Enis’s Macro Wrap – Whack a Mole

by Enis August 9, 2012 7:13 am • Commentary

After Monster’s weak report last night, and 10% fall, it seems to have become a ritual this earnings season to pick off each former high-flying growth stock one by one.  Perhaps most interesting about this trend is the way investors have shrugged off the impact of these stocks’ commentary on the broader market.  These are not small companies (CMG and MNST are around 10 billion market cap, PCLN is now 28 bln after its 17% drop).  The weak commentary is not just contained to the high flyers though, as MCD demonstrated again yesterday.

Overnight, all eyeballs were focused on Chinese economic data.  Even if you gave me the numbers beforehand, I wouldn’t know how the market would react, as potential central bank easing seems to be more in focus than the economic weakness (though Friday’s jobs number was the odd exception).

Chinese numbers came in weak.  Industrial production was up 9.2% yoy, vs. 9.7% consensus estimate.  Retail sales and passenger-vehicle sales also missed expectations, while mainland CPI came in at 1.8% vs. 1.7% expected, though still low enough to be in stimulus range.  Chinese markets in Shanghai and Hong Kong both rallied about 1%, taking the weakness as a cause for more action.

Volume was again very light.  Yesterday and Monday are the 2 lowest volume full trading days this year.  Overnight price action:

  • Europe did not sustain Asia’s strength, falling into the red a couple hours after the open, taking SPX futures to down 0.1% from up 0.5% at their peak
  • Most other asset classes are flat, with tight overnight ranges (commodities, currencies, and bonds), with the Euro the one mover, down 0.4% against the dollar
  • Main economic data point today is Initial Jobless Claims at 8:30 am EST.