the future economic outlook is brightening.
30-Aug-10	Wake-Up Call -- 30 August 2010 U.S. equity futures are showing little direction this morning. With today's calendar light and the long Labor Day holiday upcoming, volume could be thin today and this week, though that can lead to quick moves in the major averages. Treasury yields, however, are moving lower once again this morning following Friday's bounce. Today's Food for Thought: Updating the time line of the 3Par saga.
30-Aug-10	Data Detail: Personal Income and Spending - July 2010 After weeks of tepid economic data, the personal income and spending report offered a nice respite. Unfortunately, the strengthening economic data look to be fleeting, at least for spending.
30-Aug-10	Fixedated: August 23 - 27, 2010 Treasuries sold off hard last Friday after rallying to yields not seen since January 2009. The ML U.S. 7-10 Yr. Corp. A Index yield fell to 3.93% -- within 8 bps of its all-time low -- before ending the week at 4.09%. Muni yields continued to grind lower as demand outstripped light supply.
27-Aug-10	Wake-Up Call -- 27 August 2010 Futures indicate a modestly higher start to the trading day ahead of the second estimate for second quarter GDP and a 10:00 a.m. ET speech from Fed Chairman Ben Bernanke. Today's Food for Thought: U.S. mortgage delinquencies decline in the second quarter.
27-Aug-10	Market Monitor: How Now Dow Dividend Payers? Just like the U.S. government, the companies in the Dow Jones Industrial Average are not going out of business anytime soon; only most of the Dow companies offer a better yield and more attractive, long-term capital appreciation potential than U.S. Treasuries. In fact, 24 of the 30 Dow components have a dividend yield that exceeds the yield on the 5-year Treasury note while 18 of them have a dividend yield that exceeds the yield on the 10-year Treasury note.
27-Aug-10	GDP Monitor: August 23 - 27, 2010 It is hard to look around the fact that this week's economic data was anything short of lousy, but even though many economists have upped their double-dip recession forecasts, the historical trends point toward a more temporary blip than another leg down in economic activities.
26-Aug-10	Wake-Up Call -- 26 August 2010 U.S. equity futures are showing little direction early as market participants await the jobless claims report due out at 8:30 a.m. ET. Today's Food for Thought: Measuring the effects of the expiration of the Bush tax cuts.
26-Aug-10	Data Detail: Jobless Claims - August 15 - 21, 2010 A breakout from the ongoing stagnation in the labor market remains elusive as the initial claims level fell during the week, but remained firmly grounded between 450,000 and 500,000 claimants as it has done just about every week since the middle of November 2009. There has been nothing to suggest that the claims level will suddenly strengthen and fall below the lower bound any time soon.
25-Aug-10	Wake-Up Call -- 25 August 2010 U.S. equity futures oscillated between positive and negative territory overnight and currently point to a modestly lower open. Asian markets fell sharply, but European markets have also oscillated above and below unchanged during morning trade. Today's session should be influenced by July economic data for a second day, as first Durable Goods Orders will be released at 8:30 a.m. ET, followed by New Home Sales at 10:00 a.m. ET. Today's Food for Thought: CBO estimates impact of stimulus.
25-Aug-10	Data Detail: Durable Orders (July-10), Home Sales (July-10) On the surface, the manufacturing numbers provide more evidence that the economic recovery is not only weakening, but is much closer to a turning point that would signal a double-dip recession. However, in order to come to that conclusion one would have to discount the orders trend that has stabilized over the past 10 months and continued in July...After reviewing July's abysmal home sales data, there can only be one conclusion: the payback period following the expiration of the homebuyers' tax credits will not be moderate.
24-Aug-10	Wake-Up Call -- 24 August 2010 U.S. equity futures point to a sharply lower open this morning following a sell-off in global equity markets and ahead of the July Existing Home Sales figure at 10:00 a.m. ET. The Treasury market is confirming the move as the yield on the 10-year fell to a fresh 52-week low of 2.538%. Today's Food for Thought: Buybacks, M&A appear to be turning the corner.
23-Aug-10	Wake-Up Call -- 23 August 2010 U.S. equity markets may see a bit of short covering this morning as futures indicate a higher open. European markets are trading modestly higher at midday. They shrugged off slightly weaker-than-expected PMI manufacturing data in the eurozone, boosted by continued M&A activity. There is also M&A activity in the U.S., helping to boost futures. Today's Food for Thought: Merrill Lynch corporate-grade A-rated index falls to 7-year low.
23-Aug-10	Fixedated: August 16 - 20, 2010 Yields, in general, continued to trend lower indicating concerns about a big equity sell-off and/or another freeze in the credit market IF, in fact, the bond market is correct. The 10-year Treasury made a push to 2.50% late last week while the 30-year briefly broke the 3.60% mark. The continued move lower in yields is concerning on a number of levels. One concern we think is underappreciated, though, is the interest rate risk. Corporate yields also headed lower as the ML 7-10 Yr Corp A Index pierced 4.00% for the first time since June 2003. Muni yields dropped again as investor demand outweighed supply.
20-Aug-10	Wake-Up Call -- 20 August 2010 Sentiment overseas has turned negative today, and that, plus a renewed sell-off in European currencies, has pushed U.S. futures lower. European markets are firmly in the red at midday, led lower by constructions shares, carmakers and banks, in particular in Greece and Spain. That helped pushed European sovereign debt spreads even wider. The currency markets did not help, as the euro and pound have seen a strong move lower against the dollar. Today's Food for Thought: Tech sector starting put its cash to use.
20-Aug-10	GDP Monitor: August 16 - 20, 2010 This week's economic data confirm the view that the economic recovery is weakening, but it has not yet reached a point where we would consider the possibility of a double-dip recession. We readjusted our inventory forecast higher for the third quarter due to the gains in producer prices, and now expect GDP to increase 0.9%, up from 0.7%.
19-Aug-10	Wake-Up Call -- 19 August 2010 U.S. equity futures, European markets and currency markets made some volatile moves overnight. However, all of that volatility merely led to futures indicating a modestly higher open, slightly higher trade in Europe and a mixed currency market. Germany's Bundesbank came out at 6:00 a.m. ET and raised its forecast for the country's growth, increasing its GDP estimate for 2010 to 3.0% from 1.9%. European markets and U.S. futures spiked back into positive territory following the announcement. Today's Food for Thought: Apple retains spot as world's largest tech company.
19-Aug-10	Data Detail: Jobless Benefits - August 8 - 14, 2010 We are left wondering how much of the growth in claims is actually due to a weakening in the labor sector as opposed to the reduction in temporary census workers. After adjusting for the lost census workers, the initial claims level not only broke free of the 450,000 to 500,000 bound, but it deteriorated below 400,000 - a level that normally fosters employment growth.
18-Aug-10	Wake-Up Call -- 18 August 2010 U.S. equity futures are showing little direction this morning, currently pointing to a flat open. Asian markets ended mixed overnight, but European markets are trading modestly lower at midday. Market participants continue to digest earnings reports, with today's list highlighted by Deere and Target, but there is little else on the calendar. Today's Food for Thought: Growing number of U.S. patents, and lawsuits.
18-Aug-10	Trend Watch: August 2 - 13, 2010 In this Trend Watch, we discuss U.S. Treasuries and China, the potential for deflation and for a double dip, the details of the rebounds at GM and Chrysler, and using "apps" for data collection.
17-Aug-10	Wake-Up Call -- 17 August 2010 U.S. equity futures have been slowly trending higher since late last night and currently indicate a stronger open for the major averages. There does not appear to be much behind this morning's move other than short covering. Two major retailers reported this morning, Walmart and Home Depot, but their results and guidance came in mixed. However, market participants may be focusing on Walmart raising its FY11 EPS guidance range. The positive tone will be put to the test later this morning by a large batch of economic data that includes the first figures from July on housing (Starts/Permits) and Industrial Production from last month. Today's Food for Thought: Spread between mortgage and Treasury rates widening.
17-Aug-10	Data Detail: Starts (July), Inflation (July), IP (July) All three economic data reports (housing starts, inflation, and industrial production) contained encouraging headline data. However, the details of each report reveal a lack of sustainability.
17-Aug-10	Financial Review: Slowly Improving Credit and Lending Market Two releases yesterday, the Federal Reserve's Senior Loan Officer Opinion Survey on Bank Lending Practices and trust data from credit card companies and banks, point to a slowly improving credit and lending market.
16-Aug-10	Wake-Up Call -- 16 August 2010 U.S. equity futures point to a modestly lower open this morning following a weaker-than-expected GDP figure out of Japan and disappointing results/guidance from home-improvement retailer Lowe's. A continued decline in U.S. Treasury yields is confirming the move, as the 10- and 30-year saw their yields decline to fresh 52-week lows. Today's Food for Thought: Foreclosure filings may be topping, but remain elevated.
