Monday, April 30, 2012

Stocks Falling into Final Hour on Rising Eurozone Debt Angst, Less US Economic Optimism, Less Financial Sector Optimism, Market Leader Weakness


Broad Market Tone:

  • Advance/Decline Line: Lower
  • Sector Performance: Most Sectors Declining
  • Volume: Light
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • VIX 17.32 +6.13%
  • ISE Sentiment Index 106.0 +37.66%
  • Total Put/Call .85 +1.19%
  • NYSE Arms 1.18 -15.38%
Credit Investor Angst:
  • North American Investment Grade CDS Index 95.15 +.91%
  • European Financial Sector CDS Index 241.71 -.19%
  • Western Europe Sovereign Debt CDS Index 275.25 +.46%
  • Emerging Market CDS Index 252.33 -.43%
  • 2-Year Swap Spread 29.0 -1.25 basis points
  • TED Spread 37.5 -.5 basis point
  • 3-Month EUR/USD Cross-Currency Basis Swap -45.0 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .09% unch.
  • Yield Curve 166.0 -1 basis point
  • China Import Iron Ore Spot $145.40/Metric Tonne unch.
  • Citi US Economic Surprise Index -14.0 -6.0 points
  • 10-Year TIPS Spread 2.26 -1 basis point
Overseas Futures:
  • Nikkei Futures: Indicating a -100 open in Japan
  • DAX Futures: Indicating +3 open in Germany
Portfolio:
  • Slightly Lower: On losses in my Tech and Biotech sector longs
  • Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my (EEM) short
  • Market Exposure: Moved to 50% Net Long
BOTTOM LINE: Today's overall market action is bearish as the S&P 500 trades near session lows on rising Eurozone debt angst, less financial/homebuilder sector optimism, high energy prices, rising global growth fears, weakness in some key market leaders and less US economic optimism. On the positive side, Energy, Oil Service and Coal shares are relatively strong, rising more than +.75%. Copper is rising +.27%. Major Asian indices rose around +.75% overnight(Shanghai Comp, Nikkei closed), led by a +1.7% gain in Hong Kong. The Italian/German 10Y Yld Spread is falling -2.3% to 384.85 bps. The Saudi sovereign cds is falling -1.2% to 119.0 bps. On the negative side, Homebuilding, Education, Construction, HMO, Bank, Steel, Networking and Hospital shares are under meaningful pressure, falling more than -1.25%. Financial shares have lagged throughout the day again. As well, small-cap and cyclical shares are relatively weak. Oil is rising +.2%, Gold is gaining +.2%, Lumber is falling -.8% and the UBS-Bloomberg Ag Spot Index is rising +.4%. Major European indices are falling around -1.0%, led lower by a -1.9% decline in Spain. Spanish equities are now down -18.2% ytd. The Bloomberg European Bank/Financial Services Index is falling -1.0%. The Germany sovereign cds is gaining +2.76% to 85.50 bps and the US sovereign cds is gaining +1.5% to 38.22 bps(+37.0% in 9 days). US Rail Traffic continues to soften. The Philly Fed ADS Real-Time Business Conditions Index continues to trend lower from its late-December peak. Moreover, the Citi US Economic Surprise Index has fallen back to early-Oct. levels. Lumber is -4.0% since its Dec. 29th high despite improving sentiment towards homebuilders and the broad equity rally ytd. Moreover, the weekly MBA Home Purchase Applications Index has been around the same level since May 2010 despite expectations for a strong spring home selling season. The Baltic Dry Index has plunged around -50.0% from its Oct. 14th high and is now down around -35.0% ytd. China Iron Ore Spot has plunged -19.7% since Sept. 7th of last year. Shanghai Copper Inventories are still near their recent all-time high and have risen +634.0% ytd. China's March refined-copper imports fell -8.0% on the month. Singapore Electronics exports decelerated to a gain of +2.8% in March from a +23.3% gain in February. The 10Y T-Note continues to trade too well, despite the big surge in the US sovereign credit default swap and the euro currency can't sustain a bounce. US Economic data releases later this week will likely also prove mildly disappointing. Concerns over the collision course Germany and France appear headed towards during the next escalation phase of the European debt crisis are intensifying. This will eventually become an even greater problem than the market currently perceives, in my opinion. US stocks remain extraordinarily resilient, however breadth and volume remain lackluster. For the recent equity advance to regain traction, I would expect to see further European credit gauge improvement, a further subsiding of hard-landing fears in key emerging markets, a rising 10-year yield, better volume, stable-to-lower energy prices and higher-quality stock market leadership. I expect US stocks to trade mixed-to-lower into the close from current levels on rising Eurozone debt angst, less US economic optimism, high energy prices, rising global growth fears, weakness in some key market leaders and less financial/homebuilder sector optimism.

