It’s been awhile since I read the editorial page in “USA Today,” but there was something quite notable there a couple of weeks ago. There was a column in which the person of note making comments indicated that U.S. consumers face “serious” inflation in the coming months for clothing, food, and many other goods. The individual noted that he was “seeing cost increases starting to come through at a pretty rapid rate.” Furthermore, labor costs in places like China along with fuel costs for transportation are weighing heavily on his company. This was no ordinary interview. It turns out the person I am discussing is Bill Simon (aka the CEO of Wal-Mart). I did a little digging. The consumer price index rose at its fastest clip since mid-2009 in the month of February with the CPI rising 0.5%. Now, entities like WMT have access to any manufacturing facility located anywhere on the planet so some of its costs can be mitigated. But what about everyone else? We’re already seeing prices rise at the fuel pump and the grocery store. And of course this impact is found in the stock market as well as one of the effects of QE2 has been rising asset prices- including equities. As we progress, there are a few things to monitor for the next three months. First, pay extra attention to the stories during earnings season rather than earnings season to see if inflation is hitting corporate America. Second, there are a number of Fed governors out talking and the QE2 is supposed to end at some point this quarter. Finally, just look around…personal anecdotes of inflation are always the best because it’s how we learn. Certainly as time progresses, the theme of inflation will be discussed increasingly so be ready for the discourse much less the actual inflating of prices themselves.
Markets in Asia were down overnight following yesterday’s declines on Wall Street with Tokyo down 1.2% and Hong Kong off 1.3%. In Europe, prices are rebounding as the U.S. market did close off of its lows with Frankfurt ahead 0.5% and London 0.6%. Gold and oil are both down a little with the dollar and bonds flat. Housing starts and building permits data came out better than expected. Futures are ahead on the GS earnings and European strength. The day will likely be quite choppy with AAPL and GS the benchmarks for what will happen. The focus will be on the earnings plays (GS, BTU, TXN) and relative weakness plays.
If the whole story is not there -
If something is good, assume either a short thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified.
If something is bad, assume either a buy thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified-
Good- The following stocks have good news and/or a strong technical pattern
AMRN- closed near a high after positive phase III AMR101 data
SINA, QIHU, YOKU, SNDA- closed on or near their highs
REGN- closed near a high after getting a faster than expected FDA review for its eye drug
LULU- closed near its high
LVS- closed near its high
CF- closed near a high
ARCO- closed near a high
LLEN- closed near a high after announcing two contracts to supply coal to Kunming Steel
TITN- closed near a high after posting good earnings
DGSE- closed near a high after posting good earnings
ANTH- closed near a high after announcing a successful VISTS-16 study
MOH- decent earnings
CR- good earnings
STLD- decent earnings
STX- missed earnings, but expanding joint operations with Samsung
STT- decent earnings
NVS- decent earnings
OMC- decent earnings
JNJ- decent earnings
GS- decent earnings
MICC- good earnings
PKD- takeover rumors
IRM- announced it was exploring strategic alternatives to enhance shareholder value
Bad-The following stocks have bad news and/or a weak technical pattern
VPHM- closed near its low after being downgraded at Citadel
TXN- poor earnings
PKG- poor earnings
BMI- terrible earnings
GNK- closed near a low after a downgrade by Citicorp
HOG- poor earnings
BTU- poor earnings
Earnings:
TUES APR 19 BEFORE
BK BTU CMA
FRX GS HOG
JNJ MICC NTRS
NVS OMC PCAR
RF STT USB
TUES APR 19 AFTER
CCK CREE CSX
IBM INTC ISRG
JNPR LLTC PTP
STLD STX SYK
VMW WYNN YHOO
Epiphany Trading, LLC
www.epiphanytrading.com
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
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