SUPERBOWL: Bullish GDP vs. Bearish Housing

By Markos N. Kaminis:

Thursday’s rally was spurred by economic data, with GDP coming in better than expected for the fourth quarter. But housing data reported the same day supports a recent argument for a weakening real estate sector. So which will win over the long-term market perspective, bullish GDP or bearish housing?

THURSDAY’S ECONOMIC REPORTS
Economic Data Point	Prior	Expected	Actual
GDP Q4 2013 (Advance)	4.1%	3.0%	3.2%
Pending Home Sales (Dec.)	-0.3%	-0.5%	-8.7%
Weekly Jobless Claims	329K (R.)	327K	348K
Bloomberg Consumer Comfort	-31		-31.8

 -R symbolizes “revised”

Thursday’s economic data featured two major reports that pitted against one other to affect the market profoundly. We received the first reporting of fourth quarter GDP but its strength matched against a very weak Pending Home Sales data point.

Q4 GDP grew 3.2%, which while slower than Q3, still exceeded economists’ expectations for a pace of 3.0%. This one data point was the factor driving stocks higher Thursday, with the SPDR S&P 500 (NYSE: SPY), SPDR Dow Jones Industrials (NYSE: DIA) and PowerShares QQQ (Nasdaq: QQQ) gaining between 0.7% and 1.9%. The good news was the sort that could be capable of turning the trend against the January slide, but that does not appear to be the case. At the start of trading Friday, stocks were broadly lower, and perceived safe havens like the SPDR Gold Shares (NYSE: GLD), iShares Silver Trust (NYSE: SLV) and Annaly Capital (NYSE: NLY) are all benefiting.

Still, the good GDP dish had all the right spices, as the government noted important contributions from consumer spending, exports, commercial property investment and inventory investment. Those are solid drivers of healthy economic growth, so then maybe we’ve acted prematurely in punishing stocks this year. Well, one sector of the economy would beg to differ, real estate.

Unfortunately, GDP was not the only news of the day yesterday. Pending Home Sales were reported down sharply by 8.7% in December. A decline was expected, but not by that much. Weather did come into play though. Still, other housing data reported over recent weeks and months has continued to offer bad news as well.

Pending Home Sales measures contract signings for existing home sales. Existing Home Sales data measures the actual closing of an existing home sale. Data was reported on closings last week and it showed a relatively stagnant marketplace. Unfortunately, Pending Home Sales is forward looking and portends more trouble for existing home sales down the road. Add to that the fact that earlier this week, New Home Sales came in sharply lower for December, running at an annual pace of 414K, versus 445K in November and short of economists’ expectations for 450K, and we can see that real estate activity is slowing. Recently, Michael Douville, expert real estate columnist at our blog, issued a rather sour outlook for housing in 2014, and that seems to be receiving data confirmation now.

GDP was strong enough to carry the day and settle investor concerns for a day, with the help of a strong Facebook (NYSE: FB) EPS report. Today, though, investors are looking past it and also a slew of fresh economic data showing decent consumer spending and sentiment. They are instead continuing to take money out of stocks generally for the same reason they started to do so this year, which we predicted. I expect this is due to momentum building upon itself with the message of the January slide effectively reaching the masses of investors with plenty of recent gains to protect. Americans protecting their retirement savings in work sponsored retirement accounts are very likely to pull some capital off the table due to the message they’re receiving today about that. So, I’m sorry to say, neither GDP nor Pending Home Sales matters much for now, but a case can be built with time. Next week brings new market moving employment data, so stay tuned.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

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Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only. This should interest SPDR S&P 500 (NYSE: SPY), SPDR Dow Jones (NYSE: DIA), PowerShares QQQ (Nasdaq: QQQ), SPDR Gold Shares (NYSE: GLD), iShares Silver Trust (NYSE: SLV), Apple (Nasdaq: AAPL), GE (NYSE: GE), Annaly Capital (NYSE: NLY), Google (Nasdaq: GOOG), Bank of America (NYSE: BAC), Herbalife (NYSE: HLF), Sirius XM (Nasdaq: SIRI), Twitter (Nasdaq: TWTR) and Facebook (NYSE: FB).