Today's Headlines


Bloomberg:
  • Europe's Anti-Austerity Calls Mount as Elections Near. A recession in Spain and forecasts of rising unemployment in the 17-nation euro area are amplifying criticism of the German-led austerity agenda in election campaigns this week in France and Greece. With Spain’s largest unions leading marches involving thousands of protesters in 55 cities yesterday, Prime Minister Mariano Rajoy’s government battled to prevent Spain from becoming the next country to seek a bailout. In France, where the presidential-election runoff is set for May 6, Socialist frontrunner Francois Hollande pushed back against German Chancellor Angela Merkel’s focus on deficit reduction.
  • Italy Faces 20 Billion-Euro Gap, Tremonti Tells Corriere. Italy may post an unexpected budget gap of as much as 20 billion euros ($26.5 billion) by mid-year due to the government’s austerity measures, former Finance Minister Giulio Tremonti told Corriere della Sera. The implementation of a new property tax and changes to the pension system passed in December will require extra financial resources, Corriere cited Tremonti as saying. The shortfall will also include as much as 8 billion euros to fund other programs such as Italy’s international peacekeeping missions, Tremonti said, according to the Milan-based newspaper.
  • European Stocks Fall as Spain Contracts; AB InBev Sinks. European stocks fell for the first time in five days, extending the biggest monthly drop since September, as Spain entered a recession and U.S. business activity expanded at the slowest pace since November 2009.
  • Banks in EU May Face 3% Capital Surcharges Under Basel Agreement. Bank regulators in the European Union may win powers to impose capital surcharges of as much as 3 percent on lenders’ activities at home and abroad as part of a compromise plan for applying Basel rules.
  • Fed Chief Says Worst Not Over in Europe, Handelsblatt Reports. John Williams, the president of the Federal Reserve Bank of San Francisco, said he’s “very worried” about the risk of a worsening debt situation in Europe and the “worst is not yet over,” Handelsblatt reported. It’s difficult for troubled European countries to return to normal economic performance when the business situation is weak and too many countries save money at the same time, Williams said in an interview with the German newspaper. That makes it more difficult to fight budget deficits and debt and European countries must find the “right balance” between austerity and growth, Handelsblatt cited Williams as saying. The U.S. economy is likely to grow 2.5 percent this year and there’s currently no need for new monetary measures, Williams told the newspaper.
  • Sovereign, Corporate Bond Risk Rises, Credit Default Swaps Show. The cost of insuring against default on European sovereign and corporate debt rose, according to BNP Paribas SA. The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments added 1.5 basis points to 275.5 at 3 p.m. in London. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings climbed 5.5 basis points to 650.5. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 2.5 basis points to 140.5 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers was 0.5 basis point higher at 242.5 and the subordinated index increased one to 401.
  • IMF Ready to Lend Egypt $3.2 Billion at 1% Interest, Ahram Says. The International Monetary Fund is prepared to lend Egypt $3.2 billion at a reduced interest rate of 1 percent, the Muslim Brotherhood’s now disqualified presidential candidate said, the state-run al-Ahram reported. Khairat el-Shater, the Brotherhood’s chief strategist who was knocked out of the May race on electoral-law technicalities, said the offer came when IMF officials met with his group during a visit to Egypt earlier this month. He also said the U.S. deputy secretary of state had agreed to back Islamic bonds issued by Egypt abroad, the newspaper reported.
  • Manufacturing Cools Even as U.S. Consumers Still Spend. Business activity in the U.S. expanded in April at the slowest pace since the end of 2009, adding to evidence that manufacturing is cooling. The Institute for Supply Management-Chicago Inc. said today its barometer decreased to 56.2 during the month, lower than the most pessimistic forecast in a Bloomberg News survey, from 62.2 in March. Readings greater than 50 signal growth. The pace of production eased in April, reflecting a recession in Europe and a slowdown in China that may keep holding back orders. A separate report today showed U.S. consumer spending and incomes climbed in March, indicating that household demand will help underpin the economy as long as the job market continues to heal. “We’re likely to see manufacturing growth ease a bit,” said Peter Newland, a U.S. economist at Barclays in New York. “A gradual improvement in the labor market is going to be key for consumer spending. This is consistent with further moderate growth.” Economists projected the purchasing managers’ gauge would fall to 60, according to the median of 55 estimates in the survey.
  • LDK Solar(LDK) Cuts 5,554 Workers Amid Clean-Energy Shakeout. LDK Solar Co. (LDK), the world’s second- largest maker of wafers for cells, cut 5,554 jobs this year after plunging prices cut margins to a record low amid a renewable-energy shakeout that’s pushed at least eight solar companies into bankruptcy and prompted thousands of industry firings. LDK, which reported the lowest margins among its publicly traded peers, has cut its staff about 22 percent to 19,195 workers since the end of 2011, Chief Operations Officer Xingxue Tong said on a conference call today. The Chinese maker of polysilicon, wafers and solar panels has pared a third of its workforce since July, when it peaked at more than 28,000, in reaction to the “highly competitive” solar market.
  • Illinois Faces 25% Cost Increase to Borrow $1.8 Billion. Illinois plans to sell $1.8 billion of general-obligation debt tomorrow as its relative borrowing costs may increase by almost a quarter. The tax-exempt deal for the state, rated lowest by Moody’s Investors Service, includes a 10-year segment that underwriter Jefferies & Co. plans to offer to investors at 1.85 percentage points above benchmark AAA securities, according to a person familiar with the sale.
  • Occupy Wall Street Plans Global Protests in May Day Resurgence. Occupy Wall Street demonstrators, whose anti-greed message spread worldwide during an eight-week encampment in Lower Manhattan last year, plan marches across the globe today calling attention to what they say are abuses of power and wealth.
Wall Street Journal:
  • Chinese Microblogs Survive Real-Name Rules - So Far. Sina Corp.(SINA) has escalated its warnings to investors that the rules requiring weibo sites to verify the identities of users remain a major threat to the future of weibo. The company’s annual report filed with the U.S. Securities and Exchange Commission this month added the real-name rules to an already long list of regulatory risks that come with owning an Internet business in China.
  • Coke(KO) in Talks to Buy Monster(MNST) Beverage. Coca-Cola Co. is in talks to acquire Monster Beverage Corp., a move that could help the world's biggest soft drinks maker expand its presence in the growing energy-drinks market, people familiar with the matter said.
  • ISDA Set to Decide on CDS Rules Revamp Within Weeks. When is a default a default and when does a default trigger payouts on credit default swaps? CDS market watchers and participants have been raising those questions for more than a year. But the issue has garnered greater urgency in the wake of grievances from CDS buyers who felt they weren’t adequately covered going into the Greek debt restructuring.
  • Microsoft(MSFT) to Invest in Nook. Microsoft Corp. is making a $300 million investment in Barnes & Noble Inc.'s(BKS) Nook digital-book business and college-texts unit in a move that helps value the prized Nook business, the companies said. Microsoft will have a 17.6% stake in a new subsidiary for the businesses in a transaction that values them at $1.7 billion, the companies said. That compares with Barnes & Noble's current market capitalization of about $791 million and could fuel the argument of some analysts and investors that the digital business should be separated from the retail division.
  • Egypt Military Bends to Islamists Will. Egypt's ruling military said it would appoint a new cabinet within 48 hours, awarding a major victory to Islamist politicians and cooling a political confrontation that threatened to gridlock Egypt's emerging democratic institutions. Field Marshal Hussein Tantawi's pledge to lawmakers on Sunday came hours after parliament speaker Saad Al Katatni, a senior member of the Brotherhood's Freedom and Justice Party, which dominates the legislature, suspended sessions on Sunday until the military agreed to dissolve the cabinet.
Fox News:
CNBC.com:
  • Spain Default Could Hit US Market 10%-20%; Economist. Spain's newly announced recession won't be ending any time soon and it could force the U.S. stock market to fall anywhere between 10 percent and 20 percent, economist Harry Dent told CNBC Monday.
  • Euro Lending Growth Slows, Banks Spend ECB Cash on Bonds. Growth in lending to euro zone firms and consumers slowed in March as banks scaled up purchases of government bonds, showing that an ambitious funding drive by the European Central Bank has yet to trickle down to the real economy.
  • Small Business Hiring Takes Step Back in April. Small business hiring slowed considerably in the April and employees saw a reduction in their hours, an independent survey showed on Monday, adding to signs of weakening in labor market conditions. Businesses added 40,000 new jobs, a step back from the 75,000 positions created in March, according to Intuit, a payrolls processing firm. The average workweek for small business employees dipped 0.14 percent.
Business Insider:
Zero Hedge:

Reuters:

  • Emerging Markets Hold Breath as EU Banks Shrink. From Beijing to Bucharest, emerging market policymakers are as worried as those in Brussels that the rapid contraction in western European banks' balance sheets will compound the debt crisis and further delay economic recovery. In a striking indication of that concern, the International Monetary Fund said developments in the euro area pose a greater risk to the Asia-Pacific region than either a hard landing in China or a rise in commodity prices. "An escalation of the crisis with a disorderly, large-scale, and aggressive trimming of balance sheets could have a serious impact on Asia," the IMF said in a report released on Friday.
  • Exclusive: China Mulls Guarantees For Ships Carrying Iranian Oil. China is considering sovereign guarantees for its ships to enable the world's second-biggest oil consumer to continue importing Iranian crude after new EU sanctions come into effect in July, the head of China's shipowners' association said. Tough new European Union sanctions aimed at stopping Iran's oil exports to Europe also ban EU insurers and reinsurers from covering tankers carrying Iranian crude anywhere in the world. Around 90 percent of the world's tanker insurance is based in the West, so the measures threaten shipments to Iran's top Asian buyers China, India, Japan and South Korea.
  • China Wants "drastic" U.S., Russia Nuclear Arms Cuts. China called on the United States and Russia on Monday to make further "drastic" cuts in their nuclear arsenals and said all states with atomic arms should undertake not to be the first to use them. The development of missile defense systems which "disrupt" the global strategic balance should be abandoned, a senior Chinese diplomat also told a nuclear meeting in Vienna in a possible reference to U.S. plans that have angered Russia.
  • US Homeownership Rate Drops to 15-Year Low in Q1. The share of privately owned U.S. homes fell to a 15-year low in the first quarter, government data showed on Mo nday, suggesting that falling house prices are discouraging Americans from being homeowners. The home ownership rate slipped to 65.4 percent, the lowest since the first quarter of 1997, the Commerce Department said. The rate was at 66.0 percent in the fourth quarter.
  • Caterpillar(CAT) Braces for Strike Amid Labor Dispute. Caterpillar Inc is preparing for a strike at its Joliet, Illinois, plant after union workers there overwhelmingly turned down a new six-year contract during weekend voting.
  • Portugal Risks Spillover From Spain's Misfortunes. Spain's deteriorating economy has made Portugal's job of riding out its debt crisis harder as its main trading partner slides into recession and the threat of contagion across the Iberian peninsula intensifies.

Telegraph:

  • UK Business Loan Write-Offs to Hit Highest Since 1990s. Losses on corporate loans will hit their highest level since the 1990s recession this year, fuelled by a weak consumer sector and further crippling lending according to a leading group of economists.
  • Debt Crisis Live: Germany maintains hardline stance on austerity, telling Spain it must not change direction, despite figures showing Spain officially fell back into recession in the first three months of the year.

