North American Investment Grade CDS Index 96.25 bps -2.68%
European Financial Sector CDS Index 138.10 bps -1.65%
Western Europe Sovereign Debt CDS Index 193.50 bps -.85%
Emerging Market CDS Index 231.95 bps -4.01%
2-Year Swap Spread 27.0 -2 bps
TED Spread 15.0 unch.
Economic Gauges:
3-Month T-Bill Yield .15% unch.
Yield Curve 244.0 +9 bps
China Import Iron Ore Spot $167.80/Metric Tonne unch.
Citi US Economic Surprise Index +21.70 -.7 point
10-Year TIPS Spread 2.16% +7 basis points
Overseas Futures:
Nikkei Futures: Indicating +197 open in Japan
DAX Futures: Indicating +15 open in Germany
Portfolio:
Higher: On gains in my Biotech, Medical, Retail, Ag and Technology long positions
Disclosed Trades: Covered all of my (IWM)/(QQQQ) hedges, covered some of my (EEM) short, added back to my (MOS) long
Market Exposure: Moved to 100% Net Long
BOTTOM LINE: Today's overall market action is very bullish as the S&P 500 trades substantially higher despite ongoing eurozone debt concerns and China inflation worries. On the positive side, Homebuilding, Semi, Software, Coal, Energy, Oil Service, Steel, Gaming, Construction and Defense shares are especially strong, rising more than 2.75%. Cyclical shares are outperforming. (BAC), which has been a big drag on (XLF), is rebounding 3% to session highs. Copper is rising +2.93%, lumber is jumping +2.31% and the S&P GSCI Ag Spot Index is surging +4.23%. The US Scrap Steel Index is rising another +2.93%. The Spain sovereign cds is plunging -12.64% to 318.56 bps, the Italy sovereign cds is dropping -13.7% to 231.05 bps, the Portugal sovereign cds is falling -12.18% to 474.30 bps and the Ireland sovereign cds is falling -7.76% to 563.37 bps. On the negative side, Education and REIT shares are underperforming. The Greece sovereign cds is rising +.64% to 980.48 bps. The 10-year yield is surging +17 bps to 2.97%. The broad market continues to remain resilient, with mild pullbacks on negative news and huge jumps on good news. Headlines out of Europe tomorrow will dominate trading again. If eurozone debt angst falls again, global equities should build on today's rally tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on falling eurozone sovereign debt angst, declining economic fear, seasonal strength, investment manager performance angst, short-covering, bargain-hunting and technical buying.
Companies in U.S. Added 93,000 Jobs in November, ADP Says. Companies in the U.S. boosted payrolls more than forecast in November, propelled by increased hiring at small businesses, data from a private report showed today. Employment increased by 93,000, the most since November 2007, after a revised 82,000 rise in October that was almost double the initial estimate, according to figures from ADP Employer Services. The median projection of 40 economists surveyed by Bloomberg News called for a 70,000 gain last month. Small firms added more workers than at any time since the recession began in December 2007. “There’s just a feeling that maybe we’ve turned a corner” in the labor market, Joel Prakken, chairman of Macroeconomic Advisers LLC, which produces the figures with ADP, said in a conference call with reporters. “It looks to me as if hiring is beginning to pick up. I do expect these employment numbers to get firmer” in 2011, he said.
Italy, Spain Lead Drop in Debt Risk on ECB Bond Buying Bets. Italy and Spain led a decline in the cost of insuring against losses on European government debt on speculation the European Central Bank will boost bond purchases to calm markets. Credit-default swaps on Belgium, Portugal and Ireland also fell from record high levels, helping to push down the region’s benchmark index of sovereign swaps from an all-time high. A gauge of subordinated bank debt risk dropped from a 20-month peak. Investors are hedging bets bonds will fall after ECB President Jean-Claude Trichet signaled policymakers may step up their response to the region’s debt crisis when they meet tomorrow. The ECB bought Irish and Portuguese government bonds today, according to traders with knowledge of the transactions. Credit-default swaps on Italy tumbled 41.5 basis points to 226.5, and Spain decreased 46 to 318, according to data provider CMA. Belgium declined 13 basis points to 192, Greece dropped 36.5 basis points to 928.5, Ireland was down 48 at 558, while Portugal was 63 lower at 479. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments declined 12 to 189. The Markit iTraxx Financial Index linked to the senior debt of 25 banks and insurers fell 10.5 basis points to 161 and the subordinated index dropped 27 to 284.5, according to JPMorgan Chase & Co. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings declined 25 basis points to 501. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings decreased 5.5 basis points to 112, JPMorgan prices show.
