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2015-09-01 16:17:43

Posted by
Barron's

Contributor
Options

As Chinese Stocks Tumble, Here's How You Can Profit

Buying options pegged to an index of mainland stocks has been a great trade, and should continue to pay off.

 

When it comes to investing in China’s volatile stock market, investors should heed the immortal words of American philosopher Yogi Berra: “It ain’t over till it’s over.”

So until it is clear that China’s financial crisis has passed, investors are advised to focus on buying weekly puts on the Deutsche X-Trackers Harvest CSI 300 China A-Shares Fund (ticker: ASHR).

The put positions investors to profit as China’s leaders struggle to address a crisis that has broadly shaken international investor confidence in China’s financial markets and political leaders.

We have been bearish on Chinese stocks since late July. We recently recommended investors buy bearish October $30 puts on the Deutsche X-Trackers Harvest CSI 300 China A-Shares Fund after taking profits on October $40 puts.

With ASHR at $32.48, investors can buy ASHR’s September $29 puts that expire Friday for 20 cents. If ASHR declines to $28 by Friday’s close, the puts are worth $1.

The put purchase is only suitable for aggressive investors.

As options contracts approach expiration dates, they become increasingly sensitive to movements in the associated securities. This makes weekly contracts, which usually never cost much, potentially worth a lot if the underlying security moves in the right direction. If the trade is a bust, the loss is not significant because little money was wagered.

The addition of weekly puts to a previously recommended ASHR October put purchase reflects a view that China’s leaders may face a steeper-than-expected learning curve handling a financial crisis. The government is trying to quash bearish investor sentiment by threatening police action against short sellers and arresting people for spreading negative sentiment about stocks. The developments do not engender investor confidence.

The weekly put trade anticipates China’s leaders will make more clumsy moves that will startle shell-shocked investors and perhaps send stocks even lower.

While these short put trades will appeal to aggressive investors, we argue that they are best executed as complements to our long ASHR October $30 put position. The reasoning? Weekly options are a way to time the market. But it is very hard to successfully time the market. The October puts thus even the odds.

Other investors are starting to join us in the October expiration. In recent trading, an investor bought 5,000 ASHR October $30 puts.

We favor the October expiration because it captures an important political event that is not on the radar of many investors. The 18th Communist Party of China Central Committee will hold its fifth plenary session in Beijing in October. The meeting is expected to focus on a national development plan for 2016 to 2020.

This event has added significance this year due to the financial crisis and questions about China’s leadership. If the plenum fails to assuage investor concerns about China’s economic growth, the plenum could become a tradable event by increasing pressure on Chinese stocks.

To be sure, investor sentiment is already shaky. Many investors think Chinese stocks are still too expensive – even after recent extraordinary declines that saw ASHR drop some 18% over the past month. ASHR is considered a proxy for mainland China stocks.

As my colleague at Barron’s Asia, Daniel Shane, recently noted, the average stock in the Shanghai Stock Exchange Composite Index (SHCOMP: IND) now trades at 15 times earnings, a significant fall from the peak of about 22 times in June. But Shane says Chinese stocks are still expensive compared with the 10 times they traded at last year before stock market surged. The Shanghai index would have to fall to about 2,700 to return to a P/E of 10. The index was recently around 3,205.

Until valuations improve, or China’s leaders regain mastery of the situation, remember what Yogi Berra said and think about buying bearish puts on China’s stock market.

 

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This article is from Barron's and is being posted with Barron’s permission. The views expressed in this article are solely those of the author and/or Barron's and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

2015-09-01 15:38:09

Posted by
Briefing.com

Contributor
Stocks

Dean Foods (DF) is in a tough market, but risk/reward looks good

Dean Foods (DF) is a name that we think has an attractive risk/reward for value investors. The milk industry is going through some sour times right now and grocery chains have been pretty aggressive in terms of retail prices, but DF strikes us as a name where a lot of the bad news has been priced in already.