INTERNATIONAL MARKETS: A Trojan Horse for Europe & Asia

International markets are trading on 3 key factors and several other points today. Turkey continues to weigh heavily, though after the Turkish central bank action and aggressive wording, it is lifting its neighbors to the west today. U.S. Fed action from Wednesday drove all markets lower to start Thursday, but then a strong American GDP data point lifted them back up. Direct measures of economic activity out of Spain and Germany are reflecting well for Europe today, save the black market notation. Two key markets are closed in Asia on the Lunar New Year. That Year of the Horse their ushering in might be an appropriate yet disappointing one, should that horse be a Turkish Trojan version.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

International Markets

EUROPE	9:54 AM ET	ASIA/PACIFIC	CLOSE
EURO STOXX 50	+0.4%	NIKKEI 225	-2.5%
FTSE 100	-0.1%	Hang Seng	-0.5%
CAC 40	+0.4%	S&P/ASX 200	-0.8%
German DAX	+0.2%	Korean KOSPI	NA
Athens ASE	+3.7%	BSE India SENSEX	-0.7%

ASIA Today

Markets are closed today in China and Korea for the celebration of the Lunar New Year – The Year of the Horse. Markets will be shut until February 7 in China and until the end of the week in South Korea for the celebration.

ASIAN MARKET ETFs	Today
iShares MSCI Japan (NYSE: EWJ)	-0.34%
SPDR S&P China (NYSE: GXC)	+0.91%
iShares MSCI Australia (NYSE: EWA)	+1.35%
iShares MSCI S. Korea (NYSE: EWY)	+0.97%
iShares S&P India (Nasdaq: INDY)	+1.91%

Asian stocks mostly fell on the day after the U.S. Federal Reserve pushed forward with its asset purchase tapering effort. Global investors are worried that the U.S. consumption economy could falter without the Fed’s extra efforts, after previous signs of such faltering. Basically, Asia just followed the lead of American shares, which dropped precipitously on Wednesday. Even as Asia develops its economies, U.S. and Europe continue to represent important sources of life for Asian business. Emerging markets have been in turmoil since the weak manufacturing report from China, which remains unsettling and unresolved.

The NIKKEI 225 was stripped bare as it fell 2.5% on the day. Japan is having its worst month in nearly two years. Shares of Toyota (NYSE: TM) and Honda (NYSE: HMC) are down about 0.3% each this morning in U.S. trading. However, American traded ETFs are up for most of Asia this morning, reflecting what is likely to occur in Asian trade Friday. The SPDR S&P 500 (NYSE: SPY) is bouncing back today on a solid GDP report and on strong earnings from Facebook (NYSE: FB) and others.

EUROPE Today

Look at those volatile Greek shares, as the Global X FTSE (NYSE: GREK) soars 2.8% after a very rough recent period. Greece is of course Turkey’s neighbor and deemed more closely tied to the Turkish economic turmoil than other euro-trash brothers. The Athens Stock Market Index (ASE) is higher by 3.7% at this hour, but the other indexes we follow here are relatively unchanged.

EUROPEAN ETFs	Today
Vanguard FTSE Europe (NYSE: VGK)	+0.04%
iShares MSCI U.K. (NYSE: EWU)	+0.12%
iShares MSCI France (NYSE: EWQ)	-0.07%
iShares MSCI Germany (NYSE: EWG)	+0.18%
Global X FTSE Greece (NYSE: GREK)	+2.79%

Still, European ETFs started the U.S. trading day much higher than they are trading at this hour, as the Vanguard FTSE Europe ETF (NYSE: VGK) chart shows. If we looked back before the U.S. market open and the good news about GDP, though, we would find a hump at around 8:30 AM ET. Europe started the day lower, similarly following the path of Asian shares on the U.S. Fed decision and American stock decline yesterday.