16-Aug-10	Residential Construction Outlook: Wave of Inventories Ahead During the first few months of the year, housing starts accelerated as homebuilders took advantage of low inventory levels and what was thought to be increased demand for new homes. That seems to have been a mistake. Using simple calculations, we determined that inventory levels can easily exceed previous highs by the end of the year as sales demand shrinks. Fortunately, it is very unlikely that a seizure in construction following an inventory spike will be strong enough to pull the U.S. back into a double-dip recession.
16-Aug-10	Fixedated: August 9 - 13, 2010 Treasury yields moved substantially lower last week on weak economic data, deflation concerns, double-dip talks and the Fed's announcement that it would keep its balance sheet constant by using MBS proceeds to buy Treasuries. Corporates ended the week mixed as investment-grade bonds grinded lower and high-yield debt continued to give up ground. Johnson & Johnson's issued debt at record low yields last week. However, the real story was the spread at which the deal got done. When JNJ issued 10-year debt in June 2008, it did so at a spread of 103 bps. This deal came at +43 and traded down to +15 for block size on Friday. The FactSet 10-year muni index has dropped 28 bps in six weeks and is once again over 100% as a percentage of Treasuries as participants have snapped up the limited high-grade supply.
13-Aug-10	Wake-Up Call -- 13 August 2010 Following modest declines yesterday, U.S. equity futures are pointing to a slightly lower open this morning. They had been trading higher overnight, coinciding with strength in Asian markets, but gave up those gains between 5:00 and 6:00 a.m. ET. European markets had opened higher and European currencies had been rebounding against the dollar, but they also reversed course. Today's Food for Thought: The trend of overestimation from sell-side equity analysts may have reversed to underestimation.
13-Aug-10	Market Monitor: Certain about Uncertainty The Fed added to the market's uncertainty in the past week, not so much in our estimation with the decision it made, which is supportive for risk assets, but by the seemingly confused manner in which the Fed arrived at that decision. As the uncertainty looms, the stock market will remain volatile with risk trades placed one day and taken off the next. Nonetheless, against a backdrop of low inflation that is going to remain low, low interest rates that are going to remain low, earnings that will continue to grow, and a Fed that is endorsing risk, the stock market still has its appeal.
13-Aug-10	GDP Monitor: August 9 - 13, 2010 The headline growth level in the retail sales report was in-line with our estimates, but the details suggest consumption growth may be slower in the second half of the quarter. As a result, our GDP estimate for Q3 was revised down from 1.0% to 0.7%.
13-Aug-10	Data Detail: Retail Sales - July 2010 On the surface, the rise in July's retail sales figure suggests that the consumer is spending again. However, the details point in the opposite direction, one where the consumer remains weak and spending growth may be fleeting.
13-Aug-10	The Shale Rush -- An Investment Framework There is a paradigm shift taking place in natural gas. Abundant supplies from unconventional resources, and near- and medium-term carbon dioxide emission policies, imply greater gas usage and an increased share of the energy mix. Shale gas has the potential to be game changing. The resource will continue to be the single largest contributor to production growth in natural gas over the next decade -- more than offsetting declines in other production. The risk is that the shale boom turns into a bust. There is considerable uncertainty surrounding the marginal costs of supply, well economics, production rates, and the environmental impact and potential regulations.
12-Aug-10	Wake-Up Call -- 12 August 2010 Following yesterday's sharply lower session, futures moved even lower after tech bellwether Cisco Systems reported weak margins and top-line guidance. Futures have been trending upwards since then, but still point to a modestly lower open this morning. U.S. Treasury yields are rebounding modestly in early trade, ahead of this afternoon's 30-year Bond auction. The euro and pound attempted to do the same overnight, but have since extended yesterday's sharp declines following weak economic data out of Greece and the eurozone. Today's Food for Thought: Fannie, Freddie further extend credit lines with U.S. Treasury.
12-Aug-10	Data Detail: Jobless Claims - August 1 - 7, 2010 On the surface, this week's jobless benefits data reveal more of the same. The initial claims level has remained stubbornly bounded between 450,000 and 500,000 since the middle of November 2009. However, the fact that claims have not risen above the 500,000 level over the past few months may be a sign that the labor market is actually stabilizing, if not improving.
11-Aug-10	Wake-Up Call -- 11 August 2010 The secondary reaction from global equity markets following the FOMC policy directive has been a sharp move lower. The focus seems to have shifted to the "more modest" economic recovery and what the Fed's Treasury repurchases says about the growth outlook. Along those lines, the Bank of England lowered its growth outlook in its Inflation Report, which helped send European markets and currencies sharply lower. It Asia, Japan led the way lower as the Nikkei lost 2.7% after the yen hit a new 15-year high against the dollar of 84.73. Today's Food for Thought: When Doves Cry
11-Aug-10	Data Detail: Trade Deficit - June 2010 Under normal circumstances, an increase in the trade deficit would signal a growing need for manufacturing inputs and/or a rise in consumer demand for consumption goods. Yet, in June we already saw data that revealed a slowing manufacturing sector and a weakening consumption base. Therefore, the rise in the trade deficit seems to be more of an anomaly than a sustainable trend.
10-Aug-10	Wake-Up Call -- 10 August 2010 Ahead of this afternoon's policy directive from the FOMC, U.S. equity futures indicate a lower open for the market. The sell-off began overnight in Asia, where mainland China's Shanghai Composite fell 2.9% following the first batch of the country's July economic data. Imports grew 22.7% y/y, well below expectations that were closer to June's 34.1%, which could be pointing to slowing global trade. In addition, the dollar has been rebounding against the pound and euro since late last night. Today's Food for Thought: No change to analyst estimates for upcoming quarters despite strong second quarter earnings results.
09-Aug-10	Wake-Up Call -- 09 August 2010 U.S. equity markets used a late-session rally Friday to close with only modest declines. They will look to continue that momentum this morning as futures currently indicate a modestly higher open. However, trade could also be kept in check ahead of tomorrow's policy directive from the FOMC. At the same time, many are speculating that the Fed will announce new quantitative measures. Today's Food for Thought: Negative swap spreads
09-Aug-10	Fixedated: August 2 - 6 , 2010 Treasuries rallied hard on Friday's poor employment report after meandering sideways for most of the week. Renewed talk about additional quantitative easing, as well as the specter of disinflation (or deflation), helped to support a move to lower yields. Corporate debt issuance continues to be strong as companies take advantage of low yields and high demand to strengthen their balance sheets. As investment-grade corporate yields head lower, we have become increasingly focused on dividends as an income play. Separately, munis mostly treaded water on low new issuance. We continue to see relative value in BABS when compared to corporate debt.
06-Aug-10	Wake-Up Call -- 06 August 2010 Yesterday's jobless claims report and Wednesday's ADP Employment figure were just preludes to today's highly-anticipated July employment report. As usual, U.S. equity futures are showing little direction ahead of the release at 8:30 a.m. ET. Today's Food for Thought: Comparing bank-failure figures from the S&L crisis and the Great Recession.
06-Aug-10	Market Monitor: Risk on, Risk off The stock market is riding a wave of sentiment where the risk trade is on one day and off the next. While this condition is apt to persist and lead to a range-bound market, we see a benefit in utilizing a barbell strategy in the near term where positions are increased in cyclical sectors when the risk trade is off and positions are increased in counter-cyclical sectors when the risk trade is on, taking advantage of price weakness in both instances. Although there is still a good deal of uncertainty to deal with, things are less bad than they were a few months ago when stock prices were higher. That condition, coupled with reasonable valuation and low interest rates, is why we would continue to be long equities.
06-Aug-10	GDP Monitor: August 2 - 6, 2010 There was nothing in the detail of the Q2 2010 GDP data that suggested we should alter our view on next quarter's growth. We still believe that consumption will lead the recovery effort along with gains in investment spending. Net exports and government spending growth will drag.
06-Aug-10	Data Detail: Employment Report - July 2010 The headline numbers from July's employment situation report leave an uneasy feeling that the labor market malaise will remain for quite some time. Yet, digging through the details provides a sense of modest relief that a double-dip recession is not coming up on the horizon.
05-Aug-10	Wake-Up Call -- 05 August 2010 U.S. equity futures are trading around unchanged on a busy morning. The jobless claims report will be in focus this morning, but market participants also have another batch of second quarter earnings reports, July same-store sales data from retailers and interest rate decisions from two European central banks. Today's Food for Thought: The relationship between NIPA corporate profits and the S&P 500.
05-Aug-10	Data Detail: Jobless Claims - July 25 - 31, 2010 It is possible that the jump in initial claims was largely the result of census workers filing for unemployment. The lack of growth above 500,000 may suggest that the private sector is finally entering a period of stability.
04-Aug-10	Wake Up Call -- Caution Ahead of ADP Report Futures have recovered a bit from earlier lows that were reached around 6:00 a.m. ET; however, they are still pointing to a slightly lower open. The focus this morning will be on the 8:15 a.m. ET ADP Employment Change report for July. The median forecast calls for an increase of 25,000 jobs, according to the Briefing.com consensus.
