Thursday, May 16, 2013

Thursday Watch

Evening Headlines 
  • Euro Near 6-Week Low as Inflation Set to Fall to Three-Year Low. The euro slid toward a six-week low before a report that will probably confirm inflation in the 17-nation region was the slowest in three years. The common currency completed a five-day drop yesterday, the longest losing stretch in six months, on speculation the European Central Bank will ease policy after data showed the euro-area economy extended its recession to a record sixth quarter.
  • China Said to Prepare Anti-Dumping Duties on Polysilicon Imports. China, the world’s biggest maker of solar panels, is preparing to set anti-dumping duties on imports of the raw material used to make the equipment after determining it was sold below cost, said two people with direct knowledge of the matter. The Ministry of Commerce has completed probes that determined the U.S. and European Union are subsidizing producers of polysilicon and that imports of the commodity harmed domestic companies, said the people, who asked not to be identified as they weren’t authorized to discuss the matter publicly. The ministry is holding off on setting duties until the EU issues its ruling on anti-dumping tariffs against Chinese-made solar equipment, which will be a factor in China’s decision, the people said. 
  • Foreign Investment in China Misses Estimates Amid Growth Concern. Foreign direct investment in China lagged behind analysts’ estimates in April, highlighting concern at the growth outlook for the world’s second-biggest economy after an unexpected slowdown last quarter. Investment rose 0.4 percent from a year earlier to $8.4 billion, the Ministry of Commerce said in a statement today in Beijing. That was less than the 5.7 percent gain in March and the 6.2 percent median estimate in a Bloomberg News survey of eight analysts.
  • Japan GDP Jumps Most in Year as Consumers Open Wallets: Economy. Japan’s economy expanded the most in a year last quarter as consumer spending and export gains outweighed the weakest business investment since the wake of the March 2011 earthquake and tsunami. Gross domestic product rose an annualized 3.5 percent, a Cabinet Office release showed in Tokyo. Private consumption, making up 60 percent of GDP, contributed 2.3 percentage points to the jump. Nominal GDP, which is unadjusted for changes in prices, rose 1.5 percent, also the most in a year. The so-called GDP deflator, a broad measure of prices across the economy, tumbled 1.2 percent from a year before, the most since the final three months of 2011, underscoring Kuroda’s challenge as he seeks to end more than a decade of entrenched deflation.
  • Most Asian Stocks Drop as Japan’s Banks Fall on Earnings. Most Asian stocks fell as a decline in Japanese banks after forecasting lower earnings offset a report that Japan’s economy expanded faster than analysts estimated in the first quarter. Mitsubishi UFJ Financial Group Inc. sank 2.9 percent, leading Japanese lenders lower. Daewoo Shipbuilding (042660) & Marine Engineering Co., South Korea’s third-biggest shipbuilder, fell 10 percent as first-quarter profit plunged. Dai-ichi Life Insurance Co. (8750), Japan’s second-largest life insurer, jumped 7.3 percent after projecting improved earnings and a stock split. The MSCI Asia Pacific Index slid 0.3 percent to 142.78 as of 12:22 p.m. Tokyo time, erasing gains of as much as 0.5 percent
  • Copper Set to Decline 16% on Elliott Wave: Technical Analysis. “From a long-term perspective copper is now in a downtrend, after its spectacular five-wave bull run in the decade between 2001 to 2011,” he said. “In the next wave down, during July to September, it will drop to perhaps as low as $6,037.50.”  
  • Rubber Drops to One-Week Low as Declining Oil Reduces Appeal. Rubber fell to a one-week low on speculation that decreasing oil prices would cut the cost of synthetic products, decreasing the appeal of the natural variety. Rubber for delivery in October dropped as much as 2.3 percent to 276.3 yen a kilogram ($2,707 a metric ton) on the Tokyo Commodity Exchange, the lowest price for the most-active contract since May 9. Futures were at 279.9 yen at 11 a.m., set for a third day of decline and a weekly loss of 4.7 percent. 
  • Rebar Trades Near Lowest in 5 Months on Output, Iron Ore Price. Steel reinforcement-bar futures traded near the lowest level in more than five months amid rising output in China and as iron ore fell into a bear market. Rebar for delivery in October on the Shanghai Futures Exchange fell as much as 0.8 percent to 3,526 yuan ($573) a metric ton, the lowest since Dec. 3, and was at 3,562 at 10:54 a.m. local time. The most-active contract has retreated 11 percent this year.
  • Apple(AAPL) Said to Be Subject of U.S. Senate Offshore Tax Hearing. Apple Inc. will be the subject of a May 21 Senate hearing on U.S. companies’ offshore tax practices, said two people familiar with the inquiry. Apple Chief Executive Officer Tim Cook will testify at the hearing of the Permanent Subcommittee on Investigations, one of the people said. The committee has been examining companies that use various maneuvers to reduce their tax bills, including Microsoft Corp. (MSFT) and Hewlett-Packard Co. (HPQ). 
  • Bristol-Myers(BMY) Drug Cocktail Stymies Melanoma Tumors. Two drugs from Bristol-Myers Squibb Co. (BMY) shrank tumors in as many as half of patients with advanced melanoma, according to early research that may pave the way for cocktails that trigger the immune system to destroy cancer. In the study, 52 melanoma patients were simultaneously treated with Bristol-Myers’s melanoma drug Yervoy and nivolumab, its experimental therapy that targets the immune system in a different way. Tumors shrank in 40 percent of patients, and in 53 percent of those who got the most effective dose combination, according to data released today in advance of the American Society of Clinical Oncology meeting scheduled to begin May 31.
