Tuesday, January 24, 2017

Wednesday Watch

Evening Headlines
  • Japanese Exports Turn Positive After 14-Month Slump. Japan snapped a 14-month run of falling exports in December, with shipments to China setting a record as global demand picks up. The rise left Japan with a trade surplus for a fourth consecutive month. Exports rose 5.4 percent in December 2016 from a year earlier.
  • Australia First’ Policy Embraces Trade, Treasurer Morrison Says. (video) Australia is still committed to working on trade relationships, with a focus on Asia, even after the U.S. pulled out of the Trans-Pacific Partnership deal, Australian Treasurer Scott Morrison said. “Australia’s a trading nation, an ‘Australia first’ policy does embrace trade and foreign investment and all of these things,” Morrison said in an interview from London with Bloomberg Television’s David Gura on Tuesday. “And so our economic interests are very much aligned with that approach.”
  • Australia Consumer Prices Weaker Than Expected; Aussie Drops. Australia’s core consumer prices rose less than forecast in the final three months of last year. The currency dropped. While annual inflation remains below the central bank’s 2 percent to 3 percent target, Governor Philip Lowe has signaled he may tolerate weaker price growth to avoid further inflating east coast house values that are already among the world’s dearest. His desire to avoid further interest-rate cuts has been aided by unemployment holding below 6 percent for almost a year and an unexpected upswing in key commodity prices.
  • Asian Stocks Extend Global Rally as Yen Weakens. Stocks in Asia joined a global equities rally after the S&P 500 Index rose to a record as corporate results reignited investors’ optimism in economic growth. A weaker yen spurred gains in Japanese shares. Equity markets in Japan, South Korea and Australia climbed, with futures signaling gains at the market open in Hong Kong. The yen maintained Tuesday’s losses against the dollar, providing a reprieve to Japanese shares whose declines this month have been fueled by a stronger currency. The Aussie fell after weaker-than-expected inflation data. The MSCI Asia Pacific Index increased 0.5 percent as of 11:10 a.m. in Tokyo, trading at the highest level since Oct. 6.
  • Trump Budget Pick Seeks Entitlement Cuts as Urgent Step on Debt. (video) President Donald Trump’s pick for budget director, Mick Mulvaney, said Tuesday the nearly $20 trillion national debt needs to be “addressed sooner rather than later” and that he would push Trump to break his campaign promises and cut Social Security and Medicare. Mulvaney, a Republican congressman from South Carolina, told senators at his two confirmation hearings that he would “tell the truth” to Trump about the need for entitlement program changes. He said without doing something soon, the Medicare and Social Security trust funds could go bankrupt -- while also maintaining he wouldn’t advocate cutting benefits to current beneficiaries. He said the U.S. needed to shrink the almost $20 trillion national debt, which he compared to an ordinary American family owing more than a quarter of a million dollars on credit cards.
  • Alcoa(AA) Sales Exceed Estimates at New-Look Company as Prices Jump. Alcoa Corp., the aluminum producer that split from its jet- and car-parts business last year, reported higher-than-expected sales as the price of the metal rose. Fourth-quarter revenue climbed 3.5 percent from a year earlier to $2.54 billion, New York-based Alcoa said Tuesday in a statement. That topped the $2.38 billion average estimate of eight analysts tracked by Bloomberg. The report is investors’ first chance to parse how the new Alcoa, which retained the legacy commodity assets, is faring without the so-called downstream businesses that were hived into Arconic Inc. Shares in Alcoa have surged since the split in early November, helped by a rebound in aluminum after years of low prices and cutbacks in mining and smelting.
Wall Street Journal:
Zero Hedge:
Busines Insider:
  • Seagate(STX) forecasts third-quarter revenue above estimates. Hard-disk drive maker Seagate Technology Plc forecast current-quarter revenue above estimates, buoyed by strong demand for its cloud-based storage products. Shares of the company, which also posted higher-than-expected second quarter profit and revenue, soared 13.7 percent to $42.56 in after-market trading on Tuesday.
Night Trading 
  • Asian equity indices are +.25% to +.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 113.0 -1.25 basis points.
  • Asia Pacific Sovereign CDS Index 33.25 -.75 basis point.
  • Bloomberg Emerging Markets Currency Index 70.50 -.01%
  • S&P 500 futures +.07%. 
  • NASDAQ 100 futures +.12%.
Morning Preview Links

Earnings of Note

  • (ABT)/.65
  • (BA)/2.33
  • (EAT)/.74
  • (FCX)/.33
  • (HES)/-1.08
  • (ITW)/1.37
  • (MKC)/1.28
  • (NSC)/1.36
  • (NVR)/32.98
  • (PGR)/.51
  • (STT)/1.32
  • (TXT)/.87
  • (UTX)/1.56
  • (T)/.66
  • (BGG)/.28
  • (EBAY)/.53
  • (ETH)/.38
  • (FFIV)/1.94
  • (KNX)/.31
  • (LRCX)/2.19
  • (LVS)/.66
  • (MCK)/2.91
  • (MUR)/-.17
  • (QCOM)/1.18
  • (RJF)/1.01
  • (URI)/2.30
  • (VAR)/1.06
  • (WDC)/2.12
  • (XLNX)/.49
Economic Releases 
9:00 am EST
  • The FHFA House Price Index MoM for November is estimated to rise +.4% versus a +.4% gain in October.
10:30 am EST
  • Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,466,670 barrels versus a +2,347,000 barrel gain the prior week.  Gasoline supplies are estimated to rise by +900,000 barrels versus a +5,951,000 barrel gain the prior week. Distillate inventories are estimated to fall by -555,560 barrels versus a -968,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to fall by -.73% versus a -2.9% decline prior.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The China Industrial Profits report, $34B 5Y T-Note auction, weekly MBA mortgage applications report and the CIBC Investor Conference could also impact trading today.
BOTTOM LINE:  Asian indices are higher, boosted by industrial and technology shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the day.

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