U.S. Week Ahead by MarketWatch (video).
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 China bubble worries, rising economic pessimism and oil spill concerns offset short-covering, technical buying and less sovereign debt angst. My intermediate-term trading indicators are giving mixed signals and the Portfolio is 75% net long heading into the week.
Sunday, June 20, 2010
Friday, June 18, 2010
Weekly Scoreboard*
Indices
- S&P 500 1,117.51 +2.37%
- DJIA 10,450.64 +2.34%
- NASDAQ 2,309.80 +2.95%
- Russell 2000 667.17 +2.81%
- Wilshire 5000 11,554.81 +2.38%
- Russell 1000 Growth 498.26 +2.37%
- Russell 1000 Value 576.54 +2.20%
- Morgan Stanley Consumer 681.93 +1.66%
- Morgan Stanley Cyclical 862.85 +2.39%
- Morgan Stanley Technology 568.97 +3.08%
- Transports 4,433.60 +2.63%
- Utilities 383.36 +4.24%
- MSCI Emerging Markets 39.70 +3.30%
- Lyxor L/S Equity Long Bias Index 959.97 +1.84%
- Lyxor L/S Equity Variable Bias Index 853.47 +.72%
- Lyxor L/S Equity Short Bias Index 886.19 -4.43%
- NYSE Cumulative A/D Line +86,807 +4.34%
- Bloomberg New Highs-Lows Index -21 +145
- Bloomberg Crude Oil % Bulls 52.0 +23.81%
- CFTC Oil Net Speculative Position +32,930 +88.63%
- CFTC Oil Total Open Interest 1,336,533 +1.08%
- Total Put/Call .86 -18.87%
- OEX Put/Call .89 -23.93%
- ISE Sentiment 114.0 +20.21%
- NYSE Arms .98 -17.21%
- Volatility(VIX) 23.87 -17.54%
- G7 Currency Volatility (VXY) 12.63 -5.96%
- Smart Money Flow Index 8,959.81 +2.19%
- Money Mkt Mutual Fund Assets $2.806 Trillion -1.2%
- AAII % Bulls 42.45 +23.11%
- AAII % Bears 30.66 -28.86%
- CRB Index 262.93 +2.74%
- Crude Oil 77.38 +4.29%
- Reformulated Gasoline 215.64 +4.81%
- Natural Gas 5.00 +4.46%
- Heating Oil 213.44 +5.76%
- Gold 1,256.70 +2.31%
- Bloomberg Base Metals 181.79 -.86%
- Copper 291.50 -1.24%
- US No. 1 Heavy Melt Scrap Steel 338.0 USD/Ton unch.
- China Hot Rolled Domestic Steel Sheet 4,214 Yuan/Ton -.17%
- S&P GSCI Agriculture 302.77 +2.71%
- ECRI Weekly Leading Economic Index 122.50 -.41%
- Citi US Economic Surprise Index -15.80 -1.6 points
- Fed Fund Futures imply 82.0% chance of no change, 18.0% chance of 25 basis point cut on 6/23
- US Dollar Index 85.58 -2.12%
- Yield Curve 251.0 +1 basis point
- 10-Year US Treasury Yield 3.22% -1 basis point
- Federal Reserve's Balance Sheet $2.327 Trillion +.56%
- U.S. Sovereign Debt Credit Default Swap 35.98 -3.12%
- Western Europe Sovereign Debt Credit Default Swap Index 125.17 -1.57%
- 10-Year TIPS Spread 2.02% +3 basis points
- TED Spread 44.0 -3 basis points
- N. America Investment Grade Credit Default Swap Index 110.10 -12.72%
- Euro Financial Sector Credit Default Swap Index 134.25 -13.19%
- Emerging Markets Credit Default Swap Index 251.92 -11.78%
- CMBS Super Senior AAA 10-Year Treasury Spread 320.0 unch.
