Monday, June 26, 2017

Stocks Slightly Higher into Final Hour on Less European/Emerging Markets/US High-Yield Debt Angst, Oil Bounce, Yen Weakness, Financial/Retail Sector Strength

Broad Equity Market Tone:
  • Advance/Decline Line: Modestly Lower
  • Sector Performance: Mixed
  • Volume: Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • Volatility(VIX) 9.75 -2.69%
  • Euro/Yen Carry Return Index 130.53 +.4%
  • Emerging Markets Currency Volatility(VXY) 7.33 -.27%
  • S&P 500 Implied Correlation 32.98 -4.54%
  • ISE Sentiment Index 96.0 -12.73%
  • Total Put/Call .77 -18.95%
  • NYSE Arms .84 -20.63%
Credit Investor Angst:
  • North American Investment Grade CDS Index 59.72 -1.51%
  • America Energy Sector High-Yield CDS Index 486.0 -1.27%
  • European Financial Sector CDS Index 51.23 -3.16%
  • Western Europe Sovereign Debt CDS Index 7.09 +16.69%
  • Asia Pacific Sovereign Debt CDS Index 19.09 -.86%
  • Emerging Market CDS Index 196.28 -.92%
  • iBoxx Offshore RMB China Corporate High Yield Index 139.48 +.10%
  • 2-Year Swap Spread 21.50 +1.5 basis points
  • TED Spread 34.25 +.75 basis point
  • 3-Month EUR/USD Cross-Currency Basis Swap -31.25 -1.25 basis points
Economic Gauges:
  • Bloomberg Emerging Markets Currency Index 72.91 +.26%
  • 3-Month T-Bill Yield .96% unch.
  • Yield Curve 80.0 -1.0 basis point
  • China Import Iron Ore Spot $56.75/Metric Tonne n/a
  • Citi US Economic Surprise Index -78.50 -3.9 points
  • Citi Eurozone Economic Surprise Index 6.60 +1.9 points
  • Citi Emerging Markets Economic Surprise Index 10.0 -.9 point
  • 10-Year TIPS Spread 1.72 +1.0 basis point
  • 26.1% chance of Fed rate hike at Sept. 20 meeting, 27.6% chance at Nov. 1 meeting
Overseas Futures:
  • Nikkei 225 Futures: Indicating +65 open in Japan 
  • China A50 Futures: Indicating +31 open in China
  • DAX Futures: Indicating +5 open in Germany
  • Slightly Lower: On losses in my tech/medical sector longs 
  • Disclosed Trades: None
  • Market Exposure: 75% Net Long

Today's Headlines

  • Brussels Unimpressed By May’s Pledge on EU Citzens’ Rights. (video) Prime Minister Theresa May’s vow that millions of European Union nationals living in the U.K. will enjoy the same entitlements as British people after Brexit failed to convince the EU, whose chief negotiator said the proposal fell short. “More ambition, clarity and guarantees needed than in today’s U.K. position,” Michel Barnier said on Twitter. The bloc’s goal is for the “same level of protection as in EU law,” he said.
  • Draghi Defends ECB Stimulus Saying Jobs Matter Most for Equality. (video) Mario Draghi took his defense of his stimulus measures to students in Portugal, where he argued that young people will benefit from the revival of euro-area growth. Youth unemployment “is declining but it’s still very high,’’ the European Central Bank president said at ISEG Lisbon School of Economics and Management on Monday. “The millennials that found a job because of our policy, I’m pretty sure they are OK” with the ECB’s strategy.
  • Europe Stocks Rise as Intesa Leads Italian Bank Gains, Nestle Up. (video) Gains in Italian lenders and Swiss food giant Nestle SA helped European stocks rebound from three weeks of losses. The Stoxx Europe 600 Index added 0.4 percent at the close, following its longest weekly losing streak since the U.K.’s vote to leave the European Union. Miners reversed gains in afternoon trading, helping trim gains of as much as 0.9 percent in the benchmark.
  • Gold Plunges After 1.8 Million Ounces Were Traded in One Minute. (video) Gold sank like a stone at 9 a.m. in London after a huge spike in volume in New York futures that traders said was probably the result of a "fat finger," or erroneous order.
  • Your Evening Briefing.
  • Apple(AAPL) Is Working With Hertz to Test Its Self-Driving Technology. Apple Inc. is leasing a small fleet of cars from Hertz Global Holdings Inc. to test self-driving technology, an agreement that echoes a larger deal between competitors Alphabet Inc. and Avis Budget Group Inc.
  • Alphabet(GOOGL) Inks Deal for Avis(AVB) to Manage Self-Driving Car Fleet. (video)
Wall Street Journal:

Bear Radar

Style Underperformer:
  • Large-Cap Growth unch.
Sector Underperformers:
  • 1) Semis -.7% 2) Gaming -.6% 3) HMOs -.5%
Stocks Falling on Unusual Volume: 
Stocks With Unusual Put Option Activity:
  • 1) DRI 2) FINL 3) DVN 4) PAY 5) QRVO
Stocks With Most Negative News Mentions:
  • 1) SSYS 2) GRUB 3) AGIO 4) ARNC 5) SPTN

Bull Radar

Style Outperformer:
  • Mid-Cap Value +.7%
Sector Outperformers:
  • 1) Coal +3.0% 2) Hospitals +2.2% 3) Retail +1.4%
Stocks Rising on Unusual Volume:
Stocks With Unusual Call Option Activity:
  • 1) PTLA 2) NOV 3) IYR 4) CAR 5) CSCO
Stocks With Most Positive News Mentions:
  • 1) RAD 2) PTLA 3) AMID 4) MU 5) COST

