Peruzzi’s Perch 09.29.17- US Equities Markets Buttressed By Fed Coddling; Global Markets At/Near Record Highs-October Is Here.

Children are born and then coddled and fed by their parents for years until the time comes for them to face the world on their own. This is like the Fed coddling and nurturing financial markets with asset purchases and low interest rates. At the September 20^th  FOMC meeting, while not raising rates, the Fed did signal that they continue to increase the pace of their balance sheet unwind. While inflation is below their 2% target rate, which perplexes them, they are planning on raising rates soon, or eventually, or someday. While some doubt the Fed will actually raise rates again this year, the market is pricing in a meager 1% chance of an October rate hike, and a more substantial 67% chance of a December rate hike. The end of cheap money will eventually come, but the recently disclosed Tax reform blueprint could give financial markets its next coddle-induced growth spurt. Tax reform details suggest a battle in Congress is on the horizon. This leads us once again to focus on macro and micro economic data as well as upcoming corporate earnings growth.

Larry Peruzzi, Managing Director

As Major League Baseball’s regular season and the third quarter comes to an end, the S&P 500 closes out September with its 6^th straight monthly gain. This is the first time the S&P closed positive in the month of September since 2013, with leading sectors being: Techs, Energy and Industrials. The U.S dollar is closing out its best week of the year; Asian markets closed out a strong quarter with the MSCI Asia Pac index posting its 9^th straight monthly gain. WTI crude, while pulling back the last few sessions, will close out Q3 up about 10%. U.K data on Friday showed the savings rate increased more than expected while wages grew faster than prices for first time in a year. We will be watching to see if this is a one month outlier or if a trend is developing. Deutsche Bank’s rating was cut by Fitch on a lack of revenue recovery. Volkswagen announced a $3billion charge related to the buy back or retrofit of tainted U.S. diesel cars.  Also, this week we saw a pullback in August U.S new home sales as well as pending sales; better durable and Cap goods orders and personal income and spending was mostly in line. The core PCE deflator slowed to 1.3% in August, while Euro area core inflation fell .1% to 1.1% in September.

U.K. PM May will give the keynote speech at next week’s Conservative Party’s annual conference and Janet Yellen will give opening remarks at a community banking conference in St. Louis on Wednesday. September ISM data is due on Monday, ADP employment change on Wednesday, August trade balance, factory and durable goods orders on Thursday. “Here we go again” as the Spanish region of Catalonia will attempt to stage a separatist referendum on Sunday. The most-watched release will be September U.S payroll due on Friday. Payrolls are expected to show that we added the fewest workers in six months (88K estimates) as hurricanes Harvey and Irma put a temporary halt to hiring in parts of the southeast. 3Q earnings will begin in 2 weeks, but we are expecting earnings from PepsiCo Inc., Monsanto Co., Tesco Plc, Paychex Inc., Lennar Corp. and Costco Wholesale Corp next week.

Nobel prizes will be awarded through the week. Equifax ex CEO will be questioned at a U.S House Energy and Commerce subcommittee hearing on Tuesday. Asian market volume will be light next week as China, Taiwan and Korea observe autumn festivals. North Korea has been quiet recently, and that’s a welcomed change.

Most global markets are at or are near all-time highs and the VIX index once again is near its lows at 9.61. So, while the FED would very much like its child to go out and confront the world on its own, recent data and September payrolls may warrant some form of continued coddling. The coming few weeks of economic data, tax reform and earnings should give us clarity as to when the Fed can raise rates and turn that bedroom into a den. Recent trading volumes suggests traders are currently not sure. Looking back at the S&P 500 return the last four Octobers: October 2016 -1.94%, October 2015 +8.3%, October 2014 +2.32%, and October 2013 +4.46%.  We can see that October is a month that investors do not want to sit idle on the sidelines. October is a month to pick apples, watch the leaves turn, watch football and watch the market.

Larry Peruzzi

Managing Director International Trading

Mischler Financial Group

Investment Banking | Institutional Brokerage

Ph:   1-617-420-8472

www.mischlerfinancial.com

Larry Peruzzi is a 20 yr global trading markets veteran and brings a unique perspective to global equities market commentary via Mischler Financial Group, the securities industry’s oldest minority broker-dealer owned and operated by service-disabled veterans.  Larry’s experience  and best execution perspective stems from his sitting on ‘both sides of the aisle.’  For more than half of Larry’s career, he ran buy-side trading desks for Standish Mellon and thereafter, The Boston Company. In both of those roles, Larry was responsible for implementing and managing international equities trade execution. Larry’s perspectives are frequently cited by the leading financial news publishers, including The Wall Street Journal, Bloomberg LP and Reuters

Mischler End of Week Equities Market Commentary via Peruzzi’s Perch September 29, 2017 end-of-week edition is distributed via email to institutional investment managers and Fortune Treasury clients of veteran-owned broker-dealer Mischler Financial Group, the investment industry’s oldest  minority broker-dealer owned and operated by Service-Disabled Veterans.

Peruzzi’s Perch is a weekly synopsis of Everything Equities as seen from the perch of Mischler Financial Group’s International Equities Desk. Cited by Wall Street Letter in each of 2014, 2015 and 2016 for “Best Research / Broker-Dealer”, Peruzzi’s Perch is one of four distinctive content pieces produced by Mischler Financial Group.

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Peruzzi’s Perch 09.01.17- Equities Markets Action Defy Experts-“Houston, we don’t see a problem..”?

The U.S markets finished August with the NASDAQ comp at all-time highs, the S&P 500 on a 5 day and DOW on a 4 day winning streak.  In fact, both the DOW and S&P 500 were within ½ of 1 % of their all times highs set on August 8^th.  We find this to be somewhat remarkable given the headwinds the market has had to face recently.