Fed Says U.S. Economy Gains Strength in 10 Out of 12 Regions. The Federal Reserve said the economy gained strength across much of the U.S. as hiring improved, manufacturing expanded and retailers anticipated a stronger holiday shopping season. Five Fed banks, including Boston and San Francisco, said the economy grew “at a slight to modest” rate, while five others, including New York and Chicago, reported a “somewhat stronger pace of economic activity.” Conditions were reported as “mixed” in the Philadelphia and St. Louis regions.
Employers in U.S. Announce Most Job Cuts in Eight Months, Challenger Says. Employers in the U.S. announced plans in November to cut 48,711 jobs, the most in eight months, as government agencies trimmed payrolls. Compared with the same month last year, planned firings dropped 3.3 percent, according to Chicago-based Challenger, Gray & Christmas Inc. This month’s downsizing marks the smallest year-over-year decline since May 2009 when job cuts increased by 7.4 percent from a year earlier.
U.S. Manufacturing Expands for 16th Straight Month. Manufacturing in the U.S. expanded for a 16th consecutive month in November, a sign the world’s largest economy is gaining traction as the year draws to a close. The Institute for Supply Management’s factory index was little changed at 56.6 after 56.9 in October, the Tempe, Arizona-based group said today. “Businesses are starting to feel better about the outlook and so they’re willing to spend more on investment as well as to hire,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut. “We had strong growth early in the year, a little bit of a hiccup in the middle and now things are starting to come back again.” The ISM’s U.S. new orders index eased to 56.6 from 58.9, while the production index fell to 55, the lowest level since June 2009, from 62.7. The employment gauge was little changed at 57.5 from 57.7, and the index of export orders dropped to 57 from 60.5. The measure of orders waiting to be filled held at 46 and the index of prices paid fell to 69.5 from 71. The inventory index increased to 56.7 from 53.9, while a gauge of customer stockpiles rose to 45.5 from 44.
Fed Names Recipients of $3.3 Trillion in Aid During Crisis. The Federal Reserve, under orders from Congress, today named the counterparties of about 21,000 transactions from $3.3 trillion in aid provided to stem the worst financial panic since the Great Depression. Bank of America Corp.(BAC) and Wells Fargo & Co.(WFC) were among the biggest borrowers from one program, the Term Auction Facility, with as much as $45 billion apiece. Some aid went to U.S. units of foreign institutions, including Switzerland’s UBS AG, France’s Societe Generale and Germany’s Dresdner Bank AG.
Fannie, Freddie Spar With Regulators on Foreclosures. Federal banking regulators said they are pushing lenders to suspend foreclosure proceedings while distressed borrowers seek new mortgages. Acting Comptroller of the Currency John Walsh said in testimony prepared for a congressional hearing today that his agency is directing national bank servicers to suspend foreclosures for borrowers actively seeking to qualify for loan modifications.
Commodities Climb to Two-Week High on 'Positive' Global Economic Reports. Commodities jumped to a two-week high as higher-than-estimated job growth in the U.S. private sector and expanding Chinese and European manufacturing bolstered optimism in the global economy. The Reuters/Jefferies CRB Index of 19 raw materials jumped 1.7 percent to 306.63 at 11:45 a.m. New York time, the highest level since Nov. 12. Grains and industrial prices led the rally. Wheat soared as much as 7.9 percent, and cotton rose more than 3 percent.