Morning Market Internals

NYSE Composite Index:

Sunday, June 25, 2017

Monday Watch

Today's Headlines
  • Brexit ‘Fight’ Looms Over Role of European Court, U.K. Warns. Britain is ready to “fight” the European Union’s demand that judges on the continent hold sway in the U.K. after Brexit, as Theresa May’s government warns that a final deal with the bloc is not certain. Brexit Secretary David Davis, in a direct challenge to officials in Brussels, said the European Court of Justice won’t have a role protecting the rights of 3.2 million EU nationals living in U.K. after the country leaves in 2019.
  • U.K. Credit Binge May Spur BOE's Carney to Rein in Exuberance. What a difference a year makes. Twelve months ago, Mark Carney reassured a nation going into political paralysis following the Brexit vote that the Bank of England stood ready to flood the financial system with cash. This week, the governor will re-examine whether it’s time to start taking back some of that bank support following rapid growth in consumer credit, a first step toward normalizing policy in the U.K.
  • Japanese Banks at Risk as Borrowing in Dollars Doubles, BIS Says. Japanese banks have more than doubled their borrowing and lending in dollars since 2007, leaving them vulnerable to funding shocks such as those that exacerbated the last financial crisis, the Bank for International Settlements warned in a report released Sunday. Assets denominated in dollars on the balance sheets of Japanese banks surged to about $3.5 trillion by the end of 2016, the coordinating body for the world’s central banks said in its annual report about the global economy. Those exceed liabilities in dollars by about $1 trillion, creating a massive so-called long position in the currency. The report also cited Canadian lenders for following a similar trend, almost doubling their dollar exposure since the crisis. Their net long positions reached almost $200 billion, the BIS said.
  • Saudi-Led Demands ‘Difficult’ for Qatar to Meet, Tillerson Says. Qatar will find it “very difficult” to comply with some demands made by the Saudi-led bloc to end the Gulf diplomatic crisis, though they can be a basis for talks, U.S. Secretary of State Rex Tillerson said on Sunday. “A productive next step would be for each of the countries to sit together and continue this conversation,” Tillerson said in an emailed statement. “We believe our allies and partners are stronger when they are working together towards one goal which we all agree is stopping terrorism and countering extremism. A lowering of rhetoric would also help ease the tension.”
  • Takata Seeks U.S. Bankruptcy Protection After Air-Bag Recalls. Takata Corp. filed for bankruptcy in the U.S., more than eight years after initial recalls involving its defective air bags spiraled into the biggest safety crisis in automotive history. The Tokyo-based supplier filed for Chapter 11 bankruptcy in Delaware, listing more than $10 billion in liabilities, according to court filings. Takata entered the bankruptcy filing with a plan to sell the company. Key Safety Systems Inc., a U.S. air-bag maker, is set to take over Takata for about 180 billion yen ($1.6 billion), people familiar with the matter have said. Shares and bonds of Takata -- whose products are used by carmakers including Honda Motor Co. and Ford Motor Co. -- have slumped as investors anticipated an imminent bankruptcy filing by the manufacturer of faulty air-bag inflators linked to at least 17 deaths worldwide.
  • Asian Equities Face Flat Start as Pound Gains. An absence of catalysts over the weekend left investors awaiting clues from central bankers on policy paths for some of the world’s biggest economies. Stock-index futures in Japan, Australia and Hong Kong pointed to a flat start. The pound climbed for a fourth day amid Brexit negotiations by U.K. Prime Minster Theresa May, whose leadership remains under threat. The euro and the yen were little changed against the dollar. Futures on the S&P 500 Index slipped in early trading and oil held above $43 a barrel. Federal Reserve Bank of San Francisco President John Williams is first up with a speech in Sydney on Monday. Later on, European Central Bank President Mario Draghi will make some remarks in Portugal before Fed chair Janet Yellen makes an appearance in London on Tuesday.
  • Trump to Call for U.S. ‘Dominance’ in Global Energy Production. Donald Trump will tout surging U.S. exports of oil and natural gas during a week of events aimed at highlighting the country’s growing energy dominance. The president also plans to emphasize that after decades of relying on foreign energy supplies, the U.S. is on the brink of becoming a net exporter of oil, gas, coal and other energy resources.
Wall Street Journal:
Night Trading
  • Asian indices are unch. to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 87.0 -1.5 basis points.
  • Asia Pacific Sovereign CDS Index 19.25 unch.
  • Bloomberg Emerging Markets Currency Index 72.74 +.03%.
  • S&P 500 futures -.06%.
  • NASDAQ 100 futures -.09%.

Earnings of Note
  • (SCHN)/.56
Economic Releases 
8:30 am EST
  • Durable Goods Orders for May are estimated to fall -.6% versus a -.8% decline in April.
  • Durables Ex Transports for May are estimated to rise +.3% versus a -.5% decline in April.
  • Cap Goods Orders Non-Defense Ex Air for May are estimated to rise +.3% versus a +.1% gain in April.
  • The Chicago Fed National Activity Index for May is estimated to fall to .2 versus .49 in April.
10:30 am EST
  • Dallas Fed Manufacturing for June is estimated to June fall to 16.0 versus 17.2 in May.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Williams speaking, Germany IFO Index, 2Y T-Note auction,  JPMorgan Energy Conference and the (KMX) annual meeting could also impact trading today.
BOTTOM LINE: Asian indices are slightly higher, boosted by commodity 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 week.