Today's Market Take:
Broad Market Tone:
- Advance/Decline Line: Modestly Higher
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- ISE Sentiment Index 101.0 -36.0%
- Total Put/Call .84 -6.67%
Credit Investor Angst:
- North American Investment Grade CDS Index 74.91 -1.91%
- European Financial Sector CDS Index 145.66 -4.79%
- Western Europe Sovereign Debt CDS Index 94.33 unch.
- Emerging Market CDS Index 229.30 -1.09%
- 2-Year Swap Spread 13.75 unch.
- 3-Month EUR/USD Cross-Currency Basis Swap -17.75 +.25 bp
Economic Gauges:
- 3-Month T-Bill Yield .05% unch.
- China Import Iron Ore Spot $134.10/Metric Tonne unch.
- Citi US Economic Surprise Index -1.7 +3.6 points
- 10-Year TIPS Spread 2.34 -2 basis points
Overseas Futures:
- Nikkei Futures: Indicating +29 open in Japan
- DAX Futures: Indicating +21 open in Germany
Portfolio:
- Slightly Higher: On gains in my retail/tech sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back
- Market Exposure: 50% Net Long
Bloomberg:
- Euro-Area Unemployment Increases to Record 12.1% Amid Recession. The euro-area jobless rate rose to a record in March, increasing
pressure on the European Central Bank to take additional measures to
boost growth. The euro-area unemployment rate advanced to 12.1
percent from 12 percent in the previous two months, the European
Union’s
statistics office in Luxembourg said today. That’s in line with the
median of 31 economists’ estimates in a Bloomberg News survey. Soaring
unemployment “cannot be ignored, because this is the biggest
fragmentation that is happening in Europe,” ECB Vice President Vitor
Constancio said on April 25. “It’s even worse in what regards youth
unemployment.” Today’s report showed that 19.2 million people were
jobless in the euro area in
March, up 62,000 from the previous month. Youth unemployment was at 24
percent.
- German Unemployment Climbs in Sign Economic Recovery Delayed.
German unemployment rose for a second month in April, adding to signs
that Europe’s largest economy is struggling to recover from a slump at
the end of last year. The number of people out of work climbed a
seasonally adjusted 4,000 to 2.94 million, the Nuremberg-based Federal
Labor Agency said today. Economists predicted an increase of 2,000,
according to the median of 29 estimates in a Bloomberg News survey. The
adjusted jobless rate held at 6.9 percent, just above a two-decade low of 6.8 percent.
- Slovenia Bank Rescue at 20% of GDP Means No Escaping EU Aid. Slovenia, the first former
Communist nation in the euro zone, is facing a typically
capitalist dilemma: whether to protect creditors of big banks. Rising loan losses resulting from a housing bust and a
second recession in two years have left a hole of about 7.5
billion euros ($9.8 billion) at Slovenia-based lenders,
investment bank Keefe Bruyette & Woods estimates. That’s a lot
for a 35 billion-euro economy: A bank bailout would push
government debt above 70 percent of economic output. Even after a successful domestic debt sale two weeks ago,
the country may need assistance from the European Union, and
holders of bank bonds, including the most senior creditors,
could be forced to take losses, according to Raoul Ruparel, head
of research at London-based Open Europe. Such a bail-in, which
would be the second in the euro zone, after Cyprus, risks
deepening divergence in the monetary union by keeping borrowing
costs higher in economically weak nations.
- Fiat Industrial Cuts 2013 Goals on Iveco Europe Truck Sales. Fiat Industrial SpA (FI), the truck and
tractor maker spun off from car manufacturer Fiat SpA (F) in 2011,
cut earnings and sales targets for 2013 as a recession in Europe
led to a first-quarter loss at the Iveco vehicle unit. Revenue will rise as much as 4 percent, compared with a
previous forecast of 5 percent, Turin, Italy-based Fiat
Industrial said today in a statement. The trading profit margin
will amount to 7.5 percent to 8.3 percent of revenue, versus an
earlier range prediction of 8.3 percent to 8.5 percent. Amid a recession in the 17 countries sharing the euro,
demand for commercial vehicles in Europe fell for a 15th
consecutive month in March. MAN SE (MAN), the region’s third-largest
producer, lowered its earnings forecast for 2013 on April 26
because of the contraction. Industrywide first-quarter sales of
trucks weighing more than 3.5 tons dropped 17 percent to 64,198
vehicles, according to the ACEA trade group. “The news is clearly negative and not discounted,” said
Gabriele Gambarova, an analyst at Banca Akros in Milan. “Iveco
encountered more difficult market conditions.” Fiat Industrial dropped as much as 5.1 percent to 8.59
euros, the biggest intraday decline since March 19, and was
trading down 4.7 percent at 4:20 p.m. in Milan, valuing the
manufacturer at 10.5 billion euros.
- European Stocks Fall, Trimming 11th Straight Monthly Gain. European
stocks declined, paring an 11th straight month of gains, as a report
showed business activity in the U.S. unexpectedly shrank this month.
