Bonds

Benzinga Market Primer: Wednesday, June 19: FOMC Edition

Matthew Kanterman — Wed, 19 Jun 2013 10:28:38 +0000

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Futures Tick Higher Ahead of Fed

U.S. equity futures traded slightly higher ahead of the much anticipated Federal Reserve meeting Wednesday. With rumors of tapering, not tapering, and Chairman Bernanke stepping down, all eyes will be on the policy statement, the revised forecast, and the chairman's press conference.

Top News

In other news around the markets:

Japan's exports grew 10.1 percent from a year ago in May with exports to the U.S. rising over 16 percent.
Cyprus' President has asked the European creditors to revise the terms of its bailout as the nation's banks face a cash crunch. The restructuring of one of the nation's largest banks is taking longer than expected, causing a short-term liquidity crunch in the island nation.
Concerns over deficits in Greece rose again overnight as the Troika announced concerns over the finances of Greece's national health system.
S&P 500 futures rose 2.3 points to 1,647.50.
The EUR/USD was flat at 1.3390.
Spanish 10-year government bond yields rose 1 basis point to 4.56 percent.
Italian 10-year government bond yields rose 1 basis point to 4.3 percent.
Gold climbed 0.04 percent to $1,367.40.

Asian Markets

Asian shares were mixed overnight as strength in Japan was offset by weakness in other parts of the region. The Japanese Nikkei 225 Index rose 1.83 percent and the Topix Index gained 1.86 percent. In Hong Kong, the Hang Seng Index declined 1.13 percent while the Shanghai Composite Index fell 0.62 percent in China. Also, the Korean Kospi ...

Market Wrap for Tuesday, June 18: Stocks Rally Ahead of Fed Statement

Scott Rubin — Tue, 18 Jun 2013 20:22:20 +0000

Risk appetite was brisk on Wall Street on Tuesday as investors purchased stocks ahead of Wednesday's FOMC statement. The Fed is expected to provide clarity on when it may begin tapering its current $85 billion per month bond buying program.

Although there is uncertainty, the market seems to be pricing in the likelihood that the Fed will continue its dovish monetary policy for the foreseeable future in order to keep interest rates down and stimulate the economy.

Ahead of Wednesday's Fed commentary, the Dow rose triple digits for the second day in a row and both the S&P and Nasdaq also posted strong gains.

Major Averages

The Dow Jones Industrial Average rose 138 points, or 0.91 percent, to 15,318.

The S&P 500 climbed 13 points, or 0.78 percent, to 1,652.

The Nasdaq rose 30 points, or 0.87 percent, to 3,482.

CPI

Consumer prices rose 0.1 percent for the month of May. This was the first increase in CPI since February and compares to a decline of 0.4 percent in April. The consensus expected CPI to rise 0.2 percent in May.

Core CPI, which excludes volatile food and energy costs, rose 0.2 percent in May versus a gain of 0.1 percent in both March and April. This compares to consensus estimates calling for an increase of 0.1 percent.

Housing Starts

New home starts rose 6.8 percent in May to 914,000. This compares to 856,000 new starts in April and consensus expectations calling for housing starts of 950,000 last month.

Commodities

Crude oil rose along with the stock market on Tuesday. Late in the day, NYMEX crude futures were up 0.70 percent to $98.45. Brent contracts had climbed 0.51 percent to $106.01. Natural gas added 1 percent on the session and was last trading at $3.91.

Precious metals fell on ...

Draghi Hints At New LTROs In Jerusalem Speech as Spanish, Italian Stocks Gain

Matthew Kanterman — Tue, 18 Jun 2013 12:36:27 +0000

European Central Bank President Mario Draghi overnight hinted at a further extension of the longer-term refinancing operations (LTROs) that helped to un-freeze European credit markets back in late 2011 and early 2012.

On December 21, 2011, the ECB made available to European banks 3-year one percent loans totaling about $640 billion that European banks used to buy peripheral European debt, staving off further crisis.

Strong Hint

President Draghi gave the first strong hint overnight that the LTRO program, or at least its current iteration of 3-year term loans, overnight in a speech in Jerusalem. He noted that to address financial fragmentation and the breakdown in the monetary policy transmission mechanism, the ECB could increase the range of accepted collateral, increase the scope of policy outside of traditional policies, and " further contribute to alleviating the banks' funding uncertainty by providing banks with assurance that they could rely on our refinancing operations for extended periods."