Also, they just launched a new milk product: DairyPure. It seems promising as it has a lot of the same benefits as organic milk (no antibiotics and no growth hormones) but at a much more reasonable price. The early returns have looked good. We also like how the stock has been trading as it's on the lower end of its recent trading range. With that said, a stop loss limit around $13.50-14.00 makes sense to us. DF is currently ranked #23 in our most recent Value Leaders rankings.

What They Do

You're probably familiar with Dean Foods but maybe not some of the finer details. It's the largest processor of milk in the US. In a way, it's sort of like an oil refiner where they buy crude oil from exploration companies, refine it then sell it as gasoline. In DF's case, they buy raw milk from farmers, process it and sell it ready for consumption to grocery chains. So you have to watch their raw milk costs and retail prices to get a sense for how the company is doing.

In addition to its flagship Dean's milk brand, it also sells DairyPure and TruMoo, the largest flavored milk brand. It also owns a number of regional dairy brands such as Alta Dena, Berkeley Farms, Country Fresh etc. In all, Dean Foods has more than 50 local and regional dairy brands and private labels.

Dean Foods also makes ice cream, cultured dairy products, and beverages (juices, teas, and bottled water). Of note, DF spun-off most of its WhiteWave Foods (WWAV) organic business, Dean Foods still holds about 20% of WhiteWave, which makes coffee creamers (International Delight), dips, ice cream, butter, cottage cheese, and specialty dairy products.

Key Points/Financials

It's a tough environment right now for milk producers. Over the past decade, there has been a steady decline in milk consumption. Milk has been falling out of favor with consumers as other beverages have become more popular. There is also the issue of milk substitutes like almond milk and plant-based proteins.

In response, Dean Foods has been closing facilities and cutting costs. They also recently launched a key new product, called DairyPure. It's sort of a big deal to DF as it's the country's first and largest fresh, white milk national brand. The main selling point is that consumers can get antibiotic-free milk with no growth hormones without having to go all the way to organic milk, which is much more expensive. It's sort of seen as a nice in-between -- sort of the milk sweet spot.

In terms of recent earnings, the stock took a hit in early August when Dean Foods reported Q2 results that could be described as "mixed" at best. The company posted non-GAAP EPS of $0.33, which was actually much higher than expected as consensus was $0.26. The EPS upside appears to be at least partially related to cost cutting measures across its supply chain. Also, DF says it's using its scale to procure ingredients and packaging at better prices. It's also optimizing its production network and reducing its logistics costs. However, revenue fell 15.8% YoY to $2.02 bln, which was shy of expectations of $2.06 bln, as DF continues to face a difficult milk environment. Investors had been hoping milk volumes would improve in Q2 but they remained weak.

For Q3, the company expects volume declines in the low single digits, slightly increasing raw milk costs and taking normal seasonality and other factors into account, it expects adjusted EPS of $0.17-0.27, which was in-line with the $0.21 consensus.

In terms of processed milk volume in Q2, it was a bit disappointing as it was down 3% YoY to 653 million gallons. DF says it expects volume will fall in the low single digits in the near term. Investors had been hoping that lower raw milk prices and the fairly aggressive pricing by grocery retailers would translate into higher volume. But that was not the case.

Another reason the stock was down on earnings was the company's announcement that its Non-Executive Chairman Tom Davis unexpectedly resigned immediately. The company did not help itself on the call as they did not provide much of an explanation for the abrupt resignation. It's not clear how much of an impact this will have long term but we wanted to provide some more context for the drop on earnings.

There were some positives in the Q2 report. For example, raw milk costs (what DF pays to farmers) were significantly lower than prior year levels (down about 30%) and should remain relatively stable.

Also, in terms of retail grocery pricing, Dean Foods' brands averaged $3.73 at retail. This was down $0.35 from last year and down $0.21 from Q1. However, these declines are largely being driven by promotional pricing associated with its DairyPure launch and it also included the disproportionate impact of certain large retailers choosing to significantly lower branded milk prices at retail. Despite this, the price gap between DF's brands and private label has expanded 20% YoY from $0.64 to $0.77. So that was good to see as that $0.77 is about $0.15-0.20 above historical norms.

