Thursday, February 25, 2010

Stocks Finish Slightly Lower, Weighed Down by Bank, Restaurant, Hospital and Computer Shares

Posted by Gary .....at 4:30 PM
Evening Review
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Stocks Cutting Losses into Final Hour on Short-Covering, Euro Reversal, Bargain-Hunting

Posted by Gary .....at 3:46 PM
BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Technology longs and Financial longs. I added to my (IWM)/(QQQQ) hedges this morning and them covered them, thus leaving the Portfolio 75% net long. The tone of the market is negative as the advance/decline line is lower, most sectors are declining and volume is slightly above average. Investor angst is very high. Today's overall market action is mildly bearish. The VIX is rising +1.08% and is above average at 20.60. The ISE Sentiment Index is below average at 109.0 and the total put/call is slightly above average at 1.08. Finally, the NYSE Arms has been running high most of the day, hitting 2.33 at it intraday peak, and is currently 1.26. The Euro Financial Sector Credit Default Swap Index is rising +2.03% to 94.91 basis points. The North American Investment Grade CDS Index is rising +1.79% to 95.41 basis points. The TED Spread is unch. at 14.0 basis points. The 2-Year Swap Spread is rising +5.54% to 23.81 basis points. The Libor-OIS Spread is unch. at 9.0 basis points. The 10-Year TIPS Spread is down -4 basis points to 2.16%. The 3-Month T-Bill is yielding .11%, which is unch. today. Hospital, Bank and Computer shares are especially weak today, falling -1.5%+. The Western Europe Sovereign CDS Index is rising another +1.76%. The Greece sovereign cds is rising around +4.0%, which is a large negative. The AAII Bulls fell to 34.9%, while the % Bears fell to 29.53, which is also a negative. On the positive side, Coal, Gold, Steel, Road & Rail, Education, Retail and REIT shares are all higher on the day. (IYR) has traded relatively well throughout the day. Given the negative economic data again today out of Europe/US and another rise in Greece debt angst, I am very impressed with the market's resilience again today. A lot of bad news is currently being absorbed without much technical damage right here. There has also been some bad news on (AAPL) today, yet the stock has reversed 6 points from this morning's lows on heavy volume from just a split rumor and China plans, which should give the bears pause. Investors are closely watching the action in the euro as a gauge on the Greece debt situation, however today's reversal higher in the currency looks like a bought of short-covering that could prove fleeting. A more meaningful surge higher in the euro could spark a tradable rally in stocks. Longer-term, I still believe US dollar strength is a major positive for US equities. Nikkei futures indicate a -56 open in Japan and DAX futures indicate an up +39 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on short-covering, technical buying and bargain-hunting.
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Today's Headlines