04-Aug-10	Trend Watch: July 19 - 30, 2010 In this Trend Watch, we are calling attention to the potential effects of government layoffs at the state and local level to the national unemployment rate, the Federal Reserve's options regarding its mortgage-backed securities' holdings, renting versus owning a home, and a proposed California tax change that could have a national impact.
03-Aug-10	Wake Up Call -- Two Year Yield Hits Record Low Following yesterday's rally, stock futures suggest a muted start to the trading day. The two-year note yield hit a record low 0.52% and the 10 year note is up 12 ticks, leaving its yield at 2.92%.
03-Aug-10	Data Detail: Personal Income and Spending - June 2010 There is not any new information to report following the personal income and spending data release for June. The Bureau of Economic Analysis incorporated the data into the second quarter GDP release.
02-Aug-10	Wake Up Call -- Futures Post Strong Gains Following strong gains in overseas markets, stock futures suggest a sharply higher open as traders focus on encouraging earnings reports and shrug off news that China's PMI fell to a multi-month low.
02-Aug-10	Data Detail: ISM (July), Construction Spending (June) Given the ISM details, we feel the talk of a potential double-dip in manufacturing activities is being overplayed. We would need to see weaker data before we alter our thinking on that point...The construction data were included in last week's GDP data. Accordingly, there really was not any new information to be gleaned about the second quarter from this report.
02-Aug-10	Fixedated: July 26 - 30, 2010 Demand at last week's Treasury auctions was a bit sporadic -- average 2-year, great 5-year, and a weak 7-year. While Q2 corporate earnings continue to be strong, the Treasury market does not seem to agree that everything else is coming up roses. Both high-yield and investment-grade corporates rallied for the week. The ML 7-10 Yr "A" Corp Index hit its lowest yield since July 1, 2003. Income investors should note there are attractive dividend yields available from a variety of companies including Merck (MRK), DuPont (DD) and ConocoPhillips (COP) to name a few. Munis hit a roadblock as the FactSet 10-year AAA Index stalled at 2.86% all last week -- a level it first reached on July 21. BABS continue to offer some value as 10-year AAA Columbus came at 3.89% vs. 10-year Microsoft (MSFT) and Johnson & Johnson (JNJ) at 3.10%.
30-Jul-10	Wake-Up Call -- 30 July 2010 This morning, all eyes will be on the Advance report for second quarter GDP at 8:30 a.m. ET. Futures are lower ahead of the release. Asian markets ended lower overnight. Japan's Nikkei led the way, losing 1.6% on continued strength in the yen and following two days of declines on Wall Street, more than offsetting strong first quarter (Jun) earnings reports. The dollar actually fell to an eight-month low against the yen of 86.16 this morning, nearing its 15-year low of 84.83. However, the greenback is trading higher against the euro and pound. That may be pressuring European markets, which are trading lower at midday as they also await the GDP report. Today's Food for Thought: Clean tech venture capital investment.
30-Jul-10	Market Monitor: It Is Earnings Appreciation Day Ahead of the June quarter earnings reporting period, the stock market got tripped up on concerns about the earnings outlook. With roughly two-thirds of the S&P 500 having reported earnings results, it can be said that those concerns were overblown. While we are not pounding the table on the stock market outlook (yet), we are not cutting the legs out from under it either. We cannot because the earnings growth is too solid to do so.
30-Jul-10	GDP Monitor: Reconciliation of Q2 2010 GDP Since it is not feasible to reconstruct the historical data with the new revisions until after the BEA releases its supplemental detail reports on Tuesday, we cannot determine what our forecasts would have looked like if the revised data were known to us.
30-Jul-10	Data Detail: GDP - Q2 2010 - Advance Estimate The Bureau of Economic Analysis included its annual benchmark revisions in the Q2 2010 GDP forecast, and it lent credence to what many people on Main Street were already thinking: the recession was deeper than originally expected and the recovery effect has been a little slower.
29-Jul-10	Wake Up Call -- 29 July 2010 U.S. equity futures point to a modestly higher open this morning, rallying in early morning trade with European markets and the euro. European markets opened modestly higher on a batch of strong earnings reports from companies such as France Telecom and AstraZeneca. They then extended those gains just after 4:00 a.m. ET as the euro spiked, coming within a few ticks of breaking above its May 10 high of 1.3094. We have read a myriad of reasons for the spike in the euro, including positive economic data, month-end buying from an Asian central bank and concerns of a slowdown here in the U.S. Today's Food for Thought: BP after the Deepwater Horizon vs. XOM after the Exxon Valdez
29-Jul-10	Data Detail: Jobless Claims - July 18 - 24, 2010 After two weeks of volatility in the initial claims level that were rooted in biases in the seasonal adjustment factors, we are finally receiving our first clear picture of the labor market in July. Unfortunately, the data are painting a picture that looks eerily similar to what the market has been experiencing for the past nine months.
28-Jul-10	Wake Up Call -- 28 July 2010 Following a range-bound session yesterday, U.S. equity futures are trading around unchanged this morning. Boeing reported mixed second quarter results and guidance this morning while technical levels are in play in the S&P 500 as it probes its 200-day simple moving average at 1,114. Futures did not receive a boost from strong trading in Asia overnight. Potential catalysts on the calendar today include the Durable Goods Orders report at 8:30 a.m. ET and the Federal Reserve's regional Beige Book economic survey at 2:00 p.m. ET.
28-Jul-10	Unconventional Wisdom: Short-Term Greek Debt a Safe Haven? Considering that the market has been punishing Europe's riskier sovereigns for the past few months -- and with good reason -- it might seem a bit ridiculous to suggest Greece's short-term debt is a "safe haven." However, market participants may be discounting debt that is maturing in 18 months or less from now too much and, in doing so, could be creating a nice buying opportunity. For participants who believe that Greece will do what is necessary to satisfy the "required" austerity measures, short-term Greek debt may indeed offer an enticing opportunity, if not a safe-haven of sorts.
28-Jul-10	Data Detail: Durable Goods Orders - June 2010 Looking past the headline value reveals a solid business environment. Growth in both new orders and shipments of nondefense business capital excluding aircraft remained in the black. Even though consumer confidence is slipping, businesses remain unconcerned that a double-dip recession may be brewing in the immediate future.
27-Jul-10	Wake Up Call -- 27 July 2010 U.S. equity markets look to extend their July rebound this morning as futures currently indicate a modestly higher open. They began trending higher around 2:30 a.m. ET, joined by a higher open for European markets, following another positive batch of second quarter earnings reports. In Europe, bank stocks soared in morning trade following better-than-expected results from UBS and Deutsche Bank. Also helping European banks were reports late Monday that the Basel Committee will scale back many of its proposals to beef up bank capital and liquidity rules. In the U.S., Dow-component DuPont beat and raised guidance.
27-Jul-10	Data Detail: Consumer Confidence - July 2010 July is turning into a very scary month for consumers as employment anxieties and fears of a double-dip recession weigh heavily on consumer attitudes. Fortunately, weaker confidence numbers do not necessarily mean a lack of consumption growth. Overall, we continue to expect personal spending to remain steady.
26-Jul-10	Wake Up Call -- 26 July 2010 U.S. equity futures are trading modestly lower on a slow morning. Market participants are taking a breather following a full calendar last week. Earnings results, economic data and U.S. Treasury auctions will pick up later in the week, with today's calendar only containing the New Home Sales figure for June. That report could be a catalyst, however, as the sector deals with a payback period following the expiration of the homebuyer tax credits in April. The energy sector should also be in focus today following reports that Senate democrats may unveil a slimmed-down energy bill.
26-Jul-10	Data Detail: Home Sales - June 2010 We have received a second month of data regarding the payback period following the homebuyers' tax credits, and the data suggest that the sales numbers may not be as grim as once thought.
26-Jul-10	Fix-ated: July 19 - 23, 2010 Treasuries sold off into the end of last week as the risk trade picked up a bit on solid earnings reports and the European banking sector's not-so-stressful test that contained no surprises. Other high-grade investments continued to do well as the MMA AAA 10-year Muni Index hit its lowest level in over nine years and the ML 7-10 Yr "A" Corp Index reached its lowest yield since March 19, 2004. We believe there are some attractive dividend yields available now.
23-Jul-10	Wake Up Call -- 23 July 2010 U.S. equity futures are trading flat to slightly higher this morning as market participants digest another large batch of earnings reports and await the results of the European bank stress tests this afternoon. Asian markets caught up overnight following the strength on Wall Street yesterday while European markets are trading modestly higher at midday.
23-Jul-10	Market Monitor: Q2 Earnings Reporting - Act Two Entering the week, we were resigned to the idea of using interim signs of strength to reduce exposure to cyclical sectors. After a flood of Q2 earnings reports and guidance, we are resigned to putting an end to that strategy as those reports made it clear the U.S. is not headed for a double-dip recession. In turn, we consider the idea that the biggest risk to the stock market today is not a meltdown in stock prices, but a melt up in stock prices.