  • Obama’s Commerce Pick Got $54 Million from Bahamas Trust. U.S. Commerce Secretary nominee Penny Pritzker received $54 million last year from an offshore trust in the Bahamas, according to a disclosure report that describes an empire of casinos, hotels, energy companies and family trusts that may be worth more than $2 billion. Pritzker, whose family founded Hyatt Hotels Corp (H)., has assets valued in a range of $400 million to $2.2 billion, not including holdings in the hotel company, according to documents released yesterday by the U.S. Office of Government Ethics.
Wall Street Journal:
  • New Terms Weighed on Default Swaps. An industry group wants to add criteria to a form of debt-default insurance that would lead to payouts for bondholders when banks are rescued. Financial contracts called credit-default swaps act like insurance for bonds and loans. When companies issuing debt experience what is known as an "event of default," sellers of the swaps compensate buyers of the protection. The contracts, also known as derivatives, already pay out on a range of events, including if a company files for bankruptcy protection, misses an interest payment or restructures its debts. 
  • Experiment Brings Human Cloning One Step Closer. Scientists have used cloning technology to transform human skin cells into embryonic stem cells, an experiment that may revive the controversy over human cloning. The researchers stopped well short of creating a human clone. But they showed, for the first time, that it is possible to create cloned embryonic stem cells that are genetically identical to the person from whom they are derived
Fox News:
  • Benghazi emails show State Department had heavy hand in watering down account of attack. State Department officials repeatedly objected to -- and tried to water down -- references to Al Qaeda and prior security warnings in the administration's initial internal story-line on the Benghazi attack, according to dozens of emails and notes released by the White House late Wednesday. The documents also showed the White House, along with several other departments, played a role in editing the so-called "talking points," despite claims from the White House that it was barely involved. And they showed then-CIA Director David Petraeus objected to the watered-down version that would ultimately be used as the basis for U.N. Ambassador Susan Rice's flawed comments on several TV shows the Sunday after the attack. "Frankly, I'd just as soon not use this," Petraeus told his deputy in a Sept. 15 email.
  • Acting IRS commissioner resigns in wake of agency scandal. President Obama announced Wednesday that acting IRS Commissioner Steven Miller has resigned in the wake of the agency scandal in which conservative groups were targeted. The president made the announcement in a brief statement at the White House, following a meeting with Treasury Secretary Jacob Lew  and other top department officials in which they reviewed a highly critical inspector general’s report on the practice. The report concluded poor management allowed agents to improperly target Tea Party and other groups for more than 18 months, starting in 2010.
  • Cisco(CSCO) Stock Jumps on Surprise Earnings Beat. Cisco on Wednesday reported a surprise beat in earnings and revenue in fiscal third-quarter, suggesting the networking-gear maker's customers are spending more on technology. The company's shares jumped more than 8 percent in after-hours trading.
Zero Hedge:
Business Insider:
New York Times:
  • Big Banks Get Break in Rules to Limit Risks. Under pressure from Wall Street lobbyists, federal regulators have agreed to soften a rule intended to rein in the banking industry’s domination of a risky market. The changes to the rule, which will be announced on Thursday, could effectively empower a few big banks to continue controlling the derivatives market, a main culprit in the financial crisis.
The Blaze:
  • Another Headache for the Obamacare ‘Train Wreck’? Small Business Owners Sue IRS Over Employer Mandate. Small business owners in six states are suing the federal government over an IRS regulation imposed under the Affordable Care Act (i.e. “Obamacare”) which, they say, will force them to pay hefty fines, cut their employees’ hours, or burden their businesses. “Because of Obamacare I’ve already been forced to cut my ‘hourly’ employees’ hours from 40 down to 28 so I can keep running my business and keep my employees on the payroll,” J. Allen Tharp, CEO of Olde England’s Lion and Rose and a plaintiff in the suit, told TheBlaze.
  • JPMorgan(JPM) presses Bloomberg on reporters' access to data. JPMorgan Chase & Co, one of the biggest customers of Bloomberg LP, said on Wednesday it has sent a formal legal request asking the financial data and news company to provide details of what bank information Bloomberg News reporters had been able to see.
Financial Times:
  • Snags await favourite for Federal Reserve job. Janet Yellen has emerged as the clear frontrunner to become the next chair of the US Federal Reserve, but the choice belongs to one man – Barack Obama – and the selection process can be hard on favourites.
  • French Economy is 'Cumbersome,' Publicis CEO Says. French people troubles by absence of "real reforms" to lead way out of economic gloom, Publicis CEO Maurice Levy writes. Welfare system "costs far too much", he said. Govts have made "bad" decisions including 35-hr working week. Hard measures are still needed, he said.
Apple Daily:
  • Taiwan May Cut 2013 GDP Forecast to 3.17%. Taiwan's statistics bureau may lower its GDP forecast after April exports fell, citing statistics bureau head Shih Su-mei. Bureau in February forecast 3.59% GDP growth for 2013.
Evening Recommendations 
S&P Capital IQ:
  • Downgraded (C) to Hold, target $52.
  • Downgraded (FITB) to Hold, target $18.
Night Trading
  • Asian equity indices are -.75% to +1.0% on average.
  • Asia Ex-Japan Investment Grade CDS Index 101.50 -.5 basis point.
  • Asia Pacific Sovereign CDS Index 84.0 +1.75 basis points.
  • FTSE-100 futures -.03%.
  • S&P 500 futures -.06%.
  • NASDAQ 100 futures +.10%.
Morning Preview Links