The last line is key: Draghi had hinted before that the European Central Bank could offer a new round of 3-year LTROs, but this is the first concrete reference to such a policy. Although the OMT has created lots of resistance for conservative members of the ECB due to it potentially violating the ECB's mandate, the LTROs are well-within legal boundaries and could be a way for Draghi to fight the next crisis.

Effectiveness

The previous round of 3-year LTROs saved the eurozone. A broad measure of financial risk in the eurozone and the health of short-term funding markets is the FRA/OIS spread. In late 2011, the spread, which is a measure of confidence in the interbank lending market, reached near peak levels not seen since the height of the financial crisis in 2008 above 40 basis points before retreating to single digits, where it averages.

Draghi, in his speech, is most likely indicating that such measures are not coming imminently at the ...

Benzinga Market Primer: Tuesday, June 18

Matthew Kanterman — Tue, 18 Jun 2013 10:20:56 +0000

Futures Edge Higher In Calm Before the Storm

U.S. equity futures rose slightly in pre-market trade Tuesday as investors eagerly awaited the FOMC decision and statement Wednesday. Monday trading was a whip-saw marked by a steep sell-off over tapering fears.

Top News

In other news around the markets:

The German ZEW Economic Sentiment Index rose to 38.5, beating expectations of a reading of 38.1 and better than the prior 36.4.
European Central Bank President spoke in Jerusalem overnight and hinted that the LTRO operations could be extended as a means of providing additional bank liquidity. Speculation had grown that the ECB could do this however it is the first time Draghi has addressed it directly.
European car sales fell to a 20-year low in May as new car registrations fell to 1.08 million from 1.15 million a year ago. Sales at General Motors (NYSE: GM) fell over 10 percent.
S&P 500 futures rose 2.8 points to 1,636.50.
The EUR/USD was higher at 1.3396.
Spanish 10-year government bond yields fell 1 basis point to 4.57 percent.
Italian 10-year government bond yields fell 1 basis point to 4.26 percent.
Gold fell 0.41 percent to $1,377.40 per ounce.

Asian Markets

Asian shares were mixed overnight in unusually quiet trading as markets eagerly anticipate the Fed's decision, the proverbial calm before the storm. ...

Market Wrap for Monday, June 17: Stocks Jump to Start Trading Week; Dow Rallies Triple Digits

Scott Rubin — Mon, 17 Jun 2013 20:21:39 +0000

The U.S. stock market rose on Monday after a series of volatile moves last week. Investors snapped up shares on expectations that the Federal Reserve will reinforce its commitment to monetary stimulus to support the economic recovery.

The Fed is expected to provide clarity on its intentions at the end of a two-day meeting on Wednesday. The stock market gapped sharply higher at the open on Monday, but pared gains in afternoon trade.

Nevertheless, the Dow finished the day up a little better than 100 points, with the S&P and Nasdaq recording similar percentage gains.

Major Averages

The Dow Jones Industrial Average rose 110 points, or 0.73 percent, to 15,180.

The S&P 500 added roughly 12 points, or 0.76 percent, to 1,639.

The Nasdaq rose a little less than 29 points, or 0.83 percent, to 3,452.

Commodities

Crude oil prices were largely unchanged on Monday. At last check, NYMEX crude futures were down 0.01 percent to $97.84. Brent crude futures lost 0.32 percent and were trading at $105.59. Natural gas jumped better than 4 percent on the session to $3.89.

COMEX gold futures fell 0.35 percent on Monday. Silver was last trading down a little better than 1 percent to $21.76. Copper futures had shed 0.28 percent and were trading at $3.1925.

In the grains complex, corn and wheat were mixed. Near the close, corn futures were up a little more than 1 percent while wheat had lost 0.04 percent. Movers in soft commodities included cocoa and sugar. At last check, cocoa was down 1.69 percent while sugar had climbed slightly less ...

Worse, Not Better For Brazil ETFs

ETF Professor — Mon, 17 Jun 2013 20:14:02 +0000

Around these parts, we try not to pick on or laud single ETFs, or a group of similar funds, too much. We try to be fair, equal-opportunity critics and givers of complements.