Carry Trade Losses Rise to Most in Two Years Amid Europe Sovereign Crisis. Foreign-exchange losses from carry trades climbed to the highest level in more than two years as hedge funds and other large speculators unwound bets that the euro will strengthen amid Europe’s sovereign-debt crisis. Royal Bank of Scotland Plc’s index for carry trades, whereby investors tap cash where borrowing costs are low to invest in higher rates elsewhere, fell 9.7 percent in November, the biggest drop since October 2008.
European Banks Dominated Use of Fed's Commercial Paper Program. The U.S. subsidiaries of European financial institutions, led by Zurich-based UBS AG and Brussels- based Dexia SA were among the largest users of a government program to provide emergency short-term funding to U.S. companies and banks during the credit crisis. Six European banks were among the top 11 companies that sold the most debt overall to the the Commercial Paper Funding Facility. They sold a combined $274.1 billion, according to data made public today by the U.S. central bank. UBS sold $74.5 billion, the most among all borrowers. The largest U.S.-based user was insurer American International Group, selling $60.2 billion. UBS’s figure of $74.5 billion represents the company’s total sales over the life of the program. The bank’s CPFF borrowings peaked at $37.2 billion, an amount the firm rolled over, or re-sold at maturity, once. Other companies rolled over debt in the program as well.
GM(GM), Ford(F) U.S. Sales Rise as SUV, Truck Demand Increases. General Motors Co., Ford Motor Co. and Chrysler Group LLC all reported improved sales in November as demand for pickups and sport-utility vehicles pushed the industry toward matching its fastest sales pace of the year. GM’s deliveries in the month climbed 11 percent to 168,739, the Detroit-based company said today in a statement. Sales of its Chevrolet Equinox and GMC Terrain SUVs gained 60 percent. Ford’s sales rose 20 percent to 147,338, fueled by a 55 percent boost in sales of the Edge SUV. Chrysler and Nissan Motor Co. both reported light-truck gains as they boosted results.
Wall Street Journal:
IBM Claims Breakthrough in Laser-Based Chips. A race to transform computers with laser-based communications is accelerating, with International Business Machines Corp. the latest to claim breakthroughs in chips that send data at blazing speeds using pulses of light.
Erdogan Vents Fury at Cable Claims. Prime Minister Recep Tayyip Erdogan of Turkey suggested Wednesday the U.S should fire diplomats who reported claims in leaked State Department cables that he and his family are corrupt, and said he planned to take legal action against them. In a sometimes furious televised address at the start of an investment conference in Ankara, Mr. Erdogan said, "My friends in the judiciary and we are working to do what is necessary about these diplomats. We spoke to the U.S. They did apologize, but it is not enough. The U.S. should do what is necessary about these diplomats."
Cyber Monday Sales Top $1 Billion for First Time. Research firm comScore says revenue rose 16 percent from a year ago to $1.03 billion on the Monday after Thanksgiving. Since the beginning of November, online sales are up 13 percent to $13.55 billion.
Apple(AAPL) Wins Patent on 3D Projector That Needs No Glasses. Apple has been awarded a U.S. patent for a display system that would allow multiple viewers to see a high-quality 3D image projected on a screen without the need for special glasses, regardless of where they are sitting.
Politico:
House Climate Panel to Be Axed. House Republicans will scrap the committee set up by Speaker Nancy Pelosi to investigate global warming, the panel’s top Republican announced Wednesday. Rep. Jim Sensenbrenner (R-Wis.) made official what many had already expected — the GOP majority will axe the Select Committee on Energy Independence and Global Warming, which Pelosi created in 2007.
Obama Reverses on Offshore Drilling. The Obama administration will reverse its decision and not allow drilling off the Atlantic and Pacific coastlines and the eastern Gulf of Mexico for at least another seven years, sources have confirmed to POLITICO.
L-3(LLL) CEO Says Considers Acquisitions, Buybacks. L-3 Communications Holdings Inc Chief Executive Michael Strianese said on Wednesday his company is still actively looking for acquisitions but will also consider ensuring shareholder value through share buybacks.
FCC Chief Backs Some Rationing of Internet Traffic. Internet service providers would be allowed to ration web traffic on their networks under a strategy unveiled by the top U.S. communications regulator that no longer focuses solely on open access. Federal Communications Commission Chairman Julius Genachowski proposed banning the blocking of lawful traffic but allowing Internet providers to manage network congestion and charge consumers based on Internet usage.
