Thursday, July 27, 2017

Friday Watch

Evening Headlines
Bloomberg:
  • China Bond Opening Fails to Inspire Asian Funds Wary of Policy. Investors who were granted a new gateway to China’s $10 trillion bond market this month say accessibility was the least of their worries. Tokyo-based Mitsubishi UFJ Kokusai Asset Management says it’s avoiding Chinese corporate notes now because of uncertainties about the nation’s policy outlook. Japan’s Fukokushinrai Life Insurance Co. is reluctant unless China improves its debt market infrastructure such as credit ratings. Samsung Asset Management in Seoul says it would need to invest in lower-rated Chinese debt to earn sufficient yields when currency hedging costs are considered, but it’s uncomfortable doing so because of a lack of transparency in the market.
  • Asia Stocks Face Mixed Start; Dollar Rebounds. Stocks in Asia looked set for a mixed end to the week as the dollar recovered losses and investors digested a raft of earnings from Amazon.com Inc. to Baidu Inc. The American equity session was dominated by a bout of volatility that sent the Nasdaq 100 Index lower and pushed up the CBOE Volatility Index, though that eased late in the day. The dollar rebounded as data showed U.S. durable-goods orders climbed more than expected, while Treasuries fell. Japan’s Topix index fell 0.2 percent and Australia’s S&P/ASX 200 Index sank 0.9 percent. South Korea’s Kospi index declined 0.6 percent.
Wall Street Journal:
Zero Hedge:
Business Insider:
Night Trading 
  • Asian equity indices are -1.0% to -.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 81.50 -.5 basis point
  • Asia Pacific Sovereign CDS Index 20.0 -.25 basis point.
  • Bloomberg Emerging Markets Currency Index 73.85 -.04%.
  • S&P 500 futures -.36%.
  • NASDAQ 100 futures -.52%.
Morning Preview Links

Earnings of Note
Company/Estimate

  • (ABBV)/1.40
  • (AXL)/.83
  • (BHGE)/-.12
  • (B)/.68
  • (CVX)/.87
  • (XOM)/.86
  • (GT)/.73
  • (MRK)/.87 
  • (COL)/1.58
  • (WFT)/-.28
  • (WY)/.27
Economic Releases  
8:30 am EST
  • 2014-16 GDP revisions.
  • 2Q GDP is estimated to rise +2.6% versus a +1.4% gain in 1Q.
  • 2Q Personal Consumption is estimated to rise +2.8% versus a +1.1% gain in 1Q.
  • The 2Q GDP Price Index is estimated to rise +1.3% versus a +1.9% gain in 1Q.
  • The 2Q Core PCE is estimated to rise +.7% versus a +2.0% gain in 1Q.
  • The 2Q Employment Cost Index is estimated to rise +.6% versus a +.8% gain in 1Q.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Kashkari speaking, Canada GDP report and the (CRUS) annual meeting could also impact trading today.
BOTTOM LINE:  Asian indices are mostly lower, weighed down by commodity and technology shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon.  The Portfolio is 50% net long heading into the day.

Stocks Mostly Lower into Final Hour on Profit-Taking, Technical Selling, Earnings Disappointments, Transport/Biotech Sector Weakness

Broad Equity Market Tone:
  • Advance/Decline Line: Substantially Lower
  • Sector Performance: Most Sectors Declining
  • Volume: Above Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • Volatility(VIX) 10.76 +12.4%
  • Euro/Yen Carry Return Index 135.35 -.57%
  • Emerging Markets Currency Volatility(VXY) 7.50 +.4%
  • S&P 500 Implied Correlation 28.70 +2.1%
  • ISE Sentiment Index 84.0 +25.4%
  • Total Put/Call .94 +27.0%
  • NYSE Arms .88 -33.3%
Credit Investor Angst:
  • North American Investment Grade CDS Index 57.29 +1.78%
  • America Energy Sector High-Yield CDS Index 434.0 +.49%
  • European Financial Sector CDS Index 49.58 -1.1%
  • Western Europe Sovereign Debt CDS Index 4.29 -12.99%
  • Asia Pacific Sovereign Debt CDS Index 19.86 -2.46%
  • Emerging Market CDS Index 193.14 +.69%
  • iBoxx Offshore RMB China Corporate High Yield Index 140.48 +.07%
  • 2-Year Swap Spread 24.5 +.75 basis point
  • TED Spread 21.5 +2.25 basis points
  • 3-Month EUR/USD Cross-Currency Basis Swap -29.0 -2.0 basis points
Economic Gauges:
  • Bloomberg Emerging Markets Currency Index 73.85 -.18%
  • 3-Month T-Bill Yield 1.10% -2.0 basis points
  • Yield Curve 95.0 +2.0 basis points
  • China Import Iron Ore Spot $70.20/Metric Tonne -.33%
  • Citi US Economic Surprise Index -43.80 +.6 points
  • Citi Eurozone Economic Surprise Index 16.10 +2.5 points
  • Citi Emerging Markets Economic Surprise Index 16.90 +1.3 basis points
  • 10-Year TIPS Spread 1.82 +2.0 basis points
  • 17.7% chance of Fed rate hike at Nov. 1 meeting, 47.3% chance at Dec. 13 meeting
Overseas Futures:
  • Nikkei 225 Futures: Indicating -59 open in Japan 
  • China A50 Futures: Indicating +20 open in China
  • DAX Futures: Indicating -39 open in Germany
Portfolio: 
  • Lower: On losses in my tech/biotech/medical sector longs 
  • Disclosed Trades: Added to my (IWM)/(QQQ) hedges
  • Market Exposure: Moved to 75% Net Long

