Tuesday, November 17, 2009
Stocks Slightly Higher into Final Hour on Earnings Optimism, Short-Covering, Technical Buying, Lower Long-Term Rates
BOTTOM LINE: The Portfolio is slightly lower into the final hour on losses in my Medical longs and Retail longs. I have not traded today, thus leaving the Portfolio 100% net long. The tone of the market is slightly negative as the advance/decline line is mildly lower, sector performance is mixed and volume is slightly below average. Investor anxiety is very high. Today’s overall market action is neutral. The VIX is falling -1.83% and is high at 22.47. The ISE Sentiment Index is below average at 128.0 and the total put/call is slightly above average at .86. Finally, the NYSE Arms has been running around average most of the day, hitting 1.29 at its intraday peak, and is currently .77. The Euro Financial Sector Credit Default Swap Index is falling -4.20% to 64.25 basis points. This index is down from its record March 10th high of 208.75. The North American Investment Grade Credit Default Swap Index is rising +3.82% to 100.0 basis points. This index is also well below its Dec. 5th record high of 285.99. The TED spread is unch. at 22 basis points. The TED spread is now down 442 basis points since its all-time high of 463 basis points on October 10th. The 2-year swap spread is falling -2.63% to 30.06 basis points. The Libor-OIS spread is unch. at 13 basis points. The 10-year TIPS spread, a good gauge of inflation expectations, is unch. at 2.16%, which is down -49 basis points since July 7th. The 3-month T-Bill is yielding .05%, which is unch. today. Gaming, Bank, Wireless, Software, Steel and Coal shares are outperforming today, rising +.5%+. The decline in the Euro Financial Sector CDS Index is a large positive. Considering the incorrect belief my many that US stocks can only go higher with a weaker US dollar and recent strong equity gains, today’s broad market action is more impressive. Weekly retail sales continue to show improvement, which is also a big positive. The S&P GSCI Ag Spot Index has risen for 7 consecutive days and hedge funds are accumulating shares in the fertilizer stocks once again. (POT) is jumping almost 6% after a report that Soros has boosted his stake to 2.95M shares from 1.98M. I still expect US stocks to build on recent gains by week’s end. Nikkei futures indicate an +36 open in Japan and DAX futures indicate an +20 open in Germany tomorrow. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, earnings optimism, technical buying and falling long-term rates.
Today's Headlines
Bloomberg:
- European Central Bank President Jean-Claude Trichet said the euro wasn’t created to replace the dollar as the world’s reserve currency or to contest the U.S. currency’s position, France’s Le Monde newspaper reported, citing an interview. “The euro wasn’t created to compete with the dollar or to be a substitute to the dollar as a reserve currency,” Le Monde quoted Trichet as saying. “The ECB isn’t campaigning for the international use of the euro.”
- Russia is unlikely to change the structure of its reserves from dollars and euros even as currencies including the yuan gain more importance in regional trade, VTB Group Chief Executive Officer Andrei Kostin said. “Inevitably with the growth and importance of other economies like China or other BRIC countries’ economies, the role of their currencies should be more important,” said Kostin, who heads Russia’s second-biggest bank, in an interview yesterday in Singapore. “We think that the yuan and the ruble can be currencies in which we conduct bilateral trade. But as a reserve currency, I think the central bank is still dividing mainly between the dollar and the euro.”
Wall Street Journal:
- Most of the nation's recreational-vehicle makers, whose factories are clustered in this corner of Indiana, crashed in the recession. But not Thor Industries Inc., owner of Four Winds, Airstream, Dutchmen and seven other units that sell nearly 50 RV brands in all. After months of slashing jobs and closing factories, Thor is hiring again, and it expects to open two new factories here before the end of the year. "The nadir in this industry is definitely behind us," says Richard Riegel, chief operating officer of Thor, the nation's biggest RV maker by sales.
- German Chancellor Angela Merkel Tuesday defended her new center-right government's planned tax cuts, saying they are needed to get the country out of the worst economic crisis in sixty years. Speaking at a conference organized by German magazines, Merkel said there is no alternative to the government's growth promotion plans, which include tax reliefs in 2010 and tax cuts from 2011 and amount to a total of EUR24 billion in relief.
- China National Petroleum Corp. will supply the bulk of equipment for the $15 billion redevelopment of the Rumaila field in Iraq, an executive at its partner, BP PLC (BP), said Tuesday. "CNPC will deliver pipes, rigs, valves and other equipment for the Rumaila redevelopment at highly competitive rates, Jean-Baptists Renard, BP's head of the Europe and Southern Africa regions, said at the World NOC Downstream conference in London. The BP-CNPC consortium promised to pump $15 billion in investment to raise production at Rumaila from its current 1 million barrels a day to 2.85 million. BP will hold a 38% stake in the venture, while CNPC will own 37%. Iraq's Southern Oil Company will hold the remaining 25%.
