Evening Headlines
Bloomberg:
- Japan Current-Account Gap Widens to Record on Weaker Yen. Japan’s
current-account deficit widened to a record in November as imports
climbed, underscoring challenges for Prime MinisterShinzo Abe as he
tries to drive a sustained economic rebound. The 592.8 billion yen
($5.7 billion) shortfall in the widest measure of trade, reported today
by the Ministry of Finance in Tokyo, was wider than a median forecast of
a 368.9 billion yen deficit in a Bloomberg News survey of 24
economists. Weakness in the yen and extra demand for energy because of
nuclear-plant shutdowns are driving up Japan’s import bill,
highlighting drags on the recovery that will also include a
sales-tax increase in April. A longer-term risk for the nation
is any shift to a sustained deficit that would undermine
investor confidence in Japanese government debt.
- Great Wall Tumbles After Delaying Haval H8 SUV. Great Wall Motor Co. (2333), China’s
biggest sport utility vehicle maker, fell the most in more than
five years in Hong Kong trading after delaying its Haval H8
model to address technical deficiencies. Great Wall tumbled 18 percent to HK$32.20 as of 9:31 a.m.,
the biggest decline since October 2008. Hong Kong’s benchmark
Hang Seng Index dropped 1.1 percent. The company’s Shanghai-traded shares fell 9.1 percent.
- Asian Stocks Fall First Time in 3 Days, Pacing U.S. Loss.
Asian stocks fell, with the regional benchmark index on course for its
first loss in three days as it paced the biggest drop in U.S. stocks
since November amid concern over valuations. Great Wall Motor Co.,
China’s biggest maker of sport utility vehicles, plunged 11 percent in
Hong Kong after delaying the introduction of its Haval H8 model for
three months to address technical deficiencies. Honda Motor Co. (7267), a
Japanese carmaker that gets 47 percent of its sales in North America,
lost 3.3 percent. Dainippon Sumitomo Pharma Co. fell 6 percent in Tokyo
after the head of its New York-based partner Intercept Pharmaceuticals
Inc. said he may need the help of a larger
drugmaker to bring a liver-disease treatment to market.
The MSCI Asia Pacific Index lost 1 percent to 139.25 as of
12:28 p.m. in Tokyo.
- Rubber Touches Five-Month Low as Chinese Stockpiles Expand. Rubber
futures in Tokyo reached a five-month low as stockpiles in China
continued expanding, deepening concern that demand from the largest user
is slowing. The contract for delivery in June on the Tokyo Commodity
Exchange dropped as much as 3.9 percent to 246.4 yen a kilogram
($2,385 a metric ton), the lowest level since Aug. 8, and was at
247.1 yen at 10:14 a.m. local time. Futures extended last week’s
6.6 percent drop, the most since the five days through April 19.
Markets in Tokyo were closed yesterday for a holiday.
- Rebar Rises Amid Expectation Chinese Mills Will Cut Production.
Steel reinforcement-bar futures
climbed in Shanghai amid expectations that Chinese steel mills will
continue to cut output to reduce emissions and as demand slows in
winter. Rebar for May delivery on the Shanghai Futures Exchange
gained as much as 0.7 percent to 3,486 yuan ($577) a metric ton,
before trading at 3,473 yuan at 10:41 a.m. local time.
- Fed Said to Release Plan to Limit Banks’ Commodities Activities. The
Federal Reserve is poised to take a preliminary step toward limiting
banks’ activities with commodities amid Congressional scrutiny,
according to three people briefed on the discussions. The Federal Reserve is planning to release a notice seeking
information on ways to curb banks’ ownership and trading of some
commodities as it tries to cut risk for deposit-taking banks,
said the people, who requested anonymity because the talks are
private. Regulators and lawmakers have said raw-materials assets
could lead to catastrophic losses, collapses and public
bailouts.
- ECB Sees Bad-Debt Rules as Threat to Credible Bank Review. The
European Central Bank is concerned that national differences in how bad
debt is classified could cripple its probe into the health of euro-area
banks, according to an internal ECB document. Bad-debt
classification practices across Europe show “material differences that,
if not considered, would severely affect the consistency and credibility
of the exercise,” according to the undated document obtained by
Bloomberg News. A person familiar with the text said it was drawn up in
late
November and contains the ECB’s latest thinking on the subject.
An ECB spokeswoman declined to comment.
- Hensarling Seeks More Constraint on Fed’s Emergency Loan Power. The committee chairman, Texas Republican Jeb Hensarling,
outlined objections to the Fed’s proposed regulations in a
letter today to Fed Chairman Ben S. Bernanke. Fed officials drew
up the rules on its emergency lending power to meet requirements
of the Dodd-Frank Act intended to prevent bailouts of individual
institutions in danger of failing. “Disappointingly, the proposed rule does not provide any
real or binding constraints on the Federal Reserve’s discretion
to conduct bailouts of failing financial firms,” Hensarling
wrote in today’s letter, according to a copy obtained by
Bloomberg News.
- Loan
Standards Slide to Deepen in CMBS Deals Rush, Moody's Says.
Underwriting standards on commercial mortgages packaged into bonds are
poised to slide this year as surging sales of the securities allow
landlords to pile more debt onto properties, according to Moody's
Investors Service.