Larry Peruzzi, Managing Director

We have seen the market repeatedly recover from events such as North Korea missile launches, Presidential cabinet turnover, failed heath care bills, and Hurricane Harvey’s destruction and near shut down of Houston’s oil refining capacity.  This market may be overvalued, it may be “long in the tooth” and it may even be a thorn in the FED’s side. All true, but it also proving to be very resilient.

Another surprising aspect is the lack of surprise in the economic releases. Perhaps it’s a function of better forecasting, but we rarely see surprises in the numbers. This week Wholesales inventories, Dallas Fed, jobless claims, income, spending, Q2 GDP adjustment all came in as expected. July pending sales however did pull back a bit. We closed out the week with August employment report and while the headline number of 156K versus 180K estimates looked light, the bulk of that was in lower government hiring. The participation rate remained at a healthy 62.9%.  The biggest story of the week was the massive flooding caused by hurricane Harvey. The storm looks like it will be the costliest in U.S history, and the human and personal toll is difficult to comprehend. Gasoline has spiked to multi year highs, but with oil maintaining a $47.25 a barrel price, we expect gasoline prices to ease on refining capacity and pipelines return to service. The one silver lining from this storm was the drastic improvement in response time that we experienced during the Katrina Hurricane 12 years ago.

With markets closed for Monday’s Labor Day holiday we expect to see volumes slowly return more toward normal as the week progresses. Economically, we get July factory and durable goods orders on Tuesday, July trade balance and Fed Beige book on Wednesday, productivity, jobless claims and labor cost on Thursday, followed by July’s final read of wholesale inventories.

The most closely watched items will be the beige book as well as damage cost out of Houston ($70 to $90B estimate). While escalating numbers will continue to put pressure on the insurers, eventually an economic boom will be realized in construction, material and transportation stocks as the Houston area begins the rebuild process. Hurricane Irma is making its way across the Atlantic and we will be watching the storms progress.

The North Korea threat will most likely not go away, but the government and market has recently been better at handling the situation. The pending debt ceiling and tax reform debate in Washington could have some market moving effect. The EU and UK will continue to negotiate Brexit terms. Friday GM reported nice sale gains. We will be watching auto sales going forward to see if the industry has turned a corner.

While many are touting the regulatory reform as being the prime market driver the earning growth, modest job growth, and non-inflationary pressures (next FED hike now pushed out to December) are all helping to diminish investors’ concerns of a September correction. Historically, September has not been kind to equity markets. But as we know, this is a totally different market. Enjoy the ride and enjoy the long weekend. It’s back to work on Tuesday.

Larry Peruzzi

Managing Director International Trading

Mischler Financial Group

Larry Peruzzi is a 20 yr global trading markets veteran and brings a unique perspective to global equities market commentary via Mischler Financial Group, the securities industry’s oldest minority broker-dealer owned and operated by service-disabled veterans.  Larry’s experience  and best execution perspective stems from his sitting on ‘both sides of the aisle.’  For more than half of Larry’s career, he ran buy-side trading desks for Standish Mellon and thereafter, The Boston Company. In both of those roles, Larry was responsible for implementing and managing international equities trade execution. Larry’s perspectives are frequently cited by the leading financial news publishers, including The Wall Street Journal, Bloomberg LP and Reuters

Mischler End of Week Equities Market Commentary via Peruzzi’s Perch September 01, 2017 end-of-week edition is distributed via email to institutional investment managers and Fortune Treasury clients of veteran-owned broker-dealer Mischler Financial Group, the investment industry’s oldest  minority broker-dealer owned and operated by Service-Disabled Veterans.

Peruzzi’s Perch is a weekly synopsis of Everything Equities as seen from the perch of Mischler Financial Group’s International Equities Desk. Cited by Wall Street Letter in each of 2014, 2015 and 2016 for “Best Research / Broker-Dealer”, Peruzzi’s Perch is one of four distinctive content pieces produced by Mischler Financial Group.

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Peruzzi’s Perch 08.04.17- All Systems Remain in “Go” Mode; Equities Markets Continue to Scale The Peak

Throughout the last several weeks more than a few strategists and commentators have been warning investors of overvalued and overbought equities markets. Calls were being made to head for the exit. Yet, for reasons known and unknown, investors kept plowing money into the market. Lack of volatility, low interest rates, cheap oil, tame inflation and favorable business policy drew investors in to US [and global] equities markets as they did not heed the warnings. To understand this, we should look at the hikers that attempt to conquer Mt Everest. Those mountaineers are well aware that peril could be met with a slight slip of foot or unforeseen storm, yet they trudge forward for the glory and euphoria of reaching the top. Likewise, investors today are presumably well aware of the risks (until they’re not!) and this week, the glory of new all-time highs as well as very good earnings and a strong jobs report made the voyage worth it.

Larry Peruzzi, Managing Director

We had another heavy earnings week. So far, this recent quarter is shaping up as the best earnings season in 7 years, with 77% of companies reporting beating estimates. Economics-wise, this week‘s June Pending home sales, June Personal spending, July ISM manufacturing and June factory orders all came in at or very close to estimates. Price deflator and personal income data was dovish. The major economic release was Friday’s July employment report. Unemployment dropped to 4.3% as expected and non-farm payrolls added a better than expected 209,000 jobs. Average hourly earnings met estimates at +.3% M/M which at a +2.5% Y/Y rate should NOT ignite any inflation fears.

The Washington/Russia/North Korea/Venezuela soap opera drama continues. The Trump administration cabinet turnover is reaching a record pace, but none of this seems to be enough to spook the markets. Possible new sanctions against Venezuela help lift oil close to $50 a barrel but many U.S refineries have been fitted, at sizeable cost, to refine Venezuela’s heavy type of crude so look for a fair amount of politicking here.

Looking ahead to next week, earning season is nearing its end with just 206 companies due to report. Also due are Consumer credit on Monday, 2Q non-farm productivity and labor cost on Wednesday, July PPI data on Thursday and July CPI data on Friday.