Fed's Bullard: Europe a Wake-Up Call for U.S. The debt situation in Europe is a "wake-up call" for the United States to get its long-term fiscal situation under control, a top Federal Reserve official said on Wednesday.
IrishTimes.com:
Concern on Debt Contagion Deepens. Global concern about the debt crisis rocking the euro zone mounted today, with Washington sending a top US Treasury envoy to Europe and G20 officials discussing the turmoil in a conference call. A day after investors pushed the risk premiums on Spanish and Italian government debt to new highs, the bond spreads of countries on Europe's southern periphery narrowed and the euro steadied on speculation that the European Central Bank could unveil new anti-crisis steps at a meeting tomorrow. But calmer markets failed to remove deep worries about contagion in the 16-country euro region that has pushed European policymakers onto the defensive and forced them to search for new ways to stabilise their 12-year-old currency project.
CBCNews:
CBC Pushes 'Anti-American Melodrama': WikiLeaks. U.S. diplomats in Ottawa wrote to Washington that the CBC pushes "insidious negative popular stereotyping" with "anti-American melodrama" in its entertainment TV programs, according to documents to be released by the website WikiLeaks.
Corporate Spreads Show Strain, Swaps Soar, Returns Dwindle: Credit Markets. The failure of European leaders to contain the region’s debt crisis with a bailout of Ireland has driven relative borrowing costs in the global corporate bond market to a 12-week high. Investors demand an extra 1.77 percentage points in yield to own company bonds instead of government debt, the most since Sept. 8, Bank of America Merrill Lynch index data show. The premium European banks pay in the currency swaps market to borrow in dollars more than doubled in the past three weeks to the highest level since May as the cost to protect against losses on their bonds jumped to a 20-month high. Global debt markets are showing signs of strain amid concern a sell-off in euro-region bond markets will force leaders to bail out more nations, impose losses on creditors and cause the global economy to slow. Company bonds lost 1.04 percent in November, the worst performance since losing 4.44 percent in October 2008, Bank of America Merrill Lynch’s Global Broad Market Corporate index shows. “There’s definitely more fear in the market than we had a couple of weeks ago,” said Eric Stein, a money manager who helps oversee $54.2 billion in fixed-income assets at Eaton Vance Management in Boston. “We need a real sustainable solution. These kind of ad hoc Band-Aid measures aren’t really going to do anything to help Europe over the long term and investors are more and more realizing that.” In London, the Markit iTraxx Europe Index of 125 companies with investment-grade ratings rose 3.5 basis points to 117, the highest since Sept. 23, Markit prices show. In emerging markets, relative yields rose 11 basis points to 273 basis points, the widest since Oct. 4 on a closing basis, according to JPMorgan Chase & Co. index data. Spreads have widened 31 basis points since the end of October. Concern that Spain will fail to close Europe’s third- highest deficit has driven up financing costs for the nation’s lenders. Relative yields on euro-denominated Spanish bank bonds rose 141 basis points to 385 basis points in November -- the biggest monthly jump on record, according to data compiled by Bank of America Corp. Swaps on Spain jumped 13 basis points yesterday to a record 364 on a closing basis, according to CMA. Contracts on Italy, Portugal and Ireland also jumped to records. Signs of strain are showing up in the interest-rate swaps market. The difference between the rate to exchange floating-for fixed-interest payments for two years and the comparable- maturity Treasury yield, known as the swap spread, widened 3.98 basis points to 28.13 basis points, the most since July. The European crisis also is causing a surge in the premium European banks pay to borrow in dollars in the swaps market. The price of two-year cross-currency basis swaps between euros and dollars reached minus 50.6 basis points yesterday, the largest effective premium for dollar borrowing in swaps since May, according to data compiled by Bloomberg. The gap has widened from minus 30.3 basis points on Nov. 22. “People perceive credit risk much higher in European counterparties,” Douglas Borthwick, head of foreign-exchange trading at Stamford, Connecticut-based Faros Trading LLC, said in an interview. The increase in swap rates is “extremely aggressive, and what that means is that essentially over the last three or four days, credit departments have gone around saying we need to adjust your credit with local names,” he said.