Bear Radar


Style Underperformer:

  • Small-Cap Growth -1.10%
Sector Underperformers:
  • 1) HMOs -2.40% 2) Homebuilders -1.92% 3) Steel -1.71%
Stocks Falling on Unusual Volume:
  • HUM, FIO, CRAY, KB, UNH, HBHC, OLN, HOLX, RCII, ABFS, SCHL, SOHU, ARBA, LPLA, UBNT, AKAM, UTHR, ONXX, NANO, BJRI, ARMH, DECK, PACW, CTCT, CALM, COLM, PAY, TEN, ABD, AWI, GNC and ALR
Stocks With Unusual Put Option Activity:
  • 1) MRVL 2) XLB 3) PAY 4) XLY 5) EMR
Stocks With Most Negative News Mentions:
  • 1) ABFS 2) COP 3) GOOG 4) LDK 5) PG
Charts:

Bull Radar


Style Outperformer:
  • Large-Cap Value -.30%
Sector Outperformers:
  • 1) Oil Tankers +.56% 2) Energy +.29% 3) Drugs +.25%
Stocks Rising on Unusual Volume:
  • RGR, WWW, GPRO, CPTS, TGE, WCRX, FRAN, ZAGG, STX, BKS, SUN, HAE, HAR, ETE and MDRX
Stocks With Unusual Call Option Activity:
  • 1) SUN 2) MDRX 3) SU 4) BKS 5) EMN
Stocks With Most Positive News Mentions:
  • 1) MDRX 2) MDT 3) ENPH 4) KFT 5) EQT
Charts:

Monday Watch


Weekend Headlines
Bloomberg:

  • Europe Seeks to Restore Calm After Spain Downgrade, Growth Spat. European leaders will seek to restore market calm this week after Spain was cut by Standard & Poor’s and a German-led austerity agenda to resolve the debt crisis came under fire ahead of elections in France and Greece. With Spain’s largest unions leading marches involving thousands of protesters in 55 cities yesterday, Prime Minister Mariano Rajoy’s government battled to prevent Spain from becoming the next country to seek bailout aid. In France, the final round of presidential elections on May 6 and the prospect of victory for Socialist candidate Francois Hollande steered debate toward whether a focus on budget cuts worsens the crisis. “Watching Spain now is exactly like watching Ireland around October 2010 before Ireland was forced into its bailout,” Megan Greene, a senior economist at Roubini Global Economics LLC, told Bloomberg Television’s “Street Smart” on April 27. “The government can’t win no matter what it does.”
  • Schaeuble Says EU Fiscal Pact Will Come Into Force, Welt Says. German Finance Minister Wolfgang Schaeuble said the fiscal pact agreed by leaders of 25 European nations will come into force, Welt am Sonntag reported, citing an interview. The pact brings “confidence in the long-term stability of the system,” Die Welt cited Schaeuble as saying. Renegotiating the fiscal pact completely is a utopia, Jean-Claude Juncker, the head of the group of euro-area finance ministers told Die Welt. Juncker told the German newspaper that he would talk to Francois Hollande, who wants the pact renegotiated, if he is elected a France’s new president on May 6. European Central Bank Executive Board member Joerg Asmussen said the fiscal pact should be kept in its current form, Welt am Sonntag reported. German Chancellor Angela Merkel on April 28 ruled out reopening negotiations on the fiscal pact.
  • Spanish Unions March in Madrid Against Government Spending Cuts. Spain’s two largest unions led marches in cities across the country to protest Prime Minister Mariano Rajoy’s spending cuts, including the reduction of health care subsidies. Thousands of people marched to El Sol square in downtown Madrid, gathering under umbrellas to shelter from the rain. Comisiones Obreras and UGT led protests in 55 cities across Spain today, El Mundo newspaper reported.
  • Record-High Gasoline Further Burdens Consumers in Europe. Mumtaz Ozkaya, a leather-clothing salesman in London, is slashing his usual 1,000 miles (1,609 kilometers) a month of driving by 30 percent and taking cheaper vacations, as record fuel prices burden European motorists. “Wages are still the same so I am cutting back on miles and also on holidays,” Ozkaya said in an April 23 interview at a Shell-branded service station near Old Street in the U.K. capital, where regular gasoline costs 143 pence a liter ($8.76 a gallon). “Whereas we used to go on holiday to a five-star hotel for three weeks that is now a four-star for two weeks.” The average retail price in the European Union’s 27 member nations surged to a peak of 1.69 euros a liter ($8.44 a gallon) on April 20 with Germany, France, the U.K., Greece, Italy and Spain all at records, according to European Commission data. The cost of gasoline at the pump in the continent, more than double U.S. levels, had made a fresh high every week since Jan. 13. U.K. gasoline advanced to a new all-time high last week.
  • Saudis Accept Bin Ladens on 'Humanitarian Grounds,' Awsat Says. Saudi Arabia allowed the widows and children of slain al-Qaeda leader Osama bin Laden to enter the kingdom on “humanitarian grounds” after they were deported from Pakistan, the London-based Asharq al-Awsat reported, citing an unidentified Saudi official.
  • Hon Hai Drops by Limit After Net Misses Estimates: Taipei Mover. Hon Hai Precision Industry Co. (2317), assember of Apple Inc. (AAPL)’s iPhone and iPad, dropped by the daily limit in Taipei trading after posting profit that missed the average estimate of 10 analysts by 31 percent. The stock price fell 7 percent to NT$92.40 as of 10:27 a.m., the biggest intraday decline since December 2008. The benchmark Taiex (TWSE) index lost 0.7 percent.
  • Oil Slips From Near Four-Week High; Hedge Funds Cut Bullish Bets. Oil slid from the highest close in almost four weeks, trimming a monthly gain, as investors speculated that recent price gains may be unsustainable. Futures fell as much as 0.3 percent after climbing for a second week. Oil’s advance halted after it failed to surpass its 50-day moving average, a technical resistance level at which traders typically sell. Hedge funds cut bullish crude bets last week, the Commodity Futures Trading Commission said. Output by the Organization of Petroleum Exporting Countries climbed to the highest level in more than three years in April. A report this week may show U.S. employment rose this month. Crude for June delivery fell as much as 27 cents to $104.66 a barrel on the New York Mercantile Exchange and was at $104.69 at 11:11 a.m. Sydney time. The contract advanced 38 cents, or 0.4 percent, to $104.93 on April 27, the highest close since April 2. Prices are 1.6 percent higher this month and up 6 percent this year.

Wall Street Journal:
  • Falcone Agrees To Step Aside. Hedge-fund manager Philip Falcone agreed to step aside eventually as the public face of his LightSquared Inc. venture, a concession that may keep the wireless-telecommunications company from defaulting on its debt, people familiar with the negotiations said. Mr. Falcone's compromise is expected to prompt LightSquared's lenders to approve a one-week extension on a debt-term violations waiver that expires Monday morning, the people said.
  • Warren Stephens: How Big Banks Threaten Our Economy. We should promote competition and innovation in the financial industry, not protect an oligopoly.
Business Insider:
Zero Hedge:

CNBC:

Forbes:

CNN:

  • Hedge Funds Bet Against Eurozone. Hedge fund managers make for unlikely supporters of Fran├žois Hollande, the French socialist presidential candidate. But it is Mr Hollande's potential victory in the coming second round of the French elections, and with it a sharp deterioration in sentiment surrounding France's creditworthiness in the bond market, that many hedge funds are now anticipating. Indeed, their bets against the bonds of "core" eurozone countries -- not just France, but Germany and the Netherlands too -- represent a new, deeper level of bearishness on the single currency area's prospects. The European Central Bank's longer-term refinancing operation provided a huge shot in the arm to banks and markets in the first quarter of the year and triggered a huge rally in credit. But its impact is now being questioned by growing numbers of hedge funds. "The deeper balance of payments problems in the eurozone remain unresolved, and cannot be resolved by liquidity assistance alone," noted Brevan Howard, Europe's biggest global macro hedge fund in its last letter to investors.

ABC News:

Real Clear Politics:

Financial Times:
  • German Banks Rein In Exposure To Spain. The aftermath of Spain’s property boom is providing a reminder that German banks have not been far away from some of the frothiest lending of banking’s bubble years.
The Telegraph:
  • Hollande's 'Growth Bloc' spells end of German hegemony in Europe. The French-led counter-attack and rumblings of revolt through every branch of the EU institutions last week have brought this aberrant phase of the eurozone crisis to an abrupt end. "It’s not for Germany to decide for the rest of Europe," said Fran├žois Hollande, soon to be French leader, unless he trips horribly next week. Strong words even for the hustings. "If I am elected president, there will be a change in Europe's construction. We’re not just any country: we can change the situation," he said.
  • Spain's woes to deepen as it double-dips into recession. Spain is set to officially confirm that it fell back into recession in the first quarter of the year, marking the beginning of what is expected to be another rocky week for the ailing eurozone economy.
BBC:
ABC:
  • A Spanish decision to leave the euro would be positive for the country, according to a third of people polled for a survey. About 54% said a Spanish exit would be negative compared with 33.5% who would view it as economically positive, according to a DYM survey.