Another positive from Q2 was the performance of DairyPure. The launch of this new product went better than expected, partly due to some successful marketing during the launch. DF is trying to take market share from organic milk. Also, it wants to capitalize on consumers' increasing desire for protein and milk is a very good protein source relative to its cost. The launch was so successful that the company plans on boosting its marketing budget even further.

Also, on the call, management talked about the US birthrate having risen last year, portending an increase in school milk consumption in coming years. Management was also happy to see raw milk prices down by a third from a year ago, padding the company's profits.

Valuation

In terms of valuation, DF scores fairly well on several key valuation metric rankings. The real standout is EV/Sales, which at 0.3x, places the company in the 96th percentile. However, this may be a bit skewed as this is a very thin margin business. Companies with thin margins tend to perform very well on this metric. The other star metric is Free Cash Flow (FCF) yield, which at 10%, ranks DF in the 92nd percentile. DF has seen its revenue decline but the company generates a good amount of cash.

Given its strong cash generation ability, it's not surprising that the next best ranking is EV/EBITDA, which at 7.3x, places DF in the 54th percentile. Finally, Shareholder Yield (dividends + buybacks) is unfortunately a weak category for DF. The company pays a modest quarterly dividend of $0.07 per share which computes to a 1.7% annual yield. They also do not appear to be very aggressively buying back stock as shares outstanding in Q2 was 94.9 mln, up about 1% YoY. Overall, they rank in the 34th percentile for shareholder yield. So not horrible but not good either.

In terms of P/E's, DF is expected to earn $1.04 this year and $1.03 next year, which computes to current (FY15) and forward (FY16) P/E's of 15.5x and 15.7x, respectively. So it's pretty attractive, but not super cheap, on a P/E basis.

Conclusion

Overall, we think DF is an attractive name for value investors at current levels. We concede that the milk industry is going through a tough time right now. We also concede that it's not the best performer in terms of valuation metrics relative to the numerous other companies we have profiled in our Value Leaders series. However, the valuation is still decent and there are some good things going on here.

First, it has been well documented that the milk industry has been facing tough times as consumers' tastes shift to the many other types of beverages that have hit the market over the past decade, including several milk substitutes. We are not sure how much more negative it could get. It's unlikely that the market is going to spring back in the near term but our sense is that a lot of negativity has been priced in. Also, non-GAAP EPS in 1H15 jumped to $0.57 from a $(0.18) loss in the prior year period so they are making progress in terms of their financial results.

Second, we think the company's recent new product launch of DairyPure is a good move. It just launched in Q2, so it's still early but management was quite bullish about it on the Q2 call. It basically provides many of the same benefits as organic milk but at a much more reasonable price. DairyPure has good potential, in our view, to take market share from organic milk.

Third, while there has been price discounting by grocery chains at the retail level, the price gap between Dean Food's brands and private label has expanded 20% YoY from $0.64 to $0.77. That's about $0.15-0.20 above historical norms. That may come down in the coming quarters, but that was a metric that stood out to us.

Finally, we like how the stock has been trading. It has been in a $16-22 trading range for much of the past three years and it's currently on the lower end of this range where there seems to be decent support. We do not expect DF to be a barn burner, but the risk/reward for a decent return in the $16 area looks attractive. With that said, we would place a stop loss limit in the $13.50-14.00 area. If it breached those levels, we'd look for another buy-and-hold idea.

 

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This article is from Briefing.com and is being posted with Briefing.com's permission. The views expressed in this article are solely those of the author and/or Briefing.com and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

2015-09-01 15:08:01

Posted by
Barron's

Contributor
Stocks

Beijing's Crackdown Won't Scare Off Bears

Arrests and public confessions make good TV but slow growth and weak earnings mean more downside.

 

I confess: I still believe China’s stocks are likely to fall no matter how many people Beijing punishes for saying so or how many journalists are trotted out on TV to denounce their own articles about why.

