- The cost of protecting corporate bonds from default fell.Credit-default swaps on the Markit CDX North America Investment-Grade index of 125 companies in the US and Canada dropped to a four-month low, signaling an improvement in investor confidence.The Markit CDX investment-grade index fell 7 basis points to 194.5 basis points as of 4:24 pm in NY, according to CMA Datavision.In London, contracts on the Markit iTraxx Europe index of 125 companies with investment-grade ratings dropped 9.5 basis points to 167.5, JPMorgan Chase prices show.The Markit iTraxx Crossover Index of 50 European companies with mostly high-risk, high-yield credit ratings fell 61 basis points to 984, according to JPMorgan. “The market supporting initiative from regulators should continue to improve market sentiment,” Citigroup Inc. strategists led by Mikhail Foux in NY wrote today.“Given the ample desire by regulators to shore up the market, other initiatives should be coming soon.”
- The cost of protecting bonds from default fell to the lowest since November in Australia and Asia, according to traders of credit-default swaps.The Markit iTraxx Australia index fell 22.5 basis points at 287.5 as of 11:38 am in Sydney, the first time the Series 10 benchmark has dipped below 300 since mid-November, Citigroup prices show.The Markit iTraxx Japan index was down 7.5 basis points at 273.5 at 9:40 am in Tokyo, Barclays Capital prices show.The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan declined 27.5 basis points to 285 at 8:55 am in Hong Kong.
- The US dollar’s tendency to rise as investors seek protection from stock-market declines is ending as economic growth becomes the main driver of the US currency, foreign-exchange strategists at BNP Paribas said.In the five years since the end of the dot-com crash, dollar weakness has coincided with periods of increased appetite for risk as demonstrated by rising stock prices.“We expect the relationship between shares and the dollar to reverse by a full 180 degrees in 2009,” said Hans-Guenter Redeker, global head of foreign-exchange strategy at BNP Paribas in London.“The first signs of the end of this crisis are going to be seen in the US, creating demand for dollar-denominated assets, while problems remain elsewhere in the world, offering support to both the dollar and US equities.”
- Parkson Holdings Bhd., operator of 46 department stores in China, fell the most in more than two months in Kuala Lumpur trading after sales growth in the country slowed.The stock fell 7.5% on the Malaysian stock exchange.Parkson Retail Group Ltd. said yesterday the growth of same-store sales in China cooled to between 7% and 8%, compared with a 12% increase for the year, citing the slowing trading environment in the country.
- Coking coal contract prices may drop as much as 72% to as low as $85 a ton this year as demand dries up, citing traders and analysts. The consensus market forecast is about $140 a ton.Record contract prices of $300 a ton in the year to April 1 were driven by floods in Australia’s Queensland state, a major producer, which disrupted mining.Market conditions have reversed, with a collapse in steel demand and no significant supply disruptions.
- China will probably scrap a plan to build steel stockpiles as government officials couldn’t agree on the types and amount to be bought.
The Standard:
- Hong Kong will slip into negative economic growth this year before recovering in 2010, according to investment banks. Credit Suisse projects the territory's gross domestic product will contract 2.2 percent before growing 2.1 percent next year. Credit Suisse's chief economist Dong Tao said Hong Kong's credit conditions remain tight and he expects local property prices and rents to fall by double digits in 2009. Goldman Sachs estimates Hong Kong's GDP will shrink 3 percent before recovering by 3.5 percent in 2010. It forecasts the jobless rate will reach 6.5 percent in 2010.
Late Buy/Sell Recommendations Citigroup: - Reiterated Buy on (KWK), target $18, added to Top Picks Live list.
Keybanc:
- Rated (ARO) Buy, target $24.
- Rated (URBN) Buy, target $22.
- Rated (ANF) Underweight, target $20.
Night Trading Asian Indices are unch. to +1.75% on average.
S&P 500 futures -.32%.
NASDAQ 100 futures -.26%.
- The ADP Employment Change for December is estimated at -493K versus -472K in November.
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory build of +900,000 barrels versus a +549,000 barrel increase the prior week.Gasoline supplies are estimated to rise by +1,000,000 versus a +808,000 barrel increase the prior week.Distillate inventories are expected to rise by +1,100,000 barrels versus a +694,000 barrel increase the prior week.Finally, Refinery Utilization is estimated unch. versus a -2.22% decline the prior week.
Upcoming Splits - None of note
Other Potential Market Movers - The Fed’s Hoenig speaking, Challenger Job Cuts report, Goldman Healthcare Conference, Needham Growth Conference, Citi Entertainment/Media/Telecom Conference, Consumer Electronics Show and weekly MBA mortgage applications report could also impact trading today.
BOTTOM LINE: Asian indices are modestly higher, boosted by automaker and technology stocks in the region. I expect US equities to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.
BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Retail longs, Technology longs and Financial longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is bullish as the advance/decline line is substantially higher, most sectors are rising and volume is about average. Investor anxiety is above average. Today’s overall market action is bullish. The VIX is falling 2.43% and is very high at 38.13. The ISE Sentiment Index is below average at 123.0 and the total put/call is below average at .77. Finally, the NYSE Arms has been running above average most of the day, hitting 1.21 at its intraday peak, and is currently 1.10. The Euro Financial Sector Credit Default Swap Index is falling 7.97% today to 97.48 basis points. This index is up from a low of 52.66 on May 5th, but down from 157.81 on Sept. 16th. The North American Investment Grade Credit Default Swap Index is falling 1.04% to 198.58 basis points. The TED spread is down 4.40% to 128 basis points. The TED spread is now down 338 basis points in about three months.The 2-year swap spread is plunging 14.78% to 67.75 basis points.The Libor-OIS spread is rising .57% to 123 basis points.The 10-year TIPS spread, a good gauge of inflation expectations, is up 12 basis points to .25%, which is down 236 basis points in about six months and at the lowest level since Bloomberg record-keeping began in August 1998.The 10-year TIPS spread bottomed at .65% in October 1998 during the Asian financial crisis and at 1.24% in October 2001 during the technology bubble-bursting meltdown.The 3-month T-Bill is yielding .13%, which is up 5 basis points today.The broad market is performing better again today than the major averages suggest.Market leading stocks are especially strong again with many posting 3-5% gains.As well, despite more weak economic data, the most economically sensitive shares are top-performers again.Homebuilders, reits, i-banks, techs and energy shares are all posting 4%+ gains.The US dollar continues to trade very well.It is a positive to see t-bill yields moving higher, as well.(BAC) just said it expects final 08 results to be below estimates, but the stock is still 2% higher on the day, which is a big positive.The positive ramifications of the ongoing plunge in mortgage rates remains underappreciated, in my opinion.Nikkei futures indicate an +185 open in Japan and DAX futures indicate an +38 open in Germany tomorrow. I expect US stocks to trade modestly higher into the close from current levels on bargain-hunting, diminishing credit market angst, less economic pessimism, seasonal strength, less forced selling and short-covering.
- Yields on Fannie Mae, Freddie Mac and Ginnie Mae mortgage securities tumbled to the lowest since October 2007 relative to government notes, after the Federal Reserve began a $500 billion program to buy the bonds.The difference between yields on Fannie’s current-coupon 30-year fixed-rate mortgage bonds and 10-year Treasuries fell about 24 basis points to 133 basis points as of 1:30 pm in NY. Yields on Fannie’s mortgage bonds fell 25 basis points, or .25 percentage point, to 3.80%, the lowest on record.
- Steel prices in India may fall by $61 a metric ton after June because long-term global rates for coking coal are expected to decline, citing Steel Secretary Pramod Rastogi. Coking coal prices in the intermediate delivery market have fallen by a third to $200 a ton, according to the report.Indian steelmakers will likely lower metal prices in June following the fall in long-term fuel prices, Rastogi said.
Sina.com: - China Mobile Ltd. will receive a license to operate third-generation wireless services from the Chinese government tomorrow.