The US Trade Deficit - So you ask - what is that? And why is that measure now being credited with putting pressure on the mkt?
The Trade Deficit is 'an economic measure of a negative balance of trade in which a country's imports exceeds its exports. The Trade Deficit represents an outflow of domestic currency to foreign markets' - Investopedia
And why is this a problem? The theory goes that as the deficit widens - that means that more US dollars are being held by foreign nations - who at some point 'may' decide to sell them - which would put pressure on the value of the US dollar.....hmmmm pressure on the dollar would drive the dollar lower - something that the FED worked very hard to achieve over the past 7 yrs - causing a 200%+ run in the mkt......... so why now is a 'weaker dollar' causing tremors in the mkt?
Now - Since August 2014 - we have seen the dollar rise 23% and have had to listen to all the analysts tell us how 'negative' the stronger dollar was going to be for the US economy.....Yet - the mkt continued to advance and companies did NOT get broadly slammed as we were told they would............Look - a strong dollar is indicative of a strong economy - thus when the dollar is strong - the 'perception' is that the economy is strong......so herein lies the conundrum.....Is our dollar strong because the economy IS strong or because other major currencies are weak due to those "QE" programs abroad? And IF that is the reason for our strong dollar - then maybe it's not all a bed of roses......and in fact maybe the economy is not so robust - causing a near term re-pricing of risk.
Well - at least in the 1Q of 2015 - we have learned that the economy is not so strong...in fact with yesterday's trade deficit read - we can now expect 1Q GDP to be revised lower - taking it clearly into negative territory when we get this month's revision. And so - the reality of the 'state of the union' hits home as strategists play with the numbers in their excel spreadsheets to come up with new valuations - causing the algo's to light up as risk is re-priced.
The mkt began weak but then turned uglier as the day wore on as the analysis of the underlying economics kept getting uglier. The move lower more than offset the gains seen over the past 2 days and once we started breaking support levels - the algo's then ramped it up and selling begets selling.....
Rising volatility and continued concerns over Greece, China, the FED, The ECB, Oil, Bonds - both US and European, the dollar, earnings and collapsing revenues all contributed to the building negative mood yesterday... The major indexes all ended the day firmly in negative territory breaking below the short term 50 dma support line........ The Dow slid 142 points - breaking support, Nasdaq plunged 78 points - breaking support, The Russell small call falling 1.45% breaking below its midterm support line (100 dma)......and the S&P tumbled 25 points ending the day right on its short term support line..... The bottom line - Has the mkt gotten a bit ahead of itself?
So back to the 'Trade Deficit'.........yesterday we learned the trade deficit report jumped 43%, to $51.4bil - the worst since October 2008 - which puts this as the biggest miss on record and all but guarantees a negative print on GDP for the 1Q. . This caught many analysts/strategists by surprise....and when they are surprised you can imagine what happens to the algo's....... Yesterday, as the S&P 500 was nearing yet another new all-time record - sellers came out in droves, buyers pulled back and the waves of selling washed over the mkt....
And American confidence is taking a hit...according to the Gallop poll economic confidence is being assaulted as people lose confidence in the so-called “recovery”.
The FED policy makers remain split and continue to argue for both sides - rates should go up and rates should stay put.... The dollar has fallen back by 5% off the highs and is sitting right on intermediate-term support at the middle Bollinger Band line. Does the FED want the dollar to hold this support or not? We have seen what the strong dollar did in the 1Q, so its anyone's guess about what the FED wants......My sense is that they want a weaker dollar to help revive growth going forward...... They do not want another negative GDP read for the second qtr.
Eco data today includes Mort apps - they were down 4.6%......ADP employment at 8:15 am - consensus calls for +200k jobs...and unit labor costs are expected to rise a bit....but Friday is the big reveal....what will Non Farm Payrolls be? Consensus is for +225k - with estimates ranging from +150k - +325k......You could drive a Mack truck thru those estimates....
US futures are up 4 pts as the confusion continues..........Asian mkts were mostly lower overnight in sympathy with yesterday's European and US action.....This morning European mkts are higher on some stronger eco data points and better earnings. EMU (European Monetary Union) composite PMI came in at 53.9 vs. exp of 53.5.
We will have the pleasure of 3 FED speakers today.....Janet Yellen at 9:15 am - clearly the most watched - Ester George (Kansas City Fed) at 1:15 pm and then Dennis Lockhart (Atlanta Fed) at 1:30 pm.
Watch the S&P this morning.....it is sitting right on its support line....a real failure at 2090 will cause the selling to accelerate taking us very quickly to 2070.....I don't think that happens.....thoughts?
You will need: crushed garlic, olive oil, butter, the beef tenderloin cut into 1 1/2 inch thick pieces, flour, s&p, and a nice full bodied red wine….
Ok – begin by selecting a sauté pan that will accommodate the tenderloins without crowding…..Now – heat the pan on med hi….add in a bit of olive oil and about 3 tblspns of butter…..(the oil prevents the butter from burning). Drop in the crushed garlic and sauté.
While the butter is warming up – dredge the filets in flour and when the butter is all melted – add the filets and brown the meat nicely on both sides. Once you are satisfied – remove the meat and place on a platter – season with s&p.
Add in about ¾ cup of red wine to the pan….let the alcohol burn off – always using a wooden spoon to scrape the bottom of the pan….when the wine is almost boiled off – add back the filets and cook for about 1 or 2 mins per side….Remove and immediately serve on a warmed plate with a green veggie…I suggest French Cut Green Beans....simply steamed then dressed with butter and lemon and a mixed green salad. Dress with a red wine vinegar and olive oil dressing. Season the salad with s&p, oregano and a splash of lemon juice…toss and serve.
Buon Appetito.