23-Jul-10	GDP Monitor: July 19 - 23, 2010 Quarterly updates to our import/export pricing models tightened our trade-deficit estimates and subtracted almost a full percentage point from GDP. As a result, our GDP estimate for Q2 was revised down from 4.0% to 3.0%. While the economic news in the housing sector was worse than expected, it had only a minor influence on our GDP forecast.
23-Jul-10	Seeking Yield: Legally Avoiding Taxes As income and investment taxes are all but assured to go up in the near future (at least for those in the top brackets), money managers will want to take a hard look at tax-advantaged vehicles. Investments to consider for taxable accounts include general obligations bonds from out-of-favor states, certain municipal revenue bonds, as well as Master Limited Partnerships. Higher-yielding (but not necessarily high-yield) bonds, including Build America Bonds (BABS), and stocks with higher dividend yields, have a place in tax-exempt accounts. For such accounts, we take a look at the dividend yields from a few companies, several corporate bond offerings, as well as some BABS issues. We note that while interest rates may move sideways over the near term, there is substantial interest-rate risk over the longer term.
22-Jul-10	Wake Up Call -- 22 July 2010 U.S. equity futures point to a higher open for the market this morning. After European markets opened modestly lower overnight, they and U.S. futures began rallying as the euro and pound rebounded strongly against the dollar following better-than-expected economic data out of Europe (eurozone PMI, U.K. retail sales). The focus is also back on second quarter earnings results this morning, and the market has seen a number of better-than-expected reports.
22-Jul-10	Data Detail: Jobless Claims - July 11 - 17, 2010 The discrepancy between today's business activities and a normal business environment has left the seasonal adjustment factors out of synch, suggesting that any changes in claims is more than likely just noise and not the beginning of any new trend.
21-Jul-10	Wake Up Call -- 21 July 2010 U.S. equity futures are trading around unchanged this morning, though NASDAQ futures are outperforming following strong results from Apple, who beat/raised on the top line but continued its practice of providing conservative bottom-line guidance. Yahoo!, though, missed slightly on the top line and issued modestly weaker-than-expected revenue guidance. Results from Morgan Stanley and Wells Fargo are still to come this morning. Overseas, Asian markets ended mixed while European markets are catching up following the strong rebound on Wall Street yesterday. Europe held its opening gains despite a sell-off in the euro that began at 4:00 a.m. ET. A weak auction out of Portugal is the primary reason, though the currency turned lower before the results were released.
21-Jul-10	Trend Watch: July 5 - 16, 2010 In this Trend Watch, we recommend the Utilities sector for professional investors looking for yield and would take profits on the recent move lower in the dollar/higher in the euro. We are also calling attention to the ongoing enterprise cycle in the tech sector and preview the upcoming midterm elections.
20-Jul-10	Wake Up Call -- 20 July 2010 Following yesterday's modest gains, U.S. equity futures point to a sharply lower open for the market this morning. Futures initially moved lower yesterday after the close following disappointing second quarter results from tech bellwether IBM. Texas Instruments also moved sharply lower following its report. Futures extended their declines in early morning trade.
20-Jul-10	Data Detail: Housing Starts - June 2010 Going off of the starts data, one would think that the sector was moving in the wrong direction. However, that is a bit of a misnomer as the data more accurately reveal a sideways trend.
19-Jul-10	Wake Up Call -- Futures Modestly Higher Following the sharp sell off Friday, futures indicate a modestly higher open. There is not a specific catalyst for the buying interest, although some encouraging order news for Boeing (BA) is offering support.
19-Jul-10	Financial Review: Q2 2010 Bank Earnings The results last week from JP Morgan, Citigroup, Bank of America and GE Capital, as well as June trust data, confirmed that credit losses are easing and that provisions are moving lower. Although the release of reserves has raised concerns about the quality of earnings being reported, those concerns have mistakenly overshadowed the more important aspect of the reports, which is that credit quality is improving. What remains missing, though, is loan demand.
19-Jul-10	Fix-ated: July 12 - 16, 2010 Treasuries, high-yield and investment-grade corporates, and municipal bond yields all rallied last week as equities ended the week lower. Municipals have seen significant gains over the past month. The 10-year FactSet AAA has moved 32 bps lower. The ML "A" 7-10-year Corporate Index and the ML U.S. HY Mstr II Index have moved 59 and 63 bps lower respectively. We continue to believe that "second-tier," investment-grade corporates -- like GE (GE), Kraft (KFT), Verizon (VZ) -- offer the best value. Goldman Sachs' (GS) 5-and-10-year bonds are now trading back to pre-indictment levels, but still offer some relative value. There has been talk that European sovereign debt fears are calming, but we do not believe that the recent auctions by Spain, Portugal, and Greece, or the action in U.S. Treasuries, supports that idea.
16-Jul-10	Wake Up Call -- 16 July 2010 This morning, the focus is entirely on second quarter earnings as four major companies reported. Google started it off yesterday after the close, but unfortunately the company's first bottom-line miss since Q2 2008 sent shares sharply lower. Market participants are digesting financial earnings this morning, including Bank of America, Citigroup and GE Capital. Overseas markets saw mixed action.
16-Jul-10	Market Monitor: Q2 Earnings Reporting - Act One There was plenty of drama surrounding the first week of earnings reporting for the June quarter. In particular, economic data clashed with generally reassuring earnings guidance, leaving the market inclined to think earnings expectations are still too high. Seeing how things played out, we remain wedded to our view that interim signs of strength in the stock market present an opportunity to reduce exposure to cyclical sectors.
16-Jul-10	GDP Monitor: July 12 - 16, 2010 Our Q2 2010 GDP forecast was revised down from 4.4% to 4.0% after the net export deficit widened more than anticipated. While the data this week lowered our economic outlook, it actually showcased a much stronger recovery. A rise in investment will keep our long-term projections on target and possibly improve them if productivity grows faster than we expect.
16-Jul-10	Data Detail: Inflation - June 2010 Commodity prices continue to be at the heart of the deflationary moves in the indexes. Oddly, though, the reason for the drop in headline prices was different for both. Energy prices were the main driver in lowering consumer prices while weaker food prices contributed to declining producer prices.
15-Jul-10	Wake Up Call -- 15 July 2010 U.S. equity futures are showing little direction this morning as market participants digest second quarter results from JP Morgan Chase and the euro and pound continue their advance against the dollar after Spain sold €3 bln of 15-year Bonds in an auction that saw solid demand. Asian markets sold off overnight, but those losses did not spread overseas.
15-Jul-10	U.S. Economic Outlook - Q3 2010 There are ample risks associated with today's economic uncertainty. However, we do not envision a double-dip recession materializing. GDP is expected to increase 3.0% in 2010 and 1.7% in 2011. The inventory contribution to GDP is expected to fall from 1.4 percentage points in 2010 to zero points in 2011. The lost inventory contribution makes up the entire difference between our 2010 and 2011 GDP forecast. Economic output should weaken in the second half of 2010 and persist through the middle of 2011 as the inventory cycle winds down, import growth strengthens as dollar volatility induces demand for foreign goods, and consumption weakens after a portion of the Bush tax cuts expires. Led by a return in consumption and investment in equipment and software, growth returns to potential in the second half of 2011.
15-Jul-10	Cloud Computing Defined The inevitable implementation of cloud computing will transform the entire information technology industry. In the process, many of the largest vendors of technology equipment will be hurt, as the paradigm shift makes much of the underlying infrastructure a commodity item. We believe that the cloud computing revolution, over the next five years, will cause value to accrue to application vendors and data distributors, and away from the more traditional giants of the technology industry. Professional investors can benefit by viewing this shift using our definition of "the cloud" and not the one presented by technology vendors.
15-Jul-10	Data Detail: Claims (July 10), Ind. Production (Jun-10) Today's data highlight the necessity to look at the details rather than just the headline number. The entire initial claims decline can be explained by poor seasonal adjustment factors. Likewise, manufacturing production turned negative for the first time since February, but that was due to the moratorium on drilling in the Gulf and weakness in motor vehicle manufacturing.
14-Jul-10	Wake Up Call -- 14 July 2010 Market sentiment received a boost from Intel after the company reported strong results/guidance yesterday after the close. Futures moved higher in after-hours trade, helping Asian markets rally, including a 2.7% surge in Japan's Nikkei. However, futures began trending lower around 4:15 a.m. ET and have given up a good portion of their gains. Only NASDAQ futures continue to indicate a sharply higher open. A similar story played out in Europe, as equity markets opened modestly higher only to trend lower from there.
14-Jul-10	Data Detail: Retail Sales - June 2010 After driving GDP growth in the first quarter of the year, the consumer has definitely lost some of its momentum over the past couple of months. While we anticipate that consumption growth will remain positive for the remainder of the year, the strength of its contribution to GDP will be weak unless the private sector opens up its doors and starts to rehire.
13-Jul-10	Wake Up Call -- 13 July 2010 U.S. equity futures initially moved higher overnight following a strong start to the second quarter earnings season, but gave up those gains early this morning. A spike higher at 4:30 a.m. ET, however, aided by strength in Europe and a successful bond offering from Greece, points to a stronger start for the market.