After first launching investigations into what authorities said was malicious short-selling, the Ministry of Public Security has reportedly been rounding up some unusual suspects, including four employees from Citic Securities, an official from the China Securities Regulatory Commission, and a local journalist, Caijing Magazine’s Wang Xiaolu. Wang appeared on television this week to confess to writing a sensational and irresponsible article, apparently one published July 20 that suggested the CSRC was looking into how brokerages might liquidate shares they bought as part of July’s stock-market bailout.

What would really be sensational and irresponsible is if the CSRC hasn’t begun studying ways for brokerages to get those shares off their balance sheets. As this column opined at the time, the entire rescue was wrongheaded, a bailout of largely wealthy speculators who responded to a government promotional campaign to borrow big to buy stocks. Now, not only do brokerages own a tremendous amount of stock that is presumably under water, but the Chinese government has also bought its way into the ranks of even more companies’ top shareholders, thereby nationalizing a significant portion of the private sector in an economy where the largest companies were already government-controlled.

Beijing may have its own reasons for not letting the market go into a tailspin the week it’s holding a massive military parade to mark Japan’s defeat at the end of World War II. But it already appears to have averted the peril at the heart of the bailout: the default of the 2.3 trillion yuan investors had borrowed from brokerages to buy stocks. As we noted last week, that pile of debt has been rapidly whittled back down to just CNY1.2 trillion. And most of the margined positions remaining appear to be well above water.

That doesn’t account for the roughly CNY1.5 trillion in loans extended to companies and controlling shareholders who pledged their own shares as collateral. But in the big scheme of China’s debt bubble – 250% of GDP and counting – stock-related debt is small beer. That CNY1.5 trillion is about what China’s banks and “shadow banks” issue every two months in new loans.

BEIJING IS STILL CLEARLY NERVOUS ABOUT RELATIVELY SMALL DEFAULTS TRIGGERING AN AVALANCHE. Hence its paranoia about the stock market and the People’s Bank of China’s move last month to devalue the yuan and offset growing outflows of cash. A weaker yuan not only makes the dollars fleeing savers want to buy more expensive, but boosts the yuan value of every dollar Chinese companies earn selling exports overseas. A weaker yuan therefore eases the downward pressure on China’s $3.7 trillion in foreign exchange reserves, which, while prodigious, have been falling all year, sucking cash out of the local economy and forcing the PBoC last week to cut the amount it requires banks to keep in reserve.

The PBoC still has lots of room to cut further: its benchmark rate is still at 4.6% and the reserve rate requirement for the biggest banks is still 18%. But markets are betting such piecemeal moves won’t be enough and that further yuan depreciation is in store – investors in the offshore market for yuan are betting it will fall another 3% in a year. So China has found a way to meddle in that market, too, with the PBoC last week intervening in the interest-rate swap market to push the offshore yuan back up.

But Beijing will have to start burning its strategic petroleum stockpiles if it’s going to hide the evidence of slowing growth evident in China’s oil consumption: according to Bernstein, China’s energy consumption grew in July at its slowest since the global financial crisis, suggesting that economic growth continues to slow.

That doesn’t bode well for corporate earnings or, by extension, stock prices. With retail investors no longer so eager to buy shares on the prospect of policy stimulus, prices are going to be uncharacteristically driven by corporate prospects.

That’s a good thing. China’s stocks won’t start to look attractive until Beijing lets Shanghai’s benchmark index drift below 3,000. Doing so won’t keep retail investors from shipping money they used to have in stocks out of China. Authorities still need to spell out a plan for the stocks they’ve bought to reduce fears they’ll dump them onto the market. And they need to dispel concerns that China’s property-led debt bubble might still blow up. Once they do, institutional investors will be lured back in. Investors, brokers and journalists will stop bad-mouthing China’s stocks and talk them up instead – without even putting a gun to their heads.