Chart at Yahoo Finance

Europe is still unnerved by Turkish and other emerging market issues. Turkey’s Borsa Istanbul 100 Index marked a 1.0% gain on the day, and the iShares MSCI Turkey (NYSE: TUR) is up 2.3% in U.S. trading after the Turkish central bank acted aggressively.

Spanish & German Data

In other news, Spain’s GDP grew 0.3% in the fourth quarter, as expected, but some estimates show the Spanish economy is growing faster in the shadows. The black market is now estimated to be roughly 25% of total economic activity, as distrust of government and distaste of taxes results from tough times. The iShares MSCI Spain (NYSE: EWP) was up 0.9% near noon in US trading.

German unemployment declined more than forecast in January. The number of unemployed declined by 28K in January, better than the 5K predicted, to 2.93 million. The unemployment rate stuck at 6.8% after adjustment to the December rate, where it marks the lowest rate in two decades. Shares of major German corporation, Siemens (NYSE: SI), were still down by 0.8% on the day.

The Year of the Horse is here. Let’s hope it doesn’t open and offer up a sour surprise.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

5 ETFs to Avoid

The nascent market downturn has picked up steam of late, leading me to begin to think about ETFs to avoid for the near-term. While some will say the issues offer buying opportunity on already marked decline, I suggest not attempting to catch the falling knife just yet. There remain longer term questions to be answered about the global economy and recent signs of underlying weakness.

Avoid Oil Complex Trackers

The United States Oil ETF (NYSE: USO) and the iPath S&P Crude Oil Total Return ETF (NYSE: OIL) are two of those atop my list today, for various reasons.

1-Year Chart at Yahoo Finance

The one-year chart presents what seems like stability for the securities here. The USO and OIL are well off their highs of last year now, when the economy was making marked improvement and it seemed global demand was building again. However, since then, questions have surfaced about oil supply and pricing given American reserve discovery and development. Obviously, recent weather has eaten into natural gas reserves, but that is a seasonal issue that I believe commodity traders are not yet ready to call the new normal. As a result, it’s not a serious long-term driver currently.

The oil market securities began to recover from late 2013 lows, but have this year been struck again by weak U.S. economic data found in the monthly Employment Situation Report nonfarm payroll shortfall. Add to that, weakness seen in economies globally, especially in China recently, and the oil outlook comes into question. Emerging markets are suddenly seeing crisis as well, so oil has a great weight against it, and as a result, investors will want to avoid the OIL and USO.

Emerging Market Weakness

Don’t try to catch the falling knife in the emerging markets today. While the one-year chart of the iShares MSCI Emerging Markets ETF (NYSE: EEM) seems to offer a buying opportunity, it’s too early to add to risk today.

1-Year Chart at Yahoo Finance

Turkey is in the midst of a crisis and other markets are likely to feel the heat near-term before things settle. Last week, all of Europe was deeply red and most of Asia. In Sao Paulo, the Bovespa was off 2.8% last week and is down 7.2% on the year through Friday. In Moscow, the RTS is down 5.5% year-to-date and fell 2.3% last week. India’s Sensex is only off fractionally on the year, but the Hang Seng is down 3.7%. Greek stocks were down 7.1% last week. We can see, then, that risk is definitely off. It’s not for the brave to buy now, it’s for the fearless. Therefore, investors will want to avoid the emerging market trackers including the iShares MSCI Emerging Markets ETF (NYSE: EEM).

Avoid Consumer Sensitive Issues

The retailers contributed greatly to this year’s selloff. Despite solid recent retail sales data, too many individual retailers are reporting on a thrifty U.S. consumer. Retailers Best Buy (NYSE: BBY) and Sears (Nasdaq: SHLD) had some extremely sour news to report this quarter and struggling J.C. Penney (NYSE: JCP) announced some store closures. We’re dealing with an oversaturated retail environment that cannot support current capacity in my view. While some names might still do well on individual drivers, the group on the whole is out of favor, in my opinion.