Earnings of Note

  • (FLO)/.43
  • (WMT)/1.15
  • (KSS)/.57
  • (JCP)/-1.05
  • (DELL)/.35
  • (JWN)/.76
  • (ARUN)/.12
  • (AMAT)/.13
  • (ADSK)/.45 
Economic Releases
8:30 am EST
  • The Consumer Price Index for April is estimated to fall -.3% versus a -.2% decline in March.
  • The CPI Ex Food & Energy for April is estimated to rise +.2% versus a +.1% gain in March.
  • Initial Jobless Claims are estimated to rise to 330K versus 323K the prior week.
  • Continuing Claims are estimated to fall to 3000K versus 3005K prior.
  • Housing Starts for April are estimated to fall to 970K versus 1036K in March.
  • Building Permits for April are estimated to rise to 941K versus 902K in March.  
10:00 am EST
  • Philly Fed for May is estimated to rise to 2.0 versus 1.3 in April.  
Upcoming Splits
  • (CL) 2-for-1
  • (AOS) 2-for-1
Other Potential Market Movers
  • The Fed's Lacker speaking, Fed's Williams speaking, Fed's Raskin speaking, Fed's Fisher speaking, Fed's Plosser speaking, Fed's Rosengren speaking, Eurozone inflation data, Bloomberg Economic Expectations Index for May, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report, RBC Aerospace/Defense Conference, Morgan Stanley Refining Conference and the (HAE) analyst meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and consumer shares in the region. I expect US stocks to open modestly higher and weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

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