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phil
March 21st, 2016 at 6:23 am

We're testing 1,100 on the Russell (/TF) this morning – that will be interesting to watch and it's lined up with Dow 17,550, S&P 2,045 and Nasdaq 4,415.  The Nikkei is down at 16,800 on a spike back up.  To me, there's not enough good news to sustain this rally and 17,600 is the Dow's Must Hold Line while 4,400 is the Nasdaq's +10% line (and the S&P is over +10% at 2,035) so, if the rally is real, neither the Dow or the Russell should have trouble getting over their lines.  On the Nasdaq, the 200 dma is 4,420 – that's going to be significant too.

Profit margins set to hit four-year low


• From FactSet's weekly Earnings Insight brief (.pdf):
• "For Q1 2016, the estimated net profit margin for the S&P 500 is 9.3%. If 9.3% is the actual net profit margin for the quarter, it will mark the lowest net profit margin for the S&P 500 for a quarter since Q4 2012 (8.9%).
• "What is driving the weaker projected profit margin for the index relative to recent quarters?
• "Five of the ten sectors are projected to see lower net profit margins in Q1 2016 relative to the 3-year average for each sector, led by the Energy sector (0.1% vs. 6.5%). Excluding the Energy sector, the estimated net profit margin for the S&P 500 would be 10.0%. However, this would also mark the lowest net profit margin for the index excluding the Energy sector since Q1 2014 (9.9%). Thus, other sectors are also contributing to the expected lower than average net profit margin for the index for Q1 2016. After the Energy sector, the other four sectors projected to report net profit margins below the 3-year averages for Q1 2016 are the Industrials (7.9% vs. 9.1%), Information Technology (17.2% vs. 18.0%), Consumer Staples (5.6% vs. 6.1%) and Consumer Discretionary (6.5% vs. 6.6%) sectors."
• However, there is good news:
• "Based on current earnings and revenues estimates, however, the estimated net profit margin for Q1 2016 will reflect a low for the index. Over the next three quarters (Q2 2016 – Q4 2016), the estimated net profit margins for the S&P 500 are 10.1%, 10.5%, and 10.4%. Eight of the ten sectors are projected to see higher average net profit margins over the next three quarters relative to Q1, led by the Energy, Industrials, and Information Technology sectors."





It's a very quiet data week and the month/quarter doesn't end until a week from Thursday so lots of interesting things can happen.  We have Home Sales today and other housing data through Weds then Durable Goods Thursday and Q4 GDP 3rd Estimate on Friday (+1% when last we looked).  

Next week, huge data including NFP Friday, even though it's only the 1st.  

So, a nice, relaxing week and then, next week – end of month chaos!  



JPM: The Short Squeeze Is Largely Over







WOW!!!



Don't worry, be happy:



Monday's economic calendar


• 2:45 Fed's Lacker: Central bankers outlook
• 8:30 Chicago Fed National Activity Index
• 10:00 Existing Home Sales
• 12:30 PM Fed's Lockhart speech
• 8:30 PM Fed's Bullard: Economic Outlook

Here are the top 4 worries of global investors


• In a recent survey of 400 clients from Europe, JPMorgan asked them what worried them the most from a geopolitical perspective. Here are the top 4 results:
• 1. China growth and its impact on the global economy (25.9%).
• 2. The refugee crisis and its impact on Europe (24.7%).
• 3. Brexit risk of contagion for other EU members (23.5%).
• 4. A Trump presidency (17.3%).
• Scoring at #5 was oil market volatility (7.4%) and North Korea tensions (1.2%).
• Related: Waltzing Through Bullish Oil Prices (Mar. 18)
• Foreign Regimes Dumping U.S. Debt – Will The Fed Just Monetize The Debt Instead?(Mar. 18)
• Some Of The Most Non-Consensus Bullish Oil Forecasts (Mar. 15)

Goldman(GS) FX Head: "No Central Bank Conspiracy" To Crush The Dollar, "We Are Right, The Market Is Wrong"

Brazil Needs A Stronger Currency Like It Needs A Hole In The Head, Goldman Warns

Why The True Cost Of Living Is Much Higher Than We're Told (Or Sold)

These Eight EU Countries Are in the Budget Danger Zone. For the 28 members of the European Union, managing public finances comes down to a single all-important number: three. When it comes to fiscal discipline in the European Union, three is the magic number. That's a deficit limit of 3 percent of GDP, and five EU states will make the budgetary bad books this year by breaching that level, according to economists surveyed by Bloomberg since January. These five — the U.K., France, Spain, Greece, and Croatia — include three of Europe's five largest economies. Three more countries — Finland, Poland, and Romania — are seen posting deficits at the threshold. ?