With the DOW at 22, 000 and the economy close to being at full employment, analysts and investors will closely monitor any type of inflationary pressure which might cause the FED to raise rates at a faster pace or possibly, amplify asset sales.  So, we will be listening to speeches by Fed  governors Bullard, Kashkari, Dudley next week ahead of the August 16^th FOMC meeting minutes.  With global growth, low inflation, low energy prices and emerging market growth investors will be cautiously move forward as we scale the peak.

Larry Peruzzi

Managing Director International Trading

Mischler Financial Group

Investment Banking | Institutional Brokerage

Larry Peruzzi is a 20 yr global trading markets veteran and brings a unique perspective to global equities market commentary via Mischler Financial Group, the securities industry’s oldest minority broker-dealer owned and operated by service-disabled veterans.  Larry’s experience  and best execution perspective stems from his sitting on ‘both sides of the aisle.’  For more than half of Larry’s career, he ran buy-side trading desks for Standish Mellon and thereafter, The Boston Company. In both of those roles, Larry was responsible for implementing and managing international equities trade execution. Larry’s perspectives are frequently cited by the leading financial news publishers, including The Wall Street Journal, Bloomberg LP and Reuters

Mischler End of Week Equities Market Commentary via Peruzzi’s Perch July 28, 2017 end-of-week edition is distributed via email to institutional investment managers and Fortune Treasury clients of veteran-owned broker-dealer Mischler Financial Group, the investment industry’s oldest  minority broker-dealer owned and operated by Service-Disabled Veterans.

Peruzzi’s Perch is a weekly synopsis of Everything Equities as seen from the perch of Mischler Financial Group’s International Equities Desk. Cited by Wall Street Letter in each of 2014, 2015 and 2016 for “Best Research / Broker-Dealer”, Peruzzi’s Perch is one of four distinctive content pieces produced by Mischler Financial Group

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Peruzzi’s Perch 07.28.17  As Bull Market Seems Long in Tooth, Equities Markets Institutional Investors Ponder : Should I Stay or Should I Go?

Watching the equities markets this week, one can’t help but think of the song from The Clash: Should I Stay or Should I Go.  Earnings, economic data, Fed speak and cash flows all signal a market that has inflation under control and is growing a moderate pace.

Larry Peruzzi, Managing Director

We have been seeing a decent amount of shorts being squeezed and retail investors, who have been on the sidelines, are putting more money to work as they try to “catch up”. These points, as well as an S&P P/E ratio of 21.4 tend to be overbought signals and bears will try to make sell arguments. Given all this, it is still difficult to sell this market as low rates, low inflation and low oil prices ($50 oil) look to be with us for a while. While investors are starting to be cautious, we really don’t see any market correction event on the horizon. Friday’s inline 2Q GDP data further confirmed this.

The week in review saw in-line existing home sales on Monday, dovish Fed comments and no rate hike [as expected] on Wednesday, and decent Earning growth on a heavy earnings Thursday. In fact, looking at the S&P 500 earnings scorecard, it shows 10.7% earnings growth on 4.9% rise in revenues. London dealers also announced the 50-year old borrowing benchmark LIBOR will be replaced by 2021. Amazon CEO Jeff Bezos passed Bill Gates as the world’s richest person. The transformation of the retail industry continues and the value of an Amazon distribution can make a huge difference as we have seen recent life lines thrown to Whole Foods and Sears.  But, even Amazon (NASDAQ:AMZN) proved they are not invincible after issuing a profit warning on Friday.  Twitter (NASDAQ:TWTR) continues to be an enigma as the firm announced its first every decline in quarterly revenues and the stock closed below its 200 day moving average on Thursday. The S&P 500, NASDAQ and Dow Industrials hit all-time highs on Wednesday. Thursday started out well but some mid-day profit taking turned the day into a reversal day. Tobacco stocks were burned down on Friday after U.S. regulators proposed cutting nicotine levels in cigarettes. U.S dollar continues to be weak, as the U.S dollar index hit its lowest levels since April 2016.

Looking ahead to next week, the Washington soap opera will be front and center. Thursday night the Senate failed to overturn the Affordable Care Act, causing many to question the ability of the Trump agenda to move forward. Also not helping the case is the continued White House staff infighting and personnel turnover as former Wall Streeter Anthony “Mooch” Scaramucci became Trump’s latest “senior communications director”.

Monday should be a quiet month end as July often is. Also due: June pending home sales on Monday, July ISM data on Tuesday, Factory orders and durable goods on Thursday and July employment payrolls data on Friday. 113 companies will report earnings next week, with the bulk doing so after the market closes on Tuesday and Wednesday.

Investors will be best served by being cautious, as some strategist are calling the markets “expensive”, “overbought” and/or “ready for a correction.” Notwithstanding the market naysers, the data is showing us continued growth and low volatility and inflation. Although we are late in the bull’s run, we continue to see opportunities in sector rotation, as well as in old fashion stock picking. See Twitter up 3.37% YTD while Facebook is up 50.42% YTD.

The take-away? Be cautious, wear your sunscreen so you don’t get burnt, and add the Clash to your playlist.

Larry Peruzzi

Managing Director International Trading

Mischler Financial Group

Investment Banking | Institutional Brokerage

Ph:   1-617-420-8472 | Cell: 1-617-997-6318

Larry Peruzzi is a 20 yr global trading markets veteran and brings a unique perspective to global equities market commentary via Mischler Financial Group, the securities industry’s oldest minority broker-dealer owned and operated by service-disabled veterans.  Larry’s experience  and best execution perspective stems from his sitting on ‘both sides of the aisle.’  For more than half of Larry’s career, he ran buy-side trading desks for Standish Mellon and thereafter, The Boston Company. In both of those roles, Larry was responsible for implementing and managing international equities trade execution. Larry’s perspectives are frequently cited by the leading financial news publishers, including The Wall Street Journal, Bloomberg LP and Reuters

Mischler End of Week Equities Market Commentary via Peruzzi’s Perch July 28, 2017 end-of-week edition is distributed via email to institutional investment managers and Fortune Treasury clients of veteran-owned broker-dealer Mischler Financial Group, the investment industry’s oldest  minority broker-dealer owned and operated by Service-Disabled Veterans.