Lonmin Plc tumbled 5.7 percent after shuttering a South African
platinum furnace. Fiat Industrial SpA sank the most in 11 months after
cutting its 2013 earnings target. UBS (UBSN) AG surged the most in six
months as profit exceeded analysts’ projections. Deutsche Bank AG
rallied the most since September after Germany’s largest lender
announced plans to raise as much as
$6.5 billion in capital.
- IBM(IBM) Raises Dividend 12%, Adds $5 Billion in Stock Buybacks.
International Business Machines Corp. (IBM), the biggest
computer-services company, boosted its dividend 12 percent and approved
$5 billion in stock buybacks, rewarding investors after a disappointing
earnings report. The dividend of 95 cents a share will be payable on
June 10 to shareholders of record on May 10, IBM said today from its
annual meeting in Huntsville, Alabama. With the additional
buyback funds, IBM has $11.2 billion in its repurchase program.
- Yellen Has the Right of First Refusal at Fed, Meyer Says. Federal Reserve Vice Chairman Janet Yellen has the “right of first refusal” to become the next
leader of the central bank when Ben S. Bernanke’s term ends in
January, said former Fed governor Laurence Meyer. Meyer, speaking at
a Bloomberg Link panel in Washington, said it’s “a bit surprising” that
Bernanke couldn’t manage his calendar to allow him to take part in this
year’s Fed conference in Jackson Hole, Wyoming.
- Dollar Drops on Weak Data as Fed Meets; Euro Gains on ECB Bets. The dollar fell versus most major
peers as business activity in the U.S. unexpectedly shrank for
the first time in more than three years amid bets the Federal
Reserve won’t slacken its bond buying under quantitative easing.
- Copper Users Press London Exchange to Reduce Warehouse Backlogs. A group of industrial copper users
is pressing the London Metal Exchange to reduce growing queues
at warehouses that they say are contributing to supply
constraints and rising fees.
Fox News:
- Obama walks back 'red line' stance on Syrian government using chemical weapons. President Obama, who earlier said use of chemical weapons by Syria on
its people would be a “red line” requiring action by the U.S., walked
the stance back on Tuesday, saying he needs more information on the
reported attacks before responding.
- Special forces could've responded to Benghazi attack, whistle-blower tells Fox News.
A military special ops member who watched as the deadly attack on the
U.S. Consulate in Benghazi unfolded last September told Fox News the
U.S. had highly trained forces just a few hours away, and said he and
others feel the government betrayed the four men who died in the attack.
Speaking on condition of anonymity, and appearing in a Fox News
Channel interview with his face and voice disguised, the special
operator contradicted claims by the Obama administration and a State
Department review that said there wasn’t enough time for U.S. military
forces to have intervened in the Sept. 11 attack in which U.S.
Ambassador to Libya Chris Stevens, an embassy employee and two former
Navy SEALs working as private security contractors were killed. “I know for a fact that C-110, the EUCOM CIF, was doing a training
exercise in … not in the region of North Africa, but in Europe,” the
operator told Fox News' Adam Housley. “And they had the ability to act
and to respond.”
CNBC:
- The Fed Is Destroying Jobs: Ken Griffin. Ken Griffin, the head of the Chicago-based hedge fund Citadel, is not at all pleased with Ben Bernanke.
According to Griffin, low interest rates have encouraged businesses to
invest in technology that reduces the demand for human labor. Meanwhile,
health care reforms have increased the cost of human capital—so it's a
double whammy.
- Sex Superbug Could Be 'Worse Than AIDS'.
Zero Hedge:
Business Insider:
Reuters:
- Cummins(CMI) profit drops sharply, shares tumble 5 pct. Cummins Inc reported a sharper-than-expected drop in first-quarter earnings on Tuesday, citing weak demand for its turbines and engines, especially from the mining and oil and gas industries. The company's shares tumbled 5 percent in morning trading.
- METALS-Copper shows steepest monthly fall since last May.
- Empty shops, tight wallets threaten France with recession. French
consumers bought fewer
cars, tables and chairs, and clothes in the first part of the
year, challenging the government's pledge to steer the euro
zone's second largest economy away from recession. Consumer spending
accounts for more than half of France's output and is the motor of the
economy. It fell last year for the first time in 19 years. Record
unemployment is still pushing households to keep their wallets closed.
An unexpected rebound in March, largely due to heating staying on
through cold weather, was not enough to stop a 0.4 percent January to
March quarterly decline. The data prompted Jacques Creyssel, head of the
FCD business federation, to warn of a fresh contraction in purchasing
power
this year.