JoongAng Ilbo:

  • The U.S. expects North Korea may conduct a third nuclear test as early as this week, citing a person familiar with the issue in Washington D.C.
The Economic Times:
Weekend Recommendations
Barron's:
  • Made positive comments on (EBAY), (TMO), (CMVT) and (ORCL).
Night Trading
  • Asian indices are -.25% to +.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 163.0 -4.0 basis points.
  • Asia Pacific Sovereign CDS Index 136.50 unch.
  • FTSE-100 futures +.17%.
  • S&P 500 futures +.12%.
  • NASDAQ 100 futures +.16%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (WPI)/1.59
  • (NYX)/.48
  • (HUM)/1.54
  • (MCK)/2.06
  • (FLS)/1.61
  • (JEC)/.74
  • (PCL)/.24
  • (SPF)/.00
  • (APC)/.83
  • (WMS)/.42
  • (CNA)/.68
  • (L)/.89
Economic Releases
8:30 am EST
  • Personal Income for March is estimated to rise +.3% versus a +.2% gain in February.
  • Personal Spending for March is estimated to rise +.4% versus a +.8% gain in February.
  • The PCE Core for March is estimated to rise +.2% versus a +.1% gain in February.

9:45 am EST

  • The Chicago Purchasing Manager Index for April is estimated to fall to 60.5 versus a reading of 62.2 in March.

10:30 am EST

  • Dallas Fed Manufacturing Activity for April is estimated to fall to 8.0 versus 10.8 in March.

Upcoming Splits

  • (SCVL) 3-for-2
  • (ASUR) 3-for-2
Other Potential Market Movers
  • The Spain Q1 GDP report, NAPM-Milwaukee for April and the RBC Capital Financial Institutions 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 mixed. The Portfolio is 75% net long heading into the week.

Sunday, April 29, 2012

Weekly Outlook

U.S. Week Ahead by MarketWatch (video).
Wall St. Week Ahead by Reuters.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week mixed as rising global growth fears, less US economic optimism, Eurozone debt angst and high energy prices offset short-covering, mostly positive earnings reports and investor performance angst. My intermediate-term trading indicators are giving mostly bullish signals and the Portfolio is 75% net long heading into the week.

Saturday, April 28, 2012

Market Week in Review


S&P 500 1,403.36 +1.80%*

Photobucket

The Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*


Indices

  • S&P 500 1,403.36 +1.80%
  • DJIA 13.228.31 +1.53%
  • NASDAQ 3,069.20 +2.29%
  • Russell 2000 825.47 +2.66%
  • Value Line Geometric(broad market) 366.64 +2.03%
  • Russell 1000 Growth 665.50 +1.99%
  • Russell 1000 Value 685.58 +1.67%
  • Morgan Stanley Consumer 811.02 +.78%
  • Morgan Stanley Cyclical 990.60 +1.50%
  • Morgan Stanley Technology 706.21 +2.44%
  • Transports 5,267.39 +.63%
  • Utilities 469.46 +1.89%
  • Bloomberg European Bank/Financial Services 76.56 +1.12%
  • MSCI Emerging Markets 42.24 -.23%
  • Lyxor L/S Equity Long Bias 1,021.44 -.88%
  • Lyxor L/S Equity Variable Bias 814.66 -.61%
  • Lyxor L/S Equity Short Bias 539.09 unch.
Sentiment/Internals
  • NYSE Cumulative A/D Line 146,525 +2.32%
  • Bloomberg New Highs-Lows Index 189 +219
  • Bloomberg Crude Oil % Bulls 32.0 +39.1%
  • CFTC Oil Net Speculative Position 212,386 -.55%
  • CFTC Oil Total Open Interest 1,539,257 -1.99%
  • Total Put/Call .84 -3.45%
  • OEX Put/Call 2.01 +74.78%
  • ISE Sentiment 77.0 -31.86%
  • NYSE Arms 1.39 -1.42%
  • Volatility(VIX) 16.32 -6.42%
  • S&P 500 Implied Correlation 63.0 -4.54%
  • G7 Currency Volatility (VXY) 8.87 -8.84%
  • Smart Money Flow Index 11,147.93 +1.19%
  • Money Mkt Mutual Fund Assets $2.582 Trillion unch.
  • AAII % Bulls 27.64 -11.35%
  • AAII % Bears 37.40 +10.52%
Futures Spot Prices
  • CRB Index 305.51 +1.43%
  • Crude Oil 104.93 +.86%
  • Reformulated Gasoline 320.62 +1.68%
  • Natural Gas 2.19 +8.38%
  • Heating Oil 318.07 +1.33%
  • Gold 1,664.80 +1.31%
  • Bloomberg Base Metals Index 219.63 +3.09%
  • Copper 382.50 +3.43%
  • US No. 1 Heavy Melt Scrap Steel 402.67 USD/Ton unch.
  • China Iron Ore Spot 145.40 USD/Ton -2.02%
  • Lumber 284.70 +3.53%
  • UBS-Bloomberg Agriculture 1,513.14 +.79%
Economy
  • ECRI Weekly Leading Economic Index Growth Rate .60% -60 basis points
  • Philly Fed ADS Real-Time Business Conditions Index -.3179 +6.14%
  • S&P 500 Blended Forward 12 Months Mean EPS Estimate 110.33 +.49%
  • Citi US Economic Surprise Index -8.0 -13.0 points
  • Fed Fund Futures imply 58.0% chance of no change, 42.0% chance of 25 basis point cut on 6/20
  • US Dollar Index 78.71 -.55%
  • Yield Curve 168.0 -1 basis point
  • 10-Year US Treasury Yield 1.93% -3 basis points
  • Federal Reserve's Balance Sheet $2.849 Trillion -.31%
  • U.S. Sovereign Debt Credit Default Swap 37.0 +21.2%
  • Illinois Municipal Debt Credit Default Swap 215.0 -.85%
  • Western Europe Sovereign Debt Credit Default Swap Index 275.31 -2.56%
  • Emerging Markets Sovereign Debt CDS Index 286.94 -1.56%
  • Saudi Sovereign Debt Credit Default Swap 120.50 +1.26%
  • Iraqi 2028 Government Bonds 83.41 -.55%
  • China Blended Corporate Spread Index 628.0 -19 basis points
  • 10-Year TIPS Spread 2.27% +2 basis points
  • TED Spread 38.0 -2.0 basis points
  • 2-Year Swap Spread 30.25 unch.
  • 3-Month EUR/USD Cross-Currency Basis Swap -45.0 +2.5 basis points
  • N. America Investment Grade Credit Default Swap Index 94.76 -3.91%
  • Euro Financial Sector Credit Default Swap Index 242.17 -4.99%
  • Emerging Markets Credit Default Swap Index 253.42 -4.47%
  • CMBS Super Senior AAA 10-Year Treasury Spread 162.0 -25 basis points
  • M1 Money Supply $2.248 Trillion +.40%
  • Commercial Paper Outstanding 925.90 -.70%
  • 4-Week Moving Average of Jobless Claims 381,800 +7,000
  • Continuing Claims Unemployment Rate 2.6% unch.
  • Average 30-Year Mortgage Rate 3.88% -2 basis points
  • Weekly Mortgage Applications 697.70 -3.82%
  • Bloomberg Consumer Comfort -35.8 -4.4 points
  • Weekly Retail Sales +3.30% -30 basis points
  • Nationwide Gas $3.82/gallon -.06/gallon
  • U.S. Cooling Demand Next 7 Days 38.0% above normal
  • Baltic Dry Index 1,156 +8.34%
  • Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 40.0 +6.67%
  • Rail Freight Carloads 239,276 +2.19%
Best Performing Style
  • Small-Cap Growth +2.84%
Worst Performing Style
  • Large-Cap Value +1.67%
Leading Sectors
  • Homebuilders +6.46%
  • Road & Rail +4.69%
  • Internet +4.51%
  • Education +3.99%
  • Oil Tankers +3.90%
Lagging Sectors
  • Papers +.01%
  • Coal -.21%
  • Gaming -.32%
  • Steel -1.57%
  • HMOs -6.80%
Weekly High-Volume Stock Gainers (29)
  • CRAY, RDEA, CRUS, HZO, EXPE, SKX, GEOI, INCY, HK, HTWR, NEU, ABMD, ALGN, TKR, DFT, JJSF, TCBI, CSL, ARBA, ONXX, HVB, WPI, USNA, UMBF, ETH, PH, CGI, STMP and AVEO
Weekly High-Volume Stock Losers (31)
  • WMT, WAT, ODFL, MSM, CR, VAR, HES, K, N, LXK, INFA, HURN, VCI, CROX, ICON, ZIP, HSTM, CHRW, AKAM, NANO, RSG, IDCC, CTCT, SLAB, BIG, CRDN, NFLX, DECK, IPHI, NIHD and MDRX
Weekly Charts
ETFs
Stocks
*5-Day Change