Contagion May Force EU to Expand Arsenal to Fight Debt Crisis. Investors’ no-confidence vote in the aid package for Ireland may force European policy makers to expand their arsenal to fight the debt crisis threatening to tear the euro apart. Options outlined by economists at Societe Generale SA and Barclays Capital include: Boosting the 750 billion-euro ($975 billion) temporary rescue fund or turning it into an asset- buying program; cutting interest rates on bailout loans; issuing joint bonds for the 16 euro nations or flooding the economy with cash from the European Central Bank. All would be unprecedented, and none of Europe’s political leaders -- dominated by German Chancellor Angela Merkel -- has indicated the steps are being considered. Earlier this year, they struggled to cobble together the measures that investors and economists now say are proving inadequate to safeguard the euro and keep speculators at bay.
European Contagion Spreads to Region's Core as Belgian Bond Yields Surge. Europe’s sovereign crisis is spreading to the heart of the 16-nation bloc as investors question Belgium’s ability to cut the euro region’s third- highest debt load, overshadowing its economic performance. The extra yield investors demand to hold Belgian 10-year bonds instead of benchmark German bunds of similar maturity widened to 139 basis points at 5.10 p.m. yesterday in Brussels, the most since at least 1993. The cost of insuring Belgian government bonds rose to a record for a second day, according to CMA prices of credit-default swaps. The European Union’s 85 billion-euro ($111 billion) rescue package for Ireland has failed to quell market turmoil as investors shift their focus from peripheral states to countries such as Belgium, whose capital is home to the EU’s political institutions. “Belgium has moved to the foreground as investors ask themselves ‘who’s next?’ to ask for help,” said Carsten Brzeski, an economist at ING Groep NV in Brussels and a former European Commission official. Six months after the Greek rescue exposed flaws in the euro’s makeup and fueled doubts whether 16 countries belong in the same currency union, investors remain unconvinced. In Belgium, seven political parties involved in coalition talks are still sparring over whether to grant more fiscal autonomy for the country’s regions. Its public debt is approaching 100 percent of gross domestic product and 65 billion euros of bonds and bills are due to mature next year, according to data compiled by Bloomberg.
Hedge Funds Short Clean Power as Goldman Reduces Stake in Superconductor. Hedge funds increased short selling in U.S. renewable energy stocks to the highest level in a year, boosting bets against First Solar Inc. and Tesla Motors Inc. as government support for low-polluting technologies faltered. Seventeen percent of the freely traded shares of the 35 U.S. stocks in the WilderHill New Energy Index are sold short, compared with 16 percent in October and 15 percent in August, data compiled by Bloomberg show. That’s almost four times the 4.4 percent short ratio of the Standard & Poor’s 500 index. In the run-up to this week’s global climate talks in Mexico, short sellers targeted makers of wind turbines, solar panels and electric cars whose sales also were undermined by cash-strapped European governments cutting subsidies. Goldman Sachs Group Inc. and Deutsche Bank AG trimmed long positions in renewable-energy shares in the third quarter, filings show.
Guidepoint Subpoenaed by Massachusetts Officials Over Hedge Fund Relation. Guidepoint Global LLC, a research firm that links investors with experts, was subpoenaed by Massachusetts Secretary of the Commonwealth William F. Galvin in connection with its relationship to a hedge fund in the state.
Nevada Rating Outlook Cut to Negative by Moody's as Gaming Revenues Fall. Nevada’s outlook was lowered to negative from stable by Moody’s Investors Service, citing a $3 billion budget gap and an unexpected decline in the gaming industry, “a sector that was previously believed to be recession proof.”