Brazil ETFs such as the group's marquee name, the iShares MSCI Brazil Capped Index Fund (NYSE: EWZ) are making that task difficult because bad news continues mounting for Latin America's largest economy.

To be fair, EWZ and the other Brazil ETFs are far from being the only LatAm offenders these days. Slowing growth and declining commodities prices have weighed on ETFs ranging from the Global X FTSE Colombia 20 ETF (NYSE: GXG) to the iShares MSCI All Peru Capped Index (NYSE: EPU).

However, it sure feels like Brazil has been the most prolific issuer of bad news to investors. There was the interest rate increase at the end of May, which prompted increased speculation Brazil is dealing with stagflation. There is the plunging real. The WisdomTree Brazilian Real ETF (NYSE: BZF) is off five percent in the past month.

Then there is the fact that EWZ has been the worst-performing of the four major BRIC single-country ETFs ...

This EM Bond ETF's Luck Can't Get Any Worse, Can It?

ETF Professor — Mon, 17 Jun 2013 19:30:22 +0000

At least for the moment, it is fair to say emerging markets bonds are "so 2012" and it really does not matter if one is talking about the dollar-denominated variety or local currency bonds.

Amid plunging currencies and heightened fears the Federal Reserve is looking to end quantitative easing, investors have scampered out of emerging markets bond ETFs at almost break-neck speed in recent weeks.

Since the start of May, the iShares J.P. Morgan USD Emerging Markets Bond Fund (NYSE: EMB),the PowerShares Emerging Markets Sovereign Debt Portfolio (NYSE: PCY) and the Market Vectors Emerging Markets Local Currency Bond ETF (NYSE: EMLC) have lost over $1 billion in assets combined, according to Index Universe data.

On emerging markets bond ETF that has yet to be hit by the outflow virus is the iShares Emerging Markets High Yield Bond Fund (NYSE: EMHY). No, this is not a misprint, but EMHY has seen INFLOWS of almost $5.5 million since early May.

EMHY started to rally last year and kept those good times going into the first quarter on ...

Benzinga Market Primer: Monday, June 17

Matthew Kanterman — Mon, 17 Jun 2013 11:04:41 +0000

Futures Gain On Fed Hopes

U.S. equity futures advanced in early pre-market trade ahead of the much anticipated FOMC meeting this week, which concludes Wednesday. Despite recent fears of tapering, the Fed is expected to downgrade its economic forecasts near consensus economist forecasts which could increase dovish rhetoric in the policy statement.

Top News

In other news around the markets:

The Spanish government blocked AT&T's (NYSE: T) bid for Telefonica (NYSE: TEF), Europe's most indebted telecommunications company, citing its strategic position to the Spanish economy.
Bloomberg reported that Boeing (NYSE: BA) is expected to announce a new order of 10 787 Dreamliners from General Electric's (NYSE: GE) aircraft leasing unit.
Time Warner's (NYSE: TWX) Man of Steel, the relaunch of the Superman movie series, became the second-most successful movie of the year after the film made $113 million in its first weekend, behind only Iron Man 3.
S&P 500 futures rose 10.8 points to 1,629.90.
The EUR/USD was lower at 1.3337.
Spanish 10-year government bond yields were flat at 4.58 percent.
Italian 10-year government bond yields fell to 4.28 percent from 4.29 percent.
Gold declined 0.07 percent to $1,386.60 per ounce.

Asian Markets

Asian shares were mixed overnight as the Nikkei recovered some recent losses. The Japanese Nikkei 225 Index gained 2.73 percent and the Topix Index ...

Market Wrap for Friday, June 14: Stocks Retreat on Economic Reports and Profit Taking

Scott Rubin — Fri, 14 Jun 2013 20:27:10 +0000

The U.S. stock market fell on Friday as a preliminary report showed a slightly steeper than expected fall in consumer sentiment for June and other economic reports also missed consensus estimates. Although the news on the economic front was hardly a cause for panic, the market also succumbed to profit-taking, which has been intermittently triggering volatility in the major averages. The Dow closed down slightly more than triple digits on the session, with the S&P and Nasdaq recording similar losses. Overall, the S&P recorded a loss of roughly 1 percent from Monday's open.

Major Averages

The Dow Jones Industrial Average fell 106 points, or 0.70 percent, to 15,070.

