Tuesday, December 14, 2010

Tuesday Watch


Evening Headlines

Bloomberg:

  • Mortgage-Bond Slump No 'Fun' for Housing as Rates Increase: Credit Markets. A slump in government-backed mortgage securities that’s sent yields to the highest level since May is threatening a recovery in the U.S. housing market, which had been bolstered by record-low borrowing costs. Yields on Fannie Mae-guaranteed securities that most affect loan rates jumped as high as 4.21 percent today, an increase of 1 percentage point from an all-time low in October, according to data compiled by Bloomberg. Higher loan rates “won’t be fun” for a fragile housing market, said Scott Simon, head of mortgage bonds at Newport Beach, California-based Pacific Investment Management Co., manager of the world’s biggest bond fund. “If you were looking at buying a house a few weeks ago, the same house, to you, looks as much as 9 percent more expensive,” he said. The effects of higher mortgage rates, along with climbing gasoline prices, will offset much of the tax package’s intended stimulative effects, according to Gluskin Sheff & Associates Chief Economist David Rosenberg. The average rate on a typical 30-year fixed-rate mortgage has climbed for four weeks, to an average of 4.61 percent last week, according to Freddie Mac, pushing the monthly cost of a $300,000 loan to $1,540, from $1,462.
  • U.S. Crisis Panel Republicans Plan Protest on Report Due Date. Republicans on the congressionally appointed commission investigating the 2008 financial crisis are planning a public protest of the panel’s decision to ignore a deadline for reporting its findings. Bill Thomas, vice chairman of the Financial Crisis Inquiry Commission, told reporters in Washington today that he is trying to schedule a news conference for Dec. 15, the day the panel was required to issue its final report. While Thomas didn’t give details, three people with knowledge of the plan said the FCIC’s four Republicans are likely to attend and may release a statement or their own report.
  • Baltic Index Falls to Four-Month Low on Excess Supply of Ships. The Baltic Dry Index, a measure of commodity-shipping costs, fell to the lowest level in more than four months on a surplus of ships. The index declined 19 points, or 0.9 percent, to 2,076 today, according to data from the Baltic Exchange in London. That’s the lowest since Aug. 6. Declines were led by rates to hire capsesize ships, the biggest in the gauge. They fell 2.1 percent to $24,852 a day. “The dry bulk market is showing no signs of improvement,” Shalini Shekhawat, a Gurgaon, India-based analyst at Drewry Shipping Consultants Ltd., wrote in a report. “The remainder of the year will be no better, with iron ore and grain trade being insufficient to absorb the over-supply of tonnage in the market.” Shipping rates have fallen 31 percent this year as new vessels entered the fleet. Capesizes will expand 24 percent in 2010, driving overall dry-bulk fleet growth of 17 percent, Clarkson Plc, the world’s largest shipbroker, estimates. Demand will grow 10 percent over the same time, Clarkson said. Capesizes mostly carry iron ore, used to make steel.
  • U.S. East Braces for Frigid Blast as Storm Grounds More Flights. The eastern U.S. braced for frigid weather from a snowstorm that slammed the Midwest over the weekend, grounding thousands of flights. “It will be below to much-below normal across most of the eastern half of the nation over the next couple of days,” said Brian Korty, a meteorologist with the National Weather Service. Strong winds will compound the cold, he said. Colder-than-normal weather is likely in parts of the Midwest, Southeast and mid-Atlantic through Dec. 27, according to MDA Federal Inc.’s EarthSat Energy Weather in Rockville, Maryland.
  • Amgen's(AMGN) Denosumab Slows Spread of Prostate Cancer to Patients' Bones. Amgen Inc., the world’s largest biotechnology company, said denosumab helped prevent prostate cancer from spreading to men’s bones. The shares rose about 7 percent in extended trading. The study, involving 1,432 prostate tumor patients, showed that men who took denosumab delayed the spread of cancer to their bones by 4.2 months compared with those taking placebos, Thousand Oaks, California-based Amgen said in a statement. Amgen increased $3.64, or 6.7 percent, to $57.75 in extended trading at 6:31 p.m.
  • Bailouts Test Limits of Taxpayer Tolerance: Karl Heinz Daeke. These are testing times for European taxpayers, especially German ones. The European stabilization package, worth as much as 750 billion euros, already meant a huge burden on ordinary people when it was set up in May 2010. But at that time we were still told that such a protective shield would suffice to fend off speculators around the world. It hasn’t worked.
  • Kan Orders 5% Cut in Japan Corporate Tax to Spur Growth. Japan’s Prime Minister Naoto Kan ordered a 5 percentage point cut in the nation’s corporate tax rate starting in the next fiscal year to boost an economy that is showing signs of contraction. "I’ve instructed ministers to lower the corporate tax by five percent to lift up the economy and beat deflation," Kan told reporters in remarks broadcast last night on TV Tokyo.