13-Jul-10	Data Detail: Trade Balance - May 2010 While the growth in the deficit will lower our second quarter GDP forecasts, the details of the data actually reveal a strengthening economic recovery. Imports of core business capital outperformed export growth and the gains in business investment following the strong shipments data for nondefense capital goods excluding aircraft remained intact.
12-Jul-10	Wake Up Call -- 12 July 2010 Following a strong rebound rally last week, U.S. equity futures indicate a modestly lower open for the market this morning. In addition to profit taking, futures are being pressured by worries of easing demand from China, a stronger dollar and caution ahead of second quarter earnings season.
12-Jul-10	Unconventional Wisdom: An Unstable Stability Plan The €440 bln European Financial Stability Facility is expected to begin operating in late July or early August. It acts as a backstop for the eurozone, but in reality it is a tool for building market confidence. While creating the illusion of a safety net, its viability hinges on need... Since the EFSF does not have its own revenue stream to guarantee its debt, the facility is backed by eurozone countries. If more and more countries need aid, the number remaining to provide support could dwindle to an untenable level... The facility's support must come from the larger eurozone nations, in particular Germany and France. Its viability hinges on their willingness, and the willingness of their citizens, to participate.
12-Jul-10	Fix-ated: July 5 - 9, 2010 Treasury yields finally softened a bit as the 10-year rose nearly 10 bps last week in reaction to the stock market's rally. Corporate bond investors shifted favor to the high-yield sector as the ML HY Mst II Index rallied from a 9.07% to a 8.85% yield for the week. The 10-year AAA muni finally broke through the 3.00% barrier and closed the week out at 2.94%. Q2 earnings and Treasury auctions should drive the action this week.
09-Jul-10	Wake Up Call -- 09 July 2010 After a very busy premarket session yesterday, news flow is slow this morning and U.S. equity futures currently indicate a flat open for the market. In the bond market, the 10-year is trading modestly lower this morning. That is keeping its yield above the 3.00% level that it regained yesterday.
09-Jul-10	GDP Monitor: July 5 - 9, 2010 After stronger-than-expected growth in merchant wholesaler inventories our Q2 2010 GDP forecast was revised up from 4.1% to 4.4%. We anticipated that wholesale inventories would follow the downward trend revealed in last week's manufacturers' level. While wholesale petroleum inventories fell 6.0% in May, the remaining sectors more than offset the loss.
09-Jul-10	Market Monitor: Q2 Earnings Season With the stock market having been hit hard in recent weeks on earnings concerns, there is a realistic prospect of a relief rally during the Q2 earnings reporting season. Should one occur, we would be selling into the strength, reducing exposure to cyclical sectors. Conversely, we recommend increasing allocation to counter-cyclical sectors where volatility is lower and dividend yields are generally higher.
08-Jul-10	Wake Up Call -- 08 July 2010 U.S. equity futures are trading flat to modestly lower this morning as market participants digest a busy morning of news. The BOE kept its benchmark interest rate at 0.50% and its asset repurchase program at 200 bln pounds, both as expected. The ECB followed suit by keeping its benchmark rate steady at 1.00%. As usual, all eyes will be on President Trichet's press conference that begins at 8:30 a.m. ET. The IMF made headlines this morning when it increased its 2010 GDP projection for the world by 0.4 percentage points to 4.6%, reflecting stronger activity during the first half of the year. Finally, U.S. retailers are announcing June same-store sales results this morning.
08-Jul-10	Data Detail: Jobless Claims - June 26 - July 3, 2010 While the jobless report was fairly bland, we are beginning to worry about the lost income from the extended benefits. If extended benefits decline by 3.3 mln by the end of July, we could see a combined 0.2 percentage point drop in income due to the lost benefits over the next several months. This could be a significant hindrance to consumption growth and we may need to revise our third quarter forecasts as a result.
07-Jul-10	Wake Up Call -- Another Slow Morning U.S. equity futures indicate a flat to slightly lower open this morning. Both Asian and European markets are pulling back today after U.S. markets did the same yesterday.
07-Jul-10	Trend Watch: June 21 - July 2, 2010 In this Trend Watch, we are calling attention to central banks buying the euro and selling the dollar, an economic indicator that argues against deflation, the catalyst for second quarter earnings season, and the current relationship between investment-grade corporate bonds and Treasuries.
06-Jul-10	Wake Up Call -- Bargain Hunters Drive Global Rally U.S. equity futures indicate a higher open this morning, tracking strong gains in global markets. Most markets overseas did very little yesterday while the U.S. was closed in observance of Independence Day, but bargain hunters are out in force today. News flow has been light as today's move is more about short covering.
06-Jul-10	Fix-ated: June 28 - July 2, 2010 With the 10-year Treasury yield back to its April 2009 level, we are starting to wonder if there really was a recovery. With muni and high-grade corporate yields moving lower, selective high-grade debt is looking attractive again. We believe it is prudent for investors to start to consider the ramifications of what the possible fixes to the European debt crisis might look like and how they may impact the market.
02-Jul-10	Wake Up Call -- Employment Report Looms As expected, U.S. equity futures are showing little direction this morning ahead of the employment report at 8:30 a.m. ET. Asian markets closed mixed overnight despite positive developments out of China and Australia. European markets are trading modestly higher at midday, led by the U.K.'s FTSE on strength in banks and miners. In the currency market, the dollar is trading flat against the other majors following yesterday's very sharp sell-off, though it had rebounded overnight against the yen before giving up those gains.
02-Jul-10	Market Monitor: Warning Signs A number of indicators are flashing warning signs that the market is bracing itself for an economic slowdown. The unanswered question is, will it be a slowdown or will it be a recession? Either way, we are recommending reducing exposure to cyclical sectors.
02-Jul-10	GDP Monitor: June 28 - July 2, 2010 Weaker-than-expected growth in manufacturers' shipments more than offset stronger-than-expected consumption and construction data as Q2 2010 GDP was revised down from 4.2% to 4.1%. While durable inventory growth remained strong, nondurable manufacturers had the worst-performing month since November 2008 as inventories declined 2.1%. We expect a modest rebound next month.
02-Jul-10	Data Detail: Employment Report - June 2010 The drop in hours and wages may be a bigger cause of concern than the sickly payroll numbers. It seems that firms are producing beyond current demand requirements, and, as a result, inventories may be stockpiling too quickly. The weakness in weekly earnings suggests that firms are cutting production and the data lead us to believe that we may be witnessing a precursor to further declines in retail sales over the coming months.
01-Jul-10	Wake Up Call -- Poor China PMI Sinks Global Markets U.S. equity futures indicate a modestly lower open this morning. They spiked sharply lower around 9:00 p.m. ET last night, mimicking a sell-off in Asian markets after China's PMI Manufacturing figure for June came in at a weaker-than-expected 52.1 (prior 53.9). Futures have been slowly rebounding since that time, however. Helping the rebound is the euro, which rallied against the dollar this morning after the ECB lent €111.2 bln in six-day bills to ease the expiration of its 12-month bills today and Spain successfully auctioned off €3.5 bln in five-year notes despite yesterday's comments from Moody's.
01-Jul-10	Data Detail: Claims (Jun-26) Construct (May-10) ISM (Jun-10) The overall weakness of the economic recovery was evident in the jobless claims, construction spending, and ISM reports. While a double-dip recession remains a low probability, the data underscore that the economy is not growing at rates that most economists predicted at the beginning of the year.
30-Jun-10	Wake Up Call -- Liquidity Concerns Ease U.S. equity markets are looking to rebound this morning as futures indicate a higher open. European markets and the euro also opened higher. They had given up some of those opening gains before spiking to their best levels at 5:15 a.m. ET when it was announced that banks, ahead of the expiration of €442 bln in one-year ECB loans on Thursday, bought only €131.9 bln in three-month bills. Expectations had been between €150-250 bln, so today's figure eases the liquidity concerns, showing banks do not need as much money as initially thought. Everything could change at 8:15 a.m. ET, however, when the ADP releases the change to its employment figure in June.
29-Jun-10	Wake Up Call -- Global Markets Sharply Lower Markets are selling off globally, beginning in Asia overnight. Mainland China's Shanghai Composite led the way, losing 4.3% amid tight liquidity ahead of a major IPO. European equities are also selling off sharply, knocked lower by renewed fears over funding in the eurozone ahead of bank repayments to the European Central Bank on July 1.
29-Jun-10	Unconventional Wisdom: Time to Be Discreet The S&P 500 Consumer Discretionary sector was a much-loved sector during the market's recovery rally. Lately, though, the market has been less infatuated with the sector. That is for good reason as headwinds on the horizon are raising the risk of downside earnings surprises in the back half of 2010. Accordingly, we recommend reducing exposure to the sector.
29-Jun-10	Data Detail: Consumer Confidence - June 2010 The Conference Board's Consumer Confidence Index tanked in June. In doing so, it fueled concerns about there being a big downturn in consumer spending and a double-dip recession in the U.S. Both concerns are misplaced knowing confidence readings take a distant backseat to income when it comes to spending.