Bear Radar

Style Underperformer:
  • Small-Cap Growth -1.0%
Sector Underperformers:
  • 1) Airlines -3.8% 2) Road & Rail -3.4% 3) Biotech -2.3%
Stocks Falling on Unusual Volume: 
  • SAVE, PCMI, BPI, AZN, FFIV, TWTR, NTRI, BWLD, TDOC, KN, HUBG, PSA, JCI, TER, CA, BC, LM, WHR and LSTR
Stocks With Unusual Put Option Activity:
  • 1) THC 2) NOW 3) MAT 4) WLL 5) TWTR
Stocks With Most Negative News Mentions:
  • 1) BWLD 2) CYH 3) FFIV 4) FSB 5) AKS
Charts:

Bull Radar

Style Outperformer:
  • Large-Cap Value unch.
Sector Outperformers:
  • 1) Retail +.9% 2) Telecom +.9% 3) Energy +.8%
Stocks Rising on Unusual Volume:
  • ADP, SNI, LPSN, BTI, GNC, BUD, FB, BA, TSCO, NTGR, TREE, TPX, GGG, TDC, ANIK, DNKN, LBRDA, ICLR, RUSHA, SCI, DEO, VZ, PAYX, MMSI, LSXMA, INVA, KS, NTCT, MRK, T, CHTR and KRA
Stocks With Unusual Call Option Activity:
  • 1) LUV 2) ALXN 3) ADP 4) RL 5) XME
Stocks With Most Positive News Mentions:
  • 1) VZ 2) APC 3) MRK 4) GILD 5) BA
Charts:

Morning Market Internals

NYSE Composite Index:

Wednesday, July 26, 2017

Thursday Watch

Evening Headlines
Bloomberg:
  • Crisis-Plagued Europe Sees a New Dawn After Greek Market Return. (video) Five years after the sovereign debt crisis nearly tore the euro area apart, Europe’s biggest problem child appears on the road to recovery as the region continues to tick off boxes underscoring its revival. Greece sold 3 billion euros ($3.5 billion) of bonds this week for the first time since 2014, when the prospect of Alexis Tsipras’s election catapulted borrowing costs to unsustainable levels. The country’s return from the wilderness comes as a new French president has raised expectations about deeper economic integration following successive defeats of europhobic parties.
  • South Korean Economy Slows From Fastest Expansion Since 2015. South Korea’s economic growth slowed in the second quarter as expansion in construction investment eased and export volumes fell from the previous three months. Economists said the slowdown is mostly due to a base effect from a solid first-quarter performance and that it shouldn’t be seen as a negative sign for the outlook.
  • Japan Recommends Nationwide 3 Percent Minimum Wage Hike for 2017. The Bloomberg Dollar Spot Index held at the lowest in more than a year, while the 10-year Treasury yield extended losses after the Fed held rates steady and indicated it would start unwinding its balance sheet “relatively soon.” The MSCI Asia Pacific Index rose to the highest since December 2007 after earnings from Samsung Electronics Co. and Nintendo Co. beat analysts’ estimates, and the Dow Jones Industrial Average closed at a record high. Japan’s Topix index rose 0.3 percent, while Australia’s S&P/ASX 200 Index added 0.3 percent. South Korea’s Kospi index climbed 0.2 percent. In Hong Kong, the Hang Seng Index added 0.2 percent, while the Shanghai Composite Index dropped 0.4 percent.
  • The Fed May Not Be the Master of Its Balance-Sheet Fate. (video) The Federal Reserve signaled on Wednesday that it intends to kick off the long-awaited reduction in its $4.5 trillion balance sheet in September, although a final decision to go ahead may not be entirely its to make. A looming deadline for raising the government’s debt ceiling could end up complicating the Fed’s plans if it significantly disrupts financial markets, particularly for U.S. Treasury securities. “September is the most likely outcome” for the launch of the balance-sheet drawdown, said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey. “But I can’t rule out the idea that they would wait until November if the debt ceiling really looks messy.”
  • Trump Pick for Fed's Wall Street Watchdog Plans to Ease Rules. President Donald Trump’s pick to be the Federal Reserve’s top Wall Street watchdog said it’s time to reconsider the restrictions imposed on banks in recent years, even as he credited regulations with helping stabilize the financial system after the 2008 crisis. “As with any complex undertaking, after the first wave of reform, and with the benefit of experience and reflection, some refinements will undoubtedly be in order,” said Randal Quarles, Trump’s nominee to be the Fed’s first vice chairman of supervision.
Wall Street Journal:
Zero Hedge:
Night Trading 
  • Asian equity indices are +.25% to +.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 82.0 -2.0 basis points. 
  • Asia Pacific Sovereign CDS Index 20.25 -.5 basis point.
  • Bloomberg Emerging Markets Currency Index 74.03 +.07%.
  • S&P 500 futures +.16%.
  • NASDAQ 100 futures +.50%.
Morning Preview Links

Earnings of Note
Company/Estimate

  • (AGCO)/1.05
  • (ALXN)/1.26
  • (AB)/.47
  • (MO)/.86
  • (AMT)/1.51
  • (BUD)/1.00
  • (MT)/1.05
  • (AZN)/.82
  • (ADP)/.67
  • (BWA)/.89
  • (BSX)/.31
  • (BMY)/.73
  • (BC)/1.33
  • (CBG)/.53
  • (CELG)/1.78
  • (CLF)/.17
  • (CMCSA)/.49
  • (COP)/-.03
  • (DOW)/1.00
  • (DPS)/1.28
  • (FCAU)/.52
  • (HTLD)/.18
  • (IP)/.65
  • (JCI)/.71
  • (LLL)/2.02
  • (MA)/1.04
  • (MCK)/2.83
  • (MGM)/.30
  • (POT)/.17
  • (PG)/.78
  • (RTN)/1.76
  • (LUV)/1.20
  • (TWTR)/.05
  • (UPS)/1.47
  • (VLO)/1.13
  • (VZ)/.96
  • (ZBH)/2.10
  • (AFL)/1.63
  • (AMZN)/1.39
  • (BIDU)/1.44
  • (CERN)/.61
  • (CY)/.16
  • (DECK)/-1.67
  • (EA)/.27
  • (EXPE)/.93
  • (FSLR)/.04
  • (INTC)/.68
  • (KLAC)/1.59
  • (MHK)/3.59
  • (SBUX)/.55
  • (WDC)/2.86
Economic Releases  
8:30 am EST
  • Initial Jobless Claims are estimated to rise to 240K versus 233K the prior week.
  • Continuing Claims are estimated to fall to 1960K versus 1977K prior.
  • Preliminary Durable Goods Orders for June are estimated to rise +3.5% versus a -.8% gain in May.
  • Preliminary Durables Ex Transports for June are estimated to rise +.4% versus a +.3% gain in May.
  • Preliminary Cap Goods Orders Non-Defense Ex-Air for June are estimated to rise +.3% versus a +.2% gain in May.
  • Advance Goods Trade Balance for June is estimated at -$65.5B versus -$66.3B in May.
  • Preliminary Wholesale Inventories MoM for June are estimated to rise +.3% versus a +.4% gain in May.
  • Chicago Fed National Activity Index for June is estimated to rise to .35 versus -.26 in May.
11:00 am EST
  • Kansas City Fed Manufacturing Activity for July is estimated at 11.0 versus 11.0 in June.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Japan Inflation Data report, $28B 7Y T-Note auction, weekly Bloomberg Consumer Comfort Index and the EIA weekly natural gas inventory report 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 maintain gains into the afternoon.  The Portfolio is 100% net long heading into the day.