 

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This article is from Barron's and is being posted with Barron’s permission. The views expressed in this article are solely those of the author and/or Barron's and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

2015-09-01 14:16:11

Posted by
Neil Azous
Founder & Managing Member
Rareview Macro LLC
Contributor
Macro

No September First of the Month Inflows

The key takeaways to start September are invisible to the naked eye; a little sight beyond sight is required in order to see them clearly.

Firstly, we are not sure who the source was, but the following S&P 500 analog was sent to us:

In the 11 times the S&P 500 fell by more than 5% in August it declined in 80% of the subsequent Septembers; the average decline in September in those years was 4%.

Now, there are many statistics with similar odds of success being circulated out there, but in aggregate these one-liners miss the bigger picture in our opinion.

The message is that the higher volatility witnessed during August has carried over into September. It took eight hours of the overnight session for S&P futures (ESU5) to confirm 65% of the above analog, as the index was -2.6% at one point.

Secondly, the first of the month inflows into risk assets that professionals are accustomed to relying on to support their long equity positions has gone missing this year. Inflows into equities are generally expected to follow the simultaneous release of PMI manufacturing data, especially when the data historically points to a stronger global growth profile. However, the data released this morning was uniformly weak, and serves as a reminder of the regional synchronicity – that is, Japan’s consumption-led recovery is faltering, the US has a second half of the year inventory overhang to work through, Europe’s inflation profile is reverting back to pre-“QECB” profile, and China remains an unknown.

Thirdly, given the overall weakness in risk assets the sell-off in the German Bund (RXU5) over the last 24-hours is confounding professionals. Occam’s Razor, a principle that states that among competing hypotheses that predict equally well, the one with the fewest assumptions should be selected, suggests that the Chinese central bank is once again selling dollars and foreign fixed income reserves to buy yuan. As a reminder, FX intervention means foreign reserves have to shrink. The mechanics are as follows: sell foreign sovereign bonds > receive US dollars (USD), euro (EUR), yen (JPY) > use USD/EUR/JPY proceeds to buy CNY = no impact to private economy.

The Chinese Yuan, both the onshore (USD/CNY) and offshore (USD/CNH) versions, is trading at its strongest level since the devaluation. The key difference today however is that the central bank is not defending yuan weakness. Instead, in the spirit of managing volatility, it appears it is proactively reminding speculators who is the boss.

 

Sight Beyond Sight® is a global macro trading newsletter written daily by Neil Azous. With close to two decades of institutional experience across asset classes, Neil interprets the day-to-day economic, policy and strategy developments and provides actionable trading ideas for investors. We invite clients of Interactive Brokers to sign up for a free trial in Account Management. If you are not a client of IB, you can sign up for a free trial by visiting our website.


This article is from Rareview Macro and is being posted with Rareview Macro’s permission. The views expressed in this article are solely those of the author and/or Rareview Macro and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

2015-09-01 12:49:54

Posted by
Andrew Wilkinson
Chief Market Analyst
Interactive Brokers
Contributor
Technical Analysis

Carnage

Of course it all depends where you choose to draw your trendlines, but the following observation is worth taking a look at. One of the major topics of conversation investors have engaged in since the naissance of the March 2009 bull market, has been the lack of price correction. Rarely have we witnessed a 10% correction. It took 17-months for prices to fall from the October 2007 stock market peak before finding the bottom, but it took four more years to recover. Running a series of Fibonacci trendlines approximately from the breakout in 2013 to the recent all-time high reveals that the latest market dislocation has already caused a 50% setback to ~1831. The S&P 500 index has recovered over 100 points as stocks wilt on Tuesday to 1933. A deeper retracement, however, of 61.8% of the entire ~1533-2129 move would require a further slump to 1533 or 20% lower than present. Of course, that all depends on how much you like Fibonacci lines.

Chart – Fibonacci retracement for bull market

The analysis in this article is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such investments. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

2015-09-01 11:51:04

Posted by
Russ Koesterich, CFA
BlackRock
Contributor
Macro

Is a Recession Coming?