Friday, April 27, 2012

Stocks Rising into Final Hour on Earnings Optimism, Euro Bounce, Short-Covering


Broad Market Tone:

  • Advance/Decline Line: Higher
  • Sector Performance: Mixed
  • Volume: Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 15.98 -1.60%
  • ISE Sentiment Index 74.0 -28.16%
  • Total Put/Call .84 +2.44%
  • NYSE Arms 1.23 +27.48%
Credit Investor Angst:
  • North American Investment Grade CDS Index 94.02 -2.22%
  • European Financial Sector CDS Index 242.23 -2.12%
  • Western Europe Sovereign Debt CDS Index 275.25 +.46%
  • Emerging Market CDS Index 253.02 -1.05%
  • 2-Year Swap Spread 30.25 +.5 basis point
  • TED Spread 38.0 unch.
  • 3-Month EUR/USD Cross-Currency Basis Swap -45.0 -.5 basis point
Economic Gauges:
  • 3-Month T-Bill Yield .09% unch.
  • Yield Curve 167.0 -2 basis points
  • China Import Iron Ore Spot $145.40/Metric Tonne +1.11%
  • Citi US Economic Surprise Index -8.0 -6.0 points
  • 10-Year TIPS Spread 2.27 -2 basis points
Overseas Futures:
  • Nikkei Futures: Indicating a +19 open in Japan
  • DAX Futures: Indicating +14 open in Germany
Portfolio:
  • Higher: On gains in my Tech, Medical, Biotech and Retail sector longs
  • Disclosed Trades: Covered all of my (IWM)/(QQQ) hedges and some of my (EEM) short
  • Market Exposure: Moved to 100% Net Long
BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 trades slightly higher despite Eurozone debt angst, high energy prices, rising global growth fears and less US economic optimism. On the positive side, Internet, Construction, Medical, Biotech, Retail, Homebuilding and Airline shares are especially strong, rising more than +1.0%. Tech shares have traded well throughout the day. Small-caps are outperforming. Lumber is rising +2.0% and Copper is gaining +1.4%. Major European Indices are rising around +1.0%, led by a +1.9% gain in Italy. The Bloomberg European Bank/Financial Services Index is rising +1.3%. The Germany sovereign cds is down -4.0% to 83.20 bps. Moreover, the European Investment Grade CDS Index is down -3.9% to 137.51 bps. On the negative side, Coal, Oil Service, Steel, Computer, Disk Drive and HMO shares are under meaningful pressure, falling more than -1.0%. Financial shares have lagged throughout the day again. Oil is rising +.4%, Gold is gaining +.3% and the UBS-Bloomberg Ag Spot Index is rising +.6%. Major Asian indices were mixed overnight as a +.58% gain in Korea was offset by a -.43% decline in Japan. The yen’s reaction to the BOJ’s activities overnight is a negative. The Spain sovereign cds is gaining +.6% to 475.42 bps, the China sovereign cds is rising +1.7% to 113.41 bps, the Japan sovereign cds is gaining +.97% to 95.17 bps and the Saudi sovereign cds is up +.74% to 120.5 bps. US Rail Traffic continues to soften. The Philly Fed ADS Real-Time Business Conditions Index continues to trend lower from its late-December peak despite investor perceptions that the US economy is accelerating. Moreover, the Citi US Economic Surprise Index has fallen back to early-Oct. levels. Lumber is -3.0% since its Dec. 29th high despite the better US economic data, improving sentiment towards homebuilders and the broad equity rally. Moreover, the weekly MBA Home Purchase Applications Index has been around the same level since May 2010 despite expectations for a strong spring home selling season. The Baltic Dry Index has plunged around -50.0% from its Oct. 14th high and is now down around -35.0% ytd. China Iron Ore Spot has plunged -19.7% since Sept. 7th of last year. Shanghai Copper Inventories are still near their recent all-time high and have risen +634.0% ytd. China's March refined-copper imports fell -8.0% on the month. Singapore Electronics exports decelerated to a gain of +2.8% in March from a +23.3% gain in February. The 10Y T-Note continues to trade too well, despite the big surge in the US sovereign credit default swap, and the euro currency can't sustain a bounce. The equity market seems even more inefficient than usual of late. The huge moves higher in certain key large-cap stocks on earnings reports that were good, but not that surprising, are a big psychological plus for the bulls. US stocks remain extraordinarily resilient, however breadth and volume remain lackluster. Despite a +1.6% gain for the S&P 500 for the week, Coal, Alt Energy, Steel, Paper, Networking, HMO, Gaming, Airline, Restaurant and Software shares were flat-to-lower on the week. As well, Asian stocks have not participated in recent US gains, which is another red flag. In my opinion, the Fed's QE has been a major reason that the US “recovery” has been very sluggish. However, most investors are convinced otherwise and continue to believe that another round is just around the corner. There remains a fairly high level of complacency among US investors regarding the rapidly deteriorating situation in Europe, in my opinion. As I have been warning for a couple of weeks, I still believe more European bank/sovereign downgrades are on the horizon. As long as Europe can hold off another disorderly decline in credit/economic growth, Asia remains stable and until the US “fiscal cliff” begins to be a focus of investors, select US stocks will likely work higher. However, in the second half of the year these issues will likely be of intense focus. One of my longs, (TFM), is testing its recent record high. I still see substantial outperformance for the shares over the intermediate-term.For the recent equity advance to regain traction, I would expect to see further European credit gauge improvement, a further subsiding of hard-landing fears in key emerging markets, a rising 10-year yield, better volume, stable-to-lower energy prices and higher-quality stock market leadership. I expect US stocks to trade mixed-to-lower into the close from current levels on Eurozone debt angst, less US economic optimism, high energy prices, rising global growth fears, weakness in some key market leaders and less financial sector optimism.

Bear Radar


Style Underperformer:

  • Mid-Cap Value +.01%
Sector Underperformers:
  • 1) Disk Drives -2.92% 2) HMOs -2.91% 3) Coal -2.05%
Stocks Falling on Unusual Volume:
  • WDC, KEG, NUS, STX, WCG, CNC, PG, PTEN, MXWL, NANO, SIMO, DECK, HMSY, CTCT, ITMN, ABFS, BJRI, INFA, SBUX, SYNA, VPRT, HBHC, QLIK, RSG, NVO, LEG, CVH, GT, FPO, IDCC, AET, WM, AXL, PFG, N, SYNA and RSG
Stocks With Unusual Put Option Activity:
  • 1) DECK 2) ALL 3) LO 4) DNKN 5) CALL
Stocks With Most Negative News Mentions:
  • 1) MDRX 2) DECK 3) LEG 4) SBUX 5) GT
Charts:

Bull Radar


Style Outperformer:
  • Large-Cap Growth +.35%
Sector Outperformers:
  • 1) Internet +2.32% 2) Communications +1.12% 3) Homebuilding +1.10%
Stocks Rising on Unusual Volume:
  • AMZN, CRAY, NWL, ORLY, EXPE, CRBC, JAZZ, CPTS, WCRX, SAIA, WOOF, CPSI, CALL, ARBA, CERN, TRIP, SWKS, MOG, MAG, AEM, RMD, CODE, OIS, SHFL, MXIM, VCI, TRW, SPN, RNF, LL, ASGN and RYL
Stocks With Unusual Call Option Activity:
  • 1) XCO 2) DECK 3) GNW 4) AMZN 5) CSTR
Stocks With Most Positive News Mentions:
  • 1) MXIM 2) EXPE 3) UPS 4) AMZN 5) PG
Charts:

Thursday, April 26, 2012

Friday Watch


Night Trading

  • Asian equity indices are -.25% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 167.0 +5.5 basis points.
  • Asia Pacific Sovereign CDS Index 136.50 +2.0 basis points.
  • FTSE-100 futures +.03%.
  • S&P 500 futures -.38%.
  • NASDAQ 100 futures -.07%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (AXL)/.63
  • (B)/.44
  • (CVX)/3.22
  • (COV)/1.03
  • (F)/.36
  • (GT)/.09
  • (IP)/.51
  • (MRK)/.98
  • (NWL)/.31
  • (NEM)/1.14
  • (PG)/.93
  • (SPG)/1.67
  • (SUP)/1.25
  • (VFC)/1.87
  • (WY)/.00
Economic Releases
8:30 am EST
  • The 1Q Employment Cost Index is estimated to rise +.5% versus a +.4% gain in 4Q.
  • Advance 1Q GDP is estimated to rise +2.5% versus a +3.0% gain in 4Q.
  • Advance 1Q Personal Consumption is estimated to rise +2.3% versus a +2.1% gain in 4Q.
  • Advance 1Q GDP Price Index is estimated to rise +2.1% versus a .9% gain in 4Q.
  • Advance 1Q Core PCE is estimated to rise +2.1% versus a +1.3% gain in 4Q.

9:55 am EST

  • Final Univ. of Mich. Consumer Confidence for April is estimated at 75.7 versus a prior estimate of 75.7.

Upcoming Splits

  • (SCVL) 3-for-2

Other Potential Market Movers

  • The Italian bond auction and the BOJ rate announcement could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and technology shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

Stocks Rising into Final Hour on Euro Bounce, Tech Sector Optimism, Short-Covering

Broad Market Tone:
  • Advance/Decline Line: Higher
  • Sector Performance: Most Sectors Rising
  • Volume: Below Average
  • Market Leading Stocks: Outperforming
Equity Investor Angst:
  • VIX 16.15 -3.98%
  • ISE Sentiment Index 105.0 -6.25%
  • Total Put/Call .80 +9.59%
  • NYSE Arms 1.03 +16.39%
Credit Investor Angst:
  • North American Investment Grade CDS Index 96.19 -1.44%
  • European Financial Sector CDS Index 247.0 +.16%
  • Western Europe Sovereign Debt CDS Index 274.0 -.25%
  • Emerging Market CDS Index 255.63 -1.29%
  • 2-Year Swap Spread 29.75 +.75 basis point
  • TED Spread 38.0 unch.
  • 3-Month EUR/USD Cross-Currency Basis Swap -44.50 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .09% unch.
  • Yield Curve 169.0 -2 basis points
  • China Import Iron Ore Spot $143.80/Metric Tonne -1.98%
  • Citi US Economic Surprise Index -2.0 -1.9 points
  • 10-Year TIPS Spread 2.29 +2 basis points
Overseas Futures:
  • Nikkei Futures: Indicating a +63 open in Japan
  • DAX Futures: Indicating +46 open in Germany
Portfolio:
  • Higher: On gains in my Tech, Medical, Biotech and Retail sector longs
  • Disclosed Trades: Covered all of my (IWM)/(QQQ) hedges and some of my (EEM) short, then added them back
  • Market Exposure: 75% Net Long

Today's Headlines


Bloomberg:
  • Merkel Steps Up Defense of Budget Agenda, Targets Excessive Debt. Chancellor Angel Merkel stepped up her budget-cutting message in the face of rising criticism of Germany’s focus on austerity, saying that excessive debt robs states of their ability to make independent decisions. Referring to euro-area countries shouldered with too much debt, Merkel told supporters in the northern German state of Schleswig-Holstein that certain nations had themselves brought on austerity by spending more than they raised in revenue. Too much debt “harms countries’ ability to make their own decisions, so that they’re more and more dependent on the markets, and have to step up savings and make harsher cuts,” Merkel told a campaign rally today in Flensburg on the Danish border. Schleswig-Holstein holds an election on May 6. Merkel stressed her defense of consolidating budgets as the best way to resolve the two-year-old debt crisis even as the focus in Europe shifts away from austerity to promoting economic growth.
  • Spain Yields at 6% Show Bank, Economy Risk: Euro Credit. As Spain’s recession undermines efforts to cut the deficit, the risk of bank losses is keeping 10-year yields at almost 6 percent as investors speculate the government will be forced to bail out the financial system. The nation’s 10-year borrowing costs have climbed about 70 basis points this year as Prime Minister Mariano Rajoy struggles to convince investors he can control public finances amid soaring unemployment and a contracting economy. Banks threaten to disrupt the premier’s efforts as bad loans reach the highest levels in almost two decades. “Spain is likely to need support in both the banking and government sectors,” said Jamie Stuttard, head of international bond portfolio management at Fidelity Investments, which has $1.2 trillion of assets. “Government bond market developments hold the key.”
  • Anti-Euro Le Pen's Gain Spooks Overseas French Investors. Pierre Mouton, a fund manager at Notz Stucki & Cie. in Geneva, looks at the rise of anti- European, anti-austerity parties across the border in France with concern. It may keep him out of the country’s stock market. “We’re cautious on French stocks,” Mouton, whose firm manages $7.5 billion and has been reducing its holdings in France, said in an interview. “If the new president breaks under pressure from these groups, stocks will suffer. We prefer not to take that risk.”
  • Oil Rises to One-Week High. “The dollar is down, which is helping most of the commodities,” said Phil Flynn, an analyst at futures brokerage PFGBest in Chicago. Crude oil for June delivery rose 32 cents, or 0.3 percent, to $104.44 a barrel at 12:37 p.m. on the New York Mercantile Exchange. Futures touched $104.92, the highest level since April 17. Prices are up 5.7 percent this year. Brent oil for June settlement increased 45 cents, or 0.4 percent, to $119.57 a barrel on the London-based ICE Futures Europe exchange.
  • Consumer Comfort in U.S. Falls by the Most in More Than a Year. Consumer confidence in the U.S. dropped last week by the most in more than a year as perceptions of personal finances and the buying climate dimmed. The Bloomberg Consumer Comfort Index fell to minus 35.8 in the period to April 22 from minus 31.4 the previous week, the biggest decline since March 2011. A gauge of the buying climate decreased to a two-month low, and a measure of household financial wherewithal fell by the most since September.
  • Pending Sales of U.S. Existing Home Increased 4.1% in March. Signed contracts to buy U.S. homes rose more than forecast in March as low interest rates drew buyers back into the market. The index of pending home purchases rose 4.1 percent to 101.4, the highest level since April 2010, after a 0.4 percent gain in February that was revised from a previously estimated 0.5 percent drop, the National Association of Realtors reported today in Washington. The median forecast of 43 economists surveyed by Bloomberg News called for a 1 percent rise in the measure, which tracks contracts on previously owned homes.
  • Gold Climbs on Jobless Claims. Gold rose the most in two weeks on speculation that the Federal Reserve may increase stimulus measures to bolster the U.S. economy after more Americans than forecast filed applications for unemployment benefits last week. “The job market is softening, and the Federal Reserve may be forced to look at some form of easing,” James Cordier, portfolio manager at OptionSellers.com in Tampa, Florida, said in a telephone interview. “Investors have started pricing that in.” Gold futures for June delivery rose 0.7 percent to $1,653.80 an ounce at 9:33 a.m. on the Comex in New York. A close at that price would mark the biggest gain for a most- active contract since April 12. Before today, the precious metal gained 4.8 percent this year.
  • Providence Said Selling Hulu Stake at $2 Billion Value. Hulu.com owners Walt Disney Co. (DIS), Comcast Corp. (CMCSA) and News Corp. (NWSA) are close to buying out Providence Equity Partners Inc.’s stake at a price that values the company at $2 billion, said two people with knowledge of the matter. Providence is selling its 10 percent share in Hulu for $200 million after investing $100 million when the venture began in 2007, according to the people, who weren’t authorized to talk publicly.
  • Fed Sells CDOs From AIG Rescue to Barclays(BCS), Deutsche Bank(DB). The Federal Reserve Bank of New York said it sold $7.5 billion of collateralized debt obligations linked to commercial mortgages to Barclays Plc and Deutsche Bank AG. The joint winning bid “represents good value for the public and significantly exceeds the original price” the central bank paid for the assets, New York Fed President William C. Dudley said today in a statement on the regional bank’s website.
  • Banks Likely to Cut Pay, Staff, Boston Consulting Says. Investment banks, faced with a weak industry outlook, probably will reduce the amount of revenue set aside for pay and should cut 20 percent to 30 percent of managers, according to Boston Consulting Group Inc.
Wall Street Journal:
  • Sympathy for the Devils May Be Running Short at Goldman(GS). A few years ago, Mick Jagger was asked why the Rolling Stones were about to embark on one of their gray-haired, past-their-prime tours with big beer-company sponsorships and pricey tickets. "Is it about the money?" the questioner said. Without missing a beat, Mr. Jagger replied: "It's always been about the money."
  • Appetite Is Back for AIG Bonds. Two bundles of bonds that once helped sicken American International Group Inc.(AIG) now have Wall Street salivating.
  • FDA Plans ID-Tag System to Detect Faulty Devices. The Food and Drug Administration is devising a new system for detecting malfunctions in medical devices that will tap medical and billing records from hospitals and insurance companies. The system is designed to catch malfunctioning devices like the St. Jude Medical Inc. heart defibrillator wires recently linked to at least 20 deaths. The agency wants to assign a new bar-code-like identification number to medical devices. It would use that number to search large databases of records that could include veterans' and other hospitals, as well as large insurance companies.
CNBC.com:
Business Insider:
Zero Hedge:

Wall Street Pit:

Telegraph:

  • China's Property Boom Has Peaked, Forever. Here is some food for thought, if you are a China "take-over-the-world" bull. I have just been listening to a talk on the Chinese housing market by Xianfang Ren, Beijing analyst for IHS Global Insight. Land sales make up 30pc of total tax revenue for the central government and 70pc for local government. (For those of us who watched the Irish state balloon on the back of property taxes – when they had a fat budget surplus – this has a familiar ring.) Construction makes up 10pc of total jobs, and a further 20pc indirectly in cement, steel, metallurgy etc. The government is building 36m homes for the poor, but that will start to run down in two years or so. Residential investment typically peaks at 8pc to 9pc of GDP for emerging nations during their catch-up growth spurts. It is already 12pc in China. Japan’s ratio peaked in 1973, long before the property price bubble burst. China has almost certainly peaked too on this crucial measure.
  • Europeans Will Never Accept a Federal Banking System. The latest crackpot idea for shoring up Europe's monetary union, much discussed at last week's spring meeting of the International Monetary Fund and now widely promoted by eurocrats, is the establishment of a federal banking system, with a single framework for regulation, bailouts, deposit insurance, supervision and resolution.

Europa:

  • EU Sues Italy Over Rules on Energy Performance of Buildings. Buildings are responsible for around 40% of energy consumption and 36% of the CO2 emissions in the European Union. The European legislation aims to achieve a significant reduction in the energy consumption of buildings, thus helping to combat climate change and strengthen the EU’s energy security. Large energy savings will also enable households to drastically reduce their bills. It is therefore essential that Member States fully apply this legislation.

Bear Radar


Style Underperformer:

  • Mid-Cap Value +.55%
Sector Underperformers:
  • 1) HMOs -1.69% 2) Networking -1.38% 3) Coal -1.26%
Stocks Falling on Unusual Volume:
  • ISIL, ATMI, AET, GG, AZN, DOW, FURX, HURN, AKAM, MFRM, NIHD, ODFL, CROX, IDCC, SCSS, CELG, ITRI, LSTR, YNDX, CHRW, VCI, VAR, HRB, AZN, CAB, BC, BG, HP, TPX, LVS, BWA, SPPI, TRN, NUS, KMT and GGG
Stocks With Unusual Put Option Activity:
  • 1) HRB 2) KLAC 3) AKAM 4) CTXS 5) THOR
Stocks With Most Negative News Mentions:
  • 1) HES 2) XOM 3) HRB 4) BMY 5) PCS
Charts:

Bull Radar


Style Outperformer:
  • Small-Cap Growth +.44%
Sector Outperformers:
  • 1) Education +4.44% 2) Computer Hardware +1.47% 3) Semis +1.31%
Stocks Rising on Unusual Volume:
  • NRGY, CRUS, COG, XLNX, RDS/A, PATK, HTWR, NTGR, IFSIA, ACOM, SLAB, REGN, STRA, CTXS, EQIX, INCY, NUAN, ARRS, ORLY, BCO, SWI, AH, SKX, RYL, STMP, DFT, JAH, PMTC, WPI, VHC, TWI, EA, CRI, IPG, CLGX, OPEN and SUSQ
Stocks With Unusual Call Option Activity:
  • 1) CS 2) HUM 3) LEAP 4) CROX 5) SLM
Stocks With Most Positive News Mentions:
  • 1) CTXS 2) LVS 3) XLNX 4) AKAM 5) CCE
Charts:

Thursday Watch


Evening Headlin
es
Bloomb
erg:
  • Spanish Yields at 6% Show Risks of Banking Bailout: Euro Credit. As Spain's recession undermines efforts to cut the deficit, the risk of bank losses is keeping 10-year yields at almost 6% as investors speculate the government will be forced to bailout out the financial system. The nation's 10-year borrowing costs have climbed about 70 basis points this yer as Prime Minister Mariano Rajoy struggles to convince investors he can control public finances amid soaring unemployment and a contracting economy. Banks threaten to disrupt the premier's efforts as bad loans reach the highest levels in almost two decades. "Spain is likely to need support in both the banking and government sectors," said Jamie Stuttard, head of international bond portfolio management at Fidelity Investments, which has $1.2 trillion of assets. "Government bond market developments hold the key."
  • Swedish CDS Surge Tops Spain's as Crisis Spreads: Nordic Credit. Sweden's credit-default swaps soared more than debt derivatives for any other European government this month as Scandinavia's biggest economy succumbs to crisis contagion via its export markets. The cost of protecting Swedish debt against default rose about 36% in April, the biggest increase in western Europe. Swaps on Germany advanced 19% in the same period while the cost of protecting Spanish debt against default grew 9%.
  • Three Reasons Japan's Economic Pain Is Getting Worse. Japan’s economic problems are serious and getting worse. Foremost among them is the crushing burden of government debt. Japan’s ratio of government debt to gross domestic product, currently about 2.28, is by far the highest in the industrial world, almost double that of even Greece and Italy, and steadily growing. Already, the combined costs of interest on that debt and social security are approximately equal to total government tax revenue. Japan’s trade balance is about to go negative for the first time since 1980. Land values and Nikkei stock values have fallen to about 30 percent of 1989 levels. Now, educated young Japanese women are emigrating, Japanese companies are shifting production overseas (even to the U.S.), national politics are in gridlock (six prime ministers in the past five years), and last year Japan experienced its first mass street protests in decades. The economic troubles are symptoms of at least three sets of deeper social problems.
  • Buffett-Backed BYD Says First-Half Net May Fall Up to 95%. BYD Co. (1211), the Chinese carmaker partly owned by Warren Buffett’s Berkshire Hathaway Inc. (BRK/A), said first-half profit may fall as much as 95 percent because of reduced earnings from solar energy and mobile handsets. Net income for the six months ended June 30 may drop to between 13.8 million yuan ($2.2 million) and 68.8 million yuan, the Shenzhen-based manufacturer said in a statement to the Hong Kong stock exchange yesterday. Demand for BYD’s cars slowed after the government ended buying incentives and the popularity of its top-selling F3 sedan waned. First-quarter sales fell 8 percent on year to 108,755 vehicles, the company said. China’s total passenger-car sales fell for the first time since 2005, dropping 1.3 percent from a year earlier, as the slowing economy and rising fuel costs curbed buying. BYD blamed the forecast decline in profit mainly on a “great loss” in its solar cell business. “The whole solar industry has a tremendous amount of excess capacity,” said Theodore O’Neill, an analyst at Wunderlich Securities in New York. “If you’re in an industry that’s borderline profitless and you’re a smaller player like BYD, it’s maybe going to be worse than profitless.”
  • Is 'Fiscal Cliff' a Keynesian Topography Mistake? by Caroline Baum.
  • Brazil Puts Reach Record High on China, Europe Concern: Options. Options traders are paying record prices to protect against Brazilian equity losses as growth slows in China, its biggest trading partner, and concern increases that Europe's debt crisis will worsen. Puts priced 10% below the iShares MSCI Brazil Index Fund cost 1.38 times more than calls betting on a 10% gain, data on three-month options compiled by Bloomberg show. The price relationship known as skew rose to an all-time high of 1.42 on April 20. Contracts that profit should the ETF lose 10% by June were the most-owned, the data show.
Wall Street Journal:
  • Car Dealers Fight On. Auto Dealers Cut in 2009 Bailout Continue to Take on Constitutionality Issue. U.S. government bailouts of General Motors(GM) and Chrysler became a constitutional battleground when they were pushed through bankruptcy court in 2009. Turns out the battle isn't over just yet. More than 220 former car dealers are pressing their case that the Obama administration violated the U.S. Constitution when the car makers terminated franchise agreements while in bankruptcy restructuring.
Fox News:
  • TSA Screeners Charged in Los Angeles Drug Trafficking Probe. Two former and two current Transportation Security Administration employees have been arrested and indicted on drug conspiracy charges for allegedly allowing large amounts of cocaine and other drugs to pass through security screening at Los Angeles International Airport last year. Seven people face drug-related charges in a 22-count indictment unsealed Wednesday in Los Angeles federal court. Other charges include paying and receiving bribes by a government official.