28-Jun-10	Wake Up Call -- Slow Start to the Week U.S. equity futures spiked into modestly positive territory at 4:00 a.m. ET as European markets were trending higher. Other than the G20 headlines, however, it has been a slow morning thus far. Today's calendar is also relatively light, with the only economic report being Personal Spending/Income at 8:30 a.m. ET.
28-Jun-10	Data Detail: Personal Income and Spending - May 2010 The personal income and spending report for May provided some encouraging markers for future spending activity. At the same time, it showed inflation remains subdued and that there should not be any undue concern about the FOMC raising the target range for the fed funds rate anytime soon.
28-Jun-10	Fix-ated: June 21-25, 2010 Treasury yields moved lower last week even as the auction results were mixed. We believe there is more risk than reward in Treasuries at this point. The FactSet AAA 10-year Muni ended the week at over 100% as a percentage of Treasuries (3.14% vs. 3.11%), but that speaks more to the power of risk aversion than it does to the cheapness of munis. We recommend staying selective in corporates as the ML HY Mstr II Index has regained 51 bps since June 10.
25-Jun-10	Wake Up Call -- Futures Higher After Financial Reform Deal According to reports, lawmakers worked out an agreement on a financial reform bill. The bill is expected to be approved and signed into law by July 4.The news helped lift the futures market, with the major banks trading higher ahead of the opening bell.
25-Jun-10	GDP Monitor: June 21 - 25, 2010 A greater-than-expected rebound in business capital shipments along with strong inventory investment pushed our second quarter GDP forecast up to 4.2% from 3.8%. After a lack of shipments in nondefense business capital excluding aircraft in April, we anticipated a moderate rebound in investment spending. Surprisingly, business demand came in at much greater levels than expected and pushed our equipment and software growth forecast up to 19.1%.
25-Jun-10	Data Detail: GDP - Q1 2010 - Third Estimate Even though the negative revision was unexpected, the fact that GDP remained near its potential 2.8% long-term growth rate will not alter our view about the stability of the economic recovery. While economic growth may be subdued, the probability of a double-dip recession continues to be remote.
24-Jun-10	Wake Up Call -- Europe Leads the Way Lower U.S. equity futures indicate a sharply lower open this morning. Many are attributing the move to the Federal Reserve's comments yesterday, specifically where it said financial conditions have become less supportive of growth, where before it had said supportive. We would note, however, that the sell-off did not begin until 3:00 a.m. ET, after the euro had already begun trending lower.
24-Jun-10	Data Detail: Durables (May-10), Jobless Claims (June 19) More importantly, the growth in domestic business capital came during a time of global weakening and a strengthening dollar. As a result, we expect that a majority of these purchases will remain in the U.S. for domestic use. Therefore, long-term economic growth potential remains strong...Since the middle of November, the initial claims level has stubbornly remained bounded between 450,000 and 500,000 claimants every week. Time and time again we have looked for signs of a breakout, but it keeps eluding us as firms remain willing to cut costs by reducing their labor needs.
23-Jun-10	Wake Up Call -- Modest Rebound Ahead of FOMC U.S. equity market are looking to rebound this morning as futures indicate a modestly higher open despite weakness overseas. The U.S. Dollar Index is trading slightly lower this morning as the pound extended yesterday's gains following the minutes from the latest Bank of England meeting, where committee member Andrew Sentance voted against standing pat at 0.50%, instead preferring an increase in the bank rate of 25 bps. Today's calendar is more than just the FOMC, as market participants will have new home sales at 10:00 a.m. ET, which should provide more insight into the payback period in the U.S. housing market, and the second of this week's longer-term Treasury auctions at 1:00 p.m. ET.
23-Jun-10	Trend Watch: June 7 - 18, 2010 In this Trend Watch, we are calling attention to a leading indicator that must not be overlooked, a new currency policy in China that may not have the intended result the market is expecting, the hoarding of cash by U.S. businesses, and the notion that land-line Internet service may be headed the way of the dinosaurs.
23-Jun-10	Data Detail: Home Sales - May 2010 If it were up to the reactions by the media and equity markets regarding the housing sales data, a double dip in housing would no longer be considered a possibility but a reality. In truth, the weakness in the data should fuel concern that the housing sector is teetering on edge, but hard conclusions will not be able to be made until at least after the July data are released.
22-Jun-10	Wake Up Call -- Giving Some Back U.S. equity futures indicate a slightly lower open this morning despite some volatility overseas. European markets moved sharply lower, with financials leading the way after Fitch downgraded French bank BNP Paribas late yesterday and Standard & Poor's raised its estimates for loan losses for Spain's banking sector this morning. They fell to fresh lows at 5:00 a.m. ET, coinciding with a sell-off in the euro and pound on the S&P announcement.
21-Jun-10	Wake Up Call -- Yuan Move Sparks Global Rally Global equity markets surged after the People's Bank of China announced on Saturday that it will make its currency's exchange rate more "flexible." The announcement may ease political tensions that have risen between China and the U.S. since last year, including accusations that China was deliberately undervaluing its currency to boost exports. While China made a political statement, however, it did not officially change the yuan peg.
21-Jun-10	Credit Check: Loan Demand Remains Depressed More than a year and a half after the credit market froze, the consumption and extension of credit has yet to normalize fully. There are signs of improvement, but the extension of credit is being negatively impacted by weak demand. This environment is unlikely to change in the near term for a number of factors, from over-leveraged consumer balance sheets to concerns over the economic outlook to tight lending standards and ongoing regulatory uncertainty. Credit growth is not a prerequisite for economic growth, so we recently raised our near-term GDP forecast due to a positive shift in net export growth. High unemployment and a weak credit market, however, will serve as headwinds over the medium term. At a time when money is "free," the great paradox is that demand remains depressed.
21-Jun-10	Fix-ated: June 14-18, 2010 Treasuries finished last week where they began as yields were contained by lackluster economic data and ongoing eurozone fears. The ML HY Mst II Index yield has moved down 46 bps since June 11 -- the biggest one-week move since September 2009 -- and is now back to late-May levels. The 10-year AAA still failed to break through the top of its 3.09%-3.20% range that it has been in since April 27. With regards to BP, we would hold, but not add to, bond positions.
18-Jun-10	Wake Up Call -- A Very Slow Morning China's Shanghai Composite lost 1.8% overnight after an economic advisor on the People's Bank of China's monetary policy committee said that the country's economic growth might slow down in the second half of this year. That, however, is one of the few markets that showed any movement. U.S. futures, European markets, Treasuries and the currency market are all trading basically unchanged. The commodity market is active, however, as gold futures just spiked to a fresh all-time high.
18-Jun-10	GDP Monitor: June 14 - 18, 2010 Weaker-than-expected housing starts data caused a dip in our GDP growth forecast for the second quarter from 3.9% to 3.8%. There is no clear answer on why builders shut down on new construction. One conclusion is that it is a simple ease following four strong months of growth. However, it is also possible that builders overshot on their demand estimates and became worried that they may have too much inventory stock in the coming months.
18-Jun-10	Market Monitor: An Ultimate Fight for the FOMC The FOMC will not be raising the fed funds rate when it convenes at its next meeting. In fact, the FOMC may not raise the fed funds rate for quite some time, choosing instead to begin a tightening cycle with alternative measures first. Either way, history should prove again that it is worth owning dividend-paying stocks ahead of the first tightening action.
17-Jun-10	Wake Up Call -- Europe Setting the Early Tone U.S. equity futures, European markets, the euro and the pound all moved higher between 4:00 and 5:15 a.m. ET this morning. In the middle of that run, Spain successfully auctioned off approximately €3.5 bln of 10- and 30- year notes and bonds.
17-Jun-10	Data Detail: Jobless Claims (June 12), Inflation (May-10) As much as analysts would like to discount the claims numbers as an inaccurate reading of the employment situation, the sideways movement provides more evidence that the 218,000 increase in private nonfarm payrolls in April was an outlier. The data suggest that we should expect payroll growth in the 40,000 - 60,000 range instead, and anything above this level would a surprise bonus for the month...The inflation data for May provide further affirmation that the Fed will be on hold for some time yet. Inflation pressures are simply not a problem at this juncture. The trend in both PPI and CPI is clearly one of disinflation, which is apt to stoke commentary about a possible turn to a deflationary environment.
16-Jun-10	Wake Up Call -- Spain, FedEx in Focus U.S. equity futures point to a lower open this morning. The euro sold off following a strong two-day surge, particularly between 3:00 and 4:00 a.m. ET, when European markets also came off their strong opening levels. Sovereign debt fears are the cause, with the focus on Spain this morning. The spread between the country's 10-year bond and the benchmark German bund has hit an all-time high. FedEx, meanwhile, issued weak EPS guidance.