- Obamacare Customers Skew Older as Young Wait for Shakeout. About 70 percent of Obamacare’s customers are 35 years of
age or older, indicating that U.S. health-care overhaul is initially
attracting a less healthy population that may drive up insurance
premiums. The federal- and state-run insurance exchanges signed
up 2.2 million people for private health plans in the three months ended
Dec. 28, the U.S. Department of Health and Human Services said in a
report released today. About 24 percent were 18- to 34-year-olds, and
about one-third were 55 or older.
- Apple(AAPL) Loses Bid to Block Antitrust Monitor in E-Book Case. Apple
Inc. (AAPL) lost a bid to stop a monitor appointed in an electronic
books price-fixing case from continuing to interview top company
officials, including Chief Executive Officer Tim Cook and board member
Al Gore, the former
U.S. vice president.
Wall Street Journal:
- House, Senate Negotiators Seal $1 Trillion Spending Deal. Controversial EPA, Abortion Riders Dropped. House and Senate negotiators Monday unveiled
a $1.012 trillion bill to fund the federal government for the next 8½
months, a compromise that marks a temporary ceasefire in the budget wars
that have rocked Congress and the economy in recent years. The
compromise restores some of the funding cut last year from domestic
programs such as the National Institutes of Health and Head Start, but
keeps overall discretionary spending lower than when President Barack
Obama took office in 2009, when it totaled $1.013 trillion.
- Thai Protesters Turn Focus to Stock Exchange. Antigovernment Activists Seek to Escalate Efforts After Clogging Central Bangkok.
After turning central Bangkok into a
flag-waving sea of protest Monday, antigovernment activists now say they
are preparing to take their campaign to the next level by seizing
Thailand's stock exchange. The protesters' drive to force Prime Minister
Yingluck Shinawatra from office and eliminate the influence of her
brother, billionaire former leader Thaksin Shinawatra, has been marked
by a series of escalating protests, each more ambitious than the last.
Monday's
rally was touted as a bid to shut down Bangkok for a week or more and
reboot Thailand's democracy, this time without the Shinawatra clan in
command.
- For-Profit College Probe Expands. State Attorneys General Join CFPB in Review of Lending Practices. The Consumer Financial Protection Bureau and
state attorneys general are expanding a probe of for-profit colleges
and their student- lending practices, according to government officials
and regulatory filings. Kentucky
Attorney General Jack Conway, who chairs a group of 32 state attorneys
general investigating for-profit colleges, said states are working with
the CFPB to ferret out unfair or deceptive student lending and other
practices. "I expect in 2014 you'll see action by the CFPB in
coordination with states in coming months," Mr. Conway said in an
interview.
- Fighting Among Rebels Boosts Syrian Regime. Assad's Forces Benefit From Northern Conflict Between Opposition, al Qaeda-Linked Group. Pro-regime forces have consolidated recent gains in and around the
northern city of Aleppo, Syria's economic hub. These forces are also
geared up to recapture more territory around the city, in a potential
major setback for rebels after 18 months of battles to oust the regime
from parts of the city that have remained under its control.
Zero Hedge:
ValueWalk:
Business Insider:
LA Times:
- New Iran agreement includes secret side deal, Tehran official says. Key
elements of a new nuclear agreement between Iran and six world powers
are contained in an informal, 30-page text not yet publicly
acknowledged by Western officials, Iran’s chief negotiator said Monday.
When officials from Iran and the world powers announced that they had
completed the implementing agreement, they didn’t release the text of
the deal, nor did they acknowledge the existence of an informal
addendum. In the interview, Araqchi referred to the side agreement using
the English word “nonpaper,” a diplomatic term used for an informal
side agreement that doesn’t have to be disclosed publicly. The
nonpaper deals with such important details as the operation of a joint
commission to oversee how the deal is implemented and Iran’s right to
continue nuclear research and development during the next several
months, he said.
Forbes:
Real Clear Politics:
- Freezing Is the New Warming. Now we can see what they mean when the warmthers say that global
warming is supported by an ironclad scientific consensus. The theory is
so irrefutable that it's unfalsifiable! Which is to say that it has become a cognitive spaghetti bowl full of ad hoc rationalizations, rather than a genuine scientific hypothesis.
Reuters:
- Japanese stocks tumble as yen hits 4-week high. Asian shares came under pressure
on Tuesday, with Japanese stocks tumbling more than 2 percent as the yen hit a four-week high against the dollar after last
week's surprisingly weak jobs report raised concerns about the
U.S. growth outlook.
- Yum's(YUM) China sales fall short on weakness at Pizza Hut. Yum Brands Inc on Monday said December sales at established
restaurants in China, its top market, rose a smaller-than-expected 2
percent after weakness at its Pizza Hut Casual Dining chain weighed on a
recovery at KFC, which is recovering from a food safety scare and avian flu worries. Yum's China same-restaurant sales for December included a 5
percent increase at KFC and a 3 percent decline at Pizza Hut. Analysts polled by Consensus Metrix expected same-restaurant
sales to rise 6 percent at KFC and 5.7 percent at Pizza Hut.
Vendomosti:
- Russia May Boost Dividend Tax to 13% From 9%. Dividend tax will be made equal to income tax on salary, citing Deputy Finance Minister Sergei Shatalov.