Chart at Yahoo Finance

The softness is clearly seen in the tail end of the chart here for the Consumer Discretionary Select Sector SPDR (NYSE: XLY) and the SPDR S&P Retail ETF (NYSE: XRT). Today’s Consumer Confidence Index improvement was contrary to recent trend, and offered lift for these two issues today. However, I think investors should not look past other indicators which have reflected problems recently. Weekly same-store sales data have been weak; while some of that is on weather, it’s coinciding with a failing weekly measure of consumer comfort published by Bloomberg and the Reuters/University of Michigan measure of sentiment.

While in the line of fire, these ETFs are dangerous to buy today, and so I suggest continuing to avoid them here. The factors that have come against the broad reaching issues are longer term in nature and so questions about the global and U.S. economies need to be answered before sustainable change occurs. While we may see improvement on a day-to-day basis, until employment trends are repaired and the China question is answered, I cannot see good reason to approach these five issues today. Avoid them for now.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Week Ahead for Stocks

Unfortunately, after a distressing week for the market, with the SPDR S&P 500 (NYSE: SPY) down 2.6% on the week and 2.1% on Friday alone, the week ahead may only offer more of the same.

5-Day Chart at Yahoo Finance

It was an ugly week for stocks, with the Dow Jones Industrials taking the worst of it. Capital flowed out of stocks and into safe havens like gold and relative securities like the SPDR Gold Shares (NYSE: GLD).

Security	Last Week	Year-to-Date	Last 12 Months
SPDR S&P 500 (NYSE: SPY)	-2.6%	-3.1%	+19.7%
SPDR Dow Jones (NYSE: DIA)	-3.4%	-4.2%	+14.8%
PowerShares QQQ (Nasdaq: QQQ)	-1.3%	-1.4%	+30.1%
SPDR Gold Shares (NYSE: GLD)	+1.1%	+5.3%	-24.2%
iPath S&P Crude Oil (NYSE: OIL)	+2.9%	-2.2%	-0.7%

The Week Ahead

The market’s focus will be the Federal Open Market Committee’s (FOMC) latest monetary policy decision on this coming Wednesday. It seems a far stretch to expect the Fed to back off the tapering it has only just initiated. If, however, it further tapers its asset purchasing activity, affectionately known as quantitative easing, amid fading economic confidence, stocks will slide deeper. And if the Fed holds to its recent pace, but offers further inflation discussion nonetheless, that would hurt as well. Luckily for us, Ben Bernanke is still running the show, so we can at least hope for tempered discussion within the release.

THIS WEEK’S ECONOMIC REPORT SCHEDULE
Economic Data Point	Prior	Expected
MONDAY
New Home Sales (Dec.)	464K	450K
Dallas Fed Manufacturing Survey	3.1	5.0
TUESDAY
FOMC Meeting Begins
Durable Goods Orders (Dec.)	+3.5%	+1.6%
-Ex-Transportation	+1.2%	+0.7%
S&P Case Shiller HPI 20-City (Oct.)	+1.0%	+0.8%
Consumer Confidence	78.1	79.0
State Street Investor Confidence	95.9
Richmond Fed Manufacturing Index	13	10
ICSC Weekly Store Sales	-1.9%
-Year-to-Year Pace	+0.9%
Redbook Store Sales	+3.1%
WEDNESDAY
FOMC Monetary Policy
Mortgage Activity	+4.7%
EIA Petroleum Status
-Crude Oil Inventory	+1.0 M B
-Gasoline Inventory	+2.1 M B
THURSDAY
GDP Q4 2013 (Advance)	4.1%	3.0%
Pending Home Sales (Dec.)	+0.2%	-0.5%
Weekly Jobless Claims	326K	327K
Bloomberg Consumer Comfort	-31
EIA Natural Gas Report	-107 Bcf
FRIDAY
Personal Income (Dec.)	+0.2%	+0.2%
-Personal Spending	+0.5%	+0.2%
-Core PCI	+0.1%	+0.1%
Employment Cost Index	+0.4%	+0.4%
Chicago PMI	59.1	59.5
Consumer Sentiment Index	80.4	81.0
Farm Prices