16-Jun-10	Data Detail: Housing Starts (May-10); Production (May-10) Clearly the drop in May's housing starts level was a disappointment. However, it is possible that the drop in starts is a simple easing after three out of four months of growth. Starts increased 14.4% from December to April 2010 and were due for a pullback as the industry gets a better grasp of the housing situation following the tax credit....It should be noted that the moratorium on drilling has had a limited effect on the manufacturing data thus far. Oil well drilling production posted no growth in May, but we anticipate this data point will turn significantly negative over the next couple of months as the suspension is in place. Therefore, a significant drop in production next month due to the oil sector may cause the headline manufacturing number to fall, but it will have no bearing on the stable growth prospects of the rest of the industry.
16-Jun-10	Credit Card Trust Data -- May 2010 The May data provide further evidence that the peak in charge-off rates occurred during Q1 2010. Even a gradual ease in charge offs over the remainder of 2010 will be welcome as companies will be able to release reserves at the same time. That adds earnings power at a time when the industry is dealing with regulation issues.
15-Jun-10	Wake Up Call -- Positive Momentum Continues U.S. equity futures indicate a modestly higher open this morning, having moved higher with European markets and the euro between 3:00 and 6:00 a.m. ET before pulling back slightly. In Europe, markets opened modestly lower before rebounding, and are attempting to close in the black for the fifth consecutive session. The trend higher is impressive as it continued despite German investor sentiment coming in well below expectations -- ZEW survey 28.7 in June versus 45.8 in May. In the currency market, the euro is extending yesterday's strong gain despite the ZEW survey and yesterday's downgrade of Greece, helped by successful debt offerings in Spain and Ireland.
14-Jun-10	Wake Up Call -- Broad-based Strength U.S. equity futures rallied overnight on strength in overseas markets and weakness in the dollar. Asian markets rallied on Friday's gains in Europe and the U.S., short covering and a stronger euro. Europe followed suit, opening higher. Today's sharp move higher in the euro and pound appears to be merely short covering, but positive comments out of Greece Friday night have also provided support.
14-Jun-10	Fixated: June 7-11, 2010 Treasuries traded in a wide range last week, but ended basically flat. All three auctions saw average demand as low yields tempered the safety trade. Corporates were weaker as the ML HY Mstr II Index reach its highest yield (9.40%) since April 27. We reiterate our stance that we would not add to, or initiate, positions in BP or RIG -- but we would not be sellers either. The best relative values right now may be in state-backed municipal debt.
11-Jun-10	Wake Up Call -- Taking a Breather U.S. equity futures indicate a flat-to-slightly lower open for the market. The moves in the currency market have also been modest, with the euro basically flat against the dollar and the pound giving back some of yesterday's strong gain.
11-Jun-10	The Closer -- More Late-day Volatility U.S. equity markets opened lower this morning following disappointing Retail Sales data, but quickly regained those declines, helped by stronger-than-expected Michigan Sentiment. They range traded through the majority of the session, but used a late-day push to close with modest gains. However, today's move occurred on the lightest volume in two months.
11-Jun-10	GDP Monitor: June 7 - 11, 2010 We raised our forecast for Q2 2010 real GDP this week, increasing it 0.5 percentage points to 3.9%. The change was primarily due to businesses unexpectedly turning to foreign sources for their investment needs.
11-Jun-10	Seeking Yield: The Convergence of Yields The now casual comparison of the safety and/or relative value of sovereign debt to corporate bonds may now expand to U.S. municipal debt. Not only is the comparison unusual by historical standards, but it also reflects a trend that we believe has real staying power -- the pursuit of the best relative-value yield regardless of the debtor. We believe state-backed debt has been unfairly categorized in the press as increasingly risky. This has created some solid relative value plays across the municipal landscape.
11-Jun-10	Data Detail: Retail Sales - May 2010 The retail sales numbers came in as a negative complete shock. Yet, the details of the report paint a different picture. Instead of pointing toward the beginning of a negative spiral in consumption spending, in essence the premature ending of the super consumer, the report was actually very benign.
10-Jun-10	Wake Up Call -- Futures Higher on Weaker Dollar U.S. equity futures began trending higher just after 11:00 p.m. ET, once again coinciding with movements in the currency market as the euro and pound began rallying against the dollar at the same time. The euro was boosted by comments from the head of China's national pension fund, who said the currency would weather Europe's debt crisis.
10-Jun-10	The Closer -- Euro, Pound Lead the Way U.S. equity markets open sharply higher on the back of a weaker dollar, as well as strong global economic data. A slow extension upward in afternoon trade helped them close at highs.
10-Jun-10	Data Detail: Jobless Claims (June 5), Trade Balance (Apr-10) The fact is the lack of a significant downward trend in jobless claims is going to make it extremely difficult for stable employment growth. We saw this last month when claims remained at or above their March levels and it resulted in a major disappointment in nonfarm payroll growth....On the surface, a drop in imports of industrial supplies would suggest that manufacturing is overheating and future production may be curtailed until demand for the sector's products catches up. However, imports of core capital goods increased by $1.6 bln, which reveals strong growth in equipment and software investment.
09-Jun-10	Wake Up Call -- Chinese Data Boost Global Markets Asian markets began their overnight session lower, but some rebounded in late trade, led by a 2.8% surge in mainland China's Shanghai Composite after three May economic data points were leaked. China's surge helped European markets open higher, though they are off their best levels. Both European and U.S. markets are also benefitting from a modestly weaker dollar.
09-Jun-10	The Closer -- Another Late-day Decline Wipes Out Gains After opening modestly higher and holding there during the first hour of trade, the major averages trended upwards over the next hour to hit their best levels around 11:30 a.m. ET. Unfortunately, they trended lower from there, accelerating downward in the final hour to close in modestly negative territory.
09-Jun-10	Trend Watch: May 24 - June 4, 2010 Trend Watch is a succinct record of data points, news items, and abstract thoughts assembled by our analysts. The report is published every two weeks, with the primary goal of identifying emerging trends that have the potential to shape investment decisions.
08-Jun-10	Wake Up Call – Bernanke Boosts Futures U.S. equity futures rallied sharply overnight following an interview of Federal Reserve Chairman Bernanke. He said that there seems to be a "good bit" of momentum in consumer spending and investment, so he expects a continued recovery. However, the pound and European markets sold off sharply early this morning following Fitch comments on the U.K. economy, with U.S. futures following suit and giving up some of their gains.
08-Jun-10	The Closer -- Large-caps Outperform in Quiet Session With most of today's catalysts occurring overnight, U.S. equity markets range-traded throughout the session. The major averages probed, but did not break below their May intraday lows. Large-cap stocks outperformed for a second day. While the market trended higher in the last 45 minutes of trading, only the S&P 500 and Dow broke to fresh session highs, ending with gains of over 1%.
07-Jun-10	Wake Up Call -- Futures, Euro Stabilize Overnight U.S. equity futures continued Friday's sell-off overnight, trading sharply lower. However, they bottomed around 10:00 p.m. ET and have trended higher since, currently sitting in modestly positive territory. Futures traded with the euro once again, as the currency hit a fresh four-year low of 1.1877, also around 10:00 p.m. ET, but has rebounded and is trading basically unchanged against the dollar.
07-Jun-10	The Closer -- Stocks Slip Further on Slow Day Following consolidative morning trade, U.S. equity markets trend steadily lower in the afternoon, extending Friday's sharp decline.
07-Jun-10	Fix-ated: June 1-4, 2010 Treasuries rallied into the weekend on a poor payrolls reports and a new concern in Europe (Hungary). The 10-year yield went below 3.20% last Friday after breaking the 3.40% level on Thursday. Investment-grade corporates performed well while investors continued to approach high-yield debt with caution. BP and RIG bonds continued to get battered. We would hold their respective debt, but remain cautious about adding to or initiating positions as the liability picture is still cloudy.
04-Jun-10	Wake Up Call -- New Default Concerns U.S. equity futures traded flat overnight ahead of the May employment report this morning. However, the euro and pound spiked lower against the dollar at 7:00 a.m. ET, and futures followed suit, trading sharply lower ahead of the economic release at 8:30 a.m. ET. The move is being attributed to fears Hungary could be the next country at risk of default following comments from a government spokesman.
04-Jun-10	The Closer -- Jobless Recovery, Hold the Recovery Renewed default fears out of Europe, this time from EU member Hungary, send European currencies and equity markets as well as U.S. futures lower premarket. A very disappointing May employment report pushes futures even lower. Even after the sharply lower open, the major averages trend downwards throughout the session.
04-Jun-10	GDP Monitor: May 31 - June 4, 2010 We raised our expectation for real GDP growth in Q2 2010 due to stronger-than-expected construction data and motor vehicle sales. Currently, we are forecasting a 3.4% increase versus a prior outlook of 3.2%. We anticipated that builders constructing smaller homes would result in slower growth in residential construction expenditures than in the past.
04-Jun-10	Data Detail: Employment Report - May 2010 The market may attempt to discount the employment report as an outlier or a possible payback period following last month's strong employment numbers. This view would discount the weakness shown in the claims data and ADP report. In reality, the employment report provides evidence that the U.S. is struggling through a long-term jobless recovery. The outliers may prove to be more like April's data, strong growth in the face of difficult underlying data.