Citigroup(C) Said to Discuss Hiring Former White House Budget Director Orszag. Citigroup Inc., recovering from its $45 billion bailout in 2008, is in advanced talks to hire former White House Budget Director Peter Orszag, people with knowledge of the matter said. Orszag, 41, may take a job in the New York-based firm’s investment-banking division, the people said, declining to be identified because the discussions are private. Orszag, an economist trained at Princeton University and the London School of Economics, helped shape U.S. economic stimulus during the financial crisis and overhaul the health- care system. The youngest member of President Barack Obama’s cabinet, he spent 18 months as White House budget director, stepping down in July. He previously served as economic adviser to President Bill Clinton and was a staff member of Clinton’s Council of Economic Advisers. Orszag’s tenure at the Clinton White House overlapped with Citigroup’s former executive-committee chairman, Robert Rubin, who served as Treasury secretary from 1995 to 1999. In 2006, when Rubin, 72, helped to found an economic research group at the Brookings Institution called the Hamilton Project, Orszag was named its first director. Obama, then a senator from Illinois, spoke at the project’s unveiling.
U.S. Treasury Envoy to Visit Spain as Bonds, Portugal Show Contagion Risk. The U.S. Treasury Department said its top international official will visit Madrid, as Spanish and Italian bond spreads rose to euro-era records and Standard & Poor’s said it may cut Portugal’s debt ratings. Lael Brainard, the undersecretary for international affairs, will meet this week with senior government officials in Madrid, Berlin and Paris to “discuss economic developments in Europe as well as our longer-term work to advance our shared agenda on strong and sustainable global growth,” the Treasury said in a statement yesterday.
Wall Street Journal:
LME: Trader Holds Up to 80% of Exchange Copper Stocks. Up to 80% of London Metal Exchange's copper stocks are held by a single trader, according to the exchange's daily warrant banding report. The dominant position holder owns between 50% and 80% of the 355,750 metric tons currently held in LME listed warehouses. This amounts to more than 177,875 metric tons of copper, worth about $1.5 billion. "That's a big market, it's not too easy to get that kind of material, that much tonnage," said a U.S.-based physical metal trader. It is unusual for one trader to hold such a large amount of exchange-warehoused stocks as it gives the participant greater control over the amount of copper available to fill futures contracts. With more than half the stock held by one participant, physical traders may find it difficult to borrow metal stored in a particular location and may help lift premiums for key storage hubs. The dominant holder is raising the cost of copper for prompt delivery compared to metal delivered three-months out. Cash copper is trading at a $60 per metric ton surcharge to metal for three-month delivery. The surcharge was just $40 a few days ago, but has increased as the dominant position emerged, traders said. Copper traders have been bracing for a metal supply squeeze since October, when three separate companies announced plans for physical copper exchange-traded funds. These funds would let investors trade shares listed on a stock exchange and backed by LME grade metal held by the trust. The three trusts include the 61,800 metric ton J.P. Morgan Physical Copper Trust, 121,200 metric ton Blackrock iShares Copper Trust and an as-yet-unspecified sized product from ETF Securities. While both Blackrock and ETF Securities plan to back their products with LME warrants, J.P. Morgan's trust will house the copper off the exchange and is thus a less likely candidate. However, any one of the three trusts could potentially hold the dominant warrant position, traders said. "I just can't see why anyone other than an ETF would want something like that," said a U.S. based physical trader.
Plans for New EU 'Stress Tests' Spur Squabbling. European officials are planning a new round of bank "stress tests" designed to be more rigorous than last summer's widely criticized exams, but the effort is already beset by squabbling and the possibility that the test results won't become public. While some European leaders are pushing for next year's tests to be broader and more transparent than last summer's exercise, the agency that will oversee the tests says it might opt to not publicly disclose the results.
Some U.S. Money Funds Exposed to European Banks. Some of the largest U.S. money-market funds hold billions of dollars in securities issued by Spanish and Italian banks, highlighting the risk that further deterioration in Europe could have broad impact. Many European banks have long been dependent on investors for funding because their deposit base is too small relative to their loans outstanding. U.S. money-market funds have been a major source of that cash. Money-market funds in the U.S. hold about $400 billion of their $2.8 trillion in assets in foreign banks, according to J.P. Morgan.