Wall Street Journal:
  • 'Temporary' Tax Code Puts Nation in a Lasting Bind. Welcome to the world of the temporary tax code. In the late 1990s, there were typically fewer than a dozen tax provisions that had just a limited lease on life and needed to be renewed every year or so. Today there are 141.
  • Mexico's Tortilla Industry Threatens Price Hike. Mexican tortilla producers say they are planning to raise prices by at least 20% to meet the rising price of corn and other operating costs, prompting an immediate response from the government that is trying to keep food prices under control.
  • Rising Computer Prices Buck the Trend. Average Prices Rose 6% in November, Industry Reversal Has Some Executives Saying Prices Have Bottomed; No $99 Laptop.
  • Goldman(GS): We Didn't Topple Bear Stearns. Goldman Sachs Group Inc. told a U.S. panel examining the financial crisis that the company wasn't responsible for toppling two Bear Stearns & Co. hedge funds in early 2007. In dozens of pages of documents submitted to the Financial Crisis Inquiry Commission, Goldman detailed its valuation of mortgage securities underwritten by the New York company, some of which were held in two Bear hedge funds managed by Ralph Cioffi and Matthew Tannin. The collapse of the two Bear hedge funds, which invested primarily in subprime mortgage securities and derivatives, was an early victim of the crisis and a harbinger of the pummeling suffered by financial institutions and investors during the next 18 months. The Bear hedge funds were fatally wounded by a precipitous decline in the value of mortgage securities. The funds valued their assets partly on valuations of mortgage-related securities obtained from trading partners such as Goldman. Some critics have suggested that Goldman helped push the hedge funds over the edge.
  • CFTC Chief Fees Need for Speed. Gary Gensler's mission to turn his tiny agency into a regulatory powerhouse is running into trouble. The difficulties include resource strains, discord among commissioners and accusations that the Commodity Futures Trading Commission isn't taking enough care as it writes at breakneck speed rules that will transform the derivatives market.
  • Comcast(CMCSA) Trialing Internet and TV Linking Service. Comcast Corp. is testing a new service that knits together television and the Internet, as the U.S. cable giant goes after rivals that threaten to undermine its business.
CNBC:
Business Insider:
Zero Hedge:
NY Times:
Forbes:
CNN Money:
TechCrunch:
Rasmussen Reports:
  • Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Monday shows that 24% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-one percent (41%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -17 (see trends).
  • Support for Health Care Repeal Hits Highest Point Since September. The latest Rasmussen Reports national telephone survey shows that 60% of Likely U.S. Voters at least somewhat favor repeal of the health care law while 34% are opposed. As has been the case since the law was first passed, those who favor repeal feel more passionately than those who want to keep the law--46% Strongly Favor repeal while just 23% who are Strongly Opposed.
Politico:
USA Today:
  • CNBC to Launch CNBC Pro Trading Service With Real-Time Info. Investors may think that the Internet already provides all the trading information they need. But CNBC is betting that it has the goods and marketing clout to persuade investors to pay for more. The business news channel Tuesday launched CNBC Pro, a subscription news and data service for traders who want to play in lots of markets — including commodities, exchange traded funds, futures, bonds, real estate and currencies. The introductory price is $24.99 for each of the first six months and an option to pay $269.99 for an annual subscription.
Telegraph:
  • Euro Has 'One in Five Chance' of Survival, Warns CEBR. The chances of the euro surviving in its current form have been put at "one-in-five" by one of the UK's leading economics consultancies. In a research paper published today, the Centre for Economics and Business Research (CEBR) claims that keeping "the euro alive will require cuts in living standards greater than the UK faced in the Second World War" for weaker eurozone members. "There is no modern history of falling living standards in peacetime on the scale necessary to keep the euro in its current form. This is why I think there is at best a one-in-five chance that the euro will survive as it is," Douglas McWilliams, CEBR chief executive, said.
Evening Recommendations
Citigroup:
  • Reiterated Buy on (NVDA), raised target to $20.
CSFB:
  • Rated (MYL) Outperform, target $25.
  • Rated (WPI) Outperform, target $60.
  • Rated (SLXP) Outperform, target $55.
Night Trading
  • Asian equity indices are unch. to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 104.0 -2.0 basis points.
  • Asia Pacific Sovereign CDS Index 104.25 -.75 basis point.
  • S&P 500 futures -.08%
  • NASDAQ 100 futures -.09%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (FDS)/.84
  • (BBY)/.60
  • (SAFM)/1.72
Economic Releases
7:30 am EST
  • The NFIB Small Business Optimism Index for November is estimated to rise to 92.3 versus 91.7 in October.
8:30 am EST
  • Advance Retail Sales for November are estimated to rise +.6% versus a +1.2% gain in October.
  • Retail Sales Less Autos for November are estimated to rise +.6% versus a +.4% gain in October.
  • Retail Sales Ex Autos & Gas for November are estimated to rise +.6% versus a +.4% gain in October.
  • The Producer Price Index for November is estimated to rise +.6% versus a +.4% gain in October.
  • The PPI Ex Food & Energy for November is estimated to rise +.2% versus a -.6% decline in October.
10:00 am EST
  • Business Inventories for October are estimated to rise +1.0% versus a +.9% gain in September.
2:15 pm EST
  • The FOMC is expected to leave the benchmark Fed Funds Rate at .25%.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The weekly retail sales reports, (GE) annual investor meeting, (BRCM) analyst day, (ONXX) analyst briefing, (BMC) investor day and the Raymond James IT Supply Chain Conference 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 modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 75% net long heading into the day.