CNBC:
MarketWatch.com
IBTimes:
The Business Insider:
- How The Government Punishes You For Being Financially Responsible.
- America’s Growing Fuel Glut Could Torpedo Oil Prices.
Transparency International:
- Country Corruption Perceptions Index 2009. (Table)
Rassmussen:
Advisor Perspectives:
- Ned Davis: The Cyclical Bull Rally is Not Over.
CommodityOnline:
- Some analysts insist: gold is clearly overbought. For almost ten years - from 1995 to 2005 - gold has been trading between $250 and $420 per troy ounce. The rally began only in 2005. Moreover, the subsequent oil rally ended as the financial crisis reached its apogee in September 2008. The gold bubble lived through that period, falling to is local minimum of $680 in October, 08. Even Kitco analyst Jon Nadler has repeatedly said gold is setting record prices amid “some of the poorest fundamentals I’ve seen in the market for a long time.” Nadler has been top-calling gold for years. He prefers to view gold as a momentum-driven commodity like any other, as opposed to a global currency substitute that is not consumed like a commodity. He suspects the recent rise has been driven by large hedge funds and institutional investors making momentum-driven trades. As for fears of financial collapse, “The sky did actually fall last year — and it was good for $1,035 gold,” says Nadler. “But that’s about where the worst ends.” So the short-term outlook is not promising.
Reuters:
- Applied Materials Inc (AMAT) said on Tuesday it would buy Semitool Inc (SMTL), which makes silicon wafer processing equipment for the microchip industry, for about $364 million. Semitool shares soared more than 30 percent after the world's largest producer of chip-making gear said it would pay $11 a share for all outstanding Semitool stock, a 31 percent premium over the company's Nasdaq closing price of $8.40 on Monday. Applied Materials said the deal will add to its earnings within two years, and would make it the leader in the market for advanced packaging of chips for mobile devices.
- Intel Corp's (INTC) chief financial officer said the chipmaker is on track to meet its fourth-quarter outlook and said a recovery in corporate spending on PCs could happen in the next 18 months. "I think the ingredients are being put in place that will lead to a PC refresh cycle in large enterprises," Stacy Smith told Reuters on Friday, adding that when the buying starts, it tends to include a lot of demand. Smith said Windows 7 has had only a "slight net positive" impact so far in the fourth quarter, which is seasonally strong due to the end-year holiday shopping season. "For the PC market, or for the segment of the market we play in, we would typically see a fourth quarter that's up about 7 percent in terms of revenue," he said. "That's the mid-point of our guidance and everything we've seen so far is consistent with that guidance." The company blew past Wall Street forecasts when it announced third-quarter earnings in October, setting the stage for a PC sector recovery. Smith said spending on server hardware has remained relatively strong, with much of the rest of coming from consumers. "A year ago, I would have been much more vague, or much less convinced in my conviction that the gross margin profile would have been the same," he said, speaking of the company's Atom chip. "As we've ramped and as we've seen the market tick up, I have a much higher level of confidence." "When I look out across the next five years in my crystal ball, I don't see a gross margin profile that's different from the profile we've seen in the past five years," Smith said in the interview.
- Last year's market meltdown loosened Wall Street's decades-old grip on the prime brokerage business, and ferocious competition over supporting hedge funds means the old ranks may be shaken up for good. The collapse of Bear Stearns and Lehman Brothers sparked a run on Morgan Stanley (MS.N) and to a lesser extent Goldman Sachs Group Inc (GS.), prompting hedge funds to move cash and securities to more stable appearing banks like Credit Suisse, Deutsche Bank and JPMorgan Chase & Co (JPM). Goldman and Morgan Stanley quickly righted this year as markets snapped back, yet the second-tier players have no intention of giving up their newly won premier status, according to a series of interviews with Wall Street's top prime brokerage executives.
United Evening News:
- Taiwan’s central bank bought “large amounts” of US dollars today to keep the local currency above NT$32, citing bankers.
Yonhap News:
- KT Corp. plans to release Apple Inc.’s(AAPL) iPhone in South Korea on Nov. 28. KT will sell the phones at a price similar to that of the rest of the world.