Telegraph:
Style Underperformer:
Sector Underperformers:
- 1) Gold & Silver -1.93% 2) Homebuilding -1.30% 3) Education -1.28%
Stocks Falling on Unusual Volume:
- SBS, AVEO, MPC, CIE, PFE, RIO, BBL, TNAV, LGCY, BNCL, XYL, TFX, PFMT, BWLD, PCL, MAS, CMI, EGOV, NEM, SLCA, ANV, AEIS, PBI and NUAN
Stocks With Unusual Put Option Activity:
- 1) AVEO 2) PBI 3) ESRX 4) GNW 5) NUAN
Stocks With Most Negative News Mentions:
- 1) GRMN 2) CPTS 3) PBI 4) NUAN 5) DISH
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Networking +.97% 2) Oil Tankers +.69% 3) Retail +.68%
Stocks Rising on Unusual Volume:
- UBS, IRF, DB, MPWR, SU, WAIR, OIS, HTWR, MGAM, HPY, GTLS, IVZ, DPZ, BBY, AVP, TXRH, VSH and AGCO
Stocks With Unusual Call Option Activity:
- 1) HNZ 2) LTD 3) PSX 4) NUAN 5) SIRI
Stocks With Most Positive News Mentions:
- 1) T 2) OXY 3) HTWR 4) IBM 5) CNH
Charts:
Evening Headlines
Bloomberg:
- Italy’s Letta Plans to Follow EU Budget Rules, Prepares Tax Cuts. Italian Prime Minister Enrico Letta
is heading to Berlin on his second full day in office to present
his economic growth plan to German Chancellor Angela Merkel.
The program calling for tax cuts for business, consumers
and homeowners won a confidence vote in the Italian Parliament
yesterday and garnered the approval of bond investors, who
pushed 10-year government yields to the lowest in two-and-a-half
years. Merkel and Letta will hold a press conference at 6 p.m.
and then speak over dinner.
- U.K. April Consumer Confidence Unexpectedly Declines, GfK Says.
U.K. consumer confidence unexpectedly declined in April as inflation
(UKRPCJYR) extended its run above the Bank of England’s goal, increasing
households’ concern about their personal finances. A sentiment index by GfK NOP Ltd. fell one point to minus
27, the London-based group said in a report today. Economists
had forecast no change, according to the median of 19 estimates
in a Bloomberg News survey. A gauge of how consumers see their
finances over the next year fell to minus 7 from minus 6.
- Japan-to-Korea Output Misses Estimates as Taiwan Cools. Japanese and South Korean industrial output was less than
estimates in March and Taiwan’s first-quarter growth was half the
forecast pace as weakness in global demand limits recoveries in Asian
economies. In Japan, production climbed 0.2 percent from the
previous month, the trade ministry said in Tokyo today. That was less
than the median 0.4 percent forecast in a Bloomberg News survey of 27
economists. South Korea’s output fell 2.6 percent, a separate report
showed. Taiwan’s gross domestic product rose 1.54 percent. Today’s
data add to signs of a cooling global economy after U.S. gross domestic
product rose less than forecast in the first quarter and China reported
an unexpected slowdown. “Overseas demand gathered momentum in the past few months, but the pace
of growth is moderating a bit now,” said Junko Nishioka, chief economist
at Royal Bank of Scotland Group Plc (RBS) in Tokyo and a former Bank of
Japan official. “Shipments of cars to the U.S. are slowing.”
- China
Surprise Gauge Sees Aussie Below Parity: Chart of the Day. China's
economic slowdown and falling commodity prices will help snap the
Australian dollar's record 10-month stretch above parity with its U.S.
counterpart, according to Brown Brothers Harriman. Citigroup's Economic
Surprise Index for China slid to negative -27.9, a level unseen since October, signaling actual economic
data lagged behind the median estimates in Bloomberg surveys of
analysts. "In addition to China, considering the current state of
commodity prices, I see strong demand to reduce long positions on the Aussie," said Masashi Murata, a currency stategist in Tokyo at Brown Brothers.
- Copper Set for Worst Month Since May as Demand Concern Grows. Copper
dropped, poised for the
biggest monthly decline since May, as weakness in Japanese and
South Korean industrial output added to global demand concerns. Copper
for delivery in three months on the London Metal
Exchange fell as much as 0.7 percent to $7,104 a metric ton and was at
$7,128 at 10:26 a.m. in Tokyo. The metal has retreated 5.5 percent this
month. Futures for delivery in July on the Comex were little changed
at $3.2265 per pound. Markets in China are closed through May 1 for
public holidays.
Wall Street Journal:
- Female DNA Found on Bomb in Boston. Investigators Unsure Whether Evidence Means a Woman Aided in
the Attack; Russians Allege Suspect's Ties to Jihadists. Investigators have found female DNA on at least one of the bombs used in the
Boston Marathon attacks, though they haven't determined whose DNA it is or
whether its presence means a woman helped the two brothers suspected in the
bombings, according to U.S. officials briefed on the probe. In another development, Russian officials revealed details about contacts
between the older brother and suspected Islamist radicals in the Caucasus,
including Internet exchanges that led to concerns by investigators that he was
trying to join up with jihadist fighters.
- Debt and Growth. Attacking Reinhart-Rogoff to revive the spending machine. Perhaps you've read that America's debt burden is no longer a problem.
Former White House economist Larry Summers says the U.S. should borrow
even more money today because interest rates are low, and his Keynesian
brethren are busy trying to discredit economists Kenneth Rogoff and
Carmen Reinhart for their famous claim that a country's economic growth
begins to fall when debt hits 90% of GDP. Time for Stimulus 5.0!