Google(GOOG) Set to Launch E-Book Venture. Google Inc. is in the final stages of launching its long-awaited e-book retailing venture, Google Editions, a move that could shake up the way digital books are sold. The long-delayed venture—Google executives had said they hoped to launch this summer—recently has cleared several technical and legal hurdles, people close to the company say. It is set to debut in the U.S. by the end of the year and internationally in the first quarter of next year, said Scott Dougall, a Google product management director.
Comcast(CMCSA) Disputes Level 3's(LVLT) Accusations. Comcast Corp. defended its move to ask Level 3 Communications Inc. to pay for delivering more Internet traffic across its network in a letter to the Federal Communications Committee, rebutting Level 3's charge that it was erecting a "toll" to its network.
Why the Spending Stimulus Failed by Michael J. Boskin. New economic research shows why lower tax rates do far more to spur growth.
In Iraq, a Very Busy Iran. U.S. Cables Depict Tehran's Extensive Efforts to Further Its Interests Next Door.
China Manufacturing Activity Jumps to 7-Month High. China's factories revved up production in November, but a big jump in input prices also pointed to more inflationary pressure in the pipeline and a need for more monetary tightening. The official purchasing managers' index (PMI) rose to a seven-month high of 55.2 in November from 54.7 in October, the China Federation of Logistics and Purchasing said on Wednesday. The reading compared with the median forecast of 54.7 in a Reuters poll of 11 economists. While a rise in output and export orders helped power the rise, the biggest increase came in the sub-index for input prices, which climbed to 73.5 from 69.9 a month earlier. "The main problem for the economy is still inflation," said Jun Ma, China economist at Deutsche Bank in Hong Kong.
Business Insider:
Even Fewer People Are Watching Eliot Spitzer's Show This Month. Time does not seem to be doing ParkerSpitzer any favors. According to Nielsen, in its second month the program dropped in both total viewers (506,000 to 453,000) and in the 25-54 demographic (145,000 to 129,000). Perhaps needless to say the show also clocked in fourth in the 8pm time slot for the month of November, behind FNC, MSNBC and HLN in both categories. It gets worse. The program also dropped by double digits over the same time period last year: the show is down 35% in total viewers and down 28% in the 25-54 demographic from its predecessor Campbell Brown.
Without Much Fanfare, The HSKAX Is Back To August 2007 "Quant Implosion" Levels. (graph) While everyone knows that it was two and a half decades of imbecilic monetary policy courtesy of the Monstro [sic] that caused the credit bubble, few things were as much of a direct proximal cause of the market crash as the August 2007 quant collapse. And few indices tracked the obliteration of the M/N quant landscape that followed as well as the HSKAX (below). Well, after two years of painful grinding (for the market neutrals), the HSKAX is back to the same level to which it plunged in that week in early August 2007.
IBD:
Chipmaker's Vintage Products Power Phones, Cars and Industry. Such high-end packages are driving the current recovery in auto sales, analysts say. No wonder it's also helping the bottom line of Analog Devices (ADI), whose microchips power such features.
CNN Money:
Oil Execs: Drilling Ban Will Hurt for Years. Drilling activity in the Gulf of Mexico will remain light in the years ahead, despite the fact that the ban on drilling there has been lifted, according to a survey of oil executives released Tuesday. Nearly 70% of industry executives expect drilling activity in the Gulf to remain below 2009 levels until at least 2012, according to a survey by BDO, a Chicago-based accounting and consulting firm. Some say it will never return to 2009 levels.
'Flash Crash' Fixes Delayed at U.S. SEC - Sources. U.S. securities regulators are having trouble crafting permanent rules to prevent future stock market flash crashes because fixes are so complicated and rule makers are overburdened from financial reform, sources said on Tuesday.
OmniVision(OVTI) Sees Strong Q3, Shares Rise. OmniVision Technologies Inc forecast a strong third quarter as it expects to gain from the demand for smartphones and its new image sensors, sending its shares up 5 percent in extended trade.
Financial Times:
Bank of America(BAC), JPMorgan(JPM) and other banks may be required to buy back more mortgages that failed to meet underwriting standards, citing an interview with Dominic Frederico, CEO of Assured Guaranty Ltd. "This saga of mortgage dislocation has a lot more chapters to play," Frederico said. "I think we're at the tip of the iceberg."