Peruzzi’s Perch is a weekly synopsis of Everything Equities as seen from the perch of Mischler Financial Group’s International Equities Desk. Cited by Wall Street Letter in each of 2014, 2015 and 2016 for “Best Research / Broker-Dealer”, Peruzzi’s Perch is one of four distinctive content pieces produced by Mischler Financial Group

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Peruzzi’s Perch 07.14.17 – Equities: Slow and Steady Winning the Race, Now Its Center Stage for Bonds

Traders and investors return from a holiday shorten week on Monday with the same resolve: not willing to outright sell and not looking to make large bets. As a result, U.S and global markets resumed their slow, steady and non-volatile rise to new records.

Larry Peruzzi, Managing Director

The MSCI all country world index closed Thursday at an all-time high. Thursday’s June PPI data was largely in line. An Ex Food and Energy reading of 1.9% YoY provides little argument for inflation driven higher rates. These reading seemed to be confirmed with Friday’s June CPI reading. Inflation seems to be contained, and as much as the Fed would like to raise rates, there is little evidence to support that notion right now. As a result, probability of a July 26^th rate hike is now 0% and September 20^th probability dropped to 10.1%.

June retail sales looked week dropping .2% MoM. Maybe next month we will see a rebound off of Amazon prime day. The VIX index started the week above 11, but will finish the week below 10.  The Dow index set new record highs on Thursday and pushed fresh highs on Friday, S&P 500 and NASDAQ comp are knocking on the door to new highs as well. Stocks across the globe traded higher Thursday after Fed chair Janet Yellen struck a slightly less hawkish tone than expected, emphasizing her concerns about low inflation. During her testimony, Fed Chair Janet Yellen urged Congress to take into account the growth trajectory of the federal debt when making decisions about spending and taxation.  As an added bonus,  President Trump visited France for Bastille Day and actually made comments that sounded as though he was moving toward a friendlier relation with our European allies.

Finance and banking stocks tried to put a damper on the party as JP Morgan, Wells Fargo and Citigroup lowered their outlook for loan growth for the second half of the year. The KBW bank index fell the most in 2 months on Friday.  Q2 earnings season began and will be in full swing next week. Elsewhere in Washington, Mitch McConnell’s latest heath care draft looks as though it will need more work in order to gain republican support. All said, investors seem to be focusing less on the markets and more on summer plans as they enter a mood of nervous content.

Next week Q2 earnings will be in full swing, with 335 U.S firms due to report. Economically, we have July Empire manufacturing on Monday, June import and export price index on Tuesday, June housing starts on Wednesday and Philadelphia Fed and leading indicators on Thursday. It is a light week for Fed speakers, as they enter a quiet period ahead of July 26^th FOMC meeting. So,  outside of any political bombshells, earnings will dominate the headlines next week.

Oil has spent most of July trading in a very narrow $45 to $47 trading range. We will continue to monitor inventory and production data through the week,  but many analysts feel that we are in for a long term run of $42 oil.

Bonds are creeping back in favor with the low inflation readings, and that is worth watching next week. The U.S 10 year yield fell to 2.277% on Friday. Bond traders will be watching the European Central Bank’s policy decision on Thursday as many traders have initiated a large strangle trade that is set to expire on Friday July 21.

Larry Peruzzi

Managing Director International Trading

Mischler Financial Group

Investment Banking | Institutional Brokerage

Ph:   1-617-420-8472

Larry Peruzzi is a 20 yr global trading markets veteran and brings a unique perspective to global equities market commentary via Mischler Financial Group, the securities industry’s oldest minority broker-dealer owned and operated by service-disabled veterans.  Larry’s experience  and best execution perspective stems from his sitting on ‘both sides of the aisle.’  For more than half of Larry’s career, he ran buy-side trading desks for Standish Mellon and thereafter, The Boston Company. In both of those roles, Larry was responsible for implementing and managing international equities trade execution. Larry’s perspectives are frequently cited by the leading financial news publishers, including The Wall Street Journal, Bloomberg LP and Reuters

Mischler End of Week Equities Market Commentary via Peruzzi’s Perch June 23 2017 end-of-week edition is distributed via email to institutional investment managers and Fortune Treasury clients of veteran-owned broker-dealer Mischler Financial Group, the investment industry’s oldest  minority broker-dealer owned and operated by Service-Disabled Veterans.

Peruzzi’s Perch is a weekly synopsis of Everything Equities as seen from the perch of Mischler Financial Group’s International Equities Desk. Cited by Wall Street Letter in each of 2014, 2015 and 2016 for “Best Research / Broker-Dealer”, Peruzzi’s Perch is one of four distinctive content pieces produced by Mischler Financial Group  (more…)

Peruzzi’s Perch June 23, 2017–We are finishing up a mixed bag week, with a Russell rebalance on Friday that is adding some trading volume and keeping us within striking distance of fresh all-time highs. Dow and S&P 500 index hit record closes on Monday before pulling back on Tuesday and trading mostly sideways the balance of the week.  The equities market forecast would seem to indicate ‘partial clouds, but mostly blue skies.” In turn, the continued lack of equities market volatility in the US and most other major markets is contributing to rising concerns voiced by contrarians,  “we remain in a state of continued complasence.” For those manning equities trading desks (and without the luxury of summer homes to escape to), this summer portends to be a scene from the Bill Murray film, Groundog Day.

