Market Recon Thursday: Stephen Guilfoyle

By Stephen Guilfoyle, Managing Director of Deep Value Execution Services

The beatings will continue until…until…..ahhhh, forget about improving morale …the beatings will just continue.  Like a mercenary being paid only for a defined result, and for nothing else, the selling in many markets is without emotion, without loyalty.  Face already ripped off, I’ll rip something else.  What’s left?  Didn’t play defense?  You did know better.  You still do.  Failure to act initially, is no reason to remain inert.  Use your brain.  You are not tree moss.

Ugly Stick

European equity indices are all down anywhere from two to five percent this morning, after the Sweden’s Riksbank took an already negative benchmark interest rate even deeper into the abyss.  Not a member of the Euro-zone, Sweden actually has a GDP…heck, that doesn’t matter.  Deflation…. 4 eva !!!  European banks are again in melt-down mode, oh, and have you seen Crude this morning?  Whomp whomp.  US equity index futures??  Smashified !!

Sarge, What is Working ??

The cool kids already bought Gold and Treasuries.  Remember my re-allocation note earlier this week on top of the one I wrote on New Year’s Eve?  You also can find some defense in the Utilities, Telecom, and the Staples.  Write it down this time.

7am ?? Fed Bashing Time  

Ever see Hall of Famer Barry Sanders (the running back, not Bernie, the socialist) run all over the field, eluding tacklers, and end up gaining 20 or so yards, after having run 70 or 80 yards ??  Well, that’s sort of what Fed Chair Janet Yellen did yesterday….. without the 20 yard gain part.  She was all over the field.  We heard that “Monetary policy was not on a preset course”…the doves cheered.  We heard that the Fed prefers to reduce accommodation through interest rate hikes as opposed to outright sales of longer-term assets”….. the hawks roared…and then we heard the unthinkable.  The good doctor was asked if it was even legal for the Fed to, if ever needed go to the dark side, and implement negative interest rates.  Unbelievably, incredibly…she indicated that she had not fully investigated the issue.  Doves, and hawks alike stood up and screamed at their TV sets…..  “You mean you testify before Congress, and you didn’t do your homework ????!!!!!!!”  Unacceptable !!!!!  Guess she didn’t think the topic would come up.  Silly Congress.  By the way, thanks to Hilsenrath’s article in the Wall Street Journal, we all know that an internal Fed memo from 2010 states that the Federal Reserve Act is not clear on whether negative rate are at all permitted, and that memo was authorized for release last month.  So….somebody looked into something.

The Goods

08:30 ET

Initial Jobless Claims (Weekly):  My, how times have changed.  It was only a few months ago that this item was printing in the 250k’s, and the four week moving average was right around 260K.  That was then, this is now.  Last week, the number came in at 285K, which is just a shade above the four week moving average, and we’ve now gone six consecutive weeks with at least 277K folks filing for Unemployment benefits.  Prepare to make it seven, as expectations for today are for 283K, with a range spanning from 272K to 290K.  It likely will not be this week, but it does feel as if there is a 300K tag out there stalking us.

10:00 ET

Fed Chair Janet Yellen:  The cheese stands alone again today.  This time, she’s testifying before the Senate Banking Committee.  This dog and pony show will resemble yesterday’s performance, perhaps….hopefully…with a few new questions…and answers.  Maybe, she’ll talk up the markets, LOL.

10:30 ET

Natural Gas Inventories (Weekly):  Last week, supplies for natural gas shrunk for tenth consecutive week with a release of -152 billion cubic feet.  We do expect an eleventh consecutive draw on inventory for this one today, though expectations are for a reduction of roughly -80bcf.  That would the smallest drop in over a month.

Thursday’s Earnings Highlights

Before the Open:  AAP (1.21), ALU (.09), K (.75), TAP (.49), PEP (1.06)

After the Close:  ATVI (.86), AG (-.92), CBS (.93), P (.07), ROVI (.37), ZG (.01)