The last few days have reminded everyone how quickly markets can turn. In the space of barely a week, the VIX Index, a measure of market volatility, spiked from 13, suggesting extreme complacency, to over 50, evidencing total panic.

There was no single catalyst for the recent selloff, but an underlying investor concern is whether the slowdown in China and other emerging markets will drag the United States into a recession. While I haven’t been overly bullish on U.S. growth, I believe this fear is overblown.

1. The United States is a relatively closed economy

Most U.S. economic activity, nearly 70% of it, comes from domestic consumption. While the country isn’t immune to external shocks, there needs to be a transmission mechanism, such as a spike in oil prices, to impact the domestic economy.

Though a strong dollar and weakness in China have had a negative impact on U.S. corporate earnings, neither has had a material impact on overall U.S. growth. In fact, some of the disruptions from overseas come with silver linings for U.S. consumption and growth: lower rates and cheaper oil.

2. Higher rates are unlikely to derail the recovery

Rates are falling, supporting the housing market. Given low inflation and falling inflation expectations, the Federal Reserve (Fed) is likely, at most, to execute a single rate hike this year. This is in contrast to how most recessions start, with the Fed moving too aggressively and rates rising too rapidly.

3. Cheaper oil is a positive for U.S. consumers

Though the U.S. now has a large domestic energy industry that is feeling the pain from lower oil and the U.S. consumer certainly faces many headwinds, cheaper gasoline should support U.S. consumption.

4. There is little statistical evidence that the U.S. economy is slowing

Prior to the last recession there were several red flags signifying a recession ahead. According to Bloomberg data, leading indicators had been negative for nearly two years, new manufacturing orders slipped into contraction territory in January 2008 and the Chicago Fed National Activity Index (CFNAI), my preferred metric for forecasting near-term activity, had been consistently in negative territory for most of 2007 and all of 2008.

This time around, lower rates and cheaper gasoline help explain why the numbers look very different, as Bloomberg data show. The CFNAI actually hit a 7-month high in July, leading indicators are up roughly 4 percent year-over-year, and despite the slowdown in China, the new orders component of the U.S. ISM survey is 56.5, consistent with solid if uninspiring growth.

My cautiously optimistic view comes with two caveats. First, in today’s slow growth world, it won’t take much to knock the U.S. economy off of its trajectory. As we’ve seen in recent years, a cold winter is enough to cause at least a temporary contraction.

Second, it’s possible to have a bear market without a recession, though I don’t expect this to occur. But if international market volatility becomes severe enough, it could drag down U.S. stocks, even as the U.S. economy continues to grow.


Russ Koesterich, CFA, is the Chief Investment Strategist for BlackRock. He is a regular contributor to The Blog.

 

This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date indicated and may change as subsequent conditions vary. The information and opinions contained in this post are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by BlackRock, its officers, employees or agents. This post may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this post is at the sole discretion of the reader.

©2015 BlackRock, Inc. All rights reserved. iSHARES and BLACKROCK are registered trademarks of BlackRock, Inc., or its subsidiaries. All other marks are the property of their respective owners.

 iS-16475

This article is from BlackRock and is being posted with BlackRock’s permission. The views expressed in this article are solely those of the author and/or BlackRock and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

2015-09-01 11:08:03

Posted by
CME Group

Contributor
Macro

Will Friday's Jobs Report Set the Fed's Timeline?

While the CME Group FedWatch Tool shows a 27 percent expected probability of a September rate hike, CME Group Chief Economist Blu Putnam thinks Fed action is likely if Friday’s Unemployment report is strong (read his paper). As the market continues to debate timing of a change, participants are using liquid Fed Fund futures to position their portfolios:

  •     August ADV is 121,000+, its highest since September 2008
  •     Open Interest hit a year high of 915,000+ in August

Data as of August 28 (FedWatch as of August 31)

 

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Futures trading is not suitable for all investors, and involves risk of loss. Futures are a leverage instrument, and because only a percentage of a contract's value is required to trade, it is possible to lose more than the amount of money initially deposited for a futures product.