1 comment:

theyenguy said...

On December 12, 2010, the Euro, FXE, moved higher to 133.42 on a likely topping out move as Economists warn that the Euro has a 1 in 5 chance of survival in 5 years.

The Euro, often pops higher at market turns, like it did on November 4, 2010 at 141.50.

Today’s sell off In Netflix, NFLX, induced a sell off in Semiconductors, XSD, Consumer Discretionary, XLYS, and Retail Shares, XRT.

The rise in currencies stimulated a rise in copper, JJC, and copper miners, COPX and Freeport McMoRan Copper and Gold —- FCX. The blast up higher seen in FCX, with close at 115.53, shows as a harami today, and may turn out, after tomorrow’s trading to be an evening star. This is the type of event those who trade, sell short. Freeport McMoRan Copper and Gold is a component of the Morgan Stanley Cyclical Index, $CYC, which manifested a bearish hammer at the top of an ascending wedge, suggesting that a top may be coming in to the “risk trade”, which is also the economic growth and expansion trade. This seem compatible with an Elliott wave 2 high in the world shares weekly, ACWI.

I am expecting a major market turn lower in major world currencies, DBV, such as the Euro, FXE, and in emerging market currencies, CEW, on concerns over the European Sovereign Debt Crisis and related European Financial Institution, EUFN, Refunding Crisis as well as a market turn lower in consumer discretionary and semiconductor sectors. transportation, Nasdaq clean energy, with basic materials selling off due to a fall in the Euro on December 13, 2010. I recommend that one NOT be long any fiat financial asset. I encourage investment in gold bullion.