- M1 Money Supply $1.717 Trillion -.58%
- Business Loans 608.40 +.38%
- 4-Week Moving Average of Jobless Claims 463,500 -.1%
- Continuing Claims Unemployment Rate 3.6% +10 basis points
- Average 30-Year Mortgage Rate 4.75% +3 basis points
- Weekly Mortgage Applications 659.90 +17.65%
- ABC Consumer Confidence -45 -2 points
- Weekly Retail Sales +3.10% -50 basis points
- Nationwide Gas $2.72/gallon +.02/gallon
- U.S. Cooling Demand Next 7 Days 33.0% above normal
- Baltic Dry Index 2,694 -18.07%
- Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 67.50 +3.85%
- Rail Freight Carloads 223,075 +16.33%
- Iraqi 2028 Government Bonds 82.04 -.68%
- Small-Cap Value +2.84%
- Large-Cap Value +2.20%
- Oil Service +6.23%
- Gold +5.70%
- Alt Energy +5.49%
- Disk Drives +5.14%
- Semis +5.04%
- Homebuilders +.05%
- Retail -.07%
- I-Banks -.38%
- Hospitals -.85%
- Education -2.02%
One-Week High-Volume Losers
*5-Day Change
Stocks Slightly Higher into Final Hour on Falling Sovereign Debt Angst, Less Energy Sector Pessimism
Broad Market Tone:
- Advance/Decline Line: Slightly Lower
- Sector Performance: Most Sectors Declining
- Volume: Below Average
- Market Leading Stocks: Outperforming
- VIX 23.91 -4.55%
- ISE Sentiment Index 108.0 +2.88%
- Total Put/Call .87 -2.25%
- NYSE Arms 1.52 -1.42%
- North American Investment Grade CDS Index 110.10 bps -4.75%
- European Financial Sector CDS Index 133.83 bps -6.07%
- Western Europe Sovereign Debt CDS Index 125.17 bps -12.47%
- Emerging Market CDS Index 252.94 bps -3.0%
- 2-Year Swap Spread 35.0 -1 bp
- TED Spread 44.0 -1 bp
- 3-Month T-Bill Yield .09% unch.
- Yield Curve 251.0 +3 bps
- China Import Iron Ore Spot $144.10/Metric Tonne +.70%
- Citi US Economic Surprise Index -15.80 +.1 point
- 10-Year TIPS Spread 2.02% +1 bp
- Nikkei Futures: Indicating +50 open in Japan
- DAX Futures: Indicating -3 open in Germany
- Slightly Higher: On gains in my Technology, Retail and Medical long positions
- Disclosed Trades: None
- Market Exposure: 75% Net Long
Today's Headlines
Bloomberg:
- EU Stress Tests Face Investor Questions on Stringency. The European Union’s decision to publish the results of stress tests on the region’s lenders was welcomed by shareholders seeking more transparency. Investors still want to know how tough the terms of the tests will be. The studies will be done “institution by institution,” French President Nicolas Sarkozy told reporters at an EU summit in Brussels yesterday. German Chancellor Angela Merkel said it was important to give “maximum transparency.” Asked how the governments would react if the tests revealed shortcomings, she said the EU has “taken precautions,” including a 750 billion- euro ($928 billion) financial backstop. “The problem with the stress testing, in most people’s opinion, is fairly serious: It’s not stringent enough,” said Ralph Silva, an analyst at London-based Silva Research Network, which specializes in financial-services firms. The tests may be “a bit harsher” than similar ones carried out last year, helping to boost market confidence, Morgan Stanley analysts led by Huw van Steenis wrote today. The reviews are “highly likely” to take into account holdings of sovereign bonds, Javier Ariztegui, deputy governor of the Bank of Spain, said in an interview in Santander, Spain, today. Germany’s BdB banking association, which had opposed making the findings public, changed its stance yesterday. It now says publication can “contribute to creating confidence and calming the markets” as long as it doesn’t leave “room for misinterpretation.” In London, the British Bankers’ Association said it still opposes publication of data on individual banks. “The results could be misinterpreted and could lead to a run on a sound bank,” Irving Henry, the BBA’s policy director of prudential capital and risk, said in an interview yesterday. Failure to include sovereign debt exposure would “impact the credibility” of the tests, said Ian Gordon, a banking analyst at Exane BNP Paribas SA in London. “Every piece of withheld data gives skeptics reason to grumble that the tests are not transparent and therefore not meaningful.”
- BP(BP) Said to Seeks at Least $5 Billion of Bank Funding. BP Plc, the target of more than 220 lawsuits over the Gulf of Mexico oil spill, is seeking at least $5 billion in financing to meet compensation payments, according to two bankers approached by the company. BP has asked lenders for one-year credit lines, one of the people said. It is arranging the transactions individually with banks, said the people, who declined to be identified because the talks are private. The financing is in addition to BP’s $10.5 billion of undrawn lines, the people said. The funds may give BP additional flexibility if borrowing in bond markets becomes too expensive after the company’s debt was cut six levels to BBB from AA by Fitch Ratings June 15. The company had $27.7 billion in cash flow from operations in 2009. New financing could come in the form of $5 billion to $10 billion of corporate bonds, CNBC reported yesterday.