The S&P 500 lost almost 10 points, or 0.59 percent, to finish at 1,627.

The Nasdaq shed 22 points, or 0.63 percent, to just below 3,424.

PPI

Producer prices jumped 0.5 percent in May after recording a decline of 0.7 percent for April. This was well ahead of consensus expectations which called for PPI to be up 0.1 percent last month.

Excluding volatile food and energy costs, core PPI was only up 0.1 percent in May, the same as in April. This was in-line with consensus expectations.

Industrial Production and Capacity Utilization

Industrial production was unchanged in May after falling 0.4 percent in April. The consensus expected industrial production to rise 0.1 percent for the month.

Total capacity utilization fell to 77.6 percent versus 77.7 percent for April. This compared to consensus expectations calling for a rise in capacity utilization to 77.9 percent for May.

University of Michigan Consumer Sentiment

The preliminary report for the University of Michigan Consumer Sentiment Index showed a drop to 82.7 in June from 84.5 in May. This compared to consensus expectations calling for the index to fall to 83.0.

Commodities

Energy prices rose on ...

ING U.S. CEO Rodney Martin Talks About Retirement Readiness

Jason Cunningham — Fri, 14 Jun 2013 14:06:19 +0000

ING U.S. (NYSE: VOYA) CEO and Chairman Rodney Martin went on CNBC's Squawk Box to discuss their focus on retirement as a newly public company.

ING has only been public for about a month and a half, and are focusing on retirement moving forward as a company. Martin said that they currently have $481 billion in assets under management, and that the majority of their earnings, over 76 percent, come from retirement and investment management.

Martin noted that it wouldn't surprise him if the American average for retirement savings was about $25,000 per person like some ...

Benzinga Market Primer, Friday June 14

Matthew Kanterman — Fri, 14 Jun 2013 10:02:16 +0000

Futures Rise On Global Gains

U.S. equity futures rose slightly in early pre-market trade following gains around the world. The Japanese Nikkei Index rose overnight despite the yen remaining strong in volatile trading.

Top News

In other news around the markets:

U.S. equity futures rallied into the close Thursday and closed near session highs after the Wall Street Journal's Fed watcher John Hilsenrath published a piece saying that the Fed is unlikely to raise rates anytime soon, even if they taper. He also warned that tapering still seems like it will begin in the fourth quarter.
European total employment fell 0.5 percent in May, worse than the expected 0.2 percent drop. Employment had declined 0.3 percent in April.
Eurozone inflation continued to drag along at low levels in May as the CPI rose 0.1 percent in the month, in line with expectations. The CPI rose 1.2 percent from a year ago, also in line with expectations, although well below the unofficial target of 2 percent inflation.
S&P 500 futures traded up 1 point to 1,637.75.
The EUR/USD was lower at 1.3324.
Spanish 10-year government bond yields declined 8 basis points to 4.54 percent.
Italian 10-year government bond yields also declined 8 basis points to 4.27 percent.
Gold rose 0.3 percent to $1,382.00.

Asian Markets

Asian shares were mostly higher overnight, led by gains in Japan on the back of the rally in U.S. stocks. The Japanese Nikkei 225 Index rose 1.94 percent and the Topix Index gained 1.18 percent. In Hong Kong, the Hang Seng Index rose 0.39 percent while the Shanghai Composite Index gained 0.65 percent. Also, the Korean ...

Market Wrap for Thursday, June 13: Strong Economic Reports Trigger Stock Rally

Scott Rubin — Thu, 13 Jun 2013 20:24:18 +0000

Despite continued volatility around the world, particularly in Japan where the Nikkei fell more than 6 percent, the U.S. market rallied sharply on Thursday on the back of strong economic data. In particular, investors reacted to a strong retail sales report, sending the Dow up more than 180 points on the day. The move comes after three consecutive days of losses for the market and rising jitters on Wall Street. The strong bounce back will be welcomed by investors and suggests the rally in equity prices is not over.

Major Averages

The Dow Jones Industrial Average rose 181 points, or 1.21 percent, to 15,176.

The S&P 500 climbed 24 points, or 1.48 percent, to 1,636.

The Nasdaq added 45 points, or 1.32 percent, to close at 3,445.

Jobless Claims

Initial jobless claims fell from 346,000 for the week ending June 1 to 334,000 for the week ending June 8. This compared to consensus estimates calling for the initial claims level to fall to 345,000.