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This article is from CME Group and is being posted with CME Group’s permission. The views expressed in this article are solely those of the author and/or CME Group and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

 

2015-09-01 10:22:41

Posted by
Jamie Lissette
Trading Analyst
Hammerstone Group
Contributor
Stocks

Sector News Breakdown

Consumer

  • Scientific Games (SGMS) upgraded to Hold from Sell at Deutsche Bank
  • Monthly auto sales data for August released today (GM, F, FCAU, etc.)

Energy

  • Penn West (PWE) limiting capex to funds flow from ops by year-end 2015, suspending dividend, cutting board compensation, reducing workforce 35% (by >400) in response to commodity prices
  • Matrix Service (MTRX) Q4 EPS 40c/$370.5M vs. est. 27c/$377M; had backlog at June 30 totaled $1.41B, up 54.4% YoY

Financials

  • Ares Capital (ARCC) was advised Aug. 24 that GE Global Sponsor Finance (GE-GSF) notified Senior Secured Loan Fund (SSLP) that GE-GSF has terminated its obligation to present senior secured lending investment opportunities to the SSLP prior to pursuing such opportunities for itself
  • Medallion Financial (TAXI) files $100M mixed securities shelf

Healthcare

  • Trevena (TRVN) announced data from Phase 2b trial of TRV130 achieved its primary endpoint of statistically greater pain reduction than placebo over 24 hours.
  • Valeant Pharmaceuticals (VRX) struck a deal with AstraZeneca PLC (AZN) for the rights to sell psoriasis treatment brodalumab after Amgen Inc. dropped its own collaboration; VRX to pay AZN $100M upfront, with another $170M in prelaunch milestones and up to $175M following launch
  • Aimmune Therapeutics (AIMT) plans to initiate an international Phase 3 registrational trial (ARC003) of AR101 in children and adults with peanut allergy in early 2016
  • Chiasma (CHMA) says Pdufa date for octreotide capsules is April 15; application submitted 6/15
  • Medtronic PLC (MDT) said it acquired privately-held Medina Medical for $150 million
  • Pharmedium Healthcare Holdings Inc. filed for their initial public offering late Monday with an eye on raising up to $100 million
  • NovoCure Ltd. filed papers with the SEC to raise up to $300 million in an initial public offering

Industrials & Materials

  • Oshkosh Corp. (OSK) will increase its stock repurchase program by 10 million shares
  • Airlines American Airlines (AAL), Delta Air Lines (DAL) and Copa Holdings (CPA) all upgraded to Buy at Deutsche Bank saying issues surrounding PRASM weakness, unresolved labor contracts and government investigations are more than fully discounted at current share levels
  • Freeport McMoRan (FCX) downgraded to Neutral from Buy at Citi

Technology, Media & Telecom

  • Bazaarvoice (BV) Q1 EPS loss (6c)/$48.9M vs. est. (8cc)/$48.5M; had 1,337 active clients at end of 1Q; >4,200 network clients at end of 1Q
  • Adept Technology (ADEP) Q4 EPS loss (10c)/$13.9M vs. est. loss (7c)/$14.4M
  • Samsung will launch the Gear S2 smartwatch this week, a new round-faced smartwatch that will come in two styles, The Wall Street Journal reports
  • SAIC (SAIC) Q2 EPS 66c/$1.1B vs. est. 60c/$1.12B
  • VMware (VMW) upgraded to Outperform from Neutral at Baird

 

The content of this post was created by the Hammerstone Group. The Hammerstone Institutional Forum, a chat-based platform for traders, provides subscribers with up-to-the-minute breaking news headlines and instant analysis that drive the market. For more information please visit www.thehammerstone.com. For more information on the stocks mentioned in the Hammerstone Recap, please contact Brian Ducey at brian@thehammerstone.com.