Posted by Gary .....at 3:07 PM
Bloomberg:
  • Jobless Claims in U.S. Increased 22,000 Last Week to 496,000. The number of Americans filing first-time claims for unemployment insurance unexpectedly increased last week, a sign that the economic recovery will be uneven as the labor market struggles to rebound. Economists forecast weekly claims would fall to 460,000, from a previously estimated 473,000 for the week ended Feb. 13, according to the median of 43 projections in a Bloomberg News survey.
  • Mortgage Rates on 30-Year U.S. Loans Rise to 5.05%. U.S. mortgage rates climbed for the first time in three weeks, increasing borrowing costs as new home sales slumped to the lowest level on record. The rate for 30-year fixed U.S. home loans rose to 5.05 percent for the week ended today from 4.93 percent, mortgage finance company Freddie Mac said in a statement.
  • Oil Falls Most in Three Weeks on Jobs, Manufacturing Reports. Oil decreased as much as 3.7 percent to the lowest level in a week as the number of Americans filing first-time claims for unemployment insurance unexpectedly increased last week, and durable goods excluding transportation declined in January.“It’s going to take better jobs, better consumer confidence, better business confidence and getting everything going into a better direction before you can support crude oil in a $75 to $80 level,” said Adam Sieminski, chief energy economist at Deutsche Bank AG in Washington.
  • TiVo(TIV) May Offer Set-Top Box That Combines Web Fare, Tv Listings. Tivo Inc., pioneer of digital video recorders, may introduce a set-top box next week that provides Web search results alongside TV listings, said Tony Wible, an analyst at Janney Montgomery Scott.
  • Europe May Fail to Gather Strength in 2010, EU Says. Europe’s economic recovery may fail to gather strength for most of 2010 as governments phase out stimulus measures and domestic demand remains “subdued,” the European Commission said. European domestic demand remains weak and it’s not yet clear to what extent the euro region will benefit from a global recovery, the commission said. Economic confidence unexpectedly declined this month as governments try to stem investor concern about budget deficits in Greece and other nations, which has pushed the euro lower against the dollar. The German economy, Europe’s largest, may fail to grow in the three months through March before expanding 0.3 percent in the following two quarters, the commission forecast.
  • Brazil May Raise Rates in March on Stimulus Removal. Brazil’s central bank probably will raise interest rates next month for the first time since September 2008 after accelerating economic growth allowed it to withdraw stimulus measures, Goldman Sachs Group Inc. and Itau Unibanco Holding SA said. “The change in the reserve requirement was very big and means the central bank is very worried about the heat in the economy,” said Figueiredo, who forecasts an increase in the benchmark Selic interest rate in March.
  • Buy Visa(V) Calls on Revenue Growth, Morgan Stanley Says. Investors should buy bullish Visa Inc. options because the world’s biggest payments network may rise to a record as it handles more transactions and boosts revenue from emerging markets, Morgan Stanley said. Equity derivatives strategists Christopher Metli and Sivan Mahadevan recommended buying March $90 calls and said June $90 calls also are “attractive.”
Wall Street Journal:
  • Greece to Issue Bond Next Week. Greece now plans to issue a 10-year bond next week, after the government announces a new austerity package of between €2 billion and €2.5 billion (between $2.71 billion and $3.38 billion), people familiar with the situation said. S&P said it could cut Greece's ratings by one or two notches within the next month, which could put the country's long-term rating on the brink of junk territory. The government hopes to raise between €3 billion and €5 billion from the bond. The downgrade threat hit Greek government bonds Thursday, with the yield spread of the 10-year Greek bonds spreads over German bunds surging as high as 3.6 percentage points before moving back down to 3.55 percentage points. That was compared with Wednesday's close at 3.39 percentage points. Similarly, the pressure on Greek credit-default swaps intensified. The yield spread, whose move shows how investors' risk perception changes about Greece, peaked at 4.05 percentage points late January. In market terms, Greek 10-year yields traded around 6.66%, compared with 10-year German yields at 3.11%.Given the anxiety surrounding Greece's rating, the focus now turns to Moody's Investors Service and the direction it will take on the troubled nation's rating. Moody's, which currently rates Greece at A2, said earlier this month that if the country only partially implements the planned budget cuts, then it may downgrade its rating to Baa1. This could be fateful for Greece as the European Central Bank's collateral criteria is due to return to the A3/A- threshold by the end of the year, from the current BBB- level. As government-bond prices tumbled, Greek five-year sovereign credit-default swaps were also under pressure Thursday with spreads quoted around 0.08 percentage point wider at 3.93 points, according to CMA DataVision.
  • Steelmakers Eye Big Increase in Raw-Material Costs. Steel consumers should brace themselves for the onset of much higher steel prices in coming months as steelmakers conclude annual negotiations with miners that may result in steelmaking raw material prices rising by 70% or more in 2010, a large steelmaker said. "In the final negotiations...the increase that we are faced with is bringing the benchmark price close to the [current] spot price," for both coking coal and iron ore, the person at a large steelmaker said. He said steelmakers will likely have to accept iron ore prices that are 70% to 80% higher than last year's benchmark prices.
  • Illegal Workers Slip by System. Homeland Security Program Seen Failing to Catch Half of Unauthorized Hires.
BuinessWeek:
  • Bernanke Says Fed Reviewing Goldman Sachs(GS) Swaps With Greece. Federal Reserve Chairman Ben S. Bernanke said the use of credit default swaps to destabilize a country is “counterproductive,” and added the central bank is reviewing the arrangements of Goldman Sachs Group Inc. and other companies with Greece. “We are looking into a number of questions related to Goldman Sachs and other companies and their derivatives arrangements with Greece,” Bernanke said today in testimony before the Senate Banking Committee in Washington. Federal Reserve officials are using new supervisory powers over firms such as Goldman Sachs and Morgan Stanley to gather information on financial system risks. Bernanke was responding to a question from Senator Christopher Dodd, a Connecticut Democrat, who asked if there should be limits on the use of credit default swaps to prevent “runs against governments.” “Obviously, using these instruments in a way that intentionally destabilizes a company or a country is -- is counterproductive, and I’m sure the SEC will be looking into that,” Bernanke said. “We’ll certainly be evaluating what we can learn from the activities of the holding companies.”