China Securities Journal:
- China Shouldn't Stop IPO Reform. High prices and other problems with Chinese IPOs shouldn't derail market-oriented reforms after a freeze on IPO approvals was ended, according to a front-page editorial.
Study Times:
- China
Faced With 'Unconventional' Security Threats. China faces with
"unconventional" security threats from computer network safety,
extremist forces, ideology and culture, citing National Defense
University professor Gong Fangbin.
Evening Recommendations
RBC:
- Rated (SSYS) Outperform, target $175.
- Rated (DDD) Outperform, target $118.
Night Trading
- Asian equity indices are -1.50% to -.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 140.0 +2.5 basis points.
- Asia Pacific Sovereign CDS Index 107.50 -1.0 basis point.
- NASDAQ 100 futures +.04%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
7:30 am EST
- The NFIB Small Business Optimism Index for December is estimated to rise to 93.1 versus 92.5 in November.
8:30 am EST
- Retail Sales Advance for December are estimated to rise +.1% versus a +.7% gain in November.
- Retail Sales Ex Autos for December are estimated to rise +.4% versus a +.4% gain in November.
- Retail Sales Ex Autos and Gas for December are estimated to rise +.3% versus a +.6% gain in November.
- The Import Price Index for December is estimated to rise +.4% versus a -.6% decline in November.
10:00 am EST
- Business Inventories for November are estimated to rise +.3% versus a +.7% gain in October.
Upcoming Splits
Other Potential Market Movers
- The Fed's Fisher speaking, Fed's Plosser speaking, UK inflation data, weekly retail sales reports, Needham Growth Conference and the Deutsche Bank Auto Industry Conference could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by commodity and technology shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Substantially Lower
- Sector Performance: Almost Every Sector Declining
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 13.18 +8.57%
- Euro/Yen Carry Return Index 146.69 -1.22%
- Emerging Markets Currency Volatility(VXY) 8.42 -.71%
- S&P 500 Implied Correlation 51.23 +4.67%
- ISE Sentiment Index 111.0 +4.72%
Credit Investor Angst:
- North American Investment Grade CDS Index 66.04 +3.26%
- European Financial Sector CDS Index 87.33 +1.55%
- Western Europe Sovereign Debt CDS Index 51.0 +2.0%
- Emerging Market CDS Index 284.35 +1.57%
- 2-Year Swap Spread 11.75 -.25 basis point
- TED Spread 21.25 +.75 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -2.75 -1.0 basis points
Economic Gauges:
- 3-Month T-Bill Yield .03% -1 basis point
- Yield Curve 247.0 -2 basis points
- China Import Iron Ore Spot $130.90/Metric Tonne +.15%
- Citi US Economic Surprise Index 66.10 +.6 point
- Citi Emerging Markets Economic Surprise Index .1 +1.0 point
- 10-Year TIPS Spread 2.26 -1 basis point
Overseas Futures:
- Nikkei Futures: Indicating -412 open in Japan
- DAX Futures: Indicating -70 open in Germany
Portfolio:
- Slightly Lower: On losses in my retail/biotech/medical/tech sector longs
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges, added (VXX) long, took some profits in retail sector longs
- Market Exposure: Moved to 25% Net Long
Bloomberg:
- China’s Record Number of IPOs to Curb Small-Cap Equities. The
number of Chinese initial public offerings will accelerate to a record
pace in coming months, dragging down small-company stocks, according to
UBS AG. There will be some 60 to 80 IPOs each month from March to June,
Chen Li, chief China equity strategist at UBS, said at a briefing in
Shanghai. Increased stock supply will hold back share prices of smaller
companies on the ChiNext Index after
they surged last year, he said.
The regulator approved about 50 companies to sell stock in
China following new rules in November aimed at strengthening
investor protection and stamping out price manipulation. The
ChiNext gauge of Shenzhen-listed companies with an average
market capitalization of $1.5 billion is more than four times
more expensive than the Shanghai Composite Index. “The sales pace is unprecedented,” Chen said. “Starting
March, that’ll pose a big challenge to the valuation of ChiNext
companies.”
- Brazil Swap Rates Rise on Outlook for Inflation; Real Advances.
Brazil’s shorter-term swap rates climbed to a six-week high as
economists increased their inflation forecast for 2014, adding to
speculation that the central bank will extend borrowing cost increases. Swap
rates on the contract maturing in January 2015 rose for a fourth
straight day, increasing 12 basis points, or 0.12 percentage point, to
10.73 percent at 1:56 p.m. in Sao Paulo. The real appreciated 0.6 percent to 2.3443 per U.S. dollar, the strongest level since Dec. 27.
- Rise of 'Common Man' in India Threatens Stability of Government Coalition. The
sudden popularity of India’s anti-graft Aam Aadmi Party is prompting
concern at companies such as Maruti Suzuki India (MSIL) Ltd. that this
year’s general election will fail to create a stable government.
Arvind Kejriwal’s one-year-old Aam Aadmi plans to contest as many as 300
seats after taking power in the national capital last month, according
to senior party leader Yogendra Yadav. That threatens to reduce the
chances of the ruling Congress Party or main opposition Bharatiya Janata
Party emerging with a majority in the election, which is due by May.