Continuing claims rose to 2.973 million for the week ending June 1 compared to 2.971 million for the week ending May 25. Continuing claims were in line with consensus estimates.

Retail Sales

Retail sales surged 0.6 percent for the month of May compared to a 0.1 percent increase in April. This compared to consensus estimates calling for a rise of 0.3 percent.

Excluding auto sales, retail sales were up 0.3 percent in May versus no change in April. This was in line with consensus expectations.

Business Inventories

Business inventories rose 0.3 percent in April after falling 0.1 percent in March. This compared to consensus estimates calling for a rise of 0.2 percent.

Commodities

Crude oil prices rose along with the stock market on Thursday. At last check, NYMEX crude futures were up 0.67 percent to $96.52 while Brent crude contracts had added 0.73 percent ...

Bond Yields Could Be Signaling Global Economy in for a Hard Landing

investmentcontrarians — Thu, 13 Jun 2013 13:49:47 +0000

By George Leong

We are seeing some signs of selling in the global markets.

In Japan, the overblown Nikkei 225 retrenched 1.45% last Tuesday after traders were disappointed that the Bank of Japan (BOJ) failed to offer up new stimulus. Sound familiar?

Just like in the U.S., the economic renewal and surge in Japanese stocks is being driven by the availability of easy money—and traders want more of it. The BOJ’s non-move to inject more stimulus clearly supports my view that the stock market is dependent on easy money.

On this side of the Pacific, there’s concern the Federal Reserve may begin to reduce its bond buying as early as after next week’s Federal Open Market Committee (FOMC) meeting. Of course, I doubt that will happen, given that the unemployment rate increased to 7.6% in May and jobs creation remains tepid.

As long as the Fed pumps money into the system, the stock market will edge up higher. But we all know that ...

Retail Sales Rise Roughly In Line With Estimates In May

Matthew Kanterman — Thu, 13 Jun 2013 13:06:30 +0000

Retail sales for May rose just about in line with estimates, giving a market that is looking for direction little to take away. Retail sales have now gained for two consecutive months.

Total Retail Sales

Total retail sales rose 0.6 percent in May, better than the 0.4 percent gain expected by economists. The rise also outpaces April's improvement of 0.5 percent and a 4.7 percent improvement from May last year.

Retail trade sales were up 0.7 percent from April 2013 and 4.3 percent above last year. Non-store retailers were up 11.3 percent from May 2012 and building material and garden equipment and supplies ...

Benzinga Market Primer, Thursday June 13

Matthew Kanterman — Thu, 13 Jun 2013 10:15:27 +0000

Futures Drop As Nikkei Tumbles Into Bear Market Territory

U.S. equity futures tumbled in early pre-market trade after the Japanese Nikkei Index fell 6.35 percent into bear market territory. The USD/JPY, meanwhile, plunged below 95 and traded near 94.30.

Top News

In other news around the markets:

The World Bank cut its global growth forecast for 2013 from 2.4 percent to 2.2 percent in January and cut its 2014 growth forecast from 3.1 percent to 3.0 percent. They also cut the 2013 growth forecast for China from 8.4 percent to 7.7 percent and the Eurozone from a contraction of 0.1 percent to a contraction of 0.6 percent while boosting Japan from 0.8 percent growth to 1.4 percent. They noted that the global economy remains "hesitant and uneven."
Australia's employment change for May was better than expected as the economy added 1.1 thousand jobs vs. the expected decline of 10 thousand. The unemployment rate also fell from 5.6 percent to 5.5 percent.
Japanese citizens continued to park money on shore in the past week, despite the multi-months decline in the yen. Japan foreign buying of stocks and bonds both fell for the third consecutive week, which added more fuel to the already in place sell-off in the Nikkei and the yen.
S&P 500 futures fell 7.3 points to 1,602.60.
The EUR/USD was slightly lower at 1.3328.
Spanish 10-year government bond yields rose 6 basis points to 4.69 percent.
Italian 10-year government bond yields rose 6 basis points to 4.44 percent.
Gold fell 0.44 percent to $1,385.90.

Asian Markets

Asian shares were mostly lower overnight, pulled down by the Nikkei, as Chinese shares re-opened and played catch-up. The Japanese Nikkei ...