Entering this week, the major averages remain at all-time record levels. The CES began this weekend in Las Vegas. I’ve been to the show many a time over the years. There are generally 3-4 venues housing different categories of technology be them household, mobile, gaming, healthcare devices or automotive. It’s a pretty fascinating show packed with news-making headlines. Speaking of technology…
Nvidia shares may open at a record high after the chipmaker added Volkswagen AG and Uber to its growing list of carmaking partnerships keen on using its artificial intelligence technology. The announcement came straight out of the CES on Sunday.
In just a few years, every new vehicle will be expected to have AI assistants for voice, gesture and facial recognition as well as augmented reality,” said Nvdia CEO Jensen Huang.
Also kicking off this week is the J.P. Morgan Healthcare Conference. Presenters for the event running from Jan. 8-11 include Vertex Pharmaceuticals, Jazz Pharmaceuticals, Alexion Pharmaceuticals, Sarepta Therapeutics, Regero, Biogen, Gilead Sciences, Sage Therapeutics and Incyte. Based on prior years, updates could come in from Haolozyme Therapeutics, NuVasive, Acorda Therapeutics, Celgene and a host of others. Microsoft founder Bill Gates will give a keynote address.
Economic data this week will be key to deciphering the future path of rate hikes, as both CPI and PPI are due out this week. The Producer Price Index is due out Thursday with the Consumer Price Index due out Friday. Both are forecasted to come in at .2% according to FactSet. On Friday investors will look forward to the December Retail Sales results.
The ICR Conference will also take place in sunny Florida as retail execs and CEOs head to the conference after strong holiday sales have been reported by some of the retailers. Investors and traders can look forward to Target’s update on holiday sales this week. Shares of Target have been in rally mode since November of 2017. I would be of the opinion that sales were strong, as previously reported by other retailers for the holiday period, but it remains to be seen if traders take some profits with the share price possibly already reflecting strong holiday sales results. Should results come in as expected and find traders taking profits, buying the dip may prove a comforting opportunity for those who missed the rally in TGT shares.
This morning, Kohl’s reported that its total and comparable sales for November and December 2017 combined increased 6.9% over the same period last year.
We are very pleased with our Holiday period sales, which were consistently strong through November and December. All lines of business and all regions reported positive comp sales. As expected, growth in digital demand accelerated significantly in the Holiday period from the year-to-date trend. In addition, we experienced positive sales in our stores driven by stronger traffic. I’d like to thank every Kohl’s associate across the organization for their commitment to delivering an outstanding Holiday experience for our customers.”
Based on stronger than expected Holiday sales and expectations for fiscal January, the Company now expects its fiscal 2017 diluted earnings per share to be $4.10 to $4.20 versus its previous guidance of $3.72 to $3.92. Excluding the Company’s previously disclosed fourth quarter tax settlement of $30 million, diluted earnings per share is expected to be $3.98 to $4.08, compared to its prior guidance of $3.60 to $3.80. Big week for economic data and retail sales so stay tuned!
When it comes to retail and consumer spending of course the “elephant in the room” will remain credit card debt. Credit card debt was at $808 billion on Sept. 30 according to the most recent data from the Federal Reserve Bank of New York. What’s scary about that number is that it is $280 billion more than the previous high hit in 2008, at the height of the financial crisis. Some analysts and economists are of the opinion that credit card debt will achieve $1trn in 2018.
The scary number — $1 trillion — we’ll definitely hit in 2018,” said Jill Gonzalez, an analyst with WalletHub. “It seems to say a lot of American consumers did not learn their lesson from the recession and are returning to living beyond their means.
Volatility remains at or near record low levels through this bull market cycle that has entered a new calendar year. As of 7:00a.m. EST the VIX has ticked higher by nearly 4% to 9.58. Term structure/contango remains expensive for long-term holders of VIX-Leveraged ETPs. Contango is presently above 11.5% with less than 9 trading days until Futures expire and roll forward on 1/17/2018. M1 and M2 VIX Futures are presently trading higher as depicted below.
As mentioned by Russell Rhoads of the CBOE over the weekend, there was one interesting options trade he found in the VIX-ETP complex. I posted the trade alert to the Finom Group Forum. where traders have noted comments on the trade. Friday morning, a trader purchased 200 SVXY Jan 12th 137 Calls for 2.17 and sold 400 SVXY Jan 12th 140 Calls at 0.77 each paying 0.63 for each spread. So this trade makes money if SVXY closes between 1.25% and 4.74% higher next week. Knowing this I decided to run some numbers. We have 326 weekly observations for SVXY since the ETF was launched in 2010. Of those weeks, SVXY has closed lower on a week over week basis 123 times or about 38% of observations, this outcome would result in a loss of 0.63. On the other end of the spectrum SVXY has rallied more than 4.74% 106 times or about 33%. This would result in some sort of loss; the biggest weekly gain for SVXY since the fund was launched was 22.7%, which would result in a loss of 24.41 per spread. Finally, this trade makes money in the 1.25% to 4.74% range, which has been the weekly result for SVXY 74 times or about 23% of observations.
U.S. equity futures are flat to lower this morning and ahead of the opening bell. Europe is largely trading higher on the heels of another strong session in the Asian markets. Looking out toward bond yields, the 10 and 30-year Treasury yields are currently lower with the 10-Year T-bill still below 2.50 percent.
Some dividend yielders will be played this week on their respective ex-dividend dates. For a few of those names please see the list provided below by Scottrade.
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