- European Stocks Advance Second Day as Bank Shares Climb. European stocks advanced for a second day, after the Stoxx Europe 600 Index posted its first full-weekly gain of 2014, as a global banking-supervision body eased rules linked to minimum-capital requirements for lenders. A gauge of banking shares climbed to its highest level since April 2011 after the Basel Committee on Banking Supervision’s announcement on capital requirements. UBS (UBSN) AG added 3.1 percent as Chief Executive Officer Sergio Ermotti said the lender won’t spin off its investment-banking business. ICAP (IAP) Plc fell 1.1 percent as Goldman Sachs Group Inc. downgraded the
world’s biggest interdealer broker.
The Stoxx 600 climbed 0.2 percent to 330.72 at the close of
trading.
- WTI Crude Drops. WTI for February delivery fell 85 cents, or 0.9 percent, to $91.87 a barrel at
1:36 p.m. on the New York Mercantile Exchange. The volume of all
futures traded was 12 percent below the 100-day average. Oil is down 6.7
percent so far this year.
- Federal Reserve Said to Probe Banks Over Forex Fixing. The
Federal Reserve is investigating whether traders at the world’s biggest
banks rigged benchmark currency rates, raising the risk that firms will
be penalized
for lax controls as regulators look for wrongdoing.
- Elizabeth Warren’s War on Job Creators.
Senator Elizabeth Warren is drawing praise from progressives for her
legislation that would bar companies from requiring prospective hires to
submit to a credit
check as a condition of employment.
- Lululemon(LULU) Falls After Cutting Revenue, Earnings Forecast.
Lululemon Athletica Inc. (LULU) shares dropped the most in seven months
after the yogawear retailer cut its revenue and earnings forecast for
the quarter ending Feb. 2. Lululemon fell 15 percent to $50.86 at 9:41 a.m. in New York and earlier fell as much as 16 percent for the largest
intraday decline since June 11.
- Suntory to Buy Beam(BEAM) in $16 Billion Deal.
Suntory Holdings Ltd., the closely held Japanese whiskey and beer maker,
agreed to buy Beam Inc. (BEAM) for $16 billion including debt to gain
brands such as Maker’s Mark whiskey and create the world’s third-largest
premium spirits company.
- SodaStream(SODA) Plunges Most Since 2011 After Earnings Data.
SodaStream International Ltd. (SODA), the Israeli maker of home soda
machines, fell the most since 2011 in New York after the company
reported preliminary earnings that missed analyst estimates. Shares of Lod, Israel-based SodaStream dropped 22 percent
to $39.07 at 11:52 a.m. in New York, the biggest decline since
August 2011.
Fox News:
- Obama backer leading IRS probe visited White House in ’09, records show. The Justice Department attorney leading the probe into whether the
IRS improperly targeted Tea Party groups visited the White House in 2009
as a guest of President Obama, according to official visitor logs.
The visit raises more questions about possible ties between Barbara
Kay Bosserman and Obama, after Republican lawmakers complained last week
she should not be leading the probe into the IRS.
CNBC:
- Retailers' present to Wall Street? A lump of coal.
A few weeks after consumers finished unwrapping presents, a wave of
retailers are gifting Wall Street with lumps of coal. On Monday,
Lululemon Athletica and Express became the latest retailers to warn
investors of disappointing earnings in the holiday quarter. These
negative forecasts follow similar warnings last week from a range of
retail companies, including American Eagle Outfitters and Zumiez. In
response, Lululemon stock shed 16 percent and Express shares dropped
about 2.5 percent.
- Scared? This could be the perfect time to get protection. Even as stocks see a soft start to the year, investors don't seem to be
getting too fearful. In fact, the market's "fear gauge" fell Monday to a
low touched only once in the past 10 months, and that could give
investors a great chance to get protection.
ZeroHedge:
ValueWalk:
- The Valuation Question: Rich By Any Measure? The forward P/E ratio for the S&P 500 during the past
5-year, 10-year, and 35- year periods has averaged 13.2x, 14.1x, and
13.0x, respectively. At 15.9x, the current aggregate forward P/E
multiple is high by historical standards.
Business Insider:
SeekingAlpha:
The Federalist:
Reuters:
- FOREX-Dollar tumbles vs yen after jobs shock prompts stimulus rethink. The dollar tumbled to its lowest
in almost a month against the yen on Monday, as investors caught
out by Friday's soft U.S. jobs data reassessed how quickly the
Federal Reserve might scale back its stimulus.The dollar's weakness also helped push the Australian dollar
to a one-month high and the New Zealand dollar to a
near-two-month high against the greenback. The U.S. dollar slid 0.7 percent to 103.37 yen, having
fallen to 103.26 at one point, its lowest level since
Dec. 18. The greenback's losses accelerated after it breached
Friday's intraday low of 103.83 yen.
- Low interest rates may spur asset bubbles -German ECB candidate. A prolonged period of
accommodative monetary policy brings risks and low interest
rates may spur asset price bubbles, said Sabine Lautenschlaeger,
Germany's candidate for a vacant seat on the European Central
Bank's board.
Speaking to a European
parliament committee on Monday as part of her vetting, Lautenschlaeger
said economic data from the euro zone suggested "we have seen the trough
in economic activity, even in the member states hit hardest by the
crisis." "A period of prolonged monetary policy accommodation with interest rates being low for a long period is not without its
risks," she added. "In fact low interest rates may be associated with spurring
asset price bubbles", she told the committee in Strasbourg.