Fox News:
- Obama administration officials threatened whistle-blowers on Benghazi, lawyer says. At least four career officials at the State Department and the
Central Intelligence Agency have retained lawyers or are in the process
of doing so, as they prepare to provide sensitive information about the
Benghazi attacks to Congress, Fox News has learned. Victoria Toensing, a former Justice Department official and
Republican counsel to the Senate Intelligence Committee, is now
representing one of the State Department employees. She told Fox News
her client and some of the others, who consider themselves
whistle-blowers, have been threatened by unnamed Obama administration
officials. “I'm not talking generally, I'm talking specifically about Benghazi –
that people have been threatened,” Toensing said in an interview
Monday. “And not just the State Department. People have been threatened
at the CIA.”
MarketWatch.com:
CNBC:
- Flood of Easy Money Putting This Region at Risk. The risk of asset bubbles in Southeast Asia's fastest-growing emerging
economies is rising, warn economists, pointing to red flags including
surging domestic credit growth and rapidly rising property prices.
Zero Hedge:
Business Insider:
Reuters:
- Japan March retail sales fall 0.3 pct year/year. Japanese retail sales fell 0.3
percent in March from a year earlier, government data showed on
Tuesday, down for a third straight month, in a sign the economic
recovery is proceeding at a slow pace.
The fall compared with the median market forecast for a 0.6
percent annual increase.
Financial Times:
- Fed faces calls for radical reform. A
senior Republican congressman has called for everything from the gold
standard to a price level target to be on the table in a 100th
anniversary review of the Federal Reserve’s mandate. Kevin Brady, who chairs the joint economic committee, wants
Congress to appoint a bipartisan commission that could lead to a radical
change in the mandate of the world’s largest and most important central
bank.
Telegraph:
Evening Recommendations
Night Trading
- Asian equity indices are unch. to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 107.0 -4.5 basis points.
- Asia Pacific Sovereign CDS Index 87.0 -1.0 basis point.
- NASDAQ 100 futures +.02%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- The 1Q Employment Cost Index is estimated to rise +.5% versus a +.5% gain in 4Q.
9:00 am EST
- The S&P/CS 20 City MoM% SA for February is estimated to rise +.9% versus a +1.0% gain in January.
9:45 am EST
- The Chicago Purchasing Manager Index for April is estimated to rise to 52.5 versus 52.4 in March.
10:00 am EST
- Consumer Confidence for April is estimated to rise to 61.0 versus 59.7 in March.
Upcoming Splits
Other Potential Market Movers
- The Eurozone Unemployment Rate, China Government Manufacturing PMI, US Loan Officer Survey, Canada GDP report, NAPM-Milwaukee for April, weekly retail sales reports, Needham Healthcare Conference and the Barclays Retail/Consumer Discretionary Conference 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 higher and weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.
Broad Market Tone:
- Advance/Decline Line: Higher
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- ISE Sentiment Index 160.0 +41.69%
Credit Investor Angst:
- North American Investment Grade CDS Index 76.18 -2.6%
- European Financial Sector CDS Index 152.99 -3.94%
- Western Europe Sovereign Debt CDS Index 94.33 -.97%
- Emerging Market CDS Index 233.15 -2.61%
- 2-Year Swap Spread 13.75 -.5 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -18.0 -.25 bp
Economic Gauges:
- 3-Month T-Bill Yield .05% unch.
- China Import Iron Ore Spot $134.10/Metric Tonne unch.
- Citi US Economic Surprise Index -5.3 +7.1 points
- 10-Year TIPS Spread 2.36 -2 basis points
Overseas Futures:
- Nikkei Futures: Indicating +46 open in Japan
- DAX Futures: Indicating +48 open in Germany
Portfolio:
- Higher: On gains in my retail/biotech/tech/medical sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back
- Market Exposure: 50% Net Long
Bloomberg:
- Euro-Area Economic Confidence Falls More Than Forecast. Economic confidence in the euro area decreased more than
economists forecast in April as the 17- nation currency bloc struggled
to emerge from a recession and the bailout of Cyprus renewed debt-crisis
concerns. An index of executive and consumer sentiment dropped
to 88.6 from a revised 90.1 in March, the European Commission in
Brussels said today. That’s the lowest since December. Economists had
forecast a decline to 89.3, according to the median of 26 estimates in a
Bloomberg News survey. Business confidence and investor
sentiment in Germany, Europe’s largest economy, dropped more than
expected in April. European Central Bank President Mario Draghi said on
April 19 that the economic situation in the bloc hadn’t improved since
the beginning of the month. At the same time, Draghi expects the economy
to recover from a recession later this year and economists forecast
growth in the second quarter, a separate Bloomberg survey shows.
- Europe Stocks Rise on Italy, U.S. Consumer-Spending Data. European
stocks rose, pushing the Stoxx Europe 600 Index toward its longest
streak of monthly gains since 1997, as Italy formed a new government and
as U.S. consumer spending unexpectedly increased in March. Aberdeen Asset Management Plc surged to its highest price
in 12 years after increasing its dividend. Swedish Match AB
jumped the most since January 2009 after posting first-quarter
profit that beat estimates. Balfour Beatty Plc dropped to the
lowest price in 17 months after lowering its full-year profit
forecast. The Stoxx 600 advanced 0.5 percent to 297.39, its highest
level since April 2. The benchmark gauge has climbed 1.2 percent
in April, its 11th month of gains, as investors bet the region’s
central bank will cut rates and as companies reported better-
than-expected results.