Business Insider:

Zero Hedge:
CNBC:

NY Times:

  • Hedge Fund Managers See Tough Year for Industry. Hedge fund managers are predicting a tough year for the sector in 2012. A report by the consulting firm Rothstein Kass found about half of the 400 hedge fund managers who responded believed that 2012 would be a “a difficult or somewhat difficult” year for the industry. Almost 40 percent expressed concerns that the United States would enter a double-dip recession. Only about 32 percent of those who responded in 2011 thought it would be a rough year for hedge funds. Political and economic uncertainty, tougher requirements by the Securities and Exchange Commission and brutal competition for investment dollars are among the challenges facing the industry in 2012, said Howard Altman, co-chief executive of the Financial Services Group at Rothstein Kass. “Less people are optimistic; they’re thinking about the economy, the way the markets have behaved post-crisis, and the regulatory environment that’s facing them,” he said.

Seeking Alpha:

TechCrunch:
  • YouTube Is 27% Of Mobile Video Traffic In North America, Netflix(NFLX) Just 2%. YouTube is the largest source of mobile video traffic, according to a new report from Sandvine, and now accounts for as much as 25% of network data, and no less than 12% at any given time. The report examined traffic across a selection of Sandvine’s 200+ customers in North America, Europe, the Middle East, Africa, the Caribbean, Latin America, and the Asia-Pacific. Combined with other services like Pandora and Netflix, audio and video streaming make up more than half of mobile data traffic in North America, and it’s on track to reach 60% by 2014, the company says.
The Examiner:
  • Two Years On, Health Care Bill Is Like A Plague. Democrats are regretting the passage of the Patient Protection and Affordable Care Act. Now that we know it is nothing if not unaffordable, the act is itself the main danger from which they seek political protection and shelter. Why now? Perhaps to get a jump on things before the act is ruled unconstitutional, or before it causes even more Democrats to lose in November, or before President Romney repeals it in 2013. "I think that the manner in which the issue was dealt with ... cost Obama a lot of credibility as a leader," said Sen. James Webb, D-Va. Webb, who voted for passage and is retiring after one term, added that if Obama had gone for a small, simple measure, he could have won some Republican votes. Rep. Brad Miller, D-N.C., who is also retiring, remarked that "[w]e would all have been better off if we had dealt first with the financial system" and said Democrats wasted time and political capital creating problems that dragged the economy down. Rep. Dennis Cardoza, D-Calif., who is also retiring, said the bill should have been done in "digestible pieces," and they should have 'figure[d] how they were going to pay for the bill, and then figure[d] out what they could afford." Rep. Barney Frank, D-Mass., of all people, says the Democrats should have stopped after Scott Brown won his election. Former Rep. Artur Davis, D-Ala., who lost a gubernatorial primary after voting against it, got it right when he said "the Affordable Care Act is the single least popular piece of major domestic legislation in the past 70 years."
Rasmussen Reports:
  • Daily Presidential Tracking Poll. (graph) The Rasmussen Reports daily Presidential Tracking Poll for Wednesday shows Mitt Romney earning 49% of the vote, while President Obama attracts support from 44%. Three percent (3%) would vote for a third party candidate, while another four percent (4%) are undecided.
Reuters:
  • Xilinx(XLNX) 4th-quarter beats, sees upbeat Q1. Chipmaker Xilinx Inc posted better-than-expected quarterly results and it guided first-quarter revenue well above market estimates, signaling a faster recovery in its communications business. Shares of the company rose 8 percent in after-market trading.
  • Akamai(AKAM) forecast weak Q2, shares down. Internet content delivery company Akamai Technologies Inc's outlook for second-quarter profit fell short of analysts' estimates, sending its shares down 10 percent in aftermarket trade.
Telegraph:
  • Europe Faces Japan Syndrome as Credit Demand Implodes. (graph) Europe (minus Germany) looks more like post-bubble Japan each month. The long-feared credit crunch has mutated instead into a collapse in DEMAND for loans. Households and firms are comatose, or scared stiff, in a string of countries. Demand for housing loans fell 70pc in Portugal, 44pc in Italy, and 42pc in the Netherlands in the first quarter of 2012. Enterprise loans fell 38pc in Italy. The survey took place in late March and early April, and therefore includes the second of Mario Draghi’s €1 trillion liquidity infusion (LTRO). The ECB said net demand for loans had fallen "to a significantly lower level than had been expected in the fourth quarter of 2011, with the decline driven in particular by a further sharp drop in financing needs for fixed investment." Demand fell 43pc for household loans, and 30pc for non-bank firms.
Evening Recommendations
  • None of note
Night Trading
  • Asian equity indices are -.25% to +.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 161.50 -4.5 basis points.
  • Asia Pacific Sovereign CDS Index 134.50 -1.25 basis points.
  • FTSE-100 futures -.03%.
  • S&P 500 futures +.10%.
  • NASDAQ 100 futures +.11%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (OXY)/1.92
  • (LMT)/1.71
  • (ESI)/2.12
  • (MWW)/.02
  • (LLL)/1.87
  • (XOM)/2.08
  • (PHM)/-.03
  • (DOW)/.59
  • (GR)/1.64
  • (STRA)/2.09
  • (VMC)/-.44
  • (CRI)/.41
  • (LIZ)/-.12
  • (HOT)/.52
  • (WHR)/1.08
  • (AET)/1.40
  • (BG)/1.17
  • (MO)/.49
  • (ZMH)/1.30
  • (ABC)/.81
  • (CME)/4.00
  • (CL)/1.24
  • (CNX)/.58
  • (BMY)/.64
  • (CELG)/1.13
  • (UPS)/1.01
  • (K)/.99
  • (EXPE)/.14
  • (KLAC)/1.10
  • (WDC)/1.53
  • (MET)/1.29
  • (CERN)/.50
  • (SBUX)/.39
  • (CSTR)/1.39
  • (MXIM)/.28
  • (DECK)/.25
  • (MHS)/.99
Economic Releases
8:30 am EST
  • Initial Jobless Claims are estimated to fall to 375K versus 386K the prior week.
  • Continuing Claims are estimated to fall to 3293K versus 3297K prior.

10:00 am EST

  • Pending Home Sales for March are estimated to rise +1.0% versus a -.5% decline in February.

11:00 am EST

  • The Kansas City Fed Manufacturing Activity Index for April is estimated to fall to 7.0 from 9.0 in March.

Upcoming Splits

  • None of note

Other Potential Market Movers

  • The Chicago Fed National Activity Index, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report, (CBRL) Analyst Day and the 7-Year Treasury-Note Auction could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and technology shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.