BlackRock(BLK) Isn't Buying the Aussie's Rally

Australia could be headed for early elections


• Marking yet another sharp turn in politics Down Under, Australian Prime Minister Malcolm Turnbull has warned he will dissolve parliament and call early federal elections if his reforms are not approved just six months into the job.
• His decision reflects increasing frustration with crossbenchers, or senators from minor parties, who have repeatedly blocked key legislation that the ruling Liberal Party deems essential for the economy.

M&A Bankers Saying No to More Junk. Banks retreat from the lucrative but risky business of backing debt-heavy buyouts. Banks are increasingly turning down companies seeking financing to pay for debt-laden takeovers after the recent market rout left them saddled with debt from earlier deals.

Hedge Fund 'Wolf Pack'. Attention all you hedge-fund wolfs out there: Your pack is being stalked by some Washington lawmakers. Two Senate Democrats introduced a bill that would reduce the time large shareholders have to report stakes of 5 percent or more in a company to two days from 10. (Here's a good New York Times article with all the details.) The idea is to prevent "wolf packs" of fund managers from forming after a lead fund tips off the other wolves that it's planning to disclose a large stake.

Nobody Is Making Money" – Hedge Fund "VIP Basket" Obliterated, Plunges To Record Low

Troubled Plane Dims China’s Aviation Dream

Starwood Hotels strikes landmark Cuba deal


• Starwood (NYSE:HOT) has signed an agreement to manage three prominent hotels in Havana, marking the first time since the 1959 revolution that a U.S. hospitality company has been allowed to operate in Cuba.
• The multi-million dollar investment comes on the eve of President Obama's historic visit to the island.
• Starwood received an authorization from the U.S. Treasury Department last week to begin operating hotels in Cuba – something that would have previously been prohibited under the longstanding economic embargo.

Pharma Gloom Spreads. Concerns about the fate of Valeant has investors also fleeing shares of companies that resemble the Canadian pharmaceutical firm. Concerns about the fate of Valeant Pharmaceuticals International Inc. has investors not only fleeing Valeant’s stock but also shares of companies that bear a resemblance to the Canadian pharmaceutical firm.

Report: J&J settling cases tied to device that could spread uterine cancer

• Johnson & Johnson (NYSE:JNJ) is settling legal claims and lawsuits alleging that its now-discontinued hysterectomy device harmed women by spreading an undetected hidden cancer, Dow Jones reports, citing court documents and plaintiff lawyers with knowledge of the settlements.
• Of the 100 or so claims against JNJ's Ethicon unit related to the laparoscopic power morcellator device, the company has settled nearly 70 over the past few months, according to the co-lead counsel on the steering committee for consolidated litigation underway in a Kansas City federal court.
• JNJ’s total outlay on the claims likely will run into the many millions, although individual settlement sums have ranged from $100K to ~$1M, the report says.

 

RICO case heads to the Supreme Court


• The U.S. Supreme Court will hear arguments today in a case that will test the limits of the Racketeer Influenced and Corrupt Organizations Act, a case that has serious implications for American corporate liability.
• More than two dozen European countries have sued RJR Nabisco, now R.J. Reynolds (NYSE:RAI) and Nabisco (NASDAQ:MDLZ), over an alleged international money laundering scheme that used drug money to buy tobacco.
• The question for the justices, who are generally skeptical of suits based on activities outside the U.S., is whether RICO applies to conduct abroad.

#TwitterTurns10: Happy Anniversary?