- Merck(MRK) shares jump on early filing for skin cancer drug. Shares of Merck & Co Inc rose as
much as 6.5 percent Monday after it filed the first part of an
application to market its experimental drug, MK-3475, for
advanced melanoma, putting the treatment on track to become the
first in a new class of promising cancer drugs to reach the
market.
Nikkei:
- Japan to Tax Online Content Sales in 2015. Govt will implement
tax on sales of electronic books, digital music and other online
products from abroad as early as fiscal 2015.
Style Underperformer:
Sector Underperformers:
- 1) Retail -2.62% 2) Oil Service -1.70% 3) Homebuilding -1.64%
Stocks Falling on Unusual Volume:
- SODA, ICPT, LULU, BONT, CNAT, PGEM, GALT, ASNA, BTI, AAN, ORMP, CELG, NDLS, SIMO, PUK, EXPR, BPT, ISRG, SHLD, CCIH, CLUB, AYI, KSS, HAWK, ETN, OII, ZLC, AFSI, FIVE, SNI, KLIC, PMC, SFLY, ISRG, AAN, VOLC, ECYT, ASNA, OMED, QSII and CREE
Stocks With Unusual Put Option Activity:
- 1) JIVE 2) CZR 3) KSS 4) COH 5) EWJ
Stocks With Most Negative News Mentions:
- 1) SODA 2) TSO 3) CREE 4) PVH 5) SBUX
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Networking +2.25% 2) Biotech +.98% 3) Internet +.68%
Stocks Rising on Unusual Volume:
- BEAM, TKMR, NPO, CLVS, ALNY, JNPR, CADX, ARWR, CLDX, MGAM, TWI, EXAS, ONVO, MRK, CBST, BCRX, FFIV, SEM, FINL and SWKS
Stocks With Unusual Call Option Activity:
- 1) FOXA 2) NIHD 3) XOMA 4) MRK 5) NVAX
Stocks With Most Positive News Mentions:
- 1) TWTR 2) MRK 3) JNPR 4) BEAM 5) GOOG
Charts:
Weekend Headlines
Bloomberg:
- China Peer-to-Peer Loan Sites Fail as Fraud Climbs, Xinhua Says. Some Chinese peer-to-peer lending
websites collapsed last year and others may need restructuring
in 2014 to curb fraud in an industry that has grown rapidly with
little regulatory oversight, Xinhua News Agency said. About 800 such
online operations emerged in China just last year with outstanding
loans of 26.8 billion yuan ($4.4 billion), Xinhua reported, citing
industry data from Wangdaizhijia.com, China’s biggest peer-to-peer
lending site. Meanwhile, 74
websites were either shut down or their users were unable to
withdraw cash, according to the report.
- Fed-Fueled Inflation May Cost India’s Congress, Ex-Minister Says.
Indian Prime Minister Manmohan Singh’s ruling party would lose a
national election if it were held today because of voter anger over the
highest inflation in Asia, a former member of his cabinet said. “On inflation I have no defense to offer -- none,” Aiyar,
a lawmaker and senior party member, said in a Jan. 9 interview at his New Delhi home. “If there were an election today, we
would do very badly.”
- Zegna Sees Luxury Revenue Growth Under Pressure Until Mid-2014. Ermenegildo
Zegna said he expects
revenue growth at the namesake luxury goods maker will remain under
pressure for at least another six months as demand moderates in China
and the yen’s weakness persists. “October and November were not good months overall,” the
chief executive officer of the Italian company said yesterday in
an interview in Milan. “The first half of 2014 will still see
this lower pace, which I hope will come back in the second
half,” he said, forecasting growth of less than 10 percent for
the full year.
- Yen Touches Strongest in 3 Weeks as Traders Trim Bearish Wagers. The yen touched the strongest in
three weeks after bearish bets slid to a six-week low and as
investors weigh the outlook for a reduction in Federal Reserve
monetary stimulus before policy makers speak this week. The yen climbed 0.7 percent to 103.46 per dollar as of
11:43 a.m. in Singapore after earlier touching 103.26, the
strongest since Dec. 18. It gained 0.6 percent to 141.52 per
euro. The shared currency added 0.1 percent to $1.3680 following
a 0.6 percent gain last week. The Australian dollar rose 0.4
percent to 90.28 U.S. cents after advancing to 90.35, the
highest since Dec. 12.
- Asia Stocks Rise as Dollar Falls; Metals Rally on Ore Ban. Asian stocks rose for a second day
and the dollar weakened after U.S. payrolls increased at the
slowest pace since January 2011. Nickel led gains by metals and
the rupiah climbed after Indonesia banned mineral ore exports. The MSCI Asia Pacific excluding Japan Index increased 0.5 percent at 11:34 a.m. in Hong Kong.
- Rebar Falls as Steelmaker Cuts Prices on Weaker Demand.
Steel reinforcement-bar futures fell
in Shanghai after Jiangsu Shagang Co., China’s biggest maker of the
commodity, was reported to have lowered prices amid weakening demand. Rebar for May delivery on the Shanghai Futures Exchange declined as much as 0.8 percent to 3,463 yuan ($573) a metric
ton, and traded 3,469 yuan at 10:53 a.m. local time. The most-active contract dropped for a fifth week in the five days
through Jan. 10.
- Bullish Bets Fell Most in Seven Weeks Before Slump: Commodities.