- Hedge-Fund Survival Skills to Be Tested by Increased Regulation. Hedge-fund managers and investors gathered in Monaco this week said an overhaul of the U.K.’s financial regulator and new rules proposed by the European Union may prove as hard to navigate as volatile financial markets. “The survival instincts that many hedge-fund managers have in markets they’re also going to have to display in facing up to regulatory challenges,” Rick Sopher, managing director of LCF Edmond de Rothschild Asset Management Ltd., which has invested in hedge funds for more than four decades, said at the GAIM International conference. “They’re going to be subject to some really rash and nasty regulation.”
- Copper Heads for Weekly Decline on Concern About U.S. Rebound. Copper fell in New York and London, heading for a weekly decline, after reports stoked concern that the economic rebound may be weaker than expected in the U.S., the world’s second-largest consumer of the metal. Manufacturing in the Philadelphia Federal Reserve Bank’s region expanded in June at the slowest pace since August, and initial jobless claims rose in the week ended June 12, data showed yesterday. U.S. housing starts fell the most since March 2009 and building permits, a sign of future construction, slid to a one-year low, reports showed on June 16. Futures for September delivery declined 4 cents, or 1.4 percent, to $2.884 a pound at 8:12 a.m. on the Comex in New York. LME copper has slid 14 percent this year on concern about European nations’ ability to reduce budget deficits and steps taken by China, the biggest copper user, to cool its real-estate market.
- Japan Aims to Cut Company Tax to Spur Economic Growth. The government pledged in its medium-term economic plan today to bring the corporate tax rate down to a level “commensurate” with other leading nations. That rate is “about 25 percent,” Yosuke Kondo, parliamentary secretary for the Trade Ministry, said in an embargoed briefing yesterday. Firms in Tokyo pay a levy, including local taxes, of 40.7 percent.
- Bank of Japan's Shirakawa Sees Chinese Bubble Risk. Bank of Japan Governor Masaaki Shirakawa told policy makers today that China’s strengthening recovery is spurring concern that the economy is in a bubble, a Cabinet Office official said.
- Paramo Says ECB Will 'Absolutely Not' Give Capital to Banks. European Central Bank Executive Board Member Jose Manuel Gonzalez-Paramo said the central bank will ‘absolutely not” provide banks with capital should stress tests show they need it. “That is not part of the ECB’s functions,” Gonzalez- Paramo told reporters in Malaga, Spain, today. “It’s up to the governments and national supervisors.”
- Treasury to Gain Expanded Powers in U.S. Financial Overhaul. The U.S. Treasury Department under Secretary Timothy F. Geithner is coming out of the worst economic crisis since the Great Depression with expanded powers to guard against future threats to financial stability. Geithner, who has managed taxpayer bailouts of companies from Citigroup Inc. to General Motors Co., would lead a council to monitor large financial firms under legislation House and Senate negotiators aim to complete by July 4. Lawmakers confirmed the council’s basic functions yesterday and may approve final language next week. Geithner would also get a research unit that could demand data from banks and regulators and a new national insurance office. The Treasury-led council’s role includes identifying companies that might be shut down because they pose a risk to the financial system. That authority, even if well-intentioned, could be used for political ends, said Phillip Swagel, a former Treasury economist who’s now a professor at Georgetown University in Washington. “It’s such an open-ended grant of power,” said Swagel, who worked for Republican Treasury Secretary Henry Paulson. “Do we really want to give that to every future administration?”
- The U.S. job market may disappoint in the months ahead as temporary census workers finish their work, helping to keep interest rates low, said John Harrmann of State Street Global Markets in Boston. After leading job gains in May, the number of census workers declined by nearly 30%, according to weekly data published by the U.S. Census Bureau. "This is a very weak, very lackluster jobs economy," Herrmann, a senior fixed-income strategist, said. After some of the temporary census workers migrate back into the private economy, "I think we're going to be looking at disappointing job gains again" by August and September, he said.
Wall Street Journal:
- German Ministry: Publishing Bank Stress Tests Will Be Voluntary. Germany will only publish the results of "stress tests" on banks that agree to the process, the finance ministry said Friday, and won't publicly identify institutions that refuse. "There's great pressure to make them public, because the markets see who has published and who hasn't," said Finance Ministry spokesman Michael Offer in an e-mail to Dow Jones Newswires.
- Citi(C) Seeks $3.5 Billion for Private-Equity, Hedge Fund. Citigroup Inc. is looking to raise approximately $3.5 billion for its private-equity and hedge funds, a person familiar with the situation said Friday.
- Deflation - Not Inflation - May Be Bigger Threat to Economy.
- Gold Settles at Record High for Second Session.
- I.M.F. Gives Backing to Spain's Austerity Measures. The on Friday gave its blessing to Spain’s efforts to bolster its banks and reduce its budget gap, but stressed that passage of a proposed loosening of labor market rules was crucial to kick-start flagging growth.