Larry Peruzzi, Managing Director

Economic data was light, with decent May existing home sales numbers on Wednesday, mostly in line PMI on Friday, as well as better May new home sales.  The mid-month spike in the VIX index is also subsiding as we close out the week at the 10 level, down 13% over the last two weeks. So, after some political drama, Fed rate hikes and lower oil prices, the markets continued their pace of a flat yield curve, slowly rising equities and low inflationary pressures. Some investors, such as Fundstrat Global’s Thomas Lee are starting to question the market rally duration as he cut his 2017 and 2018 S&P 500 earnings outlook.

Oil remained weak, with WTI crude down about 7% the last 2 weeks. Oil’s decline in the past would have pressured markets, but weighting adjustments are allowing us to look past it. Currently the Energy sector weighting in the S&P 500 is down to 5.86%, so oil price weakness is somewhat insulated.

Some [latecomers?] have started to question the Trump agenda, as well as current valuations and earnings expectations. But, in spite of this we continue to see new money slowly enter the market.

Retail investors seem to be fearful of missing out on the rally. We will continue to watch the option markets to see if this sentiment changes.  The MSCI created some noise on Wednesday, when it approved a small weighting of Chinese A shares into the emerging market index, but it did not upgrade Argentina from frontier status to emerging status. The unexpected news in Argentina caused the Buenos Aires exchange to lose 4.8% on Wednesday, but by week’s end it had recouped 1.6% of that loss.

As we enter the final week of Q2, we expect to see some modest sector rotation and cash level adjustments. Next week we have a handful of Fed speakers out and about; Yellen, Williams, Harker and Kashkarei on Tuesday and Bullard on Thursday.

Economic highlights for the coming week are:

• Monday              Durable goods and Dallas Fed
• Tuesday              S&P Case Shiller home prices and  consumer confidence
• Wednesday        Trade balance, pending home sales and wholesale inventories
• Thursday            Q1 GDP and jobless claims
• Friday                 Personal income and spending,  Michigan sentiment and Chicago Purchasing managers

It is increasingly feeling as though this market is dealing with 2 fears; (i) valuations are stretched beyond the earnings justifications and (ii) the lack of inflationary pressures will keep real rates low for the foreseeable future. Digging a little deeper, it looks like the latter is winning. Fed Funds are pricing in a 0% chance of a rate hike in late July and only a 16% probability of a hike in September. This could be setting us up for a Ground Hogs Day movie type of summer, same thing day after day. Rinse, Repeat, Rinse Repeat.

We do see some market reactions, such as sector rotation with Energy and Retail lagging and techs, financials and health care gaining. We have also seen some increased equity risk tolerance as money flows enter the more politically stable emerging markets.

So, as investors head to the beach they will keep one eye on the sky for approaching storms and one eye on the markets for the same, but the current picture seems to be blue skies for both.

Larry Peruzzi

Managing Director International Trading

Mischler Financial Group

Investment Banking | Institutional Brokerage

Ph:   1-617-420-8472 | Cell: 1-617-997-6318

Larry Peruzzi is a 20 yr global trading markets veteran and brings a unique perspective to global equities market commentary via Mischler Financial Group, the securities industry’s oldest minority broker-dealer owned and operated by service-disabled veterans.  Larry’s experience  and best execution perspective stems from his sitting on ‘both sides of the aisle.’  For more than half of Larry’s career, he ran buy-side trading desks for Standish Mellon and thereafter, The Boston Company. In both of those roles, Larry was responsible for implementing and managing international equities trade execution. Larry’s perspectives are frequently cited by the leading financial news publishers, including The Wall Street Journal, Bloomberg LP and Reuters

Mischler End of Week Equities Market Commentary via Peruzzi’s Perch June 23 2017 end-of-week edition is distributed via email to institutional investment managers and Fortune Treasury clients of veteran-owned broker-dealer Mischler Financial Group, the investment industry’s oldest  minority broker-dealer owned and operated by Service-Disabled Veterans.

Peruzzi’s Perch is a weekly synopsis of Everything Equities as seen from the perch of Mischler Financial Group’s International Equities Desk. Cited by Wall Street Letter in each of 2014, 2015 and 2016 for “Best Research / Broker-Dealer”, Peruzzi’s Perch is one of four distinctive content pieces produced by Mischler Financial Group

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Peruzzi’s Perch June 09 2017-Comey Senate Hearings, Brexit Breakdown and Tech Turn-Down

Larry Peruzzi, Managing Director

This week investors were largely on the sidelines awaiting for Thursday’s big three events. Thursday came and the ECB left rates and asset purchase target unchanged and omitted any forward guidance. The Comey Senate testimony while dramatic did not offer a smoking gun and did little to affect markets. U.S. stocks ended Thursday little changed, while Treasuries fell and the dollar advanced as equity indices swung between gain and losses.  Trading volumes returned to their ADV on Thursday after spending the first half of the week down about 15% from their ADV. Volatility, as measured by the VIX index, creeped up going into Thursday, but by week’s end was back below 10 to all-time lows. The bulk of volatility seems to be confined to the Foreign exchange and oil markets. Oil closed out the week down 4% and the U.S dollar rose 1%. The Pond sterling lost 2% on Friday after the U.K’s ruling conservative party failed to secure a 326 seat ruling majority. While investors waited for Thursday, we saw mostly in-line April Factory and durable goods orders on Monday. Wednesday we saw a rise in mortgage applications. The Fed is in a quiet period ahead of their next meeting on Wednesday 6/14. So overall we saw a quiet state to the week, an interesting Thursday and then a return to recent trading patterns on Friday as Comey, the ECB and the U.K election did little to deter the markets slow but steady rise. The DOW, S&P 500 and NASDAQ all were trading at all-time highs early on Friday with Tesla and NVIDIA both had good weeks (+10.5% and +14.5% respectfully) as analyst raised targets on the stocks.  Nordstrom gained 7% for the week on speculation of a management buyout.  Then Tech experience a reversal that we have not seen in quite some time. Apple, Facebook, Amazon.com, NVIDIA and high-flying chip shares stocks plunged amid a Goldman note that warned about underestimating risks in large-cap tech and after Citron Research warned about“frenzied casino action” in Nvidia trading. The Philadelphia Semiconductor Index declined as much as 3.6% after reaching an almost 17-year high on Thursday. Just as we thought we had the market understood stretched valuations and analyst warnings caused a complete technical reversal. The VIX index rose 20% from its all-time low volume increased and profit takers lined up.