There will be a slew of other important economic data availing itself this week. Several important measures covering every facet of the economy are scheduled for report this week, save the monthly Employment Situation Report which comes due the following week. So, economic data will either continue to undermine investor confidence or serve to stabilize it. This matters immensely to stocks in need of some reassurance.

Corporate earnings plays strongly as well this week, with big names like Apple (Nasdaq: AAPL) and others reporting, but no matter the company specific news, I see broader stock market decline continuing.

HIGHLIGHTED EPS REPORTS
Company	Ticker
MONDAY
Apple	Nasdaq: AAPL
Alkermes	Nasdaq: ALKS
American Electric Power	NYSE: AEP
Black Hills	NYSE: BKH
Caterpillar	NYSE: CAT
Haemonetics	NYSE: HAE
Headwaters	NYSE: HW
Kulicke and Soffa	Nasdaq: KLIC
Nathan’s Famous	Nasdaq: NATH
NVR	NYSE: NVR
Oppenheimer	NYSE: OPY
Radware	Nasdaq: RDWR
Rayonier	NYSE: RYN
Regis	NYSE: RGS
Rent-A-Center	Nasdaq: RCII
Roper	NYSE: ROP
Seagate	NYSE: STX
Sonic Foundry	Nasdaq: SOFO
Ultratech	Nasdaq: UTEK
United States Steel	NYSE: X
Wynn Resorts	Nasdaq: WYNN
Zions Bancorporation	Nasdaq: ZION
TUESDAY
A.O. Smith	NYSE: AOS
Amgen	Nasdaq: AMGN
AT&T	NYSE: T
Boston Properties	NYSE: BXP
Calamos Asset Management	Nasdaq: CLMS
Check Point Software	Nasdaq: CHKP
Cirrus Logic	Nasdaq: CRUS
CIT Group	NYSE: CIT
Comcast	Nasdaq: CMCSA
Corning	NYSE: GLW
D.R. Horton	NYSE: DHI
DuPont	NYSE: DD
Electronic Arts	NYSE: EA
Ford	NYSE: F
Iberiabank	Nasdaq: IBKC
Illinois Tool Works	NYSE: ITW
International Speedway	Nasdaq: ISCA
Nucor	NYSE: NUE
Owens-Illinois	NYSE: OI
Pentair	NYSE: PNR
Pfizer	NYSE: PFE
Plantronics	NYSE: PLT
Potlatch	NYSE: PCH
RF Micro Devices	Nasdaq: RFMD
T. Rowe Price	Nasdaq: TROW
VMware	NYSE: VMW
Waters	NYSE: WAT
World Acceptance	Nasdaq: WRLD
Yahoo	Nasdaq: YHOO
WEDNESDAY
1-800-Flowers.com	Nasdaq: FLWS
Amdocs	NYSE: DOX
Biogen Idec	Nasdaq: BIIB
Boeing	NYSE: BA
Callaway Golf	NYSE: ELY
Capstead Mortgage	NYSE: CMO
Citrix Systems	Nasdaq: CTXS
Dow Chemical	NYSE: DOW
EMC	NYSE: EMC
Facebook	NYSE: FB
Hess	NYSE: HES
JetBlue Airways	Nasdaq: JBLU
Mastech	NYSE: MHH
Navios Maritime	NYSE: NMM
Piper Jaffray	NYSE: PJC
Praxair	NYSE: PX
Qualcomm	Nasdaq: QCOM
Southern	NYSE: SO
Symantec	Nasdaq: SYMC