Hedge funds cut their bullish commodity wagers by the most in seven
weeks before prices dropped to an eight-month low on signs of surplus
supply and slowing economic growth in China. The net-long position across 18 U.S.-traded commodities fell by 11 percent to 678,885 futures and options in the week
ended Jan. 7, U.S. Commodity Future Trading Commission data
show. Investors are the most bearish on wheat ever and
anticipate lower prices for corn, coffee, sugar and soybean oil.
Bullish gold wagers rose to the highest since mid-November.
- Bond Rally Gives Italy Free Pass Skirting Reforms: Euro Credit. Europe’s periphery-nation bond rally is giving Italy a free pass, raising concern that the pressure for reforms will dissipate.
The drop in borrowing costs, spurred by gains in euro-area
manufacturing and retail sales, threatens to halt a two-year push to
restore growth that has made scant progress in eight months under Prime
Minister Enrico Letta. “Italy lacks the self-discipline to truly
overhaul its economy, unless placed under extreme market pressure,” said
Raj Badiani, an economist at IHS Global Insight in London. “The fall in
Italian bond yields has decoupled from the grim realities facing the
country.”
- Crisis Hangover Traps Best-Rated Euro Nation as Jobs Disappear. As the euro area surfaces from its
worst crisis on record, the bloc’s best-rated member and a key
proponent of austerity is losing jobs and gaining debt. The challenges facing Finland -- a stable AAA rated economy
-- are “historic,” Finance Minister Jutta Urpilainen said Jan.
10 in Helsinki. “I would like to promise that the euro crisis
will end this year, that Finnish structural change in industry
will stop and government-debt growth will halt. Unfortunately, I
can’t.”
- Basel Regulators Ease Leverage-Ratio Rule for Banks. Global regulators diluted a planned
debt limit for banks amid warnings that the measure would
penalize low-risk financial activities and curtail lending. The
measure, known as a leverage ratio, was adjusted after
“thoroughly analyzing bank data,” the Basel Committee on Banking
Supervision said in a statement following a meeting of regulators in
Basel, Switzerland, yesterday. The group also
modified a liquidity rule to make it easier to count a certain
type of central bank loan against regulatory standards.
- Fed Seen Sticking to Gradual Tapering Plan After Payrolls Miss. The Federal Reserve will stick to its plan for a gradual reduction in
bond purchases, economists said after a government report showed that
U.S. employment rose at the slowest pace in three years in December. The
Fed will reduce purchases by $10 billion at each of the next six
meetings this year before ending the program in October, according to
the median forecasts of 42 economists in a Bloomberg survey.
- Bonds Captivate $16 Trillion of Pensions Seen Unloading Equities. Bond buyers stung by the first
losses in more than a decade can look to pension funds from
companies such as Ford Motor Co. (F) for a measure of redemption. “Companies
are now getting on the bandwagon,” Ford Treasurer Neil Schloss said in a
Jan. 9 telephone interview from the company’s headquarters in Dearborn,
Michigan. U.S. pensions, which control $16 trillion, shifted out of
equities and into bonds in the third quarter at the fastest rate
since 2008, latest data compiled by the Federal Reserve show.
- Neiman Marcus to Target Data Breaches Imperil U.S. Retailers. Neiman Marcus Group Ltd. said
yesterday that some unauthorized purchases may have been made
with customer cards, the second retailer after Target Corp. (TGT) to be struck by hackers during the important holiday season. Credit-card processors alerted Neiman Marcus to the breach in mid-December and the Dallas-based luxury chain is working
with federal authorities and investigating the matter, Ginger Reeder, vice president of corporate communications, said
yesterday in an e-mail statement. Reeder declined today to
elaborate. The Wall Street Journal, citing unidentified people
familiar with the incident, said fewer than 1 million cards were
compromised.
Wall Street Journal:
- Gates Defends Criticism of Obama. Former Defense Secretary Robert Gates, in his first interview broadcast
since details of his new book were made public, defended his decision
to write a candid memoir and restated his criticism of President Barack Obama’s handing of the Afghanistan war.
Fox News:
- Former Israeli Prime Minister Ariel Sharon dies at 85.
Former Israeli prime minister and storied general Ariel Sharon, who
was at the height of his power when he suffered a stroke in 2006 and
fell into an irreversible coma, died Saturday at the age of 85. Sharon
died at Tel Hashomer hospital just outside Tel Aviv, where his
family had gathered at his bedside over the past several days as his
vital organs reportedly deteriorated. His death was first reported by
Israeli Army radio.
CNBC:
- Volatility could come back big-time—here's why.
(video) "There's definitely a different tone in the market this year as
compared to last year," Peter Boockvar, chief market analyst at the
Lindsey Group, said Friday. "We got a disappointing jobs number, but
people still think the Fed is going to taper, despite an uneven
recovery."
ValueWalk:
Business Insider:
New York Times:
- The Next Data Privacy Battle May Be Waged Inside Your Car. Cars are becoming smarter than ever, with global positioning systems,
Internet connections, data recorders and high-definition cameras.
Drivers can barely make a left turn, put on their seatbelts or push 80
miles an hour without their actions somehow, somewhere being tracked or
recorded.