- Surveillance Cameras Sought by Cities After Boston Bombs. A pedestrian who strolls through Boston’s Financial
District, an area of about 40 city blocks, can be seen by at least 233
private and public cameras. In the aftermath of the terrorist
bombing there on April 15, Boston Police Commissioner Edward Davis wants
even more cameras to boost street-level surveillance, said spokeswoman
Cheryl Fiandaca. Other cities, too, now may be spurred to expand their
systems, which security specialists said will fuel sales growth in the
$3.2 billion video surveillance industry. Such actions increase
tensions between law enforcement officials and privacy advocates, who
say they worry about Big Brother intrusions into people’s legal
activities.
- Hospital Stocks Rally as Medicare Tempers Budget Cut Blow. HCA Holdings Inc. (HCA), Tenet Healthcare Corp. (THC) and other hospital stocks rose the most in at least six months after the U.S. government proposed new Medicare payment rates that would soften the blow of federal budget cuts. HCA, the largest for-profit hospital company in the U.S., rose 5.5 percent to $40.35 at 10:59 a.m. New York time.
- Gold Futures Rise on Fed Stimulus Bets; Platinum Jumps. Gold futures for June delivery rose 1.1 percent to
$1,469.90 an ounce at 11:59 a.m. on the Comex in New York. The
price headed for the biggest monthly drop since December 2011
after entering a bear market on April 12.
CNBC:
- Bayer to Buy Birth-Control Devices Maker for $1.1 Billion. Germany's
Bayer AG has agreed to buy U.S. contraceptive devices maker Conceptus
for $1.1 billion, aiming to underpin its position as the world's largest
women's healthcare provider. Bayer, whose shares were down 2.3 percent by 0823 GMT, will launch a public
tender offer to acquire all Conceptus shares for $31.00 each in cash, in
an offer agreed with Conceptus's management, Bayer said on Monday.
- Growth Outlook Leaves Commodity Investors Cold. Investors are staying away from commodities, fearing that the worst
is yet to come after prices plunged in April on signs of slower world
economic growth. Wealth managers have been pulling money from
commodities since the start of the year, culminating in a major sell off
in April when investors dumped gold, copper and oil. Poor economic data
from China, Europe and the United States has hit global growth
forecasts, making investors reassess the demand for raw
materials.
- Pending Home Sales Tick Upward in March. Contracts to buy existing homes rose slightly in March, as a
historically low supply of for-sale listings nationwide continues to
plague the housing market. The Pending Home Sales Index from the
National Association of Realtors increased 1.5 percent month to month.
It is 7 percent higher than March 2012.
Zero Hedge:
Business Insider:
Reuters:
- North Korea holds back seven South Koreans at industrial zone. North Korea held back seven of 50 remaining South Koreans
at the suspended jointly run factory zone north of the heavily armed
border on Monday, citing last-minute checks on taxes and wages. The North withdrew its 53,000 workers from the complex this month amid spiraling tension between the two Koreas. The North had prevented South Korean workers and supplies from getting in to the zone since April 3.
- German, UK banks slam US plans to toughen capital rules. German
and British banking lobby groups on Monday slammed plans by U.S.
regulators to toughen rules on foreign banks, saying they risk
fragmenting banking supervision and causing major disruption to U.S.
bank
operations. Germany's banking association, BdB, said the push by U.S.
regulators to tighten oversight of foreign banks would put
European banks at a competitive disadvantage internationally.
- As shale booms, US crude oil exports jump to 13-yr high. U.S.
crude oil exports doubled in February to a 13-year high of 124,000
barrels per day (bpd), government data showed on Monday, as shipments of
surplus
shale crude to Canada gathered pace. Exports jumped from an average of around 60,000 bpd last
year, and have soared from less than 10,000 bpd in 2002, as
Canada's refineries increase rail or tanker deliveries, monthly
figures from the U.S. Energy Information Administration (EIA)
showed.
- Moody's: High pace of US public finance downgrades continues.
Moody's Investors Service continued to downgrade more public finance
ratings than it upgraded in the first quarter of 2013, primarily because
of cuts to California local governments, the rating agency said on
Monday. "We expect rating activity to continue to be skewed toward
downgrades over 2013 as local governments continue to struggle with
increasing pension and healthcare costs and constraints on key property
tax and state aid revenue sources," Moody's Assistant Vice President and
Analyst Eileen Hawes said in a
statement.