The Trade Deficit is 'an economic measure of a negative balance of trade in which a country's imports exceeds its exports. The Trade Deficit represents an outflow of domestic currency to foreign markets' - Investopedia
And why is this a problem? The theory goes that as the deficit widens - that means that more US dollars are being held by foreign nations - who at some point 'may' decide to sell them - which would put pressure on the value of the US dollar.....hmmmm pressure on the dollar would drive the dollar lower - something that the FED worked very hard to achieve over the past 7 yrs - causing a 200%+ run in the mkt......... so why now is a 'weaker dollar' causing tremors in the mkt?
Now - Since August 2014 - we have seen the dollar rise 23% and have had to listen to all the analysts tell us how 'negative' the stronger dollar was going to be for the US economy.....Yet - the mkt continued to advance and companies did NOT get broadly slammed as we were told they would............Look - a strong dollar is indicative of a strong economy - thus when the dollar is strong - the 'perception' is that the economy is strong......so herein lies the conundrum.....Is our dollar strong because the economy IS strong or because other major currencies are weak due to those "QE" programs abroad? And IF that is the reason for our strong dollar - then maybe it's not all a bed of roses......and in fact maybe the economy is not so robust - causing a near term re-pricing of risk.
Well - at least in the 1Q of 2015 - we have learned that the economy is not so strong...in fact with yesterday's trade deficit read - we can now expect 1Q GDP to be revised lower - taking it clearly into negative territory when we get this month's revision. And so - the reality of the 'state of the union' hits home as strategists play with the numbers in their excel spreadsheets to come up with new valuations - causing the algo's to light up as risk is re-priced.
The mkt began weak but then turned uglier as the day wore on as the analysis of the underlying economics kept getting uglier. The move lower more than offset the gains seen over the past 2 days and once we started breaking support levels - the algo's then ramped it up and selling begets selling.....
Rising volatility and continued concerns over Greece, China, the FED, The ECB, Oil, Bonds - both US and European, the dollar, earnings and collapsing revenues all contributed to the building negative mood yesterday... The major indexes all ended the day firmly in negative territory breaking below the short term 50 dma support line........ The Dow slid 142 points - breaking support, Nasdaq plunged 78 points - breaking support, The Russell small call falling 1.45% breaking below its midterm support line (100 dma)......and the S&P tumbled 25 points ending the day right on its short term support line..... The bottom line - Has the mkt gotten a bit ahead of itself?
So back to the 'Trade Deficit'.........yesterday we learned the trade deficit report jumped 43%, to $51.4bil - the worst since October 2008 - which puts this as the biggest miss on record and all but guarantees a negative print on GDP for the 1Q. . This caught many analysts/strategists by surprise....and when they are surprised you can imagine what happens to the algo's....... Yesterday, as the S&P 500 was nearing yet another new all-time record - sellers came out in droves, buyers pulled back and the waves of selling washed over the mkt....
And American confidence is taking a hit...according to the Gallop poll economic confidence is being assaulted as people lose confidence in the so-called “recovery”.
The FED policy makers remain split and continue to argue for both sides - rates should go up and rates should stay put.... The dollar has fallen back by 5% off the highs and is sitting right on intermediate-term support at the middle Bollinger Band line. Does the FED want the dollar to hold this support or not? We have seen what the strong dollar did in the 1Q, so its anyone's guess about what the FED wants......My sense is that they want a weaker dollar to help revive growth going forward...... They do not want another negative GDP read for the second qtr.
Eco data today includes Mort apps - they were down 4.6%......ADP employment at 8:15 am - consensus calls for +200k jobs...and unit labor costs are expected to rise a bit....but Friday is the big reveal....what will Non Farm Payrolls be? Consensus is for +225k - with estimates ranging from +150k - +325k......You could drive a Mack truck thru those estimates....
US futures are up 4 pts as the confusion continues..........Asian mkts were mostly lower overnight in sympathy with yesterday's European and US action.....This morning European mkts are higher on some stronger eco data points and better earnings. EMU (European Monetary Union) composite PMI came in at 53.9 vs. exp of 53.5.
We will have the pleasure of 3 FED speakers today.....Janet Yellen at 9:15 am - clearly the most watched - Ester George (Kansas City Fed) at 1:15 pm and then Dennis Lockhart (Atlanta Fed) at 1:30 pm.
Watch the S&P this morning.....it is sitting right on its support line....a real failure at 2090 will cause the selling to accelerate taking us very quickly to 2070.....I don't think that happens.....thoughts?
Braised Beef Tenderloins
Braised Beef Tenderloin w/Roasted Balsamic Brussels Sprouts – this is a great dish….easy to make and so good.You will need: crushed garlic, olive oil, butter, the beef tenderloin cut into 1 1/2 inch thick pieces, flour, s&p, and a nice full bodied red wine….
Ok – begin by selecting a sauté pan that will accommodate the tenderloins without crowding…..Now – heat the pan on med hi….add in a bit of olive oil and about 3 tblspns of butter…..(the oil prevents the butter from burning). Drop in the crushed garlic and sauté.
While the butter is warming up – dredge the filets in flour and when the butter is all melted – add the filets and brown the meat nicely on both sides. Once you are satisfied – remove the meat and place on a platter – season with s&p.
Add in about ¾ cup of red wine to the pan….let the alcohol burn off – always using a wooden spoon to scrape the bottom of the pan….when the wine is almost boiled off – add back the filets and cook for about 1 or 2 mins per side….Remove and immediately serve on a warmed plate with a green veggie…I suggest French Cut Green Beans....simply steamed then dressed with butter and lemon and a mixed green salad. Dress with a red wine vinegar and olive oil dressing. Season the salad with s&p, oregano and a splash of lemon juice…toss and serve.
Buon Appetito.
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