The Blaze:
Reuters:
- Exclusive: U.S. investigating Honeywell(HON) over export, import controls. The
U.S. Justice Department is investigating export and import procedures
at Honeywell International Inc after the firm included Chinese parts in
equipment it built for the F-35 fighter jet, three sources familiar with
the matter said. Reuters last week reported that the Pentagon twice
waived laws banning Chinese-built components in U.S. weapons in 2012
and 2013 for parts supplied by Honeywell for the $392 billion Lockheed
Martin Corp F-35 program.
- Exclusive: Iran to get first $550 million of blocked $4.2 billion on February 1. Iran
would receive the first $550 million installment of a total of $4.2
billion in previously blocked overseas funds on or about February 1, a
senior U.S. official said on Sunday.
Under a November 24
nuclear agreement, six major powers agreed to give Iran access to $4.2
billion in revenues blocked overseas if it carries out the deal, which
offers sanctions relief in exchange for steps to curb the Iranian
nuclear program.
- Indonesia bans mineral ore exports, all eyes on nickel impact.
Indonesia, among the world's biggest suppliers of natural resources,
halted all mineral ore exports on Sunday to try to promote domestic
processing, but threatening the country's nickel and bauxite industries
worth more than $2 billion in annual shipments. Halting exports of
nickel ore could spark the biggest shake-up in the global nickel
industry in more than five years, with Chinese stainless steel factories
that make everything from kitchenware to cars and buildings set to hurt
the most.
Financial Times:
- US subprime car loans return with a bang. Sales
of risky pools of securities backed by car loans are accelerating at
the start of 2014 as investors snatch up the higher-yielding bonds that
were popular in the build-up to the financial crisis. This week
alone, about $2bn in deals that bundle car loans made to subprime
borrowers have hit the US debt capital markets, following a 20 per cent
jump last year to $21.5bn. Demand for the securities is forecast to
increase further in 2014, helping push sales to the $25bn mark, according to Deutsche Bank estimates.
Jiji:
- Tepco Detects Record Radiation at Fukushima Dai-Ichi Plant. Co.
detects beta radiation levels of 2.2 million becquerels per liter in
water sample from monitoring well at Fukushima Dai-Ichi plant, citing
co. Previous record was 2.1 million becquerels per liter detected in
December last year.
Asahi:
- Japan May Draft Collective Self-Defense
View in April. The administration of Japan's Prime Minister Shinzo Abe
may compile a draft in April of a new government interpretation of the constitution to allow the notion of the right to collective self-defense.
Focus Taiwan:
- Japan curriculum move over Diaoyutais does not change facts: MOFA.
Taiwan has announced its "serious concern" over a reported decision by
Japan to list the Diaoyutai (Senkaku) Islands in junior and senior high
school books as integral Japanese territories, saying the move does not
change historical facts. The Ministry of Foreign Affairs (MOFA) said the
unilateral move by Japan "does not contribute" to regional stability.
China Daily:
- Beijing Tourists Drop on Global Economy, Pollution. Tourists visiting the Chinese capital dropped "sharply" because of a weak global economy, strong yuan and the city's pollution problems, citing a Beijing Tourism Development Commission report. Jan.-Nov. visitors declined -10.3% y/y to 4.2m, the newspaper said.
China Securities Journal:
- China A-Share Market to Likely Stay
Weak. China's A-share market will very likely stay weak in 1H because
of tight liquidity and economic growth of 7%-7.5% for 2014, according to
a front-page commentary by reporter Long Yue.
Hexun:
- CIC's Xie Says China Local Govts Won't Default. China's local governments won't default and central government won't allow them to go insolvent either, CIC's deputy general manager Xie Ping said at an event Jan. 11. China should have a ceiling for total amount of local government debt before allowing local authorities to issue bonds directly, Xie said.
Weekend Recommendations
Barron's:
- Bullish commentary on (CSCO), (TWI), (F), (SLB), (JPM), (BAC), (AWI), (HD), (DKS), (LOW), (M), (TGT), (TJX) and (WSM).
- Bearish commentary on (SHLD).
Night Trading
- Asian indices are -.25% to +1.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 137.50 -3.0 basis points.
- Asia Pacific Sovereign CDS Index 108.5 +1.0 basis point.
- NASDAQ 100 futures -.22%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
2:00 pm EST
- The Monthly Budget Statement for December is estimated at $44.0B versus -$135.2B in November.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Lockhart speaking, Germany Wholesale Price data, JPMorgan
Healthcare Conference and the (YUM) Brands China Dec. SSS could also
impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by consumer and industrial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the week.
Wall St. Week Ahead by Reuters.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by Briefing.com.
BOTTOM LINE: I expect US stocks to finish the week mixed as earnings
concerns, a stronger yen and increasing emerging markets debt angst
offsets lower energy prices, lower long-term rates and short-covering.
My intermediate-term trading indicators are giving neutral signals and
the Portfolio is 50% net long heading into the week.
S&P 500 1,842.37 +.60%*
The Weekly Wrap by Briefing.com.
*5-Day Change
Indices
- Russell 2000 1,164.53 +.73%
- S&P 500 High Beta 30.63 +1.2%
- Wilshire 5000 19,384.90 +.72%
- Russell 1000 Growth 861.28 +.75%
- Russell 1000 Value 926.66 +.63%
- S&P 500 Consumer Staples 436.99 unch.