Next week’s big event comes on Wednesday with the FED’s June meeting and rate decision. A 25 bps hike from 1% to 1.25% is widely expected. In fact markets and Fed fund futures have priced in a 95% probability of a 25 bps hike as of Friday.  So with the hike already priced in investors will comb through the accompanying statements but even there, as on past statements, we have seen little in market moving comments. We do not expect to see any irrational exuberance statements coming from the Fed any time soon.

The dilemma is that many now expect this to be the last hike for several months.  Recent inflation indicators seem to be showing an easing of inflation. The Fed has also kept the level of asset purchases mostly static. Analyst expect the Fed’s current pace of unwinding its balance sheet, together with low overnight rates, will act in maintaining the relatively flat yield curve through the summer.  In addition to the FOMC meeting on Wednesday, we get May PPI data on Tuesday, May CPI data and Retail sales on Wednesday, May import/export prices, industrial production/capacity utilization on Thursday, and May housing starts/building permits and Michigan sentiment on Friday. We currently do not expect any of this data to show any inflationary pressures.  

Also on the slate is a bevy of broker conferences: JPMorgan 7th Annual Cloud & Beyond Conference, 6/13, in NY ·Morgan Stanley Financials Conference, 6/13-6/14, in NY ·Citigroup Industrials Conference, 6/13-6/14, in Boston · Goldman Sach’s 38th Annual Global Healthcare Conference, 6/13-6/14, in CA ·Piper 37th Annual Consumer Conference, 6/13-6/14, in NY ·William Blair Annual Growth Stock Conference, 6/13-6/15, in Chicago. We should be seeing some company specific news trickle out of these conferences. Trading wise we have seen little in major risk on/risk off trades up until mid-day Friday. Most volume was from moderate position/portfolio maintenance trading coupled with the occasional fundamental trigger trade. The Tech reversal on Friday started a sector reversal as investors sold high flying tech and growth stock and started to buy energy financial stocks. These type of reversals and sell offs always cause some concerns when they occur on Fridays as investors tend to return on weekends and sell on Mondays.

What politics, elections, and senate testimonies could not do, a couple of notes highlighting stretched valuations did.  Stay tune on Monday as what was looking like a tame week now takes on added importance.

Larry Peruzzi

Managing Director International Trading

Mischler Financial Group

Investment Banking | Institutional Brokerage

Ph:   1-617-420-8472 | Cell: 1-617-997-6318

745 Atlantic Ave, Suite 902, Boston MA 02111

www.mischlerfinancial.com

Larry Peruzzi is a 20 yr global trading markets veteran and brings a unique perspective to global equities market commentary via Mischler Financial Group, the securities industry’s oldest minority broker-dealer owned and operated by service-disabled veterans.  Larry’s experience  and best execution perspective stems from his sitting on ‘both sides of the aisle.’  For more than half of Larry’s career, he ran buy-side trading desks for Standish Mellon and thereafter, The Boston Company. In both of those roles, Larry was responsible for implementing and managing international equities trade execution. Larry’s perspectives are frequently cited by the leading financial news publishers, including The Wall Street Journal, Bloomberg LP and Reuters

Mischler End of Week Equities Market Commentary via Peruzzi’s Perch June 09 2017 end-of-week edition is distributed via email to institutional investment managers and Fortune Treasury clients of veteran-owned broker-dealer Mischler Financial Group, the investment industry’s oldest  minority broker-dealer owned and operated by Service-Disabled Veterans.

Peruzzi’s Perch is a weekly synopsis of Everything Equities as seen from the perch of Mischler Financial Group’s International Equities Desk. Cited by Wall Street Letter in each of 2014, 2015 and 2016 for “Best Research / Broker-Dealer”, Peruzzi’s Perch is one of four distinctive content pieces produced by Mischler Financial Group

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Peruzzi’s Perch-May 26 2017-Memorial Day Edition: Equity Markets Blink But Remain Resilient In Wake of More Presidential Drama

Just when the markets looked ready to crack, along came President Trump’s first overseas trip. The trip to the Middle East and Europe came at the perfect time as it took market focus off of the administration’s follies and back on the economic fundamentals.

Larry Peruzzi, Managing Director

The FOMC minutes from the May 2-3 meeting on Wednesday showed that the FED seems to be on pace for a June 14 rate hike. The FED dismissed 1Q slower growth and felt that higher broader growth is on the horizon. While the probability a June hike slightly diminished after the release, by week’s end markets had priced in a 92% chance of a 25 bps hike.

The week also saw some retailing firms release earning, and on a whole, traditional retailers continue to lose market share but investors were encouraged by pockets of strength in a few names such as Best Buy (NYSE:BBY),  Home Depot (NYSE:HD), and of course, Amazon (NASDAQ:AMZN).

Crude oil’s 2 week rally rolled over as OPEC’s production cuts were seen as being insufficient. Last Saturday’s news that The United States sealed a multibillion arms deal with Saudi Arabia helped lift defense stocks such as Lockheed Martin (NYSE:LMT), General Dynamics (NYSE:GD) and Boeing (NYSE:BA) to all-time highs’. On the negative side, ISIS seemed to hit new lows in Manchester England and President Trump gave us some awkward moments at the NATO meeting on Thursday; neither was enough to keep the S&P 500 and NASDAQ from hitting new all-time highs. We continue to see institutional money flow into the market, but we also saw an uptick in retail flows entering the market. Overseas the U.K pond hit monthly low versus the Euro and U.S dollar on uncertain election polling numbers and Brazil’s bribery/ Presidential drama continues to amaze us.