  • Senators Urge U.S. Action on Chinese Currency Manipulation. A bipartisan group of senators urged the Obama administration to act urgently to investigate allegations the Chinese government is keeping its currency artificially low, saying a failure to do so is manifestly harming U.S. manufactures. In a letter sent to Commerce Secretary Gary Locke Thursday, the group of 15 senators, including six Republicans, said there are serious concerns about the department's failure to conclude that China's currency manipulation is in fact a "countervailable subsidy" to its domestic exporters.
MarketWatch:
The Business Insider:
LA Times:
  • Groups Say CalPERS, CalSTRS Flout Iran Divestment Law. Past a state deadline for selling the investments, CalPERS hasn't sold any of its $900 million in holdings in foreign firms working in Iran's defense or energy industries. On Wednesday, legislators heard criticism from Jewish groups and an Iranian torture victim contending that the California Public Employees' Retirement System and to a lesser extent the State Teachers' Retirement System are flouting a 2007 law designed to bring pressure on the Islamic Republic. The United States government has identified Iran as a state sponsor of terrorism and is rallying international support to tighten economic sanctions against the Middle Eastern country, which is believed to be developing a nuclear weapon. "We have been both frustrated by the inaction and dismayed by the persistent excuses offered for why the largest state employees pension fund in the nation and the largest teachers pension fund in the national feel it is acceptable to ignore a law," said Marc Carrel, chairman of the Jewish Public Affairs Committee of California. Carrel testified at a joint hearing of the Assembly and Senate committees that deal with retirement and pension issues. The CalPERS board in February 2009 "decided after careful consideration . . . to not divest shares at that stage, having regard to its overriding fiduciary duty," CalPERS said in a Dec. 31 report to the Legislature. The law's author, Assemblyman Joel Anderson (R-San Diego), said he wasn't satisfied with the board's decision. "You have completely thumbed your nose at the Legislature," he told CalPERS officials at the hearing. He said he was working with other lawmakers to take new legislative or legal actions to force the pension fund to follow the law. CalPERS' current stance on Iran divestment differs from its involvement in carrying out California's highly successful 1986 divestment law that helped break the back of the racist apartheid regime in South Africa and bring in free elections and majority black rule. What's more, CalPERS in particular has carefully cultivated a reputation for socially and environmentally responsible investing that doesn't fit in with a policy of buttressing the government of a country that is developing nuclear weapons and threatening to use them against Israel, lawmakers contend.
Rasmussen:
  • Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Thursday shows that 25% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as President. Forty percent (40%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -15 (see trends).
Politico:
  • Poll: 52% Oppose Reconciliation. More than half of Americans are against Democrats using reconciliation to pass a health care bill through the Senate, according to a new Gallup survey out Thursday. Fifty-two percent of the 1,0009 adults polled nationwide oppose using the procedural maneuver to pass the health care bill in the Senate on 51 votes rather than the 60 votes required to end any filibuster. Forty-two percent would support the move, and not surprisingly there is a strong partisan split. Democrats support passing the bill by reconciliation by a margin of 68 percent to 24 percent. Only 9 percent of Republicans want the bill passed using the maneuver, while 86 percent oppose it. Independents mostly oppose the move by 53 percent to 38 percent. Additionally, if Democratic and Republican leaders meeting Thursday at the health care summit are not able to come to any agreement, 49 percent oppose the passage of health care legislation. Forty-two percent would be in favor of the bill moving forward and 9 percent didn't know.
  • President Obama: Unsure 'Gaps Can Be Bridged' President Barack Obama spent the morning fending off GOP charges that his health care bill was a deal-ridden monstrosity that needs to be scrapped, even tangling testily with his 2008 presidential rival John McCain. “We’re not campaigning anymore, John,” Obama said at one point during the White House health summit, after McCain listed a litany of deals included in the bill. “The election is over now.” McCain joked, “I’m reminded of that every day.” Obama replied, “We can spend the remainder of the time with our respective talking points, but we’re supposed to be talking about insurance.” The exchange also captured Obama’s strategy on display at the summit — to accuse the Republicans of being only interested in scoring political points, while lacking any serious plan to provide health insurance for all Americans. By the lunch break, it was growing clearer that the pre-summit pessimism on both sides – that there was little to no hope of grand bipartisan compromise – was on target. In fact, both sides spent the bulk of the first three hours of the session trying to score tactical points, rarely veering from their scripts to extend a hand to the other side.
  • Bipartisan Health Care Reform Must Include Tort Reform by Darrell Issa.
Reuters:
  • Libya's Gaddafi Urges "Jihad" Against Switzerland. Libyan leader Muammar Gaddafi called on Thursday for a "jihad" or armed struggle against Switzerland using all means, saying it was an infidel state that was destroying mosques. "Any Muslim in any part of the world who works with Switzerland is an apostate, is against (the Prophet) Mohammad, God and the Koran," Gaddafi said during a meeting in the eastern Libyan city of Benghazi to mark the Prophet's birthday. "Let us fight against Switzerland, Zionism and foreign aggression," said Gaddafi, adding that "this is not terrorism," in contrast with the work of al Qaeda which he called a "kind of crime and a psychological disease." "There is a big difference between terrorism and jihad which is a right to armed struggle," he said. Gaddafi accused Switzerland of being an "infidel, obscene state which is destroying mosques," in reference to a Swiss referendum verdict barring construction of minarets. He called for a "jihad against it with all means."
Interfax:
  • ArcelorMittal plans to boost steel output at its Kazakhstan unit by 20% this year, citing General Director Frank Pannier.
Xinhua:
  • China Has 'No Intention' of Capping Emissions. China has no intention of capping its greenhouse gas emissions even as it's committed to reducing carbon intensity through new policies and measures, citing the country's top climate change negotiators. The negotiators also said that rich and developing countries have little hope of overcoming key disagreements over how to fight global warming. China "could not and should not" set an upper limit on greenhouse gas emissions at the current phase, Su Wei, the chief negotiator of China for climate change talks in Copenhagen, was cited as saying.