03-Jun-10	Wake Up Call -- Stocks Steady Ahead of ADP U.S. equity futures are seeing a very slight bid ahead of the release. Corporate news is light once again, though retailers are announcing May same-store sales results.
03-Jun-10	The Closer -- All Eyes on Tomorrow's Employment Report U.S. equity markets reverse to the downside in morning trade, mimicking the euro's decline against the dollar, but trend higher in the afternoon to close with modest gains. Today's trade once again occurred amid light volume, despite a large batch of economic data, ahead of tomorrow's highly-anticipated employment report.
03-Jun-10	Data Detail: Jobless Claims - May 23 - 29, 2010 As we look toward tomorrow's nonfarm payrolls release, the latest jobless claims data do nothing to reassure the market that the payroll number is going to be strong. Instead of a strengthening labor market that analysts have been clamoring for, the claims data reveal a labor market that has been stagnate for eight weeks.
03-Jun-10	Housing Market: Volume and Price Pressures Remain As the payback period subsides, we expect total housing sales to return to their pre-tax credit levels, showing a bottom in sales has been reached. However, at this level supply pressures still outweigh demand, and pricing may remain in a deflationary trend.
02-Jun-10	Wake Up Call -- Futures Rebounding, Outperforming Europe U.S. equity markets are looking to rebound this morning, despite weakness overseas, as futures indicate a higher open. European markets opened lower this morning and have remained in the red. They are being led lower by the financial sector on continued fears about the European debt crisis after Spanish newspapers reported the country's second-largest bank, Caja Madrid, asked the government for €3 bln.
02-Jun-10	The Closer -- A Jolt of Energy for the Market U.S. equity markets extend their gains in a late-session surge, finishing sharply higher. The energy sector led the rally, helped by strength in natural gas stocks following favorable comments from President Obama and a modest rebound in shares of BP (BP).
02-Jun-10	Bond Investors Drill BP and Transocean Overall, the pressure on shelf drilling is supportive of our investment theme: "Commodities -- A Structural Imbalance." While widened bond spreads look bad, they have been exaggerated by the 10-year Treasury yield moving lower. At the same time, the risk of a BP dividend cut is limited in our view. We would hold BP and RIG debt here, but would not add to positions.
01-Jun-10	Wake Up Call -- Euro Back at Lows While most markets overseas saw little movement yesterday, China's Shanghai Composite fell 2.4%. It lost an additional 0.9% overnight after its two PMI Manufacturing figures came in weaker than expected in May. However, U.S. futures sank to their lows between 3:00 and 5:00 a.m. ET this morning as the euro extended its decline against the dollar, hitting 1.2111, its lowest level since April 2006.
01-Jun-10	The Closer -- June Starts with a Swoon On the heels of one of the worst performances in history for the month of May, the market started June on a negative note as headline risk - both real and perceived - overshadowed some encouraging economic news and pulled down the major averages.
01-Jun-10	Data Detail: Construction (Apr-10), ISM (May-10) Total construction expenditures rose 2.7% in April, their strongest monthly gain since August 2000. Combined with the gains in March, construction posted its first two-month growth period since late 2007.... At first glance, the ISM Index for May suggests a weaker manufacturing sector than in April. The index fell from 60.4 in April to 59.7 in May and barely beat expectations of a reading of 59.4. However, the details of the data reveal stability at a heightened growth level.
01-Jun-10	Market Monitor: S&P 500 Valuation - Q2 2010 The S&P 500 has had a setback of late, yet it is 63% above its March 2009 recession low. Despite the recovery run, most valuation metrics for the S&P 500 remain below their 10-year average. The technology, health care, telecom, and consumer staples sectors look particularly attractive relative to historical measures.
01-Jun-10	Fix-ated: May 24-28, 2010 Treasuries made a run at the 3.00% level early last week before settling back to the 3.25%-3.30% range as the weekend approached. We continue to believe there is more downside risk than upside potential in Treasuries. High-yield corporates may have finally levelled off. The ML High-Yield Mstr II Index went from 7.96% on April 28, to 9.33% on May 26, before settling at 9.07% to end the week. Refinancing risk could become an issue for some companies should high-yield rates resume their march higher.
28-May-10	Wake Up Call -- Modestly Higher on Slow Morning U.S. equity futures just pushed into modestly positive territory, but for the most part have shown little direction amid light volume. Many are noting a batch of economic data this morning, but we would note the market has not shown any concerted response to economic results recently.
28-May-10	The Closer -- Roller-coaster Ride Continues U.S. equity markets move lower in volatile afternoon trade after Fitch downgrades Spain's credit rating one notch from Aaa to AA+. Today's action comes ahead of the Memorial Day holiday on Monday.
28-May-10	GDP Monitor: May 24 - 28, 2010 We lowered our expectation for real GDP growth in Q2 2010 due to weaker-than-expected shipments of nondefense capital goods excluding aircraft. Currently, we are forecasting a 3.2% increase versus a prior outlook of 3.5%.
28-May-10	Data Detail: Personal Income and Spending - April 2010 Income rose 0.4%, exactly what the median estimate expected and the same growth rate as in March. However, while March's income growth was primarily due growth in government transfers, April saw a 0.4% rise in wages. Steady growth in wages is needed for sustainable consumption.
27-May-10	Wake Up Call -- China News Boosts Stocks U.S. equity futures are sharply higher, benefiting from reports that China remains committed to its diversified foreign exchange reserves, including Europe.
27-May-10	The Closer -- Market Flips the On Switch The on again-off again relationship with stocks was on again in a big way Thursday as global equity markets rallied following a reassuring comment from China about its euro holdings. The S&P 500 surged 3.3%, longer-dated Treasuries got clobbered, and crude futures made a big move for the second straight day.
27-May-10	Trend Watch: May 10-21, 2010 Trend Watch is a succinct record of data points, news items, and abstract thoughts assembled by our analysts. The report is published every two weeks, with the primary goal of identifying emerging trends that have the potential to shape investment decisions.
27-May-10	Data Detail: GDP (Q1-2010), Jobless Claims (May 16 - 22) The second estimate to first quarter GDP was a bit of a disappointment. The revisions showed output increased by only 3.0%, down from 3.2% in the advance estimate and below the median estimate of 3.3%. The main difference between the actual GDP data and the consensus estimate was due to the consensus overestimating the contribution from inventory investment... Excluding the Easter holiday biases, the initial claims level remains stubbornly above its levels in March and shows no signs of labor growth. Yet, this conclusion goes against the gains revealed in April's employment report, where payrolls increased at their fastest pace since 2006.
26-May-10	Wake Up Call -- Buying Efforts Carry Over U.S. equity futures currently suggest the rebound effort will continue today as overseas markets gain. Commodities are garnering some buying interest this morning, with oil futures up 2.9% and gold futures up 1.3%.
26-May-10	The Closer -- True to Uncertain Form The stock market started the day on an upbeat note, but failed to keep its momentum as a faltering euro tripped up the market in the afternoon. Consequently, the market was stopped short again of being able to record two consecutive winning sessions.
26-May-10	Data Detail: Durable Orders (Apr-10), Home Sales (Apr-10) In actuality, the durable goods report was extremely negative and paints a very depressing picture of the manufacturing sector. Excluding the transportation sector, durable goods orders declined 1.0%, well below expectations of a 0.7% increase....With the April 30 first-time and existing homebuyers' tax credit deadline approaching, buyers rushed back into the market in April in order to take advantage of the rebates. The resulting surge in buyers drove both existing and new home sales well above consensus expectations.
26-May-10	Market Monitor: Investment Asylum Offered in U.S. It has been a tough period for global markets in the past month. The U.S. has not been exempt from the selling pressure, but with international concerns serving as the tipping point, we have put together a list of companies that derive all of their sales from the U.S. and that could serve as a port in the storm of investment uncertainty.
25-May-10	Wake Up Call -- Global Turmoil Sinks Stocks Selling interest has carried over today on a global flight out of risky assets. U.S. equity futures are down sharply, trading near session lows. At the same time, the dollar and Treasuries are soaring in a flight-to-safety bid, while crude oil futures are dropping.
25-May-10	The Closer -- Disaster Averted There was fear and loathing in early action when the S&P 500 dropped 3.1% in the first ten minutes of trading. It was a different story by the close, though, as the market bounced back from short-term oversold conditions to log a slight gain.
25-May-10	Data Detail: Consumer Confidence - May 2010 Shockingly, consumer confidence not only beat the median consensus estimate of 58.3 but it also came in higher than the most optimistic economic prediction. This implies the average consumer is more confident about the economy than what any surveyed economist previously believed.
24-May-10	Wake Up Call -- Lower Open Expected Equity markets are indicated lower, with sentiment hurt by news that Spain's central bank took over a failed lender. The euro is sharply lower against the dollar, falling back to $1.2393.
24-May-10