Looking ahead to next week, a fair amount of data will be compressed into 4 days due to Monday’s Memorial Day holiday. April Personal Income and Spending, as well as May Conference Board consumer confidence on Tuesday gives us some insight onto the consumer sentiment and strength, while Dallas Fed manufacturing on Tuesday, Chicago Purchasing on Wednesday and May ISM manufacturing data on Thursday  will shed some light on manufacturing activity and health.

The highlight of the week will be on Friday with the release of May’s employment report. The FED has repeatedly stated that the largest factor in determining future rate hikes is the Payrolls numbers. With the long weekend and the Jobs report on Friday (providing we do not see any major news out of Washington),  trading volume will be skewed to the end of the week.

This week we looked at total U.S exchange volume versus the VIX index. It confirmed our belief that spikes in the VIX (May 15 to May 18) provided more trading opportunities as limits and Stops got triggered, and thus trading volumes spiked. This week however, the VIX has dropped back below 10 and trading volumes dropped by approximately 15%. Fed governors William, Brainard, Kaplin , Powel and Harker speak during the week, but investors seem to be locked in on a June 14^th hike so we expect little new data from the Fed until then.

With the mid-month sell off followed by the late moth recovery investors have had to digest a lot of data points in trying to determine if we are under or overvalued. The long weekend will be welcomed, but we should not lose sight as to the meaning of the day as we honor the brave men and women who made the ultimate sacrifice.

Larry Peruzzi

Managing Director International Trading

Mischler Financial Group

Investment Banking | Institutional Brokerage

Ph:   1-617-420-8472 | Cell: 1-617-997-6318

Larry Peruzzi is a 20 yr global trading markets veteran and brings a unique perspective to global equities market commentary via Mischler Financial Group, the securities industry’s oldest minority broker-dealer owned and operated by service-disabled veterans.  Larry’s experience  and best execution perspective stems from his sitting on ‘both sides of the aisle.’  For more than half of Larry’s career, he ran buy-side trading desks for Standish Mellon and thereafter, The Boston Company. In both of those roles, Larry was responsible for implementing and managing international equities trade execution. Larry’s perspectives are frequently cited by the leading financial news publishers, including The Wall Street Journal, Bloomberg LP and Reuters

Mischler End of Week Equities Market Commentary via Peruzzi’s Perch March 09 2017 end-of-week edition is distributed via email to institutional investment managers and Fortune Treasury clients of veteran-owned broker-dealer Mischler Financial Group, the investment industry’s oldest  minority broker-dealer owned and operated by Service-Disabled Veterans.

Peruzzi’s Perch is a weekly synopsis of Everything Equities as seen from the perch of Mischler Financial Group’s International Equities Desk. Cited by Wall Street Letter in each of 2014, 2015 and 2016 for “Best Research / Broker-Dealer”, Peruzzi’s Perch is one of four distinctive content pieces produced by Mischler Financial Group

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Peruzzi’s Perch Equities Market Commentary May 05 2017- VIX Messaging Goldilocks Market, Or a Teflon Market?

U.S markets close out a low volatility week with an important April jobs report on Friday. We seem to be in a Teflon market where both good and bad news alike just slide off the market. This either a Goldilocks market or a Teflon market.

Larry Peruzzi, Managing Director

The VIX index (good indication of volatility) hit a 10 year low on Monday at 10.11. In fact many have noted that the VIX trading curve looks very similar to 2007. In another indication of the low volatility the S&P 500 has not had a move of more than 20 bps over the last 7 sessions. Not that there has been a lack of new, quite the contrary between French elections, possible affordable health care plan overturned, North Korea, Apple hitting an all-time high, the Fed’s non actions and earnings investors have had plenty to digest. Q1 earning season is nearing an end with 78% of earnings reports beating forecast and 63% beating sales forecast. Wednesday the Fed decided not to raise rates and the statement was slightly more hawkish than we were expecting with the Fed suggesting it could still raise interest rates at its next meeting on June 14th.  Market expectations for a rate hike next month jumped to 75% from 60%, but much of this is contingent on a rebound in employment growth in April and May. Thursday was a great example of sector movements canceling each other out as financial stocks gained offsetting losses in telecom and energy shares as the price of crude oil fell below $45 a barrel. The question we all have is how long can this keep going?

Looking ahead to next week fist on the docket will be follow through to Friday’s job report and reaction both in Europe and the U.S to France’s presidential elections on Sunday. Polls indicate Emmanuel Macron has a 20 point lead on Marie LePen, but U.S and U.K voters are both well aware of how inaccurate polls can be lately. A Le Pen victory certainly would create some volatility, while Macron would be viewed as more of a status quo.

Cheap oil is coming back, with WTI crude at its lowest level in 13 months. We could see some continued pressure in the energy sector next week.  Keep an eye on Venezuela, a country that is nearly 100% dependent on oil revenue. Crude’s 2-year slide, as well as disastrous political decisions, has the country on the verge of collapse. This week’s EIA number added further importance. Japan will also return to work after three days of holidays.

Economic data is back loaded next week, with April PPI reading and jobless claims on Thursday and April CPI, April retail sales, Business inventories and Michigan sentiment closing out the week on Friday. Fed wise governors Bullard, Mester, Kashkari, Rosengren, Dudley, Evans, and Harker, all give speeches, but make no mistake about it; The Fed is looking at just 2 things: Jobs and inflation. Recently, both of those have not shown to be either hawkish or dovish. Washington will not be lacking any drama as the Senate GOP looks ready to overlook the House Obamacare repeal bill and write its own. If they find sometime a budget is needed to avoid another government shutdown later this year.  So call it a Goldilocks market or a Teflon market but until volatility returns brokers will continue to see low trading volumes. This will certainly result in lower earnings for the brokers in Q2.