• Today marks the 10th anniversary of Twitter (NYSE:TWTR), the social networking site that brought about hashtagging, condensing thoughts into 140 characters or less, and countless celebrity spats.
• Although there are reasons to party, analysts and investors still have a hard time valuing the company, due to concerns about user retention, product development, revenue turbulence, and management direction.
• Twitter shares are down almost 60% since the company's IPO in November 2013.
• Previously: Barron’s: Twitter’s best days may be behind it (Mar. 20 2016)

Zuckerberg meets with China's propaganda chief


• Facebook's (NASDAQ:FB) Mark Zuckerberg held a rare meeting with China's propaganda chief on Saturday, as part of a charm offensive in one of the few markets where the social network cannot be accessed.
• According to the Xinhua News Agency, Liu Yunshan voiced hopes for Facebook to share its experience with Chinese companies to help "Internet development better benefit the people of all countries."
• Zuckerberg has long been courting China's leaders in a so far futile attempt to access the country with the world's largest number of Internet users – 668M as of last year.

Alibaba to announce major transaction-volume milestone


• Alibaba (NYSE:BABA) is set to announce that transaction volume on its sites hit 3T yuan ($463B) in the current fiscal year, sources told WSJ.
• That would represent a doubling in the past three years for Alibaba, whose executives have said it could reach 3T yuan in gross merchandise volume by 2016.
• As a measure of the total value of third-party sellers’ transaction – and vastly distinct from revenue – GMV is closely tracked by investors because it shows how fast an e-commerce company is growing relative to its competitors.

Google(GOOG) has fallen out of love with robots and it’s a warning sign to all of its 'moonshots'

 

Apple to bolster lineup with new iPhone


• Apple (NASDAQ:AAPL) is expected to introduce a new version of its smallest current iPhone during an event at its Cupertino headquarters today, as the tech giant grapples with slowing growth of its flagship product.
• The successor to the iPhone 5s (called the SE or 5SE) will likely include an upgraded processor, improved camera and capability to use Apple Pay.
• In the fiscal first quarter ended in December, iPhone sales rose 0.4% – its slowest rate of growth since Apple introduced the device in 2007. Analysts also forecast sales to fall for the first time in the current quarter.
• Previously: Apple sends out invites for March 21 event; 4" iPhone, new iPad expected(Mar. 10 2016)

GOP leaders are preparing a 100-day campaign to stop Donald Trump

Will Trump win the nomination? Goldman thinks so


• Via Goldman Sachs research:
• Will Trump win the nomination? It appears to us to be the most likely outcome but far from guaranteed. To win the nomination, a candidate needs to win votes from a majority of the delegates to the convention. This is distinct from winning a majority of delegates in the individual contests in states and territories, since some delegates could vote for a different candidate than they have been pledged to support, as described in detail below. However, since nearly all of the 2,472 Republican delegates are at least nominally bound to a particular candidate based on the results of primary elections, caucuses, and conventions, the simplest path to the nomination is to win a majority of delegates prior to the convention. See this chart.
• Trump must win about 65% of the remaining pledged delegates. While this seems like a high bar, the delegate allocation methods used in the later contests make it attainable. More than 2/3 of the remaining delegates come from states that award delegates to the winner of the state popular vote or to the winner of the popular vote in each congressional district. To put this in perspective, during the competitive period of the 2008 and 2012 nomination contests, the top-placing candidate in each state won an average of 45% or so of the popular vote—not far from the share of votes Trump won in the March 15 contests—which translated into just over half the delegates awarded in proportional and “winner take more” states, but 85% and 100% of delegates in states that award delegates using winner-take-all by district or statewide.
• While the remaining contests include a greater share of closed primaries (where Cruz has generally done better), the remaining schedule also has fewer caucuses and fewer Republican-leaning states, where his support has been stronger. So while there is a clear possibility that the dynamic could change again, for now it appears to be a three-way race in which Mr. Trump has the advantage.
• Who would a contested convention favor? It would probably give Sen. Cruz a better chance at the nomination than he currently has, but it seems less likely to result in the nomination of an “establishment” candidate and could still end in Mr. Trump's nomination.
•