Futures Levels & Economic Reports

Fri, 28 Mar 2014 16:03 PM EST- Global markets diverged this week as investors concentrated on vertical phenomena rather than cross-market influences. In Asia, the prospect of stimulus to support Abenomics and the slowing Chinese market sent Hong Kong and Japan equities broadly higher, although Shanghai was flat. In Europe, another round of decent economic reports reinforced hopes the continent was starting to pull itself out of the hole, epitomized by France’s preliminary March PMI manufacturing data, which moved into expansion for the first time in more than two years. In the US, the S&P500 and DJIA traded sideways as traders continued to reposition after Yellen rearranged assumptions last week. The Conference Board’s March Consumer Confidence survey unexpectedly jumped to 82.3 from February’s upwardly-revised 78.3 reading, marking the highest level since January 2008. The advance durable goods report for February was mixed but on balance somewhat weaker than expected, showing the persistent impact of weather issues. Meanwhile the Nasdaq had its worst week since October 2012, dropping 2.8%, as many high-flying tech stocks saw stiff losses.- The Federal Reserve released the second component – capital plan reviews – of its Comprehensive Capital Analysis and Review (CCAR) this week. Twenty five of thirty large bank capital plans were approved. The Fed objected to capital plans from Citigroup, HSBC North America, RBS Citizens, Santander Holdings USA and Zions. Note that three of these are US branches of European banks, while Zions failed the earlier stress test. Citigroup shares took the biggest hit after the Fed rejected its request for a $6.4 billion stock buyback program and an increase of the quarterly dividend to $0.05. Bank of America and Goldman Sachs were forced to adjust their initial capital plan submissions to gain approval.- Facebook announced another big acquisition, paying $2 billion in cash and stock for virtual reality gaming technology company Oculus VR. The company’s immersive virtual reality technology headset, the Oculus Rift, has been lauded as a major breakthrough by the tech press. Facebook CEO Zuckerberg explained that he is looking ahead of Mobile to the next major computing platform interface, noting Oculus can be used as more than just platform for gaming, potentially becoming the “most social platform ever.”

– Popular “momentum stocks” cratered this week in unison. Stocks of Facebook and Twitter tracked each other through the week, with the two names down more than 12% on the week by Thursday morning, although they retook some losses into the end of the week. Netflix gave up 12% on the week. Biotechs that set off the Nasdaq tumble last Friday saw additional losses this week, with Biogen leading the way down.

IPOs showed signs of oversaturation for the second straight week. King Digital Entertainment, the designer of the highly addictive Candy Crush mobile videogame, launched its IPO on the NYSE this week, opening for trading at 10% below the IPO price. Shares lost another 10% of their value through the end of the week, as investors worried the company is a one-hit-wonder.

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