Larry Peruzzi

Managing Director International Trading

Mischler Financial Group

Investment Banking | Institutional Brokerage

Larry Peruzzi is a 20 yr global trading markets veteran and brings a unique perspective to global equities market commentary via Mischler Financial Group, the securities industry’s oldest minority broker-dealer owned and operated by service-disabled veterans.  Larry’s experience  and best execution perspective stems from his sitting on ‘both sides of the aisle.’  For more than half of Larry’s career, he ran buy-side trading desks for Standish Mellon and thereafter, The Boston Company. In both of those roles, Larry was responsible for implementing and managing international equities trade execution. Larry’s perspectives are frequently cited by the leading financial news publishers, including The Wall Street Journal, Bloomberg LP and Reuters

Mischler End of Week Equities Market Commentary via Peruzzi’s Perch March 09 2017 end-of-week edition is distributed via email to institutional investment managers and Fortune Treasury clients of veteran-owned broker-dealer Mischler Financial Group, the investment industry’s oldest  minority broker-dealer owned and operated by Service-Disabled Veterans.

Peruzzi’s Perch is a weekly synopsis of Everything Equities as seen from the perch of Mischler Financial Group’s International Equities Desk. Cited by Wall Street Letter in each of 2014, 2015 and 2016 for “Best Research / Broker-Dealer”, Peruzzi’s Perch is one of four distinctive content pieces produced by Mischler Financial Group (more…)

Peruzzi’s Perch 04.07.17 Risk Appetites Sour, But US Equity Markets Remain Stable

Larry Peruzzi

As we head into Friday, U.S equity markets find themselves little changed from last Friday.

It’s peculiar given the pace of news coming out of Washington and the Fed. What is becoming apparent is that risk appetite is souring, but there is apparently enough optimism to keep the markets in a status quo pattern.

It’s interesting that the VIX index trading range has been between 10.58 and 13.22 the entire year to date.  Friday will look to change that as three big events continue to take shape. First, Senate Republicans enacted the “Nuclear Option” to get Neil Gorsuch on the threshold of the Supreme Court. Second, on Thursday night the U.S. launched a missile strike into a Syria Government controlled military facility located in Idlib Provence in response to the earlier in the week chemical weapon sarin gas attack that brutally killed dozens of innocent civilians. Thursday night’s missile strikes immediately rallied crude oil pricing by as much as 2% and investors moved into the safety of bonds With that, Trump’s vision of improved Russian relations became increasingly foggy.

Finally, as this note is being published in advance of market open, Friday morning financial markets and investors will focus on March payrolls, which will likely be buffeted by the economic numbers over the week, which showed some modest improvement in ISM Employment, ADP employment change and Durable goods orders. A decline in March Auto sales is worth keeping an eye on. The decline may be rate-related, as higher interest rates take away a major sales incentive. Before Thursday’s night’s missile attack and Friday’s employment report the largest event was Wednesday’s release of the March 15^th FOMC meeting minutes. Coming on the heels of Jeffrey Lacker’s surprise resignation, the Fed signaled it is planning on unwinding some balance sheet positions and they are looking at a 2H rate increase. The result was the S&P 500 and Dow posting their biggest one-day reversal since February 2016 on Wednesday.

Looking ahead to the Easter shorten week, the economic and earnings calendar are light. Highlights economically on Thursday are March PPI numbers and April’s Michigan sentiment readings. 1Q earnings season begins the following week. Just a handful of earnings are due for Thursday, which include PNC financial, JP Morgan, Wells Fargo and Citigroup.  Federal Reserve Chair Janet Yellen speaks at the University of Michigan’s Ford School of Public Policy and will take questions from the audience on Monday in a quite week for Fed watchers.

With the exception of the constant flow of news out of Washington, the markets will be digging for actionable news and direction. The importance of 1Q earnings cannot be overlooked. With Affordable Care Act version 2.0 dead and comments from Washington that “a new tax plan is quite some time away”,  investors will need to see earnings growth to justify current valuations. Lack of earnings growth could certainly trigger the “Sell in May and go away” strategy, but would an executive order here, and a nuclear option there be enough to keep investors hanging in the market?

Whatever you do to gain success, you have to hang in there and hope good things happen. “Always think positive.” Don Rickles May 8, 1926 – April 6, 2017

Larry Peruzzi

Managing Director International Trading

Mischler Financial Group

Investment Banking | Institutional Brokerage

Ph:   1-617-420-8472

Larry Peruzzi is a 20 yr global trading markets veteran and brings a unique perspective to global equities market commentary via Mischler Financial Group, the securities industry’s oldest minority broker-dealer owned and operated by service-disabled veterans.  Larry’s experience  and best execution perspective stems from his sitting on ‘both sides of the aisle.’  For more than half of Larry’s career, he ran buy-side trading desks for Standish Mellon and thereafter, The Boston Company. In both of those roles, Larry was responsible for implementing and managing international equities trade execution. Larry’s perspectives are frequently cited by the leading financial news publishers, including The Wall Street Journal, Bloomberg LP and Reuters

Mischler End of Week Equities Market Commentary via Peruzzi’s Perch March 09 2017 end-of-week edition is distributed via email to institutional investment managers and Fortune Treasury clients of veteran-owned broker-dealer Mischler Financial Group, the investment industry’s oldest  minority broker-dealer owned and operated by Service-Disabled Veterans.

Peruzzi’s Perch is a weekly synopsis of Everything Equities as seen from the perch of Mischler Financial Group’s International Equities Desk. Cited by Wall Street Letter in each of 2014, 2015 and 2016 for “Best Research / Broker-Dealer”, Peruzzi’s Perch is one of four distinctive content pieces produced by Mischler Financial Group.

(more…)