Telegraph:
Style Underperformer:
Sector Underperformers:
- 1) Homebuilding -.22% 2) Gaming -.20% 3) Airlines +.08%
Stocks Falling on Unusual Volume:
- SBGI, LEAP, TNAV, CX, NXST, ONB, ANW, IBKC, GWAY, AUXL, CHH, ICA, ROP, EXPE, LQDT, ANGI, SBS, EMN and BC
Stocks With Unusual Put Option Activity:
- 1) AVP 2) HK 3) TDC 4) PRU 5) THC
Stocks With Most Negative News Mentions:
- 1) EMN 2) UNP 3) GCI 4) BA 5) SYK
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Hospitals +2.61% 2) Alt Energy +2.1% 3) Oil Tankers +1.57%
Stocks Rising on Unusual Volume:
- PBR, MERU, CPTS, SINA, ACT, MDSO, WX, VRX, HCA, MCO, THC, NVDQ, HNT, ETN, SPWR, MHP, CRUS, LPNT, BIIB, SWN, AMBA, SLCA, HMA and CYH
Stocks With Unusual Call Option Activity:
- 1) HUN 2) THC 3) GPOR 4) ALL 5) CSTR
Stocks With Most Positive News Mentions:
- 1) ANF 2) STI 3) AOL 4) FLIR 5) PBR
Charts:
Weekend Headlines
Bloomberg:
- Merkel’s Party Shuns ‘Stone Age’ Greens After Tax-Raising Pledge.
Germany’s Greens party backed a
campaign platform of tax increases that members of Chancellor Angela
Merkel’s Christian Democratic bloc said rules out a coalition after
national elections in September. Delegates at a Greens party
convention in Berlin yesterday voted through plans to raise the top rate
of income tax to 49 percent for those earning 80,000 euros ($104,000) a
year or more, and to 45 percent from 42 percent above 60,000 euros.
They
also backed a “wealth levy” on the richest to pay down 100
billion euros of Germany’s state debt over 10 years.
- China Industrial Profit Growth Slows as Economic Recovery Wanes. Growth in Chinese industrial companies’ profits slowed in March, adding
to evidence the nation’s economic recovery is losing steam. Net
income increased 5.3 percent from a year earlier to 464.9 billion yuan
($75 billion), down from a 17.2 percent pace in the first two months,
the National Bureau of Statistics said on its website on April 27.
Profit in the first quarter rose 12.1 percent to 1.17 trillion yuan, it
said. China’s stocks fell for a third straight month in April amid
investor concern that the recovery in the country’s economic expansion
is losing momentum and will hurt corporate earnings. The benchmark
Shanghai Composite Index (SHCOMP) closed 1 percent lower on April 26,
the last trading day before a three- day holiday ending May 1. “Profits
are only growing in line with sales and with problems of overcapacity
and the sluggish global picture, it doesn’t bode well for a speedy
return to higher profit margins,” said Louis Kuijs, chief China
economist at Royal Bank of Scotland Group Plc in Hong Kong.
- Omega Joins Patek Philippe Seeking Growth to Offset Slower China. Patek Philippe Chairman Thierry Stern had advice for Swiss watchmakers several years ago that most rivals didn’t heed: don’t overinvest in China. Amid the
recent slowdown in China, the executive’s call has proved
prescient. Stern said everyone laughed at him when he decided to limit
sales in that market to 130 pieces a year as brands including
Omega and Cartier opened shops across the mainland. Patek is now
selling about 3 percent of the 53,000 watches it makes annually
to shops there, reserving the bulk of its production for
traditional U.S. and European markets and making Chinese
customers who want its watches travel to buy them. Stern warned
two years ago that market would slow down.
- China’s Military Says No Plates for Porsches in Crackdown. China
will ban the use of military
number plates on luxury cars, including Porsche and Bentley, in a
crackdown on abuse of vehicle management within the armed forces amid
President Xi Jinping’s campaign against corruption. The change was
ordered by the Central Military Commission, headed by Xi, and is part of
the military’s effort to reinforce discipline and protect its image,
the PLA Daily, the armed forces’ official newspaper, said in a report
yesterday. A new license system will go into force on May 1 to clamp
down on the sale and use of legal and counterfeit military
plates in order to “maintain social harmony, stability and the
reputation of the military,” the paper said. Existing plates
for all military vehicles will be canceled, it said.
- Piaget Sees China Sales Slowing as Stronger Yuan Boosts Travel. Swiss
luxury watchmaker Piaget said
its sales in China may grow less than 10 percent this year, the slowest
in eight years, as Chinese consumers take advantage of the stronger yuan
and travel overseas to buy premium goods. Piaget, which makes the
$53,000 Altiplano Skeleton 1200S, is also tempering the pace of store
openings in China, Dimitri Gouten, its Asia Pacific president, said in
an April 27 interview from Shanghai. Sales may lag the “double-digit”
growth rates since around 2005, he said. The watchmaker, which is owned
by Cie. Financiere Richemont SA (CFR), has 20 boutiques in
China and 50 points of sale in total.
- Detained U.S. Citizen to Face Verdict in N. Korean Court. North
Korea said it will hand down a verdict on a detained American citizen
accused of crimes against the state, the communist country’s official
Korean Central News Agency reported yesterday. Pae Jun Ho, who
entered North Korea’s Rason City on Nov. 3 as a tourist, will face
judgment in the Supreme Court after admitting to the charges, KCNA said,
without citing a source. Pae was involved with a Protestant Christian
religious movement, according to a Dec. 11 CNN report that identified
him as Kenneth Bae. The State Department is aware of the reports a U.S.
citizen
will face trial in North Korea, department spokeswoman Jen Psaki
said in an e-mail.