Bear Radar
Style Underperformer:
Mid-Cap Growth (-.54%)
Sector Underperformers:
Construction (-1.81%), Oil Tankers (-1.18%) and Homebuilders (-1.10%)
Stocks Falling on Unusual Volume:
WBD, VRUS, HD, UBS, ISIS, ITMN, SPWRA, SIVB, GYMB, TGP, JEC, DCP, KNM and SII
Stocks With Unusual Put Option Activity:
1) SPWRA 2) JEC 3) SII 4) CSIQ 5) COMS
Bull Radar
Style Outperformer:
Large-Cap Value (-.25%)
Sector Outperformers:
Wireless (+.38%), Banks (+.14%) and Software (+.09%)
Stocks Rising on Unusual Volume:
AGO, EIG, REV, VMED, SMTL, THOR, JST, CSKI, SINA, CSIQ, DBRN, CAAS, HEAT, APWR, ROSE, GENZ, IBKC, ENOC, PALM, KVHI, DDS and NAL
Stocks With Unusual Call Option Activity:
1) CHRW 2) TJX 3) ACS 4) AGO 5) JBL
Trading Links
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NYSE Unusual Volume
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HFR Global Hedge Fund Indices
Monday, November 16, 2009
Tuesday Watch
Late-Night Headlines
Bloomberg:
- China Unicom (Hong Kong) Ltd. Chairman Chang Xiaobing said he expects Apple Inc.’s(AAPL) iPhone to become China’s best-selling smart phone, countering skepticism by analysts who say the handset is too expensive. “We’re very confident about the market position of the iPhone,” Chang said in an interview in
- Google Inc.(GOOG) and Microsoft Corp.(MSFT) took a bigger chunk of U.S. searches in October, while Yahoo! Inc. lost market share for the second month in a row, according to ComScore Inc. Google’s share climbed to 65.4 percent last month, from 64.9 percent in September, said ComScore, a Reston, Virginia- based research firm. Microsoft rose to 9.9 percent from 9.4 percent, and Yahoo fell to 18 percent from 18.8 percent.
- The United Nations atomic agency said it has lost confidence in Iran’s truthfulness and can’t be sure the country isn’t hiding more nuclear facilities. Iran’s concealment of its Fordo plant, built into the side of a mountain and revealed in a Sept. 21 letter, “gives rise to questions about whether there were any other nuclear facilities in Iran which had not been declared,” the International Atomic Energy Agency said today in a seven-page report.
- Loehmann’s Inc., a U.S. seller of discounted designer goods, will get a $35 million revolving line of credit from GE Capital to replace one from CIT Group Inc., according to two people familiar with the situation.
- Federal Reserve Chairman Ben S. Bernanke said regulators should have the power to shrink banks that pose risks to markets, signaling support for proposals in Congress that let the U.S. cut the size of financial companies. “The supervisors should be allowed by law to insist that the company divest itself or shrink its activities,” Bernanke said today in response to a question after a speech to the Economic Club of New York.
- The U.S. Postal Service said its deficit widened by $1 billion to $3.8 billion in fiscal 2009 and is likely to balloon to $7.8 billion next year if it’s not permitted to reduce delivery days or other expenses. The agency got congressional permission to fill a budget hole by deferring $4 billion in payments that had been due by Sept. 30 for a retiree benefits trust fund. The Postal Service will push Congress for another deferral of the $7.7 billion due to the retiree account this year and for permission to cut delivery from six to five days a week, Corbett said. “The business model, quite frankly, is broken,” he said. “It doesn’t work in a declining volume scenario. It’s becoming much more difficult to manage the organization in the old ways.”
- China’s military is close to fielding the world’s first anti-ship ballistic missile, according to U.S. Navy intelligence. The missile, with a range of almost 900 miles (1,500 kilometers), would be fired from mobile, land-based launchers and is “specifically designed to defeat U.S. carrier strike groups,” the Office of Naval Intelligence reported. Five of the U.S. Navy’s 11 carriers are based in the Pacific and operate freely in international waters near
Wall Street Journal:
- Verizon(VZ) ‘Very Pleased’ With Droid Sales.
- When it comes to terrorists, you would think that an al Qaeda operative who targets an American mom sitting in her office or a child on a flight back home is many degrees worse than a Taliban soldier picked up after a firefight with U.S. Army troops. Your instinct would be correct, because at the heart of terrorism is the monstrous idea that the former is as legitimate a target as the latter. Unfortunately, by dispatching Khalid Sheikh Mohammed and other al Qaeda leaders to federal criminal court for trial, U.S. Attorney General Eric Holder will be undermining this distinction. And the perverse message that decision will send to terrorists all over this dangerous world is this: If you kill civilians on American soil you will have greater protections than if you attack our military overseas.
CNBC.com:
CNNMoney.com:
- Buffett’s Berkshire ups Wal-Mart(WMT) stake.
