Can ‘Re-Risk On’ Rally Keep Going?
Out of dividend payers, into banks, builders, insurers. Re-risk is on.
Last week, it was pretty clear many couldn't get the size they wanted to get in the sectors listed above ... there was big volume in options and exchange-traded funds ... XLF (the Financial Select Sector SPDR Fund ETF) options were strong.
We saw big market leaders like Discover Financial Services do nothing last week, while Morgan Stanley jumped 13 percent, Goldman Sachs climbed 9.6 percent, Bank of America gained 9.5 percent — you cannot afford to miss that. (Read More: Morgan Stanley's $4 Billion Week.)
A good indicator for demand for financials might be the price for the Treasury Department's American International Group stock: It closed at $33.90 and chatter is $32 or above — not a bad price considering it's selling $18 billion.
1) China trade data is weak. Imports in August were down 2.6 percent vs. expectations of a rise of 3.5 percent (!), while exports grew only 2.7 percent, below expectations of a 3 percent gain.
JPMorgan Chase cut its China growth forecast, revising its third-quarter forecast to 7.4 percent from 8 percent; its full-year 2012 gross domestic product forecast was revised down to 7.6 percent from 7.7 percent; and its 2013 forecast was cut to 8.5 percent from 8.3 percent. (Read More: Is China in Danger of Missing Its 2012 Growth Target?)
2) Europe is quiet, but Greece is up better than 4 percent this morning, for a gain of about 11 percent in September. The so-called troika (European Commission/International Monetary Fund/European Central Bank) is in Athens to negotiate the next tranche of aid, but that is not what's moving Greek stocks. German Chancellor Angela Merkel, according to Der Spiegel, is now in favor of keeping Greece in the euro.
3) This is a big week for announcements. Just look at what is happening on Wednesday, Sept. 12 as the main date:
a) German Constitutional Court ruling on the European Stability Mechanism. Over the weekend, German Finance Minister Wolfgang Schauble told a German newspaper that the court will uphold the bailout fund, arguing that the constitutionality of the ESM was "thoroughly" probed when it was created;
b) Dutch elections, which will likely be won by a left coalition (Socialist/Labor) that will support the ECB's bond-buying program, further isolating German hard-liners;
c) an update on a European bank union from the European Commission, which may be just as controversial as the ECB's bond-buying program. What would a bank union look like? It will likely include oversight of Europe's largest banks (national regulators will be subordinate), and may include the power to directly inject capital into banks;
d) the Apple product launch, expected to unveil the iPhone and, possibly, an iPad mini; and
e) finally, the Federal Reserve decision on interest rates on Thursday.
4) Michael Kors drops 4.9 percent after the retailer announced a 20 million share secondary offering Friday after the close. The offering amounts to about 10 percent of all outstanding shares. Kors said members of management are included in those stockholders selling shares. Its shares tumbled Friday after hours, though the stock has more than doubled since going public last December.
5) Pandora Media rises 3.3 percent after the Internet radio service attracted more listeners in August. Pandora reported active listeners increased 48 percent year-over-year to 56.2 million last month. Share of domestic listening for Pandora was 6.3 percent, up from 3.7 percent at the same time last year. Pandora shares tumbled more than 16 percent Friday after reports Apple is looking to break into the online radio space and license music similar to Pandora.
6) Watch out for headlines from Barclays Financial Services conference this week.
—By CNBC’s Bob Pisani
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