- Asian Officials Must Respond Early to Overheating Risk, IMF Says. Asian policy makers must be ready
to respond “early and decisively” to overheating risks in
their economies stemming from rapid credit growth and rising
asset prices, the International Monetary Fund said. Growth is set to
pick up gradually during the year and inflation is expected to stay
within central banks’ comfort zones, the Washington-based lender said in
a report today.
Greater exchange-rate flexibility in the region would play a
“useful role” in curbing overheating pressures and coping with
speculative capital inflows.
- Copper Declines for Second Day on U.S., China Demand Concerns. Copper dropped for a second
straight session amid concern that lower-than-forecast growth in
the U.S. and China, the world’s biggest consumers of the metal, will damp demand. Zinc and lead retreated. Copper for delivery in three months lost as much as 0.7
percent to $6,980 a metric ton on the London Metal Exchange and
was at $7,008.25 by 10:23 a.m. in Seoul. Prices slumped 2.1
percent on April 26, the most in more than a week.
- Gold Gains as Higher Physical Demand Counters Decline From ETPs. Gold advanced, trimming the worst
monthly loss since December 2011, as demand for physical metal
countered outflows from bullion-backed exchange-traded products.
Silver climbed. Bullion for immediate delivery rose as much as 0.6
percent to $1,470.40 an ounce, and traded at $1,469.60 at 9:53 a.m. in
Singapore. Gold is heading for an 8.1 percent drop in April after the
metal plunged into a bear market this month.
Wall Street Journal:
- Companies Feel Pinch on Sales in Europe. Hiding behind the profit gains of America's biggest companies is a worrying slowdown in sales growth.
U.S. companies ranging from International Business Machines Corp. to
United Technologies Corp. to 3M Co. to Xerox Corp. have missed revenue
forecasts, hurt by a combination of Europe's malaise, a stronger dollar
and sluggish consumer spending. With
earnings reports in from more than half the companies in the Standard
& Poor's 500-stock index, first-quarter revenue for the group is
expected to shrink 0.3% from a year earlier, according to Thomson
Reuters. That would cut short the sales improvement reported at the end
of last year and mark the third quarter out of the past four in which
revenues have failed to grow by 1% or more.
- Uncertainty Is the Enemy of Recovery by Bill McNabb. At Vanguard, we estimate that policy uncertainty has created a
$261 billion drag on the U.S. economy. Developing a credible, long-term solution to the country's staggering debt is
the biggest collective challenge right now. It should be America's biggest
collective priority, too. Any comprehensive deficit reduction must take on the
imbalance between revenues and expenditures as a share of GDP. That means
entitlement reforms, spending reductions and additional tax revenues. This does not have to be about European-style "instant austerity." Because
the U.S. dollar is the world's reserve currency, America doesn't have to balance
the budget tomorrow. The key is to provide clarity to businesses, financial markets and everyday
savers and investors. Make no mistake: A comprehensive, long-term, binding plan
that brings the budget into balance over a reasonable time frame is essential.
If Washington fails to achieve one, the consequences will be harsh.
- Hollywood Pushes Back Against New China Tax.
Twentieth Century Fox is refusing to accept about $23 million it is owed
on Chinese box-office receipts for producing "Life of Pi" as a result
of a clash between Hollywood and Chinese authorities, studio executives
say.
- Hong Kong Steps Up Flu Fight.
Hong Kong immigration and hospital officials are stepping up efforts to
fend off the spread of H7N9 bird flu, which surfaced outside China for
the first time last week, as floods of mainland Chinese tourists descend
on Hong Kong for the Labor Day holiday.
- In Stocks, Payouts Trump Potential. Investors searching for higher yields are driving up the shares of
dividend-paying companies, fueling a debate over whether these
traditional haven stocks are getting dangerously expensive. Some buyers
argue that dividend stocks have entered a period where demand for income
will keep valuations high, perhaps for years, thanks to Federal Reserve
easy-money policies that are expected to remain in place at least into
2015. Skeptics say the "this time is different" thesis will prove wrong,
and that investors will discover they have overpaid.
- U.S. Rejects Cash Pay Increases for GM Executives. The U.S.
blocked 2013 cash pay increases for top executives at General Motors
Co. but allowed several raises to stock-based compensation. The U.S.
Treasury Department gained power in 2009 to approve
executive compensation at firms that received exceptional federal
assistance, following public outrage at bonuses paid at American
International Group Inc. after the financial crisis bailouts. AIG has
repaid its bailout,
leaving GM and Ally Financial Inc., formerly known as GMAC Inc., as the
last big firms still under the government's crisis-era bailout programs.
CNBC:
- Loans Borrowed Against Pensions Squeeze Retirees. To retirees, the offers can sound like the answer to every money
worry: convert tomorrow's pension checks into today's hard cash.