- Morgan Stanley Cyclical 1,471.91 +.05%
- Morgan Stanley Technology 899.23 +.85%
- Transports 7,466.03 +1.89%
- Bloomberg European Bank/Financial Services 111.39 +4.65%
- MSCI Emerging Markets 40.0 -.87%
- HFRX Equity Hedge 1,1668.23 +.24%
- HFRX Equity Market Neutral 952.40 +.06%
Sentiment/Internals
- NYSE Cumulative A/D Line 198,598 +.75%
- Bloomberg New Highs-Lows Index 460 +317
- Bloomberg Crude Oil % Bulls 45.95 +152.75%
- CFTC Oil Net Speculative Position 331,011 -6.83%
- CFTC Oil Total Open Interest 1,619,796 +.24%
- Total Put/Call .75 -16.7%
- ISE Sentiment 106.0 -6.19%
- Volatility(VIX) 12.14 -11.77%
- S&P 500 Implied Correlation 48.82 -5.52%
- G7 Currency Volatility (VXY) 7.73 -10.1%
- Emerging Markets Currency Volatility (EM-VXY) 8.47 -9.70%
- Smart Money Flow Index 11,956.74 -1.44%
- ICI Money Mkt Mutual Fund Assets $2.715 Trillion -.15%
- ICI US Equity Weekly Net New Cash Flow $3.315 Billion
Futures Spot Prices
- Reformulated Gasoline 266.91 +.84%
- Bloomberg Base Metals Index 190.75 -.99%
- US No. 1 Heavy Melt Scrap Steel 379.0 USD/Ton unch.
- China Iron Ore Spot 130.70 USD/Ton -3.2%
- UBS-Bloomberg Agriculture 1,332.30 -.86%
Economy
- ECRI Weekly Leading Economic Index Growth Rate 2.5% +70 basis points
- Philly Fed ADS Real-Time Business Conditions Index .3398 unch.
- S&P 500 Blended Forward 12 Months Mean EPS Estimate 120.22 +.16%
- Citi US Economic Surprise Index 65.50 +12.1 points
- Citi Emerging Markets Economic Surprise Index -.9 -.5 point
- Fed Fund Futures imply 36.0% chance of no change, 64.0% chance of 25 basis point cut on 1/29
- US Dollar Index 80.62 -.28%
- Euro/Yen Carry Return Index 148.48 -.07%
- Yield Curve 249.0 -11 basis points
- 10-Year US Treasury Yield 2.86% -13 basis points
- Federal Reserve's Balance Sheet $3.986 Trillion +.13%
- U.S. Sovereign Debt Credit Default Swap 27.84 -2.09%
- Illinois Municipal Debt Credit Default Swap 155.0 -.78%
- Western Europe Sovereign Debt Credit Default Swap Index 50.0 -7.41%
- Asia Pacific Sovereign Debt Credit Default Swap Index 107.0 -.37%
- Emerging Markets Sovereign Debt CDS Index 216.0 -2.48%
- Israel Sovereign Debt Credit Default Swap 99.0 -5.71%
- South Korea Sovereign Debt Credit Default Swap 7.0 -1.47%
- China Blended Corporate Spread Index 328.0 +4.75 basis points
- 10-Year TIPS Spread 2.27% +2.0 basis points
- TED Spread 20.5 +3.25 basis points
- 2-Year Swap Spread 12.0 +1.5 basis points
- 3-Month EUR/USD Cross-Currency Basis Swap -1.75 +1.5 basis points
- N. America Investment Grade Credit Default Swap Index 64.45 +2.12%
- European Financial Sector Credit Default Swap Index 86.0 +3.06%
- Emerging Markets Credit Default Swap Index 279.96 +2.18%
- CMBS AAA Super Senior 10-Year Treasury Spread to Swaps 110.0 +17.0 basis points
- M1 Money Supply $2.65 Trillion -.07%
- Commercial Paper Outstanding 1,059.30 +1.3%
- 4-Week Moving Average of Jobless Claims 349,000 -8,300
- Continuing Claims Unemployment Rate 2.2% unch.
- Average 30-Year Mortgage Rate 4.51% -2 basis points
- Weekly Mortgage Applications 345.10 +2.59%
- Bloomberg Consumer Comfort -28.40 +.3 point
- Weekly Retail Sales +3.60% +10 basis points
- Nationwide Gas $3.31/gallon -.02/gallon
- Baltic Dry Index 1,706 -19.3%
- China (Export) Containerized Freight Index 1,098.37 unch.
- Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 30.0 -14.3%
- Rail Freight Carloads 186,878 +8.40%
Best Performing Style
Worst Performing Style
Leading Sectors
Lagging Sectors
Weekly High-Volume Stock Gainers (29)
- ICPT, NBIX, EPZM, MDBX, GALT, FEYE, SGMO, KEYW, ATRO, ARTC, RCPT, UAL, FRX, MG, TSC, AYI, APOL, CACQ, STZ, FLIR, ROVI, AGYS, MCK, RVBD, XPO, GT, JBT, TMH and RBCN
Weekly High-Volume Stock Losers (16)
- IBKR, PBF, VRTU, EIG, PKY, RSE, GME, BBBY, TCS, TAL, AMAG, AZZ, BCOV, SCSS, HGG and GLPI
Weekly Charts
ETFs
Stocks
*5-Day Change