This article is from the Hammerstone Group and is being posted with the Hammerstone Group's permission. The views expressed in this article are solely those of the author and/or the Hammerstone Group and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

2015-09-01 10:08:01

Posted by
Waverly Advisors, LLC
Technical/Quantitative Market Research
Contributor
Technical Analysis

Waverly Advisors Morning Update

Largest Rel Volume: Stocks with the largest multiple of their 20 day average volume. Note that the “average” value for this number will change as the trading day progresses, but the relative position of a stock within this list should show some persistence. These are likely stocks in the news, or stocks experiencing a sharp flow of new information.
 
Largest Rel Ranges: First, we express each stock’s daily range as a % of the 20 day average range, and then choose the 10 with the largest values of that measure. These are the stocks with the largest daily ranges, relative to their own typical daily ranges.
 
Gap Analysis shows stocks with open gaps (today’s high < yesterday’s low or today’s low > yesterday’s high) remaining.
 
Stocks with Open Gaps (for the Day):  Many!

For more information about Waverly Advisors please click here.
 
 
This article is from Waverly Advisors, LLC and is being posted with Waverly Advisors, LLC’s permission. The views expressed in this article are solely those of the author and/or Waverly Advisors, LLC and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
2015-09-01 09:27:43

Posted by
Jamie Lissette
Trading Analyst
Hammerstone Group
Contributor
Macro

The Hammerstone Report

August was bad for global stocks, but September is starting out even worse, as another weak China economic data point renews slowing demand fears, and leads to a global stock market pullback. China fears have once again taken a toll on investor confidence and stock markets overall after the country’s official manufacturing purchasing managers’ index fell to a three-year low (despite all the measures taken by the Central Bank over the last few months to try and stimulate its slowing economy). Asia plunged, Europe is lower, and U.S. markets extend Monday’s losses ahead of its own data points today (ISM manufacturing index due at 10:00 am, as well as construction-spending data for July). The dollar has dropped against the yen to a low of 119.54 (has since bounced back above 120), down from 121.27 overnight following the weak Chinese data. Oil prices have pared some of yesterday’s gains, falling over 2% this morning as well as China fears hit the commodity space again.

Stocks ended August on a sour note, posting another day of losses and adding to its monthly decline. The S&P 500 index shed 6.3% in August, its worst monthly selloff since September 2011, as traders remain concerned over the instability in China and debated over when the Fed will hike rates (also stocks have had a sharp “V” shaped bounce the last two days after its sell-off). August was the worst month for the Dow by percentage since May 2010, falling 6.6%. Stocks had pared their losses midday Monday as crude oil prices surged for a third day in a row (up 29% since last Monday low of $37.75 per barrel), but ended up sliding into the close.

In Asian markets, The Nikkei Index dropped -724 points (3.8%) to settle at 18,165, the Shanghai Index slipped 39 points (1.23%) to finish at 3,166, and the Hang Seng Index fell 485 points (2.2%) to 21,18.

World News

  • China's manufacturing sector contracted at its fastest pace in three years in August, reinforcing fears of a sharper slowdown. The official Purchasing Managers' Index (PMI) fell to 49.7 in August from the previous month's reading of 50.0, in line with expectations
  • China sub-index for new orders fell to 49.7 in August from July's 49.9, while new export orders fell to 47.7 from 47.9 in July, contracting for an 11th consecutive month
  • German unemployment declined in August, as joblessness fell a seasonally-adjusted 7,000 to 2.79 million vs. an estimate drop of 4K (after unemployment rose in July); jobless rate remained at 6.4%, the lowest level since German reunification

The content of this post was created by the Hammerstone Group. The Hammerstone Institutional Forum, a chat-based platform for traders, provides subscribers with up-to-the-minute breaking news headlines and instant analysis that drive the market. For more information please visit www.thehammerstone.com. For more information on the stocks mentioned in the Hammerstone Recap, please contact Brian Ducey at brian@thehammerstone.com.

This article is from the Hammerstone Group and is being posted with the Hammerstone Group's permission. The views expressed in this article are solely those of the author and/or the Hammerstone Group and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

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