But these offers, known as pension advances, are having devastating
financial consequences for a growing number of older Americans,
threatening their retirement savings and plunging them further into
debt. The advances, federal and state
authorities say, are not advances at all, but carefully disguised loans
that require borrowers to sign over all or part of their monthly
pension checks. They carry interest rates that are often many times
higher than those on credit cards.
Business Insider:
CNN:
- South Korea withdraws citizens from joint factory after North snubs talks. South Korea started withdrawing its last remaining citizens Saturday
from the manufacturing zone jointly operated with North Korea following
weeks of tensions between the two. Pyongyang this week
shunned an offer by Seoul to hold talks over the Kaesong Industrial
Complex after it halted activity there this month. The complex in North
Korea was one of the few symbols of inter-Korean cooperation.
Reuters:
- U.S. lawmakers press Obama to take action on Syria. Republican
senators on Sunday pressed U.S. President Barack Obama to intervene in
Syria's civil war, saying America could attack Syrian air bases with
missiles but should not send in ground troops. Pressure is mounting
on the White House to do more to help Syrian rebels fighting against the
government of President Bashar al-Assad, which the Obama administration
last week said had probably used chemical arms in the conflict.
- Europe austerity debate to test periphery political will. Readers of Ireland's
largest-selling daily newspaper were confronted by an unexpected
front page headline this week when the Irish Independent
proclaimed the 'End Of Austerity'.
In a country that began cutting spending and hiking taxes
almost five years ago, well before the scale of the euro zone's
debt crisis was evident, weary Irish voters have more interest
than most in the fresh debate over Europe's cornerstone policy.
Financial Times:
- China’s bosses criticised over high pay. In China,
it is not a case of shareholder revolt – the government is the
controlling shareholder of virtually all major Chinese companies and has
the power to easily change salaries. Rather, public anger about
inequality and corruption has made executive pay a focus for media
attacks, even from official outlets. The government-run Xinhua news agency said in an editorial: “If the
top executives of state-owned companies just fatten themselves, giving
themselves high salaries and rich benefits, this is a departure from the
original intent of the founding of these companies.” The People’s Daily, the mouthpiece of the Communist party, said:
“High pay for high-level executives and low pay for ordinary employees
is immoral.
- High-frequency traders face speed limits. High-frequency
traders are facing “speed limits” for the first time on a major trading
platform, under a proposal that is being touted as a template for a
regulatory clampdown on computer-driven activity. EBS, one of the
two dominant trading platforms in the foreign exchange market, is
suggesting scrapping the principle of “first in, first out” trading,
which it says gives an unfair advantage to the fastest computers and has
led to an arms race of spending on technology.
Telegraph:
- Spanish house prices need to fall further, Goldman warns. Spanish house prices need to fall another 10pc, posing fresh problems for the
country’s troubled banking sector, Goldman Sachs has warned. House prices have already collapsed 30pc from their high but are still
over-valued, the investment bank claimed as it called for a fundamental
restructuring of the country’s lenders. The warning that Spain’s banks are holding the country back followed the
government’s decision last week to tear up its deficit reduction plan in the
face of collapsing growth.
Der Spiegel:
- There is no likelihood of reaching agreement with France on main
problems facing Europe before Germany's September elections, Nikolaus
Meyer-Landrut, Chancellor Angela Merkel's adviser on European politics,
said in an interview. France doesn't want to hold talks with Germany
before polls, he said.
Yonhap News:
- S. Korea fuming over Abe's remarks. South Korea is boiling over in anger at Japan after its prime minister
suggested that Tokyo's colonization of Korea may not be determined as an
"act of aggression," a remark that touched a raw nerve in the neighbor,
which still deeply resents its colonial-era suffering.
- North
Korea is still in process of preparing Musdan missile launch, citing
presidential office spokesman Yoon Chang Jung. Yoon replied to questions
on media reports that North Korea stopped millile launch preparation.
Xinhua:
- More H7N9 cases reported in China. Five more H7N9 bird flu cases were confirmed Sunday in four Chinese provinces, according to local health authorities. The latest confirmed cases came from east China's Zhejiang, Jiangxi
and Shandong provinces, as well as southeast China's Fujian Province.
Weekend Recommendations
Barron's:
- Bullish commentary on (HBI) and (DELL).
Night Trading
- Asian indices are unch. to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 111.50 +.5 basis point.
- Asia Pacific Sovereign CDS Index 88.0 -.75 basis point.
- NASDAQ 100 futures +.07%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Personal Income for March is estimated to rise +.4% versus a +1.1% gain in February.
- Personal Spending for March is estimated unch. versus a +.7% gain in February.
- The PCE Core for March is estimated to rise +.1% versus a +.1% gain in February.
10:00 am EST
- Pending Home Sales for March are estimated to rise +.9% versus a -.4% decline in February.
10:30 am EST
- The Dallas Fed Manufacturing Index for April is estimated to fall to 5.0 versus a reading of 7.4 in March.
Upcoming Splits
Other Potential Market Movers
- The Italian 10Y auction, China HSBC Manufacturing PMI, Japan Manufacturing PMI and the German CPI could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and industrial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the week.