Tetra Tech	Nasdaq: TTEK
Tractor Supply	Nasdaq: TSCO
Tupperware	NYSE: TUP
Valero	NYSE: VLO
Vistaprint	Nasdaq: VPRT
WellPoint	NYSE: WLP
THURSDAY
3M	NYSE: MMM
Alliant Techsystems	NYSE: ATK
Altria Group	NYSE: MO
Amazon.com	Nasdaq: AMZN
AutoNation	NYSE: AN
Beazer Homes	NYSE: BZH
Blackstone	NYSE: BX
BOK Financial	Nasdaq: BOKF
Broadcom	Nasdaq: BRCM
Camden Property Trust	NYSE: CPT
CARBO Ceramics	NYSE: CRR
Cardinal Health	NYSE: CAH
Celgene	Nasdaq: CELG
Chipotle Mexican Grill	NYSE: CMG
Chubb	NYSE: CB
Colgate-Palmolive	NYSE: CL
ConocoPhillips	NYSE: COP
Eli Lilly	NYSE: LLY
Exxon Mobil	NYSE: XOM
Google	Nasdaq: GOOG
Harley-Davidson	NYSE: HOG
Invesco	NYSE: IVZ
JDS Uniphase	Nasdaq: JDSU
Kennametal	NYSE: KMT
L-3 Communications	NYSE: LLL
MakeMyTrip	Nasdaq: MMYT
MICROS Systems	Nasdaq: MCRS
NewMarket	NYSE: NEU
Newmont Mining	NYSE: NEM
Northrop Grumman	NYSE: NOC
Occidental Petroleum	NYSE: OXY
Overstock.com	Nasdaq: OSTK
Peabody Energy	NYSE: BTU
Prologis	NYSE: PLD
Raytheon	NYSE: RTN
The Pantry	Nasdaq: PTRY
Thermo Fisher Scientific	NYSE: TMO
Time Warner Cable	NYSE: TWC
Under Armour	NYSE: UA
United Parcel Service	NYSE: UPS
Viacom	Nasdaq: VIAB
Visa	NYSE: V
Whirlpool	NYSE: WHR
Xcel Energy	NYSE: XEL
Zimmer Holdings	NYSE: ZMH
FRIDAY
AbbVie	Nasdaq: ABBV
Aon	NYSE: AON
Autoliv	NYSE: ALV
Avery Dennison	NYSE: AVY
Baidu	Nasdaq: BIDU
Booz Allen Hamilton	NYSE: BAH
Chevron	NYSE: CVX
CONSOL Energy	NYSE: CNX
Dominion Resources	NYSE: D
ImmunoGen	Nasdaq: IMGN
KKR Financial	NYSE: KFN
Lancaster Colony	Nasdaq: LANC
Lantronix	Nasdaq: LTRX
Lear	NYSE: LEA
Legg Mason	NYSE: LM
LyondellBasell	NYSE: LYB
MasterCard	NYSE: MA
Mattel	NYSE: MAT
Mead Johnson	NYSE: MJN
Micrel	Nasdaq: MCRL
Modine Manufacturing	NYSE: MOD
National Oilwell Varco	NYSE: NOV
Newell Rubbermaid	NYSE: NWL
PACCAR	Nasdaq: PCAR
Pixelworks	Nasdaq: PXLW
Provident Financial Services	NYSE: PFS
Saia	Nasdaq: SAIA
Simon Property	NYSE: SPG
Tyco International	NYSE: TYC
Tyson Foods	NYSE: TSN
Weyerhaeuser	NYSE: WY
WisdomTree Investments	Nasdaq: WETF

Other reports you may enjoy:

Apple EPS Setup Against the Whisper
Stock Market Shock Dictates Continued Avoidance of Passive Long Positions
Alcatel-Lucent EPS – What’s the Whisper Anyway?
Why I See GE’s Soft Floor at $24 and Bedrock at $20

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.