5 Gut Checks

Need to Know AUGUST 07, 2013 5 gut checks before the stock market's opening bell By V. Phani Kumar   Good morning. A hat-trick of losses looms as Wall Street looks forward to more Fed-speak to confirm what has been made all but too clear: the spigots are about to be tightened. The markets will be all ears as Philadelphia Fed President Plosser and his Cleveland counterpart Pianalto take turns this afternoon to present their tapering perspectives. Shutterstock Not surprisingly, the mood on the Street is being preset by offshore cues, after Japan took a particularly hard hit during the Asia day . U.S. stock futures, by comparison, are quite calm. And that may be the sign of a market that is in need of some rest, rather than one that sees the need to bolt toward the exits, if you follow IG Markets's Chris Weston. "It seems to us that the market looks tired and a pullback would be healthy, although on current news flow it's hard to make the case for any more than a 5% pullback," he says. "A clearout of tired long positions would entice a fresh wave of traders and longer-term capital, with a move to 1,780 [for the S&P 500] potentially being seen over the medium term." His doesn't seem to be a lone voice. BTIG's Dan Greenhaus says he doesn't view the Fed's policy "as the proverbial reaper, coming to sink equity prices." In its latest thematic views on the U.S., Goldman Sachs says S&P 500 company sales will grow 5.4% next year -- albeit with "limited margin upside" -- on their house view that the U.S. economy will in 2014 grow above trend for the first time in six years. Not convinced? Here are seven defensive ideas for you from Gary Shilling , reproduced by Cullen Roche via Pragmatic Capitalism. Key gauges: DJIA futures are off 0.4% and SPX futures 0.3% lower before the opening bell, after Japan's Nikkei Stock Average plunged 4% earlier in the day for its worst drop in nearly two months. The currency markets see some big moves as well, with the British pound sliding after the Bank of England, a la the Fed, said it would keep interest rates low until the jobless rate fell to 7% . Reuters The Indian rupee took a hit as well, unsupported by news that former IMF chief economist Raghuram Rajan will take over as the next Reserve Bank of India chief . The buzz: First Solar shares should be in for some rough treatment after the solar-panel maker missed earnings estimates , and adjusted its forecasts lower. The stock plunged 8.3% in after-hours trade Tuesday, accompanied by heavy volumes. Walt Disney , Twenty-First Century Fox and Avis Budget Group could also see some post-earnings action. The day ahead brings results from a range of companies, throwing the spotlight on Time Warner , AOL and Groupon . Also, Yahoo in the news again, as it looks set to unveil a new logo (really?!) in a fresh marketing stunt under CEO Marissa Mayer. The Chart of the day: The Chinese media has recently reported that Beijing could further relax its one-child policy as early as the end of 2013, allowing couples to have a second kid if either the husband or the wife have no siblings. So far, policy allowed for a second kid in cases where the husband AND the wife were both the only child their parents had. Deutsche Bank Coming more than three decades after the one-child policy was controversially instituted, changing China in a hundred different ways , a relaxation of the rule could bring some economic benefits. As Deutsche Bank's population model shows in the chart above, China's population would still peak next decade, but four years later than if no reforms were made, i.e. in 2028, instead of 2024. The mini baby boom that could result from the relaxation would increase China's labor force by about 40 million by 2050, and reduce the country's primary pension deficit by 4% during 2040-2050, by bringing in more pension contributors. A change would also more directly benefit some industries catering to baby needs and education-service providers, Deutsche reckons. The call of the day: William Koldus calls Tesla Motors "a terrific shorting opportunity" in a post on Seeking Alpha, after its meteoric rise so far this year. Tesla has shot up 320% this year (that's 140% above the stock's 200-day moving average, Koldus notes), propelled by the first-quarter results in May. Koldus points to the number of shorts in the stock, saying the options universe was also bearishly positioned, with puts "substantially" outnumbering calls. But while it's "an attractive fundamental short," from a risk/reward perspective, it would make more sense to short the stock after its upcoming earnings , he says. "Any spike in TSLA's share price from levels that are already extremely overbought is likely the last gasp of the current short squeeze, and thus, it would provide an optimal shorting opportunity," he writes. Random reads: Multiple reports have it that the polarity of the sun's magnetic field is set to reverse some time before the end of 2013. The event, which recurs every 11 years, will have "ripple effects throughout the solar system," says Todd Hoeksema, director of Stanford University's Wilcox Solar Obvervatory, according to this report . The result may be "unstable weather" on the downside, but reportedly might also shield the earth and its atmosphere from certain high-energy particles. Watch this space for more detail. Also worth a glance: Jay Leno has President Obama to thank for the latest addition to his car collection. Downton Abbey moves on , without Matthew Crawley on board. Dolphins beat mammoths. No, it isn't the story line from the next "Ice Age" franchise. It's what a memory study shows . The American who accidentally snapped a finger off the 600-year-old Virgin Mary statue in a Florence museum is a surgeon . To err is human, eh? 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