It's all about the Earnings

Global mkts shrugged off all of the geo-political news – bombings in Gaza/Israel and Russian rebel actions in Ukraine on Friday and surged higher to end the week on a positive note. In the end, investors are not letting Israel or Ukraine become the defining moment in this mkt rally.

As I said in my CNBC blog on Friday – the initial news did cause traders to hit the SELL button – but in the end – Investors are the ones who will decide long term mkt direction while the trader types decide short term direction - and this is important to understand - so depending on who you are - the opportunities presented are very different.

Geo-political events – almost always have an initial impact on mkts - though never tend to have longer term effects as investors/traders assess the severity and likelihood of disruption – It appeared on Friday that many do not see any major disruptions and so these events may not prove to be the catalyst for a real correction. Now that being said – Israel/Gaza still remains the wild card here – but by most accounts investors & mkts seem to have gotten accustomed to that and although there is much international concern – the mkt action is telling us that this too shall pass and be negotiated out - at some point.

Over the weekend we saw and heard a lot of rhetoric/accusations get thrown around about Russian involvement in Ukraine and their responsibility in the downing of the Malaysian passenger jet. In addition - The conflict in the Mid-East does not seem to be calming down and Sunday was one of the bloodiest so far in the 14 day conflict. This new unrest caused global mkts to come under pressure on Monday trading - US futures were down some 6 pts in early trading but have rebounded and are now down only 3 trading at 1968.

Remember - stocks that get dislocated on fear/emotion become opportunities and that is what we are seeing.
Earnings season so far has not disappointed, broad macro data points are also in recovery mode - long term investors welcome this - so short term dislocations caused by the geo-politics will get quickly resolved. Remember - long term investors will line it up this way and focus on the recovery -

1. Earnings
2. Broad Macro/US data points
3. The FED
4. Geo-political events

Short term traders will flip it around and focus on the chaos first -

1. Geo-politics
2. Earnings
3. Broad Macro/US data points
4. The FED

What is important to remember is that global political events cause initial mkt reactions but in the end have a short life span. Economics/Earnings/Central bank actions have a much longer impact on investments –and so those remain the real mkt drivers.

For the trader – they love the chaos created by the conflicts around the world – I mean just 3 weeks ago it was ISIS – and their caliphate state of mind - with their plans to move across Jordan to help out the Palestinians - this as they claimed to control large parts of Iraq and Syria - that caused global nervousness - we saw mkts move lower as the situation unfolded across the region. But this weakness was met with natural buying - long term investors that saw the dislocation decided to jump in. We have not even discussed that any longer - you have to look well into the newspaper to even find a story on Iraq today.

This week - will be full of earnings and so far 75% of the S&P 500 companies that have reported results have beaten the expectations with 70% of those beating on the top line. In addition - these same companies are projecting optimistic future guidance So expect the positive earnings season to continue providing a tailwind for markets. Key companies to report this week include - STI, HAL, BBT, HAS, CPS, NFLX,TXN, KO, BA, MSFT.

And let's not forget the role of M&A activity - to date investors have seen some $1 tril worth of deals. The most recent act is FOX's unsolicited bid for Time Warner last Monday. Even though TWX said 'no thanks' do not expect Murdoch to give up -

Over the weekend we learned that Murdoch will use proceeds from the sale of its Italian and German pay-TV assets to raise the heat and the price he is willing to pay for TWX. These assets are valued at about 10 billion Euros, and this will give Murdoch the ability to raise the stakes. - so stay tuned as the this drama has just begun to unfold. The stock is telling you that it expects much more action - as it closed at $87.23 last Friday - a 2.6% premium to his first bid and the game has just begun. What about other assets? What if he looks at shedding his 30% stake in BskyB - worth some 5.6 bil pounds? This drama is still in the first act - the other characters have yet to be introduced - investors and traders are speculating - The question is - How far will he go to win the prize?

US futures are now -5 again showing signs of weakness as traders prepare for the day. There is no broad macro data due - but there are plenty of earnings. Watch for individual stock movements based on the earnings, but look for broad mkt moves based on global tensions.

We remain in the 1945/1975 trading range - a range that we have been stuck in for 6 weeks now....This tells me that broadly investors are satisfied with the overall level of the indexes based on current macro and FED policy.

Overnight- mkts mostly lower on the back of rising global tensions in Israel/Gaza as well as the stalemate over Malaysian flight #17. Japan closed for a holiday. Hong Kong -0.28%, China -0.22% and ASX +0.15%.

FTSE -0.4%, CAC 40 - 0.41%, DAX - 0.82%, EUROSTOXX -0.57%, SPAIN -0.33% and ITALY -1.01%.

On a side note - In this time of ongoing mkt structure concerns the WSJ leads with an interesting story

"Barclays Dark Pool Drew Early Alarms on Fast Trading" noting that

"Some big trading outfits noticed their orders weren't getting the best treatment in the dark pool.....the firms began to grow concerned that the poor results resulted from Hi Freq trading..."

The time has never been riper for us to come together to address current mkt structure failures - let's not let this opportunity pass us by.... As always - I am happy to discuss.

Grilled Apricot/Honey Dijon Chicken Thighs

Easy marinade and works well with chicken on the grill.
For this you need: 6 thighs, (bone in), Apricot Jam, Honey Dijon mustard, s&p, onions and butter.

Sauté the butter and chopped onion in a pan on med hi - until translucent. Now add 2 tblspn of the apricot jam, and stir....after about 3 mins - remove from heat and add some honey dijon and s&p - taste to adjust. Let cool for 10 mins.

In a large bowl - add the thighs and the marinade - let sit for 30 mins.

Heat the grill - place foil on the grate and then place the chicken on top of the foil.

Turn heat to medium and cook until nicely browned and the juices run clear.

Serve this dish with corn of the cob and a large mixed green salad. Great for an evening BBQ.


Buon Appetito.