Telegraph:
Portugal Banks Face 'Intolerable' Risk Unless Austerity Measures Are Implemented.Failure to consolidate the public finances will put the country's banks in danger, the Bank of Portugal said in a report, which followed Prime Minister Jose Socrates last week pushing through an austerity budget. The Portuguese government says no bail-out is needed, but markets are already pointing the finger at the country as the next to follow Greece and Ireland in requesting a rescue package. "The risk will become intolerable if we do not see the implementation of measures that consolidate public finances in a credible and sustainable way," the central bank said.
The Guardian:
WikiLeaks: Interpol Issues Wanted Notice for Julian Assange. WikiLeaks founder Julian Assange facing growing legal problems around world. The WikiLeaks founder, Julian Assange, is tonight facing growing legal problems around the world, with the US announcing that it was investigating whether he had violated its espionage laws. Assange's details were also added to Interpol's worldwide wanted list. Dated 30 November, the entry reads: "sex crimes" and says the warrant has been issued by the international public prosecution office in Gothenburg, Sweden. "If you have any information contact your national or local police." It reads: "Wanted: Assange, Julian Paul," and gives his birthplace as Townsville, Australia.
Les Echos:
France currently deserves its AAA credit rating and the outlook on the rating is stable, Standard & Poor's President Deven Sharma said in an interview. Every rating can change with new circumstances, he said, when asked if France could lose the rating.
Evening Recommendations Citigroup:
Rated (DSW) Buy, target $45.
Rated (ANF) Buy, target $57.
Rated (GPS) Sell, target $20.
Rated (URBN) Sell, target $32.
Rated (ROST) Sell, target $60.
Rated (AEO) Buy, target $21.
Rated (CHS) Buy, target $16.
Susquehanna:
Rated (VMW) Positive, target $100.
Rated (INFA) Positive, target $50.
Rated (CPWR) Positive, target $13.
Rated (RHT) Positive, target $52.
Rated (CRM) Positive, target $175.
Rated (TIBX) Positive, target $25.
Night Trading
Asian equity indices are -.25% to +1.0% on average.
Asia Ex-Japan Investment Grade CDS Index 123.0 +5.0 basis points.
Asia Pacific Sovereign CDS Index 118.0 +4.5 basis points.
The ADP Employment Change for November is estimated at 70K versus 43K in October.
8:30 am EST
Final 3Q Non-Farm Productivity is estimated to rise +2.3% versus a prior estimate of a +1.9% gain.
Final 3Q Unit Labor Costs are estimated to fall -.2% versus a prior estimate of a -.1% decline.
10:00 am EST
ISM Manufacturing for November is estimated to fall to 56.5 versus 56.9 in October.
ISM Prices Paid for November is estimated at 71.0 versus 71.0 in October.
Construction Spending for October is estimated to fall -.3% versus a +.5% gain in September.
10:30 am EST
Bloomberg consensus estimates call for a weekly crude oil inventory drawdown of -1,150,000 barrels versus a +1,029,000 barrel gain the prior week. Gasoline supplies are estimated to rise by +300,000 barrels versus a +1,913,000 barrel gain the prior week. Distillate inventories are expected to fall by -1,100,000 barrels versus a -541,000 barrel decline the prior week. Finally, Refinery Utilization is expected to rise +.4% versus a +1.5% gain the prior week.
2:00 pm EST
Fed's Beige Book.
Afternoon:
Total Vehicle Sales for November are estimated to fall to 12.1M versus 12.25M in October.
Upcoming Splits
None of note
Other Potential Market Movers
The Fed's Yellen speaking, Fed's Tarullo speaking, Fed's Fish speaking, Challenger Job Cuts Report for November, weekly MBA Mortgage Applications report, (TAP) analyst meeting, (XEL) investor meeting and the Piper Jaffray Healthcare Conference, CSFB Tech Conference, Jefferies Energy Conference, CSFB Aerospace/Defense Conference and the Citi Basic Materials Conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and automaker shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.
