Monday, March 27, 2017

Tuesday Watch

Evening Headlines
  • Earliest China Data Show Strong March Activity, Brighter Outlook. China’s economy is strengthening and the future looking brighter, according to the freshest readings from small domestic businesses and global financial professionals alike. Sales manager sentiment and confidence of small- and medium-sized enterprises jumped to the highest in almost two years, according to earliest private indicators for March. International market experts see a significantly stronger outlook and a gauge of manufacturing activity based on satellite imagery remains robust. Momentum across the world’s No. 2 economy has been rebounding since late last year as producer prices surged, industrial output picked up and property prices strengthened. That gives breathing room to policy makers looking to reduce the nation’s high leverage. Here’s what the earliest indicators show:
  • How China's Bank Behemoths Make Money on the Debt War. As China ramps up its quest to conquer leverage, the banking sector is finding out that being a big fish pays -- literally. While smaller lenders grapple with soaring money-market rates -- some are said to have defaulted amid the tight liquidity -- their larger counterparts are poised for a windfall. Bigger banks are benefiting from higher borrowing costs given their status as net lenders in the interbank market, a situation that has Citigroup Inc. to Morgan Stanley favoring their shares. Large bank stocks have already returned double that of their smaller brethren so far this year.
  • Asian Stocks Climb as Worry Subsides; Yen Declines. Japan’s Topix index climbed with shares in Australia and South Korea, while Australian government bonds halted a rally. Friday’s decision to cancel voting on the U.S. health-care bill sent global stocks briefly into a tailspin on Monday as investors assessed the U.S. administration’s ability to enact reform. The dollar continued to claw back from the verge of erasing the rally spurred by Donald Trump’s election victory, the S&P 500 Index pared declines and the VIX Index fell on Monday. The yen slid 0.1 percent to 110.75 per dollar as of 9:28 a.m. in Tokyo. It’s only the second time in 11 sessions that the Japanese currency has fallen. The Topix index rose 1.1 percent, after Monday’s 1.3 percent tumble. Australia’s S&P/ASX 200 Index climbed 0.9 percent and South Korea’s Kospi added 0.3 percent. Futures on Hong Kong’s Hang Seng rose 0.3 percent.
Wall Street Journal:
Zero Hedge:
Night Trading 
  • Asian equity indices are unch. to +.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 96.25 +.5 basis point. 
  • Asia Pacific Sovereign CDS Index 21.25 unch.
  • Bloomberg Emerging Markets Currency Index 72.47 unch. 
  • S&P 500 futures +.09%. 
  • NASDAQ 100 futures +.14%.
Morning Preview Links

Earnings of Note

  • (CCL)/.35
  • (DRI)/1.28
  • (FDS)/1.80
  • (VNCE)/-.05
  • (PLAY)/.59
  • (RH)/.05
Economic Releases
8:30 am EST 
  • Advance Goods Trade Balance for February is estimated at -$66.4B versus -$68.8B in January.
  • Preliminary Wholesale Inventories MoM for February is estimated to rise +.2% versus a -.2% decline in January.  
  •  S&P CoreLogic CS 20-City MoM for January is estimated to rise +.7% versus a +.93% gain in December.
  • Consumer Confidence for March is estimated to fall to 114.0 versus 114.8 in February.
  • The Richmond Fed Manufacturing Index for March is estimated to fall to 15.0 versus 17.0 in February. 
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Yellen speaking, Fed's George speaking, Fed's Kaplan speaking, Fed's Powell speaking, Japan Trade Balance report, 5Y T-Note auction and the US weekly retail sales reports could also impact trading today.
BOTTOM LINE:  Asian indices are mostly higher, boosted by industrial and commodity shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher.  The Portfolio is 50% net long heading into the day.

Stocks Slightly Lower into Final Hour on Less Economic Optimism, Commodity Declines, Yen Strength, Financial/Energy Sector Weakness

Broad Equity Market Tone:
  • Advance/Decline Line: About Even
  • Sector Performance: Mixed
  • Volume: Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • Volatility(VIX) 13.80 +1.7%
  • Euro/Yen Carry Return Index 125.46 -.02%
  • Emerging Markets Currency Volatility(VXY) 9.20 +.99%
  • S&P 500 Implied Correlation 47.17 -1.11%
  • ISE Sentiment Index 83.0 -17.82%
  • Total Put/Call 1.12 -7.44%
  • NYSE Arms .98 -15.4%
Credit Investor Angst:
  • North American Investment Grade CDS Index 67.80 -.08%
  • America Energy Sector High-Yield CDS Index 401.0 -1.77%
  • European Financial Sector CDS Index 88.25 -.85%
  • Western Europe Sovereign Debt CDS Index 11.72 -4.75%
  • Asia Pacific Sovereign Debt CDS Index 21.38 +1.66%
  • Emerging Market CDS Index 213.59 +.75%
  • iBoxx Offshore RMB China Corporate High Yield Index 136.34 +.09%
  • 2-Year Swap Spread 35.0 -2.0 basis points
  • TED Spread 39.0 unch.
  • 3-Month EUR/USD Cross-Currency Basis Swap -20.75 +3.75 basis points
Economic Gauges:
  • Bloomberg Emerging Markets Currency Index 72.42 -.13%
  • 3-Month T-Bill Yield .77% +1.0 basis point
  • Yield Curve 112.0 -3.0 basis points
  • China Import Iron Ore Spot $81.57/Metric Tonne -4.1%
  • Citi US Economic Surprise Index 52.5 -1.6 points
  • Citi Eurozone Economic Surprise Index 67.70 -2.1 points
  • Citi Emerging Markets Economic Surprise Index 42.80 -2.2 points
  • 10-Year TIPS Spread 1.97 -1.0 basis point
  • 50.2% chance of Fed rate hike at June 14 meeting, 56.3% chance at July 26 meeting
Overseas Futures:
  • Nikkei 225 Futures: Indicating +55 open in Japan 
  • China A50 Futures: Indicating +33 open in China
  • DAX Futures: Indicating +46 open in Germany
  • Higher: On gains in my medical/tech/biotech/retail sector longs  and index hedges
  • Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
  • Market Exposure: Moved to 50% Net Long

Bear Radar

Style Underperformer:
  • Mid-Cap Value -.5%
Sector Underperformers:
  • 1) Steel -1.5% 2) I-Banks -1.2% 3) REITs -.9%
Stocks Falling on Unusual Volume: 
Stocks With Unusual Put Option Activity:
  • 1) BK 2) DD 3) S 4) KRE 5) PTCT
Stocks With Most Negative News Mentions:
  • 1) AES 2) ITW 3) MS 4) SCHW 5) BHI

Bull Radar

Style Outperformer:
  • Large-Cap Growth unch.
Sector Outperformers:
  • 1) Gaming +2.0% 2) Hospitals +1.4% 3) Gold & Silver +1.3%
Stocks Rising on Unusual Volume:
Stocks With Unusual Call Option Activity:
  • 1) CCL 2) CERN 3) RHT 4) SNAP 5) MA
Stocks With Most Positive News Mentions:
  • 1) FLS 2) HCA 3) BBY 4) UHS 5) VRTX