- Trim the 'Experts,' Trust the Locals. On Tuesday, The Times ran a front-page article on the chaotic efforts to clean up the oil washing around the Gulf of Mexico. Campbell Robertson reported on an incident in which boats that were supposed to be laying boom were, in fact, anchored on the wrong side of a bay in Louisiana. They were helpless as oil oozed in from the gulf, and BP had no way of contacting the workers to get the boats moving. The article described a cleanup operation that is overwhelmed. “From the beginning,” Robertson wrote, “the effort has been bedeviled by a lack of preparation, organization, urgency and clear lines of authority among federal, state and local officials, as well as BP.”
Business Insider:
- Greek Communists Say IMF-Imposed Austerity Means "Dachau Conditions For Life". Don't think a stopgap bailout solved the Greece debt crisis. Greek communists are cranking up the rhetoric against IMF-imposed austerity measures, now calling for war against the Athens government.
FINalternatives:
- San Diego Puts $150 Million in BlackRock(BLK) Hedge Funds. The San Diego County Retirement Association will invest in $150 million in a pair of BlackRock hedge funds. The $7 billion public pension fund yesterday approved the allocation to the global macro strategies, with $115 million going to the BlackRock Global Ascent Fund and $35 million to the BlackRock Emerging Markets Macro Fund.
- Apple(AAPL) Selling 1.2 Million iPads Per Month, Rate Could Double by Holidays. Monthly sales of Apple's new iPad device have been rising steadily over the past several months, prompting the electronics maker to adopt a second supplier of 9.7-inch display panels in anticipation of strong fourth quarter sales that could top 6 million.
- Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Friday shows that 25% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-six percent (46%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -21 (see trends).
- Issa Has Eye on Subpoena Team. Rep. Darrell Issa, the conservative firebrand whose specialty is lobbing corruption allegations at the Obama White House, is making plans to hire dozens of subpoena-wielding investigators if Republicans win the House this fall.
Reuters:
- German-Spanish Whispering Wars Hit Eurozone. A whispering war between German and Spanish officials has exacerbated the euro zone's debt crisis this month, keeping financial markets on edge and exposing deep frustrations in Berlin and Madrid. European diplomats say the background to the leaks and counter-leaks lies in pressure from Germany -- Europe's economic powerhouse and main paymaster -- for Spain to take tougher austerity measures to cut its huge budget deficit.
- FACTBOX - Iran's Crude Oil Buyers in Europe, Asia.
Financial Times:
- Merkel Set to Lose Control of Upper House. Angela Merkel, Germany’s embattled chancellor, looks set to lose her hold on the German parliament’s upper chamber, making legislation even tougher for her fractious coalition of Christian and Free Democrats. Social Democrats and Greens in North Rhine-Westphalia agreed to forge a minority government in Germany’s biggest region, a move which would oust a Merkel-ally as state premier and shift crucial Bundesrat votes to the “red-green” opposition. The power shift in the upper chamber means Ms Merkel will have to clear more hurdles with laws about which the Bundesrat has a say.
- Housing Boom Fuels Corruption in China. China’s push to build cheap housing for low-income families is being undermined by some local governments that are using the policy as a front to provide public officials with sweetheart property deals. In Xinzhou, an industrial town in Shanxi province’s coal belt, a new complex of smart apartments called Century Garden was on the local government’s list of designated social housing. The scandals are becoming the latest flashpoint in the combustible politics of China’s housing boom, which has transformed the living conditions of tens of millions in the past decade but which is increasingly creating a disaffected rump of citizens left out of the real-estate bonanza. “You are never going to get rich if you do not do anything illegal,” says Wang Zhu, a 60-year-old former policeman who has a three-room, brick house across the road from Century Garden in Xinzhou and runs a small flower shop. Social housing has become one of the Chinese government’s main priorities, including the promise to build 5.8m apartments for low-income families this year. The goal is to reduce social tensions surrounding the rapid rise in house prices, while ensuring that the clampdown on property speculation does not cause a collapse in real-estate construction, one of the main drivers of economic growth.
- Business tax receipts in German municipalities fell 20% in the first quarter from a year earlier, citing data from the Federal Statistics Office in Wiesbaden.
Bear Radar
Style Underperformer:
- Mid-Cap Value (-.26%)
- Hospitals (-1.35%), Airlines (-1.12%) and Gaming (-1.08%)
- WBD, VVUS, MNTA, LNCR, CSTR, LINTA, WBD and HCP
- 1) CAL 2) EP 3) HK 4) EWJ 5) SII
- 1) BP 2) TASR 3) FNM 4) ADLR 5) XOM
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