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Bear Radar

Posted by Gary .....at 1:48 PM
Style Underperformer:
Large-Cap Value (-1.42%)

Sector Underperformers:
Computer (-2.82%), Banks (-1.85%) and Semis (-1.83%)

Stocks Falling on Unusual Volume:
VECO, MLNX, USMO, TKC, STO, LIHR, LAMR, ROCK, FWLT, SVVS, CPLA, ICLR, ZEUS, KNDL, SLXP, GPRE, AFAM, DISCA, FSLR, IPCM, MORN, ONXX, CTXS, SWKS, OC, TS, REV, NCI, HOC, ANW, KG, DOM, CRN, KAI and GME

Stocks With Unusual Put Option Activity:
1) PALM 2) BX 3) BBD 4) KSS 5) ESRX


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Bull Radar

Posted by Gary .....at 11:19 AM
Style Outperformer:
Small-Cap Growth (-1.20%)

Sector Outperformers:
Gold (+1.10%), Road & Rail (-.37%) and Education (-.50%)

Stocks Rising on Unusual Volume:
TRLG, MYL, ESRX, LINTA, HANS, ACIQ, DWA, IPHS, VMED, ASMI, CCE and TRW

Stocks With Unusual Call Option Activity:
1) MYL 2) BRCD 3) CIEN 4) GME 5) KR

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Trading Links

Posted by Gary .....at 9:27 AM
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