Forbes:
CNNPolitics:
- Two-thirds of Americans disagree with the Obama administration's decision to try Khalid Sheik Mohammed in a civilian court rather than a military court, according to a new national poll. But six in 10 people questioned in a CNN/Opinion Research Corporation survey released Monday say that the alleged mastermind of the 9/11 attacks should be tried in the
Politico:
- As Senate Majority Leader Harry Reid (D-Nev.) aims this week to secure the votes of moderate Democrats on health care reform, a group of liberal senators Monday warned him not to abandon the public insurance option. Sen. Sherrod Brown (D-Ohio), who requested the meeting with Reid, said progressives believe they have compromised enough on the public option – from a Medicare-for-all proposal to Reid’s proposal to create a national government plan with a provision for states to opt-out. “Most of us in the caucus want a strong public option, support the Reid way of doing it,” Brown said. “And we’re confident that over time, as the debate unfolds and we take amendment after amendment after amendment, that we can get 60 votes.” He acknowledged several moderates need convincing, but said there is little willingness among progressives to back down.
- The government’s watchdog over the bank bailout program is criticizing Treasury Secretary Timothy Geithner’s handling of one of the most sensitive moments of last year’s financial meltdown, questioning decisions he made while heading up the New York Federal Reserve Bank. The new report criticizes the New York Fed’s decision in the fall of 2008 to bail out insurance giant AIG by covering its clients’ losses, sending tens of billions in taxpayer dollars to overseas banks. “The decision to acquire a controlling interest in one of the world’s most complex and most troubled corporations was done with almost no independent consideration of the terms of the transaction or the impact that those terms might have on the future of AIG,” reads the report, which is signed by special inspector general Neil Barofsky. The decision to cut the counterparty deal has come under fire because it effectively passed money along to financial companies that had signed intricate contracts with AIG, and sent tens of billions in
The Business Insider:
Reuters:
- Hedge funds will soon play a bigger role in portfolios, but investors still worry about getting their money back and understanding what a manager is doing, according to a new survey released on Monday. Nearly 60 percent of all financial advisers who help wealthy people invest their money and institutional investors said they expect hedge funds to be as important to much more important as traditional investments over the next five years. Currently 34 percent of the financial advisers think that these loosely regulated portfolios will be as important as their traditional cousins, up from 27 percent last year, the survey from research firm Morningstar and magazine Barron's found. The results come less than one year after the $1.5 trillion hedge fund industry reported its worst-ever losses and investors pulled billions of dollars out of funds as many lost more than half of their capital during the financial crisis.
- Qualcomm (QCOM), the world's biggest chip designer, said on Tuesday that it expects to be selling its TD-SCDMA chips in mainland China within the next year. The company expected to be able to grab much of the market for such chips, Chief Executive Paul Jacobs told reporters during a media event in
Late Buy/Sell Recommendations
Citigroup:
- Reiterated Buy on (UTX), target $76.
Night Trading
Asian Indices are -.50% to +.25% on average.
Asia Ex-Japan Inv Grade CDS Index 110.0 +6.0 basis points.
S&P 500 futures -.30%.
NASDAQ 100 futures -.30%.
Morning Preview
BNO Breaking Global News of Note
Yahoo Most Popular Biz Stories
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NASDAQ 100 Pre-Market Indicator/Heat Map
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Who’s Speaking?
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Rasmussen Reports Polling
Earnings of Note
Company/EPS Estimate
- (HD)/.35
- (JEC)/.65
- (SKS)/-.11
- (TJX)/.78
- (CNQR)/.18
- (CRM)/.16
- (TGT)/.50
- (ADSK)/.22
- (DDS)/-.50
Economic Releases
8:30 am EST
- The Producer Price Index for October is estimated to rise +.5% versus a -.6% decline in September.
- The PPI Ex Food & Energy for October is estimated to rise +.1% versus a -.1% decline in September.
9:00 am EST
- Net Long-Term TIC Flows for September are estimated at $30.0B versus $28.6B in August.
9:15 am EST
- Industrial Production for October is estimated to rise +.4% versus a +.7% gain in September.
- Capacity Utilization for October is estimated to rise to 70.8% versus 70.5% in September.
1:00 pm EST
- The NAHB Housing Market Index for November is estimated to rise to 19.0 versus a reading of 18.0 in October.
Upcoming Splits
- None of Note
Other Potential Market Movers
- The Fed’s Yellen speaking, Fed’s Lacker speaking, Fed’s Pianalto speaking, Treasury’s Geithner speaking, TAF results, weekly retail sales reports, ABC consumer confidence reading, API Energy Inventories, Citi Credit Conference, Lazard Healthcare Conference, Oppenheimer Industrial Conference, (STEC) analyst day, (SXCI) analyst meeting, (KO) analyst meeting and the (FLEX) mid-year business update could also impact trading today.
BOTTOM LINE: Asian indices are slightly lower, weighed down by financial